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Lead

BROWN CAVES IN

by Daphne Liddle

PRIME MINISTER Gordon Brown last Wednesday caved into pressure and agreed a package of measures to compensate low income people who will lose out when the lowest 10 pence rate of taxation is withdrawn – after saying for weeks that nothing could be done.

He was facing a parliamentary defeat next Monday after rebel backbencher Frank Field had gathered support from 46 Labour MPs to back an amendment to the current Finance Bill. The amendment would have compensated the five million who would be worse off when the 10 pence tax band is withdrawn.

The withdrawal of the 10 pence tax band passed through Parliament last year, almost unnoticed, as part of the 2007 Budget – Gordon Brown’s last before becoming Prime Minister.

Parliament cannot undo that now until the next Budget but Brown has promised to assess the loss to pensioners aged 60 to 64 and low paid people with no children and find a way to compensate them through higher winter fuel allowance, tax credits and raising the minimum wage that will be back-dated to the beginning of this financial year.

Brown said there were better ways of helping these people than having a 10 pence starting rate for everyone.

mocked

Tory leader David Cameron mocked Brown for “weakness, dithering and indecision”, even though he had been calling on Brown to compensate the 10 pence tax losers.

“Are you making these changes because you thought you would lose the vote next week,” said Cameron.

Brown was quick to reply that Cameron’s “new found” interest in the poor “only lasted a few seconds”. The abolition of the 10 pence tax band had been Tory party policy for many years. The Tories and the media have used the issue to attack Brown, accusing him of penalising the poor – though their policies would have hit the poor far more.

But it comes at a time when local elections are just around the corner and figures published on Wednesday from MySupermarket.co.uk show that the average family food bill has risen by £15 a week over the last year – and is likely to rise further.

According to Frank Field it would take just £1 billion to compensate the 10 pence tax losers.

Brown could hardly argue that he could not find this sum after he has just made another £50 billion in credit available to the banks in the hopes they will pass it on to home buyers.

Chancellor Alistair Darling had to meet with leading bankers and ask them to pass on the Government’s generosity to mortgage borrowers and repossess people’s homes only as a last resort. A big rise in repossessions would trigger a crash in house prices.

the start

Michael Coogan, head of the Council of Mortgage Lenders said the £50 billion was “a very positive step” but that would be just the start of what they need.

Darling meekly came away from the meeting saying: “The mortgage market is facing challenges as a result of the US sub-prime crisis. I welcome the arrangements that the industry has in place, and will continue to build upon, and address the concerns of borrowers in difficulty. I hope that lenders continue to take their responsibilities seriously.”

But the measures the banks will take consist of improving links to debt counselling services for borrowers facing eviction. There was nothing about lowering interest rates or refraining from screwing every last penny they could out of home buyers.

feeble

Darling’s words of feeble optimism betray the real economic relationship between the elected government and the banks. Darling cannot command the bankers – only ask them nicely.

They will tell mortgage defaulters they are not a charity – though they expect the taxpayers to treat them like one. They will demand free market policies and no Government intervention – until they need help.

Then they hold the whole economy to ransom – literally – until the Government spoon feeds them the money they crave. But they grant the Government no power over how the money is then used.

This is the reality of the capitalist state. Government aid to banks should come with the same sort of strings that the banks impose on their borrowers. If one defaults, taxpayers should repossess the whole bank and take it into public control, permanently.

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Editorial

Brown out of his depth

A YEAR ago Labour MPs were anxious for Tony Blair to resign because his record and reputation as a lying warmonger was damning their chances of re-election.

Now they are holding their heads in their hands in despair as Brown is proving even more of an election liability. The Iraq war and all its horrors, lies and deception are still with us but now Brown has emerged from Blair’s shadows his reputation for economic wisdom and his claims of compassion for the poor are evaporating fast. Brown is making the sort of stupid mistakes that we expect from the arrogant, amateur would-be tycoons on Alan Sugar’s TV programme, The Apprentice.

Brown’s decision to withdraw the 10 pence tax band was made a year ago, when he was still Chancellor and Blair was still Prime Minister. But his fellow Labour MPs, the opposition and the media have only just noticed the implications, now it is about to be implemented.

This will affect hundreds of thousands of low paid workers. Those who can claim tax credits to top up low wages will have some protection from the effects but that still leaves hundreds of thousands who will lose up to £300-a-year.

This is an economic disaster for these workers at a time when food, fuel and debt costs are soaring. And it is a political disaster for Brown, who clearly did not foresee the impact the change would have – it is obvious that the plight of these low-paid workers did not even appear on his political radar.

Now he has at least 40 Labour MPs in open revolt and threatening to vote against this year’s Finance Bill unless changes are made to give protection to the low-paid workers who will be affected. Since the opposition will be voting against the Bill, Brown is facing a parliamentary defeat.

Brown and his spin doctors are panicking and making this an issue of confidence in his leadership – a foolish gambit because it could easily go against him. Suddenly the whole party is considering alternative leaders.

It is a pity they did not consider this a year ago when they could have supported John McDonnell’s challenge to Brown’s leadership and opened up a proper debate within the whole party.

Brown is also facing defeat on his attempts to get the time that terror suspects can be detained without charge or trial extended from 28 to 42 days.

And he is coming under criticism from the media and opposition over the slow unrolling banking crisis, the resultant falls in house prices while all other prices are rising sharply.

This is a bit unfair on Brown – but not much. This crisis would have hit Britain 10 years ago if he had not promoted policies of urging consumers into borrowing in order to sustain the domestic market. The crisis itself is an inevitable part of the capitalist cycle. But having spent tomorrow’s wages yesterday workers cannot spend them again today.

This was just another way of making the workers pay for the faults in the capitalist system. The debts have led to long-hours working, damage to physical and mental health of those deep in debt, the undermining of working hours and conditions and the neglect of children as their parents work unsocial hours. The workers have paid a very high price. Many have burnt out physically and mentally; depression and stress have become an epidemic.

Even now Brown’s efforts to remedy the situation – to bring “liquidity” into the banking system have led him to put up a total of more than £100 billion of taxpayers’ money to cover banks for their bad debts so they can lend more to workers already deep in debt and keep people buying goods in the shops they cannot really afford.

The Bank of England has cut interest rates three times recently to persuade the high street banks to lend more. But they have not passed on lower rates to customers. They have had their fingers burned with the American sub-prime crash and lending will now be much more cautious. There is no way out of the coming crisis – it’s much bigger than Brown or the whole British government.

But the Government is afraid to admit this; they’d sooner blame it on rumour, panic and even too high levels of testosterone in share dealers; anything but the truth – that capitalism is falling apart. We need to change a lot more than just the Labour leader.

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