Friday, October 11, 2013

Help to Sell

Like George Osborne, I’m no economist. But I do know that a transaction has two sides: for every buyer there is a seller. And if I decided to sell my flat, I would want lots of ready, willing and able potential buyers to choose from, because higher demand increases the price.

The government’s ‘Help to Buy’ scheme, offering taxpayer-backed guarantees on 95% mortgages for people who are struggling to raise a deposit, will give me what I want. It will put people who might like my flat into serious contention to buy it. I will have more would-be buyers and so I’ll be able to get a higher price. I can pick the one who makes the best offer, and disappoint the rest.

The focus of the policy is on buyers. They are the ones who receive the help directly and they’re the ones who will feel that they’ve personally benefited from it. But the help they’re getting to reach higher will also help me to start from higher. So the people who really benefit are those of us already on the property ladder.

This isn’t really Help to Buy. It’s Help to Sell. And while it might be good for me, I’m not so sure it’ll be good for the economy.

As Osborne has said: “Hopefully we will get a little housing boom and everyone will be happy as property values go up.” Well, at least he has learnt from Gordon Brown’s mistake and isn’t promising to end boom and bust.

Thursday, September 19, 2013

A polling analogy: 2001-05 and 2010-15

Robert Ford, Will Jennings and Mark Pickup discuss the habit of drawing analogies between the next election and previous ones. They mention 1992 and 1983 as options but they don’t seem convinced. And quite right, too: no analogy is perfect and all sorts of things could still change between now and 2015.

But I’d suggest a partial analogy between the current parliament and 2001–05, although with roles reversed.

  • At first, the public gave the government the benefit of the doubt but without a huge amount of enthusiasm. (In 2001 this was because Blair had already had his honeymoon; in 2010 Cameron had a much smaller and shorter honeymoon.)
  • Satisfaction with the government gradually fell, although this didn’t lead to a significant swing between Labour and Conservative.
  • One big event caused a big swing between Labour and Lib Dem. (After 2001, this was the Iraq war; in 2010, it was the coalition deal. And of course the direction of this swing has reversed.)

  • In 2001, Labour had a huge majority; they could afford to lose ground and still win the next election. Now, the Conservatives don’t have a majority and need to gain ground. In fact, they need to gain ground relative to Labour – which the swing from the Lib Dems makes even harder.
  • UKIP are also making life much harder for the Conservatives than Respect did for Labour in 2005. Yes, UKIP have taken support from all other parties and yes, some of that support will return home. But the biggest share of UKIP support has come from the Conservatives and some of that will stay UKIP

So while the dynamics of the two parliaments may have quite a bit in common, the end result – the government re-elected – is a lot less likely this time.

Thursday, August 29, 2013

The emptiness and the irrelevance of the legal case for bombing Syria

The UK government’s legal position on Syria says:
If action in the Security Council is blocked, the UK would still be permitted under international law to take exceptional measures in order to alleviate the scale of the overwhelming humanitarian catastrophe in Syria by deterring and disrupting the further use of chemical weapons by the Syrian regime. Such a legal basis is available, under the doctrine of humanitarian intervention, provided three conditions are met: 
(i) there is convincing evidence, generally accepted by the international community as a whole, of extreme humanitarian distress on a large scale, requiring immediate and urgent relief;
(ii) it must be objectively clear that there is no practicable alternative to the use of force if lives are to be saved; and 
(iii) the proposed use of force must be necessary and proportionate to the aim of relief of humanitarian need and must be strictly limited in time and scope to this aim (i.e. the minimum necessary to achieve that end and for no other purpose).
This is political waffle. One dead giveaway it where says evidence has to be accepted by “the international community as a whole”. No such entity exists. Then the talk about what is “objectively clear” and what is “necessary and proportionate” – who decides? It doesn't say. Not even the non-existent international community.

But then, a fair amount of international law is political waffle, so maybe that’s OK.

The “doctrine of humanitarian intervention” is not a legal document; it’s a family of related political opinions. Roughly, the idea is that it can be justified to use force against another government when that government is inflicting atrocities on tis own people. This upsets the sanctity of national sovereignty, but many people – me included – think this is sometimes justified. National sovereignty can be a bulwark against colonisers, but it can also be a cage for the subjects of tyrants.

