Wednesday, December 09, 2009 

The real "we are all in this together".

At one point during the pre-budget report, you had to wonder whether Alistair Darling, tired of the deliberately tedious nature of what he was delivering, had inserted a concealed joke just to see if anyone would notice. To be vulgar for a second, you suspect that there are plenty of people out there, politicians included, whom have paid money for old boilers in their time, although £400 seems a bit steep.

It was the one moment of levity in what was otherwise a tour de force in the completely expected, the responses also seemingly written weeks in advance and not updated to take account of any late changes. George Osborne, who courtesy of Steve Bell I now can't look at without seeing buttocks on his nose, did the now standard New Tory act of claiming this meant Labour had completely abandoned the aspirational, while the Daily Mail has somehow construed a pre-budget which hits more or less everyone in some way or another as class war.

If the Mail's right, then this is class war on all of the classes rather just the middle or the upper. While the additional increase in national insurance will affect anyone earning above £20,000 (the average wage before the recession being somewhere around the £24,000 mark) the freeze in public sector pay across the board, which will in effect be a cut in real terms, spreads the pain across the board. George Osborne ought to be pleased: Darling, with the tax on bank bonuses and freeze on the inheritance tax threshold is ensuring that we truly "are all in this together", something you doubt his own plans will accurately reflect.

Like when some papers and the Tories cried that the Queen's speech was nothing but pure politics, as if this was something new and terrible, Darling's effort today could be condemned in similar terms. Depending on your view, it could be cowardly, as it puts off almost all the big decisions until after the election; political, in that as it's more than likely that the Tories will then be the ones to pick up the pieces; and also the right thing to do, as cutting now in the way that the Tories propose, when the recession is not over and everyone is just assuming that growth will return in this fourth quarter, will just damage the recovery even further. It can also be all three of these things, which is the view I take.

In short, what was billed as being significant was nothing of the sort, or wasn't presented by almost anyone in those terms. The real significance was in the back of the documents which accompanied the speech as always (PDF), showing that the deep cuts are coming in the years to come, just unannounced, although everyone already assumes the worst. The battle is now over who can be the most optimistic in the public whilst being a pessimist behind closed doors, and the government has to hope that the gap in the polls can still be made up by portraying the Tories as the ruthless cutters of old. One suspects however that even with the Tory lead being reduced of late, the victory is still the Tories' to lose rather win.

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12/09/2009 10:29:00 PM | | | links to this post

Thursday, August 13, 2009 

The perifidious French and Germans.

France and Germany have both respectively pulled out of recession, by a whopping 0.3%. Keeping in mind that these are preliminary figures, which could yet be revised in either direction, this can either prove everything or absolutely nothing.

Those predisposed (like myself) to further stimulus measures will note that both France and Germany have had far larger such packages than we have, although both also had more room for manoeuvre than we did in terms of borrowing and less personal debt to consider. Neither was as predisposed and reliant on the financial sector as we were, although there's certainly an argument that Germany is too reliant on its own manufacturing base, although it seems for now as if it's just that base which has helped it pull clear. Vince Cable is also pushing this argument.

Then there's the Conservatives (such as George Osborne) who are quite naturally crowing about how Gordon Brown was telling us all about how well placed we were and how we'd be one of the first out. This is equally correct, but it's also exactly what any politician was going to tell us, and indeed, if he'd been doom-mongering, telling us how it was likely to last years and that we'd be last out, he'd have been attacked for talking us down and spooking the financial markets. As has also been the theme throughout, the Tories have no real message on what we should be doing now, apart from "forcing" the banks to lend; indeed, they're still insistent on what we should be cutting now to bring the national debt down, which is about as insane a position as it's possible to reach.

It might yet turn out that the 0.8% contraction between April and June might not have been as bad as originally forecast, based as it was only on the figures up to May. Either way, all those old insults and jibes about the stagnating European economies while the "Anglo-Saxon" model of capitalism raced ahead no longer hit quite as hard.

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8/13/2009 09:40:00 PM | | | links to this post

Friday, April 24, 2009 

The budget aftermath.

As always happens with budgets, regardless of the party or the individual who delivers them, within hours they begin to unravel. No can genuinely envy Alistair Darling his task, except perhaps for Ed Balls, and there is much to be said for Darling's apparent calmness and unflappable nature, one of the very few to be around since 97 to not have become in some way tarnished by the travails of office. Such were the constraints on what any chancellor could have done given the circumstances, he did pretty much all he could, knowing full well that extensive cuts or extensive tax rises would doom his party to certain defeat. In perhaps the only comment that might be remembered, apart from the 50p rise in income tax for those earning over £150,000, he was clear that you cannot cut your way out of a recession. That much is obvious.

Likewise, his predictions that the economy would shrink by 3.5% this year, recovering to 1.25% growth next year and then growing at 3% plus afterwards were marked not so much by their infeasibility, but that he had to be optimistic for political reasons. Surely, for Labour to have any chance whatsoever of winning a fourth term next June, the economy needs to have began to recover by the turn of the year, at which point the government can say that they were right to be optimistic, to not have to wielded huge cuts so quickly, instead waiting to see if the fiscal measures taken had begun to work and that even though they may have wrong about many things, they were right when it really mattered. For there to be any chance whatsoever of this fantasy scenario becoming reality, today's GDP figures needed to be bang on the predicted 1.5%, or even better lower, reflecting the slight encouraging signs which some have suggested have started to become evident. Instead the drop was 1.9%, which means that it only needs a further drop of 1.6% in the second quarter, certainly not out of the question, for Darling's predictions to be already ruined.

Those figures, it should be noted, are provisional, and based only on the first two months' activity, meaning they could be revised both downwards or upwards, as the last quarter of 2008's were. Nevertheless, we have to go back to the third quarter of 1979 for worse figures. For all the hyperbolic, ridiculous talk of returning to the 70s this week, on this measure the analogy is undeniable. Add into the mix that the Institute for Fiscal Studies believes there's a £45bn hole in the budget, almost certainly to be filled by savage cuts to spending rather than tax rises, again the most severe since the dreaded decade, and the bleakness seems to be all enveloping.

For all the accusations flying Darling and Labour's way regarding dishonesty, as usual they cut both ways. No one can begin to pretend that Wednesday's budget was inspiring; it was rather all that could have been expected. Although putting off the real pain until after the election is pure politics, it's also the right thing to do. The same is the case with the 50p top rate of tax: it won't raise much, but it is equally absurd to call it a "return to class war", and not just because under Thatcher for a long period the rate was even higher. It is undeniable that an over reliance on the City, the laissez-faire attitude towards financial regulation, and New Labour's sickening sycophancy towards the filthy rich are the main causes of the current crisis. The public sector did not create this disaster; the private sector did. True, if Brown hadn't borrowed so much during the good times, we would not currently be facing such a monumental deficit, but we would almost certainly be facing a recession regardless, probably one only slightly less severe than the one we're experiencing. Things could be even worse if the Tories were in power and had carried out their promises to even further slash regulation, and as Stephanie Flanders points out, the last election was fought over little more than £12bn in public spending. That's a drop in the ocean to the amounts we are now boggling over. Even if it is purely a symbol, as Shuggy and Chris agree, the 50p rate is perhaps what the country wants to hear right now. You can argue about the unfairness of that, or the precedent it sets, but not the motivation.

