Labour – ‘the natural party of business’

This is one of those moments in history when the clouds of confusion begin to lift and it becomes easy to see how the land lies. Blowing away the clouds is John Hutton, the man in charge of the newly created Department for Business, Enterprise and Regulatory Reform. According to Hutton, Tory Leader David Cameron’s alleged weak support for business provides “a major opportunity for Labour” because “we want to be the natural party of business”. It is difficult to imagine a clearer mission statement for the all-new New Labour regime under Gordon Brown. And just in case you are in any doubt, Hutton adds: “This is not a rebranding… It’s a serious attempt to redesign across government how we work with business.”

In a bizarre reversal of historical roles, Hutton contrasted the Tory pledge to extend flexible working rights to all parents of under-18s with the new government’s more cautious approach. “In the whole debate about more employment regulation, you have to be mindful of the costs to British business,” he said. “You’ve got to be very careful and always take into account the impact and burden on business.” Hutton will be working closely with Sir Digby Jones, former Confederation of British Industry director general with a long history of opposing trade unions and their rights. Jones has been made a Lord by Gordon Brown and brought into the government as minister for trade.

And the trade union response? Jack Dromey is deputy general secretary of the Transport & General section of the new 2 million strong union Unite, which is still affiliated to New Labour. Dromey, who is married to deputy leader Harrriet Harman, has written a column in the Financial Times, trade journal of investment bankers and city traders. The union wants private equity takeovers to be included within the scope of Transfer of Undertakings Protection of Employment (TUPE) regulations which partially protect workers transferred from the public to the private sector. Fat chance! New Chancellor Alistair Darling has already ruled out an immediate clampdown on tax privileges used by the private equity industry, fearing they might have undesirable effects on the “absolutely critical” role of the City.

And then there’s Tony Woodley, joint general secretary of Unite, who says that many trade unionists are disillusioned with Labour and fed up with the government's record. "I know that because I am one of them," he told the delegates at the union's annual conference in Brighton. Woodley used his keynote address to launch a demagogic attack on the Blair government. "For the first time in my life I am seeing the sort of social divisions, the sort of wealth gap, here in our own country that I saw in other parts of the world when I was a teenager in the merchant navy.” He added: "Let Tony Blair's government be the last Labour government which let the gap between rich and poor widen. Let it be the last Labour government which boasted about the strength of its anti-union laws. Let it be the last Labour government which blocked social legislation from Europe - yet screamed blue murder if the priority of free competition is questioned.” But Woodley had another, much more disingenuous message. Delegates were told that there was now a chance to develop a "positive new agenda" under Brown's leadership. There is not a shred of evidence in favour of this deceitful argument. What Woodley and other union leaders refuse to accept is that the party founded by the labour movement has been transformed into the party of choice for big business, just as Hutton boasts.

Gerry Gold, economics editor

How corporations avoid tax

The news that Saga and the AA, the private equity businesses that are merging, paid no corporation tax last year highlights the fact that global business has turned avoidance into an international art. A shadowy world of tax havens and creative accounting means that the burden of funding the state falls increasingly on the shoulders of working people. In the case of Saga and the AA, they have paid almost zero corporation tax since their take-over by private equity funds Permira, CVC and Charterhouse two and a half years ago. Yet these three companies generated capital gains for themselves of £2.5 billion while 3,000 AA workers lost their jobs. Tax was avoided by the fact that that huge debts in the form of loans were imposed on the companies – and the interest paid on these borrowings wiped out all taxable profit.
Today the Treasury select committee of MPs will question CVC and other private equity firms about their operations. Some MPs and GMB trade union leaders are in a flap about private-equity businesses, which they describe as the "unacceptable face of capitalism". Apart from paying little tax, they asset strip and rationalise companies they take over before selling them at a profit. Saga's chief executive Andrew Goodsell’s shares will be valued at about £150m, of which he will pocket about £110m in cash. As for the AA's chief executive, Tim Parker, he is understood to be cashing in his entire stake, which is worth around £50m. Nice work if you can get it.

