Category Archives: Treasury

Cameron: I Have a set of Logical Prejudices


A Statement on Belief:
Some people believe that as an OLD ETONIAN I have a narrow concept of life and the everyday concerns of ordinary people. What nonsense. However I confess I do have a firm set of prejudices and I am happy to tell you something of them.
Empire, Monarchy and Neo-Colonialism
Charliechops has criticised me for a narrow nationalism. Let me be clear. I am proud to be an Englishman (or should I say Briton, however to my mind there is no difference). We Brits have colonised the world and brought our belief in parliamentary democracy, the rule rule of law, and a benificent British monarchy to vast numbers of ignorant people in other countries. I am proud of that. Today we have to be a little more careful but nevertheless we assert our right to depose rulers throughout the whole of Africa and the Middle East in the name of economic trade and investment. And why not? Better for us to get a share of unexploited wealth than the Chinese. Do you get my point? Get in first and give it a whirl.
Johnny Foreigner
I am against ‘Johnnie Foreigners’. If I had my way I would keep them all out. Well not quite all of them. There were some jolly nice foreigners at Eton from good families. Their Dads often had proper sorts of houses in the West End and invested in Britain. Good for them. No I mean the others living off Benefits in places like Southall, Leicester and Wolverhampton. We can do without them. On reflection not those who own restaurants snd convenience shops. Jolly useful those. I like a good currie. Oh, and I forgot, nuclear scientists, doctor and nurses. I’m in favour of those – so Vince Cable tells me.
Capitalist and Entrepreneurs
I like capitalists and entrepreneurs and make no secret of it. I want them to get very rich and to invest and create jobs in Britain. I know a lot about this. Many of my best friends are capitalists and I like to boast to them that in my government we shll reach unparalled heights of assistance. I want these people, some who I am proud to acknowlege as my very best friends, to get seriously rich. In this I speak for other members of my Government, in particular my close friend George Osborne who you may have heard of. Ring a bell?

Anyway I hope you get my drift. I am a man of many firm convictions and I intend to stick with them. I hope you do not mind if I remind you of them from time to time.

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Osborne: The Door Tax


The rumour circulating the corridors of Westminster is that our George is to introduce a door tax in next weeks Budget. A door tax! I hear you exposulate.What the hell is that? Hold on. I’ll explain A great deal of thought has gone into this. I’ll elucidate.
It’s no good just increasing taxes on a few regulars. It is subject to diminishing returns (See ch.2, Bentham The Principles of Economics). We need something that is new, easily levied and fair to rich and poor alike. By door I mean door space – every room has to have one. I know you smart Alec’s will take a screwdriver and remove the doors but you can’t fill up the spaces and get in and out of the room. Caught you there. We don’t need to be precise. There would be a scale according to the number of romms. Lets take the usual sort of 3 bedroomed house. We would assume 8 door spaces, a two bedroomed property 5 spaces and so on. Now here’s the egalitarian bit. How many doors does a mansion have? Well a small one might have 15-20, a large one, well goodness knows. Let the devil take the hindpost. Get the idea. Let’s assume £10 permonth for a small property and £40 for a large one: that is the tax wil range between £60 a year and £500 a year with the rich paying more. Get it? The number of homes is some 35 million (Well you try to do better.) This we can say is an informed guess. The type of forecast you would expect from the Treasury -let alone the OBR, giggle, giggle. This revolutionary new tax would raise £1,800 million a year. Good bye crisis. Move to one side, David, I’m coming in. The Treasury watchwords under my guidance are create, invent and pioneer. We Osborne’s didn’t get where we did in life by the wailing and nashing of teeth. At least not our teeth!

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The Economy Stupid


Elections are won on economics: its the economy stupid. Our numbers are bad but they will become worse. If the Eurozone collapsess they will be disastrous. But party alleigances are static. Hello, out there is any one listening. The reasons for static polls are well-known: mcu blame is attached to Labour’s inheritance of deby and the, seconly, the electorate are dogmatically fair-minded – they give credit for trying. The Coalition is trying – but in more than one meaning of the word. So it is a long and hard road for Labour toi convince the electorate that they could do better. 

