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''We've had to let six staff go this Christmas . . . people with families and mortgages''

Families all over Britain are bracing themselves for hard times. For some, they have already started

On first impressions, Rayne Precision Engineering is a neat little company. Tucked into the hills of the southern fringe of the Peak District, it consists of four solid modern sheds, built of a fake stone material that blends in with the local housing. These are arranged around a tidy yard next to a mobile hut that serves as office accommodation. The atmosphere in the yard is pleasantly quiet. There's a faint hum in the air, but none of the clashing or screeching of metal on metal that you might expect.

It quickly becomes apparent that there is a reason for this. The company's founder and managing director, Andrew Simmill, leads me into first one shed and then another to show me an array of laser-cutting and welding machinery, all of it standing idle. The signs of recent activity are all around - a scattering of little metal shavings; a neat pile of ring-shaped components bound for the automotive industry. Today the firm is having a shutdown, Simmill explains.

In the summer of 1997, Rayne Engineering, which is a few miles outside the market town of Leek, had 47 full-time staff, working five days and sometimes nights or Saturday mornings as well, making parts for JCB, GKN and a range of other engineering companies. Simmill bought a people-carrier so that his welders could drive in from Stoke-on-Trent, 20 minutes or so down the road. He had diversified, too, into making shopfitting parts for Waterstone's.

The crash, when it came, came fast. In April this year Simmill took on a salesman to try to boost a flagging order book, but to no avail. Now Rayne Precision is down to 26 staff working four days a week. There have been 12 compulsory redundancies. The remaining staff agreed to their hours being cut from 39 to 31 last week.

"Last week was my worst week," Simmill says. "We had to let six people go. You're looking people in the eye just before Christmas . . . these are people with families and mortgages. And there's nothing I can do - I've got to protect the business."

Simmill is a big, weather-beaten man in blue overalls and a sweatshirt. He looks out of place in the firm's meeting room, under the glossy banners he ordered so they could push for scarce orders at trade fairs. He looks as if he could shoulder quite a burden - and that is exactly what he is having to do now.

"Carol, who does the stores and the planning, came to me last week and said, 'I'll take redundancy, Andrew.' She's over 60. She didn't want a younger person with a family to lose their job. But she's a key part of the business. I don't mind admitting I've had sleepless nights about finding enough work for my men."

This little local heartache is solid evidence of the tectonic shift that has affected businesses across the world in recent months. The plummeting housing market, the struggling construction industry, banks cracking under the weight of bad mortgage debts and overextended credit, all lead here to this little office.

For Simmill it trickled down in part from JCB, which dominates the heavy industry in this area, previously employing 5,000 at its plants in Rocester, Uttoxeter and Cheadle. The digger manufacturer - for whom Simmill has nothing but praise - was forced to cut production by a third and to make nearly 600 staff redundant this autumn as orders, even from previously buoyant markets such as Russia, began to dry up.

In the nearby Potteries, there have been 350 job losses at Wedgwood and Spode has gone into administration, putting a further 150 at risk. The misery goes on, the figures stacking up in tens here, twenties there. On the day of my visit the front page of the Sentinel, Stoke's local paper, carried the news that Hinks Fine China, the UK's last china flower manufacturer, was to close with the loss of another 16 jobs. At Uttoxeter, Dairy Farmers of Britain announced it was closing its Fole Dairy with 250 to go. At Phones4u, another major Staffordshire company, 240 IT jobs were reported to be at risk. Simmill ("I'm 47 but I feel 67," he says, then laughs) has been here before. Twenty years ago he started an engineering business with his father during the tail end of the 1980s boom.

"Nineteen eighty-nine was an extremely good year, but 1990 . . ." he pauses for a moment. "I was financed up to the hilt. I had £70,000 debt on one machine. Then I had 12 months where my father died of cancer and my brother was killed in a road accident at 23.

People are buying cheaper cuts of meat rather than the high-end products on sale

"Everything came at once. I got married, my daughter Carly was born, and two weeks later the company went into receivership. I had finance people chasing me; my house was on the line. I was on the verge of being made bankrupt."

But Simmill doesn't give up easily. For a year he worked for the man who bought his business, then rented his machines. "It was just 12 months after I went down," he says. "The banks and accountants hadn't had any faith in me, and it was almost to prove them wrong. I'm a determined sort of fellow."

He and his wife Clare now have three daughters - Carly, 17, Sheri, 16, and Kate, 13 - and they never stop hearing about the evils of credit. "I was out shopping one time with Sheri when she was only four or five," recalls Simmill. "I ran out of cash and so I thought, 'I'll wait until next week.' She turned to me and said, 'Put it on your card, Dad.' I was really taken aback by that, and I thought about it a lot. What I'm fearful of is my children going through what I went through. There are too many credit cards, too much easily available credit. That's put us in this mess."

