Monday 30 January 2012

£1 trillion National Debt:. . . so what?

The media and political parties have made a meal of the fact that our National Debt has now reached £1 trillion. The Tories use the figure to "prove" that their public spending cuts are necessary and inevitable, Labour to show that the policy of public austerity is making matters worse rather than better, and the media like to sensationalise any allegedly significant "milestone" in order to attract attention, sell their papers and maximise their profits.

In fact the really significant fact about our National Debt is that it is still, at 64% of our GDP, only marginally above the accepted normal maximum of 60%, which is what is to be expected in a recession, still below those of Germany and France, and less than a third of that of Japan, (226% of GDP.)

The really serious fact about Britain's debts is that, adding together the debts of households, companies, the financial sector and the government the total comes to almost 500% of GDP. This makes the UK economy as a whole the most indebted of the big rich countries. (The total indebtedness of the US is around 280% of their GDP.)

Aggregate household debt is almost 100% of GDP, so all those households who criticise the government for having accumulated debts of 64% need to look to the beams in their own eyes. Company debt is around 110%of GDP and the debts of the financial sector over 200%.

In this scenario government debt is the least of our worries. Most of it is held internally and, if the Tories are really so desperately worried about it, it could be reduced very rapidly by a wealth tax and the closing of a few tax loopholes. I cannot, however, see any similar quick fix for the massive private-sector debts. These have to be reduced somehow and doing so must reduce aggregate demand which will in turn hamper growth and, under present arrangements, cause yet more unemployment and serious misery.

The answer must lie in more sharing, both of the work available and the incomes generated. This will mean more part-time working, more job-sharing, an end to double-income households, and more taxes to help the most adversely affected. As far as I can see, none of the three major parties is even beginning to tackle this problem. The Greens have perhaps made a start.

The alternative is to wipe out the debts by massive inflation, not a prospect which those of us with savings relish.

Friday 27 January 2012

A £37,000 pay cut

Well, Mr Hester, Chief Executive of RBS, is not to get his £1m bonus after all: it has been cut to £963,000. For most of us a cut of £37,000 would be pretty serious. Indeed for most of us £37,000 is considerably more than we actually earn. But for Mr Hester it is a flea-bite.

Mr Hester is said to be a very effective Chief Executive, and that may will be so: I have no means of judging. However, some of the "turn round" of RBS has been achieved by cutting thousands of jobs. If RBS was overstaffed and employees were just filling in their time by passing memos to each other, as per Parkinson's Law, well and good. But if they were doing useful work and their absence places an unacceptable burden on those who remain, or more functions requiring personal contact or expertise are passed to impersonal automated systems, that is unacceptable.

Given that the average wage is around £26,000 that £963,000 could have preserved the jobs of 37 RBS employees on average pay. Some enterprising journalist could pick out 37 RBS workers who have lost their jobs to pay Mr Hester's bonus and chart their experiences over the next few years as they try to find alternative work in a system where there are five unemployed people for every vacancy. Then we can compare their collective experience with whatever pleasure Mr Hester gets form his extra £963,000.

We also need to remember that the £963,000 is on top of Mr Hester's "normal" annual pay of £1.2 million - equivalent to the "compensation" of a further 46 employees on average wages. So altogether the Chief Executive, effectively a public servant, is paid 83 times more than the average employee in his, or rather our, organisation.

Most of us accept the need to pay differentials to reward different levels of ability and responsibility, but this ratio has gone well beyond what is necessary, fair or just, or even sustainable in a cohesive society which claims that we are " all in this together." Plato thought a ratio of 4:1 would be ample, but he probably didn't include the salves. My own view is that multiples of up to ten times the minimum wage would be sufficient to incentives and justly reward all sorts and conditions of men and women.