For all the impressive rhetoric delivered by both David Cameron and George Osborne, and even if you revile the politics behind it, Cameron's response on Wednesday was probably one of his best moments as Tory leader, their plans for how to deal with the economy should they enter government next year are even more hollow than Labour's. All they have told us is that they would be making cuts now; they refuse to illustrate where, and how harsh they would be. Again, the politics behind this are obvious: no opposition party is going to present their own budget a year before they are actually going to deliver it, but they have to at least give some idea of what their intentions are. All we know is that they're not going to step into the trap of promising to repeal the 50p rate, and that somehow and incredibly, they're still going to find the money from somewhere to raise the inheritance tax threshold to £1m. As Chris again suggests, now would be the time to be taking a larger proportion of unearned wealth, not less.

Similarly, the claims that this budget means the final death of New Labour are also wide of the mark, and based on a misreading of what New Labour was about. The thing about New Labour is that there has never been an ideology behind it; instead it has always been about pure populist opportunism. This has not always tallied into truly populist policies, otherwise they would have slammed the door on east European migrants being able to come and work here, but on almost every other measure they have followed not their actual supporters' values, but those which they believe are both popular and superior. Sometimes they have relied on newspaper headlines and the demands of tabloid editors and their shadowy backers, but they have also relied extensively on focus grouping, which sometimes offers different results, such as the 50p top rate of tax, opposed by the right-wing rags they usually obey, but supported by the public at large. To now introduce such a popular measure is fully in keeping with what they have repeatedly done. Meanwhile, nothing will change whatsoever as regards to triangulating, the thinking behind the policy making that truly defined New Labour. New Labour's true demise might be only a year away, but the living dead are not yet fully exhausted.

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4/24/2009 08:26:00 PM | | | links to this post

Friday, January 23, 2009 

The recession blues.

We can now at least be grateful for the small mercy that we are officially in recession; we've already become so used to the fact that the news itself has only caused something approaching a small ripple, both markets and the pound recovering from drops earlier in the day, but for those of us who have only distant memories of the last recession, which includes almost all of those in their early to mid-twenties, things are undoubtedly about to become a whole lot bleaker.

While the 1.6% drop in the last quarter was higher than expected, it's the other figures that cast further light on how what started with the poor in America defaulting has now spread across the globe, infecting most severely our already distressed manufacturing base, where output fell by 4.6%. Most surprising probably of all was that even growth in the government sector fell by 0.5%, an indication of how bad things are likely to get. Likewise, the 1.6% growth in retail sales last month may as well be a mirage: boosted by the VAT cut and the panic discounting prior to Christmas, which has continued throughout this month, it simply cannot continue. More household names are likely to close their doors as the months pass.

Much of this was predictable: when you have an extended boom, especially one built upon massively inflated house prices and unprecedented private borrowing, the inevitable bust is always going to be painfully extended. This was the undoubted hubris, not just of the prime minister but of the vast majority of politicians. The last few elections were not fought on the economy, but on the public services and social issues. So too was the next one thought to be: under Cameron, the Conservatives offered even less than Howard and Hague. Sunshine was meant to win the day, the great gods of the macroeconomic cycle having decided that this was the End of History. Even after 9/11 destroyed the tiny basis for that claim, we still imagined the economic case to be sound. This bust is indicative not just of those politicians who believed it, but also the whole school of economic theorists who similarly declared that the free-market was the be all and end all, and that only governments and regulation were to blame for not delivering the full benefits of unleashing it wholesale.

In short, hardly anyone saw this coming when it was so completely predictable. You would therefore expect that the response would be humility from all sides, admitting they were wrong. With the exception of the odd columnist in the Times, this has been noticeable for its absence. No one really thinks that Gordon Brown, who whilst not arrogant is as stubborn as feasibly imaginable, is going to own up and admit that his claim to have abolished boom and bust was wrong, but the least he should be doing is now coming straight with us and saying that we face an exceptionally bleak economic prospect over the next year. We are not, as he repeatedly claimed, among the best placed to weather the financial storm; we are in fact one of the worst placed. This though too has been following the pattern which has emerged over the past 6 months. When Alistair Darling said in his Grauniad interview that we were facing the worst economic situation for over half a century, he was denounced. He was right. When George Osborne suggested that the amount of debt were taking on was likely to cause a run on the pound, he was criticised. He was right. When David Cameron now says that we could well have to go cap in hand to the IMF, he too might well be proved right. Nothing should be ruled out.

This isn't to agree with the Conservative's predictable positioning, which is to blame everything on Labour. If they had won in 2005 we would now be facing the exact same recession, possibly an even worse one if they had quickly introduced some of the policies which featured in John Redwood's later economic review. Labour's claims that this is all the fault of a global crisis are equally hollow. Countries which had far tighter regulated banking systems and the absence of such an inflated property bubble are not facing the same problems. Either one or the other can cause disaster, for which see Spain, which has a tight system of banking regulation but an absurdly out of control property market. For the former, we have not just one or two but three people to blame. The Financial Services Authority and and the tri-partite system of financial regulation was the direct creation of Brown, Balls and Gus O'Donnell. Paul Mason, who thankfully has a longer memory than others, recalls a speech by Blair towards the end of his tenure which was highly critical of the FSA for being too burdensome, for inhibiting the perfectly efficient and non-fradulent business of companies which were doubtless complaining too him about it all being so unfair. Who knows, perhaps it even included Northern Rock. Likewise, later in 2007 Gordon Brown, in his Mansion House speech, suggested to doubtless warm applause that the City was on the edge of a new golden age. It was instead on the edge of a precipice, but it's easy to mistake one for the other.

Neither the bankers, the politicians or the regulators are those will suffer the most from this recession, however much we would like it to be the case. Instead it's going to be the poorest, the ordinary workers now about to be drafted into James Purnell's welfare reform experiment. Already even the slightest thing to resemble largesse is being denounced, whether it be the "underserving" likes of Afghan families living in supposed mansions, the radio station for prisons which cost a massive £2 million, or less easy to justify, the bonuses for Northern Rock workers. They were though after all taking a leaf out of the book of their former bosses, so who could really blame them? Our apoplexy will not turn on those who brought us into this mess, but on those supposedly taking liberties. What already resembles a cruel nation will turn even crueller. What should be an opportunity for the left seems to have already been spurned, not helped by the fact that an authoratarian party masquerading as left-wing has been in power for approaching 12 years. Things can only get better, but they'll probably only get worse before that happens.

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1/23/2009 11:59:00 PM | | | links to this post

Tuesday, January 20, 2009 

Are we about to become utterly fucked?

