Archive for February, 2011

Good Manufacturing News

Monday, February 28th, 2011

This sector is now growing faster than at any time in the last twenty years. This is an important sign of the the re-balancing of the economy essential to long term recovery. It is not just a case of shrinking the state, but also the service sector. There are signs too that over reliance by business on loans and excessive house price rises are both damping down. This is another essential part of the re-modelling plan. Caution is needed everywhere to avoid falling back into old ways which nearly bust the country. Especially we need to make more of what we use. At present far too much is made in China.

China should be a trading partner and competitor, who we sell to, as well as buy from. We have an additional hazard at the moment. Because China has become the only source of so many everyday items, we are importing not only those items, but also China’s inflation, currently running at over 5% per year and rising. The Bank of England MPC has a very tricky hand to play at the moment. The additional input of the new Financial Policy Committee will broaden the focus and bring home the truth, overlooked before, that there is more to keeping an economy functional than the level of interest rates.

More Focus

Monday, February 28th, 2011

Things are looking better for the government in its handling of the Libya crisis. The dithers and gaffes of the first few days have given way to some daring actions by the military and evacuations, of many nationalities including Americans, which have made headlines. There is now some sense of urgency as well as gravity in the government’s activities. There is still no news of some three hundred British oil workers based out in the desert. If the estimate is correct there will have to be more rescues.

Meanwhile tomorrow is  March 1st and the month of the budget begins. This budget will have to be clear and unambiguous, offering real prospects of growth which ordinary people can understand. 2011 is the year when the cuts are going to start to bite and to get people on board to bear the pain, it is essential that they have a shared vision of where we are headed. So far they have supported the government with reservation. This support must become whole hearted. This will not be an easy task. To achieve it, outcomes from ministries other than the Treasury have to be a good deal less bumbling. The current improvement from the foreign office and the MOD needs to spread right across Whitehall.

Government Wobbles

Friday, February 25th, 2011

At one level the coalition government is doing well. Most people who are not part of the opposition cavalcade approve of where it is trying to head the country and what it is trying to achieve. Not all are confident it is on the right path to achieve those goals, but they feel that if there is the will, the way will be found.

Thus the dreadful lack of action, purpose and focus that appeared to surround its response to the need to dash to the aid of our nationals caught up in the Libya chaos, is very disappointing. It gives the opposition a hand of aces, smacks of incompetence and humiliates the Prime Minister who is forced into an apology.

Yet there may be more to this. This blog has been observing the fall in the evident competence in government departments. It looks as if ministers were as astonished as the rest of the world at our inability to act. The explanation is possibly this. So ingrained into the culture of public administration is the concept of due process, health and safety, equality of opportunity and host of other laudable nostrums, all of which are commendable, the result of the combination is officials who can no longer think outside the box. When something happens unexpectedly, they cannot react with the innovation and dynamism which was once the hallmark of the British nation and upon which our independent survial thus far has been founded. 

The government must get to grips with this. A serious culture change is called for. Meanwhile it must sharpen up its own act. Cameron showed bold initiative going to the Middle East. Without him Hague looked almost a ditherer. The deputy prime minister was on a skiing vacation, having forgotten he was in charge in the prime minister’s absence. Britons sought the help of friendly ambassadors at Tripoli airport; their own was nowhere to be seen. Only the Royal Navy knew what it was doing and did it in timely fashion. Without the admiration created by its arrival in Benghazi, the tale would be even sorrier than it is.

Libyan Rescue

Thursday, February 24th, 2011

The Foreign Office has made such a shambles of something it is supposed to be good at that, it has become a world wide embarassment, forcing an apology from the Prime minister for its performance. This is disgraceful in itself, but especially so when taking into account the difficulties its ineptitude  caused its frightened and abandoned citizens in this disintegrating and violent State. Their plight was made the more frustrating when they watched Poles, Turks, Dutch and others being cared for by their national officials and flown out of danger by planes which arrived in timely fashion.

Meanwhile rescue planes from Britain were held up by technical faults and health and safety issues. Coming on top of the shortcomings in the Ministry of Defence, a Home Office which got so bad it was described as unfit for purpose, and a Ministry of Agriculture that handled the foot and mouth outbreak so badly it had to be shut down altogether, this shows a worrying trend in the performance of these government departments over the last two decades. Not only do they, when under pressure, not know what they are doing, but they cannot even do that coherently.

I suspect that in this case there has been some advance military planning for armed rescue in extreme crisis, but nothing was in place for a normal hasty evacuation from one of many potentially unstable countries, where Brits work. This needs to be put right fast. It also begs the question of the size and cost of these public departments. They are top heavy and inefficient. Other countries with smaller establishments seem to do better. A nudge for George Osborne. There still could be another £billion or two available for his coffers.

Meanwhile William Hague is badly weakened at a critical time in foreign affairs. He has always struck me as a better parliamentary performer and conference rouser than a minister or party leader. This is not a good moment to fall short.

Brighter Economic News

Wednesday, February 23rd, 2011

Just now the news seems all bad with bloodshed and death from revolution and earthquake. When compared to the trauma of the suffering, ordinary news seems pointless and trivial. Yet it still can be important in the wider picture, aiming towards better days. The fact the there was a January surplus in the government’s accounts is very good news indeed. January is traditionally a good month, but this one was even better than expected. It may not prove that the Chancellor is on the right track, but it does confirm he has not left the rails.

