Blog 2023 Malcolm Blair-Robinson

Tomorrow The First Cuts

There have been leaks already about where the £6 billion axe will fall, as well as warnings of pain to come. The argument to cut now or later has been largely overtaken by the Euro crisis and the reports of Mandarins being overruled by outgoing Labour Ministers, who pumped up spending in the last hours of the Labour dream. The economic argument for cutting is now irresistible among those in touch with economic reason. Promises to be fair and compassionate will be judged valid only once we know.

There is more than economics at stake here, powerful though the sums are. This is an opportunity to start shutting down intrusive, meddling, excessive and inappropriate government. The most positive legacy of New Labour is its constitutional reform bringing devolution, elected mayors and peace in Northern Ireland. The most negative, even worse than the ridiculous wars, was the explosion of quangos, regulators, processes and practices all of which pushed up costs and drained both responsibility and initiative.

Tomorrow will have within the gloom, good cheer, if the axe starts to cut at this suffocating bureaucratic tangle.

Another Sting

This Blog has no interest in, or knowledge of, the finances, business affairs, introductory powers or relationships of the latest victim of a set up, the unfortunate Duchess of York. Recently it was Lord Triesman, who found himself at the centre of an expose (sorry my keyboard does’t do accents). At one level one can take the view that it serves them right. The newspaper no doubt takes the view that it serves the public interest. Lawyers may claim invasion of privacy or entrapment.

This Blog finds itself disturbed. A society in which people cannot hold private conversations, however wrong these converstions or remarks may be, without fear of being recorded, is a society which is no longer free. Clearly there may be security issues. Surveillance for public safety is one thing. It is quite another if it is conducted to keep the population to a certain political line. Words like Gestapo, Stasi and NKVD spring at once to the recoiling mind.

It is also quite another thing if its purpose is to sell newspapers.

We all need to think about that.

Trident

This Blog earlier supported a Lib Dem proposal to re-examine the case for Trident. Something on these lines is now coalition policy as an adjunct to the defence review shortly to begin. I have previously suggested that Trident is over specified, capable more or less of ending the world as we know it and designed to deter the Soviets in the cold War.

I remain of the view that we should retain our own independent deterrent, but something able to deliver a surgical knockout rather than devastation beyond imagination would be a more credible deterrent against the kind of ‘rogue’ threats we may face. The problem is that a new system from scratch may well be more expensive to set up, than simply to keep Trident operational with an upgrade.  Also Trident has the advantage that once set up it is relatively cheap to run.

It has another advantage. In negotiations for nuclear disarmament it provides scope for reduction to give a lead, while remaining in force until the time comes when all nuclear weapons become history. That is the main goal for which we strive.

Curbing The Banks

Sooner or later this has to happen everywhere. It is to the greatest credit of the United States that it is the first to act. Once America sees a problem and accepts it, it acts. This is why it retains the edge on Europe and most likely always will. Contrast with the scampering around in Europe, trying to prop up the Euro, bail out Greece, stop Spain, Portugal and Italy going the same way and, on top of all of that, agree proper regulation of financial institutions run amok, but on whom they depend for endless loans to fill budget black holes.

Of course banks with ordinary High Street (Main St) depositors cannot use resources to become traders in whatever wild financial instruments fly through the market, some so obscure that nobody knows what they actually are. This is the nub. If parcels of worthless securities are bundled up and traded, if weird so called positions are bet against opposite events, if money is taken to insure against loss in these unfathomable transactions, there is at work a process of creating worthless money, little different to setting up a forger’s press and printing counterfeit notes. There is no difference when after passing from hither to thither, they are presented for payment of real hard cash. Both are of no value whatever.

The busted banks rush pleading to the taxpayers, crying that they are too big to fail and that all will come crashing down unless they are given real money now. So the taxpayers of the U.S and U.K and to a lesser extent Europe, came up with real money, which they exchanged for the worthless paper clutched in the tainted hands of the gluttonous financiers.  Now with real money in those ever sticky palms, back they went to their dodgy ways, their fraudulent activities legitimized and made profitable. Well not any more. The game is over. It will not be played again.

The market reaction? Record falls. You’re so right. Even the market knows when the music stops.

Price of Alcohol

This is again in the news, with Tesco backing a halt to loss leading alcohol sales. They may even support a legal minimum price. Various informed and thinking contributors have been giving their views on the media. A major problem appears to be the fact that booze is now so widely available in supermarkets and corner shops at all times of the day and night. The days of the off licence, allowed by the authorities here and there but not everywhere, and pubs as the only place (apart from restaurants) where alcohol could be bought are gone. So are the restrictions of licencing hours. Both may need to be brought back.

