Uncharted Territory

March 18, 2013

When Politicians Go Mad (Part 1): The UK’s Press Royal Charter

Filed under: 2010 General Election, Media, Politics, UK — Tim Joslin @ 5:30 pm

What is it about Clegg, Cameron and now Miliband? Who the hell do they think they are to repeatedly attempt to make constitutional decisions for all time?

I refer, of course, to the clause in the proposed Royal Charter for the Recognition Panel for UK press regulation (pdf) that allows the Charter to be changed (or terminated) only by a 2/3 majority in both Houses of Parliament.

The last time I became agitated about the UK political process was in a couple of posts, It’s the Executive, Stupid and (presciently) Adieu, AV, both written shortly after the 2010 election when inter alia Clegg and Cameron were attempting to lock us into 5 year fixed term parliaments for all time. It seems Miliband has now joined the party as well, since (as far as I can gather) he’s all for the 2/3 majority clause.

Quite apart from the merits of the particular media “legislation” represented by the proposed Royal Charter, it seems to me fairly obvious that all legislation should be under continual and periodic review, in the same way as an organisation’s Business Plan or a Project Plan. Are the organisational structures and processes that have been established actually meeting their objectives? Not that our politicians ever define any objectives or goals in the first place, as I might have mentioned before.

And – to continue stating the obvious – circumstances may change in future. After all, the media domain is evolving at a rapid pace.

And to claim that the current mediocre generation of politicians have a level of wisdom and insight that will never be exceeded in future would be to invite ridicule.

What we’re about to get is a “Royal Charter for the Recognition Panel for UK press regulation”. Yeap, Parliament is going to be two removes away from what amounts to Press Complaints Commission (PCC) 2.0. Instead of defining the terms of reference of a press regulator, a “Recognition Panel” is being set up to “recognise”, that is (as I understand it), license one or more potential regulators. The Charter includes some vague guidelines as to the recognition criteria.

The idea of the Royal Charter rather than normal legislation is to somehow make it seem that government isn’t “interfering” with press regulation. Come on! What exactly is Parliament there for if it’s not to make laws? We elect our MPs, not our media barons. And who’s being fooled by the Royal Charter device anyway? The irony is that a Royal Charter can – again, if I understand the arcane procedures correctly – be modified more easily than normal legislation, i.e. by the Privy Council who (it seems) advise the monarch who is obliged to take heed, thereby making any future government interference possible without consulting Parliament! Hence the need for a clause requiring the approval of the House for any changes. Which makes it legislation for those who don’t think it is already. Except, of course, for those still claiming it’s not legislation.

The Parliamentary response to Leveson seems to me to have degenerated into insanity. A bandwagon (that would be – surprise, surprise! – in the mainstream media, not through widespread mass-participation campaigning) has developed around a bizarre idea that the Press (or “free speech”) should not be limited by law. Even though “free speech” is already constrained, most notably by laws against libel and contempt of court. When people invoke vague principles, in this case “the right to free speech”, you can be pretty sure that’s cover for another interest. To state the obvious, the media are simply trying to preserve as much of the status quo as possible. And Cameron is taking their side to keep them sweet and because the status quo serves the Tories quite nicely thank you.

I want Parliament to do its job and debate and agree what the Press can and can’t do. To lay down in law, in as much detail as required, how the right to free speech is limited by the need to preserve other rights. And to fix the law in future as and when further problems arise.

For me the issue is privacy. I’d like a right to privacy enacted in law, not subject to interpretation by a Regulator accountable to a Recognition Board established by unamendable Royal Charter. Remember, the papers are allegedly in trouble not for allegedly invading privacy per se, but for allegedly doing it in ways that happened to allegedly be illegal (and allegedly getting caught), i.e. by allegedly hacking phones, allegedly buying information from alleged public officials and so on. In some alleged cases they might have been able to obtain the same information by legal means, e.g. kiss and tell.

The real danger with the Royal Charter is that the press regulation it produces will be ineffective (which is quite likely as, if my understanding is correct*, the actual regulatory board(s) will be 2/3* industry – inevitably acting in their common interest – and only 1/3* lay) and, with a 2/3 majority for change required in both Houses, either of the two main political parties will be able to veto any changes to fix the problem, for their own narrow ends.

PS I see the Guardian’s political blog has just posted news of a dissenting voice in Parliament:

“Charles Walker, the Conservative MP who chairs the Commons procedure committee, told PoliticsHome he was unhappy about the provision in the royal charter saying it could only be changed by two-thirds majority in the Commons and in the Lords.

‘It’s not how we do things in this country. It should be a 50% plus one majority. Parliament could pass a bill to overturn it anyway. The only precedent for this is the fixed term parliaments, and I voted against that on the same basis.’ ”

Hear! Hear!

——–
* This is incorrect. It’s the committee drawing up the media standards code that is weighted towards the industry. According to the latest (18th March) version of the Charter (pdf), Schedule 3, clause 5, the Board itself must:

“b) comprise a majority of people who are independent of the press;
c) include a sufficient number of people with experience of the industry who may include former editors and senior or academic journalists;
d)not include any serving editor;”

Clause 7 keeps changing and now reads:

“The standards code which is the responsibility of the Code Committee, must be approved by the Board or remitted to the Code Committee with reasons. The Code Committee will be appointed by the Board, in accordance with best practices for public appointments, and comprised of equal proportions of independent members, serving journalists (being national or regional journalists, or, where relevant to the membership of the self-regulatory body, local or on-line journalists) and serving editors. There will be a biennial public consultation by the Code Committee, the results of which must be considered openly with the Board.”

Sorry for any confusion.

July 19, 2012

We Need Rules, not Rulers: Culture, Bankers and the Mervyn King Question

Filed under: Barclays, Business practices, Concepts, Credit crisis, Economics, LIBOR, Politics, Regulation, UK — Tim Joslin @ 4:18 pm

The aim of any self-respecting blogger is to make original points. I’m no exception, so it is time to start to wind down this thread on the Libor “scandal” (previous instalments: Saint Mervyn: King by Name, King by Nature; Bashing Barclays Badly and Battling for Mount LIBOR, the Moral High Ground), for the world has in many respects come round to my way of thinking.

Yesterday’s City a.m. egged on the politicians with the momentarily confusing headline:

MPs CALL FOR CAP ON KING’S POWER

and opening salvo:

“REGULATORS grossly overreached themselves by forcing Bob Diamond out of the top job at Barclays, top backbench MP Andrew Tyrie declared yesterday…”

And the refrain “Who will guard the guards?” echoes through the land (and I noticed has even seeped, with the rapid mutation typical of memes, into the consciousness of the brigade of the commentariat more concerned with the easy target of the G4S Olympic security fiasco).

One of our heroes, already mentioned in despatches from the front-line, Hugo Dixon, has another piece on his Reuters blog, discussing how the Governor might be reined in:

“Holding the next governor accountable will be as important as choosing one. The Bank of England was rightly given considerable independence in 1997 to prevent politicians meddling in monetary policy in order to advance their electoral interests. But the institution and its leader have slipped up on enough occasions that leaving them entirely to their own devices isn’t a good option either.

