Standard Life threat shows where power really lies

Standard Life's statement that in the event of a “Yes" vote in the Scottish referendum they would leave Edinburgh, forcing 5,000 employees to choose unemployment or emigration, shows up the narrowness of the independence debate so far.

The insurance company said it would have no choice because Westminster has ruled out a currency union with an independent Scotland which would be denied the possibility of retaining the pound.

The Edinburgh-headquartered company’s statement serves as a reminder of where power really lies, and the reality that political power, whether located at Westminster or Holyrood, means nothing without economic and financial authority.

Just as Standard Life was putting the boot, the Royal Bank of Scotland posted massive losses for the sixth year running. The essentially bankrupt bank announced that it has decided to pull out of some of their riskier activities and focus on "bread and butter banking".

Is that the right or wrong thing to do? One thing is for sure, we were not asked though we as taxpayers nominally own the bank. RBS CEO Ross McEwan declines to say if the bank will leave Edinburgh if there's a vote for independence in September’s referendum.

But no way can a few million Scottish taxpayers bail out that behemoth when the next crisis strikes. They would just have to crash, taking thousands of jobs and millions in savings with them. The same goes for the Bank of Scotland.

The problem is there is no real transfer of power on offer as a result of the referendum. Alex Salmond's business-loving, oil-addicted party do not present a materially different future as a result of independence. So the SNP has a very narrow platform. In effect all they can offer is "Scotland ruled by Scots" and "no more Tory governments".

Given that the SNP and One Nation Labour are equally willing to kow-tow to ruthless corporations (remember the shocking betrayal at Grangemouth last year), that's pretty uninspiring.

The SNP had no answer to the question, what will happen if Scotland is excluded from a shared currency? They simply called Osborne-Alexander-Balls "bullies" and said they would never carry through the threat.

They didn't point out the obvious, that this shows that the three main parties are entirely in agreement on economic and financial issues, with absolutely no difference between them. That's because the SNP share the same ideology!

It couldn't have been clearer this week, when the ConDem Cabinet met in Aberdeen and the SNP Cabinet met just down the road at Portlethen. They may have been separated by a few miles, but they simultaneously presented the same fawning, acquiescent policies to the giant oil corporations.

This independence referendum is certainly putting questions of democracy and the realities of state and economic power into sharp relief. It is a disruption of the status quo that is causing huge distress, particularly for Labour.

If the SNP cannot give any powerful reason why people should vote for independence, nor can Labour give any meaningful reason why they should not. A strange scene yesterday at Westminster underlines this.

SNP MP Pete Wishart went into the voting lobby to see which Scottish MPs had turned up to vote in a motion on the bedroom tax. Scottish Labour MPs failed to even turn up last time, to their eternal shame.

East Renfrewshire MP Jim Murphy rushed up to Wishart screaming "fuck off, fuck off, fuck off....." over and over again. It was a bizarre scene by all accounts, but I would argue this unbearable tension felt by Scottish Labour is about more than loss of seats and personal incomes.

As Labour cannot advance either a socialist case, a working class solidarity case for the continued union of Scotland and England or principled support for self-determination, then what have they become? Demonstrably, undeniably, another party of big business, a process that began with the Blair governments. Neverthless, Labour’s crisis over Scotland is an  historic moment for the party of Keir Hardie.

Penny Cole

RBS is a vulture bank driven by debt

From the disaster at the Co-op Bank, driven into the hands of hedge funds by incompetent management, to the Royal Bank of Scotland, which forced small firms out of business so it could buy up their assets on the cheap, the message is clear.

Five years after the great financial crash of 2008, the regulators still haven’t got a clue what is going on and bad debts are threatening to bring the whole system crashing down in an even more calamitous way.

What’s the government been doing? Apart from bailing out banks like the RBS, the answer is precious little. The banking bill going through parliament ignores or weakens many of the recommendations made by the Banking Commission set up by the ConDems.

The Commission proposed strict separation between the lending and trading arms of the global banks. But the government, fearful of the reaction of the financial sector, watered this down.

As to the notorious RBS, which after it was nationalised continued to pay vast bonuses to senior staff, including disgraced CEO Fred Goodwin, it has taken a self-commissioned report by Lawrence Tomlinson, a care home entrepreneur, to expose how the bank is wrecking small businesses. His report claims:

“The experiences of many businesses across the country suggests that, at least within RBS, there are circumstances in which the banks are unnecessarily engineering a default to move the business out of  local management and into their turnaround divisions, generating revenue through fees, increased margins and devalued assets.”

Viable companies told Tomlinson that RBS had put them into the hands of what they called the bank’s “hit squad”, which imposed vast fees and fostered a “climate of fear” among its struggling customers. When the firms went into default, another division of RBS bought them for a song as a way of reducing the bank’s nominal debts.

RBS is desperate because its debts are astronomical. Over and above the £36bn of toxic loans RBS has put into its “bad bank account”, The Herald reports that there are a “number of enormous landmines that continue to lurk just under the surface”, amounting to a staggering £1 trillion.  

