Let them Eat Cake

Just before the French Revolution Marie Annotate is reputed to have said in response to the peasants having no bread to eat, "Let them Eat Cake". While this is untrue, it serves as a useful allegory to the fact that the rich elite were detached and separated from the needs of the poor.

This detachment from the real needs of people is a lesson that has not been learned by our leaders. This week it was revealed that a Government Minister Tony McNulty, but to be fair to my overseas readers I should explain that he is the minister for lining his own pockets. Has been claiming an allowance for a second home in his constituency, just eleven miles from his own home in London. Further, this second home belongs to his parents. I feel sorry for his parents as they thought he had left home years ago, must be such an embarrassment for them to have a middle aged son still living at home.

This is not the only minister to be caught with their snouts in the trough of public money, as the home office minister (Interior Minister); Jackie Smith was caught doing something similar. What rankles with the public is that this is all done within the rules. Even though it looks corrupt and that MPs are just looking after their own interests.

You would think that with the recession biting and ordinary folks struggling to meet the bills, the people that are supposed to be leading and setting an example, are walking off with their pockets full of tax payers money would make them look like greedy pigs. Especially when there is such an outcry over bonuses for bankers and corporate greed.

The reality is that most of our leaders have lost touch with reality. This is most evident in the bonuses that have been paid to bank staff even when the banks have lost money. Being rewarded for success is the only reason why most of us work. It is when people traders banking managers have clearly not been successful and are still rewarded that demonstrates that detachment. A number of weeks ago one woman who works in one of the failed banks was asked if she should get her bonus and said; "Yes I only earn 95 thousand". That her basic salary was sixty thousand pounds higher than the average wage, shows how detached from reality she is. The now notorious Sir Fred Goodwin pension is another. Having driven the bank (Royal Bank of Scotland) to the brink of collapse, he was required to leave as a condition of the bank getting Government Money. Therefore in a dirty little deal, the fellow directors voted that he should get an increased pension pot of sixteen million. Further he could have a cash lump sum of two point seven million and to top it all, the bank would pay the tax on that lump sum effectively making the value of the cash pay out four and half million. Now there are two ways of looking at this, as he is fifty and could have gone on working for another fifteen years, this pension is a small price to pay. As in Fifteen years he could have gone on to wreck another three or four banks and that would have cost us billions.

However the reality is that he and his fellow directors do not think that they caused the problem. They do not think they are to blame. Had Sir Fred only got the basic pension as he would have done if RBS had collapsed it would have still been twenty seven thousand per anum, but this enhanced pot is seven hundred thousand pounds per year every year. It makes me ask the question, "How do I apply to become a failed banker?"

In history civilisations fall when the elite become detached from the people, when they over indulge and become decadent, Rome and The French Court are two examples that spring to mind. Our business and political leadership has made that error. At the centre of this recession is the boom and the bust of a property market that was out of control and over inflated. This was born out by the inflation figures released this week. Or should I say the two sets of inflation figures. The one that includes mortgage rates shows no inflation, 0% price growth. The other that measures retail prices shows an increase. The simple fact is that house price inflation has never been measured for years. Therefore that inflation of three hundred percent, was not being counted. Had it been counted then interest rates would have been put up years ago and the indebtedness that is at the core of the recession would not have been as bad. The bankers and government both had a common sense bypass, on the NHS, and assumed that property prices would continue to rise.

As inflation is seen as bad in all other aspects of life, then house price inflation should also have been seen as bad. But as everyone seemed to be making money from it, people kept on borrowing against the value of their homes. What is extraordinary is that the banks, the regulators and the government allowed this. With the government I can understand this as it created the illusion of a booming economy. The regulators are only as strong as any administration allows them to be. As I could see this coming, I admit that I was predicting that it would be an environmental factor that would trigger the meltdown, I am really surprised nay shocked that the banks had not.

The trouble was simply that everyone was blinded by greed. One of the perfect examples of that were the property investors, the buy to let landlords. My regular reader will know my problems there, and it doesn’t colour my judgement here, but as the capital price of property went up the buyers just increased the rent they wanted to charge. This was irrespective of whom was going to ever pay a rent of excessive plus. Even now I can find properties in the region where the asking rent has ensured that they stay empty. Had the buy to let landlords and investors even thought about the level of rents that people could afford to pay, they would have realised that rental income was not going to pay the mortgage plus.

Well the reality check is still to come for most of the rich elite. I include most of our elected pocket liners, as they are still pressing for more of the same policies that got us into the mess in the first place. Grow this or spend more on that. There are areas where spending needs to be increased or maintained, the investment in renewable energy is the obvious one. But its areas like education that really needs to be boosted.

For years there has been an emphasis on exams, A levels and going to university. While it may be great to think that we can have a country full of computer programmers or scientists and engineers, but the reality is that not everyone can be. Education should bring out the full potential not just be to provide a team of worker robots. For the last ten years or more we have had to bring in labour for many manual and semi skilled jobs, when there are over a million people who are out of work. The problem being the emphasis on academic education brands far to many children, particularly from poor communities, as failures if they are not academically gifted. When their skills may be more creative or craft based. Again it has been this detachment from reality to expect that everyone can be rocket scientists that has neglected the needs of the less academically gifted.

Here business and government has failed. Business has not been willing to train workers here. Yet if they move a plant over to China it suddenly is cost effective to train a workforce from scratch. Government needs to tell commerce, business and industry that if they want the skills they need to train the population too.

The last aspect where for years there has been a detachment from reality has to do with tax. It has been long argued, by the rich it has to be said that you can not tax the rich to much as if you do they will go elsewhere. Also the rich need to make money as they generate wealth! Well if I am not mistaken they have generated Debt not wealth. Further, what is wrong with those that earn more contributing more for the services that help support the population that provide the rich man with the workers that help make him rich?

MPs, Bankers, the rich and elite all need to wake up to the fact that people are very angry about the way a few are getting much more than there fair share. The people that are suffering the most are those that were cautious and sensible, while those that were reckless get rewarded or can ease their pain from others pockets, makes for an unstable society. Oh I forgot Mrs Thatcher said there was no such thing as society, was that before or after she repealed the laws of gravity?

Even the police are cautioning that the present situation could lead to civil unrest. I think its about time our leaders in this country stopped worrying about their greedy needs and started to notice that the population they are supposed to be serving needs their help, support and leadership.

Bankers and Politicians all like to talk big numbers, it makes them feel big and important, it that why they like to drive big cars too? But the big numbers they need to worry about is the large number of them that will be voted out of office unless they start to help the poor as much as they are helping the rich.