Some green shoots...?

The Chancellor of the Exchequer's autumn statement does contain some signs of green shoots, not, alas, of economic recovery, but of a change of direction. Public investment is to be ploughed into upgrading some of our motorways and the railway network (including the electrification of the TransPennine route.) The money involved is peanuts compared with what is required, and much less than the amount of public expenditure that has been cut. In addition the extra spending on real investment will not come on stream for several years, (though doubtless consultants will gobble up their fees fairly quickly) whereas the cuts were and are heavily "front loaded." Even so, it is good to see signs of a change of heart, however small.

I have believed from the beginning that the Tories' public austerity policy is ideologically driven and not a matter of necessity. I suppose, to do them credit, that they genuinely believed, against all the odds and Keynesian teaching and supporting evidence, that state expenditure was crowding out private enterprise, and that if the state were cut back the private sector would expand and fill the gap. I do not believe that they deliberately set out to create misery among such a large proportion of the population.

Unfortunately, now that their policy is plainly demonstrated to be wrong, it is difficult to see what they can do without loss of face. These minor touches of the Keynesian tiller are welcome but they are not enough. However, I cannot see how the blustering harangues of Ed Balls will either bring about a more robust change of heart or convince the public that Labour's economic competence is superior. We are locked into a form of adversarial politics which may be fun for the participants in parliament (Labour members seemed to enjoy receiving news of economic failure, rather than be distressed by the consequences for the constituents for whose welfare they are so keen to seem concerned in other circumstances) but precludes changes which common sense demands

One thing that could come to and end is Liberal Democrat distortions of the truth in order to justify Tory folly. A letter from Danny Alexander to Liberal Democrat members repeats the tired old mantra of *the terrible legacy left by Labour" (it wasn't, it was left by the recklessness of the bankrollers of the Tory party, the financial sector) and that the Tory austerity programme is *sheltering households and businesses across the country from the worst impact of the (credit) storm" (it isn't, it is the relatively modest level of our long-term debt and the existence of a lender of last resort which makes our borrowing status secure).

Happily Alexander does not repeat another red herring put about by Osborne, that his policy is thrown off course by the crisis in the Eurozone. Admittedly the situation in the Eurozone doesn't help, but Osborne's policy was failing long before the Euro crisis broke. Another distortion of the truth which has come to Osborne's rescue is that UK interest rates are low as a result of his austerity programme. They are, but not in the way he would like us to think: bond yields are low because the returns from the depressed economy are even lower.

I suspect that few readers plough on to the end of a long post, but a not unexpected disappointment is that the government has not had the bottle to resist the calls for the abandonment of the 3p per litre rise in fuel duty. In this area the coalition is as supine as Labour, and claims to be the "greenest government ever" are, if not yet on the scrap-heap, at least severely dented.

Greece and its debts.

Some time ago I read that the problem with the Greeks is that they regard paying their taxes in rather the same way as many people regard the collection plate at church: you put on what, if anything, you happen to feel like at the moment.

When I repeated this to a young Greek student he responded, rather indignantly, that "ordinary " Greeks, such as his family, do pay their taxes: it is the wealthy Greeks who evade and avoid their obligations.

Confirmation of this view comes in a letter to the Guardian last Friday (04/11/11) from a Professor Greg Philo of Glasgow University. He points out that "...the $43bn funding gap of Greece's government is matched by about the same amount going offshore..."

Professor Philo goes on to quote the head of Italy's biggest bank as saying that "Italy's $2,750bn debt could be resolved by a tax on Italy's private wealth. This is five times the size of its debt."

(The difference in scale of the Greek and Italian public debts is worth noting.

Incidentally, a graphic in yesterday's Guardian gave the following figures of the debt to GDP ratios of selected countries as:

Greece, 144.9%;
Italy, 118.4;
Germany, 83.2% (sic);
France 82.3%;
UK, 79.9%.

When will we realise that we are being taken for a ride by the Tory claim that the UK's public debt is so outlandish that immediate public austerity is unavoidable. This is a Con/con tick to justify the implementation of the Tory ideology of shrinking the state. Wake up, Liberal Democrats in government.)

Later in his letter Professor Philo suggests a "wealth tax" on the richest 10% as an immediate solution to governments' financial problems. I warmly support this and, although I am nowhere near being one of the "richest 10%", should have no objection to its applying to me. In the longer term governments, including ours, need to close tax loopholes, abolish tax havens and pursue avoiders and evaders with the same vigour and enthusiasm that our government currently applies to so called "benefits cheats."

In short, there is no financial problem, just a failure in fairness and a lack of political will to ensure that we really are "all in this together."

Leadership vacuum at G20 summit

Gordon Brown was ridiculed when, by a slip of the tongue in the House of Commons, he appeared to claim that he had "saved the world" at the London G20 summit. Even so, it is generally agreed that by his determined leadership he cobbled together a package which helped bring the banking crisis under control and averted a complete collapse

No such leadership has been evident at the Cannes summit, which appears to have been a crashing failure. Yet a remedy which would calm market turbulence and put the politicians rather than the speculators back in charge, a Tobin-type tax on all financial transactions, exists. What is lacking is politicians with the courage to grasp the nettle. Germany and France are in favour but, shamefully, Britain, dithers on the sidelines waiting for the US to give a lead.

Here was an opportunity for Cameron and Osborne to gain international status similar to that enjoyed by Brown. Instead they restrict themselves to giving patronising lectures to the leaders in the Eurozone on what they should do, whilst presumable privately heaving sighs of relief that they now have a scapegoat on which to lay the blame for the crass failure of their own policies.

