Children of Thatcher, Cuts and Central Bankers
If Hague, Osbourne, Cameron and other self-proclaimed Children of Thatcher
wrote a fanzine what would it be called? Eton Rifles? The Privateer? How
ironic if it were called The Public Servant.
UK ministers have pledged to hack £81bn off the current £697bn
annual budget by 2014.
First to feel the cold steel will be students,
born, job seekers and the
If you need hospital
treatment or low cost accommodation
or think you are eligible for legal
aid you may also find you are frustrated.
The government is also enthusiastic about disposing of public
assets including public
buildings and land, the Post Office, the Student Loan Book, National
Air Traffic Services and the Channel
Tunnel. Advisory organisations like Consumer
Focus set up to protect consumers are also under pressure.
The government is, however, mute
regarding whether it will still plough £20bn of public money into
more nuclear weapons. Discussion on replacing Trident - a system capable
of killing up to 10
million people - has been deferred until 2015.
In some ways none of this surprises. The removal
of all obstacles to profit-making, transfering grants into bank loans
and public assets into private/corporate hands - it's Thatcher all over.
Less predictable is what could result from ministers' apparent desire
the Human Rights
Act. The freedoms protected by this Act, like the Geneva
Convention, are rarely spelled out. In fact both are designed to prevent
the worst abuses of State power.
Meanwhile the PM's Big
Society slogan struggles to gain traction. Cuts in discretionary local
authority grants have already delivered a slap
in the face to the UK's hitherto vibrant voluntary sector.
In truth, nothing suggests we are about to diverge from the path set towards
the end of the 70s, since when the 'haves' enjoyed the highest percentage
growth in income by a huge margin.
Words like Plutocracy, Oligarchy and Corporatocracy help define the
direction of travel. Money, rather than guns, is the means through which
power is now exercised and policy makers the world over have learned to
pay close attention to 'market sentiment'.
So to blame the UK deficit on a previous government is to overstate a
government's influence over the economy.
In fact, the Central Bankers invited
us to the party. They dished out the drinks vouchers that got people drunk.
It is they that then turned off the lights and locked
the doors. It is they that put the heavies
on the door and are now charging a premium exit fee with all sorts of
And, in concert with the IMF, it is the Central
Bankers who will now enjoy the interest
on bailout loan repayments as the general population pays the price with
It can be no coincidence that in June 2007, it was the Bank of International
Settlements that warned
of the dangers of another 1930s style Great Depression. It ought to know
- it has access to all international money transfer data in real time.
The BIS in Basel is where Central Bankers meet on a regular basis to agree
A sell-off in shares was precipitated immediately following this statement
and didn’t stop until share prices bottomed in 2009.
The impact on governments here and abroad was plummeting
tax receipts and growing unemployment claims.
As if this wasn't enough to grow the deficit, the UK government was
forced to step in and insure not just deposits but the bailout loans made
to the crippled banks.
British tax payers are now liable if these loans are not repaid in full
with interest. This was a condition
of 200bn in loans from the Bank of England and £250bn in 'wholesale'
Whenever a crisis strikes now it seems the Central Banks, IMF or some
billionaire investor have ministers by the balls and need only apply pressure
to get their way.
So, who bought in at the market bottom in early 2009 and went on to
make a fortune? Certainly the FED had no problem with finding money. It
created some $3.3tn
in loans during the crisis.
And what of Barclays? In September 2008 Barclays secured $47.9bn
from the FED. The profitability of its investment banking arm subsequently
New CEO, Bob Diamond, doubtless enjoyed the leg up.
Meanwhile look at how public sector workers were rewarded in the US.
Losses on their pension funds were estimated at $1000bn
in 2008. With municipal
bonds now under speculative attack their situation could get worse
And so we see how easily rings are run around our governments, forcing
concessions, cuts, the lowering expectations. This is not to please the
electorate but rather to please 'the market' - something manipulated with
ease by those able to create, choke or destroy demand and money supply.
Successive UK governments appear to have taken the view that feeding
the wolves is the best way to keep them at bay.
Far from taming moral hazard, the Chancellor is now softening
his stance on banker bonuses. To everyone else he offers assurances
that there can be no gain without pain. UK VAT is to rise to 20%.
Moral hazard, however, remains a problem. Incentives continue to drive
bankers and CEOs to act in their own short-term interest.
In fact, significant parrallels exist between the Great Depression and
the recent crisis. The most obvious warning sign ought to have been the
excessive growth in financial sector pay in the run up to the crisis.
Should we feel saddened or angered that our representatives have made
such deep concessions to the engineers of crisis?
Surely no amount of PR will hold up the facade of 'fairness, responsibility
and being all
in this together' to which the current goverment has laid claim. As
the cuts take affect, the
gap between the top earners and the general public will grow ever
So, the Children of Thatcher have a dilemma. Do they seize back power
from the bankers, reign in excess and use taxation to rebalance family
incomes to the benefit of most voters? Or do they satisfy their high net
worth customers and guarantee their own future careers beyond cabinet
by sticking to the script?
Answers on a postcard please.
Happy New Year.
Ends | 1 Jan 2011 | Leg
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Notes: Cuts and Probable Consequences
* University Education Cuts
Consequences: Tripling tuition fees to £9000 a year won’t
be a worry to students whose parents can easily pay up front. So 99% of
sixth form leavers from Eton will doubtless continue to go onto a degree
course - 30% in Oxbridge. Elsewhere, expect students and parents to use
price as a guide to affordability, effectively shutting out those of modest
means from the best resourced establishments.
Mar: Government got its maths wrong on Tuition fees
* Council Discretionary Grant Cuts
Consequences : Expect cuts in the number of grants to voluntary arts and
social care and advice initiatives, with repercussions for the vulnerable.
July: Drug advisory service cuts may have 'devastating impact'
Sector Cuts by Region
Apr 11: FT says Council cuts to most impact children and elderly
* Social Housing Projects cut by £4.4bn
Consequences: Higher housing costs for those least able to afford them.
There is a proposal to raise Council house rents to 80% of average private
rents - a move to eradicate Council houses altogether.
* Extension in Pension Age to 66 for men and women by 2020
Consequences: Long life is not necessarily as predictable as it sounds.
Life expectancy for Russian men fell from 64 to 58 years between 1991
and 1994 thanks to the rush to privatisation.
* Legal Aid Cuts
Consequences: As providers are ‘competitively’ slashed to
a few big firms, expect them to work both sides of the claims possible
with Legal aid support, quietly (like the Financial Ombusdsman Service)
saving the corporation/insurers £millions in court costs and damages.
29 June: Legal
aid cuts to hit family, employment, education law...
June: Legal aid cuts - likely consequences of cuts by region