Over to the Co-op Bank. Once it was part of a group that had its origins as a mutual created to help working people and the labour movement. Today it is a shambles, driven into the ground by people like former chairman the Reverend Paul Flowers, whose colourful private life has boosted tabloid circulation.

His is a story of sex, drugs and politics that helped bring down a bank. After owning up to a £1.5bn capital shortfall, it was recently acquired by vulture funds group LT2. Poor management and light-touch UK financial regulation lay behind its demise.

Flowers, who once underestimated his bank’s asset base by £44bn in public evidence, was appointed to the Co-op’s board in 2008 after using his network of labour movement contacts to his advantage. In the last months of New Labour in 2010, he was appointed chairman of Co-op Bank.

The Financial Times reports: “Crucially, he had been made a non-executive director of the bank the year before, passing a lengthy ‘significant influence function’ interview. So he got only a light grilling from the FSA on his suitability for promotion. Labour links counted in his favour, say people familiar with process.”

In 2009, the Labour government persuaded the Co-op to buy out the Britannia Building Society, which came with vast debts. This was a major factor in the Co-op’s eventual collapse. The ousting of Flowers in June this year was too little too late to save the bank.

Of course, the ConDems are milking the Co-op story for all its worth for their own political ends. But the Blair-Brown governments and their ministers also share political responsibility for the debacle at RBS and the Co-op, not that they will ever acknowledge it.

Paul Feldman

Communications editor

A corporatocracy in all but name

The scandal engulfing the Cameron government over ministers’ close links with the Murdoch media empire, as well as promises made about BSkyB before the 2010 election, is symptomatic of a wider political disease called corporatocracy.

How governments were “bought” by the corporations, especially the so-called investment banks, is the story of how the state became a direct mouthpiece, advocate and sponsor of big business.

It parallels the rise of a global economy dominated by transnational businesses that find national borders an irritation and are prepared to move capital to the region or country where it is most profitable without a second thought.

Murdoch was doing no more than what a shareholder-driven business has to do. News Corp lobbied to win support for its aim of buying up shares in BSkyB. It made use of its connections to culture secretary Jeremy Hunt and prime minister Cameron.

The fact that the plan coincided with the hacking scandal, leading to the Leveson inquiry, blew their strategy out of the water. With the BSkyB deal off for the indefinite future, the Murdochs have no further need to protect ministers.

Murdoch’s media empire is moving away from supporting the Tories and is backing the Scottish National Party north of the border. Now commentators like Peter Oborne are speculating that the government itself could fall over the scandal. The fact that Cameron is regarded as a traitor by traditional Tories for getting into bed with the Lib Dems and being too soft on Europe is only fuelling the flames lapping at the door of No.10

The Labour Party is making a great deal out of Cameron’s difficulties but let’s not forget that the previous Blair/Brown governments were politically responsible for perhaps the biggest scandal of them all – the creation of a deregulated banking industry.

Deregulation was not the prime cause of the financial meltdown of 2007 but played its part when the unravelling began. If Cameron had his Chipping Norton set with Murdoch employees Rebekah Brooks and Andy Coulson, then New Labour had its prawn cocktail circuit.

Blair and Brown assiduously courted the banks before and after the 1997 general election victory. They pledged “light-touch regulation” and Labour’s endorsement of the City and financiers in general.

Sir Fred Goodwin, who ran the Royal Bank of Scotland into the ground, by 1999 was actually in the government machine itself, chairing task forces on the work of credit unions (!) and the New Deal programme. In 2001, Goodwin attended a pre-election lunch for bankers at Chequers aimed at securing their support at an election. In 2004 Goodwin became one of eight bankers knighted under New Labour.

So when in 2007, RBS decided to take over the Dutch bank ABN Amro, no one in Whitehall or the Financial Services Agency demurred. ABN Amro was badly exposed to the US sub-prime market and RBS was severely weakened as a result. The rest, as they say, is history. Taxpayer bailouts followed by recession and spending cuts. Thank you Brown, Blair, Ed Balls (who in 2006 praised deregulation) and Yvette Cooper, chief secretary to the treasury.

The official report into the collapse of RBS identifies key moments between 2005 and 2007 when the Financial Services Authority created by New Labour backed off from challenging the bank’s low levels of capital and liquid assets.

Adair Turner, FSA chairman then and now, admitted recently: “Was there, however, a pervasive influence of assumptions about the City on the UK political dynamic? Yes, there was. There was a belief that light-touch regulation, or limited-touch, would make the City bigger, and that the City was a source of employment and tax revenue in particular. And therefore there was clear pressure on the FSA at times to say, go easy on the city. The FSA never used the phrase ‘light touch’, but politicians did, and they did it in speeches, which were directed at the FSA.”

Yes, the mainstream political parties are all in it together and have been for a long time. At our expense. The present state, the corporatocracy, is rotten to the core, undemocratic, beyond reform and ruling on behalf of the 1%.

