Blog 2023 Malcolm Blair-Robinson

The Foreign Secretary, William Hague, has announced a considerable beefing up of the coverage and capacity of the Foreign Office, in spite of the cuts in its budget, which represent very welcome news. He has also remarked on the evident dysfunctionality and peculiar rivalries at its heart, revealed when he took over. This blog has in the past repeatedly complained of its failures under the other Milliband and it shows just how bad a leader of the Labour Party he would have been. It also shows just how little influence on foreign policy the department in charge of it had, at a time when our national judgement and diplomatic skills fell to an historic low.

Mr Hague’s revamp will be welcomed around the world. It will also beg the question; what about the MOD? Sir William Gage’s report reveals truly ghastly failures in command, supervision and justice administration which not only allowed monstrous cruelties, but then covered them up. The videos of abuse show little difference to the methods of the Waffen SS. It is not good enough to say that this was isolated to one or two bad eggs, like phone hacking. This sort of thing has to be embedded in the culture, like, as we discover, phone hacking, in order for it to happen at all.

There are so many issues raised, including the misguided morality of the war on terror, which mostly has made the world more dangerous rather than safer. It is impossible to overstate just how bad this is. This blog has long argued for the Ministry of Defence to be shut down and replaced by separate Army, Navy and Air ministries similar to the organisation which won us two world wars. From the day it was set up in its present form in 1971, it has been an expensive, profligate muddle. Its financial management is appalling and it constantly tries to cover up its failures and lie its way out of exposure. It is a shame on our nation and a blot on our democracy. Torturing innocent civilians to death and videoing the practice smacks of the worst nightmares of times past.

One of the challenges of being Chancellor of the Exchequer is the torrent of advice from many economic experts who think they have better ideas and City lobbyists who have interests to protect. None of these people present a rounded picture. Osborne and his team have to do that for themselves.

At present they are under pressure on two political fronts. The first is the argument of the 50% tax rate. Lobbyists allege it is causing the clever to flee the country. The figures are something like this. If you earn £ 1 million per year, you have to pay an approximate extra £85,000 tax. That is on top of the £340000 you would have paid on the excess over £ 150,000 under the old regime. In a national emergency the patriotic should not up sticks and go, but these are not insignificant figures and the greedy, the extravagant and the dual nationals might. Clever tax specialists will deploy measures to reduce the burden. It will be interesting to see from the current study whether this new tax does, in fact, produce more revenue. It is known that if the rate is too high, the revenue falls. It is also known that if the rate is too low, as in the U.S., the public finances become chaotic. This was a Labour tax and is politically popular in the country as a whole and with the Tories’ coalition partners in particular.

The second is the plan to reform the financial structure of the banks and the need to protect ordinary depositors from loss of their money and taxpayers from providing bailouts when banks do silly things which bust them. This will curtail banker’s activities and individual earnings of their traders and they will be at risk of calamity if they make a wrong call. This is how it should be and what is needed. Osborne and his team must not bow to pressure to delay implementation. This is an issue which could cause the coalition to fail. An election fought on this issue  by the Tories on the side of the bankers would be lost.

Meanwhile there were misplaced celebrations yesterday when the German Supreme Court ruled that it was within their constitution to bail out Greece etc. The court also ruled that any such future bail outs must be subject to a parliamentary vote. This is critical because if this had happened over Greece, the bail out would not have happened and Greece would now be bust. So would a number of banks.

The biggest problem for Osborne is that the two economies upon which the prosperity of Britain and its recovery depend, America and the Euro-zone are in a political turmoil over how to manage their money. Nothing meaningful is happening in either to get to grips with the problems. It is not too late to turn more and more to the East, although we should have done so a lot sooner.

It is not too late either to start working towards a single tax rate for income, with those earning less than £20,000 removed from income tax altogether. This should have happened long ago. There is little mathematical logic ( though a lot of political mileage) in several rates. Even with one rate the rich pay more tax.  What is important is not the rate but the revenue stream and with a single rate it is much easier to gain equilibrium between rate and volume. It is also a matter of fact that those earning up to the average wage cannot afford to pay 20% income tax and 20% again on what they buy. Reducing their tax on income increases their spending power. These are the people who flock to the High Streets.