Category Archives: Alan Budd

Let’s Play Consequences


The electorate is a sceptical lot. So far that has worked in favour of the Coalition. After all it has to be accepted by reasonable people that the budget deficit must be lowered as rapidly as possible and if the OBR tells us that there will be more people in employment  by the end of 2011 then who will gainsay them. Opposition doomsayers predicting a 1930’s style depression  for some years can be safely shrugged aside. ‘They would say that wouldn’t they’ being  a common reaction. However, today’s increase in the  unemployment figures may make a difference to all that. Whichever way you look at it these are grim figures. So far the Coalition has benefited from the Labour fiscal stimulus and the first economic upturns in world trade. But as the blessed Gordon has told us there has been no follow through internationally to a viable global economic growth stategy. The moment has been lost and the monetarists have had their day. Goodness! Might Gordon (blessed be his name)  have been right all along? 

So far the Tories have been continued to ride high in the opinion polls at around 40 percent , marginally higher than in the General Election  while the Lib Dems have incurred the  public wrath with 60 percent of their vote disappearing. As the recession grips this will change , although given the nature of Tory  support among the affluent it is likely that support will  remain in the 30’s. The Tory position relies on  self-engendered high levels of confidence and David Cameron’s exuberant leadership. It can be expected that he will lash himself to the mast as the storms break upon the ship of state but not all the crew will remain. Some will cower below deck while others will wash overboard. The storm reaches an early climax in May with local and assembly elections and the AV referendum.

It is not all cheer for Ed Milliband. He has sought to play a long game and to plead unpreparedness for an early tilt at power. Might it not be desirable to build an acceptable platform much earlier than he has supposed? Come on Ed, get on with it. I have always believed that there should be good odds for an early General Election, say June 2011. I notice that the smart money has shifted  to it with the odds shortening  from 20/1 to 4/1. There is still time for you to put your money on. 

And a word to the besieged Lib Dems. Jump now while you have the opportunity to do so. Labour could do a deal not to oppose Lib Dem MPs linking  loosely with Labour at least in those seats in the south where the Libs may still have a chance. After all if the ship is sinking who could blame you for wishing to save yourselves.

You might think that I am in advance of my self and you would be right. But judgement is crucial in politics as in life itself. For God’s sake jump, your country needs you.

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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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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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A Bad Case of TNA


The Coalition is desperate to get us to believe in an acronym. It suffers from a bad case of TNA- There is No Alternative to the cuts announced in Chancellor George Osborne’s Government Spending Review. To this is added a myth: the British economy under Labour had reached meltdown  with an imminent threat of a Greek style collapse , a run on the pound and rising interest and bond rates. Nick Clegg told Radio 4 listeners of Desert Island Discs that he had searched his conscience about the cuts and had concluded there were ‘no pain free alternatives’. Unfortunately for Nick Clegg, his timing was poor. Almost at the same time a British Nobel Prize winner of Economics, Professor Pissarites said the the Government was taking ‘unnecessary risks’ with the economy and that the risks of a crisis in bond rates were minimal.

Consider the use of terms. Philosophically, the chances that there is no alternative to any decision is highly dubious. In most instances there are alternatives as in this instance. Clegg does not deny there are alternatives but he insists they are ‘not pain free’. Note that Clegg does not deny alternatives but states they are not pain free. We might think that if this is so what course of action would cause us least pain. This type of analysis, a choice between disagreeable alternatives and an issue of judgement,  we might be able to accept. Not TNA but a choice between difficult choices. Now you are talking. You admit that there are difficult choices, you might accept that the risk of the collapse of the British economy is minimal and that you together with George Osborne have opted for one of them. 

There is something of Uriah Heep in Nick Clegg. He is at pains to tell us that he searched his conscience. This statement differentiates him from others who might be thought not to have a conscience. He may have searched it but one is bound to remind him that he found it wanting on this occasion – it let him down!

It is the philosophy of the Right in politics that it is in favour of small government, the diffusion of power from the centre, low taxes and the denial of the enabling powers of the state. Perhaps on this occasion Clegg found his conscience wanting because at heart his soul belongs to a Right wing Tory philosophy. Indeed it a fit of honesty a few days ago he admitted it. If this is so it would not be insulting to the intelligence to admit that you cannot put a cigarette papoer between the politics of David Cameron and Nick Clegg. I am inclined to argue, being somwehat sceptical in outlook, that he will at some time join the Cons taking some power greedy Lib Dem members of the Government with him and splitting the Lib Dems. We could write the speech he might make at an e4mergency meeting of the Lib Dem Parliamentary Party.

This speech will begin with the words, ‘As you know I am a Lib Dem supporter to my very core (he shows his membership card). I am bound to conclude that there is no TNA. I have searched my conscience and found that, as I suspected, there is no TNA. Applause, a few mutters and stewards standing by the emergency doors.

