Blog 2023 Malcolm Blair-Robinson

George Osborne, the Cuts and the Economy

The debate now begins. Just right or too much or too soon? Fair or unfair? Do the poor suffer most? 

George Osborne has become a decisive and focussed parliamentary performer. He often appeared inadequate in opposition. This is the case no longer. The government front bench is beginning to look effective. The combination of  the strident Osborne, the dour Alexander and the homely Cable presents a formidable financial team.

To judge the cuts is more difficult, not least because each pundit bases judgement and criticism on different criteria to  make their argument. Some worry about a double dip recession, whilst others feel even that is acceptable, if it achieves an ending of the fiscal deficit and strong public finances. Then there is the argument about the burden on the rich relative to the poor. Here are the criteria which this Blog considers crucial.

Taxation must balance public expenditure, in other words running costs

Borrowing is permissible for investment in infrastructure, science and technology.

Taxation must be high enough, but not so high as to act as a disincentive to work and investment

The economy must be based on less borrowing, whether  private or public or business, and more saving and investment.

The economy must be driven by free enterprise and the private sector with the State playing an enabling and caring role never greater than 40% of GDP.

Those on lower incomes must have access to welfare in the form of healthcare, education, housing support while the cost of housing is disproportionate, and crisis support such as disability and unemployment

The better paid must recognise that their jobs depend on the public utilities and other key jobs connected to civilised living as well as wages in the manufacturing and service sectors being maintained at reasonable levels in the area of averge pay. These earners rely on the welfare state.

Over the last five years taxation rates of basic income tax and vat have been allowed to operate at too low a level to sustain 40% of GDP levels of government spending. 

Universal benefits paid to those who do not need them cannot be sustained in the long term.

Government must get smaller.

The greatest economic threat is not a double dip recession but a debt mountain and and interest bill which is so burdensome that it sucks the entire economy into depression. This remains a critical risk.

To deal with all this will take time. Some parts of the current package of measures impact the poor disproportionately hard and are unfair unless those affected are feckless scroungers. Local authorities will have real problems with services with the reduction in grants. Overall, if judged by all the measures announced by this government across the piece the package is tough but balanced. There is room for higher income tax at the basic rate to pre Labour levels, if the threshold is also raised. That shot remains in the locker. The squeeze on housing benefits will bear down on house values, as exploitation of the benefit system by the private rented sector in urban areas has been one of the drivers of excessive house price inflation for some years. The cut in social housing investment is a mistake which should not have been made.

Generally, however, the coalition government has a determination to sort the mess out and whether you like it or not, it is economically the only show in town. Ed Milliband and Alan Johnson are a much more formidable team than many commentators expected. Ed’s lucid and logical style is refreshing after all that went before in the leadership of New Labour and he is trusted. Alan Johnson strikes a cord with ordinary worried families. What these two now have to do, is come up with a real and credible alternative. So far there is nothing in sight. Just cutting less is no longer even the foundation of a plan. Until they come forward with more than soundbites and clever word play,the Coalition has the wind in its sails, no matter what the pundits say.

Defence Review

I think the government got this about right. They did not start with a clean sheet. They were committed to two useless aircraft carriers, with no suitable planes immediately available and with the wrong kind of power plant. They have to be built because it would cost more to cancel. That is over £5 billion down the tubes, but it protects jobs. If we are stupid enough to get into another Falklands war, they may come in handy.

Elsewhere there is good news. The world beating Daring class destroyers and the Astute submarines are to go ahead, giving this country two of the most advanced warships in the world. The two modern fighters remain, Typhoon and Tornado. Harrier goes because it is obsolete. There is an understanding that the cold war is over and, though not admitted to, this nation’s days at power projection of military force, to coerce other countries to do our bidding are over as well.

National defence is a priority and will remain so, with effective and  modern forces for that pupose. There is a recognition that the days of the tank as an invincible offensive weapon are gone and that cyber defence is the new theatre of risk. Trident remains in modified form for a while longer, retaining as we must, an effective nuclear deterrent. All in all, given the mess, the outcome is credible. The retired service chiefs will squeal their protests through the media, but we should ignore them, because they helped put us into the current predicament.

