Monday, February 28, 2011

Oh God, won't somebody please think of the rich?

A major downside of having bought a single share in BP for work purposes last year is that my brokers, Hargreaves Lansdown (it feels so wrong even typing that phrase) now keep on sending me crap. I am pretty sure they have now sent me crap to more than the value of the share (which was about a fiver, if anyone's interested). Moreover, said crap has a tendency to add to my levels of outrage more than I think is really healthy at this troubled time.

This month's edition of 'Investment Times' arrived on Sunday, and I didn't even have to remove it from its plastic wrapping to find something objectionable. On the front cover is an article by Mr Hargreaves with the headline "Who will bear the burden?" As you might imagine, the "burden" in question is that of reducing the deficit. And the answer to the rhetorical question appears to be "Not the rich, anyone but the rich!"

The article starts off by expressing concern that "neither the government, nor the public, exhibit the stomach for cuts in public expenditure". You can pretty much guess what's coming from the fact that this guy's biggest concern about the Tories is that they're just not keen enough on cutting things.

Next, he moves on to Labour and "the unions" - accusing them of "misinformation" designed to disguise the scale of the national debt. Surely, Mr Hargreaves concludes, "the general consensus is that we should be reducing our public debt as soon as possible."

Then, in a leap of logic I'm still struggling to fathom, he starts opining about how hard done by the rich are in today's society: apparently, "Britain has a perverse attitude towards wealth and success", reflected in the fact that "even right-wing politicians are suggesting that people with money and savings are the easy option to effect the bailout." I'm not quite sure what he means by "the bailout" in this context - I assume he's talking about the deficit again. He seems a little confused, poor man.

Anyway. Onwards and upwards: "There is no account taken of their prudence, their work ethic and the tax they paid accumulating those savings." Hmm. That would be the kind of "prudence" displayed by the millionaires who brought the financial system crashing down on all our heads? I see. Well, it sure is a mystery why nobody's taking that into account.

"Sadly" - oh so sad! I am practically weeping as I type this - "the only thing that people with savings can do is place as much of them as possible out of the taxman's clutches, for it is through taxes that wealth will be used to balance the books."

Ah, so now we get to the point. It turns out this whole article has been a rambling, incoherent intellectual justification for tax avoidance. And sure enough, when you look inside (as I have just done after finally bringing myself to tear off the plastic wrap) it turns out that the lead features in 'Investment Times' are all about how Hargreaves Lansdown is the discerning choice for all your tax-dodging needs. There's even another little vignette inside, where Mr Hargreaves complains that "[the government's] first port of call is those with the broadest shoulders" (really? I want to live in Mr Hargreaves' world please), and reiterates that "placing as much capital as you can into tax shelters is therefore vital." Well, Mr Hargreaves, why didn't you just say so in the first place? Really you could have just printed a picture of yourself sitting on a sack of money sticking two fingers up at the nation and saved us all some time.

Frankly, I am struggling to get inside the mind of someone who genuinely believes that the government is somehow more enthusiastic about taxing the rich than it is about cutting poor people's benefits. But leaving that aside for the moment, it seems to me that the rest of this article can be briefly summed up as follows:

1. It is very, very important that we reduce the national debt. Stupid lefties do not understand this.
2. It is therefore very, very important that rich people pay as little tax as possible on our enormous quantities of wealth.
3. Why? Um, because we're awesome.

Sorry Mr Hargreaves, but with shoddy arguments like that, you're not doing any favours to your claim that you deserve your millions for being so thoroughly brilliant.

Sunday, February 20, 2011

One in, one out, shake it all about

There's a maxim at the heart of government policy that shapes every single thing this coalition does - a maxim based on an ideological belief in a small state, which cripples the ability of government to actually do anything.

No, I'm not talking about public spending cuts. I'm talking about something called 'one-in, one-out regulation', and I'm continually surprised that so few people seem to have noticed it, because to me it adds huge force to the argument that the cuts agenda is ideological, not driven by necessity.

The premise is simple. Every time the government introduces a regulation, it has to get rid of one. Never mind that truly proportionate regulation should mean introducing regulations when they're needed, and repealing them when they're not. Never mind that there is absolutely no logical reason why the two decisions should be related. And never mind that this is ludicrously difficult to put into practice: is it one line of regulation in, one line out? One statutory instrument in, one out? And can you get around it by scrapping some archaic rule about who can graze their goats on Westminster Bridge that nobody even knew existed? When the policy was first introduced I even heard officials joking about whether it would be 'one letter in, one letter out', leaving them scrabbling around for more concise ways of saying the same things.

