tag:blogger.com,1999:blog-89956976945403283782024-02-19T02:58:15.482+00:00Thoughts from the Northpolitical ramblings from a failed council candidateJohn Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.comBlogger148125tag:blogger.com,1999:blog-8995697694540328378.post-21535059781853979152014-04-26T11:36:00.003+01:002014-04-26T11:36:44.194+01:00Social housing allocationsOne of the common problems raised with councillors seems to be how social housing is allocated.<br />
<br />
There's some general issues but some specific ones with housing in rural areas where the availability of private rented housing is limited and where there is a real need to give local people a chance to live in their communities to keep rural villages alive.<br />
<br />
Following an earlier discussion I went to a workshop today to discuss the problems. The rural allocation policy used by Homefinder, the service run by the Council and the main providers of social housing in the county, is set by officials from these organisations is (in simplistic terms) as follows:<br />
- people in housing need in the parish or neighbouring parishes<br />
- people in housing need elsewhere<br />
- people in the parish or neighbouring parishes<br />
- everyone else.<br />
<br />
.
<br />
This means that when new social housing is developed in local areas
there is no guarantee that local people will be allocated housing, and this can
be seen as unfair and divisive - and inhibits the maintenance of
communities.<o:p></o:p><br />
<br />
<br />
There's a number of potential solutions;<o:p></o:p><br />
<br />
The process of allocations needs to be publicised and people need to get
more confidence in the system;<o:p></o:p><br />
<br />
People need to record their need even if it cannot be met initially;<o:p></o:p><br />
<br />
If circumstances change it is always worth notifying Homefinder;<o:p></o:p><br />
<br />
The policy needs to be reviewed to give more priority to a local connection;<o:p></o:p><br />
<br />
Councillors should have more involvement in the prioritisation process.<o:p></o:p><br />
<br />
<br />
We agreed that the policy would be reviewed, as a matter of urgency, and a
further workshop would be held with members to discuss it. I hope that over a
period of time this will improve things for people who need scarce
housing.<o:p></o:p><br />
John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-66855524141678948302013-03-28T19:04:00.000+00:002013-04-04T19:09:56.041+01:00I'm standing againI've decided to have another go at being a County Council candidate which means I won't be posting here any more, or at least until after the election on 2 May 2013. <br />
<br />
I'm writing a diary of my campaign on <a href="http://www.belfordandcoastaltory.com/">www.belfordandcoastaltory.com</a>.John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-36283027601781931352012-11-07T11:08:00.003+00:002012-11-07T11:08:49.177+00:00Forward?Now that Obama has won he has to get a grip on the US fiscal position. Unfortunately early comments from prominent Republicans suggest that they have not learned the lessons of yesterday and they will continue to obstruct. The lessons (some of them at least: I wouldn't pretend to know them all):<br />
- voters don't like extremism. They admire conviction but not at the expense of working with others - just as people have to do every day in their lives.<br />
- the world changes as does the electorate: it appears that the Republicans have forgotten that not all US voters are white middle class and retired.<br />
<br />
Those are important lessons for the Tories here in Britain as well.John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-33573213670545590322012-11-06T18:56:00.002+00:002012-11-06T19:09:18.116+00:00Today's the day<span style="font-family: Calibri;">There’s two surprising things
about the US election. One is just how much the two candidates (and their
supporters have spent) on largely negative advertising. The second is <a href="http://orderorder.files.wordpress.com/2012/11/your-guide-to-the-election-night-2012-us-presidential-campaign.pdf" target="_blank">how close</a>
it is. It’s not even clear that the result will be known straight away given
the opportunity for legal challenges in swing states. </span><br />
<span style="font-family: Calibri;"></span><br />
<div class="MsoNormal" style="margin: 0cm 0cm 10pt; text-align: justify;">
<span style="font-family: Calibri;">That is surprising given the
euphoria that greeted Obama’s success just four years ago and the fact that he
hasn’t done a bad job in almost impossible circumstances. He has acted with
conviction on security matters, with common sense on foreign affairs and with
some success in economic terms. This is despite inheriting a <a href="http://www.globalpost.com/dispatches/globalpost-blogs/commentary/election-puzzle-why-moderate-republicans-are-switching-back-s" target="_blank">broken financialsystem</a> and out of control wars. <span style="mso-spacerun: yes;"> </span>He has
faced a Republican party determined not to compromise on any <a href="http://capitolwords.org/date/2012/08/01/H5533-2_republican-intransigence-and-obstruction/" target="_blank">economic issue</a> –
to an unprecedented extent - making the US deficit a real worry. </span></div>
<div class="MsoNormal" style="margin: 0cm 0cm 10pt; text-align: justify;">
<span style="font-family: Calibri;">I suspect that neither candidate
will act particularly <a href="http://www.huffingtonpost.com/david-l-nevins/do-presidential-elections-matter_b_1967867.html" target="_blank">differently</a> on most issues so at one level, who wins doesn’t
matter: economic growth will be slow but will happen and <span style="mso-spacerun: yes;"> </span>although there’s a lot of intensity at the
moment that will fade away for most people and life will get back to normal.