Thursday 26 January 2012

A Mixed Bag from Clegg

It was heartening at the beginning of the week to read headlines coupling "Bishops and Liberal Democrat Peers" in their alliance to block the benefits cap. Happy to see the party back on the side of,if not exactly the angels, at least their representatives on earth, as well as back on the side of rationality. Unfortunately this welcome sanity and consequent publicity, surely likely to make the party more attractive to all engaged professionally in the area, was spoiled by Clegg's appearing at least once on both radio and television, to say that he was in favour of a benefits cap.

It seems obvious to me that welfare payments should be based on need. Somebody somewhere has worked out what is the minimum necessary to provide one or a group of individuals a basic safety net. I suspect this provision will not be generous. To place an artificial cap on it, so that a group receives less than this basic minimum, is nonsensical and inconstant with either fairness or the standards of a civilised society.

If there is a "rip off" in this area I suspect it is not by families in difficulties but by landlords who charge exorbitant rents. The government would be on stronger ethical ground by tackling abuse in this area rather than pushing the most vulnerable in our society even further below the poverty line.

There is something rather sick about a government which bullies with such enthusiasm the weakest in society and yet seems content with ineffectual noises when it comes to tackling the excesses of the rich. One glaring example: the Chief Executive of RBS receives a salary of £1.2m and there is talk of giving him a bonus of a further £million - both sums beyond the wildest dreams of most of the rest of us. Since RBS is 83% publicly owned its Chief Executive is virtually a public servant and paid with taxpayer's money. Easy for the government to stop this abuse, but somehow there's another law when it comes to facing up to the those at the top rather then the bottom of the pile.

However, on the brighter side, Nick Clegg is expected today to call for an acceleration of rate at which the lowest earners are taken out of paying income tax. Whilst not helping the very poorest, those not in employment, this will provide some relief for the hard-pressed and, by stimulating demand, may through the Keynesian multiplier do something to promote growth and therefore employment.

Tuesday 24 January 2012

Letting the side down?

Yesterday I received a letter from Diana Wallis, one of our Liberal Democrat MEPs for Yorkshire, saying that, after twelve and a half years she's decided to call it a day and resign from the parliament. I gather Liz lynne, MEP for the West Midlands, has made a similar decision.

I'm not sufficient of an anorak to have kept M/s Wallis's campaign material, whether for selection as a Liberal Democrat candidate or for the election itself, but I doubt that in either will she have made it clear that she was interested in serving us for only half the parliamentary term. On the contrary, I expect that there will have been details of successes achieved, plans for further projects and promises of dedicated service. I suspect much the same for Liz Lynne.

There are of course legitimate reasons for public representatives to stand down before their term is completed - a deterioration in health, substantially changed family circumstances - but there seems to be no such excuse in either of these cases (though M/s Wallis does refer to a long standing medical condition,but acknowledges that his is not her main reason for resigning.)

It is hard to avoid the conclusion that both MEPs are making cynical use of the system to give their successors time to "bed in" and thus have the advantage of incumbency come the next election. M/s Lynn has named her successor, a Phil Bennion, and, indeed, gives this explicit reason. M/s Wallis mentions that her number 2, Stewart Arnold, has not yet made up his mind mind. She now mentions that Mr Arnold is her husband, something that I don't remember being made very clear in the party's selection procedure.

It could be argued that, since we electors vote in this instance for a party list rather than an individual , it doesn't really matter to the voters which person on the list does the job. This, in my view, demonstrates the inadequacy of the list system, imposed by the Labour government, which gives maximum power to the parties and the minimum to the voters.

I deeply regret that these resignations make a further dent in our quest for more honest politics. They can only add to the cynicism of the electorate. Coming from Liberal Democrats they make it yet more difficult to challenge the popular, and I used to believe misguided, view that "you are all the same."

Friday 20 January 2012

The resuscitation of Nick Clegg

A commentator has noted that, whereas 2011 was the year of "get Nick Clegg" the media has now moved on and the 2012 target is to be Ed Miliband. The unjustified pillorying of any politician does little to enhance the quality of our political process and the attempts to undermine Ed Miliband are not to be welcomed (see previous post) but I am pleased that, for a while at least, Nick Clegg has moved out of the firing line.

