Wednesday, June 30, 2010

Half-hearted satire corner

I was going to make some sort of crack about Ken Clarke being right about the need for penal reform, because the Tories have only just completed their 13-year sentence in opposition and they’re already reoffending, but I can’t really be bothered. Oh wait, I just did.

‘1.3m job losses’ looks like a non-story

I think the Guardian’s ‘Budget will cost 1.3m jobs - Treasury’ scoop doesn’t really hold together. As Peter Hoskins rightly says, the report is unclear as to whether this 1.3 million (actually a range of 1.1-1.3m) is the effects of the Tory/Lib Dem plans against Labour’s old plans or against a baseline of no fiscal tightening.

Also, you have to read a bit more to find that the Treasury thinks that 2.5 million jobs will be created over five years in the private sector – which would mean a net increase of 1.3m jobs (if we take the midpoint of 1.2m losses).

And if you do a little digging, something else becomes clear. By what probably isn’t a coincidence at all, 1.3m more jobs over five years is exactly what was predicted in the published Budget report: a rise from 28.8m in 2010 to 30.1m in 2015. The measures in the Budget are reckoned to cut employment by 100,000 relative to what it would have been, which is bad enough.

But there are three real stories lurking in there. One is the projection of 500,000-600,000 public sector job cuts, and the second is the ‘churning’ in the private sector, which will shed 600,000-700,000 jobs at the same time as it gains 2.5m. The third, though (if a colourful quote counts as news), is that the Chartered Institute for Personnel and Development thinks there is “not a hope in hell's chance” of these 2.5m jobs appearing.

(All of these predictions, of course, need to be taken with enough pinches of salt to give you seriously high blood pressure.)

Update: Anthony Painter has the right angle on this story, which is to contrast the current estimate of private-sector job creation with the rate seen before the credit crunch.

Over the eight years from 1999 to 2007, the private sector workforce grew by 1.52m, or 190,000 per year.

The current prediction is for 1.85m more private-sector jobs over five years – a rate of 370,000 per year. This does seem stunningly optimistic. Even if you include the rise in public-sector employment for 1999-2007, which one might argue ‘crowded out’ private-sector growth, that still only takes the total rate to 262,000 per year. (All these numbers are net job creation BTW.)

And when you factor in the plans for immigration to be much lower than in previous years, these forecasts look even more of a stretch. The government really is investing a lot of hope in the idea that lots of public-sector job losses will stimulate an even higher job creation rate in the private sector.

Tuesday, June 29, 2010

Bank capital, lending and the recovery

I am starting to worry about monetary policy.

The word coming out of the G20 summit and from the Bank of England is that banks are going to need to build up a lot more capital in their reserves so that they’ll be better able to weather another financial storm. This is sensible. But it means that they’ll be less willing and able to lend at decent rates – in effect, tightening monetary policy without the Bank of England raising its base rate at all – which will reduce consumer spending and business investment.

Sure, nobody is proposing that new capital requirements be rushed in, but given that we’ve got some hefty fiscal tightening every year as far as the eye can see, when is going to be a good time to squeeze the monetary side too?

According to the Institute of International Finance, the new rules would cut GDP across the USA, Europe and Japan by 3.1% by 2015. Admittedly, that number looks like it’s been pulled out of a complex series of hats, but the risk is there.

And what’s more, the Bank for International Settlements reckons that central banks should be raising their base rates sooner rather than later; the unprecedented near-zero levels were appropriate for the recession, but now there’s a risk of another asset-price bubble and “discouraging needed reductions in leverage, thereby adding to the distortions in the financial system and creating problems elsewhere”. We already have one MPC member who wants higher rates.

I hope this turns out to be unduly gloomy, because with the pound rising against a troubled eurozone, an export-led recovery’s less likely as well.

Clegg’s tax credit claims

I’ve transcribed part of the exchange between Nick Clegg and John Humphrys on the Today programme last Thursday. It raises interesting philosophical questions about whether a government deserves credit for those of its predecessor’s policies that it hasn’t undone, and whether it deserves credit for unspecified policies that it might introduce in the future.

