This week in politics
|September 30, 2011||Posted by Tom Wooldridge under this week in politics|
This week saw the grand event that was the Labour party conference; it was the usual situation of media management that all three parties are exceedingly good at. It seemed to succeed – even the word ‘strike’ didn’t make big headlines despite some quite harsh words by some from the Labour ranks. The unions seemed quite pleased with Miliband, feeling he listened to them more than Brown and Blair ever did, and this is important when they make up most of the party donations. Ed Miliband seemed to have more substance in his speech than Clegg did and even more than past conferences. The policy ideas included a bonus tax to build an (unrealistic) 25,000 homes a year and cutting in VAT on home improvements to 5%. Miliband defined good and bad business (“asset strippers” such as Southern Cross, though he failed to mention that the people making the money from the Southern Cross were the Guardian Media Group), and proposed tax breaks for companies that recruit apprentices and new staff. Labour were critical of the Government’s policies as the opposition always are: the NHS, elected police commissioners and the entire ‘economic policy’. The first snippet of the Tories’ conference came out on Thursday 29th September with an announcement about consultations on raising motorway speed limits to 80mph and lowering town speed limits to 20mph. This is likely just to be conference rhetoric however.
The Euro took a slight turn for the better this week, and Greece is continuing its talks with the ‘Troika’ (the EU and the IMF) over a second bailout, which will require another austerity package that the citizens will once again resist. This is after talks earlier in the week when Timothy Geithner, US Treasury Secretary, said the European Financial Stability Fund should be increased from its current €440m to €2tn or €3tn to protect against further financial problems. This is the fund that bailed out Ireland and Greece last year; it now needs to be large enough to cope with possible Spanish debt (€730bn) or other highly indebted countries like Italy. The main reason it needs to be enlarged is that it will be used to recapitalise banks and countries when Greece defaults, as it is now assumed that Greece will. This second bailout just creates time to organise a course of action. The EU leaders are hoping a default could see them lose 50% of their €350m debt. Votes are required in all 27 members of the monetary union on raising the EFSF and the most important, Germany’s, went through surprisingly well on Thursday 29th leading to a possibility of the fund being raised to €440bn. This change would happen if all countries back it at the EU summit in November. The EFSF even has a brand new building to move into in 2013.
On more economic issues, the President of the European Commission, José Manuel Barroso, this week called for a financial transaction tax of 0.1% to or from any financial company based inside the EU (or whichever countries might sign it). This would extend to derivative contracts at a rate of 0.01% – this is a deal that only goes through when an asset reaches a certain value or on agreed date. It has support from France, Austria, Belgium, Norway and Spain but the UK government is resisting it. This would raise about €57bn or £50bn, and the UK’s national debt is £940bn to put it into perspective. The tax would start in 2014 and the money would go to the country where the transaction occurs. On the 30th September the Swedish finance minister said it wouldn’t work as Sweden introduced one in the 1980s and lost a significant amount of business to London. There were calls for a similar tax in 2009-2010 following the recapitalisation of the banking sector and the same argument against it became prominent. If it isn’t imposed internationally then financial firms will move to countries without it, and as America is very firmly against the policy it is unlikely to leave José’s office.