About 18 months ago this niggling worry turned into a family crusade. Sitting around the table outside their house one summer evening over a meal, they began drawing out a game on sheets of A4 paper. Then the girls got busy with clip art and a boardgame, Credit 4 Life, was born. Players start with £1,500 and on a throw of the dice they pay bills - mortgage £600; night out £50; credit card 30 per cent debit interest - and, if they are lucky, draw wages. The game, now in a smart box with a laminated board, has been sold to about 20 schools and is being supported by Caudwell Children, a charity funded by John Caudwell, the local Phones4u tycoon.

Simmill says he talks to his children about the problems his business is facing, and after school they often come to see him at work instead of going home. But he has no plans to bring them into the family firm. "I'm not being sexist, but I think manufacturing is a hard game," he says. "If the government doesn't believe in it there won't be any manufacturing here in ten years."

As you drive into Leek along the Ashbourne Road, the signs of economic gloom are easy to spot. A 19th-century mill stands with its glass grimed and a board outside advertises a small business within. Further into town the White Lion and Talbot pubs are both boarded up. The Leek Post and Times has a picture of Gary Clewlow of GJ's Greengrocers holding a sign saying "Closing Down (sorry)", over the headline: "Shoppers urged to stay local as credit crunch bites hard". Clewlow tells the paper he cannot compete with Aldi.

To be fair, the former textile town, which weathered the decline of the silk industry in the late 19th century and the globalisation of synthetic fabrics in the 20th, is not completely down at heel. Its market square is wide and cobbled, and a queue of shoppers is keeping its well-stocked fruit and veg stall busy. There's a half-timbered Marston's pub, the Bird in Hand, flanked by Cancer Research and Oxfam shops.

Businesses such as Simmill's are at the sharp end of the recession, and others in the area are less gloomy about the future. Off the A523 between Simmill's works at Ipstones and the town of Leek, signs point to enterprises with a more rural flavour: Beaver Hall Equestrian Centre, Middle Farm Bed and Breakfast. Down a long track, Janet Phillips runs the Threshing Barn, a small shop selling craft supplies and meat reared on the farm she runs with her husband, Dave.

Phillips says she always has a pot of coffee on the go in her shop, which is packed to the rafters with skeins of brightly coloured wool, Christmas wreaths and knitwear; it helps to make the place feel welcoming, she says. The craft workshops she runs - a launching pad for sales of equipment and materials - had their best October ever, she says. But the meat is doing less well. People are buying cheaper cuts rather than the high-end products they sell here.

"I think long-established businesses will survive, but January and February are going to be grim," says Phillips. "From December, we would usually expect big orders, and they're not coming in. I don't think people are going to go for the big items this year."

On Derby Street, a Butters John Bee estate agent stands with property details in its windows and a To Let sign above its door. At first glance the business seems to be occupied, but a closer look reveals too-neat desks with phones and notepads and nothing else, and a notice on the door confirms, "Please note: This office is now closed. We will continue to provide our services from our Hanley and Congleton offices." Just a few doors along, the Ponden Mill shop also bears a To Let sign and big banners announcing, "Twenty Per Cent Off - Everything Must Go", though an assistant says she doesn't know whether they're going to close.

Round the corner, near the now-defunct GJ's Greengrocers, is Photoprint, founded nearly 30 years ago by Brian Johnson, now the town's mayor and president of its chamber of trade and commerce. His assessment of the situation is relatively upbeat, and he attributes several of the town's business failures to a lack of initiative or staying power. Despite having spent half a million pounds on opening a horse livery last year and carrying a lot of debt ("You don't want to know," he says when I ask how much), he is investing £20,000 in a digital colour printing machine, which would have cost him £34,000 in normal times.

"You'll often hear people saying, 'Leek's always in recession - what difference does it make?'" he says. "People round here have been used to tightening their belts.

"But the new businesses have never had to face this before. They don't make allowances, they don't think ahead far enough. People will have to promote their businesses - they'll have to think positive."

Others in the town are struggling to follow his advice. Looking for the Diva shoe shop which, according to the local paper, is to close after Christmas, I stop to ask directions from a couple huddled against the cold and carrying a plastic bag of meat bones. They cheerfully offer to show me the place and as we walk along together the man, David, tells me he has been out of work for the past six months, after being laid off by a firm that makes parts for car exhausts.

"My old boss closed the doors," he says. "I'd take anything, but if you put on your CV that you were in engineering, they think you don't want a menial job. They think you'll take off as soon as something better comes - and I would as well.

"JCB has a massive effect on this area. Last year employees had a £1,000 Christmas bonus, but this year they'll be lucky if they get anything. I've given up."

He asks if I'm going for a job interview. I tell him no, I'm writing an article about the credit crunch for a magazine. "Well," he says without a trace of rancour, "at least someone's making money out of it."