Humphrys had just mentioned the Institute for Fiscal Studies findings that the measures in the Budget would have the greatest negative impact on the poor – whereas the Budget report itself had suggested quite the opposite, but by including measures previously introduced by Labour as well:

JH: It says, perfectly clearly, that it is going to hit the poor harder than it is going to hit the rich. You dismiss their claims entirely, do you?

NC: Well, to be fair to the IFS, look, I’ve actually read the report and it says, very very clearly, that they’re making that claim if you don’t assume that you also carry over and incorporate some of the changes from the previous government: the new 50% income tax rate, the tapering away of the personal allowances for very high earners and the pension system, and also, as they recognise in their report, by not making any assumptions that we will continue to try and instil fairness in everything we do in future budgets.

JH: Well I think you’ve rather turned on their head what they’ve actually said. What they said was that the reason the measures looked so fair, that enabled you to say that they were fair, was because you took into account precisely those measures that had already been announced by Labour: higher taxes on income, the clampdown on rich people’s pension regime and so on. If you take those out then your measures are even less fair.

NC: Well, I actually just simply disagree. If you look at –

JH: That’s what they say.

NC: Well they’re not. They’re saying, they’re using the word regressive if you exclude those other things. If you include them, if you –

JH: The overall impact of the budget’s measures was regressive. That’s what they say. I’m quoting.

NC: If you exclude other measures which we are including, and if you disregard what we’re going to do in future budgets. Can I just –

JH: No, no, sorry, but even that isn’t right, you see. What they actually say is if you include some of the other things you’ve done, it becomes even more regressive, because it hasn’t included some of the things you had. It hasn’t included housing and disability benefit cuts. It hasn’t even included the cuts in public services, which will be enormous.

NC: Nothing is included, of course, future changes which we will make, will show, as we have done in this budget, that we’re going to take very exceptional measures to ensure that fairness is instilled.

Well now.

All incoming governments inherit a set of policies that, overall, they’re not happy with; some they’ll change or abolish ASAP, others later on, and some they’ll be satisfied to leave in place. A first Budget is only ever going to be ‘a step in the right direction’, so in one sense Clegg is quite right to say that the coalition’s efforts are not complete. All the same, it’s ludicrous to argue that we should be giving them credit for the undefined things that they hope they’re going to be able to do in years to come (Sunder Katwala is playfully scathing on this point).

It’s quite reasonable to judge a new set of policies based on their specific effects. Of course they won’t take us straight to the promised land, but are they a step in the right direction or not? In this case, by Clegg-Cameron-Osborne’s declared standard of supporting the poor, they aren’t.

The same approach bears on whether we should include previously enacted policies in our evaluation of the new ones. A government doesn’t write onto an empty statue book: there’s already a large body of policy that the new ones are going to add to. So if we want to know how redistributive a tax and benefit system is, we include all current measures, not just the new ones. But again, if we want to know what’s changed, and whether things are going in the right direction, we look exclusively at the new ones.

So we might look at all policies together, or at the new ones in isolation, but what I can’t see a case for is looking at the new ones in combination with a limited set of others that have been legislated for but are yet to come into force (e.g. the NI rise), as well as some that have already come into force (e.g. the 50% income tax rate). Clegg is cherry-picking from someone else’s tree to sweeten his argument.

The new government looked at the system it inherited, saw that this was becoming more progressive (in the technical sense rather than the woolly ‘nice/caring’ sense), and decided to slow this down. They wanted to save/raise more money, and have done so in a way that steers us towards a system less progressive than the one Labour left on statute.

It’s possible that they genuinely wish to move in a pro-poor direction over the next five years, but their actions so far don’t support this. Are they pulling back a bit to get a good run-up? I don’t think policymaking works that way.

I’ll meet Clegg halfway: I won’t praise the government for not scrapping various pre-existing policies, but I won’t blame it for scrapping them. And I will take into account future policies… but not yet.

Monday, June 28, 2010


I totally agree with the government that we need to cut payouts to those who are unfit for work.

England’s coming home

On this black day, The Daily Mash speaks for the nation:

England are heading home from the World Cup today after state-of-the-art video technology showed the ball crossing their goal line many, many times.

