Tuesday, February 26, 2008

Speaker Martin's had his day.

Many years ago, when I was a hack in the Westminster Lobby, a newly-elected woman MP came up to tell me of her surprise when, on her first day in parliament, she was taken aside by Michael Martin and friends and shown how to fill in her expenses. Had to get the priorities right after all. Some things are too important to be left to chance.

She went on to become a minister, he became Speaker of the House of Commons, but for all the grandeur of his surroundings, Michael Martin always remained essentially a shop steward - a guardian of the pay and conditions for the amalgamated union of MPs and allied trades. He’s a kind of parliamentary Red Robbo - with a touch of Goodfellas. And that is why many MPs stood by him and do so today - out of fear and affection - as the clamour rises for him to step down from the Speaker’s chair because of liberal use of expenses.

He is also Clyde-built and doesn’t like hacks likeme poking their snooty noses into MPs’ business. After a comic-opera altercation in the Members Lobby in Westminster about a piece I had written about how MPs harvested their expenses, Martin once reported me to the Deputy Serjeant at Arms. He didn’t chop my head off, but it was a close run thing. Nowadays Martin has the top-drawer libel lawyers, Carter-Ruck, employed at public expense to defend his image. So let me say right away that Mr Speaker is a man of impeccable integrity, a teetotaler, who I’m sure has never fiddled his expenses.

But you have to look at the current expenses row from Martin’s trade union mindset. To him, a job’s a job, all jobs have perks associated with them, and there’s no reason why MPs should be any different. So long as they are obeying the rules, it is nobody’s business but theirs.

So, he has claimed £75,000 in accommodation allowances for a house he already owns without a mortgage. That is within rules, and lots of other MPs do exactly the same. So, he charges parliament £7,595 for using a room in his house as a constituency office, even though his house isn’t actually in his constituency. Again, fully declared and passed by the Parliamentary Fee Office. His wife used taxis to go shopping, but how many business executives can say they have never used taxis for personal use? He has used air miles for family trips? Oh, come on...

Now, I don’t have a lot of deal of sympathy for Michael Martin, who has not been a great Speaker and after nearly eight years has overstayed his welcome in the Commons. He has also been an obstacle to the reform of parliament and the introduction of freedom of information to Westminster . However, I can understand - well sort of - why he might be indignant at being painted a sleazeball for sticking to the rules. But times change, and Speaker Martin hasn’t changed with them. We are living in a period in which the Palace of Westminster is being dragged kicking and screaming into the new era of transparency and accountability, that this Labour government itself initiated following the sleaze scandals of the 1990s. As with the dodgy donations row, which brought politicians like Wendy Alexander to the brink of resignation, Labour politicians never thought that the new strictures really applied to them. Now they know.

Actually, a lot of Speaker Martin’s problems really began in Holyrood. It was the Scottish parliament that introduced proper financial accountability to British politics. It’s no accident that the kind of troubles with which he is now afflicted are instantly recognisable to anyone who has been following our petty scandals. David McLetchie, the Scottish Tory leader, had to resign over his use of taxis; Henry McLeish over subletting his constituency offices. There has been a long-running Holyrood row over MSPs like the LibDem Tavish Scott allegedly profiteering on second homes bought with their parliamentary allowances (a row which received a bizarre twist with the Sunday Herald’s revelations about the Deputy Presiding Officer, Trish Godman, buying her imprisoned son’s flat in Holyrood).

MSPs in the Scottish parliament have learned the hard way that, in modern politics, you really do have to be “whiter than white” as Tony Blair famously put it. Just sticking to the letter of the rules isn’t enough. You have to ask what ordinary voters would make of the rules you play by. Is it right for MPs to use tens of thousands of pounds of public money to invest in the property market? Well, no it isn’t, when so many young families can’t afford a first home let alone a second.

Is it acceptable to employ wives and relatives as researchers and secretaries? Well, the jury is still out on this one, but the Derek Conway affair demonstrated that this practice - which would not be allowed in the US Congress - is no longer safe, and that MPs have to be very, very careful to ensure that the beneficiaries of their nepotism actually do the work.

I find the scandal of Mrs Martin’s taxi use - the cause of Mr Speaker’s latest crisis - more sad than bad. On Saturday, Speaker Martin’s spin-doctor, Mike Grannat, resigned because he had unwittingly misled the press about the nature of Mrs Martin’s shopping expeditions. He had been told - and had in turn told journalists - that these were on Palace business and that an official was always with her. Turned out that the “official” was actually the Martin’s housekeeper.

It is commendable that the Speaker’s wife is so down-to-earth that she takes her cleaner as a companion. It probably never occurred to her, or her husband, that she was doing anything wrong. Indeed, she probably wasn’t, because there is nothing in the rules that specifically precludes the use of taxis by the Speaker’s spouse. But there is now - and the departure of the spin-doctor must surely be the beginning of the end for Brother Martin.

There has been a deal of snobbishness in the way that certain Tory columnist have ridiculed Martin because of his accent and his Scottishness. There is a class issue here. But by his personal conduct, and by his unwillingness to make MPs open and transparent about their personal use of public funds, he has shown that he is out of touch and out of time. The days when MPs could hand in expense accounts without receipts is long gone. When they regarded their parliamentary expenses as part of their salary. It’s time for this superannuated shop steward to be bumped up to the Lords - where he will no doubt be canny in looking after their privileges.

Monday, February 25, 2008

Northern Rock - the bank that likes to say NO

It’s the bank that likes to say ‘No’. Newly nationalised Northern Rock has adopted a highly original marketing strategy . The bank of you and me has written to mortgage customers saying: 'We are unable to offer you a competitive deal at this time, therefore we suggest you contact an independent financial adviser who will be able to help you find the best deal available” In other words, don’t do any business with us unless you want to pay way over the odds for your mortgage.

Now, to those of us who aren’t bankers, this doesn’t sound like a terribly sound business plan. Not the kind of proposal that would get them opening their wallets on Dragons Den. Northern Rock appears to have turned into a kind of anti-bank, trying not to lend. Since it got into difficulties for handing 125% mortgages out as if they were love hearts, that’s perhaps no bad thing. However, it doesn’t give you a lot of confidence for the future of the £110 billion we are all now owed by Northern Rock since it was nationalised last week.

Nor does inspire confidence to learn that Northern Rock doesn’t actually own most of its mortgages. £45 billion were hived off to separate investment vehicle based in Jersey called Granite, which - incredibly - has not been taken into public ownership. Granite is a shell company, a shadow bank, which has no employees. However, Granite is - intriguingly - a registered charity which was set up by Northern Rock in 1999 allegedly to raise cash for Down’s Syndrome. It does not actually raise money for charity. Welcome to the wonderful world of international high finance.

I hope someone in government understands all this, but I wouldn’t bet your house on it. It’s clear that the directors of Northern Rock understood little of what they were doing, which was why the bank collapsed last September ( though they were smart enough to pay themselves mega bonuses and sell their shares just before they collapsed in value) Question now is whether the Rock is going to take Gordon Brown’s battered government down with it. Could this be the first ever case of the rock hitting the sinking ship?

Just stand back a second and review what has happened this first week of public ownership. We learned that the new boss of Northern Rock, Ron Sandler, is a non-domiciled tax exile who doesn’t pay income tax here on his foreign earnings. He is being paid £90,000 A MONTH to turn the remains of the Rock into a business that turns away customers. His deputy, is also a non-dom based in Switzerland.

