Blog 2023 Malcolm Blair-Robinson

BP Lockerbie and Cameron’s U.S. Visit

There is something rather ugly about the United States sometimes. It is the most vengeance driven society in the civilised world. This is curious because Americans are among the warmest, kindest and most generous people anywhere. It is just that there are moments when things get out of hand. Such a moment is now.

Having allowed anger and frustration about the BP oil disaster to gear up to bullying (all the regulators and most of the personnel involved were American after all), Washington has now decided to involve BP in the business of the release of the Lockerbie bomber, alleging that its lobbying in order to win an oil contract was the driver that set Al Megrahi free.

Before exploring this, certain points need to be made. Anybody who does not recognise a connection between the shooting down by a U.S warship of Iran Air 655, an unarmed passenger plane flying in its own airspace with two hundred and ninety innocent people on board including sixty six children, all of whom perished, just six months before Pan Am 103 exploded over Lockerbie, is failing to grasp the roots of this terrible event.

Anyone who has studied the evidence given in a peculiar jury free trial where a piece of Holland was deemed to be Scotland, cannot be confident that Libya acted alone, if Al Magrahi was the only perpetrator, or even involved at all. It is difficult to see in a fair jury trial that he would have been found guilty. Many of the victims’ families feel this way. It is also startling to see that while America paid compensation to Iran after being taken to the International Court of Justice seven years after the event, this amounted to a mere $180 million, whereas Gaddafi was persuaded to settle, as part of the price for coming in from the cold, $2.8 billion, or $8 million per family (some of whom refused to accept anything).

Scotland has its own legal system, wholly independent from England, which has always been the case. Since devolution the Scottish Government has held the legal authority and it was the Scottish Justice Minister who made the decision to set the prisoner free. Whether they like it or not it is none of America’s business, anymore than we could rage at them over the preposterous decision of their Supreme Court to give the disputed election to Bush without counting all the votes.

Cameron is the most socially graceful and level tempered Prime Minister in memory. He also disagreed with the decision to release the prisoner and said so loudly as Leader of the Opposition. These two attributes will help him to calm the mounting hysteria in Washington. He also needs to put his foot down and explain quite firmly that the United Kingdom is an independent democratic country, which for good or ill, can do as it sees fit whether releasing prisoners or lobbying for oil contracts and so long as corporations operate within the law, neither of these matters are the business of the Government or Congress of the United States. Whatever the special relationship is, it is not a licence for America to hector, bully and berate us. We have had enough.

The Big Society

I struggle with this. In the election people did not connect with it. Now it has moved from a hustings aspiration to a trial run in in five areas. Having heard Cameron’s speech I begin to see a little more clearly what he is talking about and what his vision is. I am not sure whether it will work, especially as the details do seem rather airy fairy, but I share the ideal to localise and empower. I have always thought the huge local government re-organsiation of the Heath administration was a disaster, with the creation of bigger local authorities and vanishing counties. These old boundaries were not based on maps and populations, but on centuries of shared interests, heritage and yes, the buzz word of today, communities.

If it is the Government’s plan to re-empower the very local communities and social networks which its Tory predecessor unraveled in the 1970’s, then this is a good thing. It will be cheaper too. I think the word I do not like is BIG. Big is bad now. Big deficits. Big debts. Big cuts. Also B is bad as in Banks. It is a rather early for a re-naming when not yet off the ground but something friendly and inviting would explain it better and be more welcoming. To many, replacing Big Government with a  Big Society sounds too much like jumping out of the frying pan into the fire. The Big Society sounds ghastly anyway, which is why it did not play on the doorstep.

The Special Relationship

There is a lot of talk in the press and by informed commentators on the media about the Special Relationship on the eve of David Cameron’s U.S trip. The trendy ones argue that it no longer exists or that it is not as strong as it was because America is more of a Pacific Power than an Atlantic one. Much of this comment is about something that was never there. The relationship has never been about foreign policy or sharing defence secrets or having a similar world view, although all of this happens, sometimes more, sometimes less. Nor is it about business, though almost all our top corporations are active in the U.S and vice versa. It is not about personal chemistry either, good with Thatcher/Regan, but bad with Brown/Obama.