For example, King didn’t sound the alarm loudly enough during the credit bubble and was slow to act when there was a run on Northern Rock, the mortgage bank, in 2007. He then long resisted any investigations into the Bank of England’s own failings in managing the crisis. Now its hands-off approach to the Libor scandal is being revealed.

Based purely on its record, the central bank wouldn’t be receiving extra powers. However, the Conservative-led government has tried to pin the blame for the credit crunch on the previous Labour government’s policies – in particular, its decision to take away the central bank’s responsibility for banking supervision. Hence, it has become politically convenient to reverse that move.

Given this, the priority should be to enhance the Bank of England’s accountability. Under the current system, the government sets inflation targets and picks the governor. It also chooses the deputy governors and members of two committees: the monetary policy committee which sets interest rates; and the financial policy committee which will soon be responsible for financial stability. Their independent members help prevent the governor becoming too dominant.

The Bank of England also has a board, called the Court. But this has been largely ineffective. Though it has recently stepped up its scrutiny of the central bank’s executives, it is hamstrung because it rightly has no say over policy or who is the governor.

Meanwhile, parliament can call the governor and other senior officials in to give evidence. Although this is a potentially important check to the central bank’s power, MPs haven’t yet used this tool effectively.

One way of improving democratic control would be to give MPs the right to hold nomination hearings and, in extremis, reject the government’s choice for governor and other top positions. Indeed, that’s what parliamentarians want. But the government is resisting. If MPs are to change its mind, they must first show they are up to the job.”

Let’s come back to this when we’ve diagnosed the problem.

Because I still feel I haven’t made my point fully.

What the Libor affair shows us is that regulation must be mechanical, not moral.

This is a lesson we failed to learn from King’s behaviour during the financial crisis, despite his starving the UK banks of liquidity in a misguided attempt at preventing “moral hazard”; his expressed desire to stitch up Lloyds shareholders with a backroom deal to take over Northern Rock; and the actual outrageous stitch-up of Lloyds shareholders with a backroom deal to take over HBoS without adequate due diligence, to which he must at least have given a nod.

My first post on the Libor-fiddling topic touched on the subject of culture:

“The excuse for laying into Diamond seems to be some problem with the ‘culture’ at Barclays. Is it any different to that at any other investment bank? Doesn’t the ‘culture’ in any occupation go with the turf? Presumably they don’t want traders to behave like, say, Premier League footballers, or Hollywood actors. Something less flash perhaps: doctors, say or IT guys. But would they still be able to do the job? These occupations surely require quite different qualities and aptitudes. Maybe something a little more sales oriented, perhaps, then: used car dealers or estate agents. Or politicians! But are these professions more or less honest than investment banking? I’m stuck. Perhaps our politicians could spell out exactly how they want investment bankers to behave.”

The aim of yesterday’s post was to develop the idea that the “scandal” is being treated as a moral issue. There’s something “bad” about Barclays, we’re told, and the Bank of England Governor, with ex officio moral authority, judges it comes from the top and fires the Chief Executive.

But what is “culture”?

This is what an editorial, “Culture shock”, in yesterday’s FT (I’m getting my full £2.50 worth!) suggested:

“Culture is not a fluffy chimera of business how-to books or self-congratulatory corporate reports. Culture, real and unnoticed as the air we breathe, is the web of unspoken mutual understandings that frame what people expect from others and think is expected of them. This web shapes the fortunes of any organisation or social group. Bob Diamond, Barclays’ disgraced ex-chief executive, knew this; he once declared ‘the evidence of culture is how people behave when no one is watching’. He was right…

… [non sequiturs omitted]

A culture cannot be heavy-handedly ‘managed’ by legislation or compliance rules alone. It must be more subtly cultivated and tended.”

OK, we can all agree that behaviour within an organisation is determined by executive example and communications; organisational stories; dress code; building architecture, location and decoration; the presence or absence of game rooms; and so on and so forth – as well as the nature and demands of the work, as I previously stressed. But within all that complexity, all we’re really concerned about here is that rules are followed. There may be indirect ways of achieving this goal by means of some kind of arcane cultural alchemy – would Fairtrade coffee, beanbags and dress-down days work? who knows? – but most people would consider it sensible to simply focus on the outcome.

Obviously the “rules alone” are not enough. There also needs to be an expectation of enforcement. A rooting out of dishonesty. And maybe by spending £100m on investigating Libor-fixing rather than, say, carrying out some “routine email housekeeping” (didn’t something like that come up with News International?), Barclays have shown a willingness to steer their internal culture in the direction of obeying the rules.

With this unsatisfactory view of “culture” in mind, let’s consider the crucial question for the future, the “Mervyn King Question”: Is it possible for the Governor to both exercise moral authority AND for there to be effective oversight of the role?

No, of course not. The Governor can’t both exercise his judgement AND explain the detailed reasons for a decision. If he can explain the precise reasons to whoever he, the Governor is accountable, for example those for firing Bob Diamond (“he broke rule 44b clause 3, which is a sacking offence”), then by definition he isn’t exercising judgement.

The Mervyn King Question suggests then that we have to decide which way we jump. Do we want, in the modern world, to trust the personal judgement of an unelected official, or do we want a team expert in banking regulation to ensure that the rules and sanctions for breaking them are clear to banks and that bank behaviour is monitored and the rules enforced?

Do we want a ruler or do we want rules?

The traditional role of the Governor of the Bank of England was one of arbitrary power. This is where Mervyn King believes we should return. No wonder the job of Governor is so coveted.

But there’s a different path. Surely we’d be better off rejecting the moral approach and focusing on the technical aspects of the role of Governor of the Bank of England?

Let’s take as an example the critical case, where it all started to go wrong, when I first became concerned about the outlook of Mervyn King. Instead of arbitrarily allowing banks (such as Northern Rock) to fail to try to prevent “moral hazard” shouldn’t the Bank have made the rules absolutely clear in advance? NR would not, I’m sure, have relied on interbank funding had it’s executives known that funding may be allowed to dry up and they would have to retire in disgrace.

I would suggest that the Bank start by announcing that it will not allow any Bank to fail due to systemic problems (as opposed to Baring-style sudden catastrophic losses), but will provide liquidity as lender of last resort. What constitutes “systemic” would need clear definition, as would the cost of such support which would include a requirement for banks to raise capital. We have to recognise that we can never allow banks to fail under stress – such failures simply cascade through the economy – and dismiss the nonsense that such a backstop is some kind of subsidy for institutions that are “too big to fail”. This is like saying that Tesco is subsidised because the State provides resources for the prosecution and punishment of shop-lifters.