Paul Feldman

Communications editor

Whatever happens on bonuses, we lose out

For all the excitement generated over the reluctant decision by Stephen Hester, the chief executive of the Royal Bank of Scotland, to decline his near £1 million bonus, this is not a zero sum game.

Hester forgoing his bonus, which would have been paid in shares, does not mean, for example, that as a result there is more money in the public purse to offset against the ConDem’s austerity cuts programme.

Nor does it help hard-pressed RBS borrowers – from small businesses to home owners with mortgages. They will not be treated any more sympathetically by the bank when they struggle to meet repayments.

Will it prevent RBS from punishing hard-pressed workers struggling to make ends meet when they accidentally drift into the overdraft zone? I don’t think so.

Paradoxically, it seems that the shares, if they had been cashed in over the next couple of years, would have produced a tax take of around £500,000 depending on their market value at the time.

In other words, if Hester hadn’t taken home more than £11m in shares and cash since being brought in by New Labour to run the bailed-out bank in October 2008 (with a golden hello of 10.4 million shares), we in the shape of the 99%, would not be better off by the same amount.

As RBS bankers outside the boardroom form an orderly queue to share in a bonus pool worth an estimated £500 million in the next month or so, some are waiting to see how many shares they get under a scheme approved in 2009, when Gordon Brown was prime minister. John Hourican, head of RBS’s investment bank, could receive up to 21.3m shares in April – worth around £5m at last night's price – and options on another 7.4m shares.

What all this demonstrates is not only that the bankers hold the aces – there is clear evidence that the RBS board threatened to resign if the Treasury had tried to block Hester’s bonus – but that they also have absolute control over resources.

While the financial system continues to be run for profit to benefit shareholders and senior staff, no good can come of it. Quite the reverse, as we have discovered to our cost since the meltdown began in 2007. The state’s resources – aka taxpayers’ money - are despatched to bail out the system without delay so that things can stay as they are. The sums committed are then added to the deficit and result in more cuts.

All the remedies suggested by either the government or Labour leader Ed Miliband are designed to maintain the status quo of capitalist-owned banks that serve their own interest. Miliband, of course, was a member of a government that gloried the achievements of the bankers and financed large amounts of public spending from tax revenues from the financial sector.

Ed Balls, now shadow chancellor but then a Treasury minister, speaking to business figures in Hong Kong in 2006, remarked: “The UK’s financial tradition as a free, fair and open global market has resulted in tremendous growth in London’s international financial markets in the past decade – over-the-counter derivatives turnover up by 770%, foreign equities turnover up by 260%, cross-border bank lending up by 160% and foreign exchange turnover up by over 60%.”

Miliband is not opposed to bonuses – so long as they are “merited”! As for a one-off tax on bonuses – which Labour actually introduced in 2009 – that is hardly going to change what goes on.

As one comment on the Financial Times website noted: “What difference does Hester's bonus make to the billions already allocated to the rest of the banking community. Given the trillion the banks are now borrowing from the ECB [European Central Bank], I can only conclude that the banking community remains impervious to their financial reality. I wish someone would give me a bonus for defrauding my customers and still managing to go bankrupt!”

The real issue is about who owns and controls the country’s financial resources and what they are used for. Massive bonuses are a symptom of the problem – but not the problem itself.

Paul Feldman
Communications editor

A Britain divided by class and wealth

Sometimes it takes a comedian to tell it as it is. Rory Bremner just about summed up the real state of affairs as he mused in the columns of the Financial Times.

“I heard of a country where they are capping benefit payments and charging single parents for access to the Child Support Agency," observes. "And, there is also a country which plans to spend around £100bn on transport and the Olympics. I wonder, are these two countries related?”

He could have also pointed to the just-under £1m bonus payment offered to largely-state owned Royal Bank of Scotland head Stephen Hester. And while Hester has now turned it down, he won’t be short of money. He still has his salary of £1.2 million to look forward to. So he’s not likely to have to give up his chalet in Verbier, Switzerland or his 350-acre estate in Oxfordshire.

Bremner is right. There is the Britain inhabited by bankers, financiers, hedge fund owners and grandees of all kinds – and there is the rest. And as the dust settles, the only bleeping Labour can summon up is to claim credit for adding its voice to the complaints.

The reality is that the economy is deteriorating and that the issue of bankers’ bonuses will pale in comparison to what is coming up. Britain’s debt has now reached the £1 trillion and the UK economy shrank by 0.2 % at the end of 2011. Unemployment is rising fast, with one million 16-24 year-olds (22%) now out of work in the UK.

School leavers, students and other youth in the UK are joining the 23 million unemployed in the European Union, and some 200 million world wide. Spain has 50% youth unemployment while in the United States the figure stands at 23 %.

At the World Economic Forum meeting which has just ended in Davos, Switzerland, economic elites described youth unemployment as “a cancer in society”. The world is “sitting on a social and economic time bomb.... not a crisis but a disaster”, they said.