This is well deserved. Already this year Nick has received a good press by articulating some well established Liberal Democrat policies and traditions. He was quick to deride the bizarre suggestion that public money should be spent on a new Royal Yacht, expressed promptly our opposition to another massive ariport, "Boris Island", in the south east, and has indicated that were Liberal Democrats the major partners in the coalition then the "Mansion Tax" would be implemented. Best of all, he has revived, to sympathetic hearing, the hallowed Liberal tradition of industrial democracy and profit sharing.

Both these last two ideas need refining. A "Mansion Tax" on homes valued at over £1m is clumsy. Additional higher council tax bands would be a better interim measure whilst plans for a land tax or site value rating were refined. (My letter to Vince Cable suggesting this has still received no reply.) The "John Lewis" model for industrial and commercial undertakings is certainly an improvement on the conventional limited company which, legally, is run solely in the interests of the shareholders (and in practice often in the interests of its managers) but there are better models for industrial partnerships, on which we Liberals made elaborate proposals in the 1960s. These should be dusted down and updated to adapt to modern conditions.

Still, it is good to see Nick flying the Liberal Democrat flag rather than acting as a junior apologist for the coalition. This is paying dividends, and long may it continue.

Thursday 19 January 2012

In defence of Ed Miliband

One of the problems I've experienced of being a dedicated Liberal/Liberal Democrat supporter is that I've spent a lot of time defending the Labour party from unjust accusations from the Tories and unfair distortions from the overwhelmingly right-wing press. Such is the situation at the moment. The trouble is that it is then difficult to explain that you are not actually a Labour supporter because there is a "more excellent way," Liberalism.

Such is the situation at the moment. I've tried to enumerate some of the many faults of the last Labour government in a previous post but gross economic mismanagement and a casual disregard of the viability of the public finances is not one of them. In fact many of us believed at the time that Gordon Brown, in his early years as Chancellor of the Exchequer, was too "prudent" in sticking to Tory spending plans and this paying off chunks of the National Debt. Yet the Tory PR machine has managed to convince the nation, and even parts of the Labour party itself, that Labour financial irresponsibility is the cause of our present economic woes.

Although not prepared to apologise for Labours economic errors (and why should he?) Ed Balls has now cravenly agreed to the absolute necessity of cuts in the public services (when in his campaign for the Labour leadership he issued an impeccable Keynesian manifesto) and his leader Ed Miliband is pilloried for ineffective leadership. Unfortunately for the latter Ed, much of the criticism comes not just from the Tories and the right wing press, but from his own party, some sections of which seem to have a suicide wish.

To paraphrase R A Butler's famous remark about his leader Harold Macmillan, Ed Milliband is "the best leader they've got." He is slightly ahead in the opinion polls, the election is three years away and what he needs to do is craft a series of policies to create a fairer, greener economic system and a fairer and more participatory constitution, on which he can fight an election in 2015. In the meantime, rather than making predictions about what he can and can't promise for the public service in 2015, he should concentrate on hammering away at the truth that the best way of repairing the public finances now is not by cutting government expenditure but by growth which will revive the tax take and thus the government's income.

Monday 16 January 2012

More micromanagement.

Yesterday's Radio 4 programme, "David Cameron's Big Idea" (13h30 on 15/01/12: available for a week on the BBC's "Listen Again" website) claimed that one of the areas of Conservative/Liberal Democrat overlap which excited the negotiating teams which formed the coalition was a mutual desire to put an end to Westminster and Whitehall dictacts and devolve decision making to the lowest possible levels.

Alas this enthusiasms for trusting professionals and the people has been very short lived. The year is as yet not a month old and nurses have been ordered from the top to visit their patients every hour. Local councils have been told they can no longer fine people for mixing up their rubbish or putting it out on the wrong day; (this on top of last year's instruction that they must collect the rubbish every week). Schools have been told that the existing curriculum for computer studies is boring and inadequate but, rather than trusting the teachers to decide for themselves what is best for their pupils, a new prescription is to be issued.