It's understandable that a lot of people are getting terribly excited about someone who isn't a Bush ascending to the presidency of the United States of America, but left behind has been a major lack of any real substantive comment on the latest bail out of the banks, or rather, as it's beginning to already look, the further throwing of money at a lost cause.

Even if you opposed the original bail out, few were so dismissive of Brown and Darling to claim that they didn't know what they were doing; quite the opposite in fact. While they may have been authoratitive then, they were left looking anything but yesterday morning. They're not helped by the fact that no one, including them, has any idea of just how much effectively providing insurance to the banks for their losses in exchange for them to return to lending is going to cost, for the simple reason that no one it seems, Brown and Darling included, still has any idea of just how much the banks have lost through the collapse of the sub-prime market. This is part of the reason why the City has took such fright and been getting out of Royal Bank of Scotland as quickly as it can - when a bank that is over 70% owned by the state is still not potentially revealing the true nature of its losses, already estimated at £28bn, the idea that RBS is in fact bankrupt and has only been propped up the taxpayer quickly gains traction.

To give an indication of just how quickly we might be moving from another bail-out to full nationalisation of most, if not all of the banks, John McFall, chairman of the Treasury select committee and regarded as close to Gordon Brown, is already calling for both RBS and Lloyds to be fully nationalised, in what could well be a softening up exercise. The implications of such a move should not be understated - taking RBS alone into the public sector would put more than a year's GDP onto the already massive and continually growing national debt. With this fast becoming an increasingly ominous prospect, there's already talk that this could result, inevitably, in a sovereign debt crisis, where the buyers of the debt refuse to take any more, leaving us to go cap in hand to the IMF and also probably the EU.

For the moment this is not yet a full-blown crisis - undoubtedly Ireland and the United States itself are in far more dire straits than we are - but the underlying cause remains the same. For all the talk from the government that this is an American problem imported here on the back of the collapse in the US housing market, it was the hubris of Brown in imagining that he had abolished bust while instituting a light-touch regulatory system which in fact turned out to be a no-touch regulatory system which allowed our own banks to get involved in the toxic loans in the first place. Undoubtedly, the main share of the blame should fall on the bankers themselves, especially the likes of "Sir" Fred Goodwin, who slashed jobs while devouring the likes of ABN Amaro in a truly disastrous predatory move. They were however encouraged by a government which had fallen completely for the mantra of neo-liberalism in the City whilst expanding the public sector too quickly. As ever, New Labour wanted results and it wanted them fast, and to be fair in certain areas it has shown - the NHS, despite the cynics, has been markedly improved. Less apparent are the advances in education, where the obsession with reform has created a gaggle of schools which to this blogger look nightmarish in their controlling tendencies, whilst failing to boost the results sufficiently to mitigate such policies.

The boast since the original bail out that the government had saved the banks has been accurate. Without the injection of funds, RBS and HBOS may well have gone bust, with all the implications that the letting of Lehman Brothers fail caused, not just here but around the world. The fear now must be that all the original bail out has succeeded in doing is postponing just that, with the state shortly to be forced to fully intervene. The jibes at the Tories that they are a do nothing party will look even hollower if it turns out that doing something was almost as bad as doing nothing. If the bank shares continue to fall tomorrow, things really might be about to get a whole lot worse.

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1/20/2009 11:59:00 PM | | | links to this post

Monday, January 05, 2009 

Suicide by churnalism.

As Sim-O notes over on the Sun Lies, the Sun and 12 other newspapers/news sites have been found in breach of clause 5 of the Press Complaints Commission's code over articles reporting the suicide of a man who decapitated himself with a chainsaw, all of which were found to have reported the method used in excessive detail, something of increasing concern due to the apparent number of copycat attempts after similar articles have been published. While I'm hardly one of those people who thinks we shouldn't so much as mention suicide or ways to kill yourself for fear that those that would otherwise live long and happy lives will kill themselves on a whim, what also has been to be kept in mind when publishing such articles is the potential for further distress to those left behind, especially when splashed all over the national press for what is little more than titillation value, so-called public interest or not.

Again though, this is a prime example of churnalism in action. It seems that none of the newspapers had reporters at the actual inquest, which naturally heard forensic detail about how the man had set-up and activated the chainsaw in order to kill himself, but rather that all the information was provided by the Press Association. The PA itself quickly realised that the first report had gone too far in giving a blow by blow account of the exact facts of the case, and issued an edited follow-up. By then though the initial account had been put up across the web, and few seem to have replaced it with the updated version. As Nick Davies argued in Flat Earth News, PA and the other wires are often considered to be authoritative and therefore don't need to be double-checked, even though they themselves are under the same time constraints as their print counterparts are. Likewise, in this instance few of the newspapers bothered to edit the initial report, or even if they did didn't edit it enough to the PCC's liking, which seems to have investigated the reports without an actual complaint being made, presumably because of their own concern about them.

The PCC emphasised the importance of editing in its statement:

However, this was not a sufficient defence [the copy having came from the PA]. Indeed, this case demonstrated the importance of the editing process in removing excessive detail before publication – both online and offline.

Of the 14 articles that were investigated, only the Metro's print version and the one in the Guardian were ruled to have not breached the code. The Guardian's is worth quoting because it seems to sum everything up perfectly concisely, without dwelling on the story:

A man cut off his own head with a chainsaw because he was "irrationally opposed" to leaving his home, which was due to be demolished, an inquest heard yesterday. David Phyall, 50, rigged the machine up with a timer before swallowing painkillers at his housing association flat in Bishopstoke, Hampshire, on July 5, the hearing at Winchester was told. At the time of his death Phyall, who had suffered from mental illness, was the only person living in the 1960s block. Recording a verdict of suicide, coroner Simon Burge said Phyall was "irrationally opposed to moving".

The PCC's adjudication decided "in a difficult judgement call" that the newspaper had "stayed on just the right side of the line". In others, such as the Sun's print version and the Daily Star, it decided that the opposite was the case and that they had included just "slightly too much" detail. None though responded in the way which the Daily Mirror did, which claimed that the method of suicide was so "exceptional" that reporting it was in the "public interest". Perhaps not knowing which battles to fight and which to not, it went on to argue that it didn't believe that copycats were likely, and "also questioned whether the restriction on the right to report inquests in full was practicable for newspapers or consistent with the principle of open justice". The Mirror might have had a point if the PCC were objecting to the details of a murder being reported in such a way, or if it was genuinely restricting the right to report on inquests completely rather than just asking newspapers to show discretion over cases involving suicide or apparent suicide, which are rarely of such public interest that the full details need to be known for justice to be seen to have been done, but it wasn't. Interestingly, the Mirror's Scottish sister, the Daily Record, accepted in good grace that its report had breached the code, "apologised, and acted to make sure that the back bench and night desk were more familiar with the terms of the Code in this area", which seems like a model response.

