Three Alternatives to the Tory Cuts

Given that the three major causes of the crisis are 1. A Failure of government to regulate the finance sector 2. Finance Capitalists (Bankers) having too much power and 3. Capitalism – or at least neoliberal forms of Capitalism – it would seem sensible to tackle these three. Now I’m not saying some form of cuts to public services should be ruled out – but I think tackling these three fundamental problems are absolutely crucial if we are to sort out future crises, so ultimately joining a movement that aims for radical social change should be on anyone’s list of things to do as an alternative to letting the government cut our services…. But we’ll come back to that later, first of all a few concrete alternatives to the cuts[1]

1.   Tax Reform – There are plenty of things we can do as a country –

Firstly we can cut down on Tax Avoidance£25 billion is lost annually in tax avoidance and a further £70 billion in tax evasion by large companies and wealthy individuals. An additional £26 billion is going uncollected. The total annual tax gap is estimated to stand at over £120 billion (more than three-quarters of the annual deficit!). This is a great visual research tool from the Guardian that allows you to discover how much tax companies in the FTSE 100 declared in recent years compared to what it nominally should have paid. It is currently much too easy for rich companies and individuals to set up trust funds etc. to avoid tax – as George Monbiot points out we effectively have a situation in which there is socialism for the rich and capitalism for the poor  

Secondly, we could apply a ‘Robin Hood Tax’ to financial transactions – If we applied a modest Robin Hood tax – a 0.05% tax on global financial transactions –to UK financial institutions it would raise an estimated £20–30bn per year. This alone would reduce the annual deficit by between 12.5% and 20%. It would also discourage the kind of financial speculation that helped to cause the economic crisis in the first place

And there are plenty of other ideas about how tax can save us from the cuts are outlined in this excellent document – The Great Tax Parachute – below are some examples – there are many more…

  • 50 per cent tax on all income over £100,000 £2.3 billion
  • Prevent anyone earning more than £100,000 a year claiming more than £5,000 a year in tax reliefs above their personal allowance £14.9 billion
  • An additional 10 per cent tax on bank profits


NB – The argument for taxing the rich more is basically that they (the 1%) have got disproportionately richer than the rest of us (the 99%) over the last 30 years – and this redistribution of wealth has carried on even with the contraction in the world economy in the last couple of years!
The world’s richest 1% has gotten $5.5 trillion richer since 2009 – Their wealth now totals $47.4 trillion in investible wealth, up from $41.8 trillion in 2009. This means the richest 1% control 39% of the world’s wealth – What’s especially unjust about this is the fact that world GDP contracted by about $4 trillion in 2009, and is predicted to have grown by roughly the same amount in 2010 (couldn’t find the actual figures for 2010 – not enough time!) – meaning that the above figures represents a straightforward $5.5 trillion transfer of wealth upwards!

Recent research has found that the wages of the FTSE 100 bosses have risen 4000% in the last 30 years. FTSE 100 bosses are paid now 145 times the average wage. Our Corporate leaders have seen their pay quadruple in the past 10 years, while average earnings increased at just 0.1 per cent a year. On current trends, this would rise to 214 times by 2020 and the top 0.1 per cent of earners will take home 10 per cent of national income by 2025 and 14 per cent by 2030 on the present trajectory. What’s especially unjust about this is the fact that the economy has now effectively stopped growing, the last decade of growth was largely debt fuelled and thus fictitious and the people running these Corporations are not especially talented, they are mostly just lucky and powerful enough to claim large wage packets.


2. We should adopt most, if not all, of the policy proposals suggested by a recent report by compass and the New Political Economy Network – entitled ‘Plan B: A Good Economy for a Good Society’ which attempts to outline where the left should be on economic reform – and offers some useful alternatives to the current Conservative government’s programme of public sector cuts etc. Some examples of proposed reforms include…