Fran Abrams is the author of "Below the Breadline: Living on the Minimum Wage", published by Profile Books (£6.99)

This article first appeared in the 22 December 2008 issue of the New Statesman, Christmas and New Year special

Jeremy Corbyn. Photo: Getty
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Lexit: the EU is a neoliberal project, so let's do something different when we leave it

Brexit affords the British left a historic opportunity for a decisive break with EU market liberalism.

The Brexit vote to leave the European Union has many parents, but "Lexit" – the argument for exiting the EU from the left – remains an orphan. A third of Labour voters backed Leave, but they did so without any significant leadership from the Labour Party. Left-of-centre votes proved decisive in determining the outcome of a referendum that was otherwise framed, shaped, and presented almost exclusively by the right. A proper left discussion of the issues has been, if not entirely absent, then decidedly marginal – part of a more general malaise when it comes to developing left alternatives that has begun to be corrected only recently, under Jeremy Corbyn and John McDonnell.

Ceding Brexit to the right was very nearly the most serious strategic mistake by the British left since the ‘70s. Under successive leaders Labour became so incorporated into the ideology of Europeanism as to preclude any clear-eyed critical analysis of the actually existing EU as a regulatory and trade regime pursuing deep economic integration. The same political journey that carried Labour into its technocratic embrace of the EU also resulted in the abandonment of any form of distinctive economics separate from the orthodoxies of market liberalism.

It’s been astounding to witness so many left-wingers, in meltdown over Brexit, resort to parroting liberal economics. Thus we hear that factor mobility isn’t about labour arbitrage, that public services aren’t under pressure, that we must prioritise foreign direct investment and trade. It’s little wonder Labour became so detached from its base. Such claims do not match the lived experience of ordinary people in regions of the country devastated by deindustrialisation and disinvestment.

Nor should concerns about wage stagnation and bargaining power be met with finger-wagging accusations of racism, as if the manner in which capitalism pits workers against each other hasn’t long been understood. Instead, we should be offering real solutions – including a willingness to rethink capital mobility and trade. This places us in direct conflict with the constitutionalised neoliberalism of the EU.

Only the political savvy of the leadership has enabled Labour to recover from its disastrous positioning post-referendum. Incredibly, what seemed an unbeatable electoral bloc around Theresa May has been deftly prized apart in the course of an extraordinary General Election campaign. To consolidate the political project they have initiated, Corbyn and McDonnell must now follow through with a truly radical economic programme. The place to look for inspiration is precisely the range of instruments and policy options discouraged or outright forbidden by the EU.

A neoliberal project

The fact that right-wing arguments for Leave predominated during the referendum says far more about today’s left than it does about the European Union. There has been a great deal of myth-making concerning the latter –much of it funded, directly or indirectly, by the EU itself.

From its inception, the EU has been a top-down project driven by political and administrative elites, "a protected sphere", in the judgment of the late Peter Mair, "in which policy-making can evade the constraints imposed by representative democracy". To complain about the EU’s "democratic deficit" is to have misunderstood its purpose. The main thrust of European economic policy has been to extend and deepen the market through liberalisation, privatisation, and flexiblisation, subordinating employment and social protection to goals of low inflation, debt reduction, and increased competitiveness.

Prospects for Keynesian reflationary policies, or even for pan-European economic planning – never great – soon gave way to more Hayekian conceptions. Hayek’s original insight, in The Economic Conditions of Interstate Federalism, was that free movement of capital, goods, and labour – a "single market" – among a federation of nations would severely and necessarily restrict the economic policy space available to individual members. Pro-European socialists, whose aim had been to acquire new supranational options for the regulation of capital, found themselves surrendering the tools they already possessed at home. The national road to socialism, or even to social democracy, was closed.

The direction of travel has been singular and unrelenting. To take one example, workers’ rights – a supposed EU strength – are steadily being eroded, as can be seen in landmark judgments by the European Court of Justice (ECJ) in the Viking and Laval cases, among others. In both instances, workers attempting to strike in protest at plans to replace workers from one EU country with lower-wage workers from another, were told their right to strike could not infringe upon the "four freedoms" – free movement of capital, labour, goods, and services – established by the treaties.

More broadly, on trade, financial regulation, state aid, government purchasing, public service delivery, and more, any attempt to create a different kind of economy from inside the EU has largely been forestalled by competition policy or single market regulation.

A new political economy

Given that the UK will soon be escaping the EU, what opportunities might this afford? Three policy directions immediately stand out: public ownership, industrial strategy, and procurement. In each case, EU regulation previously stood in the way of promising left strategies. In each case, the political and economic returns from bold departures from neoliberal orthodoxy after Brexit could be substantial.