So once again we have the mixture as before, and the "top down" management for which Labour was rightly criticised simply continues. Is it any wonder that the electorate lack trust in politicians and believe "you're all the same."?

After failing in the 1960s I'm now making a second and, so far more successful, attempt at reading Joseph Heller's "Catch 22". This quotation from pages 130/131 of the 50th anniversary edition resonates:

Without realising how it had come about, the combat men in the squadron discovered themselves dominated by the administrators appointed to serve them. They were bullied, insulted, harassed, and shoved about all day long by one after the other.

For "combat men" read "nurses, teachers, councillors et at", for a"administrators" read central government.

Friday 13 January 2012

Our disunited kingdom.

There is an insurance company which advertises that it won't make a drama out of a crisis (or maybe the other way round - I'm not sure which they regards as the more traumatic.) Unfortunately our politicians seem adept at doing exactly that. The constitutional future of Scotland could easily be settled by "quiet calm deliberation" but instead the various options bombard each other with half-truths and predictions of disaster.

Alex Salmond wants to delay the referendum because he observes that support for independence, at present well below 50%, increases with time, so pretends that it will take a long time to make the preparations. David Cameron wants the referendum sooner for the same reason, so pretends that any delay will be bad for business confidence and growth. Others chip in with varied legal obfuscations as to who has a constitutional right to call a referendum.

To me the obvious and best solution is that Scotland should have "home rule": authority over all domestic matters and sharing defence, foreign policy and odd bits and pieces such as the meteorological office and parts of the BBC with the United Kingdom. Liberals have campaigned for something on these lines ever since I've been a member of the party, and, indeed had a similar devolution of power been granted to Ireland, as proposed in Gladstone's First Home Rule Bill in 1886, over a century of strife and bloodshed could have been avoided.

The sensible thing to do is to have the referendum, let Salmond have his two questions (more if he likes) and I'm fairly certain the Scots will vote for home rule, which is now called "Devolution Max", and we can then move on to make similar arrangement for the Regions of England.

Instead our politicians shriek "crisis," their bandy half-truths, deny their real motives and bring the democratic process into disrepute.

Wednesday 11 January 2012

Guardian Pushmepullyou

The Guardian faces both ways on the approval of the plan for a high speed rail link from London to Birmingham, with eventual extensions to Manchester and Leeds. A leading article, "Big ticket transport" (11/01/12 - the "link" thing is not behaving itself) gives reasonably enthusiastic support, whilst their columnist Simon Jenkins describes it as "A triumph for all rail nerds (and) money beyond all sense" (also 11/01/12). I find myself comfortably on the side of Jenkins and, for the first time in my life the self-styled Taxpayers' Alliance, who I believe have described the scheme as a "rich man's train set."

As a dedicated Keynesian I am of course delighted that the government is planning to spend £33bn on the development of the infrastructure, but suspect there are many more projects on which the money could be spent which would be both more environmentally friendly and of more use to the majority of the population. I suspect that the government has plumbed for HS2 as a pathetic attempt to keep up with the continental Joneses. But France, for example, has over twice the land area of the UK so it is very useful to have high-speed trains for getting from one end of the country to the other without leaving the ground. By contrast, 40 minutes off the journey time from London to Birmingham is unlikely either to facilitate an economic miracle or improve the quality and convenience of most of our lives.

If and when HS2 is completed I suspect its fares will be so astronomical that only businessmen on expenses will use it, and those of us who search the web for cheaper options will still be travelling along the existing network. (Which, for long journeys, is highly satisfactory. In my college days in London in the 1950s the journey time from Leeds was about five hours: now it is just over two, and very comfortable, apart from the incessant announcements from the staff, even in the so-called quiet coach.)

