Who Needs Spending Cuts?

Regardless of what people reading Indymedia think, there is going to be a government spending review. Various political positions will shout, have no truck with such an exercise. People will disengage and then cuts will be put through on the basis of spurious claims about "consultations were held". The truth is, that the radical, left, anarchist and green thinking members of society need to act fast to ensure the the cuts are prevented. And, there is an easy way.

There is a serious suggestion, with a draft bill that can be put before parliament, for banking reform. ( http://www.bankofenglandact.co.uk/) The essence of this reform is summarised as follows:

"When money is created by the state, it is added to government revenue and reduces the amount of taxes that businesses and families need to pay. However, most money now is no longer created by the state. Instead, thanks to the rules governing banking, it is created by commercial, profit-seeking banks every time they issue a loan or mortgage. Rather than going to reduce the taxes that we have to pay, it is used to generate huge profits for the banking sector. This effectively provides a subsidy to the banking sector of up to £200billion each year – a subsidy that costs each of us over £4,000 every year."

"It also makes the economy hugely unstable. Each time a bank makes a loan, it actually creates new money to fund new loans. The more the banks lend, the more money they have available to lend, but as soon as they stop lending, the economy is starved of new money and quickly goes from growth to contraction, causing unnecessary hardship to millions of people."

The profit that banks make simply by issuing loans is a scandal in itself. That scandal is being covered up by the sustained institution of a culture of private profit and public liability. In short, we have a culture of Corporate Welfare financed through an efficient collection mechanism: money.

When the "Spending Review" begins it will be asking "who can we make pay by cutting their benefits?" along with a list of victims. Because that is what the political culture of Westminster needs: victims. Radicals can choose to be those victims or, like the Democracy Village, stand up and say something constructive. Actually pointing to those whose benefits far exceed their contributions. Primarily, the cuts to be made are in banking subsidies.

The subsidy to the banking sector arises because the banking sector creates all the credit. Where the Bank of England creates all the credit, the Public own the the created credit. Finding £60bn in £200Bn should not be that difficult, even for David Cameron. What is needed is widespread publicity of the idea that this is an alternative to the knee jerk cuts of "cut the dole scroungers money".

Because that is a real issue of government spending: where credit comes from. Without control of where credit comes from, the cuts agenda will always come around every decade or so: dictated by the banks' needs to earn profits linked to their cyclic failure to achieve profits. Take control of credit and Democracy is strengthened. Not the liberal democracy of Thatcher Cameron and Clegg but the Radical Democracy of Ordinary People. Every year for the past 40 years, banks have created about £200Bn in new money and kept it for themselves. The creation of £200Bn every year - in the UK alone - creates massive potential for ending the cycle of progressive, gradual imposition of corporate, authoritarian managerialism and handing the benefit of that credit to the Common wealth.

The first step is to prevent banks from creating money each time they issue a loan. This step is simple – we just set a ‘universal rule’ that banks can only credit (put money into) an account if they simultaneously debit (take money out of) another account by the same amount. Money cannot then be created by the banks. If they want more money, they can purchase it off the Taxpayer through the Bank of England.

Who are taxpayers? Everybody with a coin in their pocket, under their bed, or food in their cupboard. Taxation as a form of Theft affects absolutely everybody.

The unemployed are regressively taxed by the Banks Creation of credit. £4,000 per year is as much as some people are expected to live on. That constitutes a 100% taxation. Quite simply, allowing banks to issue credit for mortgages taxes the poorest sectors of society. While the Inland Revenue provide a number of tax allowances ( http://www.hmrc.gov.uk/rates/it.htm) the private taxation of Bank Credit Creation erodes the £6,475 personal allowance to £2,475 through this private taxation. It will be argued that the unemployed do not get that tax allowance. That is true. Due to the complexity of the benefit system (almost designed to fail) there is no one figure ( http://www.dsdni.gov.uk/index/ssa/benefit_information/benefit_rates.htm) that can be pointed to. However, taking just JSA at £64.30 (assuming contributory rate for an over 25 year old) gives a figure of £3,343.60 - higher than for many people but still lower than the bank subsidy. This makes the JSA recipient effectively taxed at 120%.

There is an objection that the the Banks need to create credit to function. This is nonsense: Banks simply need to issue credit they can get it from anywhere. That objection is panic from Bankers who see easy money rushing away from them. Where better for Banks to obtain credit than from the actual owners of the productive efforts that create the credit - that is Ordinary People.

There is an objection that tinkering about with the system is nonsense - the system should be broken up and started again. That objection is defeated by asking the simple question: "replaced with what?" and pointing out that this proposal fundamentally alters banking and helps to make progress towards replacing the existing system with something a good deal fairer. Breaking up the existing system must, inevitably, learn lessons from History. The Kerensky Government gave way to the Bolsheviks but, fundamentally, the Tsarist strand of Authoritarianism had not vanished: Government continued to be carried out in the same "quality" of execution.

This proposal does not seem to be about benefits or about Government Spending Cuts. However, consider it more closely: why would every person in the country pay £4,000 a year as an effective tax to allow other people to borrow money? Put that way it becomes closer to the Banks' Poll Tax. How can taxpayers be expected to both support the Banks and themselves: the clear answer is, by remaining poor.

The Bank of England Act 2010 ( http://www.bankofenglandact.co.uk/act/intro-part-1/) is an important step forwards. Despite the fact that it is a technical step, that must be put before Parliament, it will not be passed unless there is a genuinely grass roots support for it. Why would working class radicals support such an idea: because it gives a once in a lifetime opportunity to create genuinely new, grass roots financial institutions.