But at another I quite strongly hope Obama wins. <span style="mso-spacerun: yes;"> </span>I just don’t think that it would be fair for
the Republicans, after four years of such bad behaviour, to succeed. And Romney’s
<a href="http://www.washingtonpost.com/politics/mitt-romney-wraps-up-tumultuous-overseas-tour/2012/07/31/gJQAY2PsNX_story.html" target="_blank">behaviour</a> on his “meet the allies” world tour hardly shows he is someone you’d
want to do business with.</span></div>
John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-78919576564318369742012-10-06T22:24:00.002+01:002012-10-06T22:24:36.580+01:00The hunt for growth
The lack of growth in the UK economy is worrying
for all sorts of reasons; it hurts at an individual level for those who cannot
get work and it hurts at a macro level: the deficit is increased because tax
revenues are less and welfare payments are more and potentially this harms our
credit rating and therefore the value of sterling and the interest we have to
pay to fund the deficit.<br />
<br />
<div style="text-align: justify;">
The trouble is that there is very little the
Government can actually do to increase growth. In economic terms, I think it has
done one big thing well: it has sent a message on getting public sector
spending under control. It hasn’t quite achieved getting it under control but
it’s made more progress than most previous governments. This has had a positive
impact of keeping interest rates low; had the steps not been taken the negative
impact on the economy would have been horrific. But the trouble is that it has
reduced confidence, it has made people nervous and that makes consumers and
companies unwilling to spend money or invest.</div>
<br />
<div style="text-align: justify;">
In fact things aren’t too bad; I was in S Devon
last month. Most pubs and shops were advertising for staff. There were almost as
many cranes and skips as London in London. If you talk to small business owners
generally about how things are going, the answer is usually “OK”. Not great –
but OK. Businesses have adapted. But if they can, they are hoarding cash, they are
not taking risks, and they are not investing. And if don’t have cash but want
to invest then credit has dried up largely because regulatory policy limits
bank lending.</div>
<br />
<div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 10pt; text-align: justify;">
<span style="font-family: "Times New Roman","serif"; font-size: 12pt; mso-ascii-theme-font: major-bidi; mso-bidi-theme-font: major-bidi; mso-hansi-theme-font: major-bidi;">So
what should the Government do? It should recognise it can’t do too much. It
needs to get credit flowing by reducing some of the constraints on banks. It should
introduce no-fault redundancies to help employment. It should sound more
positive. It should ensure there’s no more quantitative easing. It should
develop small scale infrastructure projects. But the implication that it sees a
third runway at Heathrow as helping is worrying: that would be irrelevant to
growth now. The reduction of planning constraints on residential development
could help but also conflict with the localism agenda many of us thought was an
important policy. </span></div>
<div class="MsoNormal" style="line-height: normal; margin: 0cm 0cm 10pt; text-align: justify;">
<span style="font-family: "Times New Roman","serif"; font-size: 12pt; mso-ascii-theme-font: major-bidi; mso-bidi-theme-font: major-bidi; mso-hansi-theme-font: major-bidi;">But serious
growth will only come from improved confidence. That will take time and will
only come from working through the debt problems in the UK and abroad –
especially Europe. In the meantime the Government needs to keep its nerve and
not seem panicked.</span></div>
John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-1147348459740458932012-10-06T10:00:00.002+01:002012-10-06T10:00:41.393+01:00Why do people do silly things?A few weeks ago there were two announcements which had big implications for the companies involved and in different ways for the UK economy.<br />
<br />
One was about the West Coast rail franchise, taking it from Virgin trains and giving it to First Group.<br />
<br />
The second was the proposed merger between BAe and EADS.<br />
<br />
I heard both when I was listening to he radio. Both instinctively felt wrong; it was obvious they were silly ideas.<br />
<br />
