Monthly Archives: November 2010

The Politics of Uncertainty


Economic forecasting is an art and all who practice it are merely players. That having been said there is little doubt that the latest OBR economic forecast gives the Coalition more to crow about than the Labour Opposition. The odds of the Coalition’s deficit reduction strategy, or in fancy language the Consolidation,  working out is now over 50 percent, employment will remain high, the economy will start to re-balance, in the jargon, and all should be well and improving when the next General Election is upon us. After all, as we all know economic growth is cyclical, recessions are followed by recoveries, one is taking place, and all is well with the world.

It takes some believing. Exports bounce ahead with an annual growth rate of 6 percent and investment is sharply upwards despite the fragility of currencies and uncertainties in world trade. It might be right though and as my mother used to say, there really are fairies at the bottom of the garden. Why don’t I see them then, if that’s the case. You don’t see them because they only come put to play in the night, when you are asleep. And no, no camping out in the garden

Might all this happen? Yes it might but then on the other hand it might not. For the moment the Coalition has the better of the argument and yahboo is not an answer. There are many good tactical reasons for vagueness and indecision on the Opposition benches but it disappoints. Were Labour really to believe that growth will grind along in the valley of despair and unemployment and short time working is our fate, what do they propose to save us? If by a freak of fortune Labour became the Government in a few weeks time, what would it do? What for goodness sake is the Labour Party’s platform?

I don’t expect to receive an answer and for this vapidity I blame Ed Milliband. Leaders come in many shapes and sizes but one thing is for certain: they must be Pathfinders. By all means consult, detail is a virtue, listening is good BUT you are the leader and what do you say? Where do you wish to lead the Labour Party? What is your opinion? All these questions can be answered without detailed policies with all the t’s crossed. Tell us where you are and where you are going with this. And for God’s sake do it soon. A few more weeks of empty generalisations and you are lost for ever. Who really, in their mind of minds, wishes to go down in history as the Ian Duncan Smith of the Labour Party. Surely one Ian Duncan Smith is enough. Fail now and you are lost for ever.

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Happiness Pill Revisited


Some weeks ago I advocated the development and use of a happiness pill. Priority was to be given to our children and then progressively to all citizens in constant contact with them: parents,  other relatives and teachers and so on. I do not think David Cameron was among my readers because if he had he would not have committed himself to a happiness index.

Philosphically, an index is a difficult and complex concept  which seeks to codify incompatibles. It advances a simple proposition, first given us by Aristotle, that ‘happiness is the sole aim of life which consumes all others’. Well, yes BUT no. Consider the sadist. His joy and contentment is gained by acts of painful cruelty against others. And  the masochist, who is entirely miserable unless the subject of pain and ignominy. Is public policy to embrace both their needs? The miser wishes to hide and store his valuable resources while  the  adventurous  entreneur is stifled by lack of capital. The bully needs victims, the abuser the vulnerable, and the paedophile hunts the innocent. Are they all to be led onto the purple pathway to joy?

Consider the Puritan. What is the purpose of life? To do my duty, love God and my neighbour? Well, yes, but does that cover the arduous tasks of caring for those suffering from dementia or mental illness? Can performing the tasks involved for a 7 day, 24 hour, service to the afflicted bring human happiness to you?

My proposal for the national adoption of a happiness pill solves these problems. Everyone who takes a pink tablet will be happy. The sadist will not need his victims; the pressure of homework will be eased by jokes and pleasantries; while the male abuser does not need the alchohol his batteries are fueled on and takes joy in sharing the housework and doing the washing up. It is a universal remedy to a universal problem: unhappiness. No one on a pill a day will ever be unhappy.

Those housewives suffering from memory loss as a result of daily dosages of valium need have no fear. The happiness pill will not be toxic or addictive, and there will be no side effects. There will be many important benefits:  days lost from work caused by  depressive illnesses and boredom will be minimised. Even the most demanding and tedious of work tasks will be performed by happy and grateful workers. Output will rise and taxes fall. We shall have more leisure time and children will skip happily to school with completed homework in their satchells. Are you feeling happier now?

I can sense that our Dave remains hesitant. Dave, isn’t it true that on some days you are not happy at all and on other days you start happy and become miserable. If happiness is so important to you forget the nonsense of the index and take one pink tablet at breakfast with a glass of water every day. We shall be with you, Dave. And as we all know, because you have told us, we are all in this together. Cheers, down the hatch!