The special relationship is about something which cannot be altered except by the passage of history and has both a positive and negative streak. On the positive side there is a shared heritage; the dominant founders of America came from these islands and its Colonies were all eventually part of the British Empire.The negative stems from the fact that those colonists took up arms against Great Britain, beat it in battle and founded a Republic. This new republic sided with France in the Napoleonic wars and attacked British interests in Canada in 1812. It was slow to join Britain against Germany in both the first and second world wars. It saw itself as a rival to the British Empire which it did its utmost to undermine and unravel.

Having virtually bankrupted this country after WWII and become the first modern super-power, it extended its influence across the globe, mostly but not always, in regions where once Britain was the colonial power. The U.K, for that is what G.B. became, was not, however, idle in all this. Realising that its star was on the wain, it walked happily in America’s shadow, like a proud parent of  a celebrity child, nudging here and influencing there, opening doors closed to others , because our progeny gave us the key. Like the parent we are always there for America. Witness Iraq and Afghanistan. Like the child, America is not always there for us; witness Suez and recent State Department references to Las Malvinas, their antagonism of B.P. and their outrage over the Lockerbie bomber. Only once has a British Prime Minister faced a U.S President down. That was Wilson over Vietnam.

The bond of blood and kin will always remain. The rest of it is past its self by date. We need to move on. America is family so it will always be there. But it needs to walk alone now. Only then will it learn where it is going. Meanwhile we have other paths to tread and it is time for us to map them out.

Iraq and Afghanistan

News of another bomb in Baghdad with very considerable loss of life among Sunnis reveals how utterly un-normal is Iraq, still without a government more than three months after the election and with no deal among the parties in sight. An agglomeration of three tribes thrown together in a so called country after the collapse of the Ottoman Empire after the first world war, first held together by the British Empire then by Saddam Hussein and his neo fascists, the unviable nature of this historic project has been made worse not better by the wild adventures of Bush and Blair.

What will eventually happen is not clear. Harmonious democracy without civil war and violence seems at present the least likely option. Ascendancy of Iran backed Shias in civil war with Syria backed Sunnis, with the Kurds breaking away to the north and fighting a border war with Turkey all seem in prospect when America goes home. The Irony is that once Iraq was an ally of the West and even after its mistake of trying to grab Kuwait, was hostile to Al Qaeda. There was a route open to stability, albeit with an unattractive dictator, as well as an opportunity to loosen his grip by bringing Iraq back to prosperity through relaxing sanctions.

The deranged foreign policy of Bush and Blair made that impossible. It has produced not only a savage war, but perpetual chaos in its aftermath and no clear potential outcome when all is said and done. There is a lesson here for those who think that Afghanistan can be fixed by the military, either its own, or ours (as part of NATO). There has been a sharp rise in casualties, both British and American, in recent days. This war is not going well. Sooner or later the facts will have to be faced.

The Role of the State

The Tory party has always been the party of a small state, while Labour has used the enlargement of the state to secure its social reforms. In 1945 this took the form of nationalisation of industries and public utilities; after 1997,  following the dumping of clause four, nationalistion was off the menu and was replaced with the state as employer of legions of people in jobs which did not need doing or could be done by the private sector. Neither of these approaches has stood the test of time nor proved financially viable.

At present we have a coalition government led by the Tories, busy dismantling big government and supported by the Lib Dems whose approval is secured in the knowledge that the money has run out through outspending income on an historic scale. This trend will continue and, if history repeats itself, will be taken too far. This will present a new opportunity for Labour.