For the rail franchise, it was obvious (I speak with experience of the bungles with the East Coast main line franchise) that insufficient weight had been given to the experience of the current operator and too much weight had been given to future promises of a previously unreliable operator. I didn't know just how badly the process had been handled, or how quickly it would unravel, but it was obviously wrong. Why couldn't transport ministers see that? How did they let it happen? It's easy to blame the civil servants who clearly made serious mistakes possibly driven by the fact that Virgin trains had previously negotiated too good a deal. But ultimately the ministers decide. I suppose you get wrapped up in a bubble and there's a limit to how much you can contradict the advice of full time officials. But this was so obviously wrong they shoud not have accepted it. The fact they did means they should not be ministers now.<br />
<br />
BAe, given a downturn in defence spending, needs to consider it's strategic direction. But the companyis fundamental to the UK defence structure and its major clients are in the US. Its also a big UK employer. It's surely obvious that a merger with a primarily competitor over whom the French and German governments have significant influence is going to be very high risk, in the best case, with major implications for UK defence security and for UK jobs. This is one where the Government should simply have said "don't even think about it" when they were sounded out, as they must have been. Yet there's a major lobbying operation which appears to be having some success. If the Government is lucky shareholder pressures may put a stop to the deal. If they don't then the Government belatedly needs to stop it. If not they'll regret it even more than the rail franchise -although by the time the consequences arrive they'll probably be out of office.<br />
<br />
But again: why is this not obvious?John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-71891813238974557522012-08-27T16:48:00.002+01:002012-08-27T23:18:21.296+01:00Why can't techies leave things alone?I've just come back to the blog to find Google (who own blogger) have changed layouts, styles, fonts, the dashboard and so on.<br /><br />Why? It worked perfectly well before. Its not obviously better now - it's just different and therefore less convenient because I (and at some other time in the past) other users have to re-learn how to finesse it to produce a desired result.<br /><br />This happens so often in technology: one reason I no longer bother with facebook (and linkedin) is because they kept changing it.<br />And yet ... all those people working on the changes are doing it because they think it will make the world a better place. A shame it usually doesn't.<br />John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-37680305376097061822012-08-27T16:42:00.003+01:002012-08-27T16:48:42.073+01:002012<div align="justify">2012<br />Had I been organised I’d have posted my thoughts on what was<br />important for 2012 before the year was over half way through – in fact I’d have<br />done it at the start of the year. I did generate the thoughts, I just never<br />wrote them down. But better late than never:</div><div align="justify"><br />At home, the economy is the most important thing: will there<br />be a double dip recession and if so will it be long standing, will inflation<br />start to reduce, and will public sector spending come under control? Much of<br />the outcome will be determined by what happens outside the UK:<br />- in Europe where uncertainty about the Euro and the public<br />sector deficits and the safety of banks in some European countries is<br />depressing confidence and economic activity;<br />- in the US, where a stand-off between Democrats and<br />Republicans over pretty much everything but especially how to deal with the<br />deficit, is again damaging confidence and therefore investment;<br />- in the Middle East, where continued instability is a<br />threat to the world economy (and much else); and<br />- in China, whose growth can impact the rest of the world<br />because of its scale although in turn it can be influenced by events elsewhere.<br />I thought that there would not be a double dip recession<br />(although I now know I was wrong) but that inflation would come down and the<br />public sector deficit would continue to be brought under control albeit slowly.<br />Concerns are that the Government has prioritised rebuilding bank capital over increased<br />bank lending and that the Bank of England seems to have no policy prescription<br />other than Quantitative Easing. This does not help economic growth.</div><div align="justify"><br />Four other matters are of interest:<br />Will the coalition continue to work reasonably well?