What Wendy Alexander didn’t say in Aviemore turned out to be rather more interesting than what she actually said. Her first conference speech as leader did not once mention her Constitutional Commission. Since this is her flagship policy, her one distinctive contribution to Scottish Labour politics, this is intriguing to say the least. A bit like Tony Blair not mentioning public service reform in the year he declared war on the monopoly provision in health care.
Nor did she lay into the SNP proposals for a proportional referendum on independence, as had been well trailed in the media. We’d been led to believe that she was going to rubbish Alex Salmond’s idea of a multi-option referendum using the Single Transferable Vote because it would amount to a “gerrymandering” of the constitution. Because it would bundle Scotland out of the UK on a fistful of second preference votes.
So why so shy? Well, one suspects that the intervention by Scotland’s favourite billionaire, and former Labour donor, Sir Tom Hunter, may have had something to do with it. On the day of her speech he come out demanding a single question referendum as soon as possible on whether or not Scotland should remain part of the United Kingdom. This was an unfortunate coincidence and would have required Wendy Alexander, at the very least, to give coherent reasons why he is wrong. Her intention had simply been to attack the method of the SNP ballot - the Single Transferable Vote.
Actually, a multi-option referendum is not Salmond’s position and never has been. All along the SNP has called, like Sir Tom, for a single question, as is clearly laid out in their white paper, “Choosing Scotland’s Future” published last August. The question they would put is this: “I agree that the Scottish Government should negotiate a settlement with the government of the UK so that Scotland becomes and independent state. Yes, or No”. No multi-optoin jiggery pokery there.
Alex Salmond only started talking about a third option because people like me kept arguing that the status quo wasn’t the only alternative to independence, and that federalism - or devolution ‘max’ - should be given a go also. It has generally been the NON-nationalist voices in civic Scotland who have argued against presenting Scots with only one choice, on the grounds that this would polarise the constitutional debate and narrow the democratic choice. The outcome of a single question might lead to a spurious vindication of the status quo and leave federalism out in the cold.
Indeed, this used to be the position of the late Donald Dewar and Gordon Brown, back in the days when Labour still had confidence that it could defeat the SNP in any head to head vote. In the Herald of 13 April 1992, Donald Dewar called for a multi-option referendum, saying: “It must offer the choice which has dominated the election campaign in Scotland. It must cover the range of options that reflects the mood for change. That means it must include the convention scheme, the status quo and independence.” When Alex Salmond started talking about putting another option on the ballot paper he was not articulating the SNP’s policy, but Labour’s.
Times have changed of course since 1992, but not all that much. We are again faced with a multiple choice constitution. As soon as the Scottish opposition parties, under Wendy’s leadership, set up the Constitutional Commission they revived the constitutional issue in precisely that 1992 form. They have promised to come up with a new constitutional package and disowned the status quo.
Now, Wendy Alexander chose not to celebrate the formation of the Calman Commission in her speech. This was uncharacteristic modesty from the “perfect” Labour leader. Surely, the commission is the key plank in Wendy’s platform for the next Scottish election, her defining policy. But turned down an opportunity to explain and commend it to her party and to the Scottish people. Why?
One suspects, again, that it was interventions off-stage that counselled her to silence. The former Labour minister, Brian Wilson, had just laid into Wendy and her constitutional clique. Mr Wilson, a long term opponent of devolution said on Saturday that: "As long as Labour continues to go down what is essentially a nationalist agenda of commissions and constitutions and tampering with this and tampering with that the outcome is pretty predictable – the beneficiaries will be the nationalists. Labour and the others who have joined them in this venture are doing the job for them...To be honest I would rather have a referendum than this sort of incremental nonsense of fiddling about with powers."
Now you may wonder how a member of the Scottish Labour Party could get away with comments that are so critical of his own leader. But of course Wendy is not his leader because she is not the leader of the Scottish Labour Party - she is only the leader of the Labour group in the Scottish Parliament, and has little authority outside of Holyrood. The Labour MEP, David Martin, also contradicted party policy by supporting a referendum, and most Labour MPs in Aviemore seem to have been dissing their leaderene with impunity.
It seems likely that Wendy Alexander pulled her passages on the commission and the referendum because she didn’t want to ignite a unionist rebellion in the ranks of MPs. She left it to Gordon Brown to use the ‘c’ word, because he of course is above challenge in the Labour Party. Strange days indeed when the nominal leader afraid to address her own policy at her party conference.
But the reality is that she will have to bend to the inevitability of a referendum. It is absurd and undemocratic for Labour to deny Scotland a say on its own constitutional future. By what right do they veto the people’s will? A referendum is the accepted democratic means of resolving constitutional issues in our political system. We have had referendums on Europe, the Northern Ireland constitutional settlement and on Scottish devolution - twice. Labour is actively supporting a referendum in Wales in 2011 on the new options for Cardiff. It is politically unsustainable and morally unjustifiable for Labour to deny the people of Scotland a say.
Anyway, what are Labour afraid of? All recent opinion polls indicate that formal independence is supported by
fewer than a third of Scottish voters. Or is Labour now so enfeebled and unconfident that it believes it is no longer capable of winning any vote in Scotland? Better to get the u-turn in now, Wendy. Listen to Tom Hunter and call the damn thing.
Monday, March 31, 2008
Sunday, March 30, 2008
Angels on pins - those voting methods for the Scottish referendum
Controversy raged in Holyrood last week over the method for counting the number of angels who can dance on the head of a pin. Labour erupted with undisguised fury at Alex Salmond’s suggestions the Single Transferable Alternative Preference Vote was the only sensible way to count the angels.
Wendy Alexander accused him of blatant “gerrymandering” and demanded that it would be outrageous if a minority of angels were allowed to decide the fate of the pin issue on second preference votes. “This is an attempt to leave Heaven by the backdoor and totally unacceptable”.
However, if the First Past the Pin method were used - as in elections to Westminster - there would still be a chance of a minority of angels having the final say, since a vote could theoretically be carried by a third of the angels plus one. Other theologians have argued that there should be not one but two counts of the angels, to ensure that any final decision on the pin’s destiny would not be resolved by less than a fifty percent majority.
For their part, the Scottish Liberal Democrats insist that way forward is to set up another constitutional convention to examine the full implications of the various options open to the angels. Once complex issues were decided - including separation of powers, fiscal relations and a bill of rights - the angels would then be in a position to make an informed judgement on the extent of their pinhead autonomy - but not on whether to leave the pin entirely.
Only then, could the method of counting the angels be considered in accordance with the principles of proportional representation. AV, STV, AMS, TLC and SFA should all be examined on their merits. Though some scholars questioned whether the angels would be registered to vote.
A group of angels interviewed at random outside St Peter’s Gate, expressed ignorance about the whole question. “I’m totally bored” said one, “This just isn’t an issue on Heaven’s doorstep”. “It’s pure Purgatory, man”, said another, “It’s about time theologians started looking at the real issues - such as whether Alex Salmond truly is the Son of God.”
But others said that the angels had a right to have a say in any decisions about the fate of the pin. “This is too important a matter to be left to the same old ya-boo, theological bickering. We haven’t even got agreement on the need for a pin referendum and already people are arguing about how to do the count.“
A spokesman for St Thomas Aquinas said that “angels are pure intelligences, not material, but limited, so that they have location in space but not extension. But Wendy’s totally out to lunch on this one.”
Next burning issues before the Holyrood college of metaphysical speculation include: “Was Christ hermaphrodite?” and “Will there be there mince in Paradise”. Ms Alexander is 10.
Wendy Alexander accused him of blatant “gerrymandering” and demanded that it would be outrageous if a minority of angels were allowed to decide the fate of the pin issue on second preference votes. “This is an attempt to leave Heaven by the backdoor and totally unacceptable”.
However, if the First Past the Pin method were used - as in elections to Westminster - there would still be a chance of a minority of angels having the final say, since a vote could theoretically be carried by a third of the angels plus one. Other theologians have argued that there should be not one but two counts of the angels, to ensure that any final decision on the pin’s destiny would not be resolved by less than a fifty percent majority.
For their part, the Scottish Liberal Democrats insist that way forward is to set up another constitutional convention to examine the full implications of the various options open to the angels. Once complex issues were decided - including separation of powers, fiscal relations and a bill of rights - the angels would then be in a position to make an informed judgement on the extent of their pinhead autonomy - but not on whether to leave the pin entirely.
Only then, could the method of counting the angels be considered in accordance with the principles of proportional representation. AV, STV, AMS, TLC and SFA should all be examined on their merits. Though some scholars questioned whether the angels would be registered to vote.
A group of angels interviewed at random outside St Peter’s Gate, expressed ignorance about the whole question. “I’m totally bored” said one, “This just isn’t an issue on Heaven’s doorstep”. “It’s pure Purgatory, man”, said another, “It’s about time theologians started looking at the real issues - such as whether Alex Salmond truly is the Son of God.”
But others said that the angels had a right to have a say in any decisions about the fate of the pin. “This is too important a matter to be left to the same old ya-boo, theological bickering. We haven’t even got agreement on the need for a pin referendum and already people are arguing about how to do the count.“
A spokesman for St Thomas Aquinas said that “angels are pure intelligences, not material, but limited, so that they have location in space but not extension. But Wendy’s totally out to lunch on this one.”
Next burning issues before the Holyrood college of metaphysical speculation include: “Was Christ hermaphrodite?” and “Will there be there mince in Paradise”. Ms Alexander is 10.
Thursday, March 27, 2008
Will Iceland beat the hedge funds?
It looks a fight to the death between the puffin-eaters and the fat-cats. The Icelandic Prime Minister Geir Harrde had declared war on the international financial speculators. He claims that “false rumours” are behind a recent run on the Krona which has lost a third of its value. The international investors say that Iceland simply lived too fast and furious in the boom years and is now coming face to face with the reality.
This tiny energy-rich country, with its ambitious banks and industrious population, has certainly been targeted by the hedge funds and short-sellers who nearly brought down Halifax Bank of Scotland three weeks ago. So far, the hedgies are winning. Interest rates have been hiked to 15% to hold down inflation which has been running at nearly 7%.
Does this mean a reality check too for Scotland? Iceland has figured prominently in SNP mythology as a part of the Nordic “arc of prosperity” which Alex Salmond Salmond wants Scotland to join. With one of the world’s highest GDPs per head based on one of the smallest populations, Iceland has shown that small countries can do well in the new globalised order. Its economy, like Scotland’s, is strong on fish, energy, tourism and financial acumen. But Iceland is beginning to look like a victim of too much independence as well as economic hubris.
Simply, the country is just too small, with a GDP of only £8.5bn. Most self-respecting hedge funds could eat it for breakfast, and that is pretty much what they have decided to so. It is not hard for a group of financial institutions, working as a pack, to start selling shares in Icelandic banks, in order to create a crisis from which they can benefit by selling their short positions. (Short positions are essentially bets that a company or a currency is going to collapse in value). In the past, the international financial ‘community’ might not have bothered about a country which is a pimple on a map of the Arctic Circle. But nowadays, with the credit crisis, every billion counts.
So, could Iceland’s fate await an independent Scotland? Well, on the face of it, there are good reasons for thinking that we may be equally vulnerable. We have a similar abundance of renewable energy, as well as a lot of residual hydrocarbons, which means a Scottish currency might behave like an unstable petro-currency. Scotland has a very ambitious banking sector, based on the Royal Bank, HBoS and numerous financial institutions in Edinburgh. They are very big players, but vulnerable to credit crunches.