  • Maintaining present levels of government expenditure rather than cutting – which is seen as necessary to avoid a ‘double dip’ recession.
  • Quantitative Easing (this basically means the government increases cash flow through issuing bonds) to create a ‘New Green Deal’ – So far since 2009 the government has released £275bn through ‘quantitative easing’ – but this has gone straight to the banks who have in turn invested most of this in international commodity markets rather than lending to UK businesses and stimulating economic growth. Instead – Plan B argues that governments should be raising money to be invested in the two items below
  • Firstly, training a carbon army – to be employed in such things such as making houses more energy efficient – not only will this involve creating more skilled jobs but also have the effect of saving people money on energy bills, which in turn can be ploughed back into the economy. 
  • Secondly money should be used to Cancel out certain Private Finance Initiatives – £50bn spent now can save £200 bn in the long run – a particular favourite of mine
  • Raise the incomes of the poorest – through increasing benefits and tax credits rationale here is that these are the people who will spend money – thus stimulating economic growth


3. To bring about all of the above, we should all join a movement that aims to fundamentally change society – and the current occupy movement is, I believe, at the forefront of pushing for positive social change today. Some of the selected core beliefs of(I modified them!) the movement (London Branch) include –

  • We need alternatives to the current system which is unsustainable.
  • We refuse to pay for the banks’ crisis.
  • We do not accept the cuts as either necessary or inevitable.
  • We demand an end to global tax injustice
  • We demand that our democracy represents people instead of Corporations
  • We want regulators to be genuinely independent of the industries they regulate.
  • We want structural change towards authentic global equality.
  • The world’s resources must go towards caring for people and the planet, not the military, corporate profits or the rich.
  • The present economic system pollutes land, sea and air, is causing massive loss of natural species and environments, and is accelerating humanity towards irreversible climate change. We call for a positive, sustainable economic system that benefits present and future generations. [1]
  • People of all genders, nationalities etc. should come and participate in moving towards a fairer future.

If the above sounds Idealistic – look at what happened in Iceland following its credit crunch 

Following Iceland’s ‘Credit Crunch’ in 2008 – each Icelandic citizen was required to pay 100 Euros a month (or about $130) for fifteen years, at 5.5% interest, to pay off a debt incurred by private parties vis a vis other private parties. It was the straw that broke the reindeer’s back.

What happened next was extraordinary. The belief that citizens had to pay for the mistakes of a financial monopoly, that an entire nation must be taxed to pay off private debts was shattered, transforming the relationship between citizens and their political institutions and eventually driving Iceland’s leaders to the side of their constituents. The Head of State, Olafur Ragnar Grimsson, refused to ratify the law that would have made Iceland’s citizens responsible for its bankers’ debts, and accepted calls for a referendum.

In the March 2010 referendum, 93% voted against repayment of the debt. The government launched civil and penal investigations into those responsible for the financial crisis. Interpol put out an international arrest warrant for the ex-president of Kaupthing, Sigurdur Einarsson, some of the bankers implicated in the crash fled the country.

But Icelanders didn’t stop there: they decided to draft a new constitution that would free the country from the exaggerated power of international finance and virtual money. To write the new constitution, the people of Iceland elected twenty-five citizens from among 522 adults not belonging to any political party but recommended by at least thirty citizens. This document was not the work of a handful of politicians, but was written on the internet. The constituent’s meetings are streamed on-line, and citizens can send their comments and suggestions, witnessing the document as it takes shape. The constitution that eventually emerges from this participatory democratic process will be submitted to parliament for approval after the next elections.

It remains to be seen If Iceland will recover faster than other countries who honour their debts to finance capital, but at least in principle they’ve got things more or less spot on!


[1] Most of these figures come from the following documents (also see reading list at end) – There is an alternative: The Case against the Cuts (published by PCS)

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2 thoughts on “Three Alternatives to the Tory Cuts”

  1. don’t you think that putting a tax on all financial transactions and banks profits, it will just encourage them (the banks) to relocate to places that offer better trading conditions, like singapore? the way i see it, for some short term gain, the uk would lose the city, which is crucial to maintaining the “service” economy we now have since we lost nearly all our manufacturing to the far east…
    also, quantitative easing is possibly the worst idea in all of history, and would obliterate any shred of integrity left in the idea that the sterling as a “safe currency”, which would lose investment in our banks that we depend on to prop up our economy.
    to conclude, i agree with your views on tax avoidance, however i cant see any positive outcome for your other points.

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