The bank is going to be exempt from the freedom of information act, so we will never learn exactly what Mr Sandler is doing - or not doing - with our money. All we do know is that the government has taken on some of the dodgiest mortgages in the history of home lending,sold to low-income first-time buyers at the top of the market. And on top of all that, 140,000 dispossessed shareholders are pooling their pennies for the mother of all lawsuits against the government, trying to get their money back.

Now, you might have thought that buying shares in a bank which had just been through the first bank run in over a hundred years, might have involved just a hint of risk. But not the hedge fund RAB, which is squealing for state cash in compensation for shares it bought after the bank got into trouble in September. They want four quid a share, when the last known price for Northern Crock was 50p - which was optimistic. No doubt the government will pay up, after spending the usual fortune on legal fees. After all, it doesn’t want to appear to be anti-business, even though Northern Rock is turning itself into an anti-business.

But what is going to happen now? Now that the government is the proud owner of one of the largest collections of sub-prime mortgages in the world? We pride ourselves on not having had a sub-prime problem on this side of the pond. No “NINJA” loans to people with no income no jobs. Perhaps, but not even at the height of the mortgage madness did US banks lend at 125% loan-to-value. That is instant negative equity.

The newly-nationalised Northern Rock - like other banks - has announced that it is no longer handing out 125% mortgages - which is a start. But what about the 200,000 Northern Rockers who already have them? They’re not called “suicide loans” for nothing. When these people ask for a remortgage, after their introductory rates expire, they are going to get a very nasty surprise. These mortgages were sub-prime by another name since they were given to people who couldn’t afford a deposit, largely on the basis of “self-certified” income statements. In other words, many were “liar loans” .

So we have a nationalised bank, with huge sub-prime exposure, which doesn’t even own most of its good mortgages, and is trying to run down its business. And to make matters worse, it’s now under the charge of Alistair Darling - an unpopular rookie Chancellor who has already been rolled by the non-doms and private equity people, as this column examined last week. Doesn’t exactly fill you with confidence. If I could get the £3.500 I notionally have invested in the publicly-owned Northern Rock, I’d grab it now and run.

There is nowhere for this venture to go now but down. Northern Rock is shaping up to be the biggest public-private financial disaster in modern British history. There has never been anything like it. The government is now up to its neck in financial quicksand with £110 billion of public money at risk. Having lost the opportunity to let Northern Rock expire as nature intended last September, the government is now locked into the fate of one of the most toxic financial brands in the world.

A bank which cannot be saved, which is sitting on a heap of stinking mortgage debt, on the eve of a property slump which will hit thousands of its mortgage holders. Every case of negative equity will be laid at the government’s door; every repossession; every sob-story; every missold mortgage. Instead of taking it into public ownership, the government should have called in the administrators, and then the fraud squad, to investigate insider share dealing, conspiracy to defraud and criminal negligence. That’s what the Americans would have done, as they showed after the Enron debacle.

But Gordon Brown’s government has been bought and sold by the big banks - like Goldman Sachs - who are now practically an arm of government. Like JP Morgan, who give compliant politicians like Tony Blair £2m sinecures when they stand down. Brown’s advisors told him that Northern Rock was too big to fail; that the entire British banking sector would be damaged if the Rock went under. He believed them. God help the PM now - his banker friends certainly won’t.

Sunday, February 24, 2008

The Electoral Commission washes whiter

Prison overcrowding? Too many offenders to know what to do with? Criminals clogging up the courts? Fear not, for help is at hand. Just call in the Electoral Commission - the people who make crime disappear.

Charlie Gordon (his real name) was a serial offender, addicted to secret donations. He'd fallen in with a bad crowd in Glasgow politics and ended in a tight spot with his property developer friends. But last week he was released into the community, a free man. Able to look the world in the eye once more. A credit to himself and his party.

"If it hadn't been for Electoral Commission, they'd have thrown away the key", said Charlie. "I just can't believe it. I admitted a breach of the law and resigned my shadow cabinet post, but now I’m off Scot-free. I’m over the moon".

Wendy Alexander had form as long as your arm. Schemes like the Scottish Industry Forum netted her thousands of pounds to feed her addiction to politics. It looked like the law had finally caught up with Wendy over an illegal donation from a tax exile. Until she called in the Electoral Commission.

Now she too is back in the community hoping to start a new life as leader of the Scottish Labour Party. "I owe everything to the Electoral Commission" she says tearfully." Now I can now raise as many dodgy donations as I wish with total security"

If the Electoral Commission can do this for hardened cases like these, just think what it could do for you! Breaches of the law simply vanish. Prosecutions disappear. Kills 99 percent of nationalists stone dead.

So, how does the Electoral Commission work? How does it turn breaches of the law into simple administrative mistakes? This is because of its secret ingredient: discretion. Other crime-solving agents, like Procurator Fiscal, have to go through a laborious and time-consuming procedure called the justice system.

Electoral Commission cuts through all that by removing the legal middlemen and handing ex post facto justifications for politicians who fail to obey the laws of the land. It is guaranteed to find most politicians innocent.

But be warned. If you don't have the Electoral Commission on your side you could be at risk.

Poor Tommy Sheridan didn't have cover from the Electoral Commission. He and his wife Gail have been arrested charged and humiliated because they allegedly broke the law of perjury.

If only they'd had the help of the Electoral Commission, they too might have been found to be guilty of no intentional wrongdoing. That they had taken significant steps to tell the truth and that there was no case to answer. They could be walking tall again.

So remember. Don't accept inferior brands. Electoral Commission washes whiter

Monday, February 18, 2008

Today Kosovo; tomorrow Berwick!

UN peacekeeping forces were moving into position last night as the inhabitants of Berwick declared their independence from England. Secessionists are insisting that opinion polls confirmed that the majority of the population wished to leave at the earliest opportunity and become part of recently independent Scotland. Amid scenes of jubilation in the Border town, there remain anxieties about the fate of the remain ethnic English still living in the disputed zone.

The Prime Minister David Miliband said that the Berwick move was “a flagrant and unilateral act of secession by a part of the territory of England and illegal under international law”. The British government has reacted with fury to the Russian President, Vladimir Putin’s call for all “free peoples” to recognise the right of Berwick to self-determination. America has condemned the Berwick Liberation Front as “moral terrorists” and pledged to lend air support if English nationals are ethnically cleansed from the area. But the European Union has announced that it is willing to open a mission in Berwick to ensure that there can be a peaceful transition.

Fantasy of course. Berwick’s people are much too sensible to take up arms, even if a majority have, apparently, voted to leave England in a referendum organised by the ITV "Tonight" programme. However, Kosovo is a sobering reminder of what happens when nationalism gets out of hand. And no, I’m not going to make any facile comparisons between the SNP and the Kosovan Liberation Army or any other militant nationalist grouping. The Scottish National Party is a civic nationalist organisation, dedicated to democracy, which has stamped down hard on anti-English sectarians. Ok?

Mind you, most nationalists would be happy to see Berwick restored to Scotland and the SNP MSP Christine Grahame has tabled a motion to the Scottish parliament calling for Berwick to “return to the fold”. It’s not inconceivable that, if Scotland were to become formally independent - an eventuality that is no longer being regarded as fantasy in Westminster - there could be genuine border disputes over areas like Berwick, which ‘feel’ Scottish, even if they have been part of England for six hundred years.

