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Bookmark and ShareAndy Wimbush is nef‘s Communications Officer and blogmaster.

Ed Miliband in the Guardian on Saturday:

“Institutions are the things that define governments. The 1945 government was defined by its relationship with the NHS. The 1997 government was defined by … institutions like Sure Start. I think the idea of the People’s Bank, the network of post offices around the country connected by a new financial institution, is one of those ideas. It speaks to people’s sense of community – and frankly, banks have let down low-income consumers, and others as well. It is part of a new deal for the low paid around the banking industry. […] It is part of a bigger reform I think we need in the relationship between individuals and financial institutions. We have a set of institutions in our post offices that can form the basis of this banking system, but up to now we have not put into practice this idea that it can be a very serious financial institution and, if you like, a competitor to the conventional private sector. At present there are limits to what the Post Office can offer in terms of current accounts – we will expand those services and link them up with credit unions.”

This is really fantastic news, not just for those of us who have led the campaign for a Post Bank here at nef and beyond, but for people living on the front line of financial exclusion. Both the Liberal Democrats and Labour now support the Post Bank, and there have been some positive murmurings in the sidelines of the Conservative Party.

You can help build momentum for the creation of a Post Bank, particularly if you live in a Conservative constituency, by asking your MP to sign Early Day Motion 344.

Bookmark and ShareAndy Wimbush is nef‘s Communications Officer and blogmaster.

Lord Turner was at his iconoclastic best last night. In a lecture to the Cass Business School in London, the chairman of the Financial Services Authority once again questioned the value of Britain’s swollen financial sector and called for tougher regulation on City activities.

“We need to challenge radically some of the assumptions of the past 30 years,” he told the audience, “and we need to be willing to consider radical policy responses.” According to Turner, there are a range of ideas that need to be taken out of the “index of forbidden thoughts” and brought into the mainstream.

Among those radical policies was, pleasingly, the idea of a Robin Hood Tax on financial transactions, proposed by nef back in 2001 and now the subject of a major campaign from a coalition of NGOs, faith groups and trade unions.

Lord Turner also reflected on an interview last year in which he branded much of the activity in the financial sector as “socially useless”. “People have asked me whether I regret those comments,” he said, “The answer is no, except in one very small respect, which is that I think it would have been better to use the phrase ‘economically useless’ or ‘of no economic value added’.” This echoes nef‘s recent report A Bit Rich which found that Elite City bankers (earning £1 million-plus bonuses) destroy £7 of value for every £1 they create.

Turner’s comments come less than a week after the publication of new research showing that London has lost its unique position as the highest ranked financial centre in the world: it now shares that status with New York. The banking lobby has tried to argue that the news should make Government cautious about increasing taxes and regulation on the financial sector.

Here at nef, however, we have long argued that finance should be the servant, not the master of the economy. The protracted financialisation of the UK economy has not brought benefits to everyone. Around 3 million people in the UK still lack a basic bank account, and small businesses find it increasingly hard to obtain loans, as banks moved away from local, high street level activities to prioritise speculation and short-term profiteering. The more we can do to reconnect financial services with the real economy – and especially disadvantaged communities – the better. We might also do well to refocus attention on neglected areas of the economy – such as agriculture and manufacturing – in anticipation of the necessary transition to a low carbon food and energy system.

Lord Turner’s comments show that, contrary to what been said  by some defeatists in the movement for a just and sustainable economy, there is still plenty of opportunity to introduce new ideas and challenging, radical policy proposals. The door that was flung open by the financial crisis hasn’t closed yet. So let’s delve deep into that index of forbidden thoughts and see what works. If you’re curious, you can start here.

Bookmark and ShareAndy Wimbush is nef‘s Communications Assistant and blogmaster.

Three years ago, Local Works, a coalition of very diverse organisations including nef, the Campaign for Real Ale, the National Farmer’s Union Wales, the Federation of Small Businesses, Greenpeace, and Age Concern, mobilised thousands of ordinary people to lobby their MPs for a new law that would give local councils and community groups more power to demand thriving, sustainable local economies. The result was the Sustainable Communities Act, which was passed with full cross party support on 23 October 2007.

The Act was a victory for everyone resisting the unsustainable and destructive expansion of bland, corporate, clone town Britain. It gave towns, villages and hamlets the power to demand Government action to protect local wildlife and green spaces, promote local shops and jobs, boost local public services, tackle fuel poverty and develop new ways of broadening democratic participation in local areas. Over 100 local councils are using the Act, and more will adopt it in the future. But we now need your help to secure its position in UK law.