If Scotland , already one of the top ten countries of the world in terms of GDP, were to become independent there is every reason to believe that our economy would be liable to a similar boom and bust cycle. However - and this is the nub - there would have to be a boom first. There would probably be an upsurge in economic growth after independence, based on full employment, high wages, immigration and foreign investment, as Scotland made up for three hundred years as a dependent economic backwater.
Now, you may say, well - that’s one problem we wouldn’t mind having, and in many ways this is the right way to look at it. Abundance is no bad thing; and economic growth, especially when based on renewable energy, is a good thing. Scotland’s problem, if Iceland is any guide, would be one of managing economic success - intense growth and accumulated wealth.
But the downside is that we would also be vulnerable, like Iceland, to international economic shocks. In particular, to the predations of financial speculators who like a plague of locusts, have a habit of descending on countries and reducing them to economic dust-bowls. They did it to the Asian ‘tiger’ a decade ago, to Iceland today and will probably hit the debt-ridden Baltic states tomorrow. The advantage of globalisation is that small countries can become big players fast; the disadvantage is that global capital movements are so massive, involving trillions of dollars a day, that small economies can be swept away.
Now, the one difference between Iceland and what the SNP envisage is that Scotland under the SNP would be a part of the european single currency, whereas Iceland like Norway, sought to remain aloof from the euro. That looked like a good idea in the good times, but is not looking so attractive now. The Icelandic banks cannot draw on liquidity injections from the European Central Bank. Iceland has had to defend its currency by raising interest rates to more than three times the EU rate. One suspects that, whatever its attitude in the past, Iceland will be applying soon for membership of Europe.
But Scotland might not join the euro either, at least not immediately. Indeed, at the moment SNP policy is to stick with sterling for the time being. This could lead to Scotland being stuck in a limbo with much of its economy determined by decisions made by the Bank of England and the UK Treasury. The reason for sticking with the pound is that the alternative - customs posts at the border and currency exchanges - would be politically unattractive to Scots.
So, where lies the balance of advantage? My best guess is that Scotland, as a mature economy, would not be as vulnerable as Iceland to financial storms. But there is no doubt that an independent Scotland would be exposed - especially if England were feeling ill-disposed to its former Union partner. On the other hand, remaining tied to England, with its over-dependence on the City of London, its fatal attraction to American wars and its inability to come to terms with Europe, might not be a bed of roses either.
Independence would almost certainly liberate economic dynamism, but that comes at a cost. Iceland has brought much of its problems on its own head by allowing a runaway economic boom, based on huge foreign debts, which has now burst. Iceland’s banks have been investing abroad on a massive scale, as is evident by the presence on Britain’s high streets of investment houses like Baugur which owns House of Fraser and is bidding for Moss Bross.They tried to play the international financiers at their own game, and came off worst.
As so often in economics, you pays your money. Perhaps the greatest lesson from Iceland is not to become too dependent on banks, and not to get carried away by credit booms that can turn to bust in the blink of Bjork’s eye. But the bottom line is that there's no way Iceland would go back to being part of Denmark.
This tiny energy-rich country, with its ambitious banks and industrious population, has certainly been targeted by the hedge funds and short-sellers who nearly brought down Halifax Bank of Scotland three weeks ago. So far, the hedgies are winning. Interest rates have been hiked to 15% to hold down inflation which has been running at nearly 7%.
Does this mean a reality check too for Scotland? Iceland has figured prominently in SNP mythology as a part of the Nordic “arc of prosperity” which Alex Salmond Salmond wants Scotland to join. With one of the world’s highest GDPs per head based on one of the smallest populations, Iceland has shown that small countries can do well in the new globalised order. Its economy, like Scotland’s, is strong on fish, energy, tourism and financial acumen. But Iceland is beginning to look like a victim of too much independence as well as economic hubris.
Simply, the country is just too small, with a GDP of only £8.5bn. Most self-respecting hedge funds could eat it for breakfast, and that is pretty much what they have decided to so. It is not hard for a group of financial institutions, working as a pack, to start selling shares in Icelandic banks, in order to create a crisis from which they can benefit by selling their short positions. (Short positions are essentially bets that a company or a currency is going to collapse in value). In the past, the international financial ‘community’ might not have bothered about a country which is a pimple on a map of the Arctic Circle. But nowadays, with the credit crisis, every billion counts.
So, could Iceland’s fate await an independent Scotland? Well, on the face of it, there are good reasons for thinking that we may be equally vulnerable. We have a similar abundance of renewable energy, as well as a lot of residual hydrocarbons, which means a Scottish currency might behave like an unstable petro-currency. Scotland has a very ambitious banking sector, based on the Royal Bank, HBoS and numerous financial institutions in Edinburgh. They are very big players, but vulnerable to credit crunches.
If Scotland , already one of the top ten countries of the world in terms of GDP, were to become independent there is every reason to believe that our economy would be liable to a similar boom and bust cycle. However - and this is the nub - there would have to be a boom first. There would probably be an upsurge in economic growth after independence, based on full employment, high wages, immigration and foreign investment, as Scotland made up for three hundred years as a dependent economic backwater.
Now, you may say, well - that’s one problem we wouldn’t mind having, and in many ways this is the right way to look at it. Abundance is no bad thing; and economic growth, especially when based on renewable energy, is a good thing. Scotland’s problem, if Iceland is any guide, would be one of managing economic success - intense growth and accumulated wealth.
But the downside is that we would also be vulnerable, like Iceland, to international economic shocks. In particular, to the predations of financial speculators who like a plague of locusts, have a habit of descending on countries and reducing them to economic dust-bowls. They did it to the Asian ‘tiger’ a decade ago, to Iceland today and will probably hit the debt-ridden Baltic states tomorrow. The advantage of globalisation is that small countries can become big players fast; the disadvantage is that global capital movements are so massive, involving trillions of dollars a day, that small economies can be swept away.
Now, the one difference between Iceland and what the SNP envisage is that Scotland under the SNP would be a part of the european single currency, whereas Iceland like Norway, sought to remain aloof from the euro. That looked like a good idea in the good times, but is not looking so attractive now. The Icelandic banks cannot draw on liquidity injections from the European Central Bank. Iceland has had to defend its currency by raising interest rates to more than three times the EU rate. One suspects that, whatever its attitude in the past, Iceland will be applying soon for membership of Europe.
But Scotland might not join the euro either, at least not immediately. Indeed, at the moment SNP policy is to stick with sterling for the time being. This could lead to Scotland being stuck in a limbo with much of its economy determined by decisions made by the Bank of England and the UK Treasury. The reason for sticking with the pound is that the alternative - customs posts at the border and currency exchanges - would be politically unattractive to Scots.
So, where lies the balance of advantage? My best guess is that Scotland, as a mature economy, would not be as vulnerable as Iceland to financial storms. But there is no doubt that an independent Scotland would be exposed - especially if England were feeling ill-disposed to its former Union partner. On the other hand, remaining tied to England, with its over-dependence on the City of London, its fatal attraction to American wars and its inability to come to terms with Europe, might not be a bed of roses either.
Independence would almost certainly liberate economic dynamism, but that comes at a cost. Iceland has brought much of its problems on its own head by allowing a runaway economic boom, based on huge foreign debts, which has now burst. Iceland’s banks have been investing abroad on a massive scale, as is evident by the presence on Britain’s high streets of investment houses like Baugur which owns House of Fraser and is bidding for Moss Bross.They tried to play the international financiers at their own game, and came off worst.
As so often in economics, you pays your money. Perhaps the greatest lesson from Iceland is not to become too dependent on banks, and not to get carried away by credit booms that can turn to bust in the blink of Bjork’s eye. But the bottom line is that there's no way Iceland would go back to being part of Denmark.
Monday, March 24, 2008
Come back Karl Marx - all is forgiven
THE RED MENACE
The world's markets gambled on financial alchemy. They lost.
By Iain MacWhirter
Comment | Read Comments (9)
COME BACK Karl Marx, all is forgiven. Just when everyone thought that the German philosopher's critique of capitalism had been buried with the Soviet Union, suddenly capitalism reverts to type. It has laid a colossal, global egg and plunged the world economy into precisely the kind of crisis he forecast.
The irony, though, is that this time it isn't the working classes who are demanding that the state should take over, but the banks. The capitalists are throwing themselves on the mercy of government, demanding subsidies and protection from the capitalist market - it's socialism for the banks. Hedge fund managers of the world unite, you have nothing to lose but your bonuses.
On Friday, the heads of the big five British banks demanded - and got - another £5 billion in "emergency liquidity" from the Bank of England to add to the £5bn they received earlier in the week. But like militant shop stewards they complained it wasn't enough. "Look how much the banks are getting in Europe and America," they whinged. Hundreds of billions of dollars and euros are being thrown at banks in an attempt to save them from themselves.
advertisement
The quaint idea that loss-making companies should fail, to ensure the health and vitality of the capitalist system, has quietly been discarded. The banks, we are told, are "too big to fail", which means that they have to be taken into public ownership - like Northern Rock - or have their debts underwritten by government, like Bear Stearns, which comes to much the same thing. The central banks are also cutting interest rates to try to boost banking profits, and this is making currencies such as the dollar increasingly unstable.
Which takes us back to Marx. The crisis that is rocking the world is a classic example of the kind of shocks and dislocations that Marx said were an essential feature of a competitive capitalist economy. The falling rate of profit that results from too much investment piling into new technologies and commodities forces capital to engage in a constant search for profit.
As it becomes harder and harder to make money out of making things - just look at the collapse in prices of computers over the last decade - so exotic financial derivatives have been created to boost wealth without engaging in recognisable economic activity. Speculation takes over. British manufacturing has collapsed to a fraction of what it was 20 years ago, and a vast financial services sector has grown up in its place making money largely out of inflation in house prices, ie debt.
Moreover, with globalisation, trillions of dollars have been washing around the world markets looking for a home. This has created a monster: the market in financial derivatives; a Pandora's box of inscrutable financial instruments governed by supposedly failsafe mathematical formulae. Collateralised debt obligations - implicated in the subprime mortgage crisis - are at least rooted in nominal house prices, but they have been detached from the actual mortgages and sold as commodities in the securities market.
Credit default swaps have created a $45 trillion global industry based on nothing at all, merely speculating on the movements of currencies and commodity prices. A credit default swap is a kind of insurance contract taken out between two bankers who bet on the price of an asset. They don't need to own the asset, and there is no actual loss if the default happens. But the contracts can be traded, allowing the swappers to create value out of nothing but their own agreement.
According to the Bank for International Settlement in Basel, the global derivatives market is worth some $516 trillion - 10 times the value of all the world's stock markets put together. And much of it is based on very little but leveraged optimism; pieces of paper theoretically based on the price of an empty house in Cleveland, Ohio.
Billions have been magicked out of nothing by this financial alchemy, but in the end, there is no way of turning dross into gold, and the reckoning had to come. And someone had to pay - which is where we, the people, come in.
As happened in the 1930s, the whole system is collapsing. We are faced with the choice of colossal bank defaults or hyper inflation: saving the banks or saving our savings. The central bankers decided that they would rather save the banks. So our governments are using public money to bolster banking balance sheets and allowing inflation to rip so that the banks' losses will be devalued, along with the pound in your pocket.
So what happens now? Or as Lenin said, What Is To Be Done? Well, not Communism for a start. Central control and outright state ownership along Soviet lines is no longer a viable political option - an undemocratic public monopoly is almost as bad as a private one. The fact that the banks are currently in league with western governments to create a kind of financial communism is doubly disturbing.