It is one of the reasons why unionist politicians insist independence would be divisive. No matter how amicable the divorce between England and Scotland might be initially, when it came to dividing the geographical assets tempers could get frayed. The SNP respond that, in Berwick as in Kosovo, you have to give people the right to decide, by majority vote, which country they wish to be part of. The right of free peoples to self determination is inviolable and enshrined in international law.

True, of course. But who decides who ‘the people’ are? The Kosovan Albanians may have voted for independence, but Kosovo is still legally part of Serbia, which would vote for the province to remain so - if anyone asked. As we know from bitter experience in Northern Ireland, when you start chopping states up, and handing autonomy to oppressed ethnic groups, they have a nasty habit of becoming the oppressors themselves.

The Serbians may have behaved atrociously, trying to “ethnically cleanse” the Kosovo province of ethnic Albanians in the 1990s, but that doesn’t excuse the way in which the Kosovars have treated the Serbian minority population since the end of the war in 1999. Human Rights Watch has issued an urgent called for protection for the Serbian minority in Kosovo, which has been the subject of large scale violence since 2004, when 60,000 Kosovan Serbs were driven from their homes by Albanian militias. Many were murdered. Some 200,000 Kosovan Serbs are still living in camps abroad, unable to return to their homeland.

It would be ironic indeed if the West had to intervene in Kosovo for a second time in ten years to prevent the ethnic cleansing of the Serbs. The dark side of nationalism has never been darker than in the Balkans. In the maelstrom of nationalisms which proliferated after the collapse of the Yugoslavian state, its not easy to identify the good from the bad, the right from the wronged.

All the more reason, then, to ensure that, if Scotland does become independent, it is done in a civilised and humane manner. Now, there is no reason to suppose that the process of Scottish independence, were it to happen, should be any more ‘conflicted’ than the separation of Slovakia from the Czech Republic in the 1993. That “velvet divorce” has become the template for all civic nationalist movements in Europe. There was a bit of a fuss about the division of the Czechoslovak national debt, and whether or not to have a separate currency, but in the end the two sides sorted themselves out, and made a go of it. Indeed, the 5 million Slovaks - who were very much the poor relations in the old Czechoslovakia - have never looked back. Slovakia is one of the fastest growing countries in Europe.

Most of us would assume that Scottish independence would take the Slovakian route, rather than the Kosovan. We do not have a Balkan history of ethnic conflict, dictatorship, war and partition. Our ‘wars of independence’ ended in, er, Berwick hundreds of years ago. Moreover, participation in the European Union would likely ensure a more civilised secession than in the Balkans.

Of course, there are still those who say that Europe would refuse to admit Scotland if it became independent. Some Labour ministers have argued that countries like France would block Scotland’s membership for fear of encouaging regional separatist movements in their own countries. But as in Kosovo, I suspect the EU would be among the first to recognise an independent Scotland - especially as it would be eager to join the euro. There is Realpolitik here. The diplomatic advantage to countries like France from the disintegration of the UK would out weigh the risk of provoking domestic nationalism.

Think of it. Great Britain would be no more, its influence in the European council reduced, its place in the UN Security Council in question, and its stature in the community of nations hugely diminished. England may be the biggest bit of the UK, but the loss of the little bits could be highly damaging to its international prestige. Indeed, my own view is that Westminster - if it is sensible - would plan for a historic compromise with Scotland, giving it all the politically autonomy it seeks so long as it remains formally part of the UK in the eyes of the world.

We would be living apart together; keeping up appearances, while going our separate ways politically. Scotland would remain British under the Crown, a nominal partner in a new confederal United Kingdom. And if that meant handing Berwick back, I suspect the English wouldn’t think twice about it.

Brown u-turn on tax powers for Holyrood. Maybe

Curious, in this week of confusion and acrimony in Labour ranks over the status of this commission-that-never-was, that it is Gordon Brown who is speaking about the constitutional "review" and not Wendy Alexander. She promised that this would be a radical initiative, led by her, which would move devolution on to the next phase, and deliver a parliament that matched Scottish aspirations. The talk was of greater powers over matters like nuclear power or broadcasting. There was also a commitment to investigating new tax powers for the parliament. Speaking on behalf of his Scottish leader, the Chancellor appears to be opening the way for some discussion of “assigned taxation”. But he makes very clear that this should not be seen as a foregone conclusion, and that no one should “prejudge” the outcome of the review. This hardly inspires confidence. There is a consensus in Scottish politics which extends across the entire political spectrum - Tory, Labour, SNP, Liberal Democrat - for greater tax powers for the parliament. We need the PM to be more specific. Above all, we need Wendy Alexander to come out of her self-imposed purdah and tell us exactly what she has in mind. Some years ago, she edited a collection of essays on the future of Scottish economic policy. In her forward to this book the Scottish Labour leader wrote that the taxes which should be considered included excise duties, stamp duty, VAT, oil revenue, possibly even corporation tax. Does she actually favour any of those measures? She has surely had ample time to think about it. Should Scotland perhaps raise all of its taxes and send a contribution to Westminster for common services? This is the kind of scheme that operates in provincial parliaments in Spain. Should we go for a federal solution, as in countries like Australia, where state parliaments like Victoria are assigned stamp duty and all sales taxes (VAT)? There are many models, and all of them need to be looked at. But the premise of any inquiry should be that the present arrangements are unacceptable. The Scottish parliament has a tax-raising power - the 3p on the basic rate of income tax - which it cannot realistically use because it would create an unequal tax regime in Scotland. To give the Scottish parliament the responsibility it requires, Holyrood needs to be given its own tax powers. Here’s one suggestion. What about a beer tax to combat Scotland’s drinking problem? Over to you, Wendy.

Triumph of the pill - the Beijing Olympics

Steven Spielberg, withdrew his “artistic services” from the Chinese last week because he didn’t want to become ‘the Reni Liefenstahl of the Beijing Olympics’. Leifenstahl, director of “Triumph of the Will”, glamorized the Nazi’s 1936 Berlin Olympics.

Times change and today's Games are no longer about master races but pharmaceutical ingenuity. “Triumph of the Pill” you might call it, since as we all know its drugs wot win the medals. Communist regimes have always excelled in chemical-assisted sporting prowess, and the Chinese athletes will no doubt be up to their eyeballs in the best steroids money can buy..

But if I were the Olympic authorities, I’d also check Chinese athletes for operation scars in case they’re surgically assisted too. All those organs the Chinese military have been harvesting from thousands of executed prisoners have to go somewhere. Mind you, we are all implicated in that trade. The Guardian recently reported that skin from executed Chinese prisoners is being used to develop beauty products sold to the West. So, some of us might be wearing Chinese dissidents on more than just our conscience.

But, the Chinese know that our concern for human rights is only skin deep and that, in the interest of business, we’ll avert our TV cameras from the jails filled with dissidents, the torture of prisoners, the suppression free speech, the censorship of the internet, the oppression of Buddhist Tibet...