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The price of hypocrisy


Look old chap this interview is off the record. I trust you  to keep it under your hat because you look a trustworthy sort of cove. OK? Good. Of course I’m worried about the student reaction to we Lib Dems breaking our pledge on the raising of student fees. When it came to the cruch we did not think that this was an issue on which we should have called a halt to Dave and abstained on the Commons vote. I know it and you know it and I suspect that students know it too. On reflection we should not have signed the pledge. I agree that we made too much of it for short term electoral advantage in a number of university towns. Have a heart, we are only human you know. We didn’t think for one moment that we would finish up in a Coalition with the Tories. At least I didn’t, did you? It was so very tempting. After all who but a fantasist takes note of the daft election promises of a party that has never shared power with any other party ( a short, dry laugh). Am I upset about it? Of course, I am. Broken promises on issues like this do come back to haunt you. I accept that. What I really think that if after five years all turns out for the best, electors will have either forgotten about it or will forgive us for doing the necessary dirty stuff. They do have short memories you know, I can quote you some examples. No? All right it’s your loss. If the Coalition fails no one will dwell on our mistake with the pledge and  I shall  go down with the ship. What if we go down and not the Tories? Of course that is possible. I have bad dreams about this and wake up sweating. The Tories win an election and we are reduced to seven members.  God I hope not. Clegg the man of vice who ruined his party and went down with the ship! When I have had a shower and some coffee and toast, I usually recover. Look at it from my point of view. Leader of a tin pot party and then to everyone’s astonishment – including my own – Deputy Prime Minister and a heartbeat away from being number one. More than I could have dreamt about a year back. And for five years! When I look back on all this I shall wonder at what I achieved and make a fortune from my memoirs. Well, if Tony could do it why not me? And the party? Well, it will be a shame but a lot of people will praise me for giving them all a ride.  Am I a hypocrite. In some ways, perhaps. Name me a man who isn’t if you care too. I thought not. Difficult isn’t it? Could it be that I am a plotting man of vice as some of my members dub me. Yes, they do. A volatile lot these Lib Dems. Let me give you a quote. Oscar Wilde, Hypocrisy, he said is a tribute vice pays to virtue. Abolition of student fees? Desirable. One day, perhaps but I doubt if I will be around at the time. Tempus fugit and all that, dont you think? Bottoms up.

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Time To Get Real


On  29 November an updated report by the OBR will be published and George Osborne will give his reaction to it in the House of Commons. In July, when the OBR last reported,  Alan Budd was at pains to underline that his forecast was subject to massive uncertainy and that the Government’s policies to reduce the deficit had only a 40 percent chance of success. Despite these uncertainties commentators in millions of miles of typescript have confidently forecast the future  whether they were predicting runaway success for the Coalition  or double dip recession. Arguably, anything that has happened over the last six months should be written down to the Labour Government, credits and failures alike, but anything that happens from this point is down to the Coalition whose plans have been solidified. What will the OBR forecast reveal?

1. Uncertainty. Levels of uncertainty will be as great for our economic future is in the main determined outside the UK by happennings largely outside our control. World economic growth has slowed, currencies are in turmoil and British export growth is more precarious.

2. Growth and Employment. Alan Budd’s confident 2011 forecast of growth in the economy and high employment will be scaled back. In 2011 there will be no double dip but a churning along in bottom gear. Unemployment will rise in the immediate future before falling in later years.

3 As a consequence tax revenue will be scaled back and progress on deficit reduction  will be slower.

Here is a point then of realism.This is how the pigeons will , most likely, come to roost.  And what is to be done now after the gloss is worn thin? George Osborne will bluster it out. What else can he do? But  this call to reckoning is not for the Coalition alone, for eyes an ears will point at Labour. The electorate will wish to know what Labour would do if the Government. If Labour wishes to be pragmatic and oppositional and take things year by it must at least come up with a clear statement of what it would cut in 2011/2 and what changes in taxation it now supports.  Labour is in danger of losing public respect by obfuscation. It is time for Labour to be transparent and convincing behind a coherent policy agenda.

If Labour does this the electorate can choose. The lists will be drawn and the true battle begin. The economic future will remain murky but the issues will be rendered clearer. For Labour it is a call for Leadership.

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Welfare Compassion


The pathway to universal social benefits for those who need them has never appealed to the Right in politics. Their message has alway been, ‘very nice but the nation cannot afford it’. In their time the country could not afford a state pension, or the NHS, unemployment benefit, a minimum wage, or a guaranteed income for the disabled and the destitute. This conviction runs  in parallel with a value judgement: these benefits should only go to the deserving poor, and to its associate idea, that not many are deserving. It was once the case that poverty was considered not to be a sin but a misfortune. It was  the Victorians who branded it otherwise.