You could understand the Mirror's response more if its own reporters and editors had been involved in the story other than rewriting or editing it slightly, but they weren't. Surely the fact that the copy had been provided by an outside source, even if one routinely used, meant that it should have come under more attention, especially on a subject where the code is more than clear. Perhaps the reaction was more to do with the fact that the Mirror, along with the Express group and the Independent are the papers which have the fewest resources to work with and so less time to spend on messing around with the wire copy, especially when it is seen as high quality. Indeed, the Express recently made more than half of its subeditors redundant, with the Star having already done similar. Accordingly, the Star was raked over the coals while the paper protested that its sister had edited the story down to just mentioning the chainsaw, as if that was a defence.

As the recession takes hold and advertisers further desert the print media, more job losses are inevitable. With them will come the further triumph of churnalism, and as newspapers continue to try to appeal across the board and do everything, even more mistakes and complaints with them will be made. The future is, as Peter Wilby argues, the niche - either highbrow or lowbrow, not trying to be both. You can imagine that the Mail and Sun will likely survive, as will probably the Torygraph, Times and Guardian in their current forms, at least for now - the others may well fall by the wayside or go online only, although I can't imagine many seeking out the Star, Express or Mirror websites when everything they do is done elsewhere and almost always better. Before that happens, things will probably deteriorate rapidly, and like with the other victims of the recession outside those being made unemployed at least so far, the papers and their owners will have few others to blame but themselves.

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1/05/2009 11:59:00 PM | | | links to this post

 

Godwin's law and Tory economic policy.

One of the old rules of debate, long before the invention of Godwin's law, was that the first person to bring up the Nazis lost. Unless you want to look like Rick in the Young Ones, even in these times when calling Labour ZaNuLiarBore or similar is considered the height of wit and sophistication, or calling Gordon Brown a one-eyed communist passes for enlightened discourse, it's mostly still looked down upon.

Iain Dale, the nation's premier serious blogger is obviously beyond such subtleties. Opening his article on Comment is Free, he invokes everyone's favourite propaganda minister (no, not Alastair Campbell, or Andy Coulson):

Gordon Brown and his ministers seem to have adopted the Goebbels principle of propaganda, hoping that the more often they repeat an allegation, the more likely a gullible public is to believe it. Over the past month they have repeatedly accused the Conservatives and David Cameron of adopting a "do nothing" approach to the recession, in the hope that Cameron can be made out to be heartless and uncaring. James Purnell's interviews on the Today Programme and 5 Live this morning were classic examples of the genre. Goebbels would have nodded approvingly.

Yeah, shame about him giving his children cyanide pills before he and his wife blew their own brains out, otherwise we could have asked him personally what he thought of Labour's media strategy. By the same token, Dale must surely be concerned about how the Conservatives have repeatedly suggested that the country is either "going bankrupt", "near bankruptcy" or "bankrupt", all of which have been the Tories' refrain for quite some time now, with even less basis in facts than the accusation that the Conservatives are a "do nothing" party. Dale lists some of the other policies proposed by his party, but few of them have been praised by those outside of it, and others such as the proposed tax break for employers have been derided. Few of them would provide anything resembling a stimulus, or one more likely to be spent than saved, which is what is needed, and while the jury is still out on the VAT cut, even fewer of their promises seem to actually add up.

The same can of course be said of the government's policies, which do indeed also deserve criticise, but today's new announcement by the Tories for tax cuts for savers are especially wide of the mark. Welcome as further incentives to save would be once we're out of a recession, it's the opposite of what's needed right now, as Tom Freeman points out. The Conservatives can though of course say whatever the hell they like when they're in opposition, as they're not suddenly going to become the party of government and have to introduce their announced plans immediately, and unsurprisingly the Tory press has lapped up Cameron's latest pronouncement, as they were meant to.

All the rhetoric however masks the fact that if the Conservatives had been in power rather than Labour, they would have in all likelihood have let the market rip even further. Yes, taxes might well have been lower, the public services might well have not had as much money pumped in, the deficit might not be quite so high, but we would almost certainly be in much the same hole. It has taken the recession for the Conservatives to rediscover the "morality" of saving rather than going into debt, and that's something that should always be remembered now that parties of all political shapes and colours decide that capitalism might well need taming after all.

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1/05/2009 11:59:00 PM | | | links to this post

Wednesday, November 26, 2008 

Advertising bombshells.


The problem with combining political strategy with advertising campaigns is that when the facts change you can be quickly left looking daft.

This is exactly the trap that the Conservatives have fallen into. Last week, when all we had was rumours and guesswork over what was going to be in the pre-budget report, but where the inkling was that the government was going to produce a stimulus package worth somewhere in the region of between £15bn and £30bn, the Tories thought they were being incredibly clever by bringing back their 1992 tax bombshell campaign. Cheap, effective and simple, and they tried something similar back in 2003. It's partly down to this campaign that Alistair Darling had to set out in such detail how he was going to pay for it, which he did to a fairly decent extent. As it turned out, this wasn't really a bombshell budget in tax terms; yes, the borrowing figures are frightening, but this was negated by the taxing of the rich, which was the distraction measure and sop to the left rather than the main revenue raiser. The real surprise was that national insurance would go up by 0.5%, the part that could be accurately described at least as a potentially painful tax rise.

Almost all of the Conservative fire was concentrated on the national debt. The drop in VAT was the distraction, until an apparently wrongly issued, uncorrected paper on the changes to the tax system still read that VAT was to rise by 1% after 2011, to 18.5%. It was a pretty obvious mistake, as the government quickly made clear, also admitting that they had discussed raising VAT but had decided in the event to raise national insurance instead. You can't however blame the Conservatives for seizing on it, and trying to make hay with the idea that this was a secret plan to raise VAT, with the government not being straight about it. Fair enough.

What you cannot then realistically say is that a 1% rise in VAT is going to be a bombshell, especially when you have been sniffy about a 2.5% drop in the first place. True enough, VAT is a regressive tax, which hits the low paid who don't save but instead spend far harder than it does anyone else. Raising it by 1% would hurt them; Daniel Davies estimates that the cut gives someone working 40 hours a week on the minimum wage £2 a week back, so it isn't outlandish to suggest that a 1% raise would cost them between £40 and £60, possibly more, a year. Not a major sum, but for someone struggling it can more than make a difference. It is not though by any stretch of the imagination a tax rise which is going to put someone into instant penury, especially the mythologised "hard-working families" which both parties so bend over to talk about and discuss. It's equally risible that the country is going bankrupt, as Cameron also claimed at prime minister's questions.

The problem for the Conservatives is getting the balance right between such potentially damaging statements as the country is going bankrupt, which scares people, and attacking the government's lackadaisical and potentially even more damaging plans. Likewise, their own proposals are both rightly and wrongly being lost in the mire, more rightly judging by Cameron's piss-poor examples of what they would do differently, their promised freezing of council tax being revenue neutral and the other two suggestions ones that the government is already doing. Technically, all they have to do is sit and wait and see if the cut in VAT has an effect: if it doesn't, they can claim that their stance was the right one all along. If not, they might be in further trouble. Even then, there's no accounting for whether the public then decide that the softening of a recession created more than in part by Brown means that they'll vote Labour. The Conservatives might still be floundering somewhat, but the end result is still far from certain.

