River Wissey Lovell Fuller

The Village Soapbox

March 2010

Rone gets on his soapbox to challeng Road Tax and the sale of cadbury's to a US firm

An Inequitable Tax

Road tax was originally intended to pay for the construction and maintenance of roads, but road tax combined with the tax on road fuel is far in excess of the amount spent on roads. Nowadays it is just another tax. Once upon a time people would say that it was inequitable in that it was a tax on one section of the community, the motorist, but since almost everyone is a motorist these days, that argument is no longer valid.

The current method of taxing cars according to their CO2 emissions is intended to encourage people to buy more efficient cars, presumably with the aim of reducing total emissions from road transport. The extent to which it will influence total emissions is debatable but one thing we can be sure of is that it will make a negligible difference to global emissions. A question exists in my mind as to the manner in which the CO2 emissions in gm/km are determined because there appears to be some doubt as to the correlation between the gm/km figure on which the tax is based and the actual miles/gallon, and therefore CO2 output, achieved by the cars. Certainly I find that I am paying nearly £200/year whilst a villager I know is paying around £50/year and yet our miles/gallon figures are not very different.

The real inequity, however, is that those driving 5000 miles/year are possibly paying the same road tax as someone driving 50,000 miles/year and producing ten times as much CO2. Without doubt the best and fairest way to tax vehicles is to put all the tax, beyond a nominal registration fee, on to the fuel. That would greatly increase the pressure on people to use more economical cars and drive less. It would ensure that the polluter pays and would also mean that those who use the roads most would pay most towards road building and maintenance. With the current taxing regime those who use the roads least, often pensioners, are subsidising the rest.

The Wrong Ideology

Simon Johnson, a former economist with the International Monetary Fund (IMF) is reported to have said:

"The power of the financial sector is based not on a few personal connections but on an ideology according to which the interests of Big Finance and the interests of the American people are naturally aligned - an ideology that assumes the private sector is always best, simply because it is the private sector, and hence the government should never tell the private sector what to do, but should ask nicely and maybe provide some financial handouts to keep the private sector alive."

He was, of course, talking about US policy, but arguably his diagnosis applies equally to Britain, certainly it has been the policy of British governments since Mrs Thatcher. I would readily agree that such an ideology suits Big Finance but would challenge the view that it is best for the British people. Following the banking collapse, the former chairman of the US Federal Reserve, Alan Greenspan said to the US Congress "Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity are in a state of shocked disbelief." Why, I wonder? They must have been aware of the risks they were taking and that the possibility of the bubble bursting existed, they were warned. Despite the 'shocked disbelief', however, the free market monster rolls on with little effort by government to restrain it. Those advising the government are the same people that advocated deregulation and are responsible for the mess. We should have learned from past experience that markets can get things wrong and should not be allowed to operate without some government intervention.

Without the billions of taxpayer's money the banks would no longer exist, they remain fragile, however, with toxic debt and claim to be unable to provide loans for industry on the scale required yet they reward themselves with billions. One can't help thinking that the government would have done better by ditching the 'private is best' ideology and using that money to intervene directly. If they had provided the funds for industry and the money to help those with mortgages, that would have given a more direct boost to the economy and would have reduced, or even prevented a slump in property values, thereby helping to maintain the value of the securities the banks held on the loans.

The American ideology is imposed on the world through the IMF and American foreign policy. The world has been sold the idea that, given free elections, the people would choose to push back the state and privatise as much as possible of the necessities of life. In any instance where free elections resulted in a government that did not subscribe to the ideology, notably in South America, but not exclusively so, the US government used every means at its disposal, including subversion by the CIA to remove the government, even if that meant replacing it with a ruthless dictator, just so long as that dictator was sympathetic to the American way and would not resist global companies operating in their country.

In the major democracies the electorate are wise enough and powerful enough to oppose the extremes of the doctrine, although in the UK we have shown less wisdom and allowed the pendulum to swing much too far towards privatisation. The implementing arm of the ideology, the IMF, operates mainly in the poor countries. They approach countries in financial difficulty and offer money with strings attached, usually they require the government to cease any subsidies of the poor, to cut state spending, deregulate their financial sector and open their markets to foreign goods. The usual result is foreign investors and global companies moving in, the latter being supplied with cheap local labour.

According to a recent newspaper article, the situation was clearly demonstrated in Malawi. Prior to the IMF intervention, the Malawian government subsidised fertiliser for the farmers. When these subsidies were withdrawn the crops failed people starved and food had to be imported, the situation worsened, eventually the government heard the cries of the people and rejected the IMF rules and reintroduced the subsidies. In the end Malawi pulled itself up by its own boot straps and became a food exporter once more. The Ukraine and El Salvador could be cited of other examples of IMF intervention with imposed conditions that have not brought benefit to the people. South Korea, on the other hand, was reported as having rejected IMF offers, they proceeded to introduce protectionist policies for their industries and provided subsidies. Within two generations they went from poverty to prosperity. (Whilst one cannot deny the success of South Korea, one has to suspect that it was America's interest in building a bulwark against communism that ensured their success).

Unless the people take a stand the multi-nationals and the city investors will be rich and maintained in luxury by the world's poor and the way things are going the UK population will be poor. We have suffered greatly in the last two years from our devotion to liberal capitalism, we desperately need a change in the direction of our economy but sadly whichever political party wins at the next election we are doomed to follow the same path.


So Cadbury has been sold to Kraft. Does it matter?

It is just another British firm that is now owned by foreigners and joins other iconic British names like BAA, Jaguar and Land Rover, Rover (BMW), our electricity generating and supply industry (e-on and Npower), our water supply industry, ASDA, Man.Utd along with many other organisations and, in my opinion, it does matter.

I am aware of the counter arguments by those who would say "it doesn't matter, we are part of a global economy, it makes no difference who actually owns the firm". It is also argued that British firms and investors have bought overseas companies, possibly the best example that they would point to is the iconic American "Greyhound Bus" now owned by First Bus. That may be so but it is probably true to say that no other major democracy would allow foreigners to own essential service industries such as electrical power and water. Certainly the French are much more protective, any foreign sale of one of their large companies requires government approval (which it is unlikely to give). Similarly many other countries impose controls, not least the USA. Our governments are and have been so wedded to the concept of liberal capitalism that they don't believe we should have controls but, since the others don't play the game, we are the gullible fools.

Of course the City investors and the hedge fund managers are opposed to protectionism, they were overjoyed at the sale of Cadburys, they knew it was coming, bought big in Cadbury shares (and that gave them considerable influence over the decision to sell), and went on to make a killing. Their big profits, however, bring little or no benefit to anyone other than themselves.

The reasons why it matters that our major concerns go to foreign ownership are:

The profits of the company go overseas,

The owners have no commitment to the country or the workers, they can easily decide to transfer the manufacturing process to another country (Kraft bought 'Terry's Chocolate' and promptly transferred the production to Poland).

Any new products, processes or inventions made by the UK staff of the company become the intellectual property of the company and bring no direct benefit to this country.

In this particular instance Kraft borrowed no less than £7.6bn in order to buy Cadburys so that Cadburys has gone from a firm with a secure financial position to being a part of a firm with an enormous debt to service.

It seems to me that it is just another step away for Britain from being a leading nation towards being a labour force for foreign employers. This trend will ultimately lead to a slow reduction, in relative terms, of the pay of British workers. The gap between rich (e.g. bankers and city investors) and poor will continue to widen. If it is true that we are pursuing the best policies, as our leaders would have us believe, how is it that the French, with their strong protective policies, still have a strong French owned manufacturing industry and there economy is in a much better position than ours?

Ron Watts

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