Instead of just propping up bankrupt banks, the governments should be democratising them - mobilising their assets to stimulate the productive economy, repairing infrastructure, researching and developing new markets, and refitting western economies to combat climate change. It needs a kind of green New Deal - an update on Roosevelt's imaginative policies of the 1930s fought tooth and nail by the banks.
They want unlimited access to public money to save themselves from the consequences of their own actions; welfare for the wealthy. This is above all a political, not an economic problem. There needs to be a political mobilisation of public opinion to force the banks and the government to bring the people into the equation. Unfortunately, the party that used to perform this function, Labour, has largely been bought out by the banks. They have privatised the government, even as they have socialised the financial markets.
The world's markets gambled on financial alchemy. They lost.
By Iain MacWhirter
Comment | Read Comments (9)
COME BACK Karl Marx, all is forgiven. Just when everyone thought that the German philosopher's critique of capitalism had been buried with the Soviet Union, suddenly capitalism reverts to type. It has laid a colossal, global egg and plunged the world economy into precisely the kind of crisis he forecast.
The irony, though, is that this time it isn't the working classes who are demanding that the state should take over, but the banks. The capitalists are throwing themselves on the mercy of government, demanding subsidies and protection from the capitalist market - it's socialism for the banks. Hedge fund managers of the world unite, you have nothing to lose but your bonuses.
On Friday, the heads of the big five British banks demanded - and got - another £5 billion in "emergency liquidity" from the Bank of England to add to the £5bn they received earlier in the week. But like militant shop stewards they complained it wasn't enough. "Look how much the banks are getting in Europe and America," they whinged. Hundreds of billions of dollars and euros are being thrown at banks in an attempt to save them from themselves.
advertisement
The quaint idea that loss-making companies should fail, to ensure the health and vitality of the capitalist system, has quietly been discarded. The banks, we are told, are "too big to fail", which means that they have to be taken into public ownership - like Northern Rock - or have their debts underwritten by government, like Bear Stearns, which comes to much the same thing. The central banks are also cutting interest rates to try to boost banking profits, and this is making currencies such as the dollar increasingly unstable.
Which takes us back to Marx. The crisis that is rocking the world is a classic example of the kind of shocks and dislocations that Marx said were an essential feature of a competitive capitalist economy. The falling rate of profit that results from too much investment piling into new technologies and commodities forces capital to engage in a constant search for profit.
As it becomes harder and harder to make money out of making things - just look at the collapse in prices of computers over the last decade - so exotic financial derivatives have been created to boost wealth without engaging in recognisable economic activity. Speculation takes over. British manufacturing has collapsed to a fraction of what it was 20 years ago, and a vast financial services sector has grown up in its place making money largely out of inflation in house prices, ie debt.
Moreover, with globalisation, trillions of dollars have been washing around the world markets looking for a home. This has created a monster: the market in financial derivatives; a Pandora's box of inscrutable financial instruments governed by supposedly failsafe mathematical formulae. Collateralised debt obligations - implicated in the subprime mortgage crisis - are at least rooted in nominal house prices, but they have been detached from the actual mortgages and sold as commodities in the securities market.
Credit default swaps have created a $45 trillion global industry based on nothing at all, merely speculating on the movements of currencies and commodity prices. A credit default swap is a kind of insurance contract taken out between two bankers who bet on the price of an asset. They don't need to own the asset, and there is no actual loss if the default happens. But the contracts can be traded, allowing the swappers to create value out of nothing but their own agreement.
According to the Bank for International Settlement in Basel, the global derivatives market is worth some $516 trillion - 10 times the value of all the world's stock markets put together. And much of it is based on very little but leveraged optimism; pieces of paper theoretically based on the price of an empty house in Cleveland, Ohio.
Billions have been magicked out of nothing by this financial alchemy, but in the end, there is no way of turning dross into gold, and the reckoning had to come. And someone had to pay - which is where we, the people, come in.
As happened in the 1930s, the whole system is collapsing. We are faced with the choice of colossal bank defaults or hyper inflation: saving the banks or saving our savings. The central bankers decided that they would rather save the banks. So our governments are using public money to bolster banking balance sheets and allowing inflation to rip so that the banks' losses will be devalued, along with the pound in your pocket.
So what happens now? Or as Lenin said, What Is To Be Done? Well, not Communism for a start. Central control and outright state ownership along Soviet lines is no longer a viable political option - an undemocratic public monopoly is almost as bad as a private one. The fact that the banks are currently in league with western governments to create a kind of financial communism is doubly disturbing.
Instead of just propping up bankrupt banks, the governments should be democratising them - mobilising their assets to stimulate the productive economy, repairing infrastructure, researching and developing new markets, and refitting western economies to combat climate change. It needs a kind of green New Deal - an update on Roosevelt's imaginative policies of the 1930s fought tooth and nail by the banks.
They want unlimited access to public money to save themselves from the consequences of their own actions; welfare for the wealthy. This is above all a political, not an economic problem. There needs to be a political mobilisation of public opinion to force the banks and the government to bring the people into the equation. Unfortunately, the party that used to perform this function, Labour, has largely been bought out by the banks. They have privatised the government, even as they have socialised the financial markets.
Sunday, March 23, 2008
Change is what Wendy cannot do
“Change Is What We Do” - or so says the title of Wendy Alexander’s latest mission statement. I'm tempted to say: what - leaders? But that would be cheap. As it happens, neither of the last two Scottish Labour leaders will be in Aviemore to hear Ms Alexander address the party's annual conference this weekend. Jack McConnell will be in Malawi and Henry McLeish in America. Change is as good as a rest.
Change is also the most irksome cliché in modern politics, and it’s time politicians dumped it. We’ve had Obama’s “audacity of change”, the SNP's "time for a change", and Gordon Brown's “age of change”. We need a change of change. The 'c' word is only used by politicians because it is meaningless.
There is very little actual change in Wendy's document, apart from scrapping her predecessor's flagship policy of raising the school leaving age to 18. She hints at assigning a portion of VAT to the Scottish parliament - if Labour’s Constitutional Commission ever gets to work - but points out that this would fall foul of European rules.
Wendy's epistle to the Labourites should have been called "the more things change the more they stay the same" since it is largely an appeal to Labour's radical civic and socialist roots. She rightly reminds us that the NHS, social housing and home rule were originally Labour policies. She could also do with reminding her own UK ministers too sometimes. But Wendy goes on insist, bizarrely, that Glasgow's stalled housing stock transfer - which she launched when she was a Scottish minister - is "firmly in the traditions of John Wheatley" the architect of municipal socialism in the 1920s.
Really? Wheatley's Housing Act launched mass council house building and fair rents; Scottish Labour in office built no houses at all, sold the best council houses and attempted to to part-privatise the remainder in a botched attempt at community ownership. No Wendy, you are not John Wheatley
Nor is it credible for the party that has presided over the most obscene enrichment of the wealthy over the last decade - as celebrated recently by the Business Secretary, John Hutton - to start claiming to be champions of the poor and dispossessed. Wendy says that Labour is dedicated to ensuring that "power and wealth" is redistributed to "the many not the few". They must think we were born yesterday. This is the same New Labour that has schmoozed the City and flattered the super-rich, soliciting donations from millionaire businessmen who subsequently found themselves nominated for peerages they didn’t deserve.
Okay, I sound like Mr Angry, but like a lot of people who come from a Labour background, I have a kind of revulsion at Labour's recent attempts to airbrush history now that it is out of office and suddenly short of a vote or two. The reason Labour is in its present state in Scotland is largely because it has allowed other parties to colonise its social democratic agenda - while Gordon Brown allowed private equity barons to pay less tax than their cleaners, and non-domiciled plutocrats to avoid paying any tax at all on their foreign wealth. Iraq? Trident? Nuclear Power? I'm sorry Wendy but we won't be fooled again.
So, what else has changed? Well, it is confirmed in the document that Labour's Constitutional Commission will look at handing powers back to Westminster from Holyrood, in areas such “counter terrorism and contingency planning”. Now, I don’t want to be picky, but I’m not sure that counter-terrorism is actually devolved. Security and anti-terrorism measures are certainly reserved powers for the Westminster. As for contingency planning - will Scottish police forces have to give up the planning of events like the G8 summit?
But people are entitled to say: what commission? We have heard very little about this cross party body since it was announced with much fanfare last year. It doesn’t even have a chair yet. The
Liberal Democrats have been so worried about the drift that they reconvened their
own Steel Commission on constitutional reform as a means of geeing it up.
Scottish Labour MPs mutter about appeasing the "McChattering classes" and shake their heads about all this constitutional tinkering and deals with the Libdems. People don’t vote on constitutional abstractions and distractions, they say. And they have a point - especially right now. Scottish Labour has a real fight on its hands because the SNP is making
progress in voting intentions for Westminster. The latest opinion poll from MRUK Cello suggests that the nationalists are drawing level with Labour in terms of voting share for
Westminster elections.
The SNP strategy for 2009 - or whenever the next general election is called - will be similar to the approach of the
Parti Quebecois in Canada, which in 1990 turned itself in to the “Bloc
Quebecois” for the purposes of fighting federal elections in alliance with other parties. The BQ’s mission statement is not independence as such but “defence of the interests of all Quebecois in Ottawa” (the equivalent of Westminster).
Similarly, the ‘Bloc SNP’ will not
campaign in 2009 will ask the voters, not about constitutional reform, VAT or the significance of Sewell motions, but: ‘Who is best placed to fight Scotland’s
corner?’. Moreover, with the prospect of a hung
parliament in Westminster in 2009 - just look at Labour’s UK poll slide
- this bloc could have very considerable influence on UK politics.
Given its subordinate status within the UK Labour Party Scottish Labour is going to have real difficulty dealing with this challenge. Remember, Wendy
Alexander isn’t the leader of the party in Scotland - as Labour MPs will always remind her - but only the leader of
the MSPs in Holyrood. The SNP will portray her as a puppet or poodle
of Westminster, unable to prevent imposts like whisky taxes, withdrawal of council tax benefits, budget cuts. Given the performance of the SNP government over the last year, who is to say the Scottish voters might not listen?
Make no mistake it could lead to the disintegration of the Labour Party in Scotland. There will be calls from supporters of the “Compass” ginger group this weekend for Labour north of the border to make a decisive break with the New Labour. To adopt explicitly social democratic and Scottish policies. Wendy Alexander can do this in rhetoric, by appealing to Labour’s socialist past, John Wheatley and all, but she cannot do it in practice because she is the protégé of the Prime Minister, the architect of New Labour. This is one change she cannot make.
Change is also the most irksome cliché in modern politics, and it’s time politicians dumped it. We’ve had Obama’s “audacity of change”, the SNP's "time for a change", and Gordon Brown's “age of change”. We need a change of change. The 'c' word is only used by politicians because it is meaningless.
There is very little actual change in Wendy's document, apart from scrapping her predecessor's flagship policy of raising the school leaving age to 18. She hints at assigning a portion of VAT to the Scottish parliament - if Labour’s Constitutional Commission ever gets to work - but points out that this would fall foul of European rules.
Wendy's epistle to the Labourites should have been called "the more things change the more they stay the same" since it is largely an appeal to Labour's radical civic and socialist roots. She rightly reminds us that the NHS, social housing and home rule were originally Labour policies. She could also do with reminding her own UK ministers too sometimes. But Wendy goes on insist, bizarrely, that Glasgow's stalled housing stock transfer - which she launched when she was a Scottish minister - is "firmly in the traditions of John Wheatley" the architect of municipal socialism in the 1920s.