As far as I can tell, Whitehall seems to have spent the first six months or so of the new parliament desperately trying to find ways to make this self-evidently nonsensical policy slightly less nonsensical. Essentially, what they have come up with is this. Every time a department wants to introduce a regulation, it has to be accompanied by an impact assessment, estimating the additional burden it imposes on businesses. This then goes to the 'Regulatory Policy Committee', and from there onwards and upwards to the 'Reducing Regulation Committee', as explained in this helpful flowchart (you really couldn't make this shit up). If approved, the regulation has to be accompanied by an equivalent 'out': in other words, the removal of requirements that add up to an equivalent cost 'burden'.

And this bureaucratic process is entirely based on the numbers in the impact assessment, with no room for common sense. So if a regulation adds short-term costs but produces intangible, difficult to measure long-term economic benefits (say, by helping tackle climate change) - nope, it's still an 'in', and if you want to do it you're just going to have to find an 'out'. Sadly, this is far from hypothetical. I've seen it in my day job - this is dominating every decision departments take, hampering effective measures on climate change and many other things. The press release that first announced the system did at least say there would be an exception for regulation to tackle systemic financial risk. But even this grain of sanity seems to have sunk without trace; there's certainly no mention of it anywhere in the government's guide to one-in, one-out. This is not proportionate regulation - this is government by hokey cokey.

Astonishingly, this seems to have been the compromise position in coalition negotiations: the Conservative manifesto said:

"A Conservative government will introduce regulatory budgets: forcing any government body wanting to introduce a new regulation to reduce regulation elsewhere by a greater amount"

while the Lib Dem manifesto said it would:

"reduce the burden of unnecessary red tape... using ‘sunset clauses’ to ensure the need for a regulation is regularly reviewed, and working towards the principle of ‘one in, one out’ for new rules".

I must admit I was surprised to discover this when researching this post: I'd always thought it was a Tory policy. I am hugely disappointed that the Lib Dems have gone in for this bullshit, but then, I suppose they never thought they'd have to implement it.

Anyway. To the point of this post: I think this is as much proof as any campaigner needs that the cuts are ideological and not a 'tough but necessary' response to the deficit - and here's why. The way I see it, there are two main ways governments can do stuff. They can spend their money and do stuff themselves. Or they can pass laws and make other people do stuff. This government has made it a fundamental principle to do both of these things as little as humanly possible. And that, right there, is your libertarian small state (or 'big society', or whatever the latest euphemistic bullshit term for it is).

One-in, one-out is a farce. Everyone secretly knows it's a farce, right down to the civil service and at least some government ministers. Not only that, it's a dangerous farce. In a week where the government has U-turned on forests and housing benefit, is it too forlorn for me to hope that if it's exposed publicly as a farce, we might be able to force a rethink? Probably, but I still think it's a story that needs to be told.

Tuesday, February 8, 2011

Are companies moral beings?

Excellent quote from Vodafone on Saturday, explaining why they shut down their Egyptian mobile phone network on Mubarak's orders: “We didn't have any option as the government was within its rights under emergency powers that it invoked after the outbreak of demonstrations.”

Great stuff, Vodafone – interesting use of the phrase 'within its rights', there, I thought. I had a brief vision of somebody standing in the dock at Nuremberg saying, “I didn't have any option as the government was within its rights under emergency powers that it invoked after the Reichstag Fire.” Now, of course I'm not equating cutting off someone's mobile phone supply with complicity in genocide. The point of that slightly dubious comparison is that when an authoritarian government gives itself arbitrary and unjust 'rights', in a move that will clearly be regarded by history as illegitimate, the mere existence of those rights doesn't begin and end the question of whether you were justified in complying.

We don't expect individuals to roll over and comply with unjust orders from despotic regimes. We don't automatically exonerate those who were complicit in atrocities or acts of oppression simply because they were acting within the law. Being told to do something by a government, however illegitimate that government may be, is not a moral defence.

But for companies, it almost seems that the opposite is true. Sure, public opinion makes the distinction between what's acceptable corporate behaviour and what is legally permitted (eg tax dodging) or legally demanded (eg Yahoo giving the Chinese government information about dissidents). But there's a strong school of thought that doesn't make this distinction – as Milton Friedman famously put it, 'the business of business is business', and anything else is irrelevant.

And that school of thought still seems to be the one that holds sway in UK and US corporate governance frameworks. Much has been made of recent changes to UK law which require directors to 'have regard' to factors like their social and environmental impacts. But these changes are based on the notion of 'enlightened shareholder value'. In a nutshell, they encourage companies to think about their wider impacts on the basis that these wider impacts may ultimately affect their bottom line. It's progress, but it doesn't change the basic principle that anything which doesn't affect their bottom line is not truly their concern.

