Blog 2023 Malcolm Blair-Robinson

Alan Johnson

As predicted in this blog earlier, neither Ed Balls nor his wife Yvette Cooper made it to Shadow Chancellor. Both have been given decent high profile jobs, but both would have been easy pickings for the Coalition if either had shadowed the Treasury. Alan Johnson, who I thought months ago would be a good replacement for Gordon Brown, is a good choice by Ed Milliband. AJ is not an economist but he understands that Labour has to have  credible alternatives to the Coalition’s austerity programme and no cuts till whenever cannot be one of them.

Altogether the Shadow Cabinet looks fit for purpose, though the shape of that purpose will not be clear until the results of the Spending Review are known. Not long to wait now.

Lord Hutton  and Public Sector Pensions

Lord Hutton’s interim report is welcome, but may cause anxiety among public sector workers. This is hardly to be wondered at since they have all been living in a fantasy world, which many, but not the majority, helped to create. 

There can be no future system which is based on final salary and it must be met from contributions from the stakeholders and not the taxpayers, who will have their hands full paying off the national debt for at least a generation. Final salary is ridiculous and, once again, favours the few at the expense of the many. Average salary is fair. I heard that in Sweden which took ten years to sort its own pension crisis, over 20% of earnings have now to be applied to pension contributions. This shows what has to be done.

Falling House Prices

The apparently alarming news from the Halifax that in September house prices took a record fall of  3.6%, is in fact a very good thing. While everyone argues about cuts in the part of the economy under the control of politicians, the state sector, there is a real economy rebuilding and reshaping at the behest of the ordinary people. Manufacturing is showing its sharpest rise in fifteen years and consumer debt is falling. Affordable housing is central to everything and the use of inflating property prices as the engine of western economies is the root of all that has gone wrong.

Add to this irresponsible lending to people so that they could buy at prices they could not really afford and you have a disaster. New FSA rules are stopping the irresponsible lending and will force house prices down to the level people can safely finance. A cap on housing benefit will drive down rents. That will drive down prices as well. Houses are no different in this respect to any other commodity.

The elephant in the room which nobody, least of all any politician, is willing to look at, is that most personal wealth is founded on property and is, in fact, an illusion. It can be argued that property is still valued at double its true worth. If that were so, those with a fifty per cent mortgage have no equity and those with higher loans are, unless there are other assets at their disposal, insolvent. Moreover the banks are, and will remain, more at risk than we believe. Certainly they must lend to small business and industry, but they must be very prudent on property lending . Very prudent indeed.

Getting this economy back on track is a much bigger challenge than most people realize.

Ed Milliband’s Choice

Now that the Shadow Cabinet has been elected, the Labour Leader has to make those chosen into a powerful opposition team, capable of harrying the Coalition in parliament, in the county and across the media. The new team needs to look like a new government in waiting. It must not look like the old defeated and discredited government on the run.

Every commentator is now focused on the choice of Shadow Chancellor. Will it be the other Ed or will it be Yvette? If Ed Milliband wants to break with New labour and its now much derided economic legacy he will choose neither. If he wants to line up a pigeon to be shot at by George Osborne et al for being on the bridge when the ship struck the iceberg, he can chose either. They are both as guilty as each other. They are, after all husband and wife. Labour needs to produce a little more substance after the drama of the two Millibands than something that looks like a family soap first and serious politics second.