While not banned outright by EU law, public ownership is severely discouraged and disadvantaged by it. ECJ interpretation of Article 106 of the Treaty on the Functioning of the European Union (TFEU) has steadily eroded public ownership options. "The ECJ", argues law professor Danny Nicol, "appears to have constructed a one-way street in favour of private-sector provision: nationalised services are prima facie suspect and must be analysed for their necessity". Sure enough, the EU has been a significant driver of privatisation, functioning like a ratchet. It’s much easier for a member state to pursue the liberalisation of sectors than to secure their (re)nationalisation. Article 59 (TFEU) specifically allows the European Council and Parliament to liberalise services. Since the ‘80s, there have been single market programmes in energy, transport, postal services, telecommunications, education, and health.

Britain has long been an extreme outlier on privatisation, responsible for 40 per cent of the total assets privatised across the OECD between 1980 and 1996. Today, however, increasing inequality, poverty, environmental degradation and the general sense of an impoverished public sphere are leading to growing calls for renewed public ownership (albeit in new, more democratic forms). Soon to be free of EU constraints, it’s time to explore an expanded and fundamentally reimagined UK public sector.

Next, Britain’s industrial production has been virtually flat since the late 1990s, with a yawning trade deficit in industrial goods. Any serious industrial strategy to address the structural weaknesses of UK manufacturing will rely on "state aid" – the nurturing of a next generation of companies through grants, interest and tax relief, guarantees, government holdings, and the provision of goods and services on a preferential basis.

Article 107 TFEU allows for state aid only if it is compatible with the internal market and does not distort competition, laying out the specific circumstances in which it could be lawful. Whether or not state aid meets these criteria is at the sole discretion of the Commission – and courts in member states are obligated to enforce the commission’s decisions. The Commission has adopted an approach that considers, among other things, the existence of market failure, the effectiveness of other options, and the impact on the market and competition, thereby allowing state aid only in exceptional circumstances.

For many parts of the UK, the challenges of industrial decline remain starkly present – entire communities are thrown on the scrap heap, with all the associated capital and carbon costs and wasted lives. It’s high time the left returned to the possibilities inherent in a proactive industrial strategy. A true community-sustaining industrial strategy would consist of the deliberate direction of capital to sectors, localities, and regions, so as to balance out market trends and prevent communities from falling into decay, while also ensuring the investment in research and development necessary to maintain a highly productive economy. Policy, in this vision, would function to re-deploy infrastructure, production facilities, and workers left unemployed because of a shutdown or increased automation.

In some cases, this might mean assistance to workers or localities to buy up facilities and keep them running under worker or community ownership. In other cases it might involve re-training workers for new skills and re-fitting facilities. A regional approach might help launch new enterprises that would eventually be spun off as worker or local community-owned firms, supporting the development of strong and vibrant network economies, perhaps on the basis of a Green New Deal. All of this will be possible post-Brexit, under a Corbyn government.

Lastly, there is procurement. Under EU law, explicitly linking public procurement to local entities or social needs is difficult. The ECJ has ruled that, even if there is no specific legislation, procurement activity must "comply with the fundamental rules of the Treaty, in particular the principle of non-discrimination on grounds of nationality". This means that all procurement contracts must be open to all bidders across the EU, and public authorities must advertise contracts widely in other EU countries. In 2004, the European Parliament and Council issued two directives establishing the criteria governing such contracts: "lowest price only" and "most economically advantageous tender".

Unleashed from EU constraints, there are major opportunities for targeting large-scale public procurement to rebuild and transform communities, cities, and regions. The vision behind the celebrated Preston Model of community wealth building – inspired by the work of our own organisation, The Democracy Collaborative, in Cleveland, Ohio – leverages public procurement and the stabilising power of place-based anchor institutions (governments, hospitals, universities) to support rooted, participatory, democratic local economies built around multipliers. In this way, public funds can be made to do "double duty"; anchoring jobs and building community wealth, reversing long-term economic decline. This suggests the viability of a very different economic approach and potential for a winning political coalition, building support for a new socialist economics from the ground up.

With the prospect of a Corbyn government now tantalisingly close, it’s imperative that Labour reconciles its policy objectives in the Brexit negotiations with its plans for a radical economic transformation and redistribution of power and wealth. Only by pursuing strategies capable of re-establishing broad control over the national economy can Labour hope to manage the coming period of pain and dislocation following Brexit. Based on new institutions and approaches and the centrality of ownership and control, democracy, and participation, we should be busy assembling the tools and strategies that will allow departure from the EU to open up new political-economic horizons in Britain and bring about the profound transformation the country so desperately wants and needs.

Joe Guinan is executive director of the Next System Project at The Democracy Collaborative. Thomas M. Hanna is research director at The Democracy Collaborative.

This is an extract from a longer essay which appears in the inaugural edition of the IPPR Progressive Review.

 

 

This article first appeared in the 22 December 2008 issue of the New Statesman, Christmas and New Year special