The use of television has been a source of controversy in the sport, but experts insist it offers a fool-proof method for determining whether a team is good at football or whether it is simply a collection of absurdly over-compensated, second-rate commercial brands with ghastly, vulgar wives, locked in a sado-masochistic relationship with a cretinous media that merely reflects a society that has taken its natural intelligence, its sense of perspective and its values and violently drowned them all in a bucket of piss.

Meanwhile, central defender John Terry finally arrived back in England's 18-yard box last night only to find that everyone else had gone home. He eventually got out of the stadium after climbing over a fence.

Saturday, June 26, 2010

Tactical memo, FAO the Labour Party

Attacking the Lib Dems for their links to the Tories is the thing most likely to make them bind themselves closer together. If there are going to be splits, these have to grow from within.

Wednesday, June 23, 2010

IFS: Labour hit the rich, Tories and Lib Dems hit the poor

Forget the spin that yesterday’s Budget was “progressive”, with policies that make “the richest pay more than the poorest”. Actually, don’t forget it: denounce it as a filthy lie. The exact opposite is true.

It’s been well noted over the last day that George Osborne is guilty of subterfuge in publishing a distributional analysis that ignored policy changes applying after 2012-13, that included Labour’s NI increases, and that omitted some of the new policies in the Budget.

And now, thanks to the Institute for Fiscal Studies, we have a clearer picture. And it’s stunningly different. This chart shows the impact on different income groups, by 2014-15, of the tax and benefits changes Labour introduced since the financial crisis broke and also the effects of the policies announced yesterday:

Labour’s are textbook egalitarianism, hitting the richest hardest and the poorest hardly at all. Yesterday’s Tory/Lib Dem policies are the exact opposite.

The IFS adds that it hasn’t been able to take into account “cuts to housing benefit, DLA [disability living allowance] and reforms to in-year changes to tax credit awards”. But: “These are all likely to hit the poorest half more than the richest half.”

Funny how it doesn’t get called ‘class war’ when you attack the poorest.

Cuts and cats

Chris writes on the way politicians will frame a debate so that they turn their own political views into background assumptions. It made me wonder how widely the technique could be used...

Mr Speaker, I didn’t come into politics to drown these kittens. And I do it with a heavy heart. But this is the unavoidable felicide. While the party opposite protests, they forget to mention that the kittens were conceived and born as a result of their mismanagement of the neighbourhood tom, and they have singularly failed to explain how they would kill the kittens instead. Drowning them is tough, but fair. We will all share in the sadness at their deaths. We’re all in this together. Although not in the actual sack, of course.

VAT traps every coin

Via George Eaton, a reminder that it’s not just the Lib Dems who’ve been utterly shameless on the VAT rise:

I’m reminded of an anagram I came up with many years ago, when I was a nerdy teenager and the Tories had just extended VAT to domestic heating, a couple of years after raising the rate from 15% to 17.5%:


(Those of you who are confident that Alistair Darling was quietly planning a VAT rise as well can now claim for the hypocrisy triple.)

Tuesday, June 22, 2010

The Budget: consequences

I’ve not had time to pay much attention to the Budget, but here’s a quick table summarising (without comment) some of the key economic changes to result from the new policies. Comparisons are between the Office for Budget Responsibility’s projections made before the Budget, based on Labour’s plans, and those made in light of it now.

The big caveat is that there are margins of error around all of these numbers, particularly those further in the future.

Clegg was right about VAT

He tried to warn us...

The Times paywall

I’m not one of those people who’s complaining about the Times website’s imminent paywall; I don’t like it, because I like getting stuff for free, but I don’t think it’s in any way illegitimate for them to do this. I don’t intend to be paying, so I’ll just have miss out on Danny Finkelstein, David Aaronovitch and Anatole Kaletsky’s columns (the three best things about the paper). We do have a copy in the office, so I may just see if I can grab that instead.

But today I discover that the Times’s network of blogs will also be moving behind the paywall. Again, fair enough, but I think this in particular is a mistake (assuming that the paywall itself doesn’t prove a mistake). The blogs, particularly their main Comment Central, provide a nice taster of Times writing and offer highlights on what’s in the paper/website ‘proper’. It’s a valuable marketing tool. But not if they make people pay for it.

