Bill Gates: U.K. providing 'moral leadership' on foreign aid

British politicians are ensnared in a charged debate over whether the embattled country’s foreign aid budget should face the chopping block.

The U.K. economy has been mired in the doldrums over the past five years, and as the Star’s Tanya Talaga reported in February, three years of ruthless cuts have failed to kickstart the private sector.

Against that backdrop, some U.K. politicians have argued the U.K., like Canada, should pare its spending.

Bill Gates is now entering that fight, arguing that while he gets “furious” when foreign aid money is wasted, the U.K. is offering a “moral leadership” and should be applauded for sticking to its pledge to spend 0.7 per cent of its gross national income on development this year.

“Your country’s steadfast decision to stick with an investment that saves more children’s lives than any other possibly could, is the very definition of morality,” Gates wrote in an op-ed on Sunday in the Daily Mail newspaper.

“Critics argue it’s immoral to spend money abroad when the domestic economy is slumping,” he wrote. “I see it differently. By taking a methodical approach to saving lives, you’re displaying moral leadership in front of the world. This will be a source of British influence around the globe for years to come.

Gates wrote about the $1.2 billion the U.K. has donated to the GAVI Alliance, a multi-country partnership that provides vaccines in developing countries. GAVI buys vaccines in bulk and with the World Health Organization and UNICEF, sends them to poor countries.

Gates wrote that GAVI works only with countries that have proven that their immunization system is strong enough to reach the vast majority of children. The recipient countries also have to cover some of the costs themselves.

Over time, each country’s share gets larger and the donors’ share gets smaller, until it is covering the entire bill for its immunization program.

“China once received GAVI support – it is now paying for its own vaccines,” Gates wrote, adding that since GAVI was created in 2000, it has protected more than 370 million children from life-threatening diseases. Over the same period, the number of children dying every year has declined by 25 per cent.

Even so, the U.K., like Canada, is trying to make its foreign aid more effective. Two years ago, following a review of its aid programs, it cut its foreign aid spending in 16 countries.

In its 2012 commitment to the development index, which scores wealthy governments on helping poor countries using aid, trade, investment, migration, environment, security and technology, the U.K. ranked No. 9 out of 27 countries analyzed.

Denmark, Norway and Sweden were the top-ranked donors, while Canada was No. 11.

“There is one important element of truth in the opponents’ critique of aid,” Gates wrote. “In development, as in all enterprises, a small percentage of money is wasted, and a percentage of that percentage is lost to corruption. Taxpayers have every right to be angry – I am furious – because when the goal is saving lives, any misspent money costs lives.”

Rick Westhead is a foreign affairs writer at the Star. He was based in India as the Star’s South Asia bureau chief from 2008 until 2011 and reports on international aid and development. Follow him on Twitter @rwesthead

 

PHOTO: EU bailout protest in Cyprus

A Cypriot man holds a banner against the EU bailout deal and German Chancellor Angela Merkel's call for Cyprus to follow economic reforms outside the parliament building in Nicosia on Monday. (Yiannis Kourtoglou/AFP/Getty Images)

More on Cyprus here.

PHOTO: Protester vs. riot police

A protesting Goodyear France worker faces riot police in front of the French headquarters of the U.S. tire and rubber firm in the western Paris suburb of Rueil-Malmaison on March 7 during a board meeting. Goodyear announced in January that it would close a factory in Amiens, northern France, that employs 1,250 people by the end of 2014. With little demand for its products, Goodyear has suffered losses of about $67 million a year at the plant. (LIONEL BONAVENTURE/AFP/Getty Images)

British can't wait for Mark Carney to arrive on his white horse

As a welcoming present, the British are poised to give Mark Carney greater powers to deal with the economic crisis facing the nation.

Carney, the incoming Bank of England governor, will be taking over in July. The Financial Times is reporting that Chancellor of the Exchequer George Osborne will use the March 20 budget to give Carney greater say over monetary policy.

Prime Minister David Cameron is rejecting calls to increase economic stimulus and to slow down on painful austerity measures, or, deep government cuts combined with tax increases, to get the stagnant economy moving again. The GDP dropped 0.3 per cent at the end of 2012 and the nation is poorer now than it was five years ago.

Cameron’s critics say the austerity plan is ruthless and his coalition government has not thought out the social consequences of what he has done. The most dramatic cuts are set to begin this April to social programs, municipal or council governments and ending tax breaks to the poor.

In a tweet sent Thursday, Cameron said, “If we stick to the plan and reject the false choices we can come through this with stronger, more resilient and (a) balanced economy.”

The Times reports Osborne will use the budget to reinforce a message of “fiscal conservatism and monetary activism” and they want the Bank of England to think new thoughts on monetary policy.

The B of E also has voted to keep interest rates at a historic low of 0.5 per cent.

We all know Carney is a fan of low rates, he uses them here in Canada in his current role as bank governor.