What will change things are events. Anyone looking back in 2011 knows how difficult it is to predict them. If they are external events there is a breathless pause while the country rallies round. What woul be the public reaction to a forced opening of the Straits of Hormouz if petrol prices doubled. How would the public react to yet another war? Would it really come to that? It might. Would things look bad for the Coalition if unemployment topped three million. Mrs Thatcher recovered from that but then she needed a successful invasion of the Falklands.

Sometimes Government’s implode. What would make the Coalition implode.  European policy might if Cameron was foolhardy. Surely he won’t be tempted but you never know. Perhaps not. The Coalition might split. Not much chance of that. It is in the Lib Dem interest to soldier on rather than than be decimated by the electorate. 

Once I would have been bold and would make a prediction. Should we settle for a quiet life with more of what we have got. I hope not. Perhaps if I predict it we shall get something more exhilarating. OK nothing will happen in 2012.

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: Public Borrowing: Nearer and nearer draws the time


The constant ctiticism of the Government’s budget deficit figures is that the cuts are too great and too fast. The effect, or merely the impression, that this is so affects consumers, output and employment. The prognosis of the Coalition is that such a policy will lead to a stagnant low-growth economy and the deficit would not come down very much, if at all.

It is disappointing to the critics that so little publicity was given to public borrowing in the first two months of this financial year which shows just that: borrowing in the first two months of  2011/12 is up from £25.9 billion to £27.4 billion – up not down! 

Of course one swallow – or is it two- does not a summer make. Or does it? Well, this argument should be settl;ed in July when we have three months figures for GNP, empliyment and public borrowing. It will be a relief to pass from conjecture to fact. There are enough straws in the wind to suggest that growth will be either exceedingly modest or none at all. If then public sector borrowing has not fallen when compared with last year, the Coalition target of eliminating the deficit in four years will be lost.

Politicians will busily spin. It will be argued that there are special factors: currency uncertainty in Europe, a stalling US economy and slow downs in the BRIC countries who are expected to fuel a global economy. All very true and plausible. However, these pleas should go on deaf ears. There are always special factors and Governments are supposed to make allowance for them. The game will be up – and it should be called.

The absence of what is called a Plan B, or Plan C for that matter, places the Coalition with a conundrum. What is to be done? – as Lenin would utter. Is such a dilemma not worth a vote of no- confidence. I can hear the objections. There is no prospect of unseating the Government  and you look silly and weak if you move these motions without a chance of a majority. Is not this what the leadership of the Labour Party is really about? The baring of breasts and the gnashing of teeth which passes for Opposition now does not meet the challenge of the times. What about a reasoned motion putting forward a number of believable proposals for kick starting the economy followed by a no confidence motion? Anything less than this will fail. Those who urge an alternative economic policy should have the courage to enunciate it now. Well in July, actually. Any sign of heads being knocked together or is it time for hols? Time enough said slow.

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Riding the IMF Horse


There used to be a day when the British economy was not run to please bankers or technocrats in international bodies. Alas, they are passed. However, it is worth asking when you read a forecast, in whose interest is it published? The IMF believes that it is important for its members to reduce public indebtedness and makes it a public objective regardless of the beggering of any nation’s citizens until this goal of public policy is realised. Naturally it is supportive of the budget deficit programme of the Coalition. The IMF  addressed  the issue of a Plan B. You will be pleased to know that if growth remains low the IMF would support monetary easing, keeping interest rates low and putting a brake on cuts (without anyone noticing it). In this way the deficit would not come down quickly in the first two years but would come down faster in subsequent years.

This revelation of the existence of Plan B is hopeful but not reassuring. If growth is slow, the main body of public expenditure cuts is realised , and assuming all other parameters are stable (other than unemployment) the deficit will not come down. The credibilty of the Government in the markets, which Boy George goes on about, will be lost. If then the Government persists it will be confronted with a mountain to climb in years 3 and 4 when credibility is lost and the deficit stubbornly high. If then Georgie  presses on growth will remain low throughout the five years, So what then Grannie do we do next?