The Libor-fiddling that mattered – that before the financial crisis – was arguably criminality, pure and simple. It was orchestrated by a small group of traders who knew they were breaking the rules, as their emails make clear: “I would prefer this not be in any book!”, “if you breathe a word of this I’m not telling you anything else” and so on. It became a “scandal” because politicians – principally Ed Miliband – immediately made hay. But business isn’t politics. It’s not primarily about character (neither should politics be, of course, but the UK political process is becoming ever more Presidential and less policy-driven). The danger of allowing the political process to drive banking or other business regulation is that there is no satisfactory answer to the Mervyn King question. Even were we to confer moral authority on the Governor as we do the Prime Minister (who is not only elected, but easier to get rid of than the Governor – men in grey suits and all that), business is not hierarchical like government. It is fundamentally about choice and competition. Differences in outlook are necessary.

Dismissing company bosses in an attempt to change the corporate “culture” would seem to necessarily worsen group-think. If all our banks had been the same perhaps they’d all be part owned by the State now. Perhaps they’d all been like HBoS. As it is, Barclays managed to recapitalise without calling on government funds, Santander expanded and the “elephant” HSBC simply marched on barely affected. Diversity matters.

At worst, of course, there is no difference between condemning a bank’s culture and firing the boss simply because you don’t like the cut of his jib.

I promised I’d return to the points Hugo Dixon made. We may well need some or all of the means Dixon suggests for holding the Governor to account. But before we can do that, Parliament needs to step back and look at how the Governor’s role is defined. They need to review his Terms of Reference. Make sure he’s clear what the rules are.

July 18, 2012

Battling for Mount LIBOR, the Moral High Ground

Filed under: Barclays, Business practices, Credit crisis, Economics, FT, LIBOR, Media, Politics, Regulation, UK — Tim Joslin @ 4:17 pm

If you’re going to watch one film about the Vietnam War then I recommend Hamburger Hill. The point of the film for me at least (other discussions of the movie fail to stress this point) was that the battle was not about the strategic value of the eponymous high ground. Rather, both sides were trying to demonstrate their determination.

Catching up with an episode of Mock the Week last evening, I chanced on a rant by the one I would refer to as the tall, skinny panelist with dark curly hair, had the internet not been invented purely to allow me to remind myself that his name is, in fact, Chris Addison. The comic – who I always feel differs from his generally less hirsute colleagues in looking less like a funny-man, and more like a particularly tedious sociology lecturer – observed at some length that everyone is furious about the Libor “scandal”, even though most of them they don’t have a clue what it’s about. Well observed, in my opinion.

My first post on the Libor topic attempted to convey this moral dimension – and the battle for authority – with its title, Saint Mervyn: King by Name, King by Nature, but perhaps I wandered slightly off the theme, in favour of providing a narrative.

It seems clear after Mervyn King’s appearance before the Treasury Select Committee yesterday, though, that the Governor chose the Libor issue as the ground on which to continue a war with the City, and in particular with Bob Diamond. We’re told that Diamond’s sacking was not just about the Libor issue, but about Barclays’ “culture”, and a “pattern of behaviour”, as discussed in correspondence between Lord Turner, head of the FSA and Marcus Agius, Barclays’ Chairman. It seems clear that nothing new had emerged to implicate Bob Diamond personally and that King therefore simply seized the opportunity to get rid of him. Here’s how the Guardian puts it in an editorial:

“And why exactly was Mr Diamond pushed out? Not for any direct involvement in the Libor scandal but, in the words of Mr King yesterday: ‘They [the bank] have been sailing too close to the wind across a wide number of areas.’ No actual infraction; just a general sense of having gone too far for too long. … The impression left is of rather rough justice.”

Indeed, I’m reminded, the Libor scandal itself is nothing new. Although I now seem to have run out of free views of FT.com pages (so pushed the boat out and bought a copy this morning – £2.50, they’re having a laugh!), I did manage to access an old story that I’d bookmarked:

Banks served subpoenas in Libor case

By Brooke Masters and Patrick Jenkins in London and Justin Baer in New York

Regulators probing alleged manipulation of a key interbank lending rate have focused their demands for information and interviews on five global banks, according to people familiar with the investigation.

UBS, Bank of America, Citigroup and Barclays have received subpoenas from US regulators probing the setting of the London interbank offered rate, or Libor, for US dollars between 2006 and 2008. …”

Who says bookmarking thousands of interesting news stories is a waste of time, eh?

And this one FT story contained links to pieces in the FT’s Lex and Lombard columns, as well as another story the previous day:

“Big banks investigated over Libor

By Brooke Masters and Patrick Jenkins in London and Justin Baer in New York

Regulators in the US, Japan and UK are investigating whether some of the biggest banks conspired to ‘manipulate’ the benchmark interest rate used to calculate the cost of billions of dollars of debt.

The investigation centres on the panel of 16 banks that help the British Bankers’ Association set the London interbank offered rate, or Libor – the estimated cost of borrowing for banks between each other.

In particular, the investigation was looking at how Libor was set for US dollars during 2006 to 2008, immediately before and during the financial crisis, people familiar with the probes said.

The probe came to light on Tuesday when the Swiss bank UBS disclosed in its annual report that it had received subpoenas from three US agencies and an information demand from the Japanese Financial Supervisory Agency. …”

When were these stories published? 15th and 16th March, 2011.

Now, I may not be willing to fork out for an FT subscription, but I’m sure Bob Diamond and Mervyn King are. In fact, they probably receive the “Pink’un” as a perk of their jobs.

Regular readers will know that I’m very guarded in anything resembling an accusation that I may occasionally make on here, but it does indeed beggar belief that everyone involved is claiming to have been unaware of the brewing Libor scandal – a matter relevant to banks’ annual company reports – until the last few weeks, since even I knew about it, and the Libor-setting process was, until this month, of course, of somewhat peripheral interest to me, and even that overstates my curiosity. My £2.50 copy of the FT quotes Mervyn King on the front page as saying:

“The first I knew of any alleged wrongdoing was when the reports came out two weeks ago.”

Doesn’t the Governor read the FT? If not, why not?

To the extent I worried about it, I assumed the likelihood of fines over Libor-rigging was “in the price” of bank shares (we must be at the point where banks start assuming a few hundred mill in fines each year as part of their business plans, and therefore product-pricing). Active investors must have also thought bank share prices took account of the Libor investigation, as otherwise they would have sold the banks, short if necessary.

As I mentioned yesterday, Libor manipulation – much of which occurred during the financial crisis when the numbers were guesses anyway – would seem to be less serious than HSBC’s desultory attitude towards controls to prevent money-laundering. (Rather predictably, HSBC have seemingly gone overnight from one extreme to the other: I have recently had an HSBC account, to which I log in online 2 or 3 times a month, locked down – “suspended” so I can’t even pay into it – for no apparent reason).

No, Libor has been chosen as a battleground.

Sacking Bob Diamond makes no sense otherwise. Barclays report that they spent £100m “to ensure no stone has been left unturned” in their internal investigation and have settled early with the regulators. Since this has not been enough to keep the top guys in their jobs, perhaps their successors will adopt a different strategy next time!

And, like a misjudged military intervention, the battle threatens to turn into a war, consuming its instigators.