I am not a transport expert but I suspect that £33bn spent on electrifying the remaining parts of the long-distance network, upgrading the ramshackle cross-country and urban commuter services, providing every major city with a tram system, allocating a dedicated coach lane on the motorways and upgrading the broad canal systems to take more freight would be of far more value to the economy and to the quality of life of the majority of us.

Simon Jenkins claims that the government has caved in to a lobby "led by contractors and consultants who (have) manoeuvred themselves into what has become almost an arm of government." I hope a groundswell of opposition, not just from those on the route who are worried about their back yards, but from ordinary people throughout the country who are missing out on the alternatives ,will force a change of heart.

Tuesday 10 January 2012

The truth about the failures of the Labour governemt.

I am an admirer of the BBC, believe it to be reasonable, impartial and objective, and that it should be defended at all costs against the assaults of the Murdoch empire.

Having said that, I believe that the interview on this morning's "Today" programme between John Humphries and Ed Miliband was grossly unfair. Again and again Humphries attributed our present economic woes to the profligacy of the previous Labour government, and challenged Miliband to accept responsibility. Alas Miliband made no attempt to deny the accusation, but tried to divert the conversation from a discussion of the past to his views (one can hardly call it a vision) of the future.

It is shameful that in our highly educated and sophisticated democracy the convenient Tory lie that the primary responsibility for out present economic situation lies with Labour has become accepted truth.

It needs to be said loudly and clearly, that, in this country, in order of culpability, our present woes are the responsibility of:

1. Irresponsible capitalism made possible by the neo-liberal economic policies of market sovereignty and deregulation, introduced by the Thatcher-Major governments.

2. The Blair-Brown Labour government which went along with the prevailing philosophy. In this acquiescence they were egged along by the Tories, who urged even more deregulation.

3. The Liberal Democrats,who, having moved to the "Orange Book" right in economic affairs, failed to provide sufficiently vigorous opposition, although Vince Cable did fire a few warning shots.

I am not now nor ever have been a Labour party supporter (nor a Communist either for that matter.) The Labour government did fail, and instead of condoning the current convenient misrepresentation of their economic culpability Liberal Democrats and the responsible media should be exposing the real failings in the "13 wasted years" (an interesting echo of the 1960s), which, in my view are:

in Foreign Policy

+ Iraq war, collapse of ethic foreign policy project and general toadying to the US on foreign policy.
+ failure to engage positively with the EU

in Economic and Social Policy

+ failure to reform taxation and tax rich effectively
+ failure to close tax loop-holes, close tax havens, tax companies effectively
+ continuance of expensive and ineffective PFI projects
+ further privatisations (Air Traffic control, attempt at the Post Office)
+ no attempt to reform company law in the interests of all “stakeholders.”
+ failure to re-link pensions to earnings or prices, whichever is the higher
+ hence a growing gap between rich and poor
+vilification of claimants and those on welfare benefits
+ in summary, a continuance of the Thatcher-Major neo-liberal mixture as before.

in Constitutional affairs
+ breaking of manifesto promise on electoral reform
+ half hearted devolution to Scotland and Wales.
+ quarter-hearted attempt at devolution the English regions
+ further reductions in autonomy of local government
+ incomplete reform of the second chamber
+ failure to reform party funding
+ continued obeisance to powerful interests (Ecclestone, Murdoch press)

on Civil Rights

+ attempt to introduce ID cards
+ attempt to reduce right to trial by jury
+ extension of permitted period of detention without trial .

in Style

+ “sofa” rather than cabinet government
+ attempts to micromanage NHS, Education, and even devolved governments.

If Ed Miliband wishes to demonstrate that his party has changed then it is these issues he needs to address.

Saturday 7 January 2012

Putting the boot in on executive pay.

It is good news that Nick Clegg is going to use his deputy-priministerial status to "do something" about the excesses of executive pay, and the signs are that David Cameron is, at least vaguely, "on side" on the issue. Unfortunately the most likely option is to put an employee representative, or maybe representatives, on remuneration boards. This sounds more like an unprotected little toe rather than a steel-toecapped boot.