But private equity is only a small part of the story when it comes to corporations and tax, both in Britain and internationally. In Britain, New Labour under Gordon Brown has cut corporation tax so that at 28% the rate will be the lowest rate of the major economies. Yet while corporate profits as a share of GDP have increased on average from 21.5% to 22.5% since 1999, the proportion paid in corporation tax has fallen from 15% to 14.1%, according to the Tax Justice Network (TJN). At the same time, of course, the majority of ordinary earners have seen the share of their income taken by tax and national insurance rise to around 30%. The TJN estimates that in 2005 US$11.5 trillion of personal wealth was held offshore in 70 tax havens by rich individuals. If this wealth was taxed where they were resident or derived their wealth, the additional tax revenue available to fund public services and investment around the world would be in the region of US$255 billion annually. And the number one haven, according to the International Monetary Fund? Why, it’s New Labour’s Britain. Brown has made the UK the billionaire’s first choice of residence.

The TJN acknowledges the source of the problem, with a major report saying: "Tax havens are part of a much deeper problem facing the globalised economy. As a result of technological change and capital market liberalisation, rich individuals and transnational corporations (TNCs) can move their money freely around the world. Many have chosen to locate their wealth and their profits in offshore jurisdictions that offer minimal or zero tax rates." That problem is not going away, and no amount of pressure for tax regulation or reform will change this position. The corporations not only hold economic power but they are also well in command of national state policies as well, as the decade of Blair and Brown has demonstrated.

Paul Feldman, communications editor

Welcome to Brown's corporate state

Gordon Brown, who becomes prime minister today, may have a different style to Tony Blair, but the substance of New Labour remains the same. In fact, Brown’s politics are in many respects more explicit than Blair’s when it comes to promoting corporate-driven globalisation as the answer to everything. The architect of many of the government’s big business policies over the last decade, Brown is almost fanatical about the alleged virtues of unfettered globalisation. His speech to the assembled bankers and speculators gathered in the City of London for the Lord Mayor’s dinner last week could easily have been written by Goldman Sachs or a director of one of the private equity funds currently rampaging up and down the land. He congratulated the City for the fact that 40% of the world’s foreign shares are traded in London and that over 30% of the world’s currency exchanges (more precisely, speculation) takes place in the City. In a recent study of the top 50 financial cities, the City of London came first. Brown remarked: "So I congratulate you Lord Mayor and the City of London on these remarkable achievements, an era that history will record as the beginning of a new golden age for the City of London."

This "golden age" is, of course, the era of obscene wealth, where traders have walked off with seven-figure bonuses, house prices have soared beyond the reach of new households and inequality in Britain has grown sharply. So, forgive us prime minister Brown if we don’t join you in offering congratulations to the City for turning Britain into a rich man’s casino. Or that we don’t cheer when you say: "The financial services sector in Britain and the City of London at the centre of it, is a great example of a highly skilled, high value added, talent driven industry that shows how we can excel in a world of global competition." Or when you applaud the fact that Britain has the lowest rate of corporation tax of the major economies.

Brown talked of Britain being "pioneers of free trade and its leading defenders" with "a deep and abiding belief in open markets" and said that in the next stage of globalisation success will flow to countries which "which are open and not closed, stable, pro competition and flexible, able to adjust quickly to change". Britain, he warned, must be "ready to become even more flexible". To this end, each school in Britain will soon have a "business partner", and employer-led skills academies. A "National Council for Educational Excellence" will be created to implement the new business-driven education agenda. And who are its members? They include Sir Terry Leahy, otherwise known as the chief executive of Tesco, who dominate food retail, and Damon Buffini, a venture capitalist who runs one of the private equity funds currently enjoying the best tax breaks going.

Which brings us to the real mugs in this transition from Blair to Brown – the trade union leaders. They steadfastly refused to countenance any opposition to Brown in the hope that he would offer them some concessions when he became prime minister. To that end, they helped to block the attempt by socialist MP John McDonnell to challenge Brown in an election for the leadership of the party. Instead of concessions, the union leaders are about to receive the order of the boot. Brown intends to curb their power to put motions to the annual conference. Instead, party members will get the final say on policy through individual ballots. In effect, this means ending the conference's role as the policy-making body. Having created Britain PLC as a playground for the global economy and city speculators, Brown is to turn New Labour into a kind of shareholder institution. Welcome to Brown’s corporate state.