Mervyn King has clearly over-stepped his authority and threatened his legacy: “It is the BoE that finds itself most directly in the line of fire”, writes the FT’s Chris Giles. Not only are more and more awkward questions being asked in the UK, the regulators across the Pond are now playing holier than thou. That FT front-page lead (taking precedence over a report of the HSBC compliance chief quitting during a US Senate hearing!) is titled: “Bernanke calls Libor a ‘flawed’ benchmark”, and observes that “Mr Bernanke’s description of how the US reacted [earlier, in 2007] to claims that banks were understating the rates at which they could borrow contrasted with testimony yesterday from Sir Mervyn King.”

Mervyn King’s “pattern of behaviour” suggests to me that he may have been bullied at school. If not, I rather suspect he’s now going to find out what it’s like at his regular central-banker get-togethers.

July 12, 2012

The Pensioners’ Crusade

Filed under: Complex decisions, Economics, Inequality, Politics, Public spending, Reflections, UK — Tim Joslin @ 12:06 pm

I noted on Tuesday Nick Boles’ suggestion in a keynote speech at the Resolution Foundation (pdf) to limit certain pensioner benefits to the less well-off:

“Spending on universal benefits for the elderly (the Winter Fuel Allowance, free prescriptions, free bus travel and free TV licenses for the over 75s) reached roughly £4 billion in 2010/11.

I know that this help is vitally important for many older people – and a step away from universal provision of these benefits after the next election would need to be handled very carefully as many members of this generation are admirably reluctant to make a fuss, even when they really need help.

But, does anyone here think it would be responsible for a country in our financial position to go on giving a free TV license to Michael Winner, free prescriptions to Lord Sugar and a winter fuel allowance to Sir Paul McCartney after 2015?”

A point well made.  But, I strongly suspect, to no avail.

I diligently provided links to reaction at the BBC, Guardian, Independent and Mail which all headlined Boles’ hardly original elderly means-testing proposal, even though it would only save £1.5bn of the £8.5bn he says we need to save:

“If we are to achieve stability in our public finances AND make crucial investments in improving productivity and competitiveness, we must find a way to save at least £8.5 billion from the £145 billion we currently spend on benefits other than pensions.”

Popping into Tesco yesterday, though, I noticed that I’d jumped the gun in my headline search.  The Express is going to war on the issue.  Holy war.  Here’s their front page:

I love that capital C in Crusade.  “Upper-case there”, the editor must have ordered.  “We’re not being figurative here.  This is official.  It’ll be there in the history books alongside Richard the Lionheart vs Saladin and, of course, the Children.”

The headline’s a classic as well.  Whereas the Mail and the Independent implicitly accepted the government’s right to cut benefits, but signalled with the A-word (“axe”) that targeting elderly benefits might be a cut too far, the Express went several steps further.  “Secret Plot to Rob Pensioners”.  Hmm.  Not really “secret” is it?  Which means it doesn’t really qualify as a “plot”.  And I think most would agree that discontinuing the provision of a benefit hardly counts as “robbery” (which, strictly speaking, involves violence or the threat of violence, as opposed to theft, which doesn’t).  One might even quibble that it is “pensioners” being “robbed”.  The word “pensioners” has connotations of those struggling to get by on a meagre stipend, and the qualification for the benefits in question is on the basis of age, not – as Boles’ examples of Winner, Sugar and McCartney might suggest – dependency on an annuity.

Boles’ whole point was that benefits would only be withheld from the wealthier elderly, a subtlety somewhat glossed over in the scene-setting opening sentences of the story on the front page of yesterday’s Express:

“A THREAT to strip Britain’s pensioners of benefits such as free bus passes and prescriptions triggered outrage last night.

A key ally of David Cameron yesterday called for strict means testing of claims that also include winter fuel payments and TV licences.

But the move was immediately condemned by charities and OAP groups – and today the Daily Express adds its voice by launching a Fair Deal For Our Pensioners Crusade.

This newspaper urges readers and campaigners alike to support its demand that the Government honours its pledges to pensioners in full, and does nothing to chip away at their universal welfare entitlements. Tory MP Nick Boles caused ­fury after saying the Government could save £4billion a year by stopping better-off pensioners from getting the benefits.”

£4bn/yr is in fact the total cost of the benefits.  Boles hopes to save £1.5bn/yr.

But Cameron’s calculation will be whether £1.5bn is worth the potential electoral damage in 2015 (if the Coalition lasts that long).  He’ll be looking for media outrage at “giving a free TV license to Michael Winner, free prescriptions to Lord Sugar and a winter fuel allowance to Sir Paul McCartney”.  And not finding it.

On one side is most favourable headline to the proposal at the BBC, which reports that the “Rich elderly should lose benefits, says David Cameron ally”.

And on the other is a lot of axeing and the Express’s army of pensioners ready to march against the heathens in Downing Street.

You have to admire the Express.  They understand their constituency.  As, I’m sure, does Cameron.  This kite’s not going to fly.

July 10, 2012

Nick Boles’ Resolutions

Filed under: Complex decisions, Inequality, Media, Politics, Public spending, Reflections, UK — Tim Joslin @ 5:04 pm

Note (12:15 11/7/12): Corrected in 2nd paragraph following a communication from the Resolution Foundation – they are focussed on issues rather than party politics (like the E3 Foundation – I approve) and do not “describe themselves” as “centre-left in outlook”, as I said in the initial version of this post that they “might” do.

I wrote last time that I would try to report on events I attend. For once, I’m keeping my word.

This morning, the Resolution Foundation (RF) hosted the latest in a series of meetings making up its “Commission on Living Standards”, which constitutes a large part of the analysis and policy debate around what Ed Miliband loves to call the “squeezed middle”, that is, as RF put it, “the economic decline of low to middle income Britain”. Heck, the Commission even has its own website, full of bells and whistles. Whilst the RF seems centre-left in outlook, they are politically independent and engaged with all three mainstream political parties. Today was the turn of the Tory and Cameron loyalist Nick Boles, with Lord Adonis chipping in as responder.

Many Resolution Foundation events are heavily trailed and reported in the media, and Nick Boles’ pitch on Raising Living Standards this morning was no exception. Trouble is, the mainstream media inevitably focus on whatever aspect they believe will catch the attention of their readers, so we have “Tories plan to axe pensioners’ benefits” in the Independent, “Limit winter fuel allowance and Sure Start, says Cameron ally” in the Guardian, the more accurate headline “Rich elderly should lose benefits, says David Cameron ally” at the BBC, not to mention the A-word again at the Mail: “Axe free prescriptions and bus passes for the better-off elderly, says Cameron ally”.

Clearly the media would rather scare the horses (check out the comments – and the voting on them – on that BBC story) than present some reasoned argument. No wonder we end up with swathes of incoherent policies.

The Independent’s report gives the best summary of the politics of the situation. Cameron doesn’t want to “axe” benefits for the well-off elderly, because he promised not to in 2010. Will he be able to avoid repeating such a promise in 2015? The question was asked this morning. Although Boles made a good point about how none of the parties faced up to the impending fiscal crisis in 2010, I’m not convinced. I reckon Paul McCartney’s bus-pass is safe for some time yet.

