Saturday, October 11, 2008

Finance for Industry

A young Gordon Brown looks like a disciple of Michael Foot. Both Gordon Brown and Tony Blair were elected on the Foot Manifesto of 1983. (note the signs of the times- an ashtray was openly on display on the table)
The irony of this week is that 25 years after Foot's annihalation in the 1983 General Election, a key plank of his manifesto (described by Gerald Kauffman as "the longest suicide note in history") has been implemented.
One section of the manifesto included a section called "Finance for industry". This proposed creating a National Investment Bank, controlling the banks much more closely and if necessary nationalising one or more of the existing banks.
The 1983 manifesto was widely seen as a disaster leading to Labour's worst defeat since it became a governing party and Margaret Thatcher's greatest victory. Every Labour action up to and including the Blair Years has been aimed at learning from the mistakes of 1983 and adopting a more business friendly approach. With the arrival of Gordon Brown this clearly reached its limits but few could have thought we would be returning to the Foot Manifesto so soon.

More amazing still is that partial nationalisation of the banks is now on the global agenda. Who would have thought that the Foot manifesto could even be applied in America.

These are clearly difficult times and extraordinary measures are required. However I remain unconvinced that nationalisation of banks is a good move even in desperate times. The £500bn set aside for supporting the banks could be used in so many other ways to stimulate the economy. How about a suspension of corporation tax and income tax for a whole year ? The spending power that would give to ordinary people and businesses would be huge. What's more with Corporation tax bringing in £51 bn and income tax raising £155 bn (2007 figures) , the cost to the nation would be less.
I do not pretend to propose all the answers but if you are going to spend £500 bn on something there are probably a few more options to consider !
There would also seem to be cause for thought before the whole world "turns Foot" as Gordon Brown requested this week.
Below is an extract from the "longest suicide note in history" which is starting to be implemented after 25 years. For the record, Michael Foot is still with us at 95 years of age. He at least must have cause for a smile this week.....

Finance for industry


It is essential that industry has the finance it needs to support our plans for increased investment. Our proposals are set out in full in our Conference statement, The Financial Institutions. We will:


Establish a National Investment Bank to put new resources from private institutions and from the government - including North Sea oil revenues - on a large scale into our industrial priorities. The bank will attract and channel savings, by agreement, in a way that guarantees these savings and improves the quality of investment in the UK.


Exercise, through the Bank of England, much closer direct control over bank lending. Agreed development plans will be concluded with the banks and other financial institutions.


Create a public bank operating through post offices, by merging the National Girobank, National Savings Bank and the Paymaster General's Office.


Set up a Securities Commission to regulate the institutions and markets of the City, including Lloyds, within a clear statutory framework.


Introduce a new Pension Schemes Act to strengthen members' rights in occupational pension schemes, clarify the role of trustees, and give members a right to equal representation, through their trade unions, on controlling bodies of the schemes.


Set up a tripartite investment monitoring agency to advise trustees and encourage improvements in investment practices and strategies.


We expect the major clearing banks to co operate with us fully on these reforms, in the national interest. However, should they fail to do so, we shall stand ready to take one or more of them into public ownership. This will not in any way affect the integrity of customers' deposits.
It is interesting to note that the Foot manifesto also foresaw the arrival of broadband. I can't imagine they foresaw the internet. However all this was to be under "firm public control":



Telecommunications

A national cable system will make possible a wide range of new telecommunications services, greater variety in the provision of television, and a major stimulus to British technology and industry. But it must be under firm public control. A publicly-owned British Telecommunications will thus be given the sole responsibility to create a national, broadband network (including Mercury, the new privately-owned telecommunications system for business), which integrates telecommunications and broadcasting.
The full Labour Party manifesto from 1983 can be found here.

5 comments:

cw-patriot said...

Thank you for the excellent commentary, Luis. Especially:

These are clearly difficult times and extraordinary measures are required. However I remain unconvinced that nationalisation of banks is a good move even in desperate times. The £500bn set aside for supporting the banks could be used in so many other ways to stimulate the economy. How about a suspension of corporation tax and income tax for a whole year ? The spending power that would give to ordinary people and businesses would be huge. What's more with Corporation tax bringing in £51 bn and income tax raising £155 bn (2007 figures) , the cost to the nation would be less.

I have nothing to add to that but applause!

How many of your countrymen do you believe are as well acquainted as you with the parallels between Foot's proposals of twenty-plus years ago and what is beginning to happen on a global scale right now?

I believe that, here in America, the fact that most of the citizenry is pretty much oblivious to the real reasons behind this economic crisis is the worst tragedy of all -- and portends more tragedy to follow.

Do you feel the same about your friends, neighbors and co-workers, or is this apathy a uniquely American phenomenon?

~ joanie

Luis said...

Thank you so much Joanie,

Sadly apathy is not a uniquely American phenomenon. It is widespread here too.

Though far from universal, apathy is the default position of the majority. In this situation there is also a widespread feeling of powerlessness even amongst those who care. The government is certainly been relied upon to "sort this all out".

I fear that such reliance will not be rewarded !

The British press is now reporting that at least 2 of our major banks (HBOS and Royal Bank of Scotland) may be subject to government majority shareholdings by tomorrow and only one major bank (HSBC) seems relatively strong.

The loss of independence by the Scottish banks is particularly symbolic as Scottish merchants and bankers contributed disproportionately to the foundations of the British economy. The "father" of the Free Market, Adam Smith was a Scot. That Scotland will have its two major corporations nationalised tomorrow is difficult to believe.

cw-patriot said...

The "father" of the Free Market, Adam Smith was a Scot. That Scotland will have its two major corporations nationalised tomorrow is difficult to believe.

Adam Smith is one of those who laid the brilliant foundation for our economic freedoms. He, and those who sacrificed so dearly to preserve our other God-given freedoms as well, deserved so much better from us. We have squandered the hard-won inheritance that they bequeathed to us and expected us to be vigilant in defending.

As you sadly observed about the majority of your countrymen, and as I observe here in America daily, vigilance is no longer a popular undertaking.

We will live to regret our apathy. :(

~ joanie

Anonymous said...

Isn't that hair terrible?
(And I mean Gordon, not Michael!)

James

Luis said...

Yes- bad hair !