<br />As it nears mid-term and the warm glow of doing something<br />fresh fades away under the pressure of events, the coalition will come under<br />pressure particularly from disenchanted back benchers seeking a media presence<br />in the absence of a seat in Government. As long as it remembers why it is<br />there: to focus ruthlessly on getting public sector finances under control: it<br />should continue. It is in the interests of neither of the parties nor the<br />country to have a minority Government or an election. </div><div align="justify"><br />The Leveson enquiry<br />It has been pretty unedifying and a bit tedious to watch<br />resentful celebrities and forgetful politicians parade before the enquiry but<br />this enquiry is important. This enquiry is important for the country; press<br />freedom is precious and in an over-hyped atmosphere it would be easy to see it<br />diminished. </div><div align="justify"><br />Feel good factors<br />The Diamond Jubilee and the Olympics ought to be good for<br />the country. I wish we hadn’t got the Olympics (too much of the original ideals<br />seem to have disappeared under rampant commercialism) but I hope we make the<br />best of them and the Jubilee should be something special. Hopefully the<br />spending around both events will offset the fact that many people won’t be<br />working during them.</div><div align="justify"><br />Banks: as before, will we stop hating them?<br />See my 2011 comments.<br /><br />Abroad, the factors I noted above will be important.</div><div align="justify"><br />In Europe, the survival of the Euro (which I don’t doubt)<br />will lead to greater common Governance amongst the Euro area and potentially in<br />the Union generally. This will put pressure on the British position. Our<br />relationship with Europe is tense at the best of times – the facts that we’re<br />an island that’s never been successfully invaded, we have a common law culture and<br />an international economy mean that we approach the Union with a different<br />philosophy from the other major countries. Most of the political parties are<br />divided on the subject, and the coalition is particularly so. Although<br />renegotiation of our relationship is inevitable it is not a good time to do it<br />when everyone is in crisis. </div><div align="justify"><br />In the US, the Presidential election is very close. The<br />Republicans have made America ungovernable and their candidate does not deserve<br />to win. But the Democrats have responded by ignoring the need to cut long term<br />spending commitments as part of sorting out the deficit. Obama inherited<br />probably the biggest mess ever but has not been able to sound convincing on the<br />economy. I hope he wins; I suspect he won’t.</div><div align="justify"> </div><div align="justify">In the Middle East, life is as ever a series of flashpoints. I visited Jordan and Israel earlier in the year, an excuse in due course to publish some of my pictures. The visit reinforced my view that the real danger in the Middle East is Israel: it may be closer to the West than the rest of the region but its intolerance could mean it will do something stupid in Iran.</div>John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-25789407585186075362012-08-27T16:32:00.003+01:002012-08-27T16:42:11.792+01:002011 Reprise<div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;">2011 seems a long time ago, but as a restart for my blog Ithought I’d briefly comment on my thoughts for that year to see how relevantthey proved to be.</span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;"><b>The AV Vote</b> seemed important at the time, and it was.Had AV been supported it would have led to a major change in UK electionpractices. Pleasingly, it was rejected by a substantial majority which shouldput an end to this sort of constitutional meddling for a good few years (Iwrite with the broad philosophy that change is best avoided if things aren’ttoo broken because the unintended consequences are usually much worse than theproblem being solved). However, the result has (as I thought) led to moretensions within the coalition Government because the to keep their supportersquiet the LibDems now have to appear to be getting more out of the arrangement.I think the differentiation between the parties would have happened in anyevent: because Government is harder than people think, frustrations develop;because the next election always gets nearer; because the initial euphoriawears off. But it has happened earlier than otherwise, which is a shame, and policieswill be impacted by posturing rather than practicality. An example is thatClegg and some colleagues are now pushing House of Lords reform. Yet the Houseof Lords is one of the few parts of Government that works well. </span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;"><b>The slight reduction in the growth of public expenditure(aka The Cuts). </b>Only history will tell us the outcome; it’s clear that someprogress has been made