In order to use it to electoral advantage, with a prospect of making success in government, Labour has to re-engineer its understanding of the role the state should play. There are several roles. The most obvious is provider of benefits to those in need. The needy do not have to be seen as scroungers. Some undoubtedly are but a lot are not and receive benefit in return for a lifetime’s service or as carers or parents, out of all of which activities society as a whole makes a profit. Some benefits, however, such as unemployment or sickness could be transferred to an insured or part insured system, so that they ceased to be part of the taxation drain altogether. There is nothing inherently wrong or immoral requiring those in work to provide for a situation when they are not. Self employed people have to do this anyway. 

This leaves for Labour an opportunity to look at a more productive area for the state. The banking crisis showed a new kind of state ownership; the state as part or majority shareholder of companies operating at a profit. In the case of the banks, this required a rescue, but in a future takeover of the railways, water, energy and other public utilities, an investment would be the order. It is impossible to find anyone who now feels that we are better off since all these things fell into private, ofter foreign, ownership.

A plan to allow for the government to own the majority of shares in such companies, while allowing the private sector to retain a stake, and have the businesses run at a profit with dividends going into the public purse to pay for services, has political merit. Unlike the old nationalisation system when there were no shares and the businesses were run (mostly at a loss) by Boards packed with people who knew little about how to run them, this way the state would be an investor like any other and would expect and demand the businesses were run properly.

What these thoughts are intended to develop is the idea that there is a positive role for the state in a modern vibrant economy (China has done wonders with its version of state capitalism) and that if Labour wants to remain true to its roots, but offer a fresh alternative, the theme is worth developing. Its first attempt at state primacy was inefficient and the second was unaffordable. Maybe third time lucky.

Since the advent of Thatcher’s reforms and the demise of socialism, there has been no creative tension between the ideology of state versus private enterprise. The state has become the provider and private enterprise, through taxation, has become the paymaster. This had not worked very well. There should be competition between state investment and private capital.  Not all banks, railways, or energy companies should have state investment, but those that do should be very good, so that the state becomes more of a driver and the tension between state and private becomes a motivation not a drag. The state would need to show a talisman rather than a  dead hand.

U.S Banking Reform

The legislation passed by the U.S Congress is the biggest piece of news in the world today and will set the foundation for the rebuilding of the Anglo-Saxon financial model. It is not likely to make popular headlines as few will understand its complexity. This blog will help you with the implications.

American banks will be banned from proprietary trading. This is how most of them make their money. They will also be banned from selling dodgy mortgages to people who cannot pay and if banks get ‘too big to fail’ the authorities can move in and break them up. If a bank gets into trouble it can be liquidated in an orderly way.  In the latter case shareholders will be wiped out, not baled out as in 2008. With a host of other controls governing all aspects of lending amounting to 533 new regulations and 2300 pages this monumental effort sweeps away the last vestiges of the American equivalent of Big Bang. 

In the U.K., where new regulations are still under discussion this will have a profound effect. We have had two misconceptions in the public domain since the Crisis erupted. The first is an obsession with what bankers are paid rather than with what they do. The second is the idea that we were innocents caught up in a Global event.

Recently I drew attention to the total debt of the U.K. which is 4.5 times the GDP. If we add our figure to that of the U.S we arrive at 40% of all the money owed in the world. In the U.K alone our debt total is 16% of  the global total, whilst our economy only generates 3% of global GDP. There is no doubt that the U.S and U.K are the joint epicentre of the disaster and avoidance of a repeat will depend on the two of us setting our financial model to rights.

Now that the U.S. has acted we will have to do something very similar as most of our banks are active in the U.S and vice versa. This is good. There are now several positive signs that things are moving in the right direction. The end of lending based on the value of a house, rather than the ability to pay is of critical importance. The new FPC will need to keep houseprice inflation in line with the whole economy. Households are already reducing debt and therfore saving faster than they are borrowing. Equity release is now seen as no such thing; it is just higher borrowing.