Social democrats have always considered welfare as a safety net through which the unfortunate should not fall. Human nature being infaillable it was accepted that there would always be some who abused the system but that no device of man could prevent some abuse. Taxpayers were the fortunate: after all they had income and their taxes helped the unfortunate.

Is it possible to select the deserving and weed out the spongers? One can try, it is right to attempt it, but the pathway leads to poverty, discrimination and, yes, a lack of compassion. There are a thousand reasons for some not working: mental or physical problems, looking after children or incapacitated adults – and a lack of work. Now all these people and they run to hundreds of thousands are for the high jump. If they try and fail to get a job any payment being made to them and their families will stop.  ‘Work will make you free’. Hold on, are they not the words above the entrance to the Auchwitz concentration camp? Some of these people, staring at the tellie with instant coffee to hand, know at the start they will fail. And what about the children? We shall look after them say the Coalition at the same time denying this family financial help. How will this be done? If they are shunted to a boarding house in Hastings, homeless, penniless, away from school and friends, are they being helped? Surely it is better and more compassionate to help keep this family together in its own home. It is usually better to have a home than not.

Well it is objected, I exagerate. It will not come to that. But it will for some family near to you, perhaps many near to you. What about your neighbour or your neighbour’s friend?  Let us consider the 8,500 London families whose  Housing Benefit is to be cut, some of these will lose their home and fail to find another. Not all of them you mutter, and serve them right, they, this family, should get on their bikes, assuming that they have them, and find something else. Some will, but some cannot. Perhaps no more than half, you retort, will lose out.  Oh that’s good not more than a  half, being 5,000 families in southern coast boarding houses. No problem. One would be too many, ten a mishap, but thousands of avoidable family disasters? Surely,  a shame on us all!

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The Use and Abuse of Statistics


There are maxims worth following whenever a politician makes use of statistics. In particular, in whose interest are the statistics prepared and published and are they being interpreted acurately and fairly. Let us consider the thorny issue of the effect on families in Greater London of ceilings and cuts in Housing Benefit. According to Government statistics,  and let us say they are right, there are 17,500 families and some 82,000 people. The London Boroughs speaking collectively are preparing plans for what to do if all these people could not pay higher rents, could not make other provision and were therefore forced to move.

Ask some questions:

1. Would all these tenants be forced to move? No, but no one has bothered to find out. Come on Government,  survey them first and give us the answer. 2. What proportion of these tenants are short stay anyway with agreements running up to 3 years.? Up to 40 percent of landlords, according to the Landlords Association but they would say this wouldn’t they. 3. Up to 30 percent of landlords according to the Landlord’s Association  They don’t tell us by how much. There are other estimates ranging fr0m 30-50 percent some of which come from Tory Councils. They would say this wouldn’t they. 3. Some of these tenants might be given social housing by their Councils. Source Tory Westminster Council. What is the current waiting list? Not given. It must be lengthy, say up to ten years. No chance. 5. Not to worry anyway the Government has put aside £130 million to mitigate hardship. Sounds a lot. Let’s say every family affected was a hardship case. If this was true 17,500 familes  would each get £742 pounds. Enough to pay 2 weeks rent. Whacko.  Lets be fair. Reduce the number forced to move by 20 percent as a result of lower rents that they could afford, and a further 20 percent for their own ingenuity, and ten percent for short term rentals and a willingness to move on. (Statistical point. These percentages are not additive) and we might say that 50 percent of families, 8,750,   will have to leave their homes  and most will go into boarding accommodation on the South Coast. 5.. At what cost? Not known.  Leaving this aside the Government could give the families concerned and the Councils bearing the cost £130 miillion towards the cost of this, that is £1,484. How long would this last? Are there jobs for them in places like Hastings with very high rates of unemployment? I have not seen any figures. Come on you Council’s, tell us.

You might say that the Coalition Government, in the interest of transparent administration should tell us. If Labour MPs were smart enough they could ask the Parliamentary questions that would give us all the answers. Come on you Labour MPs and Labour C0uncillors. Do your job.

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Can Governments Arrest Economic Growth?