Right now, the Sustainable Communities Act Amendment Bill is passing through the House of Commons. The Amendment will ensure that the Act will be an ongoing process, reviewed and discussed year on year. Last week the Amendment Bill successfully cleared its Committee Stage. It has the support of all parties and the Government. But in order for the Bill to become law before the General Election, it needs more time in Parliament.

Please email ministers John Denham and Harriet Harman TODAY and ask for that the Sustainable Communities Act Amendment Bill receives more time in Parliament. By doing so, you’ll help communities and councils fighting for thriving local areas.

Email Harriet Harman:

Email John Denham:

Sugggested email:

Dear Harriet Harman / John Denham,

The Sustainable Communities Act Amendment Bill is vital as it will ensure that the democratic involvement seen in the Sustainable Communities Act continues. I ask that you please do all you can to ensure the Bill receives the Parliamentary time it needs in order to become law before the General Election.

I look forward to hearing from you.

Yours sincerely,

[your name and your address]

Bookmark and ShareAndy Wimbush is nef‘s Communications Assistant and blogmaster.

Herman Daly, professor of economics at the University of Maryland, is one of the very few voices within the economics profession who has the audacity to question the pursuit of economic growth at all costs. Of course, it wasn’t always that way: John Stuart Mill and John Maynard Keynes both thought that after a period of growth, economies would eventually reach a point of dynamic equilibrium. Professor Daly has just made his first excursion into the blogosphere with the brilliantly titled Daly News from CASSE, the Centre for the Advancement of a Steady-State Economy.

The term “economic growth” has two distinct meanings. Sometimes it refers to the growth of that thing we call the economy (the physical subsystem of our world made up of the stocks of population and wealth; and the flows of production and consumption). When the economy gets physically bigger we call that “economic growth”. This is normal English usage. But the term has a second, very different meaning – if the growth of some thing or some activity causes benefits to increase faster than costs, we also call that “economic growth” – that is to say, growth that is economic in the sense that it yields a net benefit or a profit. That too is accepted English usage.

Now, does “economic growth” in the first sense imply “economic growth” in the second sense? No, absolutely not! Economic growth in the first sense (an economy that gets physically bigger) is logically quite consistent with uneconomic growth in the second sense, namely growth that increases costs faster than benefits, thereby making us poorer. Nevertheless, we assume that a bigger economy must always make us richer. This is pure confusion.

That economists should contribute to this confusion is puzzling because all of microeconomics is devoted to finding the optimal scale of a given activity – the point beyond which marginal costs exceed marginal benefits and further growth would be uneconomic. Marginal Revenue = Marginal Cost is even called the “when to stop rule” for growth of a firm. Why does this simple logic of optimization disappear in macroeconomics? Why is the growth of the macroeconomy not subject to an analogous “when to stop rule”?

Read the entire article >>

Professor Daly has contributed to nef‘s Other Worlds are Possible and wrote the foreword to National Accounts of Well-being. Read nef‘s own critique of economic growth in Growth Isn’t Possible and Growth isn’t Working.

Hat tip to Jeremy Williams for spotting this.

Bookmark and ShareAndy Wimbush is nef‘s Communications Assistant and blogmaster.

Steel manufacturing in Shanghai | Image by 2 dogs via Flickr

You’d be forgiven for suspecting that the Chairman of the Financial Services Authority, Adair Turner, might be some sort of Climate Camp mole (and you wouldn’t be the first: the Financial Times nicknamed him Swampy last summer).

Look back over Lord Turner’s policy suggestions over the last twelve months and you’ll find that they read like an activist’s wishlist. He began his call to tame global finance by accusing banks of engaging in activity that is “socially useless”, and arguing that many financial institutions had grown “beyond a socially reasonable size”. In the same interview, Lord Turner proposed that banks be subject to a tax on financial transactions, pre-empting the Robin Hood Tax campaign. Speaking to nef policy director Andrew Simms on the BBC’s World Tonight in January, he even suggested that the pursuit of economic growth at all costs might become a “false god“. Not surprisingly, we’re completely in agreement: see our report A Bit Rich on the real social value of elite City banking, our publication on the Robin Hood Tax and our various reports on the limits to growth and GDP: Growth Isn’t Possible, Growth isn’t Working and National Accounts of Well-being.