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11/26/2008 11:54:00 PM | | | links to this post

Monday, November 24, 2008 

The pre-budget report.

The media can often be accused of overstating otherwise run of the mill events, both for effect and to try to put conflict into politics which has for some time not been there, but today at least it has both been right to describe the pre-budget report as a gamble and to point to it as at least the end of a 14-year long, if not 30-year long economic orthodoxy.

Let's not get too carried away with ourselves though. This isn't, as Pollyanna herself is promoting it, the end of New Labour and the beginning of social democracy, only a year after she declared that social democracy was dead, but rather a readjustment forced on New Labour by events of their own making. Keynes may have been taken out of the box, dusted down and decorated like a soon to be hauled out of the loft artificial Christmas tree, with Friedman, monetarism and supply-side economics placed on the naughty step, but this was still a cautious, as it had to be, reappraisal of what New Labour's economic policy would become when faced with recession. If anything it was far too cautious when it came to deciding that some of the stimulus package would be paid for by increasing the top rate of tax on those earning over £150,000 a year to 45% - raising a little over £2bn, a pitiful amount. They could have surely got away with making it 50p in the £1, and dropping it to those earning over £125,000, even £100,000, as the old Liberal Democrat policy was, raising a much more substantial amount.

Even if it it is timid, it's still the breaking of the Labour promise at the last three general elections not to increase income tax; the last major shift was 20 years ago when the rate was dropped to 40% by Nigel Lawson, causing uproar on the Labour benches. It is long overdue, an overt return to redistribution, previously carried out almost by stealth on tax credits, where the scheme is so complex that the costs of running it and frustration of those on it who often end up having to pay back that which they weren't supposed to take almost do more harm than good. It also leaves the Tories in a quandary: do they attack it as a tax on wealth creation, on hard work, or agree with the progressive thinking behind it in their new, caring, tough on bonus culture way? At the moment they seem to be uncertain.

As welcome as the shift to taxing the rich more was, the rest of the PBR was almost teeth-grindingly awful, not in the policy sense, but in the doom that pervaded it and which we have to look forward to. Darling, for his part, who I'm willing to suggest is a far more accomplished politician than he has ever been given credit for, did his best to offset this both in his familiar dull delivery, without bombast, and only a few party political jibes at the party opposite, the old style bank manager within him shining through, and in the very optimistic estimates for how quickly we will pull ourselves out of the mire. The Treasury forecast is that we will only be in negative growth for four quarters, the second of which we are currently in. Next year will see a fall in output of between 0.75% and 1.25%, which again seems highly optimistic, both by other forecasts and by the fact that the economy shrank last quarter alone by 0.5%. Equally hopeful is that savings can be found, yet again, within Whitehall which will help to lower overall borrowing, which Darling expects to reach 57% of GDP by 2013-14 - or about £500bn, which really will put us amongst the most indebted of the G7, if not the world.

All of which makes it all the more dark-eyebrow raising to see that £12.7bn of the £20bn stimulus package is to come by cutting VAT by 2.5%. Making it even less attractive is that the duty on tobacco, alcohol and petrol will rise to ensure that there is no overall difference, thus leaving the only things on which the cut will make any real difference expensive electronic goods, cars and furniture. You get the impression that they must somehow know something which we don't, as surely a far better way to have inspired spending would have been the American way of cutting income tax, directly sending cheques back out with the rebate instantly cashable. Unity argues that it will result ultimately in lower consumer prices even on zero-rated goods, which is what the government must also be hoping for. It will become quickly apparent if it has worked or not: if this Christmas is as bad as the retailers have been suggesting it might be, and their sales in January also fail to spark interest, the indication will be that it will have already failed.

The unsurprisingly unleaked other major change was that alongside the tax rises for the rich, national insurance will rise by 0.5% from 2011, which will directly hit the middle classes, and even the upper-working class, affecting those earning over £20,000 a year. With the average wage being somewhere around £24,000 a year, although if we face a far harsher recession than that forecast by the Treasury with deflation a major issue that could in fact drop, it's bound to further embitter those already fed up with Labour and who haven't benefited from the 10 years of relatively benign conditions. At least however they know what's coming: the government's spelling out of exactly what will have to rise to pay for the stimulus, as they had to do and also did to pre-empt the Tory shouts of a coming "tax bombshell" was for the most part well-handled.

George Osborne, for his part, was mostly dreadful in response. The only real hit he landed was that the gap between the stimulus ending and the tax rises kicking in signified that what they were really concerned with was the political cycle rather than the economic one, and it does indeed now look as though Brown will wait until the last moment to call the election, although any party in the same position would have almost certainly done the same thing. This was again though the blundering Conservative party which we have become accustomed to on economics over the past couple of years, decrying Labour while offering no substantive alternative, or indication of what they would do instead. Osborne gave no specifics whatsoever, surely a mistake, even if his anger may have struck a chord.

For all the talk of shifting back towards the comfortable ground on which both parties once stood, at best what they have done is take a few steps to the left in Labour's case and a few steps to the right in the Tories'. Unfamiliar to begin with, but easy to adapt back into. A far bigger change is that all three parties will go into the next election having to promise not tax cuts, or as it has been over the past three elections, the investment versus the status quo dichotomy, but instead tax rises. We will back to the biggest question being who you trust the most to run the economy. After 10 years of New Labour economics, if there is such a thing, the answer ought to be obvious. Yet whilst the Tories both fail to look convincing or offer anything even approaching an all encompassing policy, you'd still have to more than consider the odds on the devil we know. How deep the recession will turn out may will be the ultimate decider. Politics may not have just become interesting again, as per the cliché, but it certainly has, after years of economic consensus, suddenly got far more intriguing.

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11/24/2008 09:32:00 PM | | | links to this post

Thursday, November 20, 2008 

Those Conservative economic travails.

This must be a truly strange time to be a supporter of the Conservative party. To enter cliché for a moment, all the chickens have finally came home to roost. The man who promised an end to Tory boom and bust has succeeded in abolishing boom, while the prospects for the bust look increasingly ominous. The economy which he boasted was among the best placed to deal with the global downturn is in actual fact one of the worst placed to deal with it, according to the IMF and the European Union. Unrelenting, the Labour party believes that the solution is to borrow more to fund the tax cuts to stimulate the economy. As Larry Elliot has pointed out, this is a direct contradiction of what Gordon Brown formerly believed. At the weekend the same man attended a conference which he claimed would back up his solution to the downturn; it did nothing of the sort, and predictably only agreed to more or less meet again. Gordon Brown, by rights, ought to be finished.