They are right. As around 40 million young people globally enter the workforce each year, it doesn’t take rocket science to work out that massive, long-term unemployment amongst young people will have explosive political results. Most people are aware knows that it was the lack of a real future – combined with years of political repression - which sparked the Arab Spring and the downfall of tyrants in Tunisia, Egypt and elsewhere during 2011. The lack of a future for an entire generation, globally is what is at stake.

For all their wealth and power, the bankers, company bosses and politicians, the truth is that the so-called masters of the global capitalist economy remain at a loss and are deeply divided. While the IMF is calls for austerity, financier George Soros said that the fiscal cuts, which Germany supports, could even lead to a "lost decade" of economic stagnation in Europe.

"This German insistence on austerity could destroy the European Union," he said. "This is reality, this is the harsh reality that we need to face. It is not written in stone, the future is not predetermined. We determine the future, so it would be well within the possibilities of the authorities to change it."

We have to agree, at least partly, with Soros. Austerity and cuts are not the answer and we can determine the future (albeit in a different way to what Soros imagines would happen if policy makers followed his ideas for reviving capitalism).

The top 1% rely on the rest to remain in their places and accept that the system is what it is and can never be transformed in a fundamental way. So developing an alternative outlook to that which views Britain’s class-based, class-divided society as impregnable is absolutely vital.

Corinna Lotz
A World to Win secretary

Turn anger over RBS bonus into action

The palpable anger over the £963,000 bonus in shares awarded to state-owned Royal Bank of Scotland chief executive Stephen Hester has to turn into some direct political and industrial action if society is to see an end to this kind of obscenity.

Hester is effectively a public servant, as 81% of the shares are owned by the state following a bail-out of the bank by the previous New Labour government. Since he took over as CEO in November 2008, RBS has sacked 33,000 staff.

The aim, as always with a capitalist concern, was to shed staff in a bid to return the bank to profitability. This Hester has done with the blessing of both the ConDem coalition and the Brown government that preceded it.

The mistake some people have made is to think that because the state owns a bank or two they would be run along different lines, perhaps more ethically or fairly. But the state nationalised the banks to prevent a collapse of the entire financial system – not to set up an alternative banking network.

The banks were allowed, nay encouraged, to continue along their usual profit-driven path. Recently-sold Northern Rock, for example, went about repossessing people who were behind with their mortgages and calling in loans while state owned.

As one of hundreds of angry comments on the BBC news website noted: “This is interesting, we own 81% of RBS and still the government and board of this bank show nothing but contempt for the general public and small business. RBS are about to repossess my brothers house for approx the same amount and close his building company putting people out of work and on the dole. Can anyone explain this madness?”

What is “madness” to some is sanity to others who hold the reins of a state that to all intents and purposes is a plaything of economic and financial elites. They call the shots – and not the government. Or as another sharp comment put it: “It's another sign the politicians aren't running the country, or at least not for the people. Their bonus is the cushy job their friends in finance offer them when they quit parliament.”

Robert Peston, the BBC commentator who broke the Northern Rock debacle, says he was “reliably told” that had the government blocked Hester’s bonus, it would have triggered mass resignation from the RBS board and the CEO’s departure. This financial blackmail clearly worked. Only a junior LibDem minister has demanded that Hester rejects the bonus – elsewhere there is silence.
So there you have it – the state is an extended arm of business. That has been the case since the modern state was formed in the early 19th century to facilitate the development of capitalism in Britain. For a period, this role was disguised by consensus politics, a welfare state, full employment and trade union rights.

The globalisation process produced transnational corporations and global financial institutions that more openly wagged the tail of the state. One consequence is that large numbers of people believe that traditional politics is corrupt, unrepresentative, undemocratic and a waste of time.

They are right. The state needs deconstructing and rebuilding with people’s assemblies and the like to create a real, functioning democracy.

Trade union leaders have reacted with outrage at the bonus for Hester, whose basic salary is £1.2 million a year. David Fleming, the Unite national officer, said: "What planet does Stephen Hester and his banking chums live on? Taking almost £1m from taxpayers' pockets as a bonus is utterly disgusting and offensive to every working person across the country.” Paul Kenny, the general secretary of the GMB union, said: "A bonus of nearly a million pounds looks to ordinary people like he has won the lottery – with a ticket they paid for.”

Public sector workers, by contrast, are facing a pay cut as a result of the government’s 1% pay limit (backed by Labour). If the union leaders are to be taken seriously about their desire to remedy gross inequality, they ought to be organising indefinite strikes against the pay limit (and pension cuts) with the aim of bringing down the ConDems. Otherwise it’s all hot air.

Paul Feldman
Communications editor

Climate activists change course

There will be no Camp for Climate Action this year, and leading activists say this is in recognition of the world’s changing economic and political landscape.

After a lengthy meeting of camp activists, a consensus was reached and a statement issued which says:

“The near-collapse of the financial system; droughts in the Amazon, floods in Pakistan; a new government in the UK; a violent programme of unprecedented cuts; food prices rising and real incomes eroding; revolutions across the Middle East… This is all very different from 2005 when the Camp for Climate Action first met to spark radical action on the greatest threat to humanity, climate change.”