As the great shakeout of excessive public sector employment takes place, the foundations of the financial State are slowly being relaid. It is now critical to get the banks focusing on their core function in the economy. This is to finance business and industry, so that it can offer new and wealth creating jobs to those displaced from the public sector. A banking sector that went into the crisis with over 75% of its lending on property, another slice on credit cards and only 3% to industry will find this something of a culture shock. They will not be willing. The government will need to drive them forward to their new responsibilities.

The coalition shows every sign of having got the message and being willing to preach it. On the other hand the sermons coming from the contenders for the Labour leadership are now so far from financial reality that they represent something close to irresponsibilty. Whether this is out of muddled thinking or a need to justify Labour’s record is not clear. This blog is not partisan and is rude about all the parties in turn from time to time, but before Labour can be regarded as other than dangerous it will have to get real over the economy. For that we shall have to wait for the new leader to be elected.

Difficult Issues

The Prime Minister had little option but to condemn the sympathy phenomenon for Raoul Moat, but troubling issues remain. Most gratifying, though, is the extraordinary courage and lack of bitterness shown by P.C.Rathband. Whatever flows from this tragic chain of events, his commitment to overcome the dreadful legacy of Moat’s violence should shine like a bright star.

But there remain questions for the investigating authorities and for society as a whole. The authorities need to discover whether the police tactics were the best available and whether the probation and social authorities responded correctly and whether warnings, including those from Moat himself, were heeded.

For society there are different questions. Why do we have an underclass in modern times which feels excluded and oppressed? Why do so many see a man who appears to have been both violent and deranged as a figure for sympathy, even a hero? What did these people see of themselves in Moat? What is  the image of the police in communities which depend upon their protection and support more than more affluent locations? Have we really faced the enormity of the human price of the mantra ‘there is no such thing as society’?

The answers to all these questions are neither straightforward nor easy to define. They are nevertheless there to be found. Whilst Cameron must proclaim the uncompromising good versus evil take on recent events, as probably the most socially aware and sensitive prime minister of modern times, in his heart he will know not only the questions, but also the need for solutions. This is our best hope.

It is true that one of the better legacies of Labour is a more open, kinder, less selfish society than it inherited in 1997.   Ironically the dark core of exclusion, which lay deep at the start, has grown bigger through the same policies and over the same period which helped the mainstream to open out and become more inclusive. This perverse heritage is one which both the main parties helped to create. Cameron and the coalition have the initiative to set about building a better outcome, but to succeed not only Labour, but all the institutions of the land will have to engage in the project too.

Lending Controls

Lord Turner has signalled that there will have to be a return to income based lending which ensures that the borrower has both sufficient income to pay the loan and also have  enough money left over to live. The era of ignoring income, or having no formal controls, relying on house price inflation to take care of the mortgage, is over. This reliance on house price inflation to drive the economy is now  recognised as a major structural flaw and is traced back to the bonfire of credit regulations in 1971 by the Heath government. This theme was strongly argued in my book months ago, so I am pleased to see this major shift in thinking.

It is an interesting moment to reflect upon the record of both  Tory and Labour on the road to our present parlous state. Between 1970 and 2010 the Tories were in government for 22 years and Labour for 18. The Tory failure was to suppose that entirely free markets would be self regulating and find a natural safe level. Heath’s bonfire and Big Bang created the conditions which allowed the economic model to run out of control.

Labour’s failure was to allow public employment (and therefore expenditure) to run out of control as well, creating not just unsustainable cost, but also terrible bureaucratic inefficiency with multiple management layers and futile jobs; an advertisement for a Street Naming Executive to join and lead the Street Naming Team is one of countless disturbing examples. The stack of regulators and quangos is now not only too high to stand, but it is unfundable. Not only is the country nearly bust, but worthwhile projects such as building new schools become casualties. 

