Archive for September, 2012

Labour Must Be Bold

Sunday, September 30th, 2012

Ed Miliband is invoking the spirit of 1945 in a nostalgic think back to the post war Attlee government. This is a foolish and meaningless comparison. Yet it need not be.

The reason for the Attlee triumph was an entirely new prospectus put before the British people; a welfare state, social justice, public ownership and, perhaps above all after the jobless despair of the 1930’s, full employment. Although Labour retained power for just six years the following Conservative government changed very little in the new order, but it did make things work better. This post war consensus on the fundamentals of how society should be ordered remained more or less untouched until the Thatcher revolution. Thatcher’s brand of de-regulated free market capitalism with its privatisations and emphasis on home ownership fuelled a grand renewal of national confidence and aspiration. It succeeded because the old socialist system had failed through its own excesses. Public acceptance of high unemployment as the price for prosperity as one worth paying, represented the most remarkable rethink in electoral strategy since the end of WWII.

Now we find ourselves faced with the greatest economic challenge since the industrial revolution. The challenge is awesome because none can agree on the remedy, though all can see that a boom fuelled by borrowing led not just to bust, but to a collapse of the economic model to which all had, since Thatcher, paid homage, including the Labour Party and especially New Labour. Excess borrowing has led to asset inflation, especially property, unsupported by a broadening of wealth creation. Indeed the creation of wealth now struggles from a shrunken base. The unproductive State is too big a burden for the private sector to bear, whilst the productive state, once referred to as the family silver by Harold Macmillan in a prescient speech delivered when in his nineties to the House of Lords and ridiculed by Thatcher acolytes, has all been privatised and sold off. It is now in the ownership, not of a multitude of ordinary folk called Sid, but a tiny group of massive corporations who exploit their monopoly of public utilities to the detriment of the economy as a whole.

This should be fertile ground for Labour, but it is not good enough to talk about new regulators and tinkering with tax credits or whatever. There has to be a new appraisal of the responsibility and role of the state vis a vis the private sector. Thatcher’s ideas worked at the time but have now gone wrong because they were abused, just as Attlee’s dream faded because its principles were eventually abused also.

The country now has to re-balance the critical elements of resource and supply which should be best managed by the state, freeing up the private sector to do all the things it does best in a modern efficient environment,  ie create wealth and jobs through bold enterprise and clever innovation. Full employment must return to the top of the political agenda with a radical re-shaping of the social model to end exclusion and benefit dependency. This should be fertile ground for the Labour Party from which it should reap a rich harvest. But first it has to come to terms with the fact that Blair was Thatcher’s heir and whilst his premiership gave her nostrums a human touch, his Chancellor’s eye was turned from Prudence to Mammon.

Labour must, once again, break with its recent  past and revisit its roots, in order to build a future, not just for itself but for the whole country. This blog urged the Liberal Democrats to be bold. The task of Labour now is to be a good deal bolder. Fiddling about with regulators and spending plans misses the point altogether.

Cameron At The United Nations

Thursday, September 27th, 2012

As an emotive public relations exercise the Prime Minister’s speech to the UN in New York should play well, especially with his party. However it was not the speech of a statesman, neither will it do any good. Unfortunately the FCO and Downing Street do not see the difference between diplomacy and banging the drum.

It is indeed the case that the suffering, cruelties and mayhem in Syria are appalling. It is unfortunately also the case that while much of it is caused by Assad  and his various regular and militia forces, not all of it can be laid at the door of the regime in whose potential fall the West has squandered so much diplomatic capital. The free Syrian Army is guilty as well and some irregular elements in the rebel forces whose identity and aims remain unclear, are very guilty indeed.

From the very beginning Russia has argued that making regime change as a precondition for anything, nothing would be achieved other than a slide to sectarian civil war of a very destructive kind. Russia has also called into question the provenance of a good deal of the rebellion and questioned what would follow the fall of Assad. The West, in particular Britain and France, have put their faith in something which will never happen, to be organised by people whose identities and purposes are far from clear.  As of today Cameron has lost his patience with the UN but has no proposal to offer which will moves things forward.

