This Blog does not think so. Wait for the opening of the Harbottle and Lewis file and the likely spilling of quite a lot of beans by Glen Mulcaire.
In the end, after several hours, the deferential and sympathetic responses, by the whole Murdoch clan, to the questioning of the select committees, added up to the simple summary; Not me Guv!
Hmmm. We shall see.
It was a good performance in the Commons yesterday from from the PM. He put heart into the Tory benches which were beginning to lose it and many, though not all, commentators felt that he had gone far enough on Coulson. Then came Hunt.
The Secretary of State for culture Media and Sport is perhaps the most hapless minister that the long memory of this blog is able to recall. Everything about his quasi-judicial function is a shambles and now he has successfully put Cameron on the spot. Again. Everyone suspects that these covert meetings with various Murdochs and their people gave rise to talk of BSkyB. Vince had had the responsibility taken from him once he offended the quasi judicial element of his portfolio. This appeared to clear the way for the compliant Hunt to make the right noises and nod it through. This was all part of the bargain between the Murdochs and their support for the Tories. Or so it looks.
Cameron yesterday allied himself ( another poor judgement call?) to Rebekah Brooks when deflecting questions about what he had talked about with her over BSkyB when pressed, time and again, by Labour. His failure to answer a yes or no, coupled with the Hunt gaffe, opens a new front of opposition attack.
The problem with political drama is that, once tainted, a Prime Minister remains in office but not in power; Chamberlain after Munich, Eden after Suez, Macmillan after Profumo, Major after Black Wednesday, Blair after Iraq. As all the enquires unfold in the phone hacking saga, too often will names associated with Cameron resurface to keep the whiff of scandal fresh. Especially if any go on trial.
For Milliband the Murdoch crisis has been his making. Down the track with gathering speed is coming the Sovereign Debt Crisis. For this test (for us all) Cameron leads the stronger team. He must now unite it to make the new crisis Milliband’s undoing. That should not be difficult. All Milliband has got is Ed Balls.
This crisis now has, like some terrifying monster of ancient mythology, four heads. Each head is operating independently of the others, yet all are connected to the same body. The four heads are: the Murdochs and their media empire, the Metropolitan Police, Parliament and finally and critically, the Government. We will now look into the eyes of each one in turn.
The Murdochs A month ago this was still one of the greatest media empires of all time and an indispensable ally of those who sought or exercised power. Its ugly side is now exposed, its corrupt methods laid bare and its reputation destroyed. The Murdoch family ( inclusive of Rebekah whom they treat as theirs) is under siege and suspicion and may in part or all end up in a criminal court. Both the people and the business are subject to a range of judicial and investigative enquires. Ten employees and former employees have thus far been arrested.
The Police To the extent of connections to the media and its ability to investigate media issues and crimes, the Metropolitan Police have been revealed to be lax and incompetent with curious cross connections with the Murdoch empire. This gives rise to issues of partiality and corruption, now subject to numerous official probes. Its two most senior officers have resigned.
Parliament Now enjoying a golden renaissance as the power in the land, operating in its true Constitutional role as the authority to which all are accountable and over which none can prevail. It is now for the first time in years operating independently of the government and to a different agenda.
The Government Rudderless and drifting, tossed by the waves of public outrage and Opposition pressure, trying to find safe haven before the whole thing is sunk.
At stake
for the Murdochs is to salvage the business and avoid criminal conviction
for the Police the restoration of shaken public confidence
for Parliament to build on its new found authority to restore pubilic trust in democracy
for the Government The prime minister’s and his government’s survival together. It may very well be that in the end neither will make it, but before it comes to that, his government may find the only chance of its own grip of office is without Cameron himself.
As predicted yesterday by this Blog, the pressure on Cameron is building. First we had Coulson, then the tardy response to the erupting phone hacking scandal, followed by the arrest of Rebekah Brooks and now the coded complaint from Britain’s resigning top policeman that he could not give the prime minister full details of what was going on because the PM was matey with a prime suspect in the case. As this news sinks in and it is so peculiar that it will take time to register, it will be seen that this crisis is now at the centre of the government.
