Expenses: MPs in the right, shock.

  MPs were in the doghouse again last week - or should that be the duck house - over  their expenses.  Employees at the Independent Parliamentary Standards Authority, who process MPs’ expenses claims, say they have been threatened, insulted and abused. Called  “f..ing idiots” and  “monkeys” by irate MPs one of whom described their computerised system as a “f...ing abortion”.  Mind you that’s nothing compared to the language voters used about MPs when their expense abuses became known last May. However, in this case, MPs aren't wholly to blame.  IPSA is being called to put its own house in order

Edinburgh: how "Dodge City" really makes its money.

    Summertime and the living is easy - at least for Edinburgh’s commercial classes.   The Festivals are jumping - heading for two million ticket sales across the 'cultural olympiad'.  The warm weather is stuffing the pockets of hoteliers and those Edinburgh folk who famously decamp for the summer in order to charge inflated rents to festival goers.  Where else could you see a caravan being offered at £800 a week? 

   But it’s not just the Festival that’s putting a smile on the faces of Edinburgh’s business class.  Somehow, the financial crisis that was supposed to turn the capital city into a soup kitchen for bankers seems to have completely passed it by.    Edinburgh house prices rose 20% in the year to February 2010;  unemployment at 3.3% is way below the Scottish average.  New business start ups are up 33%, planning applications are pouring in, commercial property is recovering.  Even the tram chaos seems to be passing, to be replaced by something worse:  an endless traffic jam of new Range Rovers and BMW as Edinburgh’s new money pours into the car showrooms. If you’re looking for austerity, you won’t find it here.

   But there’s a slightly shifty quality to this prosperity - as if the benefiaries feel just a little guilty about it.  One prominent Edinburgh financial commentator has taken to calling Edinburgh “Dodge City”, such has been its ability to side-step the banking collapse, the economic recession and now the government’s austerity drive. The city that was at the centre of the financial cyclone seem to be making a fortune out of it.  But  the catch is that their good fortune is almost entirely built on other peoples’ taxes. 

What goes up... Mobility isn't very social

 I’ve always been just a little suspicious of people who advocate social mobility as a cure for society’s ills, as the answer to  inequality.   It isn’t.    When Nick Clegg said last week that social mobility is “the badge of fairness in society” he is missing the point.  The very image of “social mobility” is one of those loaded metaphors like “housing ladder” which implies that we can can make it to the top if they have enough drive and are given the right opportunity.  This has always been a myth.  

Long Live al Megrahi

    Will the Queen be sending a telegram to Abdel Basset al Megrahi when he reaches a hundred?   

       Has this man no decency?  Doesn’t he realise that by clinging on to life he is daily destroying the credibility of our own Justice Minister, Kenny MacAskill.  Tony Blair - whose ‘deal in the desert’ with the Libyan dictator began the process that led to Megrahi’s release - is in the dock of American opinion. I mean, sales of Blair’s autobiography, The Journey, could seriously be affected.    If only Megrahi could see the distress he’s causing I’m sure he’d top himself. 

Jimmy Reid's failure

 Many and various have been the tributes to Jimmy Reid, hero of the Upper Clyde Shipbuilders work-in in 1971.  The  occupation was a success, the yards saved, but politically it was downhill all the way from then on for Scotland’s favourite communist.  I don’t mean that to sound negative or unsympathetic:  Jimmy had a great life and was much loved by friend and foe alike.  He became a national institution: successful journalist, university rector and genuine working class hero.  Latterly, like many on the Scottish left, he gravitated toward nationalism, became an influential voice in the home rule movement and ultimately joined the SNP.   So, no tears necessary, and he wouldn’t want them. He’d want us to reflect instead on the history and politics of his times.  But it’s not a comfortable history for the Left.  

Gordon is Back - thanks to Mandy

   Peter Mandelson’s memoirs may have achieved the impossible:  kick started the rehabilitation of Gordon Brown’s political reputation.  By rushing into print while the wounds of defeat are still raw, by cashing in shamelessly on his insider knowledge and displaying breath-taking disloyalty, Mandelson hasn’t just discredited himself.  He has raised fundamental questions about Tony Blair’s integrity. For a start, he reveals that Blair really did promise to step aside for Gordon and then went back on his word.