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Pain and No Gain


The success of George Osborne’s spending review, or otherwise, is a question of judgement. Is George right to conclude that after four years the budget deficit will be eliminated and the UK economy and total employment will have risen. If he is right we might shrug and say, as many commentators do say, that many of us may have driven to desperation but that the economic problem will have been solved. Good old George we might say. He is our saviour.

I am distressed that the discussion is so loose. It is true that earl;ier in the year the Office for Budget Responsibility (OBR) believed that George might be right but that the Goverment’s statistical chance of being right was 40 in a 100. In other words, if he was a horse  at that time the odds were 2 to 1 on. A gamble? Not really but many a horse loses at these odds. What might the odds be now? The OBR has another go in November. Since then many economic signs indicate the odds have worsened. Whether the OBR alters the odds (and I think they well might) is an unknown. Perhaps the odds then may be 3,4,or 5 to one. You pay your money and takes your choice. Do you want George to gamble people’s jobs,  welfare and family prospects at odds of say, 4 to 1 ? Well, not my job George, if you don’t mind, would be the likely response. To put my job and house at risk for those odds would in my mind be an unjustifiable gamble.

What do I mean? I think that George is wrong on a number of matters. First, I follow the IFS in suggesting that George’s spending review will not eliminate the budget deficit. He is relying on substantial efficiency savings in Government Departments. Come off it George it is far more difficult that you realise. We have all been there before. The worldwide economy is recovering slowly with many months of slow growth ahead of us all. What will George do  if the numbers do not work out? He tells us that he has no Plan B. I do not believe him. Rather than admit that they were wrong the Coalition will plunge on with further cuts.

Politically what will the Lib Dems do? Whatever they do, it might be argued that they are doomed. They may split with the Lib Dem ministers clinging on to the Tory coat  tails and the rest abandoned to the political wilderness. This might be very obvious by next May.

Can the Opposition in all its forms bring this Coalition experiment to an end? Not now. Next June, when we are all examining the damage? Why not?

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Three of a Kind


Ruthlessness is a underestimated political virtue. With the election of Ed Miliband as Leader of the Labour Party, we have three ruthless, youngish, men leading our main political parties and the ‘game is a-foot’. Ed Milliband has had the courage to sweep his brother aside, separate himself from a past that had in the end failed his party, and  thus able to re-shape the social democratic message to an electorate that may be  willing, if not now at some time, to listen to him. This is precisely the path that Cameron and Clegg have taken in the pursuit of power. And this is what WE ELECTORS expect of them all.

For the moment the Coalition is centre stage. If we are to be fair they are confronted with a massive challenge to deal with a budget deficit that could swallow us all in a ‘black hole’. Fortunately for Labour it can stand aside if it wishes and the fruit may fall off the tree. If so it must be far more effective in deflecting the blame for our economic woes away from a Labour Government that in some ways failed us. If these massive Coalition budget cuts do not work out well, and they might not, it won’t matter. A decent par round will do the job. After all I remember Nick Faldo winning a major with a final round without any birdies. If the economic outcome is indecisive with a long period of modest growth, which seems to me to be the likely outcome, playing a straight bat and making the right noises (to mix my sporting metaphors) may still do the job. According to the OBR there is a 40 percent chance of the Coalition economic policy producing the goods. Of course the OBR is now under different management so the odds may change by end October. but at the moment the odds are not unattractive.

What should Ed do? Having cleared a space for himself he might place a stress on competence, new faces, appropriate noises, not too many policy initiatives; an Opposition that is co-operative but determined, with  emphasis on a few political strategic issues of importance to us all and where he can win. Push, push, push and hold onto everything he wins.

Can he do it? I think, yes. So far he has been very brave, determined and right. But not many, not really, are watching, and he will not be able to hold the stage. But what an opportunity he has for striking electoral gains in Scotland, Wales and much of England by next May. We all love a winner.

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Clegg’s Tactical Error


It is rumoured that David Cameron insisted on approving a draft of Nick Clegg’s Lib Dem Conference speech. Of course I am neither able to affirm or deny this. Perhaps, if true, the conversation went something like this.

Sit down Nick, do. This speech of your’s. I have some suggestions and I have made some amendments.  Andy can help you with a redraft. Thanks Dave, I’m grateful. (pause). There is a lot of this red ink, Dave. It will take me some time to absorb it. It’s pretty simple really, we have agreed that neither of us is going to engage in criticism of each other. If we do, the game is lost. We can argue in this room for as long as you please but once outside the Coalition speaks as one. Or to be more accurate, you and I speak as one. If we don’t we are going to have a growing anarchy in both our parties  with everyone feeling they can policy cherry pick. Well I understand that but we do need to have safety valves with room for a few mavericks to sound off. Of course so long as it is understood that the mavericks do not represent the Coalition.