At a seminar I attended for work recently, someone suggested that the role of the law in relation to legal persons (like companies) should be to replace the role of virtue for natural persons (ie. individuals). Yet in some ways the law seems to have the opposite effect: companies exist to make a profit, and have no obligations to anyone but their shareholders. Investors exist to make money for their underlying owners, and will often loudly proclaim that their 'fiduciary duty' to do so absolutely prevents them from considering the rights and wrongs of what they're doing. The law not only doesn't require them to be virtuous: it actively reassures them that being virtuous is none of their business.

This is especially worrying when you think about the lessons of social psychology: people feel less responsible for their actions when they're cogs in a huge machine. It makes even less sense to rely on the 'virtue' of individuals within big organisations to make them do the right thing than it does for individuals acting on their own behalf. If we refuse to attach moral responsibility to those organisations, there's a danger we're left with a moral vacuum.

So what's the answer? How can moral responsibility be transferred from individuals to massive legal entities? I have a vague feeling I might be indulging in some slightly woolly thinking here, although I can't quite pin down how, so feel free to rip this to bits in the comments...

Tuesday, February 1, 2011

The cuts have been with us a while, and we shouldn't forget it

Last week, I joined the Justice for All campaign against legal aid cuts. You should too. In a nutshell, the government is proposing to drastically restrict the people and cases that qualify for legal aid, with potentially disastrous consequences for access to justice for the poorest and most vulnerable groups: welfare recipients, people in debt, low paid workers contesting unfair dismissal, asylum seekers and refugees, and so on.

In fact, I couldn't put the case against cuts to legal aid much better than this blog on Left Foot Forward today by the Shadow Justice Minister, Andy Slaughter. I find this quite ironic, because one of the reasons I'm interested in legal aid cuts is that I spent quite a lot of time in my last job challenging legal aid cuts being imposed by, um, the last government. That would be the government that reintroduced means testing for Crown Court legal aid (with painfully stringent thresholds that left people of well below average income being expected to contribute to their own defence), and that proposed to scrap free advice to prisoners about the legality of their treatment. The demand for euphemistically named 'efficiency savings' from the Ministry of Justice is nothing new. And, as one of the biggest-ticket items of expenditure, legal aid's position on the chopping block is nothing new either.

Of course, what is new is the scale and ferocity of the proposed cuts. Tentative salami-slicing seems to have been replaced by taking a massive hacksaw to the entire edifice. Where one round of proposals in 2009 amounted to cuts of £23m, the package currently out to consultation plans to cut £350m by 2014-15. In fact, in some ways, I have a newfound respect for the MoJ as it was then: what looked to us at the time like petty and mean-spirited reforms that would barely save a bean now looks more like a department under huge pressure to make cuts, desperately trying to do so by shaving off a bit here and a bit there without slashing services for the most vulnerable. Now, it seems, services for the most vulnerable are the first to go. The axe is cheerfully being taken to legal aid as part and parcel of the war on benefits, and the idea that access to justice is a citizen's right seems to cut about as much ice as the rest of the welfare state.

Nonetheless, the fact remains that a lot of the brilliant organisations behind Justice for All – Citizens Advice Bureaux, Justice, Advice UK – were raising the alarm about legal advice reforms well before this government came to power. Nobody else gave a monkey's: after all, it's not exactly a sexy issue. Now, though, they are beginning to succeed in mobilising a mass movement in defence of legal aid – because now, it can be positioned as 'a cut'.

In itself, this is obviously fine. Anything that helps mobilise dissent against injustice is all to the good, and if that's a silver lining to the present situation, then hooray – God knows there are precious few. But I sometimes feel that the anti-cuts movement is a bit too ready to collude with the myth that all cuts began life on May 6, 2010. “Yes, Labour also planned to cut the deficit, but it wouldn't have done it till the economy had recovered”, etc. As far as I can see, this is just not true. Admittedly, my experience of the previous government is limited to the MoJ. But let's take that as a case study.

From 2008-2010, the MoJ was not just talking about cuts: it was very definitely cutting. £1bn over the next spending period, to be precise. So, to be clear, around half of the cuts being planned by the current government were happening anyway. Not just legal aid: courts were closing left right and centre; the probation service was being subjected to cuts of 20% (around the level of cuts the department as a whole is now being asked to make); officials admitted that they had gone as far as they could go with 'efficiency', and that any claims that further cuts could be made without affecting frontline services were disingenuous. In shadowing the department, budget cuts were consistently one of the major issues we dealt with.

It suits the Tories to ignore this, because they can blame the cuts on Labour's 'profligate public spending' and 'Whitehall waste'. It suits Labour to ignore it, because it means they can quietly deny responsibility and position themselves as the party of the anti-cuts movement. But it doesn't suit the rest of us. The argument against cuts is surely even stronger once you realise how much services were already being squeezed before 'cuts' became a household word. Maybe this is just one more area where grassroots movements need to reclaim the narrative and expose the political consensus for what it is: a convenient untruth.