Liar Loans: SFA from the FSA

You’ve heard of locking the stable door when the horse has bolted. Well, the Financial Services Authority, has gone one better and promised to do its job properly only after it's been closed down.  Yesterday, the boss of Britain’s financial watchdog, Lord Turner, grandly announced that the FSA was going to put an end to “liar loans”, 125% “suicide” mortgages and other scams from the great housing bubble.  Bit late your Lordship.    Last month, the Chancellor, George Osborne, announced that the FSA is to be scrapped and financial regulation returned to the Bank of England.

    Perhaps if the FSA had done its job six or seven years ago, we wouldn’t be in the state we are in now.  Ah, but that’s just being wise after the event isn’t it?”  It’s easy to criticise with 20/20 hindsight.  Wrong. As readers of this column will be aware, perhaps painfully so, I have been banging on about irresponsible mortgage lending for most of the last decade.  In 2004 I warned that house prices were an unsustainable bubble. In 2005 I fulminated against the irresponsibility of lending five or six times income.  IN 2006 I railed against Northern Rock’s “Together” mortgages where the bank loaned first time buyers 25% more than the value of their property, thus placing them in negative equity even before they got the keys.  After Northern Rock collapsed in 2007, to demonstrate what was happening,  I applied for and was offered a £200,000 mortgage after telling the broker I had a disposable income of only £18,000.  Sheer madness. 

Free personal care saves money - axe top salaries instead.

   

     So who pays?  What gets cut? Well,  hardly a day seems to go by without a story in the press claiming that the cost of free personal care for the elderly is “out of control” and “unsustainable” .   There are repeated calls to axe near-free prescription charges; to restore the graduate endowment and bridge tolls.  Let’s end free bus passes; shut swimming pools and libraries.  Museums - who needs ‘em?  Clearly, everything has to be looked at.  But there’s a real danger that we start from the wrong end, axing relatively cost-effective front line services rather than cutting administration.  That is where the real savings are to be made ina public sector which is highly labour intensive.  Great damage could be done to the quality of peoples’ lives, and the dignity of vulnerable groups, by slashing services that don’t actually cost very much while protecting the public sector bureaucracy.

Pension apartheid: just how bad are private pensions?

 It’s war.  Public sector unions have promised strikes and hinted at civil unrest if the government tries to cut their “gold plated” final salary pensions.  But the £1 trillion unfunded pension liabilities of the public sector, as reported in yesterday’s Herald, are simply unsustainable. This is going to be an epic struggle.   The unions are right on one thing though: the real scandal is the poor state of PRIVATE sector pensions. 

   The average public sector pension, according to the TUC is a modest £7,000, but look over the other side of the fence and you’ll find that the average private sector pension is much less - around £1,700 a year, according to the Pensions Policy Institute. And of course around a third of all employees aren’t saving anything at all for their old age. But to cap it all, most low income earners who do save into private pensions will lose out in the Pension Credit trap. It is a national scandal.

Turn AV day into Constitution Day.

Calamity Clegg rides again.  The Liberal Democrats have been inviting ridicule by proposing a referendum they could easily lose on a voting system they don’t actually support.  The proposed AV referendum on May 5th, the same day as the Scottish parliamentary elections,  will be held at the height of the cuts controversy, with unemployment rising amid a wave of public sector strikes, and may simply provide an opportunity for disgruntled voters to register their disenchantment with the ConDem coalition.  And it’s not even as if the Alternative Vote is proportional. 

  Then there is the Scottish question.  I can understand why Alex Salmond is livid about having the Holyrood elections upstaged by a Great Debate on electoral reform.   Just as in the May general election, the campaign will likely be dominated by televised debates generated by the London media and featuring prominent Westminster politicians like Nick Clegg, David Miliband, David Cameron.  This could drown out the Nationalists just as they are trying to get a fair hearing for their case for re-election in Holyrood on May 5th. 

Don't mess with union laws.