Everything now hangs by a thread. One more disclosure, an unforeseen arrest, a leaked email or whatever can hit Downing Street below the waterline. Politics is about events and there may yet be some event that comes to Cameron’s rescue even now, so an anxious Number 10 will not yet despair. The Tory party needs to ready the lifeboats, however, just in case. A succession plan needs to be drawn up, because hour by hour anything can happen.
A neat one would be Hague for premier and Clegg to the Foreign Office. The post of Deputy PM could lapse. No other moves would be needed. Or is Hague too damaged by that room share episode? In which case there is no other credible candidate. Perhaps that will be the nature of Cameron’s survival. Hardly ideal, but then again in politics you can never tell.
We must not forget that there is in the wings a simmering sovereign debt crisis both in Europe and America. This is not the time for a government led by someone hobbled by scandal. The country has been stoic through first the crash and then MPs’ expenses. Now it deserves better.
The arrest of Rebekah Brooks today has many repercussions, not least upon the parliamentary select committee before which she is due to appear. Much is being said and will be said about all that. However this blog today will concentrate on one issue only. The future of the Prime Minister.
This is now the biggest political crisis since Profumo. It does not involve sex, nor a second rank minister and a tart. It involves crime and the political leader of our country. It now transpires that Cameron had Coulson to Chequers for one sleepover and Rebekah for two, the only person to have been honoured with a repeat visit. Both are now arrested in connection with phone hacking and bribing the police. To say that this hospitality is unfortunate is to understate the case. To realise that the taxpayers paid for it, as Chequers is not a private house, will just inflame the scandal. But none of this holds a candle to a question which may now be asked.
How much did Cameron actually know?
Where these sleepovers just a junket at public expense or where there serious conversations in the library after dinner?
Why was the hostile Vince removed from the Murdoch frame in favour of the supine Hunt?
If these questions do start to be asked, whatever the denials and explanations, the Cameron premiership will be in trouble.
Next week will be full of surprises.
That’s a very good question. If you have faith in the EBA tests, then you will know that out of 90 EU banks, a total of 24 either failed the tests, or are in the danger zone. That is 26% and not very good, especially if there is trouble ahead. Moreover apparently while the tests indicate a bank’s ability to cope with various adverse business and market scenarios, default by a sovereign country, or several of them, is not taken into account.
This is very much like the unsinkable Titanic. It was indeed unsinkable if it hit an object head on and if inrushing water did not fill more than the first (I think) four watertight compartments. The accident which occurred was not quite to this specification. The blow was not head on but glancing and the breached compartments were five not four. Down it went to the bottom. There were not enough lifeboats because it was assumed that as it could not sink, they would only be needed to shuttle passengers from a crippled ship to other vessels standing to. Because all these assumptions proved flawed the most famous maritime disaster in history happened.
If a country defaults in chaos while politicians argue, other countries will be forced to follow, if not by the markets, by their voters. The losses will at once bust the banks who have lent directly to these countries, those who have leant to those banks and those banks which have done neither but have insured those who have. That is most, if not all, of them.
After the Titanic sank, its identical sister, Olympic, was taken out of service and modifications were carried out to overcome the flaws and make it unsinkable no matter what. It sailed on, much loved, until at length reaching honourable retirement. The banks must now be sufficiently capitalised, their activities sufficiently ring fenced and their business models organised according to banking, not gambling, principles, if they are to face and survive what is likely yet to come.
It would be even better if politicians could get real about these mountainous sovereign debts, recognise they can never be paid in full and come up with some numbers which will allow an orderly, collective default under the general spin of debt re-structuring. The actual losses can then be quantified and plans laid, as in the third world debt crisis, to absorb them.
The results of the so called stress tests for all EU banks, within and outside the Euro zone, will be announced later. This is one of the features of the sovereign debt crisis, which, having engulfed the Euro zone, is, like the Murdoch scandal, seeping across the Atlantic. Standard and Poor’s today declare a 50% probability of a US downgrade unless there is an armistice in the US economic war of principle between the White House and Capitol Hill. Added to Greece, Ireland, Portugal and perhaps Italy and Spain, the debt crisis is beginning to shape up big.