Well, dear, says Grannie, it might not be as bad as that. That’s what they all say, says I. What is the use of saying that when the flood waters have reached the bedroom sill? Shouldn’t we have been alerted before this time to leave the house? Hindsight,  says Grannie, it is an easy art.

There are other dangers. The IMF talks bravely about global growth rates remaining high,  surviving high commodity prices and resuming stable growth and low inflation. But then he would, wouldn’t he? But  we know that all recessions and recoveries are unique. Perhaps this depression will last for ten years or more. And what shall we do then Granny, says I. Don’t worry dear, says she, I’ve put a little money aside to cope with the odd crisis. Well Granny, that’s the problem. We have been using it. Using it? No one told me that. The problem Grannie is that debts continue to rise. Good gracious, what did you say about the bedroom sill. Take me there. There’s time to jump. A splash is heard, off stage. Granny, you can’t swim! These words came too late. Poor Granny, poor me -oh, and by the way, poor you.

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The Obama Doctrine: A Signpost to Disaster


President Obama is an eloquent exponent of the American Dream and gave we European’s a version of this on his visit to Europe last week. Dreams are important to us all but they rarely survive long in the harsh glare of light and to seek to fulfill them can lead to disaster. In the current version the extension of universal rights to democracy, representative government , equality, and the rule of law should become a foreign  policy objective for the West. Its immediate focus is on extending democracy to Africa and the Middle East. In the pursuit of this objective all means, economic, financial and the use of force as a last resort are in order. It has become unanswerable in this docrine that democracy is best not only for human happiness but for the trade and economic development on which the economic stability of Western countries is so dependant.

The Obama doctrine finds an enthusiastic audience in Britain and the European Union. Scarce resources are being provided for the funding of aid and active assistance in nation building and the UN itself is enthusiastic about nation building wherever its sway can be achieved. No one is more enthusiastic than David Cameron and, judging from his recent public appearances and pronouncements,   Ed Milliband.

I hear raised voices at this point. What is wrong about that then? Hold on, my revolutionary friends, say I. Rember the Mensheviks. Do you have a monopoly of vision and prophecy? Can you at this moment of history tell us what will be the outcome of the Arab Spring? Do you expect reason to prevail in Israeli- Palestinian relations? Can you predict the political develpment of Iran?  What will be the nature of successor regimes in the Arab world? Is there more to this world than is dreamt of in your philosophy? Much derided as it is it is now, there is logic in the foreign policy objective of seeking stability in the world and not adding to political turbulence. Perhaps we should be a friend in need to emerging nations and not a friend in your face.

Can I point out to you dear British reader that you live in a country constantly at war in ‘far-away countries’ for the ideals that we share with President Obama. More so than any European country we have been alongside our American friends in worthy (but impractible?) causes around the world. Let’s have more of that then, I hear you say. We Brits have an appetite for it. Does not the call to arms and economic and financial sanctions on  recalcitrant states weary you a little? Are we to have a further two decades of armed struggle with all the division among ourselves this brings?

Well, yes, if need be may be your reply BUT I doubt it. I suggest to you that it is wholly absurd to commit ourselves to the Obama docrine at a time of great austerity, economic stagnation and public expenditure cuts, not least to the armed forces; that to be ‘playing soldiers in Libya’ and perhaps elsewhere is an unsupportable nonsense. For the cost of an intervention in Libya, soon to run beyond a billion pounds and ever upwards we could, for example, ensure the financial viability of care services fior the elderly, boost low cost housing or extend aid to the unemployed. No one would receive a tin medal for it but it could do good. The best way to build respect in the world is to earn it ourselves for our love and attention to our nearest and dearest.