Interestingly Russia is modernising its military. It is adopting a similar general approach to the U.K. It accepts the cold war is over and that threats to its sovereignty and independence do not come from the West.  America is now the only country in the world with global military reach with a foreign policy predicated by its the military thinking. Time for this to change also.

London Bombings

A witness, one of the survivors, of these terrible bombings described fire crews waiting in the wings whilst victims died without  first aid. Apparently they were under orders not to put themselves in danger in case there was a second explosion. If this is correct it is a national disgrace.

The emergency services have a duty, it is inherent in the vocation, to put themselves at risk in the course of protecting, aiding and rescuing victims. We do not need to go back to the blitz to know how true this tradition is. It gives the whole country a sense of pride in its emergency services, akin to that of the armed forces.

If  some daft adherence to some safety protocol comes between that duty and its application, then it, together with those mindless zealots who apply it, must go. There is no place for it or them in any situation which calls for bold and heroic action to save lives and help the suffering. This is not a country deaf to screams of agony.

What a tawdry contrast to those brave firemen in New York, over two hundred of whom died trying to rescue the trapped on 9/11. I have said before that if you create a procedure manual you empower the fool. I will now add that you also licence the coward.

Iran in Iraq

Perhaps the most intersting  piece of real world news yesterday was a story carried in the Guardian about the active part the Iranian authorities are playing in brokering a deal to break the impasse in the government forming process in Iraq, following the deadlocked elections. If this turns out to be correct, Iraq will have a government close to, and an ally of, Iran.

Pragmatically one must say that anything that produces a functioning government in Iraq, which also has the backing of Iran and Syria, must be better than the present vacuum. However if we refer back to the battle plan of the Bush Blair war with its neo-con drumbeat, an Iraq counting Iran as its principal ally, was not an outcome even contemplated in the wildest nightmares of the Pentagon and its trigger happy followers. Added to the fact that there were no weapons of mass destruction, the trigger for war, and you have what is without doubt one of the most ill advised and futile wars in history.

That so many brave lives have been lost among the military of America and Britain and innocent civilians in Iraq makes this foolhardy adventure one of the darkest episodes in the record of the Atlantic Alliance.

Cyber Threats

About fifteen years ago I was researching a novel (which I never wrote) in which particle beam weapons (known then as star wars) featured as a threat. It was before Internet research and involved old fashioned leg work. I met some rather interesting people who had contacts with, but who were not themselves directly, spooks.

I learned that the big new threat was not particle beam weapons, which nobody could make work and which were already out of date. It was cyber wars where pressing a few keys on a computer could disable an entire missile system, plunge New York into darkness, cut off  NORAD from the outside world; the list was endless and apocalyptic.

Now it could all be presumably done from an iPhone or certainly an iPad. It is good now to hear officially that this threat is a security and defence priority. No doubt countermeasures are in continuous development. This is one area where cuts or economy would be very unwise.

The Cabinet, The Cuts and the Economy

The media feeding frenzy of leaks, speculation and guesses about the size, nature and effect of the cuts has now reached very nearly its climax. It has all been a rather curious process. This may reflect upon the two party nature of the Cabinet, key members of which are gathered at Chequers, putting, we are told, the final touches on the austerity package, as if it were a collection of dresses for a fashion show. In days of old everything would have been shrouded in secrecy. Now Westminster is awash with briefings, leaks and mini announcements, with rumour supplanting reality as the basis of news.

There is a reason for all this. Nobody engaged in it, whether media, government or victims, have ever seen anything like it before, unless there are old enough to remember Sir Stafford Cripps (why do modern politicians no longer have such wacky names?). In the frenzy, there is anxiety. Will we lose our jobs? Will the government deal itself a fatal electoral hand? Will Labour paint itself into a corner of unreality leading to years in the political wilderness? Will the LibDems implode? Above all the question hangs in every living room across the land; how will the cuts affect us?

We have to remember this exercise is not just about cuts. It is about debt interest spiralling out of control. It is about national debt so big it cannot be repaid for generations to come. But it is more than that. It is reshaping the economy on a sounder footing, where prosperity is real, based upon money earned and assets valued at realistic levels. The real economy of the United Kingdom is much smaller than we think and we have to expand it. So much of what is there is not ours. Remember the key figure. List all the countries in the world in order of what they and their businesses and their populations owe in debt and Britain ranks number two. Yes, only America owes more. Yet America owes 98% of its GDP, close to the world average. We owe a staggering 415% of GDP.