The only thing which will make any difference, and it may be too late even for that, is to sit down with Russia and China and work out a common position upon which all can agree. It will not be easy and there will have to be compromise. The current posture of the West may be worthy but it will achieve nothing. The suffering of the Syrian people and the atrocities will go on for months, maybe years, even many years. It surely must be worth eating a little humble pie on a visit to Moscow, if by doing so there is any prospect whatever of helping those children.

Coalition Bad Ideas: Think Again

Wednesday, September 26th, 2012

There are two bad ideas in the offing from the government. The first is the proposal that people should be allowed to add extensions without planning permission. Can you imagine the disaster of next door being sold to  aspirational know-alls who want everything  they can legally get without a thought for the effect on their neighbours? These permissions were put in place for good reason and work well. Local authorities know their patch. Why in the big society with the accent on localism, is central government intending to issue this directive to change the law? If they seriously think that this absurd proposal will kick start economic growth, they are both desperate and deluded.

The second is the idea of granny and grandpa pledging their pension fund as security for the younger generation to borrow to buy a house. What happens when they lose their jobs, the house is repossessed and the bank call in the guarantee? Who pays for the old folk when the bank have helped themselves to the pension fund? The financial crisis has its root in borrowing to buy more than we could afford. Yet this government is obsessed with schemes to facilitate borrowing. Cameron says you cannot borrow your way out of a debt crisis. Why is he constantly supporting ministers who think up new ways to borrow? He sounds like the alcoholic who promises to go on the wagon after one more drink.

Once the party conference season is over and the reality bell rings again, there is work to be done before it is too late.

Lib Dems: An End To Universal Benefits?

Wednesday, September 26th, 2012

Nick Clegg is talking in rather vague terms about stopping free bus passes, winter fuel allowances etc. to those who have no financial need of them. This is bound to cause controversy because of the pivotal notion of  the universal right to benefits enshrined in the foundation of the welfare state.

To test this hypothesis we need to go back to the post war world of the mid to late nineteen forties. This was a peiod of radical Labour government, state ownership and social levelling. Taxation was much higher on income with even the basic rate at 37.5%. Top rates eventually reached over 90%. Universal entitlement seemed only fair under such a penal taxation discipline.

Now things are very different. Income tax is much lower at all levels and there is greater emphasis upon taxes collected at point of sale. It is also the case that our financial predicament stems, at least in part, from a past failure to raise enough tax to pay for all services and benefits the governments of the day offered and a current failure of the economy to generate sufficient activity to provide anything like enough cash to balance the books.

There is no reason why universal benefits should not, while being available to all, at the same time be available only to all those who need them. Such a concept does not undermine anything of value and we cannot any longer afford to finance dogma. However Nick’s proposal to deny benefits to people ‘worth over a million’ lacks any practicality and would cost more to administer than it would save.

What would make better sense would be to deny bus passes and fuel allowances to all those paying HRT and to reduce the state retirement pension pound for pound to those whose income post retirement age rises above £50,000 per year, so that before £60,000 it would have stopped altogether. It would also be reasonable to introduce small charges for GP visits, hospital clinics etc., to be paid only by those not eligible for free prescriptions. None of this would cause significant hardship and all of it would be applied through existing data and application systems. It would save a lot of money. Moreover it would escape from the old style woolly thinking of  ‘people worth over a million’ and apply a new realism of a Liberal Democrat party versed in the practicalities of government. A party worth voting for after all.

Lib Dem Conference: The Challenge of Power

Monday, September 24th, 2012

The Lib Dems cannot reasonably be blamed for clumsiness with the levers of power. They have had to learn on the job.

Unfortunately fate and votes determined that they form a coalition with the Conservatives. This is the party, still, of the view that it is the natural party of power and that it is reasonable to go to any lengths, almost, to gain it. The Tories no doubt thought themselves clever in offering a referendum on the worst option of fair voting, AV, only to campaign to make sure it was lost. They doubtless felt pleased with convoluted and unrealistic compromise for House of Lords reform, knowing their backbenchers would scupper it. Yet the price of Lib Dem support for a Tory led government was fair voting and constitutional reform. In return the Lib Dems undertook to cut and slash and burn and even to break a written pledge not to vote for an increase in tuition fees.