in reducing the growth in public expenditure but thereis a long way to go before we have a balanced economy. </span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;"><strong>The impact on the economy</strong> </span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;">I said the key would be confidence and it is this which hasbeen lacking. Although a significant number of jobs have been created by theprivate sector – almost as much as predicted – people and businesses lackconfidence. Some of this is because of the global economy, because of the europroblems and some because the news, and the message from many in Government, isdepressing. The Government has a difficult task: it has to be negative to keeppopular support for what it is doing but it can’t be so negative as to putpeople off; I think it had the balance wrong. This meant people and businesses didn’tspend or invest. All this coupled with a banking system that is not lending meant2011 saw very low growth. </span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;">But it could have been much worse. We have benefitted as acountry from very low interest rates, which have also stopped individuals withhigh borrowings from defaulting and creating further debt problems. The tripleAAA rating that we kept throughout the year has saved us from having to paymuch more for our borrowing leading to much greater public spending cuts and areally serious decline. We kept it because of the focus by the Government onpublic spending cuts to the extent that they convinced the world that theymeant it.</span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;">So the cuts are working although a lack of confidenceprevents growth.</span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><?xml:namespace prefix = o /><o:p><span style="font-family:Calibri;"> </span></o:p></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;"><strong>The impact on social cohesion</strong></span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;">I expressed concern over whether the apparently randomnature of the cuts would reduce the broad public support for them. </span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;">This didn’t seem to happen; the public still generallyunderstood the broad efforts of the Government. But there were damagingimpacts, in my view because the public has never accepted the cause of theeconomic crisis: it feels resentful because it is suffering because of others,particularly bankers. I think it is would be right to be resentful becauseothers have done better through the crisis, but it needs to look in the mirrorto find the cause. The general mood is to be ready to react with harshjudgement when things go wrong: the hype about press behaviour and the Murdochempire was a good example in 2011. And the riots showed how easily things cantip into the wrong direction. But although the country seemed tense it alsoseemed accepting of what was being done.</span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;"><strong>The Royal Wedding</strong></span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;">I thought this would be a good news event which would boostthe economy; it was good news, and was brilliantly handled and probably helpedbring people together but sadly didn’t seem to help the economy. I describedthe forthcoming Olympics as a damp squib. That now seems churlish but I suspectit would be better for the economy had it been in Paris.</span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;"><strong>Bankers</strong></span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;">I hoped that banker bashing would diminish – because of theimportance for our economy – and I was wrong. As in many other posts I tried toexplain why we need to understand the faults of banks if we are to put themright.</span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;"><strong>Freedom of information</strong></span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;">I got the theme right: this was an important issue that ranthrough the year. My focus was on Wikileaks and the need for the privacy ofinformation to be respected, although not at the expense of freedom ofinformation.</span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;">The big stories were contradictory: the ability of thepowerful to use injunctions to prevent information being published. It appearedfor a time that a few members of the judiciary were determined to prevent pressfreedom, but eventually a combination of political pressure, Private Eye,apparently unconnected stories and pictures in the press and finally Twitterand blogs saw most of the injunctions fail to the chagrin of the odd footballerand actor.