The stage is set. Britain is ready for its knight to come riding in and save the kingdom.

Tanya Talaga is the Star's Global Economics correspondent. Follow her on Twitter @tanyatalaga

 

 

 

Swiss electorate vote to prevent golden handshakes

An angry Swiss electorate voted on March 3 to impose new laws aimed at curbing CEO salaries and preventing golden handshakes.

The legislation, which could take years to be implemented, takes the power of deciding executive compensation away from boards of directors and places it in the hands of public shareholders.

Signing bonues and golden parachutes to outgoing executives were also prohibited.

Failing to abide by these measures could result in three to six years jail time.

This move comes on the heels of the European Union’s decision, last week, to cap bankers bonuses.

Reducing top earners perks and salaries has become a huge issue in Europe as the eurozone struggles to keep economically viable.

Declining finances in many countries have resulted in policies of harsh austerity measures, or swift government cuts combined with tax hikes, in Greece, Spain, Italy, Britain and Bulgaria.

The say-on-pay movement is gaining ground as a popular initiative with the 99 per cent who feel the 1 per cent making top dollar should be somewhat punished for the 2008 market melt down.

As PricewaterhouseCoopers Jon Terry said from London, “It is only a matter of time before, globally, we have binding votes” on executive pay by shareholders of most public companies.

Swiss corporations did not react well to the news – five of Europe’s top 20 highest-paid CEOs work in Switzerland, Bloomberg reports.

Last month, Swiss residents were up in arms when it was disclosed Novartis was going to pay $78 million to outgoing chair Daniel Vasella to prevent him for working for another pharmaceutical firm.

Novartis withdrew the golden handshake.

With files from Bloomberg.

Tanya Talaga is the Star's Global Economics correspondent. Follow her on Twitter @tanyatalaga.

EU to cap bankers bonuses

The 99 per cent are fighting back.

The EU is a step closer to imposing bonus caps on bankers - a move many see as a way to calm public anger over hefty pay outs to big money earners being blamed for the financial mess plaguing most of Europe.

An agreement, reached late Wednesday in Brussles, means bankers could only receive bonuses worth two times their salaries.  

Some say this is the toughest limit ever imposed. It applies to Europe-based employees of any bank, and, to staff of those banks wherever they are based - be it London, New York or Hong Kong.

The cap went over like a lead balloon in Britain, the largest financial centre in the EU. Britain is struggling to get the country out of recession by imposing harsh austerity cuts - many on the backs of the working poor, critics say.

In the words of London Mayor Boris Johnson, Reuters reports he said: "This is possible the most deluded measure to come from Europe since Diocletian tried to fix the price of groceries across the Roman empire."

Somebody has a long memory. Diocletian was a Roman emperor at the end of the 3rd Century.

And in Latvia, a country that saw its economy tank after one of its three big banks failed, British Prime Minister David Cameron who was visiting the country said they would carefully examine the legislation to make sure it can be "flexible enough to allow those banks to continue competing and succeeding in the U.K."

No doubt, if the legislation is passed by the EU's 27-member states, this will be more fodder for the anti-EU movement in Britain. Cameron has pledged to hold an "in or out" vote on staying in the EU if he wins the next election in 2015.

With files from Reuters

Tanya Talaga is the Star's Global Economics reporter. Follow her on Twitter @tanyatalaga

Q&A: Tanya Talaga on can Britain be saved?

A man photographs a burnt out police car after riots on Tottenham High Road on Aug. 7, 2011 in London. (Dan Kitwood/Getty Images)

“People are happy when there are riots because at the time, at that exact point, they are having their own way. They are voicing their feelings to the establishment. They are taking it to the streets,” Clasford Stirling.

Britain is poorer now than it was five years ago, as measured by gross domestic product, the total amount of goods and services a country produces each year. The Star's Tanya Talaga recently went to Britain to survey the impact the austerity cuts are having on its people.

Read Tanya's report here: Can Britain be saved? Country feeling pain of PM David Cameron’s austerity cuts

Q:  You visited Broadwater Farm Estate, a social housing project in Tottenham, north London. What was it like being in Broadwater?

A: I took the Underground to Broadwater Farm one evening after interviewing British Labour MP David Lammy at Westminster. I had tried to head up to Tottenham earlier that day, but my cab driver took me in the wrong direction and I missed my set-up interviews, so I had to try again at night.

The Farm is a massive, social housing project, home to 4,000 people living in low-rise and tower apartments built nearly 45 years ago. The place is like a labrynith, built on a maze of streets and it is confusing to outsiders.

Lammy gave me a specific set of instructions on how to get to Broadwater once in Tottenham – which subway exits to take and what mini-cab stand to use as some cabbies don’t know their way around the Farm, or, refused to go after dark. The cab driver who picked me up told me that in his last four years of driving, I was the first “white” woman he had taken to the Farm in the evening.