But Boles’ talk was not titled “Pensioner’s perks”. It was much more wide-ranging than that. Indeed, there was much more discussion in the Q&A this morning of tax credits, youth unemployment and even the comparative advantages of the German education system (better for technical students) and that in the UK (better for the academically inclined).

If there was a takeaway policy message from Boles, it was not that the government might try to claw back around £1.5bn/yr from well-off pensioners, it was that they want to find £8.5bn of savings (at 2012 prices) from the welfare budget as a whole by 2016 (by which time that £8.5bn will have inflated to £10.5bn). And my impression was that if it was up to Boles most of the saving would come from child-related benefits, especially those paid to parents (i.e. Child Tax Credits and Child Benefit), as opposed to schools, and Sure Start, which Boles seems to have it in for.

Since the hard-working families demographic is up there in electoral importance with the pensioners-who’ve-earned-the-right, it’s hard to see where any of the £8.5bn is coming from.

The strength – and weakness – of Boles’ approach is that he aims to be ruthlessly analytical. So he laid down 4 principles:
(1) Only those areas of spending that measurably increase the competitiveness of the economy should be allowed to increase faster than GDP.
(2) As implied by (1), spending on other areas (police, defence, environment etc) must fall relative to GDP.
(3) Areas of recent public-spending growth must decline relative to GDP.
(4) There should be no new areas of spending.

This leads to some overly-rigid thinking, in my opinion. For example, principle (4) seems to preclude a resolution of the elderly care issue, which has revived this week (apparently all-party talks broke down some time ago – like Adonis, I despair at the Westminster political process). And principle (1) relies on measurements, which are not simple in practice – this seems to be why Boles doesn’t like Sure Start.

During the Q&A though, it became clear that Boles has another principle:
(5) Public spending must decline as a proportion of GDP.
Boles said he didn’t go as far as David Laws, who has apparently called for a reduction in public spending as a proportion of GDP to 35%, from 45% after the financial crisis, but implied 40% was a ceiling (Osborne is trying to get it back down to around 39%, similar to the level under New Labour).

Of course, as Adonis pointed out, growth is key, and could reduce the tax-take percentage simply by increasing the denominator (GDP).

But the real weakness in Boles’ thinking is that it ascribes a cost to money that is simply paid to the Exchequer and then paid back out again. This is illogical. A perk is still a perk whether it is a free bus pass (counts towards the public spending percentage) or preferable tax treatment (doesn’t count). You could save money by taking away free bus passes for well-off over 65s or by requiring over 65s to pay National Insurance (NI). Now you or I would weigh up the pros and cons of both these measures. But Nick Boles doesn’t look at it that way. He’s wrong – the public only care about the rate of tax they pay (and to be honest even that’s irrational – they should only care when it changes, as pay rates adjust to the tax regime over time). People certainly don’t give a monkey’s whether UK public-spending is 29% or 45% of GDP – or 25% or 50% for that matter.

So Boles would be wise to reflect on the last question asked this morning, by Gavin Kelly, the RF CEO and Chair of the meeting. Gavin reckoned that the £8.5bn could be saved by requiring over 65s to pay NI (which all agree should be consolidated with income tax – it would be a bit illogical to pay insurance for when you can’t work when you’re over retirement age!) and (probably the biggie) reduce tax relief on pension contributions to basic rate tax only.

I suspect there are other tax allowances that really apply only to the better off that could be looked at – some of those for buy-to-let landlords look rather generous to me, and do we really need to allow new savings to be added to ISA tax shelters every year? Are we really serious about reducing the deficit?

It would seem to be less painful to reduce tax allowances than cut public spending. Consideration should at least be given to tax measures that don’t commit the political cardinal sin of raising headline rates of tax. Come on guys, even Brown was bold enough to raise the NI rate!

Let’s hope ideology doesn’t trump pragmatism in the Coalition’s forthcoming Spending Review. Perhaps they should start by renaming it a Budget (or even Deficit Reduction) Review. Or simply reclassify tax allowances as “spending”!

May 11, 2011

You’ve Got to AV a Laugh

Filed under: 2010 General Election, Politics, UK — Tim Joslin @ 12:41 pm

Well, laugh or cry, because AV would have made a huge difference to UK politics. Perhaps not immediately, but over the long-term it would have made it possible for a broader political debate, with a larger number of parties.

Today is the first anniversary of the LibCon coalition. Here’s what I wrote precisely one year ago:

“…it seems to me that Clegg is a self-deluding fool. I therefore expect him to go into coalition with Cameron and destroy his party. The pretext will be ‘the national interest’, but the real reason will be the desire for power.

…Clegg’s probably already lost the Lib Dems any chance of AV, let alone PR, for a generation.

Here’s why. Think about it. The Tories have said they will campaign against AV in any referendum they grant the Lib Dems. What incentive will Labour have to support the proposal? None. Sure, they might pay lip-service, since AV was in the Labour manifesto, but, unlike if they were in coalition with the Lib Dems, they will not expend political capital whipping their significant dissenting elements into line. And they’re hardly likely to spend a lot of money on a referendum campaign when they could be saving their pennies for the next election. I simply can’t see the Lib Dems winning a referendum on anything against the Tories, their toadying media supporters AND elements of the Labour party.”

So the outcome of the referendum was totally predictable. I suppose that at least the £200m or whatever it cost provided a small economic stimulus.

I can’t claim to be totally prescient, though. I certainly didn’t expect the mind-blowing incompetence of the Yes campaign.

First, I can still scarcely believe that the Yes campaign failed to get across one simple point. It’s daft to have an electoral system where the outcome depends on whether or not a 3rd or 4th (or other additional) candidate happens to stand.

This is currently the case in every UK constituency. But you don’t have to look back too far for graphic historical examples. Dubya Bush in 2000 benefited from Ralph Nader’s candidature, representing the Green Party, which disproportionately drew votes from, ironically, Al Gore, environmentalist and potential competent President. And maybe the Yes campaign could even have allowed some maverick to point out that divided opposition let the Nazis in.

Second, the timing was absurd. Why the referendum was held so early is a complete mystery to me. The Tories had signalled their opposition and, newly in power for the first time in 13 years, were bound to be speaking with one voice. If time had been allowed for a few Tory splits on the issue to develop (and for Labour to get over the election and be a bit more united) that might have made all the difference. The damage done to the Yes campaign by John Reid wasn’t mirrored on the other side.

Third, the agreement with the Tories should have forced Cameron to declare neutrality. Allowing the office of the Prime Minister to be used could only help the Noes.

Strangely none of these reasons appear in the Guardian Top 10.

But the underlying problem is far more fundamental. There’s no point having a proportional voting system if Parliament doesn’t work in a proportional manner.

Our elections don’t have to be winner takes all. In the long run greater separation of the executive and legislative arms of government is needed, as I also wrote precisely one year ago. This would allow the House of Commons to debate issues without the outcome having been predetermined by the whips, as happened in the dim and distant past.