The Lib Dems have managed to raise the tax threshold for low paid workers and to curb the excess of the economics of the Tory right, but the price in electoral terms is disaster. If the disaster cannot be repaired by 2015, it will become an electoral meltdown. The Tories appear to be the winners at the expense of their inexperienced junior partners. However, if you think about it, the Tories may not be as clever as they think.

The Lib Dems now have much more power within the Coalition, since with nothing left to loose, they have found the courage to say NO. Clegg and Co have already scuppered the piece of electoral reform the Tories wanted, boundary changes to create fewer, bigger constituencies, without which they will have more difficulty in 2015 gaining enough seats to win a Tory majority outright. Moreover the Lib Dems have declared their intention to veto any proposal for further cuts, unless balanced by tax increases upon the rich. This will present Osborne with serious political problems as he struggles to balance the national books.

The Lib Dems are now in a battle for electoral credibility. To survive they have to be strident in government and bold with the architecture of their policy platform for 2015. No longer can they go before the electorate with a list of worthy but unrealistic aspirations, knowing that they will never have to implement them. This time they must present radical and clear cut objectives with sufficient electoral sting to ensure that they can deny a majority to either of the two main parties, thus giving the Lib Dems a clear opportunity to make things happen. This is not as difficult as it looks. The Tories will be under pressure from UKIP and Labour could be under serious pressure from Scot Nats in many seats north of the border. Neither the Tories nor Labour will see the Lib Dems as a threat.

Granted this is a tough moment for a party which, for far too long, has been seen as a cosy resting place for the disaffected and uncertain. To turn it to advantage will demand a clear headed radicalism driven by an uncluttered theme. Above all it is surely a moment to be bold.

Obama V Romney: America Polarised

Sunday, September 23rd, 2012

Two things stand out about the 2012 Presidential race. Neither the President nor his opponent have yet developed obvious winning themes and America is polarised. Rather than a theme, there is instead a schism. It is about the American dream of individual freedom, self reliance and minimal government versus the one nationhood of the United States, in which all are equal, but none shall be forgotten, because those who have, are willing to share with those who have not.

Many Americans grow agitated and angry at the thought of the European social model and recall, whether consciously or not, the old issue which sundered the country in the first century of its existence and cost it two thirds of million young lives. The issue then was not, as history has been re-written to portray, whether there should be slavery or not, but who or what organ of government had the power to decide the issue. The Union triumphed and the United States are became the United States is.

The old schism was never resolved, though it became focussed on the running sore of segregation and the lack of opportunity for African Americans. Tackling that problem was put off for a hundred years and bringing real equality took another fifty. Yet the gap between rich and poor of all races within the American family is as bad as it has ever been and Barack Obama, the first Black President, has been thwarted at every step in his mission to close that gap. This ideological conflict is not now for the most part between  States or regions, but between individual people spread everywhere right across the country.

The standard bearer for the political philosophy of the old Confederacy, for that is root of the the small government ideology (although most modern adherents would probably deny this) is in 2012, Mitt Romney. His gaffes at home and abroad and the release of secret recordings, portray a singularly ill prepared candidate whose victory in November, where it to happen, would alarm the entire world. It is, of course for Americans and Americans alone, to decide who they want to lead them. The trouble is that the division now runs so deep within the country that if the outcome is close, it may not make any difference.

The checks and balances so carefully installed into the nation’s institutions and systems of government by the founding fathers, make the United States, in a polarised stand off, very difficult to govern.

Hillsborough: An Important Lesson

Thursday, September 20th, 2012

This Blog has recently drawn attention to an untrustworthy Establishment,  following the lies and deception at the heart of the failure, for over twenty years, to reveal the truth about the Hillsborough disaster.  Waiting in the wings are the outcomes to Leveson and Chilcot. There are high hopes that both will deliver emphatic conclusions in the light of evidence already seen or heard by the public, although Chilcot is delayed by arguments about the release of allegedly sensitive material seen by the inquiry but over which there is currently a prohibition of disclosure.

There is an important lesson at the heart of all this. We operate our state under an unwritten constitution, in which the rules governing the conduct of our public  institutions are not codified, but rely on precedent,  a few statutes, goodwill and honour. The notion is fine, even heroic, as well as popular and in keeping with the British pride in tradition and continuity. For the notion to work in the interests of the governed, rather than to the advantage of those who govern, honesty and integrity among all the organs of government and law enforcement as well the legal profession must be at an unimpeachable level.