Climate Camp mobilisations, as well as the protests by students last year, have shown that there is nothing passive or deferential about young people in Britain. Their actions have put the trade union leaders to shame, exposing them as weak-kneed in the face of injustice.

Visiting the camp over the years, you could chart the deepening of people’s understanding of the source of the climate crisis. Year by year, people moved away from the idea that ordinary human beings and their consumerism are to blame, to a recognition that it is the capitalist economic system of production itself that is the root of the problem.

As the Camp’s statement says: “As the financial crisis unfolded we moved to directly targeting the root cause of airport expansion and coal-fired power stations: our economic system.” The 2009 camp was the high point, with a huge sign at the entrance on London’s Blackheath stating “Capitalism IS crisis”.

But at Blackheath, the question arose – can we overthrow the corporations DIRECTLY by targeting them with protests; or can we only create change that is truly transformative by bringing down the governments and STATES which maintain their rule of the transnationals that have gone about destroying the planet’s eco-systems?

Climate Camp answered that question with more of the same, culminating with the occupation of the RBS bank’s headquarters in Edinburgh. This protest simply did not rise to the political challenge people in Britain were now facing, with the election of a Coalition government hell-bent on imposing the cost of the crisis on the mass of ordinary people.

This is a government that, far from curbing the role of the corporations in response to the climate crisis, is extending their reach. Ministers took part in the Cancun conference’s decision to abandon any attempts to sign a replacement treaty for Kyoto. Privatisation and cost-cutting will drive down standards in the name of profit.

The Climate Camp’s statement continues: “This is a unique opportunity to work together with others to create a more co-ordinated, dynamic and stronger movement against climate change and its root causes. Now is a chance to team up with the anti-cuts and anti-austerity movements and play a crucial role in the revolutionary times ahead. Anything but co-ordinated action is doomed to fail.”

The revolutionary times are, in fact, here and now. The new generation that is leading the revolutionary upsurge in North Africa and the Middle East are driven by the impact of the global crisis, including climate change that has contributed to soaring food prices.

Climate campaigners championed People’s Assemblies during the protests at Copenhagen in 2009 . Hopefully, climate camp activists will now join the movement to establish a network of People’s Assemblies throughout Britain. Then we will not only challenge the power of the state to impose cuts, and the corporations that are wrecking the eco-system, but actually go on to build a sustainable alternative to capitalism’s destructive growth addiction.

Penny Cole

Environment editor

Ireland and Britain in the same boat

You would be wrong if you thought that Ireland’s banking and budget crisis that has all but overwhelmed the country’s government, couldn’t repeat itself in Britain. In fact, the two countries’ fates are inextricably linked.

Ireland’s banks are essentially insolvent. They don’t have the money to cover the write-offs of loans to property developers that have gone sour. And the Irish government doesn’t have the money to bail them out. That’s why Dublin has had to bite the bullet and go cap in hand to the European Central Bank (ECB) and the International Monetary Fund (IMF).

The price to be exacted for a bail-out is destined to fall on the backs of Ireland’s workers. Public sector workers have already had their wages reduced by 15%. Further cuts are planned, along with tax rises and a reduction in the minimum wage, plunging the economy into even deeper crisis.

British banks have a massive exposure to debt-ridden Ireland. According to the latest figures, their total lending to Irish households and companies totals a mammoth £140 billion. The Royal Bank of Scotland, which is largely owned by the British taxpayer, is the most exposed at £54.4 billion, a third of which is residential mortgages.

Clearly, British banks are going to have go whistle for most of these loans, which explains why coalition chancellor George Osborne is so keen to lend Ireland billions (which would have to be borrowed as the British exchequer’s coffers are largely empty too).

It gets worse.

British banks, like their Irish counterparts, are also insolvent, despite commitments from the state amounting to £1.2 trillion following the global financial meltdown of 2008. A recent report by the New Economics Foundation, Where did our money go? warns:

“Based on Bank of England data, banks now appear to face a funding cliff. In order to maintain existing levels of activity they currently have to borrow £12 billion a month; the projections we reproduce in this report indicate that in 2011 they will have to borrow £25 billion a month. We believe the public sector is likely, once again, to be asked to bail out the banks for the emerging funding gap.”

Other analysts suggest that British banks will require another £1 trillion in 2011 as existing loans mature and need refinancing. There is no way that the Lib-Con coalition can stump up this kind of money, despite the savage cuts in public expenditure planned for the next four years. The banking system all but failed in 2008 – it may well do this time around.

Those who still insist that the crisis is largely “ideological” had better wise up. There is an objective, evolving global crisis of the capitalist economic and financial system. It is having a direct impact on governments, tearing them apart as in Ireland or rendering them helpless and ineffective as in Washington.

The bail-outs of 2008 only postponed matters. Mountainous debts and valueless securitised assets dominate the balance sheets of the banks. As the IMF-ECB team will insist in Ireland, those who work, add value and are the source of profits will be told they have to sacrifice their living standards and futures so the bankers can survive for another day.