The reality is, of course, that Lord Turner is a figure at the heart of the establishment, who has reached his conclusions not through ideology, but from a long cool look at things as they stand. Now he is back in the news for his suggestion that government should consider a carbon tax on cheap imports from countries not implementing serious climate measures to help boost British manufacturing and encourage world leaders to tackle climate change. From the Guardian:

Lord Turner, who heads the UK committee on climate change, said the government should “rigorously assess” bringing in levies on cheap imports from countries outside the European Union, which are not subject to carbon-related costs such as the EU emissions trading scheme.

Ministers have in the past resisted calls from European counterparts to introduce such carbon levies, arguing they would be anti-competitive. In future, heavy industry such steel and cement manufacturers in the EU will not have to pay for most of their allowances to emit carbon under the trading scheme, unlike other firms taking part. The idea is to protect EU manufacturers and prevent “carbon leakage” – plants being moved to countries which do not have their own trading schemes.

It has emerged that Indian-owned steelmaker Corus, which is closing its Teesside plant, stands to pocket around £250m by selling unused carbon permits. Unions allege that this is why the company does not want to find a buyer for the plant.

Lord Turner said a change of approach was needed. “Business needs a clear and consistent market-based incentive to move towards a low-carbon economy. We can’t solve the problem by giving out emission allowances for free as the only option for internationally trading manufacturing sectors. Border carbon-price levelling should not be excluded, but rather subject to rigorous assessment alongside other options.”

In 2003, nef published a report called Free-riding on the Climate which proposed that since UN negotiations were not delivering the binding agreement necessary for avoiding dangerous climate change, the UK and the EU should consider using litigation or trade measures to force other industrialised countries to cut emissions. The thinking behind the idea is that if some countries are spending money to cut their emissions in industry and manufacturing, then they will be undercut by cheaper goods from other countries that are still using cheap and dirty energy. A border tax on these imports would try to redress the balance. It’s called a countervailing duty, and is permitted by the World Trade Organisation in certain circumstances. Andrew Strauss, Professor at Widener University School of Law, explains:

The Organisation currently allows states to impose countervailing duties when foreign companies ‘dump’ goods into their markets at less than the market value, and to offset the previously discussed competitive trade advantage that foreign companies gain when they receive subsidies from their governments.

So despite seeming like a radical measure, a carbon tax wouldn’t be without precedent in other areas. In fact, nef‘s report pointed out that there was a scheme introduced in the USA to help clean up domestic toxic sites, which was paid for by taxes levied on the petro-chemical industries: the 1980 US Hazardous Substances Trust Fund, popularly known as Superfund. GATT – the precursor to the WTO – decided that the Superfund wasn’t an unacceptable restraint of trade.

When George W. Bush was resolutely refusing to even acknowledge climate change, Caroline Lucas – on nef‘s behalf – asked Pascal Lamy, then European Commissioner for Trade, whether economic measures against the United States would be permissable under existing agreements. He replied that it was a “thought-provoking contribution”, adding:

“There is a clear case for being aware of any adverse effects on our industry and doing everything in our power to minimise these. In that sense, it is relevant also to keep under review the scope for action under WTO rules to ‘level the playing field’.”

Even with President Bush out of the way, a binding international agreement on climate change still seems impossible to reach. Perhaps it is time to reconsider the possibility of border taxes and sanctions against those countries who are still taking a free ride on the climate.

Letter to the Financial Times, Friday 26 February.

Sir, The Institute of Directors claims (report, February 23) that the UK could not cope with the European Union’s proposal to increase paid maternity leave. But there is a wealth of evidence to suggest that the UK’s public finances and economy could benefit from more investment in the early years of childhood.

The UK currently spends £161bn a year tackling preventable social problems that arise from disadvantaged childhoods, including crime, obesity, mental illness and family breakdown: far more than any other country in Europe. The UK is also ungenerous on parental leave: despite being one of the wealthiest countries in the European Union, the UK spends only 0.11 per cent of gross domestic product on parental leave, offers no statutory pay at a full-time equivalent rate and allows fathers to take only two weeks’ paid leave.

Countries that invest in provisions for early childhood, including full-time equivalent paid parental leave and universal childcare, tend to have far fewer social problems, and therefore save money on public services. Finland offers both parents 35 weeks of fully paid leave each and spends 0.81 per cent of GDP on parental leave, but it spends less than a quarter of what the UK does on coping with social problems per head of capita.