After all, what’s a few disagreements between friendly nations? At the Olympics, we come together to celebrate sporting achievement not politics. My money’s on the Janjaweed team in the track and field, where they’ll literally murder the opposition. Tibetans will be for the high jump, and British athletes will be competing blindfold because, as Tessa Jowell said, “there’s simply no point” in making an issue of human rights. Our own Great Helmsman, Chairman Gordon has issued a decree on the matter. Anyway, the Chinese might organise a boycott of the London Olympics in 2012

Well, bring it on say I. Put an end to this tasteless and overblown exercise in international self-promotion. Why not spend the fifteen billion on something worthwhile - like a peace keeping force in Darfur, or saving he planet? The Chinese are opening a new coal fired power station every week. The air is so bad in Beijing that America athletes are being advised not to arrive until the very last moment , so as not to inhale too much ofthe toxic soup they call an atmosphere.

But how did you think they produced all cheap those toys, laps tops and video recorders that we all buy in the West? In the hypocrisy Olympics we are all going for Gold. After all, America has killed more civilians in Iraq than the Sudanese have killed in Darfur. Perhaps Steven Spielberg should be boycotting himself.

Sunday, February 17, 2008

United King- non-dom

They may not pay taxes here, but the non-doms seem to think they run the country. Last week, the Chancellor, Alistair Darling, was forced to make a humiliating capitulation to the non-domiciled plutocrats who have been using London as a global tax-haven. Attempts to get them to open their books and pay a risible fee of £30,000 for the privilege of sheltering millions in overseas earnings were shredded by their lobbyists.

The hapless Chancellor has also had to execute an embarrassing u-turn on capital against tax. He was trying to close a loophole which allows private equity barons to pay only 10% tax instead of 40% when they wind up their businesses. They had other ideas. He’s no longer the Darling of the City, and the pressure is on to have him sacked from the cabinet.

Now, I know that finance is complicated, and that peoples’ eyes glaze over when you talk about capital gains tax, private equity and non-domicile status. But the essence of this story is very simple: we have created in Britain a society in which the rich have more or less been relieved of paying tax altogether. The more you make; the less you pay.

If your are an honest British basic-rate tax payer you pay 33% tax (including NICs) or 40% at the higher rate. They pay 10% by paying themselves in capital gains rather than taxable income. You have to declare your earnings; they send them offshore and pay nothing. You pay National Insurance for hospitals; they avoid it. You have to pay your mortgage out of your net income; they use buy-to-let and deduct their mortgage interest from their tax. No wonder you can’t afford a house.

According to the BBC’s business editor, Robert Peston, the top 50 UK-based billionaires paid just £15m in tax last year on a combined fortune of £126bn. In fact, most accountants say that for the modern rich - the 4,000 Britons earning over £1m a year -taxation has become largely voluntary, because there are so many ways of avoiding even the small amount the Revenue tires to levy. The man who’s likely to take over Northern Rock this week, Richard Branson, is a world champion in offshore tax farming. What a marriage made in heaven is that is.

We live in a bizarre parody of a social democracy: a welfare state for the rich where the poor and middle classes are taxed to the hilt. There are around 112,00 non-doms in London, many living in extravagant isolation, like the Russian oligarch, Badri Patarkatsishvilli, who died last week in a fortress in Leatherhead surrounded by 120 armed guards. These people are attracted by a society which appears to value wealth above all, and which asks no questions about where it is or where it came from.

Non-doms come here to buy their multi-million tax-free houses, to launder their money through casinos and football clubs and our corrupt property system (see the reports last week on the FSA and police investigations into “endemic” fraud in British real estate). They then wind up their companies, paying virtually no tax, repatriate their earnings and live tax free. I don’t care if it’s the politics of envy. It’s grotesque.

The government justifies its tolerance of tax avoidance by saying that it benefits Britain to have all these ‘wealth creators’ come and live here. Look at all the money they spend, the people they hire, the taxes their employees pay in the businesses they create. But I’m not so sure that Labour are getting the politics right here. The most immediate impact of this unrestrained wealth has been to make housing all but unaffordable to most middle class couples in Britain.

The people who’re paying the taxes that the non doms and private equity people avoid are being priced out of their own country. Real middle class earnings in Britain have stagnated over the last decade a new class of super-salaried hedge fund managers and CEOs have captured our government. This impoverishment of the middle classes has been disguised by the boom in house prices which gave people an illusion of wealth. ‘Eating’ their houses by equity withdrawal - another name for debt.

Well, not any more. As the Governor of the Bank of England, Mervyn King, made clear last week, in an astonishingly blunt assessment of the state of the British economy, house prices are going nowhere but down for the next four years at least, while we experience “a genuine reduction in our standard of living”. This is largely because the British economy has been distorted by its subordination to narrow interests of the financial superrich.

Our productive industry collapsed as we embraced the so-called “asset economy” based on inflated house prices and colossal debt - public and private. One reason the Chancellor was trying to get the superrich to pay just a little more is because he realises that the party is over, and that - as the Institute for Fiscal Studies warned last week - the government is going to have to raise taxes and cut government spending. Yes, we will all be paying more tax, while the very rich will pay less.

What about some public equity for a change?Why is there so little moral outrage at what Britain has become? Of course, our media is dominated by the international superrich, thanks to the malign influence of buccaneers like the imprisoned Conrad Black and Rupert Murdoch. Yet, Murdoch is actually a citizen of America were non domiciles have all their foreign earnings assessed and taxed by the government. Here, it’s no questions asked. No names no pack drill. Welcome to Brown’s Britain.

We all naively thought that Gordon Brown would do something to address the shocking imbalances of wealth and power that developed under Tony Blair. How stupid we were. Brown has turned out to be the greatest defender of the non doms and the superrich. Have you heard a word from the Prime Minister of Britain as his Chancellor has been hung out to dry? Not a squeak, as always when there is trouble, Gordon has gone missing.

Yet, he could have stood behind his Chancellor, raised public awareness, taken on the plutocrats and won widespread support from the public As the credit crisis spreads, we are approaching a historic turning point in political attitudes. There is growing disquiet at the shameless wealth on display in London. At the hedge-fund Henrys, the private equity pirates, the ‘con-doms’ and the rest of the hyper-rich, cruising their gated communities in “Chelsea hearses” - huge, black 4 by 4s with smoked windows. These people are in danger of becoming public hate figures, rather like that the trades union barons of the 1970s. A narrow interest group, beyond democratic accountability, who care nothing about society, refuse to pay their dues and seem only interested in getting their snouts in the trough.

As people discover more about the crazy way the banks have been manipulating the financial system in order to pay themselves stupendous bonuses attitudes are hardening. British society is no longer in thrall to wealth. Only this time it is the middle classes, not just the working class, who are going to be taking to the barricades, as their living standards decline. Are you listening Gordon? It’s time to tax the rich.

Constitutional Commission is dead in the water

In the week following the May 3rd Holyrood election, this paper issued a challenge and a warning. We called on the political leaders of Scotland to look beyond their own narrow party interests and see what the Scottish people were telling them in that election: that they want a new kind of politics in which all the forces committed to constitutional change unite behind a broadly-based campaign to extend the powers of the Scottish parliament. “Devolution Max” is the new settled will, confirmed by countless polls and surveys like the Scottish Social Attitudes Survey.

Our warning was that if the parties failed to seize the moment, politics itself would be the loser, because the Scottish people would call a plague on all their houses. Voters have little patience for party political manoeuvring and point-scoring. Too often in Scottish history, the fate of this nation has been sealed by petty minded bickering among leaders who cannot see beyond their own egos.