Quite simply, it’s a price not worth paying. A revolutionary reorganisation of society on both sides of the Irish Sea, restarting the financial system on a new, co-operative basis, is rapidly becoming the only practical alternative


Paul Feldman
Communications editor

Tar sands: not ‘dirty oil’ but ‘bloody oil’

A new report produced by the campaigning organisation Platform reveals the extent of global banks’ funding for the world’s most polluting activity. And RBS, which is 84% owned by the UK public, is the biggest lender.

The campaign to stop RBS and the Royal Bank of Canada from funding the extraction of oil from tar sands in Alberta was stepped up this week with protests in London and Toronto. The Platform report explains how tar sands extraction is devastating Indigenous communities, wildlife and vast areas of boreal forests, as well as being many times more carbon-intensive to produce than “conventional” oil.

“The higher oil prices in recent years have meant that it’s become a more attractive prospect for oil companies to expand their operations in the costly process of obtaining and processing the thick bitumen into a usable form. It’s estimated that the industry is looking for a capital investment of $120-$220 billion over the next 20 years to build the new pipelines, mines, refineries and upgraders that are necessary to sustain the boom,” says campaigner Kevin Smith.

In fact, the banks have blood on their hands, says George Poitras, of the Mikisew Cree First Nation: “We are seeing a terrifyingly high rate of cancer in Fort Chipewyan where I live. We are convinced that these cancers are linked to the Tar Sands development on our doorstep. It is shortening our lives. That's why we no longer call it 'dirty oil' but 'bloody oil.”

The report scrutinises Investments of 26 banks from across the world, including Barclays, RBS and HSBC – both their direct lending to companies involved in tar sand extraction and to others involved indirectly, for example, in transporting the oil.

Platform, and other organisations, are mounting a further legal challenge to the UK Treasury, insisting that the government could and should make RBS halt this investment. When first hauled into court last year, the Treasury claimed that any such restriction would be interference in RBS’ profitability, and that it would be inappropriate for ministers to impose wider policy objectives on RBS.

But the campaign disputes this standpoint and says that the government could issue some instructions if it wanted to. After all, tar sands extraction runs entirely counter to the government’s own stated policies on sustainable energy and carbon reduction.

What this case underlines is the extent to which the corporations, and their financial backers, are the driving force of climate change and that they are not going to change now.

RBS had losses of £3.6bn in 2009, but the losses were lower than expected. There is no doubt that all the banks will continue to pursue any potentially profitable investment, and for them fossil fuels are one of the routes back to improved balance sheets. Another example is that of Chase Manhattan, under attack for funding the most environmentally-damaging open cast coal mining in the US.

Green campaigners sometimes speak about ending “our addiction to fossil fuels”. In the case of individuals this is a misleading characterisation – we are not addicted to fossil fuels, we are force fed them in a million different ways.

But in the case of the banks, it is spot on – though it might be more accurate to say they are addicted to profit. Faced with the options of making a fast buck from investing in proven, but polluting, technology or investing in cutting-edge sustainable technology that may not deliver profits in the short term – you know what decision the banks are going to make.

Penny Cole
Environment editor

Business as usual for bankers

Despite the mind-blowing size of bank bail-outs, governments on both sides of the Atlantic are struggling to have even a modest impact on the behaviour of those held responsible for the collapse of the global financial system. It is quite a demonstration of capitalist power relationships, with politics coming a distant second.

For example, New Labour's one-off 50% levy on the bonuses banks pay to their high-performing senior staff has proved to be no deterrent. Banks operating in the UK are set to pay out an expected £40 billion over the next few weeks, absorbing the extra tax themselves to protect the size of bonuses.

Stephen Hester, chief executive of the Royal Bank of Scotland, told MPs yesterday warned that the government-guaranteed lender has no choice but to pay large bonuses to its top employees as it has become a “prisoner of the market” despite being 84% state owned. What Hester is acknowledging is that the state is in fact propping up the market.

We, the taxpayers, are making it possible for bankers to enjoy massive bonuses once more. And for doing what precisely? By all accounts, banks are still not lending to ordinary people and small businesses. All the profits are being made out of “investment” activities – mergers, acquisitions, currency speculation and so on.

The global financial crisis broke in 2007, and Northern Rock was just the first New Labour took into public ownership, in February 2008. Since then the government's strategy has been to restore the bankrupt banks to profitability and return them to the private sector.

On January 1, following European Union approval, Northern Rock was split in two. Northern Rock plc is the “good”, profitable bank that will hold and service all customer savings accounts and some existing mortgage accounts, as well as offering new mortgage and savings products to new and existing customers.

Northern Rock (Asset Management) plc is the renamed old and “bad” bank holding and servicing the majority of existing mortgage and unsecured loan accounts. It will not offer any new products or provide the option of additional borrowing to its existing customers. Guess which of the two will be returned to the private sector and which will remain in public hands, in receipt of continuing bail-outs funded by taxation?