I used to deliver a lecture with the title, ‘Can Governments Arrest Economic Growth.’ My considered answer was, yes, if they tried hard enough. The gist of the argument was that, ‘all things considered’ (the usual cop out) entrepreneurs and the rest of us were determined to improve our lot by hard work, skill and imagination, and that hampered as we  were by government meddling and poor policy making, we usually succeeded. That is where we are now. We should expect the UK economy to bounce back from a depression given the fiscal and monetary stimulous it has been given. Left alone, so to speak, we would come out of it and resume our normal growth.

What is different this time is twofold: we have a huge budget deficit which the Coalition is determined to eliminate in four years and a concious decision to run back public service for ideological reasons. What we all need is economic growth and ‘full employment’ and an end to deficit reduction delusions. The Labour stimulous has given us an inflation rate which will not come down and  there can be no more fiscal encouragement or quantity easing. Zilch and minus zilch for incomes per head for price increases will outscore the growth in wages, unemployment will rise as the VAT increase comes in  January,  and Boy George will be in trouble. He will not admit it. He dare not.

I had hoped, delusionist that I am, that we would then  have a change of Government. I do not believe this now. I do not expect the Coalition will change course, the Lib Dems will not rebel in sufficient numbers, and the Tories will maintain most of their support  amomg eectors as the  the country endures bleak times (there is something masochistic in the British psyche). And so we shall muddle on hoping for the best. It will be said that the British lose every battle but the last. So Boy George will cling to the mast, violently sick, together with the rest of the crew, but buoyed to the last with the conviction that the storm will blow itself out and the ship will find a harbour.

Well it might. It is possible but I plead unlikely. No one in their last mind would want George to fail for we would all go down with the ship. What do we do then as the crew is washed overboard? Best to do whatever there is to be done sooner rather than later you might conclude. Mutinies sometimes succeed but not often. As our Dave might say, if you want to have a mutiny, have a plan. Can someone help me. What, please is the Plan?

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Elasticity of Demand


Everyone is an economist these days and many of these new pundits have never read an economics text book. Alan Johnson is not the first to admit it and rumour has it that James Callaghan was sent  on a course at Nuffield College. Of course, some of their advisers  have read something along the lines of economics . So it was a relief to me to  tune in to a debate in the House of Lords on the proposed rise in tuition fees and hear economic terms being used.

An issue discussed was would an increase in tuition fees reduce the number of people applying for a university place particularly the ‘deserving poor’. The Coalition argues that when Labour did it applicants dropped for a short time and then the rise resumed. Well as any economist knows whether it rises or falls  depends on the elasticity of demand for university courses and their supply in the past and in the future. It is possible to calulate the numbers for the earlier period and make some reasonable forecasts now when the determinants of demand have changed. Has any one done that? if so please speak up. Obviously when Labour did it the demand for university places was rising and their provision expanded to meet this demand. The total number of applicants were on that part of the demand curve that was rising quickly.  The potential supply of students is not infinite and we would expect the rise in the percentage of the population going to a university to level off within its limits. Of course there is the issue of rising population and overseas students. No one said that forecasting was simple?

Then there is the issue of rents in London  the elasticity of demand for the properties occupied by 17, 500 hapless Housing Benefit families. What we might wonder are the demand  and supply curves for this accommodation in London. There is no doubt the population of London has been growing fast and the demand for rented accommodation has been rising. What is the percentage of these 17,500 homes to the total number of such properties in the whole of London by segment? Let’s guess. Pretty small I hear you say. And what is the demand for them? Well, you might say,  getting into the swing, the curve must be rather steep. After all who can get a mortgage these days? Atta boy you are getting the idea. What we need to predict are the growth rated in family establishments and the need and aspirations of people to settle in London. Look, you can stop at this point. I think you get the drift of this. What I am saying is that when you are seeking to change Housing  Benefit it is reasonable to predict the consequences and not make up fairy tales.

I am a prodigious borrower of books from my local library most of which comes from the British Library at £3.50 a book. My librarian tells me that the charge is to rise to £10 a book which is the real cost of the British Library lending it. I consult these books rather than read every word in them. At the British Library there is no limit to the number of books I can borrow in a day. Let us assume I work in the British Library on ten books free of charge which is quite usual for me. I can get there by train for £25. I resolve not to borrow these books  through my local library. It is a matter of elasticity of demand you see. Anyone know what it is? At the end of the year some accounting Wally will argue that there is no local demand and the Council should withdraw the facility.  And so on.

What is my gripe? The illiteracy of many people, and especailly, the politicians who debate these important public issues.

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