And another thing Nick don’t overstate your claims. What do you mean? Bashing the bankers, Nick. Tone it down. We need them- whatever I or you say in public – to move us out of this depression business. We have a world leadership position in financial services. We need these City guys to motor us forward. No future in widget production Nick. And another thing,  don’t make too much of the benefits of closing off tax evasion. That idiot Danny Alexander keeps talking about tax avoidance. That’s legal Nick. You and I and most of our friends practice it. I’ve looked at the figures. Every Government goes on about closing tax loopholes and they try to no avail. Nothing in it Nick. We must not look like idiots. How did you put it Andy? The first rule of politics is never to believe your opponent’s propaganda,  and the second is not to believe your own. (laughter).

Look, Nick, I think of us as friends as as well as colleagues. There is no future for you in your sandal and beard brigade. They will drop away. What will be left is you and me and our friends. They can go their own way. They will be happier in a wilderness. But not you Nick and not me.We can go on for a very long time. Keep it simple. Be brave and rely on Labour to shoot itself in its own foot. They are  good at that.

It’s a big gamble, Dave. A very big one. They could get rid of me if things turn out badly. Come, come, Nick. The’ve never had it so good.

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Coalition Symptoms of Madness


I am a social psychologist specialising in group behaviour and I have been asked to determine whether the Coalition government in its frenzied determination to make  deep and irrevocable cuts in public expenditure is mad. In the first place I would point out that the behaviour of a group as opposed to a single indivdual cannot really be described as mad. Put it this way, if someone you know insists he is Napoleon Bonaparte or a hatstand you might reasonably accept, on the evidence of bystanders, that he is barking: but what if 30 people came to the same conclusion? Might we not hesitate? It would seem unlikely but if thirty people with ordinary features and characteristics were to say so you might hesitate: perhaps, they are right and you are wrong. Still, I think you would come to the same conclusion.

Let’s look at it another way. I shall list some symptoms and characteristics that indicate madness in a group of people in a clinical sense.1. This group has been scorned and rejected for a long period of time and now comes into its own. They are right. They have always been right, yah boo!2. The Group has a divine right to act out its beliefs in public, whatever the evidence may say to the contary. 3. This divine mission cannot be changed to suit the circumstances and events of the time. God cannot be challenged and his mission is sacrosanct.4. Those who challenge the mission  are accredited agents of the devil. 5. God created group members in his own image. People like us, having been so created, are entitled to re-build the world in our own image. God’s values are our own and we insist upon them.7. Revolutionary methods are appropriate because the world has departed too far from God’s/our own image of it.8 The telling of whoppers in pursuit of our mission is justified. They have served God’s disciples well down the ages. 9. There is little time to waste. God’s tasks are challenged every day. 10 We have no fear of God’s verdict But it would be prudent to shift Judgement Day well into the future.

You might think that these ten points do describe the Coalition’s behaviour (it is not an acceptable objection to this conclusion to say, you must be talking about our darts team, social club or trade union branch). What you ask can be done about it?

Let us be guided by good literature. In Alison Lurie’s, The Seekers, God did not appear to an evangelical group at the time predicted. Members melted away and took up hobbies and one went clinically mad, although he might have been pretending. In Lord of the Flies a group of boys were rescued from a desert island in time to prevent a murder. If a group is mad events will not work out as predicted by it. Its members become demoralised and others come to the rescue. However, madness and mad behaviour can be harmful. Learn how to recognise it and resist, offer sane alternatives, appeal to the public’s good sense (well you have to believe in something!) Act at the earliest possible moment before irreperable damage is done. Touch wood before you go out to work in the morning. And good luck!

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Austerity Without Impoverishment?


The road to hell is paved with good intentions. Few doubt the sincerity of Lib Dem members of the Government: they do genuinely wish to be fair and to reduce  poverty, especially among children but outcomes depend on the implementation of the right policies not Conference resolutions. These thoughts are prompted by a report of the Institute For Fiscal Studies (IFS) which concludes that as a result of fiscal measures take by the Coalition todate the poorest families will lose five times as much as richer childless families, as a percentage of their annual income,  over the next four years.

The debate about this  will need to address a central dilemma, The question is:  when real incomes fall, as they will over the next four years, can you protect the poor and vulnerable? No, you can’t. The popular ditty is right: ‘the poor get poorer and the rich get richer.’ But you can alleviate the impact of fiscal constriction. The burden of cuts cannot all be borne by the public sector for poor people are more dependant on them and the incidence of tax increases must not fall unfairly on the poor. The case against the VAT increase, despite the increasingly sophisticated reasoning in its favour, is a case in point.

The Lib Dems cannot prevent unfairness by talking the talk. The truth is that they have sold out. They are committed to support Tory policies to eliminate the budget deficit in four years and mainly by swinging cuts in public services. You can’t help the poor by contracting the economy, reducing their chances of a job, and  slowing the growth of national income. Chickens will come home to roost. If you are patient and wait a short time you will see them return.

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