Paul Feldman, communications editor

Global cities - divided cities

Global Cities, the new exhibition at Tate Modern, raises big questions about the future of humanity. In the vast Turbine Hall, a banner announces that more than half of the world’s population now lives in cities. Originally made for the 10th Venice Architecture Biennale in 2006, Global Cities provides a bird’s eye tour of Cairo, Istanbul, Johannesburg, London, Los Angeles, Mexico City, Mumbai, Sao Paolo, Shanghai and Tokyo. There are presently over 20 mega-cities with populations of over 10 million people, including places like Tokyo (with Yokohama it runs to 33-35 million) and Mexico City with 18 million souls. It is expected that three-quarters of us will live in cities by the year 2050. Films, computer-generated models, architects’ designs and art works and statistics show the speed of growth which has transformed human existence on the planet earth during the last couple of decades of rampant corporate globalisation and the heavy costs. In Sao Paulo 1,000 new cars are registered each day; Mexico City faces a water crisis; Los Angeles has one in five families living in poverty in one of the wealthiest cities of the world; Mumbai is in the "throes of civic emergency", lacking sanitation for half its population. One out of three city dwellers lives in slums.

Curator Ricky Burdett’s take on this process is refreshingly humanist – he does not point to human reproduction as the source of crisis. On the contrary, he focuses on the extraordinary inventiveness and flexibility of humans as social animals as well as the harmful sides of urbanisation. The intention is to stimulate debate about London at a turning point in its long history. Skyscrapers are transforming London’s cityscape as property prices continue to rocket while the surrounding green belt is under enormous pressure from government and developers. But as Tate director Sir Nicholas Serota formally opened the event yesterday, he specially thanked its sponsors - Land Securities, Savills and Derwent London. Land Securities is Europe’s largest property development and investment company with a £15bn portfolio. It focuses on "maximising the opportunities to be found in the commercial property sector". With over 140 offices and associates world-wide, Savills is one of the leading international property advisors. Its website claims: "A unique combination of sector knowledge and entrepreneurial flair give clients access to real estate expertise of the highest calibre, across the UK, Continental Europe, Asia Pacific and Africa. Our distinctive collegiate culture and highly motivated staff ensure that we are committed to getting the very best results for our clients - every time." Derwent London describes itself as a leading central London office specialist with a combined portfolio valued at over £2.5 billion, and says its strategy "is to add value to buildings and sites… to deliver an above average annualised total return to shareholders." The cultural paradoxes of today’s corporate-driven globalisation could hardly be sharper. With most Londoners priced out of the property market and 62,000 households in temporary accommodation, the profit-driven control of the property market results in vast fortunes for some and misery for many others. Not so much a global city but a divided city.

Corinna Lotz, AWTW secretary

Privatising probation boosts the market state

The forcing through on Wednesday night of the Bill to part-privatise the probation service is one more New Labour act in the creation of a market state to replace the welfare state that developed in the period after World War II. Although more than 40 New Labour MPs voted against this latest privatisation, another 310 or so allowed the government to gain its victory in the House of Commons. Behind these fundamental changes lies the power of the globalised market economy to reduce the direct influence of the state and, at the same time, put a price on everything. Allowing private companies to provide probation services at a stroke dilutes the role and responsibility of government while creating new areas for profit making. The role of New Labour in facilitating this process overrides any other consideration that might raise its head, such as the growing crisis with youth offending, which privatisation is certain to accelerate.

Privatisation of the state and its functions has overtaken whole areas of what were formerly public services. In health, companies running private treatment centres, with patients supplied by the NHS, have unbreakable contracts. So when primary care trusts run out of money, as most have, they are forced into drastic cuts in local hospital care to balance the books because private firms are untouchable. In London, the part-privatisation of the Tube network courtesy of Gordon Brown allows firms to make huge profits while passengers endure overcrowding, delays and ever-increasing fares. What the Tories started with gas, electricity and rail, New Labour has taken much further. In secondary education, private-financed and run "academies" are increasingly dominant. And many are under the influence of religious groups who want to substitute creationist mumbo-jumbo for scientific theories of evolution. Care for older people, which was formerly the responsibility of local authorities, is now almost entirely in the hands of private companies. Support for the elderly in their homes is now severely rationed and many are forced to endure dire conditions as a result of the indifference of the local state to their plight. At the heart of the state, private corporations like IBM, KPMG, Accenture, Capgemini are having a field day as "consultants". They milk almost £3 billion a year in fees from the state for providing advice on how to rationalise and privatise services. Their fees, which are in the range of £2,000 per person per day, shot up 33% in the NHS between 2003 and 2006. In many government departments, consultants often constitute a parallel administrative arm which bypasses civil servants and provides direct access to ministers. The new, market state has at the same time assumed draconian powers over its citizens and adopted a war-like posture to the rest of the world, as the Iraqis in particular have discovered. The market state, along with the New Labour government, is truly harmful to the interests of ordinary people.

Paul Feldman, communications editor