I was struck by that comment and found it hard to believe. This is inner-city London. Could the divide between the haves and the have-nots be that bad?

The Farm was the flashpoint of two of the worst riots in London’s recent history. Perhaps that is why there is a perception that this isn’t a safe place to be. But the community has worked hard to turn around the Farm’s reputation and reduce crime in wake of the 2011 riots, triggered after the shooting death of Mark Duggan.

Q: How would you describe the residents of Broadwater?

A: Inside the Farm’s community centre, I was welcomed with open arms by soccer coach Clasford Stirling, who appreciated I took the time to visit and check the place out rather than doing a phone interview.

Inside the gym, groups of 9 and 10-year-olds were busy running drills. Families waited on the sidelines and it felt like I was back in Toronto, watching my own kids at soccer practice. The place was packed with parents sitting on the sidelines.

It struck me as a community like any other, full of parents struggling to meet demands of the day, juggling kids, homework and everything else. The Farm reminded me of social housing projects here in Toronto, just on a far larger scale.

 

Q: Can Britain be saved? How?

 A: Britain is trying to manoeuvre itself out of nearly three straight recessions, triggered after the 2008 global financial collapse. Like many western powers, I think they have found themselves falling behind due to a lack of investments in possible growth sectors of the economy coupled with being burdened by high social services costs.

In order for the economy to turn around, I think they need to get aggressive on job creation and infrastructure spending and ease off on drastically reducing transfer payments to local council governments. Spending on building roads, bridges and other public works helped to insulate the Canadian economy from some of the fallout after 2008. So did a strong hand from the Bank of Canada with policies of low interest rates.

Will incoming Bank of England Governor Mark Carney make a difference? He could be a help, but it is going to take a concerted effort by both Westminster and Carney to turn the ship around.

Q: What do you see happening in the future?

 

A: If the British government does not ease up on a series of deep funding cuts to local governments combined with measures that tax the poor – such as the bedroom tax for those living in social housing – there is a real recipe for unrest in the coming months.

Youth unemployment looms large in some areas, for instance in Tottenham it is 55 per cent. In Liverpool it is more than 25 per cent in some neighbourhoods.

Local governments are being forced to shut down youth sports programs, women’s shelters, libraries and other community services.

When that happens, there's more harm than good results.

Tanya Talaga is the Star’s Global Economics reporter. Follow her on Twitter @tanyatalaga

 

PHOTO: Job cuts in Spain

A worker from Spanish telecommunications company Telefonica protests against job cuts, in Barcelona, Feb. 15. The words on the mask reads, "Yes, I'm profitable". (Albert Gea/Reuters)

Tiny islands, big investors

The coast of Bermuda in the Southampton area is lined with chalky cliffs. (Jim Byers/Toronto Star)

Offshore tax havens don't reveal who sends their cash over and how much - that's the point.  They are secretive and above the law. But here's some data that illuminates how they work. The OECD just released a report on the issue today. 

Barbados, the British Virgin Islands and Bermuda receive more direct foreign investment than economic powerhouses Germany or Japan. What this means is these tiny countries are where citizens and companies of major countries send their money to cut down their tax bills. The British Virgin Islands, Bermuda and the Bahamas are among the top five investors into Russia, the report said.

"Some macro data are quite meaningful: some very small jurisdictions are in the top 10 investors in large countries," said Pascal Saint-Amans, head of the tax centre at the Organization for Economic and Cooperation Development in Paris, in an interview.

Saint-Amans and his team are now putting together an action plan and coming up with practical ways for G20 countries to clamp down on tax dodgers. G20 finance ministers will be discussing the problem this week at a meeting, he said. 

Saint-Amans added that multinational companies should welcome an overhaul of the system because it is about protecting capitalism. 

"It will also protect multinationals from uncertainty or double taxation, which would have a negative impact on investment, and thus on growth and employment globally."

READ MORE:  Q&A: Hamida Ghafour on Europe's secret tax havens

Hamida Ghafour is a foreign affairs reporter at The Star. She has lived and worked in the Middle East and Asia for more than 10 years and is author of a book on Afghanistan. Follow her on Twitter @HamidaGhafour

Democracy is at stake, pleads OECD's Angel Gurria

OECD secretary-general Angel Gurria. (Lefteris Pitarakis/Getty Images)

It's not often you hear passionate statements about tax.

But Angel Gurría, head of the Organization for Economic Cooperation and Development which has just released a report looking at corporate tax avoidance had this to say to The Guardian: 

"Citizens are already losing faith in their banks and the financial system. If big corporations fail to pay tax ... it will undermine democracy. This is about the survival of democracy." 

Hamida Ghafour is a foreign affairs reporter at The Star.  She has lived and worked in the Middle East and Asia for more than 10 years and is author of a book on Afghanistan. Follow her on Twitter @HamidaGhafour