At the heart are the busted banks. Because of the stuff in their balance sheets, including bets and instruments of opaque value and money owed by countries who cannot pay, some banks will fail the tests; unfortunately these will be fewer in number than those which will actually fail or need rescue when the default cycle starts.
These uncertainties are made very much worse by the inability of the Europeans to agree a common policy to manage their common currency and the failure of the Americans to stop grandstanding untenable economic positions and get real. In effect any country requiring a bail out is defaulting, because it cannot pay its dues to banks. To stop another banking crisis, the EU, the IMF and the ECB are lending taxpayers’ money to busted countries in order that the busted banks can survive a while longer. This is a pointless process which will have to stop.
The reality is that the western economies are collectively over borrowed and have no realistic chance of paying off these debts, without plunging into a vicious circle of cuts and economic stagnation in the failed attempt to do so. Sooner or later there will have to be the acceptance of a collective partial default in order to restore a coherent economic function. To what extent these debts will have to be written off, depends on how far various governments, including the US, can reduce expenditure and increase taxation in order to eliminate their budget deficits. In other words two things have to be done. Get the income and expenditure streams into balance, to include servicing and repayment of a manageable element of these debt mountains and then add up the losses. Until that net figure is known and therefore bank losses can be measured, stress tests will not mean what they appear to say.
Britain has been gripped by the Murdoch drama. What threatened to become a political crisis has become something of a political triumph, with the standing of parliament greatly enhanced. Most, if not all, of the credit for this is due to Ed Milliband. For him this has been as the Falklands to Thatcher. We must see if he can use the advantage he has gained against a shaken, but still intact coalition.
The nation is now out of the thrall of News Corp, giving a curious sense of relief, felt far beyond political circles. The fall out will rumble on for months and years, but the nation, though shocked, is both safe and liberated. This is just as well. There is a real crisis waiting in the wings where the threat is vastly greater. It is centred in the euro zone and now also in the U.S. We will start across the Atlantic.
Moody is threatening a downgrade and has put America’s rating under review. This is because the White House and the Republican majority in the House are locked in a financial argument which could, if not resolved, cause a U.S. default in August. Nobody dares think of what that could mean, but the UK, whose economy is very closely tied to that of the US, needs to be thinking deep and fast. The problem is part financial but only in part. The federal budget deficit is out of control and the accumulation of debt is eye popping, but all of it is within, just, the county’s capacity, if its economy fires on all cylinders.
The real problem is the fact that the country is joined in an economic civil war which has its roots way back in the founding of the nation. What size, what price and what authority should be invested in the United States? What freedom to choose and decide should be retained by individual States and the free individuals who live in them? This is what the Tea Party is about and it was the theme which gave the Republicans their mid-term success. On top of that is the flawed Republican idea that you can spend and cut taxes at the same time, which will somehow close the gap between revenue and expenditure (it has not). This is challenged by the equally flawed Democrat notion that you can pay for excess spending by taxing the rich. The crisis deepens because two opposing dogmas argue, while the ship drifts in dangerous waters; it is worse because both are wrong. The US is without any credible economic strategy to get its economy back in balance. It is without a political strategy to define what the United States actually is.
This is quite enough to worry us all but it is not all we have to worry about. The Euro zone is no nearer doing what it has to do to save its big idea, as both Ireland and Greece are downgraded to junk and Italy and Spain begin to look increasingly at risk. Just as in America, there is in Europe an ideal and a reality which do not match.
In Europe however, it is clear what is needed and sooner or later it will have to happen.There has to be a pan-euro zone finance ministry which alone is empowered to borrow on behalf of all the countries in the currency. It would then lend such funds to member countries and could iron out regional imbalances by charging different rates of interest. All this it would do under the edict of a prudent and realistic economic policy. Countries would still be free, within limits agreed by the finance ministry, to sell their own bonds, but the markets would be told that there would be no central guarantee for these instruments and that countries would be allowed to default on their own bonds without prospect of rescue, as are individual States in the USA.
The surrender of sovereignty by euro zone countries would be real and important, but there is no other way to run a currency. Financial union without political union is impossible. The problem is that all this would have to be done within the framework of existing treaties, because there is little chance that referenda in all the countries involved would deliver a Yes vote. Unfortunately this will mean a lack of democratic legitimacy to the arrangements, whatever they are and however they are described, which may impede effectiveness. As in America, there is a financial crisis with a political question; how much economic power should regional and nation states cede to a wider union for the greater good?