Once chroninic binge drinking becomes part of the culture of a community, a country or a generation of the young, it is a diaster. This is not to say that drinking alcohol is bad, if at sensible levels. But it becomes bad if the purpose of drinking is to get drunk, the sooner and the more completely the better and even the more heroic. This is a cultural wrong turning and will need radical measures to get us back on track. Tinkering with the price will not work alone.

America tried total prohibition. That did not work. This blog believes that something between it and what we have now, would. A complete ban on the sale of alcohol in stores and supermarkets across the board whatever time of day or night. Re-opening pubs shut because of supermarket competition, so that people drink in the right place and the prohibition of drinking in public non-licenced open spaces and buildings. Return of off licences but not too many. Reintroduction of liberal licencing hours but an end to 24 hour availability. Slap on tax to make drinking an affordable luxury not a cheap thrill. Triple tax beers or wines with excessive alcohol content. Culturally outlaw boozing as a severe weakness of character and help those addicted.

In other words not unlike what we had before all the trouble began. Oh, something else. Get some life values and work practices that do not make people want to drown their sorrows at the end of every single day. Understand that boozing, bankers,  borrowing and bust, all come from the same dark cave.

Labour Leadership

The leadership campaign has revealed an ever growing list of lacklustre male candidates (with the possible exception of Ed Milliband who alone has something extra), which tends to emphasize the tired and battered nature of the party following defeat. I think it a very great mistake for leaders of political parties to throw in the towel straight after losing a general election. The party needs time to re-group and for the strong to emerge before facing a leadership campaign. Yes, even if the current leader is Gordon Brown. Unfortunately this has become the custom in modern times.

It is therefore very welcome indeed that Diane Abbott has put herself forward. She has a sharp, analytical mind, an engaging manner and is a very good communicator. She is by far the best candidate so far and I hope the Labour party has the courage to vote her in. It would be good for Labour. What is more, it would be good for Britain.

Euro In Trouble

This blog has been consistent in its analysis of the situation with the Euro. The fundamental problem is that there is no central direction of financial policy. My phrase is that you cannot have a currency without a government. A currency without a central government is similar to a country without an effective central government. There is unrest while rival factions vie for control of different parts of the country, with varying and often irreconcilable aims. We know all about this from recent history.

Of course there are straightforward financial issues confronting the Euro, all of which are soluble. But only on condition that there is a central financial policy covering all of Euroland, with provision for countries which ignore the rules and go on a spending binge to go bust. This is what happens in the United States if one of the states goes off the financial rails. California is often teetering on the brink. It does not affect the stability of the dollar or the economy of the rest of the country if they do, beyond the effect of adverse news which always dents markets. As we all know the Fed (Federal Reserve Bank) is the most powerful Central Bank in the world. The European Central Bank has nowhere near the clout, because the political institutions on whose behalf it functions are many, diverse and often conflicting.

This has to be resolved and Germany, knowing this only too well, has spoken out. Reports of markets in panic, stunned European capitals and so on, just go to demonstrate how unreal the politicians of Europe have become and how naive and unstable the fabled markets actually are.  There is now no running away from the issues.

Whether they can be solved by a beefing up of the Lisbon Treaty is doubtful unless is provides for central governance of economic policy and monetary control. If it does so provide it is by no means certain that all the countries affected will be able to gain sufficient democratic authority to ratify the amendments. The alternative is that they muddle on. In this event Germany will walk away. The rest will be forced back into their various unstable and third rate currencies and the Deutschmark will once again be the dominant currency of Europe with the Bundesbank in charge. 

Europe will then have to consider what it is. As a trading union it has huge potential still. As a political alliance  of  Nation States it will go far, but the dream of a federal structure and ever closer union will be over. The people of Britain will prefer that. So, I suspect, will most of the people of Europe.

Transformation

There is an extraordinary transformation occurring, led by two similar but different young men, the like of which this country has never seen. One is so very English privilege, the other, with no English blood at all is so very British privelege. The first Eton and Oxford, the second Westminster and Cambridge. Both have concealed from their parties the extent of their revolutionary zeal. Now in partnership in a new kind of government (I can think of no other pair of political leaders since the war who would have had the guts and drive to set it up) the one in charge of the running of the country, the other in charge of turning it into a modern inclusive democracy, both hell bent on giving people back their lives. This is amazing stuff.

There is an clear unity of purpose amalgamating the combined drive of the economic realists, with the socially liberal and with the radical reformers. This has to be an enterprise too big to founder. It deserves all the goodwill it can garner. The moment of Liberal Conservatism has arrived. It has caught the commentators by surprise, but it far the biggest thing since Thatcher.