Much as though the Mainstream political parties like to rattle on about "competition" they frequently give sustained, unfair, substantial advantages to Large Organisations and actively penalise small enterprises. On a view that an Unemployee must be "actively seeking work" but that no Employer must be "actively creating work", this imbalance is made both a personal and a public concern. With the Bank of England being the sole source of credit in sterling, there would be nothing to stop a group of committed activists from putting their savings together into one big pot, seeking supporting credit from the Bank of England and building a Wind Farm or Recycling Project. In short, the suggestion makes investment and achievement of social change accessible. Competition in such a situation can be about which idea is best, not about how much profit it will make.

All of this has a marginal chance of becoming Government Policy. The List of Members Interests ( http://www.publications.parliament.uk/pa/cm/cmregmem/memi02.htm) gives a clue why. The second step that needs to be taken is for the criminalisation of "private" relationships between politicians and "financial" institutions.

While Mister Cameron might not view his declared relationship to IPGL Limited ( http://www.ipgl.co.uk/about/) or William Cook Holdings Ltd. ( http://www.icgplc.com/invest_result.aspx?InvestmentID=270) as compromising, there is a danger that declarations such as

"IPGL is currently investing in UK based financial services companies with enterprise values between $10 million and $100 million. We will occasionally consider other sectors"

show that he is more likely to be unduly influenced by the interests of organisations that will directly benefit from the proposed banking reform approach to cuts. It is an approach that has the principle that cuts that do not consider banking reform are, in fact, giving Banks and Investment Funds, a subsidy.

While nobody would suggest wrongdoing, there are concerns hanging over the behaviour of politicians ( http://news.bbc.co.uk/1/hi/politics/10293475.stm) when it comes to financial matters. The precautionary principle taken with claimants of any kind of benefit (as exemplified in the "actively seeking work" declaration) should be extended to politicians in order that the Government Spending Reform is carried out by people "actively seeking to serve" and not just a bunch of boys club members.

Unless there is genuine pressure on the Government for this kind of banking reform before Government Spending Changes (of any kind) then the economy will stagnate as the Banks take decades of profit from the economy while everybody else is obliged to work harder, longer hours simply to keep the £4,000 - which is growing at 7% per year - generated for the shareholders.

While, at this point, it is likely that any reader is bored and stopped long ago, and those who have not read carefully are becoming mouthpieces for Bankers' interests, there are two further changes that need to be in place.

The first is a Tobin Tax variation (Spahn Tax). There is a tax on "trading money". Both France and Belgium ( http://www.globalpolicy.org/images/pdfs/SocEcon/2003/071504Belgian_CTT_Legislation1.pdf) have put legislation in place to levy the tax. The importance of such a tax to a Central Bank is that it manages the relationship between global currency markets and the currency. With a Tobin Tax variation in place at 0.25%, the global revenue generated from $90Tr in trades per year (in 2004) would be £225Bn. As an international mechanism for protecting economies, the rate could be raised to 100% in emergencies where speculators are threatening central banks currency reserves. The presence of a Tobin Tax variation enables a brake to be applied by the Bank of England - and the Taxpayer - onto the Markets when they are "overheating". Indeed, instead of the euphemistic language of economists, speculation will be more appropriate addressed in the language of the petty criminal: when market racketeering is excessive.

Again, this mechanism is simple, fundamental and addresses sources of effective Global Spending that are far larger than the miniscule amounts given to social purposes. Indeed, by addressing the scale of the problem at the scale the problem was created, markets are made more competitive - which suits the ideological purposes of the Mainstream Parties - without turning the welfare state into a single giant subsidy for the "interest" that Banks would like to charge for "loaning" us the money we create.

The alternative is the Greek Solution. Nobody will trivialise the situation in Greece by characterising it as only rioting. But, public disorder as a means to manage politics and the economy is a standard response of both State and Class interests. From the Committee for Public Safety in 1793, right through to the Patriot Act of Bush, Public Order has been used to manage what Ordinary People are permitted to do, say and think. In the virtual open prison of UK Society today, The Greek Solution needs to be backed up with other methods.

Which is the third element of what the Government Spending Review need to contain: an Election in October. Unless the parties wanting to do the cutting are prepared to put their careers where their ideology is then the Government Spending Review is nothing but the sham that every Anarchist, Socialist or Radical (of left or right) knows it to be. Both the Proposed Bank of England Act and the Proposed Tobin Tax variation are about consequences. Those proposing these cuts need to go to the Electorate and ask for approval.

Anybody having followed the argument this far will realise that a Bank of England Act and a Tobin Tax Act would generate revenue for the Exchequer. In the beginning this would be in the order of £200Bn which can address the budget deficit. Given that the total revenue would also be future revenue, there would be a means to address the future budget deficit and, in the longer term, to begin transforming the Economy.

With a sound proposal for "how will you pay for that", most Social Spending gets junked. A Bank of England Act and Tobin Tax creates a situation where the financing of a Basic Income becomes possible. Currently, the £4,000 of credit that each person is taxed by the Banks ends up being used to further indebt people for profit. In the future that amount could circulate around the economy as a positive contribution to community wellbeing. Without widespread action to promote the other proposals, that potential for genuine social spending instead of managerialist welfare vanishes.

The Government Spending Review is a once in a lifetime opportunity for Radicals to hijack the mealy mouthed forelock tugging rubber stamping of enforcing poverty. All it takes is concerted argument to promote Banking Reform, Currency Reform and insist that elected officials are accountable.

All of which might not impress those with a penchant for Black Blockery. But there are times to strategically withdraw and support ideas that push forward your agenda despite being ideas you would not suggest yourself.