Finally it is certain that Greece, Ireland and Portugal will have to undergo debt re-structuring which will involve partial default and the market bearing significant, but not total, loss. This may even happen to Spain and Italy. That will seriously undermine the balance sheets of most of our banks. The Treasury has not been caught up in the Murdoch drama. Just as well. It will need all its powers of concentration in the weeks ahead.
News Corporation has a lot on its plate. Its UK operation is engulfed in what the prime minister calls a firestorm. The brand is toxic and the family management is under siege from parliament, the police, a judicial inquiry and the public, all on a scale and with a scope without precedent. Yet the crisis, whilst growing still, is significantly defused by the withdrawal of the BSkyB bid. The management has been cut down to size and that size is a good deal smaller than people had, until very recently, thought. Whether it stays or goes is still an issue, but less so. The empire may not be powerless but it is a lot less powerful. As the police investigation advances there will be more arrests and as the Inquiries get into their stride there will be more astonishing disclosures. The police themselves are damaged, more damage will come and some promising careers will be cut short. But all of this is predictable and will happen within known boundaries.
Politically , the government has now fallen into line, having utterly misjudged the public mood and the political power of the Labour Opposition. It will not now be engulfed, though it is severely damaged, especially the Tory element. Ed Milliband has been making all the running and although Cameron is now earnestly and with his usual polish, singing the same tune, it is Ed Milliband’s song. A systemic failure in the efficacy of the Downing Street machine calls for examination and repair.
As for Rupert Murdoch, it is not known how long he will stay in the UK. When he returns to the US, he may find things have changed there also.
As yesterday’s new revelations stunned everyone, it became clear that this is now a full blown crisis spreading like red hot lava from a volcanic eruption. The Murdoch business in the UK is under siege, with the scandal now spreading to the Sunday Times and the Sun. The family management of James and Rebekah is utterly discredited. Rupert Murdoch himself has become toxic. Whatever dance of regulators and quangos is now begun around his bid for control of BSkyB, the reality is that it is now too late for mere delay to smooth the path. This deal is never going to happen while the Murdoch family has anything to do with the management of News International. We suspect that the same goes for the parent, News Corporation. Although America regards this as a British crisis, it is beginning to turn its gaze inward. What it may see we cannot tell, yet, but the US is the land of the Special Prosecutor. SPs provide leadership and focus to complex enquiries. It is to Murdoch’s advantage that so such authority exists in the UK.
One of the most remarkable features of this drama, full to the brim with remarkable features, is the ineptitude of the leadership provided by the government in general, the minister, Jeremy Hunt, in particular and the prime minister most of all. Hunt’s performance in the commons yesterday, dancing to the Murdoch tune, was cringe making and the absence of the prime minister telling. The political damage to the government is huge. Ed Milliband shines as a star and speaks for the nation. Already an average of opinion polls projects Labour with a majority of 90.
What shocks perhaps the most, is the discovery that the police are corrupt, even to the level of officers protecting the Queen. The police themselves are under investigation as they investigate an ever widening array of potential crimes. The British public, perhaps, certainly to foreign eyes, just a little too keen to gorge on celebrity scandal, now finds itself faced with the third great crisis of our times. We started with the banking crash, then came the MPs and their expenses, now comes a discovery that the police steal and sell secrets, the media (or part of it) is a law unto itself with no boundaries, decency or conscience and the politicians have been in thrall to a Darth Vader style empire. The effect upon the health of our democracy is very grave, the more so because we lack the protection of a written constitution.
The implications are far reaching. Both Murdoch and his family are damaged beyond repair, though their effort to patch each other up will be energetic. Cameron too is a broken authority and so long as he leads it, his coalition will be much weakened. This is not a good time for weak government Jeremy Hunt style. The economy is stalling, Italy and Spain are now in trouble, the euro zone cannot resolve its issues, Gaddafi soldiers on regardless; the list is long and lengthening. Moreover, the Opposition is now united in a cause, behind a leader who has found his voice.