Really? Wheatley's Housing Act launched mass council house building and fair rents; Scottish Labour in office built no houses at all, sold the best council houses and attempted to to part-privatise the remainder in a botched attempt at community ownership. No Wendy, you are not John Wheatley
Nor is it credible for the party that has presided over the most obscene enrichment of the wealthy over the last decade - as celebrated recently by the Business Secretary, John Hutton - to start claiming to be champions of the poor and dispossessed. Wendy says that Labour is dedicated to ensuring that "power and wealth" is redistributed to "the many not the few". They must think we were born yesterday. This is the same New Labour that has schmoozed the City and flattered the super-rich, soliciting donations from millionaire businessmen who subsequently found themselves nominated for peerages they didn’t deserve.
Okay, I sound like Mr Angry, but like a lot of people who come from a Labour background, I have a kind of revulsion at Labour's recent attempts to airbrush history now that it is out of office and suddenly short of a vote or two. The reason Labour is in its present state in Scotland is largely because it has allowed other parties to colonise its social democratic agenda - while Gordon Brown allowed private equity barons to pay less tax than their cleaners, and non-domiciled plutocrats to avoid paying any tax at all on their foreign wealth. Iraq? Trident? Nuclear Power? I'm sorry Wendy but we won't be fooled again.
So, what else has changed? Well, it is confirmed in the document that Labour's Constitutional Commission will look at handing powers back to Westminster from Holyrood, in areas such “counter terrorism and contingency planning”. Now, I don’t want to be picky, but I’m not sure that counter-terrorism is actually devolved. Security and anti-terrorism measures are certainly reserved powers for the Westminster. As for contingency planning - will Scottish police forces have to give up the planning of events like the G8 summit?
But people are entitled to say: what commission? We have heard very little about this cross party body since it was announced with much fanfare last year. It doesn’t even have a chair yet. The
Liberal Democrats have been so worried about the drift that they reconvened their
own Steel Commission on constitutional reform as a means of geeing it up.
Scottish Labour MPs mutter about appeasing the "McChattering classes" and shake their heads about all this constitutional tinkering and deals with the Libdems. People don’t vote on constitutional abstractions and distractions, they say. And they have a point - especially right now. Scottish Labour has a real fight on its hands because the SNP is making
progress in voting intentions for Westminster. The latest opinion poll from MRUK Cello suggests that the nationalists are drawing level with Labour in terms of voting share for
Westminster elections.
The SNP strategy for 2009 - or whenever the next general election is called - will be similar to the approach of the
Parti Quebecois in Canada, which in 1990 turned itself in to the “Bloc
Quebecois” for the purposes of fighting federal elections in alliance with other parties. The BQ’s mission statement is not independence as such but “defence of the interests of all Quebecois in Ottawa” (the equivalent of Westminster).
Similarly, the ‘Bloc SNP’ will not
campaign in 2009 will ask the voters, not about constitutional reform, VAT or the significance of Sewell motions, but: ‘Who is best placed to fight Scotland’s
corner?’. Moreover, with the prospect of a hung
parliament in Westminster in 2009 - just look at Labour’s UK poll slide
- this bloc could have very considerable influence on UK politics.
Given its subordinate status within the UK Labour Party Scottish Labour is going to have real difficulty dealing with this challenge. Remember, Wendy
Alexander isn’t the leader of the party in Scotland - as Labour MPs will always remind her - but only the leader of
the MSPs in Holyrood. The SNP will portray her as a puppet or poodle
of Westminster, unable to prevent imposts like whisky taxes, withdrawal of council tax benefits, budget cuts. Given the performance of the SNP government over the last year, who is to say the Scottish voters might not listen?
Make no mistake it could lead to the disintegration of the Labour Party in Scotland. There will be calls from supporters of the “Compass” ginger group this weekend for Labour north of the border to make a decisive break with the New Labour. To adopt explicitly social democratic and Scottish policies. Wendy Alexander can do this in rhetoric, by appealing to Labour’s socialist past, John Wheatley and all, but she cannot do it in practice because she is the protégé of the Prime Minister, the architect of New Labour. This is one change she cannot make.
Saturday, March 22, 2008
The poetry of Gordon Brown
“At Downing St upon the stair, I met a man who wasn’t Blair. He wasn’t Blair again today. Oh how I wish he’d go away.” So read the mystery quatrain, allegedly penned by a disgruntled cabinet minister, which circulated Westminster last week.
The verse is a paraphrase of the American poet Hughes Mearns’ Antigonish, “As I was going up the stair, I met a man who wasn’t there...”.
Now, this isn’t the first time that Brown has been hit by a rocket-propelled stanza. T S Eliot’s poem “Macavity: The Mystery Cat” has been widely used by the Prime Minister’s critics. Both poems relate to the Prime Minister’s tendency to absent himself when things are going wrong. “Macavity’s not there”.
Obviously, this is all just dodgy doggerel, but humour has a knack of revealing truth. For the image of Gordon Brown now becoming fixed in the public mind, and reflected in these poems, is that of a politician who cannot face up to adversity. The truth is that Brown does absent himself from difficulties. He went to ground during the Northern Rock debacle, and he has gone to ground again over the current and related credit crunch.
What has the Prime Minister had to say of any significance about the crisis? Nothing that I can recall. Can it really be that the man who presided over the British economy with such apparent success for over a decade, who is lauded as the best Chancellor in a hundred years, now has nothing to say about what the greatest financial crisis since the Second World War? Apparently, because he wasn’t there again last week.
One suspects that Tony Blair, like him or loathe him, would at least have been out there calming fears and dispelling rumours. Challenging irresponsible city traders; raising questions about the behaviour of the banks and why we should bail them out. He would have had a soundbite, even if it was. "When the whorehouse burns down, it's not just the pimps who perish." Okay, maybe not that one.
He might not have done a great deal of good, but it would at least have given the voting public an impression that someone was thinking about it all, that there was someone looking after our interests. But Brown’s policy, as always, is to keep his face out of the papers and the bulletins during a crisis so as not to be contaminated by bad news. It’s what he does.
But the problem with presentational absenteeism is that it is a lot harder for a prime minister to hide than a chancellor. Before, Brown could bury himself in the treasury whenever Tony Blair was getting into a mess over party funding, foreign wars, NHS cock ups. Not any more. He is on display at Question Time week on week, and he is looking ragged, exhausted, clapped out.
Now appearances aren’t everything of course. A few bags under they eyes are expect in a leader - a price worth paying for the privilege of being Prime Minister. However, increasingly, Gordon Brown looks like a loser, and David Cameron is getting the better of him week by week - much as Blair succeeded in ridiculing the Tory MP John Major.
The truth is that this government is in the midst of a severe downturn. Brown is suffering his own credit crunch in the form of falling poll ratings. The latest YouGov survey has the Tories in the lead by in any UK election by 16 points (43 - 27) and ICM last week gave David Cameron’s party a 13 point lead (42 - 29). These are very serious numbers and indicate that turbulence in political allegiances in Britain is just as serious as turbulence in the markets. People are looking at Brown harder than ever and not liking what they see. He is not their Easter Bunny.
We are so used to thinking the Tories are the party of no return that we are perhaps failing to recognise that they are making a serious comeback. The Labour Party is demoralised and uncertain about its political future. The atmosphere on the government benches is gloomy and negative, and there is turmoil in the Prime Minister’s private office, with the departure of his close aide of 10 years, Spencer Livermore.
He found life under Brown’s new chief of staff -the public relations expert Stephen Carter - less than congenial. Brown is surrounding himself with people who made their names in advertising, David Muir, and investment banking, Jennifer Moses, rather than in Labour politics, which is why some are talking about a Tory take-over in Number Ten. But this leadership requires more than a PR face lift. Labour has lost 4 million votes since 1997 and it will not be easy to get them back.
The problem is that people don’t know what Labour stands for anymore, under Brown. The widely expected return to more traditional Labour values never happened. Indeed, Brown has been even more neo-liberal than his predecessor, pressing ahead with public sector reform, cutting inheritance tax, blocking attempts to curb the non doms tax avoidance. Ministers like John Hutton have been free to call for rich people to be “celebrated” just at the moment when the the rich have plunged the world into an economic crisis.
Brown has pushed ahead with terrorist detention; has joined with France to lead a global revival of nuclear power. He could have used the fifth anniversary of the Iraq war last week to try to draw a line under Britain’s greatest foreign policy disaster in half a century. But he hasn’t apologised for the war, or indicated any new strategy for getting out of it, other than the retreat by stealth. He certainly hasn’t tried to give us any vision of world affairs post Iraq - a new philosophy of international relations following the collapse of American neo-imperialism.
It’s just non-business as usual - wittering on about a “national risk register”; maybe meeting the Dalai Lama of Tibet but only if it doesn’t upset the Chinese; dithering over a free vote on the Embryology Bill. Say what you like about Tony Blair, but he did at least make decisions, and he tried to give an account of the world in which he made them. May have been the wrong decisions, but - as he always said - at least he made them. The danger is that Brown appears to be a passive victim of events rather than the master of them. That is not a credible attitude for a Prime Minister, who must at all times be visible and proactive.
Brown was supposed to be the keeper of the soul of Labour; he has turned out to be just another desperate politician surrounding himself with “brand” managers like to sell the political vision he doesn’t have.
But wait. What’s this? A new mystery poem has landed in my in box. “As I was going to the polls, I met a man who hadn’t balls. I hope he comes again this way. so I can say he’s had his day.
I
.
The verse is a paraphrase of the American poet Hughes Mearns’ Antigonish, “As I was going up the stair, I met a man who wasn’t there...”.
Now, this isn’t the first time that Brown has been hit by a rocket-propelled stanza. T S Eliot’s poem “Macavity: The Mystery Cat” has been widely used by the Prime Minister’s critics. Both poems relate to the Prime Minister’s tendency to absent himself when things are going wrong. “Macavity’s not there”.
Obviously, this is all just dodgy doggerel, but humour has a knack of revealing truth. For the image of Gordon Brown now becoming fixed in the public mind, and reflected in these poems, is that of a politician who cannot face up to adversity. The truth is that Brown does absent himself from difficulties. He went to ground during the Northern Rock debacle, and he has gone to ground again over the current and related credit crunch.
What has the Prime Minister had to say of any significance about the crisis? Nothing that I can recall. Can it really be that the man who presided over the British economy with such apparent success for over a decade, who is lauded as the best Chancellor in a hundred years, now has nothing to say about what the greatest financial crisis since the Second World War? Apparently, because he wasn’t there again last week.
One suspects that Tony Blair, like him or loathe him, would at least have been out there calming fears and dispelling rumours. Challenging irresponsible city traders; raising questions about the behaviour of the banks and why we should bail them out. He would have had a soundbite, even if it was. "When the whorehouse burns down, it's not just the pimps who perish." Okay, maybe not that one.
He might not have done a great deal of good, but it would at least have given the voting public an impression that someone was thinking about it all, that there was someone looking after our interests. But Brown’s policy, as always, is to keep his face out of the papers and the bulletins during a crisis so as not to be contaminated by bad news. It’s what he does.
But the problem with presentational absenteeism is that it is a lot harder for a prime minister to hide than a chancellor. Before, Brown could bury himself in the treasury whenever Tony Blair was getting into a mess over party funding, foreign wars, NHS cock ups. Not any more. He is on display at Question Time week on week, and he is looking ragged, exhausted, clapped out.