</span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;">However something much more worrying for freedom ofinformation then happened: a combination of such deep jealousy of the successof News International newspapers by a failing newspaper, the Guardian, that itpublished lies which subsequently had to be corrected and a bitterness byelements of Labour over the Sun’s change to support the Tories saw an outcryand the establishment of the Leveson enquiry into the operations of the pressand the relationships between the press the media and the police. As withbanks, the politicians found it convenient to throw some mud at someone else.Phone hacking is what the press should do: there job is to expose what peopledon’t want exposed and we should be grateful to them. </span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;">Again, it’s too soon to say what the outcome will be, but2011 was not good for a free society.</span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;"><strong>The Euro</strong></span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;">I thought it would survive and it did. Bruised, and with anuncertain status in the future, but it’s still here.</span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;">The situation is not good for Britain in two regards: oureconomy suffers as our largest trading partner suffers and the problemsencourage some of the sillier members of the Tory party to destabilise theGovernment by trying to push for withdrawal from or renegotiation of theEuropean Union.</span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;"><strong>“AfPak”</strong></span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;">As the west tires of Afghanistan, Pakistan continues to be apowder keg trusting no-one including itself. The instability in the Middle Eastis probably helpful: it shows that over time people can defeat military-sponsoreddictatorships – although at much cost and stability will take many years.resolved. </span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;"><strong>China</strong></span></div><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;">I said:</span></div><span style="font-family:Calibri;">It faces three broad questions: how it controls the economywithout an excessive boom leading to bust (many think this is inevitable); howit balances a growing middle class and personal wealth with state control and alack of political freedom; and how it chooses to use its influence in worldpolitics – whether it continues to be largely impartial to world events orwhether it seeks to use its influence – and if the latter, how. We will all beimpacted by those questions.</span><br /><br /><div style="margin: 0cm 0cm 10pt;" class="MsoNormal"><span style="font-family:Calibri;">We still are: little changed, for good or bad.</span></div><br />John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-89626606447413429652011-12-16T00:23:00.004+00:002011-12-16T00:45:27.826+00:00Europe isolated from UK<div><br /><div><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmN-e5tqEs-KFdSuKalLYlibvnBDdKIvqbjwCmsp_8FdOsLsm9rXlSDPqNh-_xxoPRkyUPVYp_fyMj4BvbGGqVGG2UXvTiqIKa5FFwOiMFXsUrPIBHAi9T47O7DlqOCvGEuwX92e1SFWw/s1600/Provincial_Government_Buildings_on_the_Meuse.jpg"><img id="BLOGGER_PHOTO_ID_5686519881002996562" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 329px; CURSOR: hand; HEIGHT: 132px; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhmN-e5tqEs-KFdSuKalLYlibvnBDdKIvqbjwCmsp_8FdOsLsm9rXlSDPqNh-_xxoPRkyUPVYp_fyMj4BvbGGqVGG2UXvTiqIKa5FFwOiMFXsUrPIBHAi9T47O7DlqOCvGEuwX92e1SFWw/s400/Provincial_Government_Buildings_on_the_Meuse.jpg" border="0" /></a> By co-incidence I was in Belgium and near Maastricht, <a href="http://en.wikipedia.org/wiki/Maastricht_Treaty">the birthplace of the Euro</a>, last weekend. This was a good opportunity to assess the aftermath of David Cameron’s decision to veto the proposed European treaty.<br /><br /><div><br />The UK media was pretty hysterical about it whether they were pro- or anti-, and they had been vocal about the treaty beforehand. In this relatively rich part of Europe people seemed much less concerned. There was some concern about the state of the Euro and the financial situation and disappointment that the UK had withdrawn from the discussions - but a resigned acceptance that the UK was always different. A much calmer reaction (which perhaps shows that the posturing in the European Parliament was just that, posturing) than in the UK. </div><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgDpYzBQbPG47XFpfL4e8_1kBvUWzJDNxTuKPXqHOdXnV2r0ioNqt8NzxHJPL8ubXUkyHahREwXPSCpQvnqArdSdHcnejam8zYZTlh_fToTUdLzYC553tBb3d8qbitq5VnndSvrlUNVqDo/s1600/banner.JPG"><img id="BLOGGER_PHOTO_ID_5686520604805599666" style="FLOAT: