THE VILLAGE SOAPBOX

Ron has a few words to say on the Government Strategy for reducing our financial deficit and on Oil Prices, forests and forensics

The yoke about our necks

The government might talk of getting back the £1 trillion pounds of taxpayer's money committed to the banks, but that can only be from profits made at the expense of the bank customers, in other words we will be paying ourselves, in the end it is the people who carry the burden.

There is a desperate need for a radical departure from current politics and financial policies. The free market capitalist policies of the IMF have left a trail of destruction, millions of people have been driven into poverty. It was those policies following the Wall Street crash that led to the depression of the thirties. Keynes, that much lauded economist, argued that it was wrong, and yet we are still controlled by the same principles. The Irish people are suffering now, in order to maintain the confidence of the international bankers they are going to have to suffer a significant drop in their standard of living, with reduced public services and debts such that they will be paying for a generation, they will be servants of the international bankers. It is a form of tyranny. It is not restricted to the Irish of course, standards of living of ordinary folk will fall and unemployment increase all round the developed world. Not through any fault of theirs, of course, they trusted their bankers.

Nobody denies that the financial problems facing nearly all governments are due primarily to the gambling in the global financial sector. - "Never in the field of financial endeavour has so much been owed by so few to so many." Mervyn King - Governor of the Bank of England

Liberty is under threat from the vested interests of organised capitalism. Friedrich Hayek develops this argument in his book "The Road to Serfdom". There is clearly a need for a major re-organisation of the global financial capitalist system with much more regulation, yet there is no sign that western governments are willing to take strong action to reform the system. The idea that banks must be left to their own devices still dictates government policy. Mervyn King, recognises the need for more regulation but he is reported as saying, "There has been very little real reform".

Whilst the people are struggling to make good the damage, the bankers and city traders are carrying on just as before, paying themselves millions along the way. It is clear that they are treating the rest of society with contempt. Without more regulation the possibility must exist that they will repeat their past performance, pocket the money and put another burden on the rest of us.

The sad truth is that there is a stratum of extremely wealthy people who rise above the rest of us. They are driven by self interest and pay little heed to the consequences of their actions on the nation as a whole. Their wealth and global influence is such that they can intimidate governments. Some bankers and traders threaten to take their expertise and their business away if the government attempts to control their activities, but I wonder if they would find that so easy in the present financial climate. It is a bluff that has to be called, I don't doubt that there are many competent young men ready to take their place. John Hawksley, a former director of a bank, stated that bonuses paid in the city are not driven by the need to buy skills, as is claimed, but by greed and the lack of accountability. J K Galbraith once wrote; "The salary of a chief executive of a large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself."

An arrogant young trader interviewed on TV claimed that he deserved his big bonus because he had made a lot of money for his bank. Truth is these people don't make anything, they just handle other people's money, wealth often created by people who actually do produce something. The service that they provide could and should be at a much more moderate cost. With their gambling and their short term deals for quick profits they are more like parasites living on the backs of everyone else.

One observer commented "Bankers and banks have found a way to enclose a massive part of the profit added by the productive economy before it gets distributed... our reaction should not be to clamp down on the bonuses but to clamp down on the whole concept of unreasonable spreads and spurious financial engineering".

The City claims to have contributed much to our national economy, but, since much of their activity is associated with fostering and organising deals and takeovers, pocketing a significant slice for themselves in the process, one has to wonder whether they have depleted our economy at the same time. Over the last forty or more years we have witnessed the city making deals that have resulted in the destruction and/or the selling off of much of our engineering and manufacturing industries to make quick bucks for themselves. These short term activities have been extremely damaging and have been at the expense of long term jobs and prosperity. The West Midlands, once prosperous and the centre of our manufacturing industry is now an area of high unemployment and is rated as the poorest area in western Europe. Selling Cadburys to a foreign concern was the last straw for many. It was a hostile take-over that the directors were unable to resist. Afterwards the Cadbury directors proposed that, in future, shares should be held for a minimum of six months before they could vote on a take-over bid and that 60% of the shareholders votes should be necessary to approve a take-over. Even these quite modest proposals would at least have made the quick bucks a little slower, but there is no evidence that they will be adopted. Why do we sit back and permit these foreign take-overs without any consideration as to whether or not it is in the national interest? Presumably because our politicians are too closely wedded to the city and free market capitalism. The French would not do it, they have laws to prevent it, the Canadians wouldn't do it, even the Americans wouldn't do it.

It is too readily accepted that free market capitalism, privatisation and competition are always best and that monopolies, be they state or private are bad. Deregulation of the buses ruined public transport in some of our cities for years. London Transport was the envy of the world. Nobody can claim that privatisation of the railways has been a great success. Water prices have soared since privatisation yet losses due to leakage remain almost as high as ever. I personally greatly regret the demise of the Central Electricity Generating Board, the Atomic Energy Authority and the National Coal Board, even British Rail. These monopoly organisations did much to keep us in the lead technically and did not cause us to suffer high prices. In some areas we need more monopolies, with appropriate controls, of course. Now Royal Mail is set to go, even though they provide one of the best and cheapest postal services in the world.