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Cameron: I Speak My Mind


Look Charlie, I’m getting tired of all this criticism. What I told the public – and some believed me – was that we Tories were going to roll up our sleeves and get things done. You should at least acknowledge that we have been successful in this. Not a day passes without a new iniatiative: legislation, white papers, special committees’of enquiry. You name it and we’re doing it.

That’s just my complaint Dave. These so-called reforms of your’s are half-baked and driven by ideology, a narrowly based schemata of outdated right-wing philosophies common in the South of England and loathed elsewhere. You do not recognise the difference between a statement of principles and a detailed implementation of a policy, you do not genuinely consult the people who will be affected by Coalition changes and then of course when you get tired of banging your head against the wall you change your mind and parade a retreat as a victory. Do you wish me to list these policy retreats? No, I thought not.

Charlie, you are not fair. For the sake of this argument, let me accept that we have made some mistakes. But I would suggest to you that we are quick to react to intelligent comment and we have the guts to change our mind to accommodate good suggestions. Isn’t that a sign of maturity and inclusion? Well it may be Dave but I would prefer to describe it that you are indeed quick to recognise a cock-up when someone points it out to you.

I think  that this is not worthy of you Charlie. I have read a book on leadership ( I can’t remember the title for the moment but when I do I shall tell you). Anyway, Charlie, this author categorised types of leader and I used these to recognise and define my own style. I am a pathfinder, Charlie. I find the right path and charge down it shouting for others to follow me. I do not want you to tell people Charlie but Tony Blair was a pathfinder! I can believe it Dave. Did you think of Tony Dave when you committed British armed forces to Libya? I seem to remember being told by Tony that ian invasion of Iraq would be a 7 day wonder. In and out in no time. Today eight years later we finally withdrew  our sailors. Did you not tell us something similar Libya? How much longer will we be wasting scarce resources there.

There’s no comparison Charlie and you know it. I am determined to exercise my leadership everywhere in this small world. Just you wait and see. It will all work out well in the end. I confidently predict that we will be out of there by the next General Election (unless of course we run out of amunition!) Ha, ha Charlie, that’s a joke. Seriously, though Charlie you have a point. Not much of a point but a point. You will notice that after a year or two we shall slow down and consolidate. We have to leave something yet to be done of course. We don’t want to run out of cornucopia, so to speak. When I win the next General Election Charlie I shall grant you an interview and you can publicly admit that you were wrong about me. That’s if you want one!

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Lib Dems: They Just Don’t Get It


There is now a Lib Dem mantra designed to show how Government has been materially improved becaus of its involvement in the Coalition. What we have, it might be supposed, is really a Lib Dem administration. The party can come up with a long list of its achievements. One by one Lib Dem policy dreams have been put into place. It is necessary  side for the purpose of this argument to recognise that there are   policies that those of us on the left can support: higher personal tax allowances, improvement of tax credits for the very poor. the triple lock on increases in the state pension, the Pupil Premium to help some disadvantaged poor children. Good on you, say I.

Do these policy changes make people less poor?  Yes, they do in a way. However, alas and alack, the imposition of VAT dwarfs these advantages and the poor will get poorer. I will not dwell on the LiB Dem opposition to any VAT increase in the General Election campaign except to comment the they were against it. We all remember the poster. They were against increases in tuition fees too and then suddenly they were not.

But what is the heart of the matter. Remember, the Lib Dems were against cuts in public expenditure on the scale propsed by the Tories. Now they are not. What they tell us now  is that these cuts are necessary and like Pilgrims Progress to the promised land they bring us all closer to full employment, rising living standards and sunshine. Trust us, you will see how wise we are it is said.

The Lib Dems no longer command trust. But are they right? Certainly the OBR has consistently produced economic forecasts that suggest they might be. We are days away now from a reckoning. The first quarter GDP figures for the for 2011 is soon to be announced. It may be that over the last six months the British economy may not have grown at all, or if it has it will be  at some miserable annualised rate. Unemployment may be rising not falling, inflation will continue to work its way up and not down and real incomes will be squeezed further. I do not know whether the OBR will be asked for a revised forecast but even if they are not asked, it is highly likely that some other respected forecasting institute will make a good fist of doing it.  And what will be observed? I anticipate it: a rising budget deficit and no chance of the Coalition’s economic objective of eliminating the deficit by 2015 being achieved.