The EU proposals also have positive implications for gender equality. Countries that offer more paid parental leave also have a greater percentage of women participating in the labour market, who find it easier to balance family commitments with working life.

Contrary to what the IoD thinks, more paid parental leave would not leave businesses and the state “picking up the bill”, but would deliver real long-term savings, a stronger and more cohesive society and, most important of all, happier, healthier childhoods. Investing in children would be good for us all.

Jody Aked
Nicola Steuer
Eilís Lawlor
nef (the new economics foundation)
London SE11, UK

A letter published in last weekend’s Observer, Times and Sunday Times:


We urge the UK Government not to heed the siren’s song of the 20 economists who, having failed to predict the crisis, now seek to advise on its resolution.

The world economy is in the deepest recession since the Great Depression. In the UK, output has collapsed by £70bn on an annual basis. Under such conditions, common sense tells us that the government must compensate for the collapse in private investment and address the high level of unemployment.

The only way to restore the public finances to health is to restore the economy to health. And that means public investment (not cuts) to create jobs and income in the private and the public sector. Government should oblige the banks that have been effectively nationalised to lend to the public sector at low rates of interest. Consequent tax revenues raised and savings on benefit expenditure will reduce the public debt. As Keynes observed: “Look after the unemployment and the budget will look after itself.”

There is already a credible plan on the table. It is called the Green New Deal. Invest now and we could kick-start the transformation of the UK’s energy supply while creating thousands of new green-collar jobs, restoring the UK’s skills-base and building the recovery on the manufacture of necessary goods. We urge the government to act now and implement the Green New Deal without delay.

Andrew Simms
Policy director, nef (the new economics foundation), London SE11

David Blanchflower
Professor of economics, Dartmouth College

Dr Anastasia Nesvetailova
Assistant professor, international political economy, City University

Victoria Chick
Emeritus professor of economics, University College London

Andy Denis
Senior lecturer in political economy, City University London

Ann Pettifor
Director, Advocacy International

Christine Cooper
Professor of accounting, University of Strathclyde, Scotland

Colin Hines
Convenor, Green New Deal Group

George Irvin
Professorial research fellow, University of London, SOAS

Ismail Erturk
Senior lecturer in banking, Manchester Business School

Prem Sikka
Professor of accounting, Centre for Global Accountability, Essex Business School

Richard Murphy
Tax Research LLP

Dr Stephanie Blankenburg
Department of Economics, SOAS

Stephen Spratt
Chief economist, nef

Bookmark and ShareAndy Wimbush is nef‘s Communications Assistant and blogmaster.

Today sees the start of a campaign to introduce a tax on financial transactions in the banking sector that would raise billions to save vital public services, green the economy and tackle poverty.

Called The Robin Hood Tax, the campaign bears the same name as a report nef wrote back in 2001 with our colleagues at War on Want, which outlined why a transaction tax – sometimes called a Tobin Tax – would stabilise volatile markets and raise funds for international development. The Green New Deal Group also recommended a Tobin Tax in their latest report, The Cuts Won’t Work.

Even at a rate as low as 0.05 per cent on each transaction has the possibility to raise hundreds of billions each year. And when the banks have been saved at the taxpayer’s expense, it’s only right that we should see some return from it. And surely even the most self-assured banker – even one played by Bill Nighy – couldn’t be opposed to that.

nef is very proud to be part of the broad coalition of NGOs who are calling for this tax. You can show your support by signing your name on the Robin Hood Tax website.

Bookmark and ShareAndy Wimbush is nef‘s Communications Assistant and blogmaster.

Our policy director, Andrew Simms gave a lecture to the London School of Economics last night introducing the kind of economics we do here at nef.

Listen now (mp3; 38 MB; approx 82 minutes)

Bookmark and ShareAndy Wimbush is nef‘s Communications Assistant and blogmaster.

The Tobin Tax is back in the headlines again, with Gordon Brown now insisting that support for a levy on financial transactions is growing. I’ve also noticed that our friends at the World Development Movement are starting to campaign in this area. nef made a case for the Tobin Tax way back in 2001, with our report Robin Hood Tax.

All of which gives me license to reprint a cartoon I published in the last edition nef‘s newspaper, Radical Economics. Enjoy!

(click for a bigger version)


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nef employees blog in their personal capacity. The opinions expressed here do not necessarily reflect those of the new economics foundation.