The key thing is that this justification is moral or political. It is not legal. The UN charter continues to insist that force may be used only in self-defence or when approved by the Security Council acting under chapter VII of the charter, which covers the use of force.
There are, though, official documents that support the principle. Most notably, Security Council resolution 1674, in 2006, which:
Reaffirms the provisions of paragraphs 138 and 139 of the 2005 World Summit Outcome Document regarding the responsibility to protect populations from genocide, war crimes, ethnic cleansing and crimes against humanity
And the key part of 2005 World Summit Outcome Document says:

The international community, through the United Nations, also has the responsibility to use appropriate diplomatic, humanitarian and other peaceful means, in accordance with Chapters VI and VIII of the Charter, to help to protect populations from genocide, war crimes, ethnic cleansing and crimes against humanity. In this context, we are prepared to take collective action, in a timely and decisive manner, through the Security Council, in accordance with the Charter, including Chapter VII, on a case-by-case basis and in cooperation with relevant regional organizations as appropriate, should peaceful means be inadequate and national authorities are manifestly failing to protect their populations from genocide, war crimes, ethnic cleansing and crimes against humanity.
This is all well and good, but it still puts the Security Council firmly in charge. And it doesn't commit the Security Council to do anything in any particular case if it doesn't want to. It’s just a statement of potential willingness.

You might say that if the Security Council fails to live up to the aims it has set itself, then that makes it legitimate for others to act. But legitimate is not the same thing as legal. The word gestures towards legality, but also towards morality and popularity.

In practice, what all this amounts to is that world leaders want to do what they want to do, and they want to do it while claiming they’re acting within international law. They want to claim that because it will help to give the impression that what theyre doing is the right thing. They know that no body will ever rule their actions illegal, so they can say more or less what they want on that front and can dismiss any disagreement as politically motivated or subjective opinion.

None of this is to judge whether airstrikes against Syria would be on balance good or bad. Nor is it to endorse the Security Council as a fine collection of wise, well-intentioned, disinterested adjudicators.

All I’m saying is that this “legal” case is purest political humbug.
Today’s parliamentary debate has shown a lot of consensus on the need to pay lip service to legality.
First, David Cameron: 

The very best route to follow is to have a chapter VII resolution, take it to the UN Security Council, have it passed and then think about taking action. … However, it cannot be the case that that is the only way to have a legal basis for action, and we should consider for a moment what the consequences would be if that were the case. We could have a situation where a country’s Government were literally annihilating half the people in that country, but because of one veto on the Security Council we would be hampered from taking any action. I cannot think of any Member from any party who would want to sign up to that. That is why it is important that we have the doctrine of humanitarian intervention, which is set out in the Attorney-General’s excellent legal advice to the House.
I agree with the spirit of this, but he really is skating on the very edge of pretending to care about legality here. ‘That would be awful and we’d all hate it’ is not a legal principle.
Then, Ed Miliband. Despite Labour’s disagreement with the government, on this point they are as one:

…there will be those who argue that in the event of Russia and China vetoing a Security Council resolution, any military action would necessarily not be legitimate. I understand that view but I do not agree with it. I believe that if a proper case is made, there is scope in international law—our fourth condition—for action to be taken even without a chapter VII Security Council resolution. Kosovo in 1999 is the precedent cited in the Prime Minister’s speech and in the Attorney-General’s legal advice; but the Prime Minister did not go into much detail on that advice.
 Perhaps because there was not much detail to go into.
Nick Clegg, of course, holds the government line, but what really struck me on the Lib Dem side was Saint Menzies of Campbell, who made his name denouncing the Iraq war as illegal. Today he said:

The effort to achieve a resolution under chapter VII is a vital component of the doctrine of the responsibility to protect, because if no such resolution is achieved—here, I agree with the Attorney-General—we turn to what was once called humanitarian intervention and now is called responsibility to protect. It is a fundamental of that doctrine that every possible political and diplomatic alternative will have been explored and found not to be capable.
 They all agree: Security Council resolutions are optional, and anything they do is legal because they’re good people.

Wednesday, August 07, 2013

The paradox of forward guidance

By saying that interest rates won’t rise until unemployment goes below 7%, Mark Carney hopes to reassure us that rates will stay low for a long time. And, so reassured, the theory is that we’ll borrow more to spend more. This will boost the economy and create jobs, meaning that interest rates will rise sooner.

Thursday, May 16, 2013

The rise of UKIP

The recent rise in UKIP support is bigger and longer-lasting than anything in the party’s history. Here’s a long-term view:

(I’ve used ICM and Ipsos MORI because they both did well at predicting the 2010 election result and they both have a series of monthly polls, with UKIP numbers available, going back this far. It’s also worth bearing in mind that they tend to show lower UKIP scores than most other pollsters.)

Previously, UKIP has spent its life plodding along to very little effect until a European Parliament election comes along (2004 and 2009) and gives it the publicity it needs to make headway. It gets a modest but sharp boost, about half of which then vanishes almost immediately.

That’s not what’s happening now.