Monday, June 21, 2010

The domino theory of spending cuts

Sunny may have a point: complaining about damage to public services and unfair harm to the poor will only go so far as a critique of the Budget’s spending cuts. He says that “instead of just defending the public sector, the arguments should be reframed to talk about [the] whole economy in general”. Here’s a stab at a more accessible narrative that does that:

The Tories seem to think that the public and private sectors are each other’s enemies, and that the state’s existence just gets in the way of the market. But in fact, the whole of the economy is deeply interdependent, and public-sector cuts will echo throughout the private sector.

The employees who get paid by the state don’t just bury this money in a hole. They spend it, like the rest of us, mostly in the private sector. Doctors buy furniture. Teachers buy DVDs. Police officers buy broadband. Even bureaucrats buy groceries.

Cuts that hit them will spread through the economy. Like dominoes, if the government knocks some people down then the businesses that rely on their custom will be hit too. If you work for a firm that sells something to these millions of ordinary people, then there’ll be less demand for your work.

The recession officially ended, but the economy is still weak. And with our biggest trading partners in Europe getting into new difficulties, it’s clear that now is not a good time for our government to slam on the brakes.

We do need to reduce government borrowing over the next few years, but we’re not facing the desperate ‘emergency’ that the Tories talk about. The markets have been a lot calmer than the rhetoric, and in fact borrowing has already been coming down a bit as growth starts to return. A rush to make big cuts now will prove a false economy if these tip us back into recession. Growth is a precondition to getting the deficit down, not an alternative.

(OK, it’s a tad weak on nuance, but you can read someone like Martin Wolf if you want an more sophisticated explanation of how ‘crowding out’ is far less of a risk under conditions of low private-sector investment and high unemployment.)

Saturday, June 19, 2010

Greek myths and Obama’s double-dip warning

The latest exhibits in the case for why the UK public debt ‘crisis’ is over-hyped are two graphs from the Federal Reserve Bank of Atlanta (via Bill McBride).

On the left, ten-year government bond spreads relative to Germany – this is a pretty common yardstick for the interest paid on government borrowing. On the right, five-year credit default swap spreads – roughly, the cost that buyers of government bonds pay to insure themselves against the risk of default:

Both tell the same story. The brown line going crazy is Greece; the red line calmly plodding along the bottom is the UK; wobbling in between are Italy, Spain, Ireland and Portugal. The lower the better, so the markets view UK public debt as being pretty safe.

The tumult centred on Greece has been hurting other parts of the eurozone, but not us. Why the Lib Dems have chosen to use the Greek crisis as an excuse to change their minds in favour of bigger and faster spending cuts is a question I can’t answer. (The charts also appear to show total indifference to the arrival of our new, deficit-hostile, market-friendly government.)

In fact, the main risk that the European trouble poses to the UK is that if their economies suffer, it’ll become harder for us to shift our exports, thus hitting our own economy again.

On that wider subject, and on the subject of what David Cameron calls the “international consensus that dealing with our budget deficits is vitally important”, Barack Obama yesterday wrote to his fellow G20 heads of government:

Our highest priority [at next weekend’s summit] in Toronto must be to safeguard and strengthen the recovery. We worked exceptionally hard to restore growth; we cannot let it falter or lose strength now. This means that we should reaffirm our unity of purpose to provide the policy support necessary to keep economic growth strong. … In fact, should confidence in the strength of our recoveries diminish, we should be prepared to respond again as quickly and as forcefully as needed to avert a slowdown in economic activity.

We need to commit to fiscal adjustments that stabilize debt-to-GDP ratios at appropriate levels over the medium term. … We must be flexible in adjusting the pace of consolidation and learn from the consequential mistakes of the past when stimulus was too quickly withdrawn and resulted in renewed economic hardships and recession.

Yes. We can.

Friday, June 18, 2010

The deficit is already coming down

Alistair Darling quite despicably hid from us the real truth about the public finances: government borrowing peaked in February and has been falling, albeit slowly, since then.

This graph shows the rolling 12-month total for public sector net borrowing as a percentage of GDP (using a combination of NIESR monthly GDP estimates and official ONS figures on quarterly GDP and monthly borrowing – a bit more explanation here):

If you’re sceptical about my blend of two different sets of GDP figures, that’s fine: a clearer fact is that the simple cash total for 12-month borrowing peaked in January, at £146.6bn, and has fallen every month since then, to £141.9bn in May. And during this time, GDP has been growing, so the ratio will have been falling too.