There's a rather ugly swagger about the Lib Con government right now.  Like insecure playground bullies, they're puffing out their chests and giving it large.  Danny Alexander says 25% cuts aren't nearly enough. No, I want 40％！  Year!  Look at the size of my cuts.   George Osborne and David Cameron are jeering at trades unions and threatening to tighten laws against striking.  Come on you Simpsons and Crows. If you think you're hard enough.  Just try and take us.
   
  But if ever there were a time to try to change the law on strike ballots, this is not it.  The cabinet hard nuts should remember Ted Heath and the Industrial Relations Act. The Tories in 1971 tried to take on the unions in an economic crisis and failed because they misjudged the public mood.  Voters then were unhappy about the power of trades unions, but they did not want them victimised
 and they didn't like seeing trades unionists in court and union funds sequestrated.
 
  Trades unions today are a shadow of their former selves.  In the 1970s most of the workforce, 12 million, were in unions.  Today, little more than half that number are organised, and the laws on strike action are much, much tougher.  The public are less willing to support unions today because they tend only to represent public sector workers and their privileges.  I do not believe there would be much public sympathy for any wave of strikes .But the surest way to create it, and reignite trades unionism as a moral force, would be to come down hard with the law.  So put down the baseball bats. guys. You're beginning to look stupid.


  

 

Turn the AV referendum into a Constitution Day

 Calamity Clegg rides again.  The Liberal Democrats have been inviting ridicule this weekend for proposing a referendum they could easily lose on a voting system they don’t actually support.  The proposed AV referendum on May 5th, the same day as the Scottish parliamentary elections,  will be held at the height of the cuts controversy, with unemployment rising amid a wave of public sector strikes, and may simply provide an opportunity for disgruntled voters to register their disenchantment with the ConDem coalition.  And it’s not even as if the Alternative Vote is proportional. 

Mad Max Budget - but is he serious?

After a stunned silence after the most draconian budget in modern times, the country is waking up to what the new age of public austerity will actually mean.  Commentators paint a picture of a Mad Max dystopia - a country plunged into depression and decay.  Crumbling schools, empty swimming pools, leisure centres boarded up.  Feral children running riot as police numbers are cut.   Potholes in the road filled with rubbish uncollected.   A million public sector workers sacked;  families evicted after losing housing benefits; strikes and civil unrest returning to the streets of Britain after nearly thirty years.  Yes, it’s pretty grim. 

    So grim in fact that people are beginning to wonder if  George Osborne really means it.  Was the budget just a ploy to sound tough?   Will it all be quietly laid to rest before the comprehensive spending review in the autumn spells out exactly where the cuts will fall?   It’s actually very difficult to know how you go about cutting departmental spending by 25% in real terms.  Do you throw a quarter of prisoners out of jail?  Close a quarter of all libraries, museums, schools? You can't just sack social workers when there are statutory responsibilities like child protection.    Health and overseas aid are the only departments given a clear exemption from the cuts, but even here there will be cost implications of the increase in VAT to 20%.

Osborne's Bullingdon Budget

  Prepare for a hot autumn, comrades: the class war starts here.  Labour have hoist the red flag over Westminster and are preparing bonfires for the Liberal Democrat “collaborators”.  This budget, they say, was  Bullingdon Man taking his “ideological” retribution against the state using the coalition as cover.  It will hit people on low and middle incomes hardest, throw hundreds of thousands out of work, create fear and insecurity among benefits claimants and the disabled.   But the question is: was there any alternative, given Britain’s wrecked finances? Or was this, as the Chancellor put it, the “unavoidable budget”?   

  It is certainly a radical, even a revolutionary budget.  A 25% real terms cut in non-protected government departments in four years. A fiscal consolidation of nearly £120bn by 2015.   The rollback of the state implied by this Budget is simply unprecedented in modern British history.   We are talking tens of thousands of public sector jobs going, services like education, housing, transport, police and social work slashed.  Margaret Thatcher never tried anything so ambitious. George Osborne said he was seeking a deficit reduction on the ratio of 80% spending cuts to 20% tax increases.  She only managed about a fifty fifty split in her early budgets, and public spending actually went up during he 1980s. Can he be serious?

Oil spill? Sorry Guv, I just work here.

 “ I’m really really sorry for this accident. I really really regret that my car left the road, killing eleven people and causing massive environmental damage.  