It is plain that it no longer is, if indeed it ever was. In a modern world it is doubtful that it ever could be. For this reason it becomes all the more important for the debate to begin about the idea of a Written Constitution. Nothing would jolt the duplicitous culture at the heart of so much of public life, than the looming prospect of a codified constitution. Indeed it might spark a complete re-think in the way the untouchables enact their obligations to the people, to the point where it never needs to happen. Nevertheless this Blog will continue to press for Constitutional Reform. It is long overdue.

Arab Protests

Saturday, September 15th, 2012

Protests about the unfortunate and apparently very bad film made in America, but nobody seems to know by whom, which insults Islam, has led to an ever widening area of protest, which now goes beyond Arab counties right across the Islamic world. America is shocked by the death of its Ambassador to Libya. It is deeply hurt by the fact that it is being abused by the very people whose freedom to organise these protests is, in many cases, available only because America and its allies helped overthrow  repressive regimes, which kept order with an iron fist, supported by death squads and torture chambers.

Unfortunately maverick and unwelcome films can be the product of a free and open society and these episodes cannot be prevented with any certainty by any acceptable means in the modern world of total communications. A reclusive nutter now has the power to inflame a whole and distant continent without stepping from his lair. Unfortunately, too, western foreign policy, especially the use of NATO and taking sides in civil conflicts either directly as in Libya or indirectly as in Syria, fails to recognise just how unpredictable the forces at work in these developing societies are and how unwise it is to go beyond the humanitarian dimension of any form of aid.

We now have a post Iraq War (which the barmy neo-cons declared would herald the age of democracy in the Middle East and be a beacon of freedom) situation in which instability flares across the Arab world, through Afghanistan and into Pakistan, all because of a film, however offensive and insulting. If this does not underscore the fragility of the status quo, you are not paying attention. Meanwhile the conflict between Israel and the Palestinians remains unresolved and new tensions with Iran grow daily.

For the Western diplomatic community this is not a good report. At the very least it is time to start finding consensus with Russia and China. Without unity of purpose in the Security Council the chaos will grow. The West must learn that no longer will it be able always to get its own way. It owes far too much money to the rest of the world for that. The US and the UK owe the most of all.

Those Pictures

Saturday, September 15th, 2012

It is very distressing for the Duke and Duchess of Cambridge, multitudes think of them affectionately as Wills and Kate, to have to brave their own scandal of privacy invasion, while on an important overseas tour. Now it transpires that the decision to sue the publishers of the pictures in France has provoked an Italian magazine to jump on the bandwagon and print the pictures next week in a special issue. Driven by the backlash against the judgement of the Sun in publishing the Prince Harry photos, all the UK media have shown commendable restraint, perhaps because of the shadow of Levenson looming large everywhere in medialand.

This incident demonstrates an uncomfortable truth. Celebrity, including Royal celebrity, depends for its very existence on the media. Without the media nobody would know who almost all of them are. Yet, like a forest fire, when out of control, or set upon a hostile course, the media can consume and destroy. No laws will stop this nor regulation prevent it. It may very well be that you cannot have the one without the other. It may also be that when things go wrong, it is best to treat the crisis with dignified detachment and move on.

The Fed Acts

Saturday, September 15th, 2012

Markets have gone wild with the news that the Fed is going to pump new money, not once, but month by month, into the US economy, until it begins to grow convincingly under its own steam. Coming on top of the ECB decision to stand ready to do its own version of QE, this shows that, as indicated several times by this blog, the re-construction of the western economic model will have to be through new money, not more borrowing.

Iceland has achieved an extraordinary turnaround from national bankruptcy by another version of the same method. On the other hand the economies caught in the bind of cut and borrow, Greece, Italy Spain, Portugal, are in difficulty.

In the UK the authorities have used  cuts, cheap borrowing and QE, but so far growth has proved elusive, as has real reduction in government borrowing. This Blog believes the this is because QE is being used to strengthen banks and financial institutions and not to generate real wealth creating economic activity.  The authorities show a curious mix of willingness and hesitancy over QE which indicates how little is understood about the relationship of modern money to economic growth. Let us hope that this understanding grows and with it economic prospects grow as well. All eyes will now be on America.