Wednesday 30 November 2011

St Andrew's Day Strike.

I have sympathy with some but by no means all of the three million or so public service workers who are expected to strike today. As I understand it the strike is to protest against three things: the increases in pension contributions, the postponement of the age of retirement and the switch from final salary to career average as the basis for assessing the size of the pension.

My sympathies are with the lower paid: the dinner ladies, care workers and those at the bottom of the pile, and especially those under threat of privatisation, with pension rights greatly reduced. I find it hard, however, to have much sympathy for the professionals, and am dismayed to see that my own old union, now called the NASUWT, is joining the strike. I've read somewhere that the average teacher now earns £34 000 a year, and head teachers' scales rise to over £100 000 a year. No one needs a pension based on half of salaries like that in order to fend off penury in old age.

It seems to me to be common sense that, as life expectancy increases, then contributions need to increase to fund the extra years of retirement. I'm less sure about the postponement of the age of retirement. Given the number of people, especially young people, who would like employment but can't get it, there is a strong case for enabling people to retire earlier (which, I can assure them, is a very pleasant option to take). This clearly implies a combination of both higher contritions and lower pensions in order to produce the necessary funding.

The switch to career average rather than final salary as the basis for calculating pensions seems to me to eminently sensible. It has the advantage of providing perfectly adequate pensions and at the same time unclogging the top echelons of various organisations (certainly some schools) where the people in charge are burned out but hanging on ineffectively in order to qualify for a higher pension.

If we accept that the purpose of a pension is to provide an adequate standard of living when one's earning life is over, then a pension equal to half the median wage, currently about £21 000 per year in the UK, should be quite adequate. In my view there should be no tax relief on any pension contritions designed to provide a "pension pot" which would generate a pension above the median wage rate.

One of our problems is that, in pensions as in so much else, we are not "all in this together." Fat cats in the private sector can award themselves pensions in the millions, funded perfectly legally by tax avoidance, and former ministers and MPs feather their nests. Until the government has the courage to tackle these abuses it will be difficult to have a rational discussion about pensions.

Saturday 26 November 2011

Help for young unemployed people

At one stage in my career as an economics teacher I stressed that we should always refer to "unemployed people" rather then "the unemployed" or the even move impersonal "unemployment": a reminder that we are discussing "people like us", in this case boys and girls, with aspirations like ours, for a decent lifestyle, respect, relationships and a purpose in life, and not just an abstract economic concept.

The £1bn aid package announced by Nick Clegg yesterday to help half the million unemployed young people into meaningful work is to be welcomed. The coalition has been accused of a "U" turn, since it abolished Labour's very similar "Future Jobs" fund. Although I supposed some form of "I told you so" knockabout is inevitable in a combative rather than a co-operative political structure, I believe we need to view changes of mind as evidence of a government prepared to learn from experience and respond to circumstances. How I should like to see asimilar change of mind on the present wrong-headed public spending cuts.

Because the problem we are facing, the reason young people can't get jobs, is lack of demand. Firms do not take on workers if they do not see demand, preferably growing demand, for whatever product they produce or service they provide. So Nick Clegg's "supply side measure," welcome as it is, will fizzle out and the young people will be back on the dole once the bribe to keep them in work runs out, if there is no demand for their products.

Honed and refined skills and and work-orientated ethos are not what is lacking, it is demand.

Sunday 20 November 2011

Missed opportunity (2)

It has become conventional wisdom to praise Gordon Brown for keeping us out of the Euro, but my own view remains that we ought to have joined at the beginning. I should much prefer to be on the inside trying to make a great project work rather than on the outside gloating over its problems and, I suspect, secretly hoping for its failure.

I am not an expert in counter-factual history but I think it plausible to argue that, had Britain joined, our adherence to rules and regulations would have caused us to block the membership of those countries - Greece and some other "Mediterranean" economies - which blatantly came nowhere near meeting the Maastricht qualifying criteria. Hence, with Britain on the inside from the beginning, the Euro may not have been in its present difficulties.

Be that as it may, our current failure to support France and Germany in their quest for a financial transactions tax (FTT - aka a Tobin tax or a Robin Hood tax) is deeply disappointing. The initial proposal by Tobin was that a tax of a fraction of 1% would curb currency speculation and thus lead to more stability in international trade. The World Development lobby latched on to the idea and suggested that the substantial proceeds of the tax could be used to tackle world poverty. More recently it has been suggested that the takings should be used to bail out European countries with sovereign debt problems.

I have some sympathy with David Cameron's view that such a tax, now proposed for all financial transactions, is not viable unless it is adopted by the US and other major financial centres. However, I should like to see him and George Osborne lobbying hard for this, as Gordon Brown lobbied hard for a package to "save the world" in 2009, rather than standing to one side and saying it can't be done.