When George Osborne stands up in the Commons on Wednesday, there hangs upon his words nothing less than the economic independence of our country. Let us hope he gets it right. The midnight oil must burn at Chequers.

President Sebastian Pinera of Chile

The Chilean President is off on a pre-scheduled European tour, with the U.K. the first stop. In his luggage he carries fragments of rock from the refuge deep in the mountain where the miners awaited their miraculous rescue, which he plans to give to the Queen and the Prime Minister. To survive underground, for the first seventeen days undiscovered, is a miracle of survival and self preservation which will go down in history. To be Chilean today is to be among the proudest upon the earth. To have been engaged in the astonishing rescue, not only Chileans here, will be a life defining moment for all, and rightly so.

The way Chile mobilised itself for a project which many, perhaps most, experts round the world thought hopeless, is a sharp example of how the simpler lifestyle and government structure of less developed countries can respond to a crisis. The President is anxious to visit Churchill’s War Rooms apparently, having been inspired by those famous speeches of 1940, not to give up in the battle to rescue the entombed miners. Britain in 1940 was also a much simpler, more practical, state structure, capable of total mobilisation of all the people in a fashion Nazi Germany, with all its vast parades and myriad uniforms, could never match. We might want to reflect on this today.

Meanwhile Chile can bask in its deserved glory. It is a long way from the times of the Disappeared. There is, however, an outstanding question. If cracking was heard from the rock formation in the mine, why were the men sent down on their shift? Maybe there is a case for the Health and Safety Executive after all.

General Patraeus

This widely respected general is here for talks and has been to Downing Street. No doubt the tragic death of Linda Norgrove was discussed. No doubt too each side bolstered the other’s confidence that Afghanistan was going according to plan. Clearly it is not.

Mark Sedwill, Nato’s senior diplomat in Afghanistan was interviewed on the Today programme this morning. He was eloquent and logical as well as unreal and unconvincing about Nato’s prospects of creating the kind of country envisaged when this ridiculous and costly adventure began so many years ago. It has now been going on almost as long as WWI and WWII put together.

There is talk of ‘contacts’ with the Taliban going on right now. The plain truth is that Afghanistan will become what the Afghans, not Nato, want it to be. We really do need to face up to the fact that these resilient tribal people know that the Karzai government is totally corrupt, its so called security force is unreliable and may well switch sides and the police are entirely dishonest. Against this ghastly display, the austere but efficient Taliban have quite a shine. Nato’s failure is that it has not been able to give birth to a credible alternative. Now it is much, much too late.

Francis Maude and the Quangos

This is one of the best pieces of news to come out of any government for years. Not because it can save money, though it may, not because it cuts back government, though it does, but because such a system of public management is undemocratic. Each Ministry is responsible for a facet of national life. Some responsibility is delegated to local government. All are elected, Quangos are not. Nobody knows who they are, what they do, why they are there or how they arrived. Yet their power reaches into every nook and cranny of our private, professional and working lives.

Now there is to be a bonfire of this chaos which is so muddled that even the government cannot answer either how many people are involved or what they all cost, because nobody knows. If ever there were a reason to light the match it is that.

Ed Milliband and PMQs

Ed did well, much better than many, especially his brother’s supporters, expected. David Cameron will get no easy ride.

As for the theme of attacking the removal of child benefit from HRT payers, this was wrong anyway but very wrong for Labour. It is true that the individual tax system makes this unfair in favour of two just sub HRT incomes and to attack this alone demanding modification would have been sound. But to argue that the measure could cause hardship to the top 15% of earners will dismay the grassroots supporters who earn half that level or less. His advisers need to be careful.

If he cozies up to the chattering friends of New Labour, which he was elected not to do, he will leave his working class flank exposed. Cameron’s more liberal and nicer Tories could easily make inroads into Labour’s core vote, just as Macmillan and, for differing reasons, Thatcher did. The prospect of power would then drain from Labour and Ed would become yet another longer serving leader of the Opposition.