Of course there must be regulation, well directed, to control the framework in which free markets function and the economy cannot be allowed to run riot. There must be able public employees to provide services and run the country but working to a clear need and on affordable pay. The purpose of good government is to balance all this as well as the budget. There is good evidence that the coalition knows that. Cameron and Clegg may be seen by history as much bigger figures than voters who elected them imagined.

Labour has to go through a re-think. Presently engaged in choosing a leader and washing dirty linen in public, the latter to continue with the Blair book and maybe one from Brown, the time will come when a political agenda is required for presentation to voters. Nothing very exciting is yet flowing from the lips of the many candidates other than excuses and obscure wisdoms. What will be needed is a  clear Labour philosophy which will define a left of centre approach which is both radical and cost effective.

Meanwhile the Coalition has the initiative and sets the agenda. As it does so both of its constituent parts, the Tories and the Lib Dems, are undergoing a transformation driven by reality and arithmetic which neither saw coming. Never before have we had an election campaign when so little of substance was said as a prelude to so much of substance happening.

Tributes to Raoul Moat

The Metropolitan Police Commissioner has expressed disappointment in the level, 17000 at the time of writing this, of supporters of a tribute website to Rauol Moat on Facebook and the flowers and other tributes outside his home and at the spot where he shot himself.

This raises profound issues which should be of great concern to the police across the country. They are these. There is something alarmingly aggressive and unfriendly about the way a modern police force, when fully mobilised, goes about its business. Huge areas are sealed off. People are either trapped in their homes or public places or cannot get to where they want to go. Armed police are not like the old style cop pulling a snub nosed revolver. They are kitted out in a quasi military ensemble with automatic weapons with authority to shoot to kill if needed to protect the innocent.

Here is the nub. Has the issue of safety first and public protection got out of hand? The police are supposed to be of the public, for the public, but the public, as in the war, have to accept some risk and use common sense. At what point do the police become a Militia? How much does all this cost? Does the public any longer see the police as on its side? At all levels and for different reasons, I sense major disquiet. Politicians will make supporting noises, but confidence is shaken, whether it is a murder hunt or crowd control. Reform is needed.

This is what sympathy for the sad and sorry figure of Raoul Moat is all about. He was armed and dangerous. He had killed and maimed the innocent. Yet too many felt he was fighting for a cause. We have to ask how we got here and where we go now.

Deeper Recession

New figures from the National Statistics office show that the recession in the U.K was worse than at first thought, going down from peak to trough 6.4%. This compares with 5.3% for Euroland and 3.8%  for the U.S. In other words we did worst.

When I was researching for my book 2010 A Blueprint For Change, the figure that struck me above many other alarming economic numbers, was the staggering level of the total debt of the U.K as a whole; in other words, business, households and the public sector combined. It is the second highest total in the world after America, but whereas there it is (June2009) 94% of GDP and $44000 per head of population, here it is a staggering 416% of GDP and $142000 for every head of our population, man woman and child.

I quoted this in the book to illustrate the extent of the crisis. I have since mentioned it in a blog at least once. John Humphries quoted it this morning on the Today programme to Ed Balls, who appeared not to know of it. Yet it is the key, for it tells that a very substantial part of the boom was unreal because it was borrowed and the actual level of economic activity was much lower.

As we struggle to pay off  both public and private debt and live within our means the economy will reveal its true level. I suspect this may be lower than we think it is today. I do not believe in a double dip recession simply because the spike upward has been through government expenditure from yet more borrowing. We have never really left recession.

There are signals to see. House prices are now falling again and so is inflation. In reality this is very good news, but I am not sure that the public is prepared for this. The catastrophic mis-reading by the Treasury (or its domination by Brown and Balls) during the years immediately prior to the crash is the main reason for their misplaced hope that we are well on the road to recovery. There is a long way yet to go. The new government, faced with numbers no amount of political dogma could ignore, has made a brave start. We must now hold our nerve. For those in the public sector caught in this phase of the storm, times are going to be very hard. We need to remember this is not just a recession brought about by the economic cycle. It is the collapse of an entire financial model.