  Do you take full responsibility? 

 

  Well, that’s a matter for the inquiry. 

  But you were driving the car were you not?

  

  Of course, but I wasn’t around when the key decisions were taken on the design of the car and the safety measures so I can’t really be held responsible for this terrible and tragic incident.

   Who is responsible. 

   Well, that’s a matter for the inquiry and we mustn’t pre-empt that in any way... I’d like to help, really, but my hands are tied”

    It looks like ‘Hapless Heyward’, as the boss of BP is known after his appearance before the US congressional energy committee inquiry into the Gulf of Mexico oil spill, may get his wish.  He said he wanted his life back, and after last week’s performance he will assuredly get it -  minus his job.   It was a  dismal display, in which the BP CEO - one of the highest paid executives in Britain -  sounded evasive and a bit dim, like a middle ranking manager of a small engineering company rather that the leader of one of the greatest economic forces on the planet.  How many companies in the world could agree to pay out £20bn in compensation and then see their share price actually go up?  

   Mind you, I didn’t find the congressional hearing particularly edifying.   The sub-Paxman questioning by drawling and self-important congressmen.  Not so much grandstanding as an Olympic display of synchronised indignation for the benefit of the voters back home.  The inquisition was led by the marvellously sneering  Henry Arnold Waxman, Ca, a man Time Magazine once described the  as “the scariest guy in Washington”.  He certainly looked the part with his flaring nostrils and pitiless moustache.   The purpose was clearly not to get at the truth but, in President Obama’s phrase, to kick ass.  Heyward’s ass certainly made a target rich environment and the congressmen didn’t miss.  But the episode reminded me a little of the show trials that Stalin used to stage in the 1930s to humiliate political rivals. 

   The astonishing thing was the latent chauvinism that the affair uncovered on both sides of the Atlantic.   Special relationship?  You’d be pushed to tell, as the Americans laid into “British Petroleum” and the tabloid press in Britain ran peevish  headlines like the Daily Mail’s two classics:  “America’s ALWAYS tried to do down Britain” and “When disaster strikes, the US will NEVER take the blame”.    Really?  Did America try to do us down in the war fascism in the Second World War?    Okay, American companies didn't exactly leap to take the blame for disasters like the Torrey Canyon or Piper Alpha, but there is a question of scale here: this is America's worst ever environmental catastrophe

     Tory MPs practically accused President Obama of stealing the pensions of millions of elderly Brits and Boris Johnson, the London Mayor, came right out and accused Obama of being “anti-British”.    Wisely, David Cameron ignored appeals to “stand up for Britain” and kept his comments brief, unemotive and to the point.  In doing so, he rather got one over Barack Obama, whose comparison between the Macondo spillage and the destruction of the twin towers on 9/11 was just a little over the top.  The two episodes hardly compare either in body count or in international significance. 

   Nevertheless, this was an epic disaster and almost certainly avoidable.   BP knew this was a “nightmare well”  as email traffic confirmed.  It certainly looks as if they took risks because the reward was so high and the BP leadership was so remote from the well-head.    Tony Hayward’s “wasn’t me guv” attitude reminded me of the Wall Street CEOs who appeared at the congressional hearings into the financial disaster.   Yes they were sorry - terrible catastrophe...deep regrets...but they weren’t responsible for all those dodgy collateralised debt obligations because they weren’t around when they were introduced and anyway no one understood them them.    Like BP,  financial institutions were working at the limit of human comprehension, but no one asked whether this was safe just so long as the money was rolling in.   Deepwater Horizon is also reminiscent of the way politicians rationalised an illegal invasion of Iraq on the basis of weapons of mass destruction that didn't exist.      All those Labour leadership candidates insisting that they weren’t really around when the fateful decisions were made.  Or rather they were around but they didn’t think to say anything.

  But the the Macondo disaster could have wide ramifications for the future of world energy.  It was part of the drive to find new sources of oil deep beneath the surface of the earth.  Most of the easy-to-get oil in the world has already been exploited, and the rate of new discoveries has slowed to a crawl.  It was this that led leading businessmen like Richard Branson to declare, earlier this year, that we are about to reach “Peak Oil”, after which the black stuff will rapidly run out.  Branson said that the crunch would come within five years and that governments should be preparing now for the end of the oil age. 