Well, they didn’t listen. And now come the consequences. The Scottish Labour Party has been plunged into disarray by its partisan attempts to set up a Scottish Constitutional Commission composed solely of unionist parties. We argued that it was wrong in principle to try to exclude nationalists from the debate on the constitution, and and that it was impossible in practice since the SNP happen to be the government. Labour, the Liberal Democrats and the Scottish Conservatives went ahead anyway.

On St Andrew’s Day, Labour’s Scottish parliamentary leader, Wendy Alexander, declared that “devolution is a process not an event” - well she got that bit right - and said she wanted Scotland to “walk taller within the UK, without walking out of it”. The cross-party commission was to explore further powers - like broadcasting, immigration law, drugs - and to explore fiscal autonomy through giving the Scottish parliament power to levy taxes like stamp duty, corporation tax, excise duties.

This commission is now in chaos. In fact, as we revealed last week, it isn’t even a commission - at least not in the eyes of Gordon Brown and his UK ministers, who regard it as a “review’ or “working party”. The Prime Minister has decided that the devolution process cannot be entrusted to the Scottish Labour party and must be under UK government control.

The Scottish Office minister, David Cairns, hammered the message home by saying last week that further significant powers for the parliament were only of interest to “the McChattering classes”. The review will seek to take some powers back to Westminster; Wendy Alexander is not to be allowed to style herself as the leader of the party in Scotland (she is only the leader of the Labour group of MSPs) and significant tax powers are off the agenda altogether.

There has been a stunned silence from Ms Alexander, though sources close to the Scottish leader have expressed dismay at the behaviour of the Westminster leadership. An uneasy truce was called at a meeting of Labour MPs and MSPs in Glasgow on Friday, but it must now be plain to everyone in Scotland that the Constitutional Commission is dead in the water.

This episode has posed a challenge to the Scottish Liberal Democrats. They risk being compromised by their participation in a body which is manifestly an attempt to maintain the status quo. With Wendy Alexander elbowed aside, the Liberal Democrats face being squeezed by Gordon Brown on one hand and the Conservatives on the other. They should reconsider their participation in this Constitutional Commission before it is too late.

The LibDems are probably closest in thinking to mainstream Scottish opinion on the constitution. The Steel Report, which they published two years ago, stands as the most coherent road map towards a parliament that would meet the aspirations of the Scottish people. However, the LibDems can’t do it on their own.

And neither can the SNP. The Scottish National Party leader, Alex Salmond, may feel he is in the clear because the collapse of the commission has strengthened the moral legitimacy of his own National Conversation on the constitution. This had at least been open to participation by unionists, federalists and others. However, the National Conversation remains by default a partisan initiative - there is only one party talking - and there has been a studied vagueness about who would assess the outcome of the great discourse.

This is too important a matter to leave to one party. The SNP’s Conversation, if it is sincere, will only confirm the constitutional reality, which is that the Scottish people are not ready yet for full blown independence. Perhaps at some future date Scots may opt to set up a separate state, with its own currency, army, foreign service, but right now, there is no evidence that they want to leave the UK. Indeed, on some measures there is less popular support for formal independence now than there was before the election. The danger is that, blinded by their own approval ratings, the SNP government seeks to impose independence by an act of Leninist voluntarism, by giving history a push. This would be a big mistake.

The success of the 1997 Referendum demonstrated that real constitutional progress in Scotland can only come when the parties work together. So, we renew our call for the Scottish political parties to unite on the constitution. The SNP already endorse the Steel Report, and many Labour activists see it as the way forward. So do we. There is no obstacle we can see to members of all the Scottish parties discussing the constitutional future rationally. If the Labour Party in Wales can sit down with the Welsh Nationalists in government, then the very least the Scottish people have a right to expect is that the Scottish parties here sit down with each other in the national interest.

We have invited a wide range of organisations and individuals to contribute their thoughts today in this issue of the Sunday Herald. We intend in future to seek further ways of bringing the fragmented politics of Scotland back together. In the past decade we have witnessed two momentous events: the Devolution Referendum in 1997 which delivered a historic majority for home rule, and the May elections of 2007 which showed that Scotland is resolved to move to the next stage of self-government. The Scottish people are discovering their strength, and self-confidence. They are ready. It is only he politicians who have yet to find the courage to lead.

Sunday, February 10, 2008

The Wendy Commission is now the Gordon Commission

So the Wendy Commission is to become the Gordon Commission. It should come as no surprise that the PM has been trying to fix the suppposedly independent constitutional commission even before it has convened. Indeed, if he gets his way it wouldn’t be called a commission at all, but a “working party”. What the PM envisages is an exercise in defending the status quo rather than giving Scotland maximum say in her own affairs.

Each Scottish member of the Brown review would be marked by one Westminster politician - to ensure that it doesn’t get any crazy ideas - and there will be three “independents” - and I’m sure the PM has ideas about who they should be. Perhaps members of the Electoral Commission could lend a hand. Wendy Alexander’s role in all this can be gauged by the fact that she wasn’t even present at this pretty crucial Downing St confab between the Scottish Secretary, the Chancellor, the Lord Chancellor (?) and the PM.

This is the way Gordon Brown has always operated. He hasn’t been called the Godfather of Scottish politics for nothing. Scotland is his backyard, and he expects to be in control of everything that happens in it. A tremendous effort was mounted to save Wendy Alexander in the donations affair, precisely because she is a loyal Brownite who can be relied upon to keep the Scottish party on the right lines in these dangerous nationalist times.

Now he is seeking to control a committee which has been created by a vote of the Scottish parliament, and which is supposed to be financed by the Scottish Parliament. Well, I think the Liberal Democrats and the Conservatives should be very careful before they buy into this exercise. And I can’t for the life of me see the justification for financing it out of Holyrood funds if it is reduced to the status of a UK government review. If this is just another of PMs fifty odd reviews, then why shouldn’t he pay for it?

This is clearly not any kind of legitimate descendant of the Scottish Constitutional Convention of 1989, the cross party body which originally campaigned for Scottish home rule. Could you imagine Margaret Thatcher, the Prime MInister of the time, gathering her inner cabinet to discuss how to manage that particular commission? It was no government working party.

The Wendy commission will have no legitimacy in Scottish eyes if it is seen do be driven by the Westminster political establishment. And we know Gordon Brown’s attitudes from his remarks during the Scottish Election campaign. The PM said that there should be no further powers of any significance handed to the Scottish parliament. Des Browne, the Scottish Secretary, went further and announced that devolution was not as Donald Dewar called it, “a process not an event”. Indeed, he said that Donald Dewar had never used the phrase.

Now, Wendy Alexander is sincere in her desire to amend and improve Scotland’s constitutional condition. To make Scotland “walk taller in the UK rather than walking out of it”. She has a long history of support for constitutional reform dating from the days of Scottish Labour Action in the 1980s. Nevertheless, she is up against a formidable force for constitutional conservatism here.

But the party with most to lose is the Liberal Democrats, since they will be outnumbered two to one by unionists from Labour and the Conservatives. Liberal Democrat hopes that they will be able to get the federalist Steel Report proposals implemented looks increasingly naive. The LibDems should demand the body should be a full commission with independent status and a non political chair. That it should take evidence from all sections of the constitutional argument, and, if it proposes significant change, that this should be put to the Scottish people in a referendum. And if Brown doesn’t accept that, they should have nothing to do with it.

Bugging the buggers.