Now appearances aren’t everything of course. A few bags under they eyes are expect in a leader - a price worth paying for the privilege of being Prime Minister. However, increasingly, Gordon Brown looks like a loser, and David Cameron is getting the better of him week by week - much as Blair succeeded in ridiculing the Tory MP John Major.
The truth is that this government is in the midst of a severe downturn. Brown is suffering his own credit crunch in the form of falling poll ratings. The latest YouGov survey has the Tories in the lead by in any UK election by 16 points (43 - 27) and ICM last week gave David Cameron’s party a 13 point lead (42 - 29). These are very serious numbers and indicate that turbulence in political allegiances in Britain is just as serious as turbulence in the markets. People are looking at Brown harder than ever and not liking what they see. He is not their Easter Bunny.
We are so used to thinking the Tories are the party of no return that we are perhaps failing to recognise that they are making a serious comeback. The Labour Party is demoralised and uncertain about its political future. The atmosphere on the government benches is gloomy and negative, and there is turmoil in the Prime Minister’s private office, with the departure of his close aide of 10 years, Spencer Livermore.
He found life under Brown’s new chief of staff -the public relations expert Stephen Carter - less than congenial. Brown is surrounding himself with people who made their names in advertising, David Muir, and investment banking, Jennifer Moses, rather than in Labour politics, which is why some are talking about a Tory take-over in Number Ten. But this leadership requires more than a PR face lift. Labour has lost 4 million votes since 1997 and it will not be easy to get them back.
The problem is that people don’t know what Labour stands for anymore, under Brown. The widely expected return to more traditional Labour values never happened. Indeed, Brown has been even more neo-liberal than his predecessor, pressing ahead with public sector reform, cutting inheritance tax, blocking attempts to curb the non doms tax avoidance. Ministers like John Hutton have been free to call for rich people to be “celebrated” just at the moment when the the rich have plunged the world into an economic crisis.
Brown has pushed ahead with terrorist detention; has joined with France to lead a global revival of nuclear power. He could have used the fifth anniversary of the Iraq war last week to try to draw a line under Britain’s greatest foreign policy disaster in half a century. But he hasn’t apologised for the war, or indicated any new strategy for getting out of it, other than the retreat by stealth. He certainly hasn’t tried to give us any vision of world affairs post Iraq - a new philosophy of international relations following the collapse of American neo-imperialism.
It’s just non-business as usual - wittering on about a “national risk register”; maybe meeting the Dalai Lama of Tibet but only if it doesn’t upset the Chinese; dithering over a free vote on the Embryology Bill. Say what you like about Tony Blair, but he did at least make decisions, and he tried to give an account of the world in which he made them. May have been the wrong decisions, but - as he always said - at least he made them. The danger is that Brown appears to be a passive victim of events rather than the master of them. That is not a credible attitude for a Prime Minister, who must at all times be visible and proactive.
Brown was supposed to be the keeper of the soul of Labour; he has turned out to be just another desperate politician surrounding himself with “brand” managers like to sell the political vision he doesn’t have.
But wait. What’s this? A new mystery poem has landed in my in box. “As I was going to the polls, I met a man who hadn’t balls. I hope he comes again this way. so I can say he’s had his day.
I
.
Friday, March 21, 2008
trash and cash
Trash and cash - it’s the new investment strategy that everyone’s talking about. Spread a rumour, buy some cheap stock, make a packet.
So, let’s try it out, shall we. I’ll spread a rumour that the Royal Bank of Scotland is in a pickle - pass it on! That it’s going cap in hand to the Bank of England for emergency cash - truly. People are trying to get their money out because it hasn’t got the cash reserves to meet its liabilities.
Now, wait for the share price of RBS to fall by 3 billion, and then buy, buy, buy. As the stock recovers, you make a fortune by selling your depressed shares at a higher rate than you bought them for. It’s a steal.
It’s also entirely legal. In fact, what happened to HBOS last week isn’t just the ploy of a few rogue traders, but the way that investment in the stock market, indeed any market works. People buy and sell on rumour - that’s what happened to Northern Rock and Bear Stearns. In both cases, the management and regulators insisted that nothing was wrong, that the bank was sound, that if people would just stop taking their money out, all would be well.
But here’s the sting: the investors who led the Rock and Bear panics were right to do so. They were vindicated by events, because despite all the assurances from the politicians and the boads these institutions, they both collapsed because people took their money out. Bear Sterns was worth £20 billion a year or so ago; last week it was sold to JP Morgan for £260 million. Northern Rock is nationalised and its shares are worth nothing at all.
And here’s another worrying thought. The rumours about HBOS last week - which led to its 20% share collapse - were not falsehoods, they were perfectly true. HBOS has indeed gone to the Bank of England for emergency cash - in fact all the big banks went to the Bank last week to ask for more money please. Depositors have been taking money out of the bank - I certainly have. And it is also true that HBOS does not have sufficient reserves to meet all its obligations to depositors. This is called “fractional reserve banking” - look it up.
The truth about banks, which we should all do well to remember in this crisis, is that their business is lending money they don’t actually have. To repeat: if depositors in any bank, however well established, all took their money out at once, the bank would collapse. Banks are only required by law to have cash reserves to meet average withdrawals - it used to be 10% but this has fallen over the years, and the average cash reserve ration of British banks is 3%. The problem arises when more than 3% wan their cash back.
So, the trash and cash merchants have a bomb proof business model here. They can spread ugly rumours about any bank they choose, safe in the knowledge that they are actually telling it like it is.
So, let’s try it out, shall we. I’ll spread a rumour that the Royal Bank of Scotland is in a pickle - pass it on! That it’s going cap in hand to the Bank of England for emergency cash - truly. People are trying to get their money out because it hasn’t got the cash reserves to meet its liabilities.
Now, wait for the share price of RBS to fall by 3 billion, and then buy, buy, buy. As the stock recovers, you make a fortune by selling your depressed shares at a higher rate than you bought them for. It’s a steal.
It’s also entirely legal. In fact, what happened to HBOS last week isn’t just the ploy of a few rogue traders, but the way that investment in the stock market, indeed any market works. People buy and sell on rumour - that’s what happened to Northern Rock and Bear Stearns. In both cases, the management and regulators insisted that nothing was wrong, that the bank was sound, that if people would just stop taking their money out, all would be well.
But here’s the sting: the investors who led the Rock and Bear panics were right to do so. They were vindicated by events, because despite all the assurances from the politicians and the boads these institutions, they both collapsed because people took their money out. Bear Sterns was worth £20 billion a year or so ago; last week it was sold to JP Morgan for £260 million. Northern Rock is nationalised and its shares are worth nothing at all.
And here’s another worrying thought. The rumours about HBOS last week - which led to its 20% share collapse - were not falsehoods, they were perfectly true. HBOS has indeed gone to the Bank of England for emergency cash - in fact all the big banks went to the Bank last week to ask for more money please. Depositors have been taking money out of the bank - I certainly have. And it is also true that HBOS does not have sufficient reserves to meet all its obligations to depositors. This is called “fractional reserve banking” - look it up.
The truth about banks, which we should all do well to remember in this crisis, is that their business is lending money they don’t actually have. To repeat: if depositors in any bank, however well established, all took their money out at once, the bank would collapse. Banks are only required by law to have cash reserves to meet average withdrawals - it used to be 10% but this has fallen over the years, and the average cash reserve ration of British banks is 3%. The problem arises when more than 3% wan their cash back.
So, the trash and cash merchants have a bomb proof business model here. They can spread ugly rumours about any bank they choose, safe in the knowledge that they are actually telling it like it is.
Monday, March 17, 2008
Super-Salmond can deliver everything but independence
Right now, I'd say Labour's best bet looks like assassination. With Alex Salmond leading by a ridiculous 75% over his Labour rival, Wendy Alexander, in a weekend poll, Labour's only immediate chance of getting back in the race would be to eliminate the SNP leader altogether.
Super-Salmond's party isn't doing nearly so well. In the same mruk poll, the SNP is only eight points ahead of Labour, even at the dizzying height of its electoral love affair with the Scottish voters. This would translate into 57 SNP seats to Labour's 44 in any election. Given Labour's abysmal performance recently, you might have expected the SNP's lead to be greater still. And, of course, if you were to ask Scots straight out if they wanted to leave the UK, then fewer than one-third would probably say they support independence.
So, the success of the SNP right now is overwhelmingly down to the character of its leader, Alex Salmond. He has matured as a politician just at the right historical moment to become Scotland's first truly national political leader, arguably, in three centuries. Salmond speaks for a broad range of Scots from all political backgrounds and none. That is his enormous strength and the reason why he speaks with such authority in a parliament of minorities. Politicians of other parties realise it, too, even if they don't admit it.
advertisement
Does that mean it is all down to personality? If Salmond were to fall under one of Brian Souter's buses would Scotland go back to its docile, default Unionism? No, of course not. History has a knack of finding the right person at the right time. Scotland was clearly in the mood for a new kind of politics and Salmond simply answered the call. Like all great politicians, he is first of all a gifted opportunist.
But the SNP's fortunes certainly rest on Salmond for the moment. Right now he can do no wrong. Even with the local income tax plans disintegrating, with criticism of his dealings with Donald Trump and Aviemore developers, and with all those broken manifesto promises on student debt, new police and housing grants - Salmond remains above it all. He would loathe the comparison, but the SNP leader is enjoying the kind of unquestioning popularity that Tony Blair had in his first 18 months in office.
It's not just about leadership, of course, but what you do with it that counts. In the next few weeks Scotland will experience the results of Salmond's policy whirlwind last summer. Prescription charges are cut from April 1, the graduate endowment disappears, the council tax freeze comes into force, business rates start to fall. These are tangible benefits which will bolster the SNP's position in Scotland. The irony is that, overall, the SNP has been pursuing a broadly social-democratic agenda, even though it has been kept in power by Conservative votes. Many of its policies are ones Labour MSPs would dearly have liked to implement themselves but couldn't because of the London veto. The SNP is not a party of the left, but it seems to be taking over from Labour as Scotland's natural party of government So far, so good. But the fact remains that the SNP is not Labour, but a nationalist party dedicated to creating an independent Scotland with all the appurtenances of a separate state: currency, army, revenue, health service, etc . . . The question is whether the SNP under Salmond will be able to go on to fulfil its mission statement. Following his sensational political coup, could Salmond, by force of character alone, persuade Scots to go all the way and seek statehood?
It's a subject I found myself debating at this year's Changin' Scotland - a political and cultural "boutique" conference in the celebrated Ceilidh Place in Ullapool. Somewhere with room to think. Mind you, every time I opened my mouth I disagreed with myself.
No, I don't see the remotest prospect of the SNP winning an independence referendum in 2010 as planned. There is no majority for it in parliament or in the country. But, yes, Scotland might well be functionally independent within a decade or so, in which case a referendum might be an anachronism. If you ask Scots whether they want to separate from Britain, they will say "no" for a variety of reasons - filial obligations, economic and sentimental ties, geography and history. Above all, because Scots just don't go in for "revolutionary moments", for epic historical upsets, and will opt for stability whenever possible. We talk a lot, but we don't like conflict - we've had a bellyful of it.
However, if there were an election tomorrow, I'm certain the SNP would be back in office with a much increased majority. And there is no sign that the Scottish voters are losing their enthusiasm for gaining ever-greater powers for their parliament. Devolution is a process, and an unstoppable one. The other Scottish parties, and even the Tories, accept this now - which is why they have set up the Constitutional Commission - or rather the commission-that- dare-not-speak-its-name because Gordon Brown doesn't like the "c" word.