   Now the idea Peak Oil has been  highly controversial ever since it was first forecast by early environmentalists in the 1970s and the attitude of governments and the oil industry has always been that new technology will come along and allow difficult oil to be extracted, either from far below the oceans or from deposits like tar sands in Canada.  But the Deepwater Horizon episode could be the moment when oil really does peak.  Like nuclear power, which stopped in its tracks after the Three Mile Island meltdown in 1978, this could be the end for deep sea drilling, at least for the next two decades.

    On the principle of never allowing a good crisis to go  to waste, President Obama, has declared this the moment when America must wean itself off the black stuff and start looking seriously at renewable energy like wind and solar.  The halt to deep drilling will leave America even more dependent on hydrocarbons from the Middle East - hardly a comforting prospect given the march of Islamic fundamentalism.  Really, America has no choice but to go green now. Let’s hope the British government takes note and, unlike the BP boss, takes responsibility now instead of avoiding it later . 

Sorry guys: the debt has to be paid,

 They don’t call it the dismal science for nothing.  You could forgive politicians of all parties for despairing of economics.  Take the great deficit row.  On the one hand we have all the economic analysts in the City, saying that Britain’s budget deficit is much too high, the largest peacetime deficit in history,  and has to be cut.  If you don’t cut the deficit, then the cost of debt interest will shoot up above £70bn and Britain will have a Greek tragedy. This is why the chancellor, George Osborne, is planning an epic austerity programme in next week’s emergency budget. 

   But on the other hand we have another group of economists, like Nobel laureates  Joseph Stiglitz and Paul Krugman, who say no! no! no! -  cutting the deficit is the last thing we should do. At least not now, while all the EU economies are doing the same thing. The combined austerity programmes will plunge us all back into recession as demand falls and trade grinds to a halt.   Government debt will actually rise because of the increased cost of mass unemployment and the loss of tax revenue.  The latest rise in unemployment yesterday to 2.5 milion suggests that this is a real problem. We were already having a jobless recovery - swingeing cuts in public spending could make it a jobless slump.  Labour’s interim leader, Harriet Harman, tore into the “Tory cuts” at prime minister’s question time yesterday accusing David Cameron of “talking down the economy” for ideological ends. 

     So there you have it: the deficit is going to go up if we cut public spending and it’s going to go up if we don’t cut spending.   Brilliant!  Britain is on the fast track to default, and in a hand cart to stagflation, whatever we do.   Might as well grab a gun and a bag of gold and head for the hills.     Fortunately everyone is agreed on one thing: economic growth is the only way ultimately to bridge the deficit - just as you have to get a job earning good pay in order to pay off a mortgage. Everyone, Labour and Tory, also agrees that the deficit has to come down.  The question is basically one of when and how.  The neo-Keynsians say that you need to keep spending high for the time being to replace the demand destroyed by the downturn/  The fiscal conservatives say that we are already nearing the limits of borrowing and that Britain’s debt crisis will spiral out of control if we don’t convince the bond markets that the government is serious about balancing the books.  After all, our deficit is larger than Greece’s right now, and the about only reason financiers and firms are still buying our government debt is that Britain has a relatively good record of paying it back.

   It’s really a question of just how much debt can we take.  Britain’s national debt is relatively small right now at 60% of GDP  and is scheduled to rise to something like 90% .  After the Second World War,  America had a budget deficit of 120%.  Which was a good thing according to the Guardian’s economics editor Larry Elliott. “Far from being burdened with unpayable debt” he wrote this week, the baby boomers in the late 40’s and early 50’s were the most blessed generation in history”.  Well, some might disagree with the beatification, but what is really wrong with this analysis is that,  er, we aren’t at war,  and hopefully won’t have to be.  

    It’s true that rearmament ended the Great Depression and  America boomed after the war.  But this was largely because the dollar became the world’s reserve currency, and America, on the back of that, became the world’s greatest industrial and military power.  It could dictate the terms of trade, and still does.   War isn’t a get out of jail free card mainly because  it is not possible to replicate the wartime conditions in peace. The government can’t go around freezing bank accounts, seizing property and dictating to industry.  And Britain after the war was a very sorry place indeed,  afflicted by rationing, deflation and manufacturing decline.     I don’t believe that people could go back to that.   