It’s good to know that in an uncertain world, there are some things you really can still rely on. No matter who you are, where you are, some bugger is monitoring you. Yes, a thousand bugs at day are being applied for in Britain according to the commissioner for the interception of communications (George Orwell eat your heart out ) by the police, Revenue, local government.

That’s a lot of bugs. It means that in a couple of decades, every adult in the nation will be electronically monitored - for their own safety and security, of course.Not a word spoken in Britain will go unrecorded. Doesn’t matter your religion, class or nationality, in the surveillance lottery, everyone’s a winner.

But it’s not just a bugger’s paradise. We are also the most watched country in the world. Britain has one quarter of all the worlds CCTV cameras, and they’re trained on you. The average citizens is videod 300 times a day. Forget digital television and YouTube. Just go into your backyard and perform - you’re on live TV.

But you do have to wonder about the sanity of the poor souls who have to listen and watch all this stuff. I mean, do they have special monitoring centres in the Midlands where thousands of bog-eyed buggers are tuning in to our dull and worthless lives 24/7 and taking notes? “07.30 am. M flushes loo and asks where his pants have gone”. What kind of cruelty is that? Must be even more boring than Big Brother.

And if, in due course, we are all going to be bugged , that will surely mean there is going to be a chronic lack of buggers. Perhaps we’ll all have to be forced into listening into each other because there won’t be enough of them to go round.

No wonder all that information about our medical records, immigration, tax and social security records is being found on dumped lap tops, lost computer discs, and jiffy-bags addressed to al Qaeda. The buggers are throwing it away so they don’t have to watch it all.

You can’t force people to do things that are injurious to their mental health. Health and Safety will have to start monitoring the monitors to ensure they aren’t break the law.

Now, of course, none of this would have come to light had it not emerged that an MP, Sadiq Khan, had been bugged while making a prison visit. This has caused outrage. Seems it’s fine for ever citizen in the land to become a target of the snooper state, but just don’t bug politicians. Well, they might be doing their expenses at the time, unintentionally accepting illegal campaign donations, or having intimate relations with their employees/family members. That would be a bug too far. This isn’t a police state, you know.

It's over for Wendy

Triumphant Labour MPS were doling out the humble pie last week and force-feeding it to the political hacks. “F***ing brilliant”, one was overheard saying. Wendy was “in the clear” following her exoneration by the Electoral Commission. We journalists should all be ashamed of our “vendetta” against her, according to the Labour MSP George Foulkes .

Well, the court of public opinion will be the final arbiter of the donorgate affair, since of course no court of law will now consider it. SNP MSPs are saying it is one law for politicians, another for the general public. But actually, its more a case of one law for Wendy and another for Peter.

Peter Hain, had to resign because he failed to register donations to his campaign. Yet, the pensions secretary had not “knowingly” or “intentionally” broken the law either - in fact his donations, while much larger than Wendy’s, were at least legal. It was administrative incompetence that led to his late declarations. Can he, in fairness, be prosecuted under this law, since it has now been established that ignorance IS a defence? So much for “strict liability”.

But everyone in Holyrood is heaving a sigh of relief that we don’t have to spend any longer on petty party donations. The wider question, now, is whether Wendy’s vindication marks a new beginning for Labour in Scotland. Labour are hoping that they’ve reached bottom, and that the only way from here is up. In their dreams.

When Wendy said that the donations affair was a “distraction” from ‘real’ politics, she was right - though for the wrong reasons. The Electoral Commission’s belated verdict last week diverted attention from the tirade of criticism the Labour leader was receiving for her handling of the budget vote in parliament. “Humiliation”, “shambles”, “mince” was the verdict of the Scottish press in one of the most sustained assaults on a leader’s competence that I can remember.

A note of contempt is creeping into press treatment of Wendy Alexander’s leadership, which is curious because until she became leader, she had a lot of friends in the media. She was regarded as an intelligent, open-minded moderniser who would take the party out of its male-dominated West of Scotland ghetto and into the mainstream of Scottish politics. Her cross-party commission for more powers for the parliament chimes with most editorial opinion in Scotland. But she is being ridiculed, almost pilloried.

Her repertoire of facial tics and grimaces is a gift to photographers, and newspapers have taken to running collages of Wendy faces revealing the full range of her contortions. There is a particularly damaging video which has been playing widely on on Youtube, in which some unkind soul has edited one of her interviews with Glen Campbell cutting her words and leaving only her grimaces.

Why so nasty to Wendy? Well, partly it is her manner and her approach to politics which a lot of people find off-putting. Her continual references to her integrity and reputation over the last ten weeks - as if it was ‘all about me’ - hasn’t helped. Nor did her attempt to drag other senior politicians by name into the donations row. She has fallen out with some Labour local authorities, over ring-fencing, and some Labour MPs over the constitution. She hasn’t had a lot of success with her own press officers either, and has lost three of them despite being leader for only five months.

FMQs is really just a bear-baiting session, but it is important in revealing and shaping a politician’s public image, and Wendy Alexander has not got the measure of this yet. She has been eclipsed by a revived Nicol Stephen, the LibDem leader, who has been asking well-researched and thoughtful questions. And by the Tory leader Annabel Goldie who is turning into something of a star turn.

Of course, she is up against the master of the withering put-down, in Alex Salmond. Labour say that the press has been hypnotised by the First Minister, and there is something in that. But perhaps it’s because the performance of the FM and his ministerial team has been mesmerising. The finance secretary, John Swinney’s, efficient and decisive handling of the first SNP budget in history received rave review. He piloted the SNP’s spending policies safely onto the statute book despite having only 47 out of 129 MSPs.

Actually, if it’s humble pie time, then hacks like me should really be apologising to Swinney. Nine months ago I said that there was no way the SNP would be able to get its programme through the budget process unscathed because they simply lacked the numbers in parliament. I was wrong; they did - through guile and negotiation. Labour’s failure to exploit the unionist majority and to shred Swinney’s budget in committee was bad enough, but their decision to vote down their own amendment on skills in the final vote turned incompetence into farce. They couldn’t follow the logic of their position and vote the budget down for fear of forcing an election which would likely return an SNP landslide. The Labour-supporting Daily Record said it left Labour with “egg on their faces”

Labour’s claim that there had been a “fix” with the Tories - the “useful idiots of separatism” as the Labour finance spokesman Iain Gray put it - amounted to a statement of the bleedin’ obvious, since any minority government has to do deals. The question is why Labour didn’t manage to do their own dealing, using their strength to mould the Swinney budget in their image. Instead they indulged in spectator politics, jeering from the sidelines while Swinney got on with the job.

The Tories got a few more police - not the 1,000 they wanted - and they got an acceleration of the reduction of business rates and something on drug rehab. But there was nothing here that caused real trouble for Alex Salmond. He can legitimately say now that he has delivered a substantial chunk of his “social democratic” manifesto - freezing council tax, abolishing bridge tolls, student fees, prescription charges etc. - on the strength of argument alone, not force of numbers.

It’s what he said he would do when he was elected First Minister, and you cannot help being impressed. It won’t last, of course - in politics it never does. But the SNP have demonstrated something very important and enduring: that minority government - as envisaged by the ‘founding fathers’ of the Scottish Constitutional Convention - can work, and work well.

Last week has also finally demonstrated that this SNP administration is not an overnight affair but an accomplished and purposeful government which will be hard to dislodge. Wendy Alexander’s challenge is to find some political answer to this. She needs to discover some wit at First Minister’s question; develop a coherent critique of progressive nationalism; make progress on reforming the UK constitution; and invent a distinctive set of domestic policies.