But Clegg could have made a start. He could have said he’d support Cameron as PM and vote on the merits of bills put before the House. This is pretty much the position he’s now been forced into, but sometimes it’s not about where you are, but how you got there! He could even have relaxed the Lib Dem whip, since, as is now clear, the Lib Dems – having tried to be all things to all men over the years, and respond to local issues around the country – represent a broader spectrum of opinion than either Labour or the Tories.

It is indeed laughable that the Lib Dems thought they could win a referendum on a more proportional voting system at the very same time as they are giving coalition government a bad name. Do they really think the British public is stupid?

Without a broader vision for the evolution of the Westminster political process, we’re not going to see PR in this country for a century, never mind a generation!

May 20, 2010

Dodging Difficult Decisions

Filed under: 2010 General Election, Politics, UK — Tim Joslin @ 6:24 pm

Imagine yourself house-hunting, or just cast your mind back. You’ve worked hard all week, have your normal chores to carry out, but have managed to free up a few hours of your precious weekend. You window-shop, review sheets of details and finally book a time to see some properties. You spend Sunday thinking about them, agonising over your budget, and on Monday take the plunge. Sorry, says the estate agent, the vendor has decided to take that one of the market. Or maybe they’re not so decisive. You arrange a mortgage, pay for surveys, and only then are you given the bad news: sorry, no deal.

This is the awful situation prospective purchasers will once more be in as a result of the abolition of (Home Information Packs) HIPs, by the incoming LibDem Con government. And on the radio at lunchtime I heard a smarmy voice – it seemed to be a politician, but logic tells me it must have been an estate agent or other housing market parasite – justifying the decision as removing an obstacle to homeowners “testing the market”. Look, you twat, Tesco doesn’t let you get to the checkout before saying, sorry, we’ve decided not to sell those today, we might get a better price tomorrow.

I recollect painfully my first attempt to buy property, jointly. If I recollect correctly, we had 5 surveys done and were gazumped in most cases, never buying at that time, in the end. It cost us a fortune in time and effort, yet the (non-)sellers never spent a penny.

The last Government weighed up all the pros and cons and realised that it was fair for sellers to bear the cost of collating information about their properties, in part to show they are entering into discussions in good faith. This involved taking on a number of interest groups.

What have the LibDem Cons done? Yes, without thinking about it, they’ve abolished HIPs, making redundant overnight 3,000 people who had been trained to carry them out.

True, energy certificates have been retained, but you can still market your property without one. What’s the point of them, then, if they’re not available until people have decided which house they want?

So, the first way to dodge difficult decisions is to do the easy thing without any serious thought.

As I reflected on this I realised that the LibDem Con government is set on writing the book on dodging difficult decisions. There are other instances of “doing the easy thing without any serious thought”.

The third runway at Heathrow? Cancelled. Additional runways at Gatwick and Stansted? Refused. Um, shouldn’t we look into it a bit? I mean, no-one wants to concrete over villages, but the previous lot looked into this and reached a different conclusion.

Or take ID cards. Abolished. Now, correct me if I’m being a bit thick here, but isn’t the government also planning to clamp down on immigration? Wouldn’t it be useful for foreign nationals to have id cards? In fact, I thought they already had, so perhaps we can’t actually believe that id cards have really been abolished.

Because when we look more closely at the coalition’s statement of their programme for government (pdf), we say that they also employ other strategies for dodging difficult decisions.

Their second strategy is pretend to take difficult decisions but don’t actually do so.

Remember those Regional Development Agencies that received so much flak during the campaign? This is what the LibDem Cons say:

“We will support the creation of Local Enterprise Partnerships – joint local authority-business bodies brought forward by local authorities themselves to promote local economic development – to replace Regional Development Agencies (RDAs). These may take the form of the existing RDAs in areas where they are popular.”

Unsurprisingly, the LibDem Cons are not very clear, but I think we can be fairly sure that we’re not going to be able to tell the new pigs from the old pigs. George Orwell would be proud.

What about other quangos? Read on:

“We will abolish the unelected Infrastructure Planning Commission and replace it with an efficient and democratically accountable system that provides a fast-track process for major infrastructure projects.”

In other words: “We said during the campaign that we don’t need it, so we’re going to abolish it and reinvent it. Britain needs a new kind of government!”

Maybe we need a new word, for abolishing something, and simultaneously retaining it. It would save a lot of effort if Cleggeron simply stood up and said: “We’re going to abolain the RDAs and the Infrastructure Planning Commission”. Ra ra ra!

It goes on. School league tables? They’re being abolained as well!:

“We will reform league tables so that schools are able to focus on, and demonstrate, the progress of children of all abilities.”

And on. Remember the hated SATs?

“We will keep external assessment, but will review how Key Stage 2 tests operate in future.”

Which brings us onto another coping strategy for political parties that don’t know what they stand for in, especially those in coalition with those who stand for something different, though they’re not quite sure what. Announce a review! There are 27, according to the Guardian.

Then, if you can’t really think of anything, you can simply repeat existing government policy:

“We will apply transitional controls as a matter of course in the future for all new EU Member States.”

“We will seek to attract more top science and maths graduates to be teachers.”

You can go even further and state policies that are in fact the normal business of government. Here’s my favourite:

“We will make every effort to tackle tax avoidance, including detailed development of Liberal Democrat proposals.”

Or you can make meaningless statements:

“We will take a range of measures to encourage charitable giving and philanthropy.”

And if you’re in a real mess, you can engage in complete obfuscation. This is my favourite passage, on the rather important topic of taxation:

“We will increase the personal allowance for income tax to help lower and middle income earners. We will announce in the first Budget a substantial increase in the personal allowance from April 2011, with the benefits focused on those with lower and middle incomes. This will be funded with the money that would have been used to pay for the increase in employee National Insurance thresholds proposed by the Conservative Party, as well as revenues from increases in Capital Gains Tax rates for non-business assets as described below. The increase in employer National Insurance thresholds proposed by the Conservatives will go ahead in order to stop the planned jobs tax.” [my emphasis]

That’s right. They’re going to fund a tax cut with money they aren’t spending. “Mummy, can I have that toy?”; “Sorry, darling, we don’t have any money.”; “Can I have some sweets, then?”; “No!”; “Whaaaah! But we’ve saved money by not buying that toy!”.

The most worrying thing about the LibDem Con “programme for governance” is that there are an awful lot of giveaways: an increase in the personal allowance for income tax, reductions in corporation tax, freezing council tax and so on, and very little in the way of clawbacks.

Either there’s something they’re not telling else, or this government’s going to be a dog’s breakfast.

Woof!

May 11, 2010

It’s the Executive, Stupid

Filed under: 2010 General Election, Politics, UK — Tim Joslin @ 8:28 pm

So, I hear on the radio that the Lib Dems are getting into bed with the Tories for – Heaven help us – 3 or 4 years. “For the good of the country”, of course.