Certainly one employee representative will not be enough. Two would be better, but even they would need substantial back-up to produce arguments based on research and evidence in addition to moral indignation.

Economic historians tell us that the "invention" of the Joint Stock Company with limited liability was as important to the development of the Industrial Revolution as the technological inventions, since it enabled investors to put money into companies without putting their entire fortunes at risk.

When I first campaigned as a Liberal in the 1960s we argued that the existing Joint Stock Company was no longer "fit for purpose" and we proposed lots of ingenious plans to ensure that company boards should have equal representatives of shareholders, employees and the community. No one interest should have an automatic majority, so companies would be forced towards decisions that were in the interest of all concerned, rather than just the shareholders.

That still seems a good idea, and I suggest that Liberal Democrats in government should search the party archives and dust down these splendid ideas. If it is felt that things have moved on in the last half century than, rather than a feeble couple of "worker representative" I'd like to see Nick Clegg use his deput-priminister's department, in conjunction with Vince Cable's Department for Business, to produce proposals for a major revision of company law which will ensure that the interests of all relvant influences are taken into account when companies make decisions.

It is not just remuneration boards which need reforming, but the entire way our capitalist sector is organised. Liberal Democrats have made great sacrifices by going into government. We might at least try to ensure that something substantial comes out of the pot, and not just sticking-plaster remedies.

Thursday 5 January 2012

Back to the "undeserving " poor?

I don't pretend to be an expert on the highly complex welfare system, but it seems to me that, in his Guardian article, "Beveridge for this century" Liam Byrne wants the Labour Party to revert to making a distinction between the "deserving" and "undeserving"poor. Byrne, shadow Work and Pensions secretary, claims that state help should be based on "something for something" and should reward "those who are desperately trying to do the right thing." He quotes Ed Miliband: "..we (Labour) are on the side of people who work hard and do the right thing."

Well, of course they are, and so is everyone else, but there is in the article no mention of how to differentiate between these virtuous citizens and those who don't meet the criteria, nor what to do about these less virtuous fellow citizens. Will Labour let them (and, more poignantly, their children) starve, leave them to build tree houses in the woods? (Byrne points out that housing benefit costs and "unbelievable" £20bn a year.)

It must have been in the 1960s or thereabouts that either Richard Titmuss or Peter Townsend (I can't remember which, but both were eminent sociologists and experts on welfare) wrote:

When the economic history of this era comes to be written the problem of the skiver will not merit so much as a footnote.

In spite of this, then as now we let the mistaken concept that vast hordes are ripping off the system and undeservedly getting "something for nothing" dictate our welfare policy, to the detriment of the quality of our civilisation.

Some years ago I heard a Radio 4 "Thought for the Day" speaker claim that, on top of the basic physical needs of security, shelter, warmth and food, all of us have three basic psychological needs:

-to know that somebody, somewhere, cares what happens to us;
-to feel that somebody, somewhere, has benefited from our existence;
-to pay our way.

All three of these make sense to me. In the context of welfare it is the third that is relevant. I cannot believe that there are many who are comfortable with being permanent spongers, either on their families, their friends or the state. Of course there are some, but we all have our pride and put a brave face on things when we are forced to accept welfare, and may make up boastful stories rather than admit that we can't find a niche in society which enables us to support ourselves. We mustn't let this minority and their self-justifying fictions wag the welfare dog.

The solution to the problem of these "undeserving poor" is to give to us all a Citizens' Income, as the Green Party has advocated and which the Liberal Democrats supported until we got cold feet. A Citizens' Income is received as or right, "deserved" because we are citizens. Those who chose to live on this very minimum income are welcome to do so and good luck to them.

Much better for Labour to adopt a visionary policy such as this rather than revert to a discredited and irrelevant Victorian concept