right; MARGIN: 0px 0px 10px 10px; WIDTH: 139px; CURSOR: hand; HEIGHT: 400px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgDpYzBQbPG47XFpfL4e8_1kBvUWzJDNxTuKPXqHOdXnV2r0ioNqt8NzxHJPL8ubXUkyHahREwXPSCpQvnqArdSdHcnejam8zYZTlh_fToTUdLzYC553tBb3d8qbitq5VnndSvrlUNVqDo/s400/banner.JPG" border="0" /></a><br />I think Cameron had little choice. I think it was unfortunate because it’s always a shame to leave a discussion unresolved, especially because the topic (solving the Euro crisis) was pretty important. But Cameron was stuck: he had no support from his party (the largest party in Parliament) to compromise much; he had no support from other countries who were too scared of the Franco-German axis and he was caught in a disagreement between France and Germany. Had he put off a decision, he would have been criticised at home and more importantly would have been blamed for the eventual collapse of the talks and the weakness in the Euro. Now, the UK has stood aside so if anything goes wrong it’s the fault of the Euro countries – primarily France and Germany. There’s another point in his favour, spelt out by one of his most ardent critics: <a href="http://www.telegraph.co.uk/finance/financialcrisis/8946845/EU-Treaty-after-a-feat-close-to-genius-David-Camerons-status-is-now-as-high-as-it-has-ever-been.html">he played it straight</a>. He didn’t stoop to the Euro sceptics stance of kicking Europe when it was down; he gave everyone warning of what was important to him and he followed through.<br /><br /><div><br />The short term winner of the summit was Sarkozy, who needed a win because of his Presidential election next year. He wanted a weak agreement without the EU being able to bind countries, unlike Merkel who wanted a strong formal agreement. The trouble for him is that it is clear, and increasingly clear, that the summit has <a href="http://www.bbc.co.uk/news/business-16109444">not helped solve the problem </a>of the Euro and that there will have to be more discussions. Even worse, and perhaps unsurprisingly, more and more countries are stepping away from what they agreed to. The summit may have been portrayed as the UK vs the rest, but the UK will soon be one of <a href="http://www.nytimes.com/2011/12/15/world/europe/euro-deal-faces-some-second-thoughts.html">many who can’t agree </a>to the plan. This will weaken Sarkozy’s position and strengthen Merkel’s.</div><br /><div><br />As far as UK politics is concerned, Cameron’s position has been strengthened. Miliband had little useful to say and Clegg looked silly. There’s no doubt the Lib-Dems will be disappointed but fundamentally the coalition is about sorting out the UK’s financial position and it is unlikely (not least because of their weakness in the opinion polls) that the Lib-Dems will withdraw. It is more likely that the stupid part of the Conservatives will push for an aggressive stance in the next phase of European discussions. Even though this could damage the coalition, reduce confidence in the UK’s ability to sort out its deficit and therefore harm the UK’s economic situation, and disrupt sorting out the Euro problem – also damaging the UK’s situation. Hopefully a combination of common sense and party discipline will prevail. </div><br /><div><br />As for the Euro: it really is a mess. There are only two solutions, full fiscal union with central budgetary control and Germany picking up the pieces (which in the long term might be unsustainable politically) or the exit or devaluation of the weaker nations. This would be very disruptive in the short term but better in the long term because the Euro could start again. From this side of the Channel it is unclear why the Euro elite are so wedded to a costly project – but they are, and they will do their best to keep the Euro going whatever the cost. The trouble is, it’s a cost to us as well as them.</div><br /><br /><div>So for those thinking the summit was bad:<br />- Most of the sensible politicians in Europe still <a href="http://www.bbc.co.uk/news/uk-politics-16209414">want the UK engaged</a>. They know we can’t help being straightforward, practical and outward looking. They value that. We will only be on the fringe of decision making if we choose to be.<br />- The package agreed at the summit will probably fizzle out, we won’t get too much of the blame and discussions will continue.</div><br /><br /><div>But for those thinking the result of the summit was a good thing, a couple of warnings:<br />- in the past we have done well by being slightly disconnected from Europe; we did not suffer from staying out of the euro as so many suggested we would. But that doesn’t mean we should be complacent. Things don’t always repeat themselves.