The poor dead babies seem to be operating under the delusion that a coalition is about agreeing a set of policies. It isn’t. That’s the easy bit and would result from the parliamentary arithmetic anyway. For example, the Tories are dropping their proposal for an inheritance tax give-away, which only their 306 MPs support.

No, what government is about is the day to day decisions, the responses to events, dear boy, events. In short, the executive.

So if we put the policy horse-trading to one side, Clegg has steered his party into the arms of the Conservatives in return for a referendum on AV. Which, as I pointed out earlier, will very likely be lost, so will be worse than no referendum at all. Much worse.

The last few days, though, have shown that proportional representation will simply not work in the UK. Power is so concentrated in Downing Street that further constitutional changes are needed as well.

In fact, many constitutional changes are needed. I started a blog post a couple of weeks ago listing things wrong with our political system. I never finished it. There was too much to write. The franchise doesn’t even makes sense, for Christ’s sake, with votes for Commonwealth citizens living in the UK, but not for EU and others working here and also profoundly affected by decisions on how their taxes are spent and the services that are provided.

Looking at my draft now, though, I see how I was waxing lyrical about how we have strengthened our presidential system with the TV leaders’ debates. And the Tories won the battle in a shamelessly compliant media that the Prime Minister must be “elected”. Which is meaningless in a parliamentary system.

With all this in mind, here’s my proposal: separation of powers (throughout the whole election campaign I’ve only seen this mentioned by Simon Jenkins in the Guardian).

We should directly elect a Prime Minister – who appoints a cabinet – and, separately, a fully proportional legislature – the House of Commons – which will be free to pursue shifting allegiances.

The executive vote should be by Alternative Vote (AV), since otherwise the outcome depends on which candidates are on offer, as we’ve seen in the US when Ralph Nader ran against Al Gore.

Single Transferable Vote (STV) in multi-member constituencies makes sense for the legislature, since it is desirable for legislators to have some contact with what happens on the ground. To all intents and purposes, the legislators in this proposal would operate in a similar way to back-bench MPs at present.

There’s a lot more that could be done – for example, power, including the right to set the appropriate tax rate could be devolved to departments such as health, and the executives of such departments elected separately – but my point is that electoral reform in isolation makes no sense in the UK.

Other proposals, such as fixed-term parliaments, also make no sense in isolation. The UK’s constitution relies on a Prime Minister with the confidence of the House of Commons. It’s entirely possible that no-one would be able to “command a majority in the House”. We’re not far off that situation now. AV (or PR) plus fixed term parliaments in fact creates an even worse situation.

I’m not sure I agree with fixed-term parliaments anyway – what’s the point of lame-duck government? – but in isolation it makes no sense.

It seems to me that a whole package of constitutional changes needs to be agreed by all the major parties, as a coherent whole, and put to the British people in a referendum.

Changing the voting system alone would simply exchange one unfair system for another, even more unfair system, where Clegg and his successors remain permanently in power! And as far as the vast majority of the electorate are concerned it will still be a case or Tory or Labour.

Adieu, AV

Filed under: 2010 General Election, Politics, UK — Tim Joslin @ 3:53 pm

What does Clegg think he’s doing?

The situation will probably have changed by the time I finish and post this piece, but, as I write, the Lib Dems are back in talks with the Tories, who seem to want a coalition to govern for a full term! That’s just not going to happen, guys.

If I was a Lib Dem, I’d not agree a deal at all. The Tories would just have to try to struggle on with a minority. The news-flow would be caustic for Cameron as his party shows weakness on a daily basis as they struggle to get legislation through.

Here’s one possibility: once Labour has a new leader they could ally with the Lib Dems and others to vote Cameron down on a confidence motion. But then refuse a dissolution (I assume this is allowed in the constitution), instead indicating that Miliband can command a majority. The Queen would have to ask him to form a government. This probably wouldn’t last long either, but would allow the Lib Dems and Labour to control the timing of an election and prepare with some populist legislation and executive action. Maybe they’d even get through a referendum on the Alternative Vote system (AV).

The trouble is, it seems to me that Clegg is a self-deluding fool. I therefore expect him to go into coalition with Cameron and destroy his party. The pretext will be “the national interest”, but the real reason will be the desire for power. Many Lib Dem voters who lean towards Labour or even tactically voted – together possibly a majority of Lib Dem support – will be long gone by the next election. And then there’s the risk that the Lib Dems will be seen to prop up an unpopular Tory government, or will be seen as hopelessly split on whatever issue brings the folly to an end.

And whatever happens, Clegg’s probably already lost the Lib Dems any chance of AV, let alone PR, for a generation.

Here’s why. Think about it. The Tories have said they will campaign against AV in any referendum they grant the Lib Dems. What incentive will Labour have to support the proposal? None. Sure, they might pay lip-service, since AV was in the Labour manifesto, but, unlike if they were in coalition with the Lib Dems, they will not expend political capital whipping their significant dissenting elements into line. And they’re hardly likely to spend a lot of money on a referendum campaign when they could be saving their pennies for the next election. I simply can’t see the Lib Dems winning a referendum on anything against the Tories, their toadying media supporters AND elements of the Labour party.

Especially after what’s happened since last Thursday. It’s same old, same old. Like many voters I might support the Lib Dems if I could just work out what they stood for.

Given all the talk of Lib-Lab tactical voting, I rather hoped we’d see Clegg talking to Brown first. By 6am last Friday morning I was able to sleep because I was contentedly absolutely sure the Tories would have around 10 seats less than the Lib Dems and Labour combined. I didn’t lose a night’s sleep willing on the Lib Dems to reach a position to prop up a Tory government.

It is simply ludicrous for the Lib Dems not to know who their natural allies are until after an election. Clegg may be a closet Tory, but whatever, the strategy is entirely wrong. In fact, it’s more than a strategy, it’s what the Lib Dems are, the way the party has been shaped over decades, so it’s not entirely Clegg’s fault. If we’re going to have PR, or even AV (which gives a slightly more proportional outcome in terms of MPs per vote), the electorate (and MPs of other parties!) needs to understand that the Lib Dems will ally with Labour (or the Tories), if at all possible. Only if the natural alliance is absolutely impossible should allegiances of convenience be considered.

We wouldn’t be where we are now if Clegg had campaigned on the basis of being a more moderate progressive party than Labour, so would seek to form a coalition with them. Or, if the party is really the wet wing of the Conservatives he should have made that clear. If any party wants to be taken seriously they have a duty to tell the electorate what they are voting for.

When the dust settles, I think the Lib Dems will find the voters are really quite cross with them.

Sorry, I’m in favour of electoral reform, but, in my judgement, the British people are simply not going to vote for an electoral system where only one vote counts – Nick Clegg’s.

A future of continual tawdry soliciting by the Lib Dems for coalition partners after every election is not a prospect that can be sold to the voters.

And why the hell the Lib Dems want a referendum they’re likely to lose is beyond me. They won’t get another chance for decades. I guess they simply haven’t thought it through.