Instead, it's the Tories themselves that look as though they're the ones in need of some sort of a stimulus. By contrast to Brown, who seems unaccountably at the moment to be walking on water when he should be sinking like a brick to the bottom, they're the ones looking washed up. Nothing they do at the moment can get a look in, or when it does it's almost immediately knocked down for its flaws. Take their hastily cobbled together policy on tax breaks for employers, which was dismissed almost universally as being the kind of tax con which the Conservatives have so often accused Labour of pulling. This week's panic was, with it looking almost certain that there will be at least £15bn worth of tax cuts in Monday's pre-budget report, the minimum needed for it to be minimally beneficial, to declare that they would, despite everything which they've previously said, not stick to Labour's spending plans for at least the first year should they win the next election. In any event this was always a false promise, but such was the apparent anxiety within the party over the floundering response to Gordon Brown's sudden found decisiveness that red meat had to be tossed to those who have always wanted tax cuts before anything else.

Even this though leaves the party looking contradictory, or at least at first glance it does. On the surface it looks like a standard, fiscally conservative measure: you can't borrow your way out of a crisis, so don't try. Instead, spending cuts will have to be found. Yet the Tories are still committed to spending the same as Labour on the NHS, the police and on education, whilst refusing to say where the cuts would be made. Even abandoning ID cards, as they promise, will not immediately summon up the £20bn that they are forecast to cost once they are fully introduced. The figures simply don't add up. As a consequence, the Conservatives are again being accused of being the do nothing party, and it's an insult that for the moment appears to be sticking.

Some of this is undoubtedly thoroughly unfair on the Conservatives. An element of their plight at least is that the media has become bored of the prospect of the Conservatives sleepwalking towards victory at the next election, and with Brown's sudden self-proclaimed saving of the global economy, they have a new horse to get behind, even if it's the same one they were previously saying was only fit for the glue factory. Also influencing it though is that despite all the plaudits mystifyingly bestowed upon George Osborne, such as politician of the year, they have been absolutely hopeless on the economy ever since the run on Northern Rock. Their immediate tactic was to portray the potential nationalisation as a return to old Labour, which could have worked if they had a realistic alternative policy. Gordon Brown took fright, which is partly why they dithered and dithered and made things worse by not doing it sooner. The problem was that the Tories didn't have an alternative, and that everyone got so fed up with waiting for them to come up with one that Vince the Cable suddenly emerged as the politician who knew what he was talking about, given pride of place as the first man to turn to for analysis which ought to have been coming from the real opposition.

The other reason though is that they like Brown and New Labour truly believed the rhetoric. They honestly thought that the economy was now an area of consensus, that growth was natural and endless, and that it was social policy on which they should concentrate. A nasty and pernicious social policy it is, calling a society broken when is isn't and which their solutions for fixing are the opposite of what is needed, but a policy it was, and one which the conservative press especially were fully behind. They may have made some murmurings on personal debt, but they offered no substantive opposition to the government on its spending and borrowing plans, and as Labour has rightly pointed to, they even proposed loosening the regulation on mortgages. Their belief, like Labour's, was that we didn't need to worry about not actually making anything, it was making London the city in which to do financial business which mattered most. In fairness, many of us became caught up in this fantasy: that neoliberalism, despite all the evidence to the contrary, could deliver, and that through almost indiscernible redistribution, played down at every opportunity, that the proles would not become too upset at being continuously shafted. The latter it seems can still be contained, for now, but it was neoliberalism itself which has come in for the mightiest of shocks.

From being 28 points ahead at one point in the craziest poll, the Conservatives are now down to just 3 points in front, within the margin of error, in the mirror craziest poll. Unlike New Labour prior to 97, whenever things aren't going their way, the Conservative approach seems to be to panic. Last year, during Brown's brief honeymoon, there were murmurings of defenestrating David Cameron, such was the concern that the change in leader would affect their fortunes. Luckily, Brown succeeding at shooting himself in the foot not just once but on numerous occasions, first through a dismal conference speech, then over the election which never was, then the obsession with 42 days, then the 10p tax rate etc etc, coupled with Osborne's moment of supposed genius, the raising of the inheritance tax level to £1m. This time round Osborne himself is the casualty, not helped by his dalliances with yachts and trying to win in an unpleasantness contest with Peter Mandelson.

The really strange thing is that the Conservatives have arrived at the right policy in the circumstances in a completely Byzantine way. Although their claims that we are among the most heavily indebted nations in terms of GDP is bogus, even if you include the nationalisations, PFI and pensions, they are right that we should not be further adding to those figures without explaining fully and comprehensively that this means taxes are going to have to rise significantly, or that spending is going to have to be cut considerably to return at some point to equilibrium. After a crisis that was caused by private-sector debt, the public-sector should not be seeking to emulate it. If we are going to have tax cuts, then we should be funding them appropriately by either cutting the ludicrous number of databases we are planning or which are in use, abandoning ID cards, getting rid of Trident and not replacing it, not "investing" in aircraft carriers, by getting out of Afghanistan and Iraq now and by raising the top rate of tax on the richest considerably. It was our indulgence of them that led to this mess, and while our politicians should more than shame the blame, they should also help to pay for it, by also closing down the loopholes that allow so many to evade tax altogether. The party that again seems to be leading the way is the Liberal Democrats, who are flat-lining in the polls and have more problems it seems than the Conservatives. That, sadly, is modern justice.

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11/20/2008 11:41:00 PM | | | links to this post

Friday, November 07, 2008 

A blip?

What a difference a couple of months can make: back then we were seriously discussing the possibility that Glenrothes could be Gordon Brown's last stand as Labour leader, where a defeat to the Scottish National Party would mean his cabinet colleagues would move against him, with David Miliband the most likely successor. Harold Macmillian said that it was events that were most likely to blow a government off course, but it was the apparently imminent collapse of the banking system which has turned out to be Gordon Brown's saving grace. Having bailed out them and by his own spin, having led the world at large to decide upon a similar policy, he's almost certain now to lead Labour into the next election.

The circumstances of the win in Glenrothes are enough to make you question whether there was a cock-up or conspiracy in Labour's apparent acceptance that were going to lose yesterday's vote. Use of Occam's razor would suggest the former, but how on earth do you go from the apparent doom expressed to the media by Nick Palmer, who said that he didn't know any Labour MPs who expected to win, to what looks like a remarkable in the circumstances 6,000+ majority? The betting was all on the SNP to win, with Paul Routledge alleging there was a conspiracy amongst SNP supporters to lay bets around the country in order to get the odds back in their favour, and the pundits all agreed that the SNP were likely to take it, but how do you not apparently manage to realise that you've got a more than healthy majority in the bag?

Labour's share of the vote in actual fact increased, despite their majority dropping by around 4,000, something which has not happened to a government fighting a by-election since 1982. The vote for both the Conservatives and the Liberal Democrats collapsed, possibly because of their failure to campaign in what was seen as a straight fight between the SNP and Labour, but it's hardly encouraging for the leadership of either party, especially David Cameron, whose hopes for the next election were on the SNP taking Labour's Scottish seats in the areas where his party is not close to being in the running.