There is no denying that, thanks largely to the City, we do have a significant national debt and we have been brainwashed into believing that the situation is critical. As a percentage of GDP, however, it is not nearly as high as we have known in the past and not nearly as high as in some other countries, most notably Japan. Our government's financial liabilities in 2010 were 81.3% of GDP, this compares with: Germany 79.9%, France 92.4%, USA 92.8% and Greece 129.2% (OECD figures). I believe the figure for Japan is nearer to 200%.

Now that we have these debts the debate has to be on the best way to handle it. The current policy is in accord with IMF philosophy and it means that the less well off will suffer most, and public services will be cut. The consequences could be dire for many. An alternative approach would be to tax the rich more and to increase the tax burden generally by a small increase in income tax, an extra 1p perhaps. This would spread the burden more on to those that can afford it without causing massive hardship. It would also help enormously if more effort was put into reclaiming the tax owed, mainly by the rich and by corporations. In 2007-2008 this was estimated to be £40bn, three times the amount that will be obtained from the recent increase in VAT. There is also the vexed question of those non-domiciles that get away with millions. With higher government revenue the reduction in public expenditure could then be less severe and brought about in a more progressive manner, thereby reducing the risk of high unemployment with its associated benefit payments and lost tax revenue, and allowing time for readjustment of the economy.

It is clear, however, that our main political parties are content to allow the bankers, EU and the IMF to control our future. Somehow we have to get out from under this yoke, the role of the financial sector is totally dominant in our society and it has to be diminished, so that the real wealth producers; agriculture, manufacture and construction et al can be seen as more important. We have to protest and convince our politicians that, whilst they may be content, we are not.

Oil prices

As we all know oil prices have gone through the roof. At the time of writing I have seen a price of 83p/litre. Assuming a boiler efficiency of 85% that price would result in a heating cost of 9.13p/kWh. That is approaching the cost of daytime electricity and almost double the cost of off peak electricity for storage heaters, at this rate it may soon be cheaper to heat the house with ordinary electric heaters.

Some years ago I wrote in 'The Pump' about the potential of heat pumps for domestic heating. Heat pumps are similar to refrigerators in that they extract heat from a low temperature source and deliver it to an environment at a higher temperature. Depending on the temperature difference and the efficiency of the apparatus, it is possible to deliver heat to the higher temperature environment up to 3 or 4 times greater than the electricity input i.e. for a 3kW input it is possible to obtain up to 12kW or more output. An ideal low temperature source would be a river or large lake. But for most domestic applications it is usual to either extract heat from the ground by some means, (for example by burying a network of pipes below ground level, this can be quite satisfactory depending on the nature of the soil), or to simply extract heat from the ambient air. The ground source is preferable because ground temperatures below the surface are less variable than air temperatures. Using air as the source results in a cheaper installation but the heat output falls off at very low air temperatures such that it may be preferable to preheat the incoming air to keep it above 2C. The heat exchanger for extracting heat from the air would be sited outside and may be quite large, about the size of a wardrobe perhaps.

At the time of writing those years ago the relative prices of oil and electricity meant that there was no economic justification for using a heat pump. If the present high prices of oil are an indication of the future, however, and in anticipation of the swing towards nuclear power keeping electricity prices lower, it may be that heat pumps will look very attractive. With oil and electricity prices as they are today heat pumps using air source could probably halve heating costs throughout the year and could possibly do better than that, but it all depends, of course, on the relative prices for oil and electricity in the future, but the omens for oil are not good.

Anyone contemplating buying a new boiler should give careful consideration to the possibility of a heat pump for their heating and hot water. It should be possible to continue to use existing hot water tanks and radiators.

Forests and Forensics

It does seem as though public ownership of anything is an anathema to our present government. Why would they want to privatise our forests? They are a public asset and do not cost a lot. Promises that they will remain open to the public, in the same way as they are currently, are unlikely to be kept. Potential bidders are timber merchants and leisure companies, and neither would be keen to have the general public wandering around or to provide car parking and other public amenities.

They also want to close Forensic Sciences and leave the work that they do helping the police catch criminals, to private companies. The Forensic Science unit is world renowned for its pioneering work in developing the science. Will private companies conduct that type of research? The excuse given for closing the unit is "that it is losing £2M/month". £24M a year does not seem very much in relation to other government expenditure. How can a service lose money? A service costs money. How much do the police 'lose'? Do they imagine that the private concerns will do the work involved for nothing? There is no good reason for closing this unit other than the fact that it is in the public sector and that is against this government's ideology.

Ron Watts