It is fashionable and currently popular to heap scorn on Gordon Brown and pretend that his failings are the cause of Britain's present problems. But no-one of similar drive has emerged on the world stage stop the present drift.

Anonymous fame

In his G2 "review" of the Liberal Democrat conference (23/09/11) Alexis Petridis writes:

"The moment when a lone voice shouts:'Rubbish!' as Danny Alexander suggests Gordon Brown spent too much turns out to be a dizzying pinnacle of insurrectionary excitement that the conference will never scale again."

I am happy to acknowledge that the lone voice was mine and sad that no other Liberal Democrat was prepared to express dissent to a blatant distortion of the truth. The prime cause of the current expenditure deficit is not Labour profligacy but the collapse of revenues resulting from the financial crisis which in its turn was caused by the financial deregulation which is part of the monetarist creed with which almost everybody went along. True, Vince Cable uttered a few words of caution in 2006, but as far as I can remember that was more to do with private rather than public debt, and I don't recall any sustained Liberal Democrat campaign to urge people to cut up their credit cards and live within their means.

At the 2010 election we promised more honest politics. Latching on to a dishonest myth, however popular and convenient, will not restore the public's confidence in politicians and the democratic process. I understand that today's headline in the Daily Mail calls upon the Labour Party to apologise for the economic mess in which it claims they left the country. If Liberals and the Daily Mail are singing from the same hymn sheet we have cause for worry.

Petridis is wrong, however, to think that there was only one expression of dissent. Alexander's claim that an immediate coalition and savage cuts were necessary to avoid the fate of Greece brought from me a cry of "Nonsense!", and his insistence that the government will not alter course (as the economy stagnates and unemployment rises) a cry of "Shame!" Again, alas, a lone voice. Where were the other Liberal Democrats who are proud to be inheritors of the traditions of Keynes and Beveridge?

For my own suggestions of how the course should be changed please see My Plan B post (09/08/2011)

Whilst on the subject of the Labour record, it is worth remembering that, with all his faults (and especially PFI) Gordon Brown is credited with taking the lead in organising prompt and effective international action which possibly averted an even worse financial crisis in 2008. There is no evidence of similar action by any member of the present cabinet. Again, my own suggestion is that the G8 finance ministers should get together and slap a Tobin-type tax on all financial transactions with effect from this-afternoon. Maybe I do George Osborne and Danny Alexander a disservice and they are working on this at this at this very moment, but I'm not holding my breath.

Public sector/Private sector

When I was at school the external examinations we took were set by the Northern Universities Joint Matriculation Board, and that continued to be the case during much of my teaching career. I presume the Universities of Leeds, Liverpool, Manchester, Sheffield and Birmingham tried to cover their costs but I doubt if they tried to make much profit out of the operation.

I don't recall any great fusses abut errors and unanswerable questions, though occasionally the question papers were accompanied by a "correction" slip putting right some mistake in the printed paper. These caused no problems to those sitting the exam (indeed, the invigilators made such a performance of making sure everyone understood the correction that they gave us useful extra time to think) though they could cause a bit of a nuisance if the correction slip had been forgotten or misplaced when the papers were used in future years for examination preparation.

Now the examination boards have been merged and privatised and the media are full of a record number of errors and unanswerable questions. Presumably the errors are unspotted because the profit maximising boards are reluctant to incur the additional costs necessary for thorough checking. The deterioration in standards does not give much credence to the "market forces" mantra of private sector good public sector bad.

To be strictly fair public examinations are a much bigger and more highly publicised operation today than in the "good old days" when they covered a much smaller proportion of the population and examinations were more of a private matter between the student, parents and the teachers. Whilst having no wish to reduce the number of people gaining meaningful qualifications I do feel that the annual round of publicity is rather overdone, especially when, errors and omissions apart, it tends to be limited to moans that the standards of the students are are falling if the percentage passing falls, and the standards of the examinations are falling if the percentage passing rises.

Sense from St Vincent

An article in yesterday's Guardian could be the beginning of Vince Cable's rehabilitation. For me the key paragraph is:

"We are actually a poorer country , mainly because of the banking crash, the recession that followed it and partly due to the squeeze we are under due to the changing balance of the world economy. Britain is no longer one of the world's price setters."

Thankfully no more moaning mantra about "the mess left by Labour" (although both Nick Clegg and Liberal Democrat News are still churning this out.)

This change of emphasis, from petty point scoring about the recent past to an awareness of the present realities, is to be welcomed. It is not the case that, even with the application of sensible Keynesian policies, the right "touch of the tiller" will restore prosperity as it was. Through the changing balance of the World's economies we are on the verge of economic changes as fundamental as the agrarian and industrial revolutions were in their own time.

Essentially we need to redefine prosperity. A look at Tim Jackson's "Prosperity without Growth" (Earthscan 2009) would be a good start, followed by an examination of what makes a happier society, via, of course, Wilkinson and Pickett's "The Spirit Level" (Penguin 2010)

I've read somewhere recently that the UK economy has now shrunk back to the level it was in 2007. Why is that a cause for "shock horror"? I had a very comfortable standard of living in 2007 (and in 1997 and 1987 come to that)and so did the overwhelming majority of others in the UK. The per capita income in the UK is around £22 000. That's per man, woman and child, including the babies, or £88 000 for a family of four if it were evenly shared out. Of course it is not shared out absolutely evenly, and few would want it to be, but more generosity from the haves would mean that the have nots could live a life of dignity, and there's still be plenty left over for us to contribute 0.7% of GNP to Third World development.

Our political debate has not even begun to examine these issues: Vince's realism is a small step in the right direction.