In the US, Barney Frank, Democratic chairman of the US House financial services committee, said he was not in favour of replicating the UK’s one-off tax on bonuses. “The problem with taxing only bonuses is they shift it to other forms of compensation.” He's not wrong there. Banks employ armies of accountants and consulting firms like Ernst & Young who specialise in arranging the figures, switching funds around the world to minimise charges

The political heat on bonuses is also rising in Washington. In the US bank stocks fell in New York as investors took a dim view of the Obama administration’s proposals to charge banks a levy to pay for the estimated $120 billion the government lost on its bail-out fund.

Top US financial executives will testify today in the opening sessions of before the Financial Crisis Inquiry Commission. The FCIC will cross-examine the chief executives of four large banks to explore the causes of the 2008 meltdown. The commission is scheduled to report in December. Many more catastrophes will engulf the global economy before then.

One thing the commission won't do is to shed much if any light on the essentials of capitalist profit-chasing growth that called for the 30-year explosion of credit preceding the crash.

The mother of all bail-outs

In the run-up to the 2012 London Olympics, the New Labour government has put in a credible bid for victory in the financial events with the sums spent on bailing out the banks. The increasing size of the bail-outs shows one thing – the crisis is getting worse rather than better.

The Royal Bank of Scotland has so far received a world-record £53.5 billion since the onset of the crisis in 2007. That accounts for most of the total of £74 billion of taxpayers’ money the government has put into the banks, including Lloyds and HBOS, over the last two years.

The latest £25.5 billion for the RBS announced by Chancellor Darling yesterday is part of a second bank bail-out which adds up to nearly £40 billion, which is more than the amount handed over in 2008. The government is hoping this will keep the banks afloat whilst they tear themselves apart under direction from the EU’s competition commission.

The dismemberment of systemically important “too-big-too-fail”’ banks is a hot topic for the world’s financial community, but there is no agreement on a co-ordinated package of regulation and reform. Some want to return to the regime established in the wake of the 1929 crash which separated high-risk investment – gambling – from the relatively safer, but less profitable business of balancing deposits and lending.

Others, like the IMF, are busy trying to work out how to reduce the grossly unsustainable government deficits resulting from attempts to prevent global meltdown. All of the schemes under discussion concentrate their attention on repairs to the financial system. None of these can work however.

Martin Wolf, the Financial Times’ leading commentator puts it starkly: “It is idiotic to discuss the reduction of the huge fiscal deficits, without considering the nature of the offsetting adjustments in the private and external sectors.” What he implies is that the financial system can’t be fixed without either an “extremely perilous” return to credit-led growth.

Yesterday the Indian government gave its verdict on the health of the global economy. It swapped $6.7 billion of its US paper dollars for 200 tonnes of gold bullion put up for sale by the IMF. This is the latest and strongest indication that the Asian countries are moving away from a reliance on the declining dollar. India’s finance minister couldn’t have put his reasons clearer. He said the economies of the US and Europe have collapsed.

The contradictory movement of the tectonic plates of the capitalist financial and economic system is producing seismic shocks throughout the world. Even its most ardent defenders are losing faith in the possibility of a “solution” that is anything but an attempt to repeat the past.

Warren Buffet, the capitalist system’s most long-standing and successful investor of other people’s money has just bought a US railroad, in his biggest ever deal, describing it as “$an all-in wager on the future of the American economy”. Burlington Northern Santa Fe is a freight company. Its biggest cargo is coal for power stations. So much for concern about global warming.

Profit-motivated growth has brought us to an historical crossroads. The capitalist road leads to economic destruction, warfare and the collapse of life-support systems. If the historical process could speak to us directly, it would surely urge humanity to move forward to a co-operative social set-up where a financial system that serves only shareholders and speculators is put out of its misery and corporations that plunder the planet become the property of the people as a whole.

Gerry Gold
Economics editor

Business as usual for bankers

Despite the credit crunch and the global financial meltdown, it’s business as usual for bankers. While the jobs massacre continues, thousands of small firms struggle to finance their operations and repossessions mount, bankers are cashing in – courtesy of the New Labour government.

As public sector pay deals go, the £10m package for Royal Bank of Scotland’s new chief executive Stephen Hester must be some kind of world record. The fact that it comes on the eve of massive government spending cuts and a wage freeze for everyone else, is as a clear an indictment of New Labour as anyone could wish to see.

RBS is now 70% publicly owned, rescued from collapse by the Brown government at the expense of present and future taxpayers. RBS has slashed thousands of jobs to “cut costs” and more are on their way. Hester, however, will draw a £1.2m salary, be eligible for an annual bonus of £2.4m, and get another £6.4m after three years if RBS shares recover to 70p each.

The package has won the support of shareholders, including UK Financial Investments (UKFI), the state body that manages the taxpayer's stake in the lender. Some financial institutions are reported to have said the deal may not be generous enough! And if you think Hester’s deal is over the top, apparently it is not as munificent as those for his subordinates. Presumbably RBS is spending £300,000 on corporate entertainment at Wimbledon in celebration.