Most impressive is perhaps not the result, but the way in which Labour so successfully, at least for now, turned the onus onto Alex Salmond. Despite the fact that it's Gordon Brown himself who's primarily responsible for the bursting of the biggest economic bubble of recent times, the attack on Salmond's plans for independence was pointed and damning. An independent Scotland would not have been able to bail out the likes of Royal Bank of Scotland and HBOS in the way that Westminster had, went the argument, whilst the television networks happily played along, repeating and replaying Salmond's in hindsight naive rhetoric about how Scotland, along with Iceland, Ireland and the Scandanivan nations could form an arc of prosperity if only it was freed from the union.

The last few days, in contrast, really should have been horrendously damaging for Gordon Brown and New Labour: first the European commission reported that the UK would face the deepest recession among the EU's mature economies, then the IMF issued a similar verdict, which also said the UK would be the worst hit of the world's developed economies. For a man and a spin machine which had boasted repeatedly that we were well-placed to deal with the economic downturn, if not among the best-placed, this should have been enough to puncture any sign of personal political recovery. Instead, with the election of Barack Obama helping to distract attention away from events here, the story has been the exact opposite.

To draw much else from the victory in Glenrothes would be wrong. It's almost as if the whole by-election was conducted in a vacuum: the opinion polls show at best that the Brown bounce has been fairly negligible, at least in personal terms. Labour has clawed itself back up from 20% behind the Tories to between 8 and 9% behind, which in a general election would deliver either a hung parliament or a very slight majority for David Cameron, which for a government in the middle of a third term in a soon to be recession isn't bad, but certainly isn't going to save it. As the downturn starts to really bite and unemployment rises further, it's then the resentment against Labour will likely start to really affect things. The odds are most certainly still on for a Conservative victory, and Labour's hopes in the long-term still look fleeting at best, Gordon Brown saviour of the world economy or not.

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11/07/2008 11:59:00 PM | | | links to this post

Wednesday, October 08, 2008 

They say, we pay.


In what is now a multimedia age, it's two newspaper front page headlines that still sum up a day's events: the Telegraph going with back from the brink, while the Guardian has staring into the abyss. If you believe both the politicians and the wider commentariat, all of whom seem to be in basic agreement that today's/yesterday's bailout was both on the whole a good package, and one to which there was, in the age old phrase now so hollow, no alternative, then what would have been considered hyperbole weeks ago is now wholly justified.

That very lack of dissent is what ought to worry us the most. Today's givens, or in Rumsfeldian, known knowns, are tomorrow's deepest regrets. It is even more telling that around the only two people who are objecting to the bailout as set out are on what would be considered the further reaches of both left and right: John McDonnell, who advocates a controlling stake in the banks that will apply for the immediate £50bn of funds being made available, and John Redwood, who appeared to oppose the sort of plan which has emerged on Monday but who now appears to have rowed back somewhat.

Perhaps a better example is in two more well-known economic thinkers. Reading Ruth Lea's whole-hearted welcome was enough for the alarm bells to really start ringing: her past is impeccable having both been chief UK economist at - who else - Lehman Brothers, and also director of the unashamedly Thatcherite Centre for Policy Studies. In much the same vein, Will Hutton, who's had a new lease of life thanks to the "credit crunch", sings the praises so profusely that you'd not be surprised to find he was sporting a huge erection while writing it; apparently the markets were too "shell-shocked" to assimilate the greatness of the Brown and Darling bailout, hence why the FTSE continued to drop like those who threw themselves off buildings in New York in 1929.

It would of course be ludicrous to judge the plan by how the market reacted to it, especially on a day on which the IMF produced a grim as it gets report on how the economy is likely to contract slightly next year, with most even thinking that at the moment is too optimistic. The Dow later plummeted after Paulson made clear that he believed institutions in the US would still fail despite their own bailout being passed and now slowly being put into place.

There are however more than legitimate reasons to be incredibly apprehensive about this plan, not least because unlike in America, our own legislators seem unlikely to even be offered a vote on whether it should be put into action or not. Partly this is because the problem is so urgent that something has to be done now, or so we're told, and it's also true that in the current, almost war-time consensus which has fallen upon both the media and the politicial classes it would be passed with hardly a single vote against, but that is besides the point. This is something far too serious, especially when it involves such vast sums which the taxpayer will be providing collatarel upon, to be decreed simply by a prime minister and his chancellor in agreement with the other very people who brought us into this mess.

This £50bn, or is it £500bn, is itself a hall of mirrors, as we don't have such sums in the coffers to instantly pay out. No, this money itself is to be borrowed, pumped into the banks in the form of the government taking a stake via preference shares. Of the four banks which are in the most relative trouble - HBOS, RBOS, Lloyds TSB and Barclays - three could be bought outright with that £50bn, while you could take a significant stake in the one left out. After all, as we're splashing money around, why not take control, wind down the businesses and put the deposits in one big bank? This is not to say that the government should be in the job of running banks when it can't so much as run its own departments properly, but could they really be any worse at just running them down than the current proprietors that got them into the situation today?

For taking this stake which will, if the plan works, in effect prop failing institutions up, with the eventual promise that there might be a profit in it for the taxpayer if they wait long enough and don't die in the mean time, the deals that the government has supposedly received in return are not worth the paper they aren't even written on. Banks will apparently have to cut to the bone their executive bonuses this year, shareholder dividends will similarly fall under the knife, while small businesses must be offered better rates than currently on their own borrowing. There is perhaps a tendency in such times to call for heads on sticks, as someone has already put it, but whilst there must be stability, surely those responsible at the executive level at these banks must at some point be shown the door, starting as Nils Pratley suggests with Sir Fred Goodwin. Again though, perhaps the reason why there has been far more carping from the Conservative side, with David Cameron demanding, almost Trot-like that no banker receive a bonus this Christmas, is that if the chief executives and others at the banks have to go, then surely also does this country's chief executive for his own role in the crisis. If they are to be treated as Justin suggests, like the benefit scroungers so demonised for their weekly pittance, then Brown and Darling and the rest of them should all be exposed to such penury and shame also.

Fundamentally, the current consensus cannot last, and nor should it. Despite the apparent undoubted Conservative part in the deregulation and the "age of irresponsibility", as well as how if they were in power they would be doing much the same, the resentment that today's payola will breed will likely be easily built on by Cameron and friends, even if they have been so woeful thus far. As we stumble into the recession, the bills will just keep mounting up, with the increases in welfare spending for those newly unemployed already starting to hit the Treasury. Make no mistake, despite everything that has happened, the poorest in society, the sick, the elderly, all will be hit the hardest as those very same bills are aimed to be kept by down by a government that has just bailed out the very richest with our own inheritance. Already the ridiculous one-off cases like the Afghan single mother supposedly living in a "mansion" for which the taxpayer pays out £170,000 a year are being highlighted, with the one direct aim of hitting the welfare state as a whole. How bitterly and cynical typical that it is one of the richest men in the world, with some of the most comparatively better off individuals in the country in tow that are doing such sniping now, and this is only likely to be the start of it.