Financial Regulation

Tuesday, February 22nd, 2011

Timothy Geithner made a good point to Evan Davis on the BBC Today programme this morning. Comparing the economic position of the U.S. with that in the U.K., he pointed out that the light touch regulation, which began with Thatcher and continued under Brown, both as Chancellor and PM, sucked banking activity to the U.K. from the U.S., where the regime was tougher. This meant that in London under-capitalised banks represented a much larger and riskier proportion of our GDP. Described by Brown as a ‘goldenage for the City’ (that surely ranks with the unsinkable Titanic for calamitous declarations) the relaxation begun with Big Bang produced the biggest financial crash in modern history.

What is significant is that the U.S. is already ahead on its banking reforms, creating a much tougher set of capital rules and separating propriety trading from main street banking. Our government is still talking tough and doing little. There is fear we will drive the bankers away. That is the whole idea. Dangerous banks are worse than no banks. What we need is more and smaller banks, with regional connections and specialist know how. None should be too big to fail. Fear of failure is the most powerful regulator of all.

Oil and Revolution

Tuesday, February 22nd, 2011

When the governance of a country implodes, diplomats have to tread with care, not least because it is hard to identify who has power. In Libya Col. Gaddafi is still there, but how much he controls and who accepts his orders is far from clear.  What is clear is that his country is a major producer of oil, without the flow of which the shortages and price hikes would risk a double dip recession. Everywhere the eyes of the world are turned anxiously to that convulsed country to see what will happen next.

Everyone hopes, especially Libyans hope, for an outcome of liberation. Meanwhile there is terrible bloodshed. Many of the innocent have died. Many more are willing to give their lives to end a tyrannical form of government entrenched for nearly half a century. It is hard nowadays to recall that Gaddafi came to power as a socialist liberator.This time round the international community must act together to ensure that in the various revolutions now sweeping the Arab world, one form of despotism is not replaced with another.

Revolution, Forieign Policy and Wars.

Monday, February 21st, 2011

David Cameron has scored well to be the first leader to visit Egypt in the post Mubarak transition. What is happening across the Arab autocracies of the Middle East is truly remarkable, but also predictable. It is  of profound historic importance. It has a philosophical element. It  demonstrates what so many have said so often. The war in Iraq was futile, as is the war in Afghanistan.

In my book I suggested that the better way of dealing with Saddam Hussein would have been to lift sanctions after the first gulf war, to enable life for the ordinary people to return to normal. In time they would have overthrown their dictator on their own. By depriving them of medicines and other essentials, the power of the regime was much strengthened. A second war created chaos and suffering which is far from over, even now.

For reasons of self interest, the only rational driver of foreign policy, the West was willing to do business with Arab governments which fell far short of their democratic prescription. Now their people, empowered by modern communications and mindful that no regime can survive the wrath of its own citizens, have set about toppling them one by one. Gaddafi hangs by a thread having looked, after Mubarak, the strongest of the lot.

The implications of this are considerable and far reaching. A complete re-appraisal of the whole dynamics of the Middle East will be required when the upheavals are complete. Until then the West will have to sit on the sidelines, side with the people, condemn violence by security forces and advise its erstwhile friends they have a choice; reform or go. Some, maybe most, possibly all, have no choice. They will have to go. The writing on the wall was the collapse of European Communism. Only China read it. That is why it has been steadily introducing reform and why it is the second economic power of the world. It will adjust again now. We will need to do the same.

Above all we need to learn a fundamental truth. Foreign military intervention does not work in a modern world. It damages the interests of the perpetrator more than the enemy. However bad a regime, it is impossible to liberate a country from itself. Only its own people can do that and when they are ready, as we now can see, they do.

Political Uncertainties

Sunday, February 20th, 2011

It is interesting the way so much of what happens is unforeseen by politicians and especially governments.

Suddenly the new week looks a good deal less attractive from Whitehall than Mondays in the dynamic post natal period of the coalition government. Now there is revolution in the Middle East, unemployment is rising fast, growth has stalled, inflation looks menacing, a divisive referendum campaign is opening, there is confusion and u-turns in several directions and, to cap it all, government borrowing is rising to even dizzier records. There is more. Are the GPs really to be trusted with all that money? Can the government really not get to grips with the banks? What about this business with the European Court of Human Rights? 

It is a time for steady nerves and calm deliberations. All eyes will turn to the Chancellor. Can he come up with a budget for growth which will give morale a boost and set a path to recovery? Much depends on George now. It could soon be his moment.

Moving the Clocks Forward

Sunday, February 20th, 2011

There is new impetus to bring the U.K. into European time, which would mean permanently one hour ahead of GMT and two hours in summer. This has been the case twice in my lifetime; once during  WWII, when it was known as double summer time and once in the early seventies, when the experiment was known as British Standard Time. The wartime arrangement was with good reason, reducing the need for blackout. The BST idea was predicated on the current argument about longer days.

After the war, because of public opinion, we went back to GMT. The same thing happened after two or three years in the seventies. It sounds a clever idea, but in the end people do not like going to work and taking the children to school in the dark for most of the winter. Neither do they see advantage in daylight after eleven p.m. in the summer, or  even midnight in Scotland. Additionally there becomes a longer gap with the America. Business links have to get started one hour later, leaving only two hours of our office day left. Of course everyone works longer hours nowadays, though to what effect is far from certain.

Anyway it will be interesting to see what current consultations produce as a policy. Let us hope we are spared a referendum.