Hester’s outrageous and obscene pay deal is such a straightforward example of what to expect from a bankers’ government, aka New Labour, that you might have half expected that Unite, the main trade union involved, might weigh in. But the leaders of Britain’s biggest union have spent so long cultivating New Labour, to no avail, that they don’t really feel one more kick in the teeth.

Graham Goddard, Unite deputy general secretary, could only say that Hester’s package will be met with “absolute disbelief” by front line staff and added that the “bumper” (!) pay package will leave a “foul taste” in the mouths of those who have lost their jobs at RBS. As to the government, it got no mention at all in Goddard’s statement . Goddard simply declared that the union was “appalled” that UKFI had not been “striving to save jobs” and instead had approved Hester’s pay package.

Never mind querying why UKFI has not been trying to save jobs, where have Unite’s officials been all this time? Where and when have they lifted a finger to save a single job lost as a result of the financial crisis of capitalism? Don’t bother to do the research because the answer is self-evident, as those who have joined the dole queue will testify.

UKFI's board of 15 is packed with former directors of failed banks, including Citigroup, Merrill Lynch and UBS. A senior director at Santander is in charge of Northern Rock and Bradford & Bingley, the wholly-owned state banks. There are only two people on the board from the Treasury. Their remit is to restore finance capitalism to health, whatever it takes in terms of jobs and pay packages.

In this they have the unconditional support of chancellor Alistair Darling, who told the City last week that no new regulations would be imposed on the sector and that it was a case, instead, of having “the right people and the right experience ... making the right call at the right time". Enter Stephen Hester, weighed down by his £10m package to the accompaniment of fake outrage from Unite. What a state of affairs! Time to get shot of the lot of them.

Paul Feldman
AWTW communications editor

How to 'rescue' the banks from the owners

On the day the Royal Bank of Scotland reported the biggest annual loss in UK corporate history - a mind-boggling £24 billion - and news emerged of former chief executive Sir Fred Goodwin’s £700,000 a year pension, New Labour announced its third rescue package for the stricken bank.

This was timed to prevent a further decline in the bank’s share price which had fallen by 90% in the last year. The plan worked. Shares rose. How so?

The deal stops short of total state ownership, limiting the state’s interest in the bank to a potential 95%. But the government’s, and hence the taxpayers’ non-voting share-holding leaves control and any future profits to the current shareholders. The details of the deal are complex, involving a tax-funded insurance scheme under which the state guarantees to buy up the bank’s toxic assets.

Since October, the major capitalist countries have pledged not to allow systemically important banks to fail. What is being protected by this conspiracy of the world’s most important governments is of course the system of social relationships in which private capital owned by shareholders underpins billions of employment contracts. The contract guarantees that part of the value generated by the labour of people who work for a living ends up as profit in the shareholders’ bank accounts.

But the economy is in freefall, and the profit system is broken. Japan’s exports have fallen by 50% in a few months and its industrial output plunged 10% in January - the biggest monthly drop since records began more than half a century ago, the government said today. Key industries like car manufacturing which have been the engine of growth are, like the banks, bankrupt, too important to be allowed to fail, too big to save.

This contradiction is real. It can be resolved in one of two ways. The competitive logic of capital insists on the destruction of overcapacity and the loss to humanity of much that it has produced. The 90% drop in RBS’s share value provides a measure of the shrinkage the system needs before growth can restart.

Another way is possible. A different kind of government and political system would greatly simplify the rescue by taking the banks – all of them – into full social ownership. Has anyone trodden this path in history? Well, yes actually. Just a few weeks before the Russian Revolution of 1917, Lenin wrote how capitalism had made a new society possible by creating an “accounting apparatus in the shape of the banks”, which revolutionaries “take ready-made from capitalism; our task here is merely to lop off what capitalistically mutilates”.

He added: “ We can ‘lay hold of’ and ‘set in motion’ this ‘state apparatus’ ...because the actual work of book-keeping, control, registering, accounting and counting is performed by employees, the majority of whom themselves lead a proletarian or semi-proletarian existence.” [emphasis in original]. A few weeks later the transfer of Russia’s private banks into public ownership was achieved.

RBS has vast resources and assets worth a nominal £2.2 trillion. It has been at the heart of the world’s financial system since the earliest days of capitalist production. It grew to become one of the world's top 10 financial services groups which operate in every country around the world.

The services they provide over global networks enable people and organisations throughout the world to account for the products they produce and exchange.
In common with most of the big banks, RBS provides insurance services. It is the second largest general insurer in the UK, and the biggest provider of motor insurance. It develops and maintains the infrastructure and technology that support its branches and cash machines, internet and telephone banking services, mortgage processing and money transmission.

The work of the bank is carried out by the more than 140,000 people it employs worldwide. Under their control the bank can continue without the need for shareholders. From their own ranks they could elect a new system of democratically-accountable management. Who needs the owners or executives like Goodwin? No one! It's time to seize what belongs to us in any case.

Gerry Gold
Economics editor