New Labour could have prevented this. It was always going to win the 97 election, and it could have done so without the support of Rupert Murdoch, of the City, of the CBI, and everyone else that has directly contributed to the current crash. It could have properly regulated the City, rather than ticking boxes and slapping backs; it could have restrained the buy now pay later culture; and it could have condemned the bonuses which are now being criticised far earlier. None of the above though deserve the blame except for Labour themselves. We must not let them forget it, and we must fight to ensure that those blameless in all of this are not the ones held responsible any more than they already are.

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10/08/2008 11:59:00 PM | | | links to this post

Tuesday, October 07, 2008 

As the spiral continues downwards, are Labour's chances actually improving?


The economic crisis, which it can almost certainly now be justifiably called, has just entered a new and latest phase, quite plausibly the critical stage. After Darling's statement to the House on Monday went down in the City like a lead balloon, apparently leading to swift pleading overnight and today that something had to be done to stop the precipitous decline in the shares of HBOS, RBOS, Lloyds TSB and Barclays, even while the latter two of those organisations said they didn't need any handouts, by most accounts before the FTSE opens tomorrow morning up to £50bn will be used to take stakes in all of the mentioned institutions, with potentially more to follow if the fallout is is even more serious than now thought.

How much of this has been planned in advance and how much has been developed ad hoc is open to question, with Simon Jenkins in particular railing against the "dithering". The government's plan may well have been to deal with problems as they developed, but the biggest drop in the FTSE's history on Monday, followed by continuing to decline bank shares seems to have forced their hand fully now. However much criticism can be directed at the government for letting the banking crisis develop, through the "light touch" regulation to the promotion of easy credit, few can envy either Brown or Darling being at the very centre of a storm which is potentially far more serious than the withdrawal from the ERM was in 1992.

The mentioning of Black Wednesday is key because this could also now help further determine who the victors of the next election will be. If the "plan", such as it currently is succeeds, gets the banks lending again and restores liquidity, then it is still not too late for Labour's reputation to be if not restored, then vastly improved. For sure, there is going to be a recession, and Brown's abolition of boom and bust is going to do an awful lot of damage. If however the electorate gives the credit to the government for making the worst of a bad situation, and the recent polls have suggested that most actually have been favourable, if grudgingly of Brown and Darling's performance thus far, it could still with pushing by Labour prompt doubt in what the Tories would have done and how they would have coped. For all Cameron's claiming of being a "man with a plan", their contribution to the economic arguments has been pitiful. On Newsnight again tonight the best they could offer was Kenneth Clarke, whilst Vince Cable for the Lib Dems was again in evidence.

It might well be that the general public has had enough of Labour, end of, as the 10 to 12 point deficits in the polls even after the boost from the Labour conference suggest. While it looks increasingly bleak financially, Labour's chances will probably now depend on what happens over the next few weeks.

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10/07/2008 11:59:00 PM | | | links to this post

Friday, September 19, 2008 

Taken from the bleakness to come.

The week began with the bankruptcy of Lehman Brothers, and the commentariat decreed that this showed that the Fed was no longer prepared to bail out anyone who came running begging for mercy. The week ends with what might be the biggest dead cat bounce that the FTSE has ever seen, leaping nearly 9% in one day, all on the back of the Fed announcing a plan which will to all intents and purposes involve the nationalising of all the losses and bad debt that has led to this week's banking crisis. Dsquared in the comments on Blood and Treasure probably sums it all up:

What a fucking unbelievable day. I haven't seen a man eat his own head yet, but I have now, officially, been present on the trading floor during a melt-up.

Despite all the hyperbole which is floating around like the effluent in a festival toilet, this week's financial meltdown and then the melt-up probably is the once-in-however many decades event which so many have suggested it is. It is not however, necessarily, the end of an epoch, or even a turning point, as Larry Elliot believes it might be. No, it seems to be something quite different: this isn't the end of the neoliberal consensus which has undoubtedly directly led us towards this huge default, it's probably just the very beginning of it.

To go with a cliché, all the chickens have came home to roost. The deluded dream of the everyone a home owner society, coupled with the complete abandonment of anything even resembling financial regulation and the evisceration of the manufacturing sector, all of which you can blame both the Conservatives and Labour equally for, has reached the nadir which many that have long been derided as Cassandras always said it would. Some have been left to go to the wall, but the vast majority have all instead been either taken over or taken under the wing of the state, the same state which those in charge demanded to get out of their boardrooms and to inexorably lower the burden of.

For what we have now clearly came to is not socialism for the poor, but socialism for the uber-rich, all of whom are incredibly likely to get off scot-free, or even more amazingly, even with golden goodbyes for their part in the crisis. The irony of it all is also completely overbearing; a Republican government in the United States that cut taxes for the super-rich and which continues to believe in the smallest of small states has probably just involved itself in the biggest nationalisation project of all time. Things have of course over here not yet reached such a catastrophe, but the takeover by Lloyds TSB of HBOS is a similar example of all the usual rules being broken; conspiracy theorists might even reason that some of those involved in the short-selling of what the vast majority concluded to be a solvent and viable business just might have something to gain from a bank which will now own 1 in 3 branches on the high street.

It then has to be asked: who exactly is going to pay for all of this? It certainly doesn't seem to be those that got us into this mess in the first place, unless we blame the humble taxpayer for going along with everything that was offered him in good faith. We see Gordon Brown claiming that he is now going to clean up the City, but who on earth honestly believes it? This after all is the man that has helped deliver us here, a leading member of the party that accepted all the cheques courtesy of numerous businessmen now involved up to their arm-pits in this crash, that promised to abolish boom and bust and has succeeding in abolishing boom while nationalising the bust, all for his fair-weather friends in the City that howled and squealed and got everything they asked for but still complained that levels of corporation tax were slightly higher than in Ireland.

As others have noted, this ought to be the greatest opportunity for the left potentially for decades. If Keynesianism ended in 1976, then surely Friedmanism has now been left similarly low in 2008. The Labour party, the party that ought to be the one to lead us out of this mess, instead signed up completely and utterly to neoliberalism, declared that there was no alternative and set about emasculating the welfare state, and if anything, it's only likely to continue at a far faster pace now. After all, how else is the government going to pay for all those shortly going to be claiming jobseeker's allowance if it doesn't cut to the bone those that are genuinely sick? As for your pension, well, might as well forget that. All the more reason to accelerate the privatisation of the health service and close down those failing schools so that our friends in the business and voluntary community can re-open them as academies.

We can all point to those that should share the blame. What might really come to matter is that we force them to take it. Some, as stated, will see an opportunity; I see only the bleakness to come.

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9/19/2008 11:41:00 PM | | | links to this post

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