It’s still a very big number, and it needs to come down more quickly.* But as far as the ‘borrowing crisis’ goes, it looks as though the worst has passed without the bond market going nuts and without any maelstrom of extra spending cuts. An ‘Emergency’ Budget next week? No: it’s a choice.

* Update: it's just occurred to me to wonder exactly how quickly the deficit is falling right now. I make it a drop of 0.14% of GDP per month since the peak. So over five years, that rate would bring the deficit down to 1.7% of GDP and eliminate it completely in six. Pretty good.

I. Told. You. So.

Is there a name for the special feeling a blogger gets when a national newspaper publishes something that confirms what the blogger said several days beforehand? It’s a sort of doubled-edged feeling, a mixture of smugness at being proved right and resentment that far more people will notice the newspaper article than the blog post, and it blends lofty disdain for the mainstream media with an eagerness for their validation.

Anyway, I said that Tory plans to cut immigration would lead to lower growth and tax receipts than the Office of Budget Responsibility was projecting. And now the FT agrees:

David Cameron’s proposed cap on immigration will stunt economic growth and cost families around £300 a year in higher taxes or lower public spending, according to the government’s own forecasting models.
The prime minister’s pledge to bring net immigration down to the level of the 1990s will hit output by as much as 1 per cent and cost the exchequer £9bn a year in foregone tax revenues by the end of the Parliament.

To ensure the independence of the OBR is not challenged, it will have to cut its assessment of the potential growth rate to reflect slower growth in the population

Basically, I’m brilliant. And very reasonably priced.

Thursday, June 17, 2010


One of the advantages of hanging onto my old WHSmith pocket diaries is that I can do things like this:

Ten years ago from exactly as I post this, I was dancing with my friends in one of the fountains in Trafalgar Square.

England had just beaten Germany 1-0 – our first competitive win over them since The Year That Shall Not Be Named* – and we were very, very happy.

Objectively, the game wasn’t all that good, but a win is a win. Shearer scored not long into the second half, and then an increasingly tense German side repeatedly just failed to equalise. This prompted us to set the pub off on a chant (to the tune of ‘You’re not singing any more’) of ‘Now you know how it feels’.

Then, after Collina, the maestro of all refs, blew the final whistle, we sauntered/staggered from the White Lion in Covent Garden down to Trafalgar Square, where a fantastically good-natured buzz coaxed us into the fountain.

Strange looks from people in the Tube on the way home. Sod it. Great day.

* I’m not counting the three-nation Azteca 2000 Tournament in Mexico in 1985. Really, come on.

Wednesday, June 16, 2010

Borrowing could destroy our way of life within 45 minutes

I was very taken with this analogy by Steve Richards:

The way the Government is attempting to manipulate voters into accepting savage spending cuts reminds me of the build-up to the war in Iraq. There was then, and is now, an attempt to create a sense of… inevitability.

And after a while I remembered that I’ve used a similar one myself, three months ago:

The quality of public services should be treated… not a sad but inevitable piece of collateral damage in the War on Debt. Intelligence reports suggesting that the ratings agencies possess weapons of mass destruction are deeply dodgy. And so is the argument that we have to inflict the mass destruction on ourselves to appease them.

Now, Richards has obviously come up with this independently, and he’s done more with it than I did. And, now I think about it a bit more, there are quite a few parallels between the anti-war narrative and the current situation:

  • Something that everyone agrees is a problem but not on how urgently or how forcefully it needs dealing with.
  • A government whose motives stretch more broadly than the official ones.
  • A favoured approach that could end up harming us rather than making us more secure.
  • Official reports showing that some progress is being made and is indeed accelerating, but provoking angry impatience from the government.
  • Monstrous yet dubious warnings about the dangers of delay.
  • A coalition, the smaller partner of which is clearly less happy about the way things are going.