It's our old friend the Caledonian Paradox again: Scots don't want separation but they do want self-government. And while Salmond may not be able to win Scots to independence on the strength of his personality alone, he is clearly in a position to help Scotland explore the outer limits of home rule.
Salmond is a constitutional gradualist, after all. It was he who brought the SNP kicking and screaming to acceptance of devolution. He has shown the SNP that half-way houses can be quite comfortable places. And his job now will be to show that it can be more comfortable still with a few extensions and a roof conversion.
My view is that this constitutional expansionism will continue until Scotland has full economic powers short of its own currency, and full political control of domestic policy - broadcasting, firearms, drugs, energy, etc. Holyrood will not have a fully independent foreign policy, but it may lose Trident and have a veto on Scottish regiments participating in American military adventures.
The SNP may cock it up, of course, by getting carried away and trying to impose formal independence on a reluctant electorate. Westminster might equally take a wobbly and force Scotland out, just as the Czechs pushed Slovakia down the independence road in 1993. We are apparently entering an economic crisis which could cause relations to sour rapidly. But, in the end, I think the Scots are committed to home rule by stealth. And I think Alex Salmond's strength is that he knows it.
Super-Salmond's party isn't doing nearly so well. In the same mruk poll, the SNP is only eight points ahead of Labour, even at the dizzying height of its electoral love affair with the Scottish voters. This would translate into 57 SNP seats to Labour's 44 in any election. Given Labour's abysmal performance recently, you might have expected the SNP's lead to be greater still. And, of course, if you were to ask Scots straight out if they wanted to leave the UK, then fewer than one-third would probably say they support independence.
So, the success of the SNP right now is overwhelmingly down to the character of its leader, Alex Salmond. He has matured as a politician just at the right historical moment to become Scotland's first truly national political leader, arguably, in three centuries. Salmond speaks for a broad range of Scots from all political backgrounds and none. That is his enormous strength and the reason why he speaks with such authority in a parliament of minorities. Politicians of other parties realise it, too, even if they don't admit it.
advertisement
Does that mean it is all down to personality? If Salmond were to fall under one of Brian Souter's buses would Scotland go back to its docile, default Unionism? No, of course not. History has a knack of finding the right person at the right time. Scotland was clearly in the mood for a new kind of politics and Salmond simply answered the call. Like all great politicians, he is first of all a gifted opportunist.
But the SNP's fortunes certainly rest on Salmond for the moment. Right now he can do no wrong. Even with the local income tax plans disintegrating, with criticism of his dealings with Donald Trump and Aviemore developers, and with all those broken manifesto promises on student debt, new police and housing grants - Salmond remains above it all. He would loathe the comparison, but the SNP leader is enjoying the kind of unquestioning popularity that Tony Blair had in his first 18 months in office.
It's not just about leadership, of course, but what you do with it that counts. In the next few weeks Scotland will experience the results of Salmond's policy whirlwind last summer. Prescription charges are cut from April 1, the graduate endowment disappears, the council tax freeze comes into force, business rates start to fall. These are tangible benefits which will bolster the SNP's position in Scotland. The irony is that, overall, the SNP has been pursuing a broadly social-democratic agenda, even though it has been kept in power by Conservative votes. Many of its policies are ones Labour MSPs would dearly have liked to implement themselves but couldn't because of the London veto. The SNP is not a party of the left, but it seems to be taking over from Labour as Scotland's natural party of government So far, so good. But the fact remains that the SNP is not Labour, but a nationalist party dedicated to creating an independent Scotland with all the appurtenances of a separate state: currency, army, revenue, health service, etc . . . The question is whether the SNP under Salmond will be able to go on to fulfil its mission statement. Following his sensational political coup, could Salmond, by force of character alone, persuade Scots to go all the way and seek statehood?
It's a subject I found myself debating at this year's Changin' Scotland - a political and cultural "boutique" conference in the celebrated Ceilidh Place in Ullapool. Somewhere with room to think. Mind you, every time I opened my mouth I disagreed with myself.
No, I don't see the remotest prospect of the SNP winning an independence referendum in 2010 as planned. There is no majority for it in parliament or in the country. But, yes, Scotland might well be functionally independent within a decade or so, in which case a referendum might be an anachronism. If you ask Scots whether they want to separate from Britain, they will say "no" for a variety of reasons - filial obligations, economic and sentimental ties, geography and history. Above all, because Scots just don't go in for "revolutionary moments", for epic historical upsets, and will opt for stability whenever possible. We talk a lot, but we don't like conflict - we've had a bellyful of it.
However, if there were an election tomorrow, I'm certain the SNP would be back in office with a much increased majority. And there is no sign that the Scottish voters are losing their enthusiasm for gaining ever-greater powers for their parliament. Devolution is a process, and an unstoppable one. The other Scottish parties, and even the Tories, accept this now - which is why they have set up the Constitutional Commission - or rather the commission-that- dare-not-speak-its-name because Gordon Brown doesn't like the "c" word.
It's our old friend the Caledonian Paradox again: Scots don't want separation but they do want self-government. And while Salmond may not be able to win Scots to independence on the strength of his personality alone, he is clearly in a position to help Scotland explore the outer limits of home rule.
Salmond is a constitutional gradualist, after all. It was he who brought the SNP kicking and screaming to acceptance of devolution. He has shown the SNP that half-way houses can be quite comfortable places. And his job now will be to show that it can be more comfortable still with a few extensions and a roof conversion.
My view is that this constitutional expansionism will continue until Scotland has full economic powers short of its own currency, and full political control of domestic policy - broadcasting, firearms, drugs, energy, etc. Holyrood will not have a fully independent foreign policy, but it may lose Trident and have a veto on Scottish regiments participating in American military adventures.
The SNP may cock it up, of course, by getting carried away and trying to impose formal independence on a reluctant electorate. Westminster might equally take a wobbly and force Scotland out, just as the Czechs pushed Slovakia down the independence road in 1993. We are apparently entering an economic crisis which could cause relations to sour rapidly. But, in the end, I think the Scots are committed to home rule by stealth. And I think Alex Salmond's strength is that he knows it.
Tuesday, March 11, 2008
The food crisis is caused by speculation
What has the food crisis got to do with Northern Rock? Well, quite a lot actually. The rocketing price of wheat, soyabeans, sugar coffee etc is all part of the credit crisis which has caused panic in financial markets and encouraged investors to take their money out of risky mortgage bonds and shaky equities and into commodities as ‘stores of value’. Put another way, the Western banks are exporting their debts to the third world.
The phenomenal increases in food prices recently are only in part a consequence of climate change and population. Most of the recent rises have been the result of speculation and the collapse in the value of the dollar. This is being tacitly encouraged by the central banks like the US Federal reserve who are trying to ignite another asset bubble to replace the real estate and dotcom bubbles which have now burst in spectacular fashion. It’s the third bubble and it’s hitting the third world hard.
. Desperate for quick returns, trillions of dollars are being taken out of private equity and financial derivatives and ploughed into food and raw materials. The financial websites call it the “commodities super-cycle”. It ranges from gold and precious metals at one end, to corn, cocoa and cattle at the other - speculators are even placing their bets on water prices.
The collapse in the price of the dollar means that most international commodities are more expensive for poor people to buy. The dollar’s decline is a direct result of the low interest rate policy of the Federal Reserve. When rates are set below the rate of inflation, investors have to keep moving their massive funds from sector to sector in search of higher returns.
They piled into the internet stocks in the 1990s as the boom in dotcoms got under way. Then they shifted into real estate and complex financial derivatives like collateralised debt obligations based on sub=prime US mortgages. Now, with the collapse of the property bubble , not just in America but across the world, the investors are on the move gain, and the only place left is commodities.
Of course, long term factors like the depletion of oil, population and the changing eating habits of South East Asia are putting long term pressure on agricultural resources. But the Fed has thrown fuel on the fire recently by dramatically cutting interest rates, even as inflation grows, in a desperate race to revive the American economy on the back of a commodities boom. The people who suffer most will be on the other side of the world.
Will it work? In the short term, possibly yes. But in the end, the US may be cutting its own throat. Once speculative prices get out of control, there is no knowing when they will stop. Oil is now over $100 a barrel, which is causing gas prices and fertilisers to rocket in the US. America depends on these as much as sub-Saharan Africa. This might be the bubble to end all bubbles.
The phenomenal increases in food prices recently are only in part a consequence of climate change and population. Most of the recent rises have been the result of speculation and the collapse in the value of the dollar. This is being tacitly encouraged by the central banks like the US Federal reserve who are trying to ignite another asset bubble to replace the real estate and dotcom bubbles which have now burst in spectacular fashion. It’s the third bubble and it’s hitting the third world hard.
. Desperate for quick returns, trillions of dollars are being taken out of private equity and financial derivatives and ploughed into food and raw materials. The financial websites call it the “commodities super-cycle”. It ranges from gold and precious metals at one end, to corn, cocoa and cattle at the other - speculators are even placing their bets on water prices.
The collapse in the price of the dollar means that most international commodities are more expensive for poor people to buy. The dollar’s decline is a direct result of the low interest rate policy of the Federal Reserve. When rates are set below the rate of inflation, investors have to keep moving their massive funds from sector to sector in search of higher returns.
They piled into the internet stocks in the 1990s as the boom in dotcoms got under way. Then they shifted into real estate and complex financial derivatives like collateralised debt obligations based on sub=prime US mortgages. Now, with the collapse of the property bubble , not just in America but across the world, the investors are on the move gain, and the only place left is commodities.
Of course, long term factors like the depletion of oil, population and the changing eating habits of South East Asia are putting long term pressure on agricultural resources. But the Fed has thrown fuel on the fire recently by dramatically cutting interest rates, even as inflation grows, in a desperate race to revive the American economy on the back of a commodities boom. The people who suffer most will be on the other side of the world.
Will it work? In the short term, possibly yes. But in the end, the US may be cutting its own throat. Once speculative prices get out of control, there is no knowing when they will stop. Oil is now over $100 a barrel, which is causing gas prices and fertilisers to rocket in the US. America depends on these as much as sub-Saharan Africa. This might be the bubble to end all bubbles.
Monday, March 10, 2008
Jack McConnell the unlikely hero of democracy
The story so far: The former Liberal Democrat leader, Sir Ming Campbell, last week spilled the beans on his and Gordon Brown’s attempts to prevent the SNP taking office after the May election. Secret talks were held - over the heads of their own Scottish parties - about how to keep Alex Salmond’s paws off the £30bn Scottish Executive budget. Brown wanted a new Liberal -Labour coalition to seize power even if the SNP won, on the grounds that it would have a majority of seats in parliament.
It may have come as no surprise to learn that Gordon Brown tried to fix the result of the Holyrood election, Do bears defecate in afforested areas? Nevertheless, it’s rare in political history to have conspiracy theories confirmed so soon after the event. It will now go down in nationalist mythology that Gordon Brown launched a plot to overturn the democratic will of the Scottish people, like some unionist Robert Mugabe.
Meanwhile, Jack McConnell, the former First Minister, has emerged as an unlikely home rule hero for having had the bottle to stand up to Brown. For we also learned last week that Brown wanted Labour MSPs to vote for “anyone but Salmond” for First Minister, even if that meant voting a Tory or Liberal Democrat into Bute House. Jack McConnell refused and told Brown bluntly to get his tanks off his lawn.