I have read recently that, just as the Labour party was, and perhaps still is, the political arm of the trade union movement, today's Tories are now the political arm of the City of London. That seems to ring true. But it is a nonsense to force great democracies to dance to the tune of the greedy and amoral speculators of "the market." This should be stopped. An FTT of not just of a fraction of 1%, but 2%, 5% or what ever it takes to put the markets in their place is, in my view the obvious solution. Where are the politicians with the energy and vision to be working for this?

It is true that an FTT would place a disproportionate cost on Britain vis a vis our European partners because of London's financial pre-eminence. Perhaps the analogy is too strong, but I cannot help reflecting that, in the past British politicians have been prepared to send our young men to shed their blood in order to "save" Europe. When it comes to sacrificing the income of their paymasters, their priorities are different.

Missed opportunitiy (1)

The good thing that came out of the banking crisis was the chance to break the existing pattern of the industry by doing something constructive with the bank we taxpayers own and the two that we part own. Northern Rock in particular could have been returned to the mutual sector, from which it originated and to which it belonged for most of its existence. This would have provided a boost to the growing mutual, profit-sharing and co-operative sector of which Liberals have been keen advocates for most of our existence

Even better, in my view, Northern Rock could have been retained in public ownership and charged with the duty, not of maximising profits, but of providing investment finance at low rates of interest to businesses in its area, on the model of some of the German banks. That is just what the depressed North East needs and is in the fine tradition of the original Northern Rock, with its strong local roots and tradition of service to the local community.

Instead Northern Rock has been flogged off at a bargain price to the private sector: a return to the Tory practice established in the 1980s of flogging off public assets (comparable to the family silver, said Harold Macmillan) to their mates.

Thursday 17 November 2011

How green you are...or are you?

David Cameron promised us "the greenest government ever" so I hope his response to the current campaign for the government to abandon the 3p increase in fuel duty next January is more robust than that of the Blair/Brown government in 2000.

We cannot be serious about ameliorating climate change and conserving the earth's scarce resources if we cave in to every squeak of protest when sensible and modest measures to achieve these aims are implemented. I believe Monday's debate in parliament was laced with hyperbolic references to struggling motorists.

Yes, I own a car, and yes, I have noted that not very long ago £10 worth of petrol was enough to half-fill* its tank, then it was £20 and now it is £30. But I don't struggle: I just travel as much as is practical on foot, and by bicycle, bus and train.

And yes, I know that the public transport options are not so conveniently available in more rural areas. The responses we need to develop are not holding fuel prices down, but more car sharing, community buses and, in the long run living closer to our work.

Steve Bradley, chair of the Green Liberal Democrats, points out in Liberator 349: "It is strange indeed that a government that justifies its fiscal policy through the plea that 'we can't leave a burden of debt to the next generation' remains thoroughly indifferent to the prospect of handing countless future generations an inheritance of nuclear waste." The same argument applies to bequeathing them a polluted planet with unnecessarily depleted resources.

So on this issue let's hope the coalition will tough it out.

*"Green" motorists who don't travel very far don't fill their tanks, as that gives unnecessary extra weight to carry around and lowers fuel efficiency. They also use the Environmental Transport Association ( as their rescue service, as the ETA campaigns for green transport solutions rather than adds to the motorist lobby promoted by the AA and RAC. Very green motorists restrict themselves to the "green speed limit" of 55mph but I tend to be a bit self-indulgent and go up to 65mph. the fuel consumption calculator does not indicate much difference.

The recent proposal to raise our motorway speed limit to 80mph is clearly very ungreen. It is to be hoped that the recent dreadful accident on the M5 has scotched that idea.

Monday 14 November 2011

Call to Remembrance

The long weekend of "remembrance" which has just passed has been the usual uneasy mixture of national pride, nostalgia, sanitisation of the effects of war, and mourning. What I believe should be its principal purpose, an acknowledgement of the horror futility of wars, which occur through the failure of politics, is barely acknowledged.

I applaud the British Legion's attempts to transfer the remembrance events (sure the term "celebration is a misnomer) to the 11th November rather than the nearest Sunday, which is something the French do, and it is a public holiday, perhaps meant to be observed in the original derivation of the word, as a "Holy" day. However, when I "observed " it in my year in Pau in 2005 the mixture was very similar to that in Britain. There were detachments of the French armed forces,, lots of "Garde-à-vous" and "Repos," a band playing bursts of chirpy French military music, and a dignitary in a cap with lots of gold braid whom I first supposed to be an admiral but later realised was the "préfet," who gave out medals on behalf of the President of the Republic.

Public attendance at the event was sparse. A young engineer whom I asked said that for him and his generation it was "just another day's holiday."

So changing to the correct day is not in itself enough. In my view the it is time to change the character of the day from one which effectively celebrates national pride and past military glory to one of repentance and reflection. There should be no marching in step, military music and "the usual shallah-humps and shalla-hoops," no politicians, no singing of nostalgic songs: just lots and lots of reminders, pictorial and otherwise, of the futility of war, the refugees, the loss of life, the mutilated, the widowed and nowadays widowered, the fatherless and motherless. No comforting hymns - just an acknowledgement and bleak reminder of the horrors when politics fails.