UKIP’s vote has been rising pretty much consistently for over a year. Whether you look at its monthly poll rating or the six-month average, which smoothes away blips, it has been above its 2009 peak for over half a year and is now at more than double that peak. And this is without the benefit of a Euro-election. Next year’s will help the party keep its momentum up.

Far more people than ever before are taking UKIP seriously, and they have been doing so for longer than ever before. The longer the idea of voting UKIP spends in their heads, the likelier it is to settle.

But I suspect UKIP is pretty near its limit now. I’d be surprised if it managed more than 10% at the 2015 general election, and even more surprised if it won any seats. That said, it could still make a difference by changing the balance between the bigger parties.

Why is UKIP doing so well?

It’s not that people are suddenly so much angrier about Europe and immigration. Rather, a generally culturally conservative group of people, who initially gave the coalition the benefit of the doubt (and gave the Conservatives the benefit of the doubt in opposition), are becoming more and more disillusioned. Look at the chart and you can see that the dam started to break after last spring’s ‘omnishambles’ Budget.

The Conservatives and Lib Dems have bound each other in to a mesh of governmental disappointments and half-hearted compromises, and Labour remains deeply unimpressive and tainted by its own time in power. These cultural conservatives increasingly think the mainstream, ‘modern’ political class has nothing to offer them.

As Kenan Malik argues, people are becoming more likely to vote as a personal statement of belief or outlook rather than as a way of choosing a government. This is borne out by the recent rise in people voting for no-hoper minor parties:

True, when push comes to shove, some of the UKIP’s current supporters will return to the bigger parties – but many won’t. In a large poll last November by Lord Ashcroft, only about half of people considering voting UKIP said that letting their most disliked of the bigger parties win would be a factor in their decision.

The largest part of UKIP’s new support comes from the Conservatives. From the details of the latest ICM and MORI polls, and the daily YouGov polls from the last week, UKIP is currently taking between a fifth and a quarter of the Conservatives’ 2010 vote and about a tenth of Labour’s. The overall effect of that is to increase Labour’s lead over the Conservatives by 4 to 6 percentage points.

If half of UKIP’s recently gained support goes back where it came from by 2015, that would still leave Labour a 2-to-3-point relative boost. That could swing maybe 20 seats.

Friday, April 19, 2013

Evidence-basted policy

A prominent economic study, supposedly showing that growth slows down once national debt gets above a certain level, has turned out to be based on a few simple errors.

Carmen Reinhart and Ken Rogoff’s research was quoted approvingly by supporters of austerity around the world, including George Osborne in a major speech in early 2010. Osborne has consistently argued that the government needs to reduce its borrowing and debt or risk all kinds of disaster, and this research gave him a handy few paragraphs of material.

But he won’t now reconsider.

Politicians like us to think – and they probably like to think themselves – that they go for evidence-based policy. This makes them look like wise, careful, well-informed pragmatists.

But, too often, they don’t go for evidence-based policy. What they go for is evidence-basted policy.

Here’s how to do it:

  1. Choose your policy.
  2. Scour the publications of friendly think-tanks and academics to find evidence that seems to support your policy.
  3. If you also find evidence against your policy, cut this off and throw it away.
  4. Marinate your policy in the evidence that most complements its taste, and cook as needed, sealing in that delicious evidential flavour.
  5. When your policy is ready to serve, it will be all the more appetising.

All the austerity camp have lost this week is one ingredient for their marinade. But this hardly matters to them: that wasn’t the reason they chose this course. They’ll keep serving it, even if it now tastes a little bitterer. A change of evidence doesn’t mean a change of course.

Sunday, April 07, 2013

UK and international welfare spending

Using OECD data from Declan Gaffney (a great blog post – do read it), I’ve made the two charts below. They look at the amount of money different countries’ governments spend on benefits, excluding pensions and benefits in kind.

The first shows that benefit spending in the UK has fallen as a share of GDP, not risen. Of the 18 countries Declan compares, the UK spending fall was the fourth-largest from 1980 to just before the financial crash, and the fifth-largest from 1980 to 2009.


The second chart shows in more detail how spending has gone up and down. To avoid a mass of criss-crossing lines, I’ve included just six countries. This also shows that the UK welfare state – not counting pensions – is not particularly expensive by international standards.

Wednesday, March 20, 2013

Osborne unveils Plan D

Plus c’est la même chose, plus ça change…

The more George Osborne insists on sticking to his policy, the worse the results become.

He’s like a driver who refuses to reset his faulty satnav long after it becomes clear that the geography is nothing like what he’d expected. He’s still turning right in 200 metres, but the turn takes him into a ditch instead of the hoped-for motorway.

In 2010, we planned to borrow an extra £471 billion by 2015/16. Today I can announce that we will hit this target two years early.

He didn’t say that, of course. But it’s true.