In this narrative, someone like Fraser Nelson (via Bob and Luke and Will) plays the role of the hawkish ideologue who’s not really concerned about UN resolutions, and even fears a peaceful, diplomatic solution, because he just wants a righteous war:

Sir Alan [Budd] said yesterday that Alistair Darling was being too pessimistic: on almost every measure, the public finances look like being in better shape. Unemployment, he said, will be almost 200,000 lower than had been feared. Economic growth will not be quite as strong but the tax revenues – which are far more important – will come in much more strongly than Mr Darling gloomily forecast. Something is going badly right.
In many areas that were not included in Sir Alan's report, the British economy is doing remarkably well. Manufacturing is bouncing back – helped, of course, by the weak pound. The Bank of England is no longer buying British government debt, but demand remains strong – keeping bond yields low. Banks are lending, and money supply is increasing. Just as the economy sprang a volley of nasty surprises as we entered the crash, it's yielding pleasant surprises now.
So when Mr Osborne declared yesterday that "it's worse than we thought" he had precious little to point to. The so-called structural deficit (the amount of overspend that will not be eliminated by an economic recovery) is a little bigger than had been estimated. But crucially, Mr Osborne's election goal – to abolish "the bulk" of the structural deficit by 2014 – would have been easily achieved had Mr Darling remained in place. No more taxes need to be raised, or budgets cut, to honour this Tory manifesto pledge.

But Mr Osborne will have to change tactics. He cannot credibly play the worse-than-we-thought card if Sir Alan's team – on whom he has bestowed Delphic authority – disagrees. Instead, he will have to focus on something from which he shied away in opposition: the moral case for cuts; to argue, on Budget day, that even if Britain could keep on borrowing it would be reckless and wrong to do so.

No analogy is perfect, and it’d be easy to take this one too seriously. But there’s a more general reason that there’s some ring of truth in it; it’s the same as the reason I was never particularly surprised about the revelations of dodgy government manoeuvres pre-war. I think that almost any major contentious policy, with some definite downsides and the risk of others, gets justified to the public with some level of dishonesty. It’s deplorable, but hardly exceptional.

Anyway, cue George Osborne’s Mansion House speech tonight.

Superficial hustings review

I’m a good way off deciding who I want for Labour leader, so all I’m going to say about yesterday’s Newsnight hustings is a few tiny remarks on how they came across (IMHO).

David Miliband is making an effort to seem prime ministerial, and his model for that is Tony Blair. I got that same sense of ‘I see your point of view but the truth we have to face is such-and-such’ from him. He pulls it off competently, but is it what we want?

Ed Miliband is looking and sounding even younger. I would never have guessed from that performance that he was 40.

Andy Burnham looked like a puppet wearing eyeliner.

Diane Abbott and Ed Balls are, in their very different ways, insufferably smug.

As for their actual political positions, the format – five of them in little over half an hour – didn’t do much to draw these out. I remain unsure and uninspired.

Tuesday, June 15, 2010

Tory immigration policy undermines OBR forecasts

Another item of interest from the small print of the OBR’s report:

we assume net migration of 140,000 a year

Which stands in contrast to the government’s immigration policy:

we will reduce net migration back to the levels of the 1990s – tens of thousands not hundreds of thousands

If the OBR takes this into account, it will mean a smaller workforce, less GDP, lower tax receipts and higher borrowing. Probably not a big difference, but worth noting.

OBR: openly uncertain, but no more accurate than the Treasury

The Office for Budget Responsibility has spoken! And, if you duck past the headlines about growth predictions being a bit worse and borrowing predictions being a bit better, one or two interesting things emerge.

The first is that the OBR is wholeheartedly joining in with the Bank of England’s campaign to put uncertainty at the heart of economic policy making. The Bank has popularised ‘fan charts’ showing a probability distribution of outcomes. The OBR is doing the same:

I love these charts. I am, if you can resist the urge to hunt me down and kill me for making such a laboured pun that’s both crushingly obvious and startling feeble, a fan. They grab you – the public, the media, the politicians – by the lapels, shake you and yell “It’s not that simple!” Hopefully this will make us all grow up a bit and stop demanding certainty and/or pretending to it. (Well, OK, I’m not holding my breath…)

And while both the central projections in these charts are lower than the figures in Alistair Darling’s Budget in March, those earlier forecasts are still well within the bounds of what’s likely. For instance, the 3.25% growth figure for 2012 on which Darling’s fiscal plans were based is higher than the OBR’s central 2.8%, but it’s still lower than a bit over a third of the range of the fan chart.