I have been told independently that Jack McConnell was indeed expected to step aside after the election to make way for Wendy Alexander, who would have been installed as leader without a contest on the Monday after the election. McConnell’s refusal to stand down is regarded by influential figures in the Westminster government as the proximate cause of Labour’s downfall. Jack still isn’t on the prime minister’s christmas card list even now.
Incredible stuff. Explains a great deal, and suggests that Brown was Labour’s own worst enemy in Scotland. Not only had he set his face against any review of tax powers - the very review which he has now,belatedly, agreed to set up - he had also failed to understand the dynamics of a proportional parliament. In Holyrood, where all parties are minorities, governments cannot simply be fixed by executive fiat in the way they can be in a winner-takes-all system like Westminster. Here, things work by consensus, or not at all, and attempts to rig the consensus are invariably counterproductive.
Everyone in Scottish politics knew or guessed what was going on over that manic May weekend, including the Scottish Tories. They were under pressure to join in the “pan-unionist anti-SNP coalition” to save the Union from the Salmond menace. However, they wisely realised that this could be fatal to their future electoral credibility. If the Scottish Conservatives had appeared to salvage a lacklustre Labour administration, which had been rejected by the voters, not just in Holyrood but in council chambers across Scotland, they would be tainted by association. They kept their own counsel, and allowed Salmond to be installed as a minority leader dependent on their votes.
The Liberal Democrats had a kind of nervous breakdown. Aware that their UK leader was in cahoots with Brown, and unable to seize the political advantage, they lost the plot. They didn’t want to prop up Labour any more than the Tories did, and nor did they want to be seen as Brown’s little helpers. But nor were they free to do any deals with the SNP,
The logical thing would of course have been to enter coalition talks, as the Liberal Democrats did in Wales. Most of the Scottish Liberal Democrats policies were a direct match with the SNP manifesto, on nuclear power, local income tax, student fees etc.. The Libdems had a very strong hand to play, and could almost certainly have won a constitutional convention and blocked any referendum on independence within the lifetime of the parliament, since Alex Salmond didn’t have the numbers to deliver a referendum bill. The Libdems could have presented themselves as saviours of the union, and kept their ministerial motors too.
If they hadn’t won an assurance from Alex Salmond on the constitution, they could have walked out of the talks, declaring that the SNP were sectarians only interested in separatism. It certainly looked like a no brainer, but grey matter was in short supply. The Liberal Democrats, knowing Sir Ming Campbell’s antipathy to any nationalist deal, refused even to discuss a coalition with the SNP. Sir Ming Campbell hosted a ‘pizza summit’ at his Edinburgh home with his Scottish leaders, on the night following the election after which they: “packed away our pizza boxes and any possibility of a coalition deal with the SNP”.
Why was Sir Ming so opposed even to talking with the Nats? Presumably because Brown would have gone nuclear and told him to forget any possibility of Liberal Democrats being part of a UK coalition after the next general election. The machinations over the Scottish government were clearly part of a bigger game in which the Liberal Democrats were hoping for a role in the UK government under future- prime minister Brown if Labour lost its Westminster majority. Sir Ming could reasonably have become foreign secretary, or possibly even deputy PM.
Anyway, having failed to get the Scottish Liberal Democrats to revive the Holyrood coalition under Labour leadership, Brown ordered his troops to seek out and back anyone who could win a majority in the Scottish parliament, even if that meant supporting Nicol Stephen. Jack McConnell balked at the prospect of becoming deputy to his former deputy and dismissed the idea in what is reported as a “blazing row” with the future Prime Minister.
Looking back, it was senseless for Brown and Ming Campbell to behave like imperial governors of an Indian province under the Raj. Their meddling has damaged the credibility of their own Scottish parties who now look like unionist stooges. Historians will argue for decades about exactly what happened during those fateful forty eight hours in May, but the are likely to judge that Jack McConnell was the only person in the Labour leadership who really understood the political significance of the result. That Labour’s hegemony was over, at least for the moment, and that trying to hold back history would only damage the party even further.
It speaks volumes that the First Minister was kept in the dark over the backstage dealings over the future governance of Scotland. But perhaps it was as well for Jack that he wasn’t informed because at least he can say his hands are clean. For his stand against Brown’s ‘unionist fix’ McConnell may even in time become something of a national hero - the man who stood up for Scottish democracy, even though it meant defying his party leader. Now there’s a turn-up for the books!
It may have come as no surprise to learn that Gordon Brown tried to fix the result of the Holyrood election, Do bears defecate in afforested areas? Nevertheless, it’s rare in political history to have conspiracy theories confirmed so soon after the event. It will now go down in nationalist mythology that Gordon Brown launched a plot to overturn the democratic will of the Scottish people, like some unionist Robert Mugabe.
Meanwhile, Jack McConnell, the former First Minister, has emerged as an unlikely home rule hero for having had the bottle to stand up to Brown. For we also learned last week that Brown wanted Labour MSPs to vote for “anyone but Salmond” for First Minister, even if that meant voting a Tory or Liberal Democrat into Bute House. Jack McConnell refused and told Brown bluntly to get his tanks off his lawn.
I have been told independently that Jack McConnell was indeed expected to step aside after the election to make way for Wendy Alexander, who would have been installed as leader without a contest on the Monday after the election. McConnell’s refusal to stand down is regarded by influential figures in the Westminster government as the proximate cause of Labour’s downfall. Jack still isn’t on the prime minister’s christmas card list even now.
Incredible stuff. Explains a great deal, and suggests that Brown was Labour’s own worst enemy in Scotland. Not only had he set his face against any review of tax powers - the very review which he has now,belatedly, agreed to set up - he had also failed to understand the dynamics of a proportional parliament. In Holyrood, where all parties are minorities, governments cannot simply be fixed by executive fiat in the way they can be in a winner-takes-all system like Westminster. Here, things work by consensus, or not at all, and attempts to rig the consensus are invariably counterproductive.
Everyone in Scottish politics knew or guessed what was going on over that manic May weekend, including the Scottish Tories. They were under pressure to join in the “pan-unionist anti-SNP coalition” to save the Union from the Salmond menace. However, they wisely realised that this could be fatal to their future electoral credibility. If the Scottish Conservatives had appeared to salvage a lacklustre Labour administration, which had been rejected by the voters, not just in Holyrood but in council chambers across Scotland, they would be tainted by association. They kept their own counsel, and allowed Salmond to be installed as a minority leader dependent on their votes.
The Liberal Democrats had a kind of nervous breakdown. Aware that their UK leader was in cahoots with Brown, and unable to seize the political advantage, they lost the plot. They didn’t want to prop up Labour any more than the Tories did, and nor did they want to be seen as Brown’s little helpers. But nor were they free to do any deals with the SNP,
The logical thing would of course have been to enter coalition talks, as the Liberal Democrats did in Wales. Most of the Scottish Liberal Democrats policies were a direct match with the SNP manifesto, on nuclear power, local income tax, student fees etc.. The Libdems had a very strong hand to play, and could almost certainly have won a constitutional convention and blocked any referendum on independence within the lifetime of the parliament, since Alex Salmond didn’t have the numbers to deliver a referendum bill. The Libdems could have presented themselves as saviours of the union, and kept their ministerial motors too.
If they hadn’t won an assurance from Alex Salmond on the constitution, they could have walked out of the talks, declaring that the SNP were sectarians only interested in separatism. It certainly looked like a no brainer, but grey matter was in short supply. The Liberal Democrats, knowing Sir Ming Campbell’s antipathy to any nationalist deal, refused even to discuss a coalition with the SNP. Sir Ming Campbell hosted a ‘pizza summit’ at his Edinburgh home with his Scottish leaders, on the night following the election after which they: “packed away our pizza boxes and any possibility of a coalition deal with the SNP”.
Why was Sir Ming so opposed even to talking with the Nats? Presumably because Brown would have gone nuclear and told him to forget any possibility of Liberal Democrats being part of a UK coalition after the next general election. The machinations over the Scottish government were clearly part of a bigger game in which the Liberal Democrats were hoping for a role in the UK government under future- prime minister Brown if Labour lost its Westminster majority. Sir Ming could reasonably have become foreign secretary, or possibly even deputy PM.
Anyway, having failed to get the Scottish Liberal Democrats to revive the Holyrood coalition under Labour leadership, Brown ordered his troops to seek out and back anyone who could win a majority in the Scottish parliament, even if that meant supporting Nicol Stephen. Jack McConnell balked at the prospect of becoming deputy to his former deputy and dismissed the idea in what is reported as a “blazing row” with the future Prime Minister.
Looking back, it was senseless for Brown and Ming Campbell to behave like imperial governors of an Indian province under the Raj. Their meddling has damaged the credibility of their own Scottish parties who now look like unionist stooges. Historians will argue for decades about exactly what happened during those fateful forty eight hours in May, but the are likely to judge that Jack McConnell was the only person in the Labour leadership who really understood the political significance of the result. That Labour’s hegemony was over, at least for the moment, and that trying to hold back history would only damage the party even further.
It speaks volumes that the First Minister was kept in the dark over the backstage dealings over the future governance of Scotland. But perhaps it was as well for Jack that he wasn’t informed because at least he can say his hands are clean. For his stand against Brown’s ‘unionist fix’ McConnell may even in time become something of a national hero - the man who stood up for Scottish democracy, even though it meant defying his party leader. Now there’s a turn-up for the books!
Sunday, March 09, 2008
Identity cards - now terrorists won't need to forge them
Isn’t it reassuring that the finest minds of their generation are serving in Gordon’s government. Take home secretary Jacqui Smith and her brilliant solution to the problem of compulsory identity cards: making them voluntary! This oxymoronic u-turn sets a new benchmark in government dithering.
The whole point about identity cards - or so Tony Blair told us - was that they were meant to be held by everyone. That way, wrong ’uns, illegals and people with dark faces (sorry, ‘criminally-profiled terrorist suspects’) would be easy to spot because they wouldn’t have said card. They could then be banged up for weeks without charge under the proposed law on detention of suspected terrorists.
Now that the they are voluntary the terrorists, illegals etc will not even have to go to the inconvenience of forging their ID cards. Only those who actually have the cards will be liable to arbitrary arrest and detention by the police, when they inevitably confuse Mr Oswald B. Linden with Osama bin Laden. We can sleep safely in our beds secure in the knowledge that they know where we live.
In her further wisdom Ms Smith has made students an exception to voluntary compulsion. They will all expected to have identity cards. Which is inspired because, of course, students are the one group in society that can be absolutely guaranteed to lose their identity cards, after using them to cut up lines of coke or whatever. This means that the government won’t have to go to the trouble of losing the identity cards themselves, in the way they lost the child benefit records of 25 million citizens.
Senior managers at the HM Revenue and customs, have been amply rewarded for losing our bank accounts, national insurance numbers and pension details by posting them in a jiffy bag to al Qaeda. A grateful government has increased their bonuses by more than 50%. You might find it surprising that officials in dysfunctional government departments are getting any bonuses at all, but incompetence on this scale doesn’t come cheap. It takes brains to lose £3.3 bn in overpaid tax credits, and civil servants need proper incentives or, heck, they might go to the private sector.
Talking of which, Gordon Brown himself must surely be in line for some kind of bonus for losing £4 billion of our money on the bullion markets. Gordo sold most of Britain’s gold reserves off the back of a lorry eight years ago when it was worth 275 dollars an ounce. Now the yellow stuff is trading at nearly a 1,000 dollars, which makes GB the biggest rogue trader since Jerome Kerviel.
You can see why banks are so keen on hiring top politicians like Tony Blair when they leave office. I bet Societie General will be lining up to hire Mr Brown, who will be able to name his price even if he can’t price his name.