So imagine what he would say about a Labour Chancellor who had presided over this:

At some point, the government has to take responsibility. Three years is past that point.

(Note on data: The public finance figures are becoming harder to unravel. The ones I’ve used above exclude the effects of various special factors such as the asset price facility and financial transactions. The result of this exclusion is to raise the borrowing and lower the debt in the most recent figures. See tables 4.36 and 4.37 of the OBR report.) 

Monday, March 18, 2013

The press regulation deal is both more and less than it seems

I wonder whether our political leaders know what they are doing.

Their agreement includes a draft Royal Charter establishing the new press regulation system. The Charter states that, once passed, it can only be altered by a two-thirds majority in both the Commons and the Lords.

This provision is being given legal force in an amendment to the Enterprise and Regulatory Reform Bill:

Where a body is established by Royal Charter after 1 March 2013 with functions relating to the carrying on of an industry, no recommendation may be made to Her Majesty in Council to amend the body’s Charter or dissolve the body unless any requirements included in the Charter on the date it is granted for Parliament to approve the amendment or dissolution have been met.

This amendment is deliberately general. As David Cameron, fearful of charges that he had caved in, explained:
This is not by any stretch of the imagination statutory regulation of the press. Nor is it even statutory recognition of either the independent press regulator or indeed the Royal Charter. It is a three line clause which applies to all Royal Charters of a particular nature from this point onwards.  
Colleagues may ask whether this no change clause could be used in future for a more aggressive approach to regulation of the press. Because it doesn’t mention press regulation and it doesn’t even mention this Royal Charter it is no more in danger of being used in this way than any other piece of legislation on the statute book.
But the objection he didn’t anticipate is the opposite one: couldn’t this no-change clause be used to set up other Royal Charters in defiance of the will of Parliament?

It looks like it could. The Privy Council – which is, in effect, the Cabinet – could create a Charter regulating some other industry, and include a no-change rule that required a two-thirds (or three-quarters, or nine-tenths) majority for its amendment or repeal.

But there’s a but.

The Enterprise and Regulatory Reform Bill, when passed, won’t itself be subject to the two-thirds rule. It could be amended by a simple parliamentary majority to remove the no-change clause. So a Cabinet that tried to bypass Parliament could be reined back in.

But there’s another but.

This also applies to the current Royal Charter. The no-change clause can be overturned by a simple majority, and then the new press regulation system can be scrapped in the ordinary way.

This feels like locking your valuables in a strong safe and then putting the key to the safe in a shoebox.

So, I wonder whether our political leaders know what they are doing.

Friday, March 08, 2013

Cameron opposes faster cuts. But why?

The hole in David Cameron’s economy speech is telling. Here it is:

Some say cut more and borrow less, others cut less and borrow more. Go faster. Go slower.  Cut taxes. Put them up. We need to cut through all this and tell people some plain truths. So let me speak frankly and do just that. There are some people who think we don’t have to take all these tough decisions to deal with our debts. They say that our focus on deficit reduction is damaging growth. And what we need to do is to spend more and borrow more. It’s as if they think there’s some magic money tree.

His argument against slower deficit reduction is pretty feeble. But his argument against faster deficit reduction is non-existent. After the brief initial mention of people who take this view, that’s it.

There’s a reason for this. Any argument he makes against faster public-spending cuts is an argument that Labour (or Vince Cable, or the Economist, or anyone else) can quote against his policy.

In exactly this way, the general points in his argument against slower cuts are used against him by people who are urging faster cuts. But clearly, he feels either that those people are politically insignificant or that he doesn’t have the strength to fight on two fronts.

Cameron, Osborne and Clegg have created an arbitrary timetable of cuts and then nailed themselves to it.

For instance, in 2013/14, the government plans to borrow £99 billion. Why is that the correct number? Why would £109bn or £119bn cause a market panic while £99bn is OK? Why would £89bn or £79bn stifle the recovery while £99bn is OK?

As Cable says, “nobody knows how the markets might respond” to a change of plan. “The balance of risks remains a matter of judgement.”

I’ll leave it to others to make the case for faster cuts. But the case for slower cuts is not the insanity he presents it as: “They say that by borrowing more they would miraculously end up borrowing less.”

The case can be summarised simply: more haste, less speed.

If you fire public-sector workers and scrap investment projects and cut benefits too quickly, the economy suffers. Cameron knows this, which is why he opposes faster cuts. By making less haste at cutting the deficit, he hopes to make more speed.

The argument for slower cuts is the same, only more so.

Nobody knows the optimum speed. But Cameron asks us to trust that the plan he worked out with Osborne and Clegg back in the summer of  2010, based on economic forecasts that reality has torn to shreds, managed to get it right.