   The peacetime debt record is held by Japan, which is scheduled, according to the IMF, to borrow 250% of GDP by 2015.   But this colossal spend hasn’t been much of a stimulus - Japan’s economy been stagnant since the property crash nearly twenty years ago.  Japan is able to run massive deficits because the Japanese people are fanatical savers.  The British public doesn’t save a penny, in fact we are so addicted to debt that we owe, in personal debts, more than our entire annual national income.  Any way you look at it, Britain simply cannot risk going much further into debt. We are heading for a trillion pound national debt; a trillion pound public sector pension liability piled on top of a trillion pound bank rescue and personal debts of one and a half trillion.  There’s no way of laying this off, pretending it’s not there, wishing it away.    Nor is default, or declaring national bankruptcy, an easy way out because that just raises further the cost of borrowing. 

   I’ve thought a great deal about this issue in the last couple of years, and I’m afraid I have to part company with the neo-Keynsians.  Actually, Keynes didn’t support unlimited public spending and argued for balanced budgets in the 1930s.   The most important political reason for cutting the debt, Keynes argued  is that it will ultimately be paid, not by the rich, but by the working class.  Public spending is unique in that it is paid entirely out of the taxes of ordinary working families or through inflation. 

  These are scary times.  As European countries like Greece and Spain topple under the weight of their own debt, there’s a very serious risk of  a wave of sovereign defaults across the euro zone. These are countries only recently emerged from dictatorship where democracy has yet to be tested by serious economic hardship.  If the politicians here and abroad get it wrong, spending too much, printing too much, devaluing too far, we could end up like Weimar Germany.  And what’s worse, Germany could end up like Weimar Germany too. 

So Scots have a death wish?

 We’re doomed. Doomed. Get out now while you still can. It’s a wonder there’s anyone left in Scotland so terrifying are the headlines about Scottish mortality.   97% of us are living dangerously unhealthy lives according to a report last week in BMC Public Health.  A boy born in Glasgow can expect to live thirteen years less than a boy born in Chelsea, according to the Office of National Statistics. Twice as many of us die from alcohol abuse than in England - that’s if we aren’t murdered first. Half a million of us have coronary heart disease, according to CHASS -  one of the highest rates in the world.  Diseases like multiple sclerosis are off the scale. Two thirds of us are overweight or obese.   

Labour leadership candidates: 'wasn't us guv'.

 The odd thing about the Labour leadership contest, nominations for which closed yesterday,  is that the leading candidates all appear to have been elsewhere during the last 13 years of Labour government.  How else can we account for their disowning so many of the policies pursued by Tony Blair and Gordon Brown.

    The former cabinet secretary Ed Balls has recently discovered that the government of which he was a prominent member was letting in far too many immigrants. And the Iraq war was a “dangerous mistake for which the country has paid a heavy price”.  Well he kept that to himself.   David Miliband agrees that immigration got out of control in the Labour years and that the government let down Labour voters.  Oh, and the former foreign secretary never supported the policy of regime change in Iraq . 

CGT - more welfare for the wealthy

 Is there any group in society more jealous of its privileges, more militant in defence of its perks, more determined to avoid paying tax than the ‘hard working’  British middle classes?  The howls of anguish at the proposal  to tax capital gains as income, part of the ConDem coalition agreement, illustrates how difficult it is to tackle what is called the middle class welfare state.  People who complain about welfare scroungers and benefits tourists see nothing morally wrong with avoiding  tax. 

David Laws: no sympathy, no excuse.

Let's be absolutely clear: this has nothing to do with David Laws' sexuality.  It is about his failure to follow the rules on parliamentary expenses.    These rules are very clear: “housing allowance must not be used to meet the cost of renting a property from a partner”.  Mr Laws has no excuse for not being aware of these rules after years in which parliamentary expenses have rarely been out of the news. He has done a huge disservice to his party, the Lib-Con coalition, his constituents and the country and he should have resigned immediately.