Is this not the real charge against the Lib Dems? Not the cavilling  daily objections to their nonsense BUT one overriding error. On the essential and over-reaching issue of how to keep the economy growing and the public deficit falling THEY ARE PLAIN WRONG. The Lib Dems have sold their soul for a mess of potage to find it uneatable. The electorate will not forget it and a day of reckoning is close.

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The Economy: Spotting the Runes (Ruins)


One of the mysteries of our lives is the constant confidence of the OBR in economic recovery. There is, it is said, no need for a Plan B because the independent OBR tells us that the economy will recover. Each OBR forecast downgrades its predecessor but there is no denying the cheerful tone of its forecasts. In its recent forecast the OBR expresses the thought that the slide in output in the last quarter of 2010 was a dud figure and suggests that the decline was 0.2 percent and not 0.6 percent. On the back of this assumption the OBR confidently expects a bounce of 0.8 percent in the first quarter of 2011. The OBR gives a reassuring drop in inflation in 2012 to a rate of 2.5 percent.

We shall have to wait for the inflation figures but the output figures are available in some four weeks time, that is before the May local and assembley elections.  If the OBR is right, or nearly right, the Coalition can heave a sigh of relief but if they are wrong or mostly wrong they are up to their fetlocks in the mire.

One forecasting way out of such a dire consequence is the use of fan charts. These charts show a range of outcome. You can rely on it that the Government will finish some way between higher and lower points. It does this time. What a relief. But supposing , just supposing,  in April it is towards the bottom and not the top of the range. Is there then a Plan B? And what does the Daily Mail say then, poor thing? And what is the answer?

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The Budget: A Tiptoe into Fantasy


A word about forecasting now that the OBR has had its third attempt to plot the economic progress of the British Economy. Like accountants before them the OBR is useful in recording the past but well-nigh useless in forecasting the future. We live in a time of  extreme economic turbulence and uncertainty when at any      time  wars, earthquakes, worldwide  pressure on resources and the stupidities of the human race can turn  nice judgements into inanities. Yet still we persist. It will be better in the future: the economy will grow, employment will rise, inflation will come down and real incomes will rise again. The OBR at least has the common sense to admit that all its forecasts are subject to great uncertainty. Well yes, they say, it may not turn out like this but we hope it will.

I commit myself to several judgements, First, the attempt to eliminate the budget deficit in a five year Parliament is doomed to failure. At  best the Coalition may complete the Parliament having achieved what Labour continues to promise: the deficit could be halved. We have in the Coalition a group of supply side fanatics who have always maintained that growth must come through a smaller state and greater productivity, who are antagonistic to public administration and welfare and suspicious of the state as pump priming anything. Come back Milton Friedman, all is forgiven. Economists have an adage that you can lead a horse to a trough but you cannot make it drink. The IFS has remarked that the numerous supply side intiatives announced in the Budget do not amount to a row of beans. They will add nothing to aggregate demand. What is needed is the pump priming of capital investment in rail, roads and building construction and a real (rather than imaginary) attempt to raise skill levels. Of course the Government is aware of these needs. It is doing something – but too little.

The central issue of George Osborne’s budget is a judgement of whether this Government at this time is right in believing that it is possible to eliminate the budget deficit in five years. If it is right in its belief it will go on to the glory dreamt of by our Dave and Nick. The objectives of financial probity and economic sucess will be achuieved and electoral success will be the reward. If it is imposible for Britain (and I suspect Greece, Ireland and Portugal) to do anything of the kind when will the game be up? I suggest the Budget of 2012 will be the time of reckoning. The Parliamentary rules now make it difficult to get rid of a Government – but not impossible. And at this time who might be leading the Labour Party. Might events work in favour of Ed Balls? The electorate love a winner. Watch this spot!

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