But above all, she needs to demonstrate that she is the real leader of the Labour Party in Scotland, and has the authority to take her party in a radically different direction. She bought a breathing space, she has until the European election next year to get her act together. If she has one.

Monday, February 04, 2008

Wendy and the procurator fiscal.

Has the former Labour health minister, Andy Kerr, had his chips? A case of small fries to go? In the latest bizarre twist to Labour’s donations scandal, the senior Labour MSP, Andy Kerr, has been reported to the procurator fiscal by the parliamentary Standards Commissioner for failing to register a thousand pounds worth of hospitality from the McDonald's burger chain. He was taken to a football match and scored an own goal. Will McDonald's be issuing A-levels in sleaze as well as management? (That’s enough burger jokes - Ed.).

Ok,how’s about this then. The former Labour cabinet minister, Peter Hain, who resigned two weeks ago for failing to declare campaign donations, has revealed that he employs his 80-year-old mother as a secretary. No, I’m not making this up. Such is the bizarre world of politics right now. It’s becoming such a farce that it is hard to know what to take seriously any more.

Take Wendy Alexander. When I learned on Saturday that she too had been reported to the procurator fiscal for failing to declare her campaign donations on the MSP’s register my immediate reaction was that the game was finally up for the Scottish Labour leader. Surely she couldn’t survive this. It’s widely accepted now that once a politician has been handed over to the legal authorities, there is only one honourable thing they can do, and that is to resign.

She was already in legal limbo waiting for the Electoral Commission to rule on that illegal donation from the tax-exile businessman, Paul Green. It seems inconceivable now that the commission could not also refer her case also to the Crown Office, since a breach of the law is accepted. That would mean two criminal referrals to the Crown Office in one week! But Wendy has determined to tough it out, and who am I to say that she shouldn’t?

Ms Alexander certainly made a spirited defence of her position yesterday on the BBC’s Politics Show - the best interview I have seen her give since this whole affair started. She was confident, clear, and appeared to be utterly relaxed, despite the desperate position she has been placed in by the Holyrood Standards Commissioner, Dr Jim Dyer. She batted the ball straight back into the commissioner’s court by declaring that she had it in writing from Dr Dyer’s own clerk that she didn’t need to declare the donations in question as gifts on the register of interests.

Make of that what you will. Did the Standards Commissioner make a gratuitous referral to the procurator fiscal? If so, why? He is only supposed to call in the legal authorities if there is prima facia evidence of a criminal offence having been committed - not just a legal technicality. It seems inconceivable that he could have been unaware of the political consequences of such a referral in the present political climate.

Perhaps Wendy Alexander has cause to feel hard done by. The Electoral Commission has been sitting on its hands for fully two months over the Green donation.(Keep up at the back) Whatever you think of Wendy Alexander’s conduct over her campaign fund-raising, this procrastination by the commission has surely been inexcusable - justice delayed is justice denied.

Senior Labour politicians are briefing the press that the Electoral Commission has got its legal knickers in a twist over company law and the definition of the word "donor". Well, if it doesn't know what a donor is, I don't know who can help it out. Perhaps it should just pack up and hand all this over to McDonalds who at least know how to deliver on time. By this ruinous prevarication, the Electoral Commission stands accused of a dereliction of its constitutional duty.

However, this doesn’t help Wendy Alexander one whit. The coincidence of the referral by the Standards Commissioner and the imminent arrival of the Electoral Commission's ruling, is a double whammy of Mike Tyson proportions. If there had been a conspiracy to destroy her leadership, these official bodies couldn’t have done it better.

Labour set up this elaborate machinery of parliamentary scrutiny after the sleaze scandals of the 1990s, but it has become a victim of its own zeal. Wendy Alexander’s leadership has been all but destroyed by petty donations to a leadership election campaign that never happened. How she must wish now that she had just declared all those dodgy “995” donations from her business friends, instead of spinning this web of needless and self-incriminating secrecy. Never has the case for transparency been better made.

Her supporters, like the MSP Jackie Baillie, are insisting that Wendy has done nothing wrong, and that it would be unfair for her to have to give up her job, and her reputation, for petty and inconsequential misdemeanours which were the fault of her incompetent campaign team and bad advice from the parliamentary authorities. They say that it is her duty to stay in post until she clears her name, because to stand down would be an admission of guilt.

Maybe, under different circumstances, this would be a reasonable argument. If the former work and pensions secretary, Peter Hain, had not resigned the moment his case was handed to the legal authorities, she might have had a chance. Perhaps if Gordon Brown had not said of Hain that resignation was "the right and honourable thing to do" Wendy Alexander would have been better able to weather this storm.

But the precedent has been established, and she must be measured by the same rule of parliamentary honour. Remember, Peter Hain has not accepted any guilt either, and insists that he is fighting to clear his name. The charge against him is one of failing to declare donations to his campaign for the Labour deputy leadership - which is identical to the allegations against Wendy Alexander. It is very difficult for her to argue that her circumstances are materially different from those of Peter Hain. He said he simply could not do his job as a cabinet minister while distracted by the legal consequences of the Electoral Commission's actions. Can Wendy Alexander can do her job when she is in the midst of this legal maelstrom?

That’s always assuming she could do the job before, which many in her own party seem to doubt. If Wendy Alexander stays she risks being pilloried by the press which has fallen seriously out of love with her. Given the state of public outrage at parliamentary expenses scandals, it is perhaps incredible that Wendy Alexander is in post at all, given the questions that have been raised about her integrity. One can only conclude that having godfather Gordon Brown on your side confers a unique immunity to the conventional requirements of honourable parliamentary conduct.

Sunday, February 03, 2008

Put Wendy out of her misery.

Waiting for Godot was never as bad as this. Politicians and press are growing irritable and restless at the endless wait for the Electoral Commission to rule on the illegal donation to Labour leader Wendy Alexander’s campaign fund. Two months! What on earth are they doing? Distraught hacks have been wandering the lobbies tearing their hair in frustration.

Scottish politics needs to move on, but can’t until this issue is resolved. No one knows whether Wendy Alexander’s leadership is viable and she is becoming increasingly accident-prone. In such a climate almost anything can turn into a political crisis - such as the confusion last week about declaring campaign donations on the Scottish parliament’s register.

The parliamentary standards commissioner instructed the Labour leader to register her campaign donations - the money raised for the leadership election that never happened. Labour had believed that, so long as they kept the donations under £1,000 ,they would be allowed to keep the names secret. Commissioner Jim Dyer said no, and so last week Wendy had to deliver names and pack drill.

Not that these would have come as any surprise to readers of this paper since they had been published here first. However, the episode drew attention, once again, to the manner in which the Alexander campaign sought to get round the spirit, if not the letter of the law on donations by getting benefactors like property developer Michael D Rutterford to donate £999 pounds, just under the £1,000 threshold of public scrutiny. It just looks so devious.

We knew of course that Ms Alexander had “unintentionally” accepted £950 from Paul Green, a tax-exile property developer who was not entitled to make a donation to a British political party. That was why the Electoral Commission was brought in all those weeks ago. But why did Labour not want people to know that Neil Davidson, the Advocate General for Scotland, had donated to them? Or the former deputy chairman of SEPA, Nicholas Kuenssberg? It’s a mystery only they can explain.