Labour need not despair. There will be a role for them. Not in some form of sofa based meritocratic social empowerment, but in true gut felt, hard driven, socially just policies of the Left. Labour must re-ignite as a Movement embracing the Tony Woodleys and the Bob Crows as well as the Millibands and the Bradshaws. There will be much to defend and many whose voices must be heard. But Labour needs to remember than once the Constitutional reforms are complete the electoral and social landscape will be different.

The Trade Unions have got to get real. Instead of these ridiculous and unpopular strikes from Unite and the RMT (which helped in Labour’s defeat) they need to learn  that the courts which frustrate them are the route for their causes. Getting the travel perks restored is far more likely through a court case than through a strike. Likewise threats to the safety of the travelling public alleged by the RMT. I have said before that strikes are to industrial relations as lynching is to justice. Until  all the Unions can see that (many of them have), the road to power will be blocked by lack of enough popular support .

In 1997 Labour polled 13.5 million votes. In every election since they have lost votes. They are now down to 8.6 million. That is only 1.8 million ahead of the LibDems. In 1997 the gap was 8.3 million. There is a lot of ground to make up.

Deficit Cuts: What To Look For

As the fur begins to fly among the politicians when figures at last become public, readers of this Blog may find some thoughts useful to help them decide, who, if any, are telling the truth.

In an ideal economy the revenues from taxation balance or exceed all the government’s expenditure. There should be a small surplus at the low end of midway in the economic cycle, a surplus at the top end of midway and a big surplus when the economy booms. This enables reserves to be built up so that in the downturn there are savings to call upon.

These reserves should then be used to meet the shortfall arising in day to day running costs of functions and services as tax revenues drop and benefit costs rise, while economic activity falls. At this point the government can start to borrow, not to pay daily running costs which should be met out of reserves, but to stimulate new economic activity by investing in new infrastructure projects like transport, schools, hospitals and so on. This  stimulates economic activity, boosts revenues and drives regeneration and renewal. Eventually budget surpluses return,borrowing is paid off and a modernised country presses forward to new prosperity. This is classic Keynesian economics.

If the government has increased spending on services and reduced taxation to pay for them in the good times so that it has built up no reserves, or worse if it has overspent in those good times and borrowed to bridge the gap, when the bad times come, it has to borrow for everything. It has to borrow not just for projects to benefit the economy but for the daily bills to keep it working. The borrowing gets bigger and bigger and the cost of the interest due on the accumulated loans takes a bigger and bigger proportion of tax revenue which eventually snuffs out any recovery bought with wholly borrowed money. It is this set of economic sins of which Labour stands accused. As every traditional housewife knows you cannot borrow your way out of debt, any more than you can dry your washing in the rain.

How to deal with this crisis is what the argument will be about. Certain points are clear. The revenue from taxes must be sufficient to pay for all expenditure of running the country, its benefits and its services. This means increasing taxes and cutting services in some combination about which there will be big arguments. There also has to be a surplus to pay the interest on the accumulated debt and to reduce it significantly by paying it off.

To do this without creating a second recession will be difficult. Questions will need to be asked about value, need and benefit to the economy as a whole. It would help, too, to consider whether the welfare state should be universally free to all, or whether the better off should enjoy subsidy, but not a free run in health and education and tax breaks for children.

Apart from dentistry where the charges are quite steep, the only charge in the NHS is for prescriptions. That may not be sustainable. The only charge for education up to age 18 is for school meals. That may not be sustainable either. As for paying winter fuel allowance to people, many of them retired civil servants on fat pensions, or child benefits to everyone including those with £1million bonuses in their pockets; this nonsense must stop right now. 

The Welfare State means helping everyone in need. It does not mean throwing borrowed money at the entire population regardless.

Cuts and Talking

One of the bizarre elements of the recent general election was the refusal of any front line politician to answer questions about what, if in charge, they would cut. Last year at the party conferences Osborne talked of an Age of Austerity and Clegg warned of Savage Cuts. Both spoke the truth and both were warned to rein in this candour as dawning truth downed poll ratings. Now the election is over. Both are in Government. The truth will at last start to unfold with the identification of the pinprick £6 billion next Monday.

Much has been made complicated of a simple set of problems. Even at the weekend distinguished economists were warning of ‘talking down the ecomomy’. Sadly the power of talking, for whatever purpose, has waned. To the fore is simple book keeping at the economic level of the traditional housewife. First you cannot spend above your income without borrowing. If you borrow more than you can afford to pay back you go bust. If the interest you pay on your borrowings absorbs your income you starve. Talking, up, down, backwards on in many tongues has nothing whatever to do with any of it.