Since the Lib Dems’ appeal during the election campaign was to break the two-party mould and usher in PR, I fear – no, I can feel it to be the case – that support is ebbing away from both the policy and the party advocating it. Don’t throw away those red-blue swingometers just yet.

Adieu, AV, it was nice knowing you.

April 9, 2010

Job Sums

I’ve been trying to avoid commenting on the General Election campaign, since it would be a huge distraction from far more important issues, but I can no longer ignore the absurd reasoning that’s making its way into the media.

Yesterday, the Guardian, bless their little cotton socks, tried, under the banner “Reality check”, to answer the question “Do national insurance rises cost jobs?” (if you follow the link, then don’t be puzzled – as usual, the online title is different to that in the print version of the paper). The Guardian’s answer is slightly to the “solid” side on a cute little dial that goes from “shaky” to “solid” – let’s call it “mushy”. They seem to think NI rises might cost jobs.

The article included some strange logic, most notably from Richard Dodd of the British Retail Consortium who apparently argued that “…in a competitive market, retailers will struggle to pass the tax on in the price of goods…”. The “competitive market” has nothing to do with it, since the tax will affect all employers. No-one has a new competitive advantage as a result of the tax.

The Guardian also failed to question why business leaders might be against an NI rise. The point is that increasing taxes (like other costs) reduce profitability (temporarily) because in general it takes time to raise prices and recover margins following an increase in costs. As clearly testified by Richard Dodd’s concerns about how “retailers will struggle to pass on the tax”.

But the Guardian’s piece made a bigger mistake – in fact they managed to completely miss the point. You can only answer a question like whether an NI increase will “cost jobs” by considering also what happens to the money raised by the tax. Taxes rob Peter to pay Paul, so if you can only evaluate the effect on any measure – in this case jobs – by looking at the issue in the round.

Since, as argued by the Guardian, the effect on (private sector) jobs of the NI increase is marginal and the money will be spent on retaining jobs in the public sector, then, if it’s the overall number of jobs in the economy you care about, you should be in favour of the NI proposal. The arguments put forward by the Tories and their business friends are misleading.

[I should say I don’t actually believe the prime goal of an economy should be to create jobs and I don’t believe the Tories or business leaders do either. The goal should be to produce as much as possible with as few resources – including people – as possible. Then we’ll all be rich and jobs will then take care of themselves. What I object to is all the dissembling. Having said that, unemployment is high and rising, so it’s not the best time to be bearing down on jobs. In other words, the trajectory Labour wants to put the economy on makes more sense to me than that which the Tories propose. We may as well, for instance, maintain staffing levels in the NHS – thereby saving and improving lives – and, in particular, continue to invest in the IT necessary for future efficiency savings, rather than have people sitting around on the dole].

Today’s FT gives us some clues on how many jobs would be lost by reducing public expenditure by an amount equivalent to that which would be raised by the NI increase. The FT appears to consider a slightly different question, i.e. the effect on jobs of additional public spending cuts in 2010-11 (i.e. this financial year), as proposed by the Tories. The point, which several BBC news bulletins have missed this morning, is that the NI rise only comes in in 2011-12. With the usual disclaimer that unless I’ve completely misunderstood something, in which case perhaps someone will be good enough to put me right…

And it’s surprisingly in the FT, where a “Cameron adviser discloses cuts detail” that the serious dissembling starts.

First, there’s an enormous howler. The article describes a proposal for £1-2bn in job savings by natural wastage this financial year, 2010-11. That is, during the year that’s already started. But the article appears to reckon on a saving of the full annual cost of the jobs – estimated to be £50,000 each – this financial year. Wrong. You can only reckon on that saving if the jobs disappear at the start of the financial year. On average they will disappear halfway through the year (actually later than that, because the Tories wouldn’t even be able to start until May 7th). So on average only £25,000 will be saved this financial year per job shed. Therefore, to save £1-2bn this financial year would require the wastage of £1-2bn/£25,000 = 40,000 – 80,000 jobs, not the 20,000 to 40,000 stated.

Note that if the jobs are lost other than by natural wastage there will be redundancy costs and less, or more likely negative, cashflow savings this financial year. Basically the Tories need to find 40-80,000 retirees or leavers this year who have not yet been accounted for. And whose jobs are so inessential that they don’t need to be replaced. Tough call, I’d have thought, when there aren’t so many other jobs out there to move to.

Furthermore, some of the cost savings are in things like office space, not salary. There’s always going to be a delay in realising such savings, because you can’t move to a smaller office every time someone retires and is not replaced.

Even furthermore, the cost in benefits of 40-80,000 people who would otherwise have had a public sector job to go to needs to be subtracted from the fiscal saving. Let’s be generous and assume that this has been taken account of in the £50,000pa annual cost of a public sector job quoted in the article. You can do your own sums if you want to assume the actual saving is less than £50,000pa (or less than £25,000 saving on average in the current FY, 2010-11).

Second, we’re discussing jobs in the overall economy. The FT article considers how the Tories propose to save an extra £12bn this financial year:

“Other cuts set out by Sir Peter include reductions in IT spending, yielding ‘potentially at least’ £2bn to £4bn. Renegotiation of contracts with suppliers of goods and services – which Sir Peter described as ‘not rocket science … it’s not about beating them up on price’ – would save about £3bn.

Cuts to ‘discretionary’ spending, such as consultants and staff expenses, should yield a further £2.5bn for 2010-11, he said. He declined to be drawn on a figure for property costs.”

Let’s see. Reductions in IT spending will cost jobs at IT suppliers, not all of them overseas. “Consultants” last time I looked were living, breathing working people as well. Reducing staff expenses would cost jobs indirectly as would renegotiation of contracts. The trouble is the lead time on renegotiation of contracts as well as “property costs” – realised presumably by selling offices – is months to years, so achieving the promised cashflow savings this financial year is implausible, to say the least.

I simply don’t find the Tory plans credible. They’d have more chance of getting my vote if they were actually honest about what they believed in. I remember Labour came to power in 1997 with a promise to stick to the Tory spending plans for the next two years. Cameron thinks he knows better. His position is contradictory – he said on the radio this morning that it was difficult for an Opposition to make spending plans, yet he’s confident he can make huge additional cuts this year. Cameron was once thought of as the new Blair. He now seems to have morphed into the new Thatcher. It seems to me that he’d give the economy the sort of shock treatment it received in the early 1980s. Steeply rising unemployment, an assault on the public sector and so on. Maybe it needed it then. I don’t know. But if it needs it now, perhaps Cameron should be making that case, not promising to save jobs when, at least in the short term, his policies are more likely to produce higher unemployment than would otherwise be the case.

Cameron is giving the impression that he can reduce public sector borrowing and unemployment this year and next compared to Labour’s plans. If he really believes this then he’s seriously wrong and not ready for the job of PM. If he doesn’t believe he can square the circle, then perhaps he should clear up the misunderstanding (or is he already planning to make his old chum George Osborne the fall guy when the Government can’t deliver?). The only other possibility is that he’s deliberately misleading the electorate.

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