But shadow cabinet ministers are being kept on a very tight rein. Last week, a cringe-making Labour “crib sheet” was leaked to the press revealing what their leader expected them to say to journalists in a defensive ring-around: “I’m phoning because the whole of the Labour shadow cabinet is united behind Wendy’s leadership and is fed up reading otherwise in the papers”. Or so it says here.

We know that Labour front benchers have been bereft since they lost their civil service briefs, but this is ridiculous - turning them into speaking clocks. It was counterproductive too, since the co-ordinated lobbying of political hacks just made it look as if Wendy was in more trouble that they were admitting.

Nor did she do herself any favours by attacking other politicians who have run in leadership campaigns. In an attempt to deflect public criticism over the Dyer ruling, team Wendy challenged senior figures in other parties by name to publish details of their own campaign spending. This aroused the wrath of MSPs like the SNP’s Christine Grahame, and the Tory leader Annabel Goldie, who insisted that they had not raised any cash for campaigns, and had relied on their own pockets.

Labour’s intention was presumably to hint that these candidates might have misused their parliamentary and other allowances for party political purposes, and to invite the press to start taking a look at their accounts. At a time when all politicians are under unprecedented scrutiny, this was taken very badly. MSPs may knock lumps out of each other at question time, but Scottish politicians are all members of the same club, and they don’t like it when someone transgresses the unwritten rules.

There had been a degree of sympathy building up for Wendy Alexander - dead woman walking - as she awaits the Electoral Godot. But much of that has now evaporated. She has ensured that when the Electoral Commission does get round to ruling on her case, she will attract maximum hostility. Wendy is now being seen as a liability, not just to Labour, but to Scottish politics as a whole. Time to put her out of her misery.

Saturday, February 02, 2008

What financial crisis?

The international financial crisis has, for most of us, been a spectator sport so far. It's like watching a well-made American television series about global capitalism, where each instalment brings a new fantastic turn of events as banks lose billions in and crazy characters emerge like buff bond-dealer, Jerome Kervial, who blew £3.6bn on financial derivative bets for the French bank Societe General. A lot of City of London traders were feeling their collars after that episode.

In the ‘States, where they take their drama seriously, the FBI has been called in to investigate the sub-prime mortgage scams and the derivatives vehicles used by the banks to keep their losses - and their gains - off their books. The lawsuits are piling up so fast on Wall St. there is actually a shortage of lawyers to handle them all. The City of Cleveland alone has 21 lawsuits outstanding against leading banks like Goldman Sachs and Morgan Stanley.

But as I say, for most of us in Britain this has been a fascinating and compelling drama, but nothing really do with us. Crisis?what crisis? The talk of monolines, libor, collateralised debt obligations and credit default swaps goes way over our heads. Part of an exotic world far removed from the real economy, let alone our salary slips.

Until now. For, what has become clear in the last week or so is that this is not just about US mortgages, or turbulence in the international derivatives market, but a systemic crisis of the global economy. And we can’t escape it. Last week the Financial Services Authority said that a million sub-prime mortgage holders in Britain are facing ruin. Britain is about to rediscover the meaning of negative equity as the property bubble deflates and exposes all those dodgy mortgages from the likes of, well, Northern Rock. The banks are refusing to lend on the old throwaway terms. The number of new mortgages approved by the banks fell to ten year low last month.

This might explain why no new bidders have been prepared to enter the race for the Rock before tomorrow’s deadline, despite the government guaranteeing what is effectively a £50 billion loan of our money. That none of the big name banks are prepared to take on Northern Wreck speaks volumes for their confidence in the financial future. Gordon Brown seems determined to hand those billions over to the self-publicist Richard Branson, who didn’t even have a banking license when he made his initial bid.

The other way the crisis is going to hit home is through inflation. This is building as central banks cut interest rates in a desperate attempt to shore up the commercial banks many of which are, effectively, bankrupt. This means that the recent increases in the cost of essentials like food, housing and fuel - which have been running at 12% according to the Office of National Statistic - are not a blip.

Of course, the official inflation rate, the Consumer Price Index, is only showing 2.1%. But since that excludes things like council tax, energy costs and housing it is utterly discredited, especially in the eyes of union pay negotiators. This means that industrial relations are going to become a lot more interesting. Only ten days ago, the police took to the streets for the first time in history to demand that the government met their pay settlement in full.

But what about jobs? So far, employment has held up remarkably well in Britain and America, leading some to conclude that the recession can be avoided, whatever the gyrations of the stock market. But there are very few people in the financial world who take such a sanguine view. Look at your local high street. Those shops which aren’t charity outlets are estate agents, banks, hairdressers or cafes. Polish delicatessens have been the big growth area. Now, house prices are turning, the banks are not lending and debt-ridden consumers are reining back their casual spending as the essentials of life start taking up more of our income. So, the delis will shut, the estate agents will lay off staff and the banks will be closing branches to cut costs.

In the absence of manufacturing, our economy is now largely driven by consumer spending fuelled by house-prices and bank lending - a broken business model. Financial services has been the most dynamic sector of the Scottish economy over the last decade, responsible for around a third of all new jobs. This is going to crash into reverse, as the banks struggle to survive. The Royal Bank of Scotland’s recently saw its stock market value cut in half as a result of its exposure to US sub-prime -related derivatives. Scotland’s biggest company may have to go cap in hand to the sovereign wealth funds of the Middle East. HBOS - Bank of Scotland as was - is also in deep financial waters, and things aren’t looking very happy at Standard Life. This will feed back into the property slump as the bonuses, which went into all those million pound houses in Edinburgh, disappear.

As it happens, most jobs in Scotland depend on the public sector, so this should provide some kind of buffer. But state spending is also being squeezed as the government desperately tries to mend its own finances. Irresponsible spending by Gordon Brown during the boom, and now a collapse in tax revenues because of the credit slump, have blown a hole in the Treasury finances. The institute for fiscal studies says the government will have to raise £8bn in taxes and cut back on spending across the board, and this on the back of the tightest spending round in nearly a decade. If the public sector crashes into reverse, it means a disproportionate loss of jobs in Scotland - which might be one reason the SNP seems so optimistic about about incinerating all those semi-state ‘quangos’. They know that the party is over in the public sector.

But still, you look around, and you think. Well, things aren’t exactly tough right now, are they? Perhaps it’ll never happen? Personal bankruptcies are rocketing as are home repossessions, but they always seem to happen to someone else. And it’s true that the economies of the West have great resilience. The world economy is still growing.

But as the financier George Soros has pointed out, this credit crisis looks like the end of a long boom based, essentially, on the expansion of debt. Average earnings of households in Britain and America have been stagnant for the last decade and a half. The consumer boom, which has kept the economy going, has been fuelled by borrowing on a colossal scale. In Britain we collectively owe £1.4 trillion, more than our entire GDP. We are going to have to stop borrowing and start saving.

But no one wants to admit it. The government is still in denial and hoping that cuts in interest rates will somehow get the consumer spending again. But it’s not going to happen because the banks will not lend. The US Federal Reserve has found that unprecedently steep cuts in interest rates has just led to a collapse in the dollar and the return of ‘stagflation’. We need a new approach to economic management, based on technology and productive industry rather than financial speculation and debt. But by the time the politicians realise that, it could be too late to avoid the worst economic storm in a generation