Another nice little nugget for the anoraks comes in Appendix A of the report, explaining how the OBR worked out the probability distribution of the fan charts:

We could take one of two possible approaches to quantifying uncertainty at this stage. The first is to choose parameters that reflect our subjective view of the distribution of risks. This has the advantage of flexibility but it may be difficult to explain how the parameters have been chosen. The second, which is the approach we have taken, uses the distribution of past forecast errors made by the Treasury to quantify the probability distribution around our forecasts.

In other words, the OBR is operating on the assumption that it will be no more or less accurate in its predictions than previous, ‘politically fiddled’, Treasury forecasts. That’s one in the eye for George Osborne.

Monday, June 14, 2010

Obama to invade UK (and then some other unrelated country two years later)

I was going to blog about the deficit numbers, but then this rather bigger story caught my eye:

US President Barack Obama has said the oil disaster in the Gulf of Mexico will have the same impact on the US psyche as 9/11.

I think we’re in trouble.

Thursday, June 10, 2010

Poor sustenance

There’s a talk at the Cheltenham Science Festival today titled ‘London 2012: The Most Sustainable Games Ever?’

No. The 2012 Olympics will last from 27 July to 12 August, and then stop. They will not be “sustainable”.

(The blurb for the event also asks: “Construction of the Olympic site is well underway, but is the sustainability agenda on course for a gold medal?” Ah, it’s that kind of subtle blend of inhuman corporate jargon and leaden sporting metaphor that makes me proud to be a speaker of this fine language of ours.)

Wednesday, June 09, 2010

The bond market is barking

I was going to start by saying that the bond market has been the dog that – so far – hasn’t barked, but of course it has been. Whether in the form of fund managers warning that UK government debt is riskier than juggling with chainsaws, or credit-rating agencies trying to persuade us that they’re still worth listening to despite their minor mistakes over securitised sub-prime mortgages, or a Chancellor and PM who want to create a sense of emergency, there have been plenty of yaps and growls warning that the cost of public borrowing is about to shoot up.

But the bark has been worse than the bite.

This handy chart in today’s FT shows that UK government borrowing costs have changed very little relative to Germany and the USA since before the credit crunch – and in absolute terms, they’re down. This is despite our surging deficit, the end of quantitative easing, a period of political uncertainty, the resignation of whatever that guy’s name was, and the recent turmoil in Europe that Nick Clegg claims has converted him into a high-speed cutter.

Past performance is not necessarily a guide to future performance, but one does suspect that there’s just a teensy bit of scaremongering going on here.

Tom for leader!

I would like to announce my last-minute candidacy for the leadership of the Labour Party.

My name is neither Ed nor Miliband, I have never been a government adviser, I have never shared a sofa with Andrew Neil, and I have never been John McDonnell. I have no record of serving in an unpopular government nor of being a disloyal backbencher.

Our great party needs radical change, and what could be more radical than picking as our leader a total unknown with no experience of electoral politics and quite frankly a deep dislike of both politicians and voters?

If elected, I promise to slap my forehead, ask you what the hell you were thinking, and resign.

Furthermore, when the Conservatives held a leadership contest in 1995, I telephoned their Central Office on the day nominations closed and tried to nominate myself (true story; I was 18 and, if memory serves, still drunk from the night before). They refused me, and went on to catastrophic defeat.

We cannot afford to make the same mistake. Vote for me!

1pm update: Bah. I have been thwarted by the ridiculous rule - clearly designed to keep me out - that requires candidates to have more than zero nominations for MPs.

The myth of the spending splurge

A very carefully crafted statement from David Cameron:

We had a significant deficit problem way before the recession. In fact, much of the deficit is structural. A problem built up before the recession, caused by government spending and planning to spend more than we could afford. It had nothing to do with the recession. And so growth will not sort it out.

The first two sentences are each technically true, but the link that he then draws between them is sleight of hand.

Distinguishing structural from cyclical factors in the deficit is, shall we say, a fine art, requiring estimates of how the economy is doing relative to its potential, and these are always debatable. But here are the numbers the March Budget gave for government borrowing, both actual and adjusted for the economic cycle:

(The 2009/10 estimate is already out of date, as the deficit turned out lower than expected.)