Tuesday 8 November 2011

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."

Monday 7 November 2011

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.

Friday 4 November 2011

Heads you lose, tails your lose - but only if you're at the bottom of the pile.

In the bad old Labour government days state welfare benefits and pensions were indexed in the following April according to the inflation rate in the previous September. One year, I forget which, the September inflation rate was so low that state pensioners received only a 75p increase. Even Labour was embarrassed, maybe more by the PR disaster than the plight of the pensioners, but, whatever the reason, Labour has promised that under them this should never happen again.

We Liberal Democrats promised in our election manifesto that such payments would be indexed according to a "triple lock" of wage inflation, price inflation,or 2.5%, whichever is the higher. To our joy this was accepted by the Tories and included in the Coalition Agreement. It was a bit of a let-down that the price inflation measure to be used was to be CPI rather than the normally higher RPI, but, even so, it wasn't a bad deal.

Even by this lower measure inflation last September was 5.2%. Pensioners and welfare recipients will still have to endure these increased costs for another six months before they get relief, but even so, it is something to look forward to.

Alas, George Osborne is alarmed and it is rumoured that instead of keeping to the agreement he is keen to adjust these payments to a six month average figure, which he hopes will be lower than the September figure

Well, our Liberal Democrat leaders have broken one promise and it could be years before we're allowed to forget it. Lets hope they have the guts to tough this one out. We must not connive with a government which seems totally incapable of tackling the bankers' bonuses and the near 50% rises of top CEOs, but as soon as those at the bottom of the pile strike it lucky, skim off their little bit of the cream.

Thursday 3 November 2011

Population bomb or Consumption Bomb?

The birth of the earth's seven billionth citizen this week has focussed predictable attention on the optimum size for the population of our planet.

Commentators on population matters have long been divided into "Isle of Wight optimists" and the "Malthusian pessimists." The former point out that we must get the issue into proportion. Large as it is, if you stood us shoulder to shoulder you could still get the world's entire population on an the Isle of Wight, so there's nothing much to worry about. The pessimists predict starvation and doom, as did the Rev'd T R Malthus in the 18th century. (The church's penchant for bad PR is nothing new.)

I tend to side with the Isle of Wight optimists. First, we are far from starvation point. If the world's food supply were divided equally between the seven billion there would be enough for 3 000 calories per person per day. In other words, if we all consumed our fair share we should all need to be enrolling for Weight Watchers. If 1bn people are starving and another 3bn hungry, the problem is one of distribution rather than numbers or resources. The real problem is one of coping with "waste", both natural and chemical, and the side effects of our industrial processes (pollution, greenhouse gasses etc.)

The truth about population size is that there is no acceptable method of doing much about it in the short run. Yes, we can make contraceptive methods available worldwide, and, more expensively, expand the most effective contraceptive method of all, girls' education. But forced methods such as the Chinese "one child" policy and the sterilisation programmes tried in India in the 70s and 80s are neither effective not acceptable.

Happily the long term solution is inbuilt. As poorer countries develop and children become expensive the population will control itself, as has already happened in the rich world. So welcome, little seven billionth citizen: you have entered an environment furnished with enough for everyone's need. Now we all need to work hard to make sure that you get your fair share.

Wednesday 2 November 2011

100(?) Economists and Plan B (2)

As loyal follower Chris rightly points out (see his comment to "100 Economists and Plan B [1]"), the 100 may be a slight overstatement, as two of them, Prof Malcolm Sawyer of Leeds and Dr Pritam Singh of Oxford Brookes, appear on the list twice. However, as my former students and colleagues will acknowledge, I have never claimed that economics is all that precise a science: we look for trends and tendencies. The French, as usual, have a word for it,une centaine, which means "about a hundred."

The centaine make five specific proposals for their Plan B:

1. reversing public sector cuts:
2. directing quantitative easing to a green new deal;
3. increasing (welfare) benefits;
4. a British investment bank;
5. the introduction of a financial transactions tax.

I'm proud to say that, although I have never claimed to be a leading economist, all but the last of these appear in my own Plan B, posted on the 9th August. In a fit a absent-mindedness I seem to have failed to mention a financial transactions tax, but have advocated that on several other occasions so, though now retired, and never at the "cutting edge," I do feel reasonably "up to speed."

I do quarrel, however, with the leading economists' advocacy of quantitative easing, even if it is specifically directed at a green new deal. I should prefer direct government expenditure. Both that and quantitative easing risk fuelling inflation, but, of the two, direct expenditure is more subject to control.

It is heartening to see, in a letter to yesterday's Guardian, that a group of leading Liberal Democrats have also at last come to the conclusion that "enough is enough," that we should stop supporting the coalition's disastrous austerity programme and support the Compass Plan B.