The whole point about identity cards - or so Tony Blair told us - was that they were meant to be held by everyone. That way, wrong ’uns, illegals and people with dark faces (sorry, ‘criminally-profiled terrorist suspects’) would be easy to spot because they wouldn’t have said card. They could then be banged up for weeks without charge under the proposed law on detention of suspected terrorists.
Now that the they are voluntary the terrorists, illegals etc will not even have to go to the inconvenience of forging their ID cards. Only those who actually have the cards will be liable to arbitrary arrest and detention by the police, when they inevitably confuse Mr Oswald B. Linden with Osama bin Laden. We can sleep safely in our beds secure in the knowledge that they know where we live.
In her further wisdom Ms Smith has made students an exception to voluntary compulsion. They will all expected to have identity cards. Which is inspired because, of course, students are the one group in society that can be absolutely guaranteed to lose their identity cards, after using them to cut up lines of coke or whatever. This means that the government won’t have to go to the trouble of losing the identity cards themselves, in the way they lost the child benefit records of 25 million citizens.
Senior managers at the HM Revenue and customs, have been amply rewarded for losing our bank accounts, national insurance numbers and pension details by posting them in a jiffy bag to al Qaeda. A grateful government has increased their bonuses by more than 50%. You might find it surprising that officials in dysfunctional government departments are getting any bonuses at all, but incompetence on this scale doesn’t come cheap. It takes brains to lose £3.3 bn in overpaid tax credits, and civil servants need proper incentives or, heck, they might go to the private sector.
Talking of which, Gordon Brown himself must surely be in line for some kind of bonus for losing £4 billion of our money on the bullion markets. Gordo sold most of Britain’s gold reserves off the back of a lorry eight years ago when it was worth 275 dollars an ounce. Now the yellow stuff is trading at nearly a 1,000 dollars, which makes GB the biggest rogue trader since Jerome Kerviel.
You can see why banks are so keen on hiring top politicians like Tony Blair when they leave office. I bet Societie General will be lining up to hire Mr Brown, who will be able to name his price even if he can’t price his name.
Monday, March 03, 2008
UK ministers are playing tough with Scotland.
Ouch. The SNP government are behaving like “big babies” according spokespersons for the UK work and pensions minister, James Purnell, and it’s time to start slapping their bottoms. No council tax rebate for them! No consultation on firearms. No Lewis chessmen, it’s off to bed and no watching the footie on telly on the way!
There has been a marked change of tone in Westminster’s dealings with the delinquent Scottish administration Holyrood in the past couple of weeks. After the Prime Minister’s apparent concession on tax raising powers for the Scottish parliament, three weeks ago, there seems to be a feeling that it’s time to start showing the upstart Nats just who is really in charge. Who the big boys are. And remind Scots that the real government of Scotland is not the SNP, but Labour who won the last general election here.
Well, good luck to them. For if this is the new strategy then it is an unwise one. The rejection by the Home Secretary Jacqui Smith of a summit on banning air weapons seems particularly pointless - a case of shooting yourself in the foot while attempting to place it in your mouth. Labour in the Scottish parliament has already signed up to a review of air-weapons, the tabloids are behind stricter controls since the shooting the toddler Andrew Morton in 2005. Around eight out of ten Scots seem to approve a ban as do the police and the other political parties.
As it happens, I don’t. I think we are becoming rather too obsessed with banning everything in sight and it would take a lot to convince me that airguns really are such a threat to life. However, it would be politically pointless for the UK government to defy Scottish public opinion on such a relatively minor issue, and I can hardly believe that they’re
serious about doing so. Haughtily refusing to endorse the review just plays into the SNP’s hands.
Nor am I a great enthusiast for local income tax. I don’t understand why working couples, struggling to buy a home, should subsidise wealthy older people living on unearned income in big empty houses. But again, the political parties in Scotland have all more or less accepted that the council tax is a disaster and politically unsustainable. And who am I to argue.
The proposal to scrap the council tax was a major vote-winner for the SNP, and I doubt if Labour in Scotland is really prepared to go to the wall again in another election in order to save the unloved tax. The Liberal Democrats at their conference in Aviemore this weekend reaffirmed their commitment to local income tax and there is a clear majority in parliament for introducing it - though there are differences of view about how exactly to go about it.
But in walks James Purnell, the work and pensions secretary in the UK government, and says NO. He doesn’t mount a coherent argument against the tax on moral or economic grounds either, but threatens in a newspaper interview to cut of council tax benefit currently worth £400m if the Scottish Parliament goes ahead with a LIT. “If they are promoting a system which is income related and based on the ability to pay, then there is no need for a benefit on top of that. They can’t have it both ways.”
This is eerily reminiscent of the refusal by the former work and pensions secretary, Alistair Darling, to allow attendance allowances to be recycled to help pay for free personal care back in 2001. . The recent financial difficulties of free personal care are largely down to the cumulative effect of the UK government’s refusal to maintain the level of financial assistance to the care of the elderly that existed before the policy switch. It was an act of vindictive pettiness which did absolutely no good to Labour in Scotland. And nor will this attack on local government finance.
When Westminster scrapped the rates, they didn’t abolish rates reliefs; when the poll tax was scrapped, local government subsidies were transferred intact to underwrite its successor, the council tax. It is not for UK ministers, acting like colonial governors, to make arbitrary rulings about how Scottish tax-payers' money should be used in Scotland. The £400 million that currently goes in council tax benefits is part of the overall structure of local government finance - which already mostly comes from recycled income tax since council tax raises only a small proportion of what councils actually spend.
This is just spite. Even as I read the quotes in the press yesterday, saying that the SNP were behaving like “big babies” I couldn’t believe that Westminster could be so stupid. By all means challenge the intellectual credibility of local income tax, but to adopt this kind of patronising attitude just delivers votes for the SNP. Its peaks volumes about the attitudes of the London Labour administration, and its detachment from political reality in Scotland.
Labour like to criticise the SNP leader Alex Salmond for picking fights with Westminster, for manufacturing grievances for political ends. But he hardly needs to because the UK ministers are doing the job very well for him already. They seem to forget that Salmond isn’t the prime minister or president of Scotland but the first minister of a minority government. He can only act on issues like local income tax by consensus, by the agreement of the other parties in the Scottish parliament. This means that when UK ministers attack Salmond on issues like the airguns or local income tax, they ae not attacking just the SNP, but the consensus view of a proportional parliament. IN other words they are attacking the people of Scotland.
The policy of local income tax is already posing problems, as will be clear in the Scottish Executive consultation paper which is due in two weeks time. There are important issues about how to ensure local accountability if councils are just going to get a slice of centrally-raised income tax. There are questions about how LIT should be collected, and whether there would need to be a Scottish Revenue established, and about the impact on two income families. However, the one way to divert attention from these difficulties is to suggest that London is arbitrarily going to cut local authority funding as a punishment for a democratic decision to abolish council tax. It really is the politics of the nursery, and it’s time for UK ministers to grow up.
There has been a marked change of tone in Westminster’s dealings with the delinquent Scottish administration Holyrood in the past couple of weeks. After the Prime Minister’s apparent concession on tax raising powers for the Scottish parliament, three weeks ago, there seems to be a feeling that it’s time to start showing the upstart Nats just who is really in charge. Who the big boys are. And remind Scots that the real government of Scotland is not the SNP, but Labour who won the last general election here.
Well, good luck to them. For if this is the new strategy then it is an unwise one. The rejection by the Home Secretary Jacqui Smith of a summit on banning air weapons seems particularly pointless - a case of shooting yourself in the foot while attempting to place it in your mouth. Labour in the Scottish parliament has already signed up to a review of air-weapons, the tabloids are behind stricter controls since the shooting the toddler Andrew Morton in 2005. Around eight out of ten Scots seem to approve a ban as do the police and the other political parties.
As it happens, I don’t. I think we are becoming rather too obsessed with banning everything in sight and it would take a lot to convince me that airguns really are such a threat to life. However, it would be politically pointless for the UK government to defy Scottish public opinion on such a relatively minor issue, and I can hardly believe that they’re
serious about doing so. Haughtily refusing to endorse the review just plays into the SNP’s hands.
Nor am I a great enthusiast for local income tax. I don’t understand why working couples, struggling to buy a home, should subsidise wealthy older people living on unearned income in big empty houses. But again, the political parties in Scotland have all more or less accepted that the council tax is a disaster and politically unsustainable. And who am I to argue.
The proposal to scrap the council tax was a major vote-winner for the SNP, and I doubt if Labour in Scotland is really prepared to go to the wall again in another election in order to save the unloved tax. The Liberal Democrats at their conference in Aviemore this weekend reaffirmed their commitment to local income tax and there is a clear majority in parliament for introducing it - though there are differences of view about how exactly to go about it.
But in walks James Purnell, the work and pensions secretary in the UK government, and says NO. He doesn’t mount a coherent argument against the tax on moral or economic grounds either, but threatens in a newspaper interview to cut of council tax benefit currently worth £400m if the Scottish Parliament goes ahead with a LIT. “If they are promoting a system which is income related and based on the ability to pay, then there is no need for a benefit on top of that. They can’t have it both ways.”
This is eerily reminiscent of the refusal by the former work and pensions secretary, Alistair Darling, to allow attendance allowances to be recycled to help pay for free personal care back in 2001. . The recent financial difficulties of free personal care are largely down to the cumulative effect of the UK government’s refusal to maintain the level of financial assistance to the care of the elderly that existed before the policy switch. It was an act of vindictive pettiness which did absolutely no good to Labour in Scotland. And nor will this attack on local government finance.
When Westminster scrapped the rates, they didn’t abolish rates reliefs; when the poll tax was scrapped, local government subsidies were transferred intact to underwrite its successor, the council tax. It is not for UK ministers, acting like colonial governors, to make arbitrary rulings about how Scottish tax-payers' money should be used in Scotland. The £400 million that currently goes in council tax benefits is part of the overall structure of local government finance - which already mostly comes from recycled income tax since council tax raises only a small proportion of what councils actually spend.
This is just spite. Even as I read the quotes in the press yesterday, saying that the SNP were behaving like “big babies” I couldn’t believe that Westminster could be so stupid. By all means challenge the intellectual credibility of local income tax, but to adopt this kind of patronising attitude just delivers votes for the SNP. Its peaks volumes about the attitudes of the London Labour administration, and its detachment from political reality in Scotland.
Labour like to criticise the SNP leader Alex Salmond for picking fights with Westminster, for manufacturing grievances for political ends. But he hardly needs to because the UK ministers are doing the job very well for him already. They seem to forget that Salmond isn’t the prime minister or president of Scotland but the first minister of a minority government. He can only act on issues like local income tax by consensus, by the agreement of the other parties in the Scottish parliament. This means that when UK ministers attack Salmond on issues like the airguns or local income tax, they ae not attacking just the SNP, but the consensus view of a proportional parliament. IN other words they are attacking the people of Scotland.
The policy of local income tax is already posing problems, as will be clear in the Scottish Executive consultation paper which is due in two weeks time. There are important issues about how to ensure local accountability if councils are just going to get a slice of centrally-raised income tax. There are questions about how LIT should be collected, and whether there would need to be a Scottish Revenue established, and about the impact on two income families. However, the one way to divert attention from these difficulties is to suggest that London is arbitrarily going to cut local authority funding as a punishment for a democratic decision to abolish council tax. It really is the politics of the nursery, and it’s time for UK ministers to grow up.
Subscribe to:
Posts (Atom)