What this shows is that, yes, Brown was running a pretty much entirely structural deficit during the good years, of 2-3% of GDP. And yes, most of the deficit now is structural. But these two facts don’t really connect, because there’s been a huge rise in the structural deficit - not as a result of irresponsible spending but because the recession caused structural damage to the economy as well as reducing output across the board. (In particular, the housing and finance sectors took a big hit.) This caused a sharp drop in tax revenues, and was accompanied by a mild increase in public spending.

About 80% of the deficit has appeared since the start of the recession.

The fact that the structure of the economy (and of the taxes it produces) changes all the time, particularly during a sharp recession, illustrates why untangling the structural and cyclical aspects of the deficit is a tricky theoretical exercise. No doubt the recovery – assuming that the recent European tumult and the looming spending cuts don’t derail it – will see more structural changes, as some sectors grow faster than others.

Tuesday, June 08, 2010

Fewer MPs, more constituents

Jack Straw makes a decent case against cutting the number of MPs, covering a number of points that I’ve made before (although his opposition to this has as much partisan interest as the Tory support for it does).

Today I just want to illustrate one consequence of the proposal to shrink the Commons. If the number of MPs is cut by 10%, as the Tory manifesto proposed (the Lib Dems wanted a 25% cut), and if the electorate grows by half a million over this parliament, as has been the average recent trend, then the number of voters per constituency will shoot up:

When you hear someone in government saying we should have a smaller Commons, ask them why they want their own constituents each to be able to have less access to them.

Monday, June 07, 2010

On women, and other kinds of people

I’m sceptical about Harriet Harman’s desire for the shadow cabinet to have a 50% female quota – more so than I am about quotas aiming at 50% female representation in parliament.

In the latter case, there’s a 50% female population (in fact a bit more) to draw on, so there should be no problem finding good women. But for the shadow cabinet, the pool is the Parliamentary Labour Party, which is 31% female. A 50-50 shadow cabinet would therefore have to use disproportionately many of these, leaving few on the backbenches to speak out freely and to sit on select committees –important roles in their own right.

But there is a case for pushing against this sex bias, and in doing so from the top. So maybe, if we really have to have a quota, it could be for a figure somewhere between the PLP level and the population level – 40%?

(NB Evidence suggests that voters are no less satisfied with female MPs selected through all-women shortlists than those selected against men.)

However, if we’re concerned about a disproportionately male politics, what about other under-represented demographics? If we start thinking about ethnicity, age, class, disability and so on, we could find ourselves with a horrifyingly complex quota system.

Me, I’m far more concerned about the personal qualities and political views of politicians. Could we have quotas for diligence, courage, imagination, humility, honesty and intelligence?

Oh, and if we feel like scoring a lazy point at the expense of a certain pair of parties, we could have a rule that at least 50% of the shadow cabinet have to be non-millionaires.

The chopping forecast

Shorter David Cameron on public-sector cuts:

I will do such things – what they are, yet I know not: but they shall be the terrors of the earth.

And I like Don’s shorter Nick Clegg.

It would be a huge mistake for the "centre-left community" to oppose our plans to cut jobs for young unemployed people, cancel the most successful savings scheme ever for low income poor families, cut the number of university places, take money away from schools, cut training for childcare workers, stop families on low incomes getting laptops, cut programmes which help children learn to read, cancel summer playschemes, close playgrounds, cut youth offending teams, and take away support which helps parents get jobs.

We have to do all these things, because otherwise it will be our children and grandchildren who suffer.

Saturday, June 05, 2010

'Win One Lose One' by Mitch Benn

Mitch Benn has come up with an England World Cup anthem for mildly patriotic realists (video by Kenny Ellaway):

Thursday, June 03, 2010


I’ve been wondering what to call the new government. I think that Steve Bell has the answer:

Tuesday, June 01, 2010

Bold, principled, progressive, green, tough, caring, credible, new, reforming, reconnected, internationalist, mainstream, radical, doubleplusgood

The invention of the internet has today been made worthwhile by Hopi’s use of it to publish this sentence:

Leading isn’t compiling a list of adjectives that describe a popular party.