<br />- The UK is benefitting from a very low interest rate because people still believe we are sorting out the deficit. But our ability to do so is harmed by the struggling European economy. It wouldn’t take much for people to take a hard look at our credit rating and think we too have problems so increasing our borrowing rate. Rather unpleasantly the Bank of France today suggested the UK should lose its AAA status before France. I don’t think we will but we mightn’t be far behind. </div><br /><br /><div>It is therefore in our interest to be good Europeans for a bit so we can help them solve the Euro problem –as long as we aren’t pushed too far, as we were last time. </div><br /><br /><div><br />We are, after all, all in this <a href="http://www.blogger.com/www.youtube.com/watch?v=Hnz5McrMbsI">together</a>.</div></div></div>John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-54155055312051732512011-10-25T20:06:00.002+01:002011-10-25T23:00:15.749+01:00QE or not QE?<a href="http://www.bbc.co.uk/news/business-15198789">Quantitative easing</a> is not the easiest thing to understand, both in how it works and how well it works. It’s even harder to understand why the Bank of England wanted to spend another £75bn on another QE round. But they did, and the Governor <a href="http://www.bbc.co.uk/news/business-15443610">defended the decision</a> in Parliament today.<br />To me, it’s silly. More than that, it’s really silly.<br /><br />The Bank of England gives banks and other institutions cash in return for certain types of assets they hold (primarily gilts). The banks and institutions are meant to do useful things with that cash, including (hopefully) lending it to businesses and maybe even individuals. Generally however, they use it to make short term financial gains trading in money markets. They already have lots of cash because they are deliberately reducing their size and increasing their capital (to be able to cope with forthcoming losses). They don’t really need more to increase productive lending.<br /><br />Thinking of QE as a method of boosting the economy is like putting your foot on a car accelerator when someone has cut the cable. There’s no direct connection. It might work (if for example the car is going downhill) but it might not.<br /><br />We need to improve growth and business confidence. Surveys show that lending to the engine room of the economy, small businesses, is drying up and the pressure on their working capital is damaging confidence and future investment – and employment. This is where action is needed, urgently, and QE does nothing to help.<br /><br />Some think QE is inflationary; the Bank thinks it won’t be because it thinks we are about to get deflation. There’s also an argument that this isn’t new permanent money in the system because it is buying assets. However, a cynic would say that inflation is one way of reducing the country’s debt burden. They would note that an abnormally large proportion of the Bank’s pension fund assets are in inflation linked instruments; that could be a co-incidence but it probably isn’t.<br />Inflation is having a bad effect on household discretionary spending and on household confidence. A lack of confidence prevents spending, increases saving and harms the economy. I’d agree that deflation would also be bad, for different reasons, and it’s not definite that QE will create more inflation. But it might, and is that a risk worth taking?<br /><br />What QE definitely does do is distort gilt yields, it makes them abnormally low. These yields are used in pension calculations and this distortion has two negative effects:<br />- New pensioners (unless they are lucky enough to be in the public sector or in defined benefit schemes) have to take their pensions when the <a href="http://www.annuity-rates.org/ros-altmann-criticises-latest-round-of-qe-2540/">annuity rates</a> are low. This, other things being equal, gives them a lower income for the rest of their lives<br />- The <a href="http://www.bbc.co.uk/news/business-15257540">deficits</a> in company pension schemes are increased, so companies have to put more money aside to meet the deficit and have less to use productively in helping growth.<br /><br />These effects are certain. The benefits of QE are not.<br /><br />Even if there are some benefits, the effort is not being targeted where the economy needs help: working capital for the SME sector so that business confidence can gradually be built up.<br /><br />So: it’s a lot of money; it has uncertain benefits (the only certain one being that it is increasing banks’ profits and therefore capital*); it may increase inflation; it will damage new pensioners; it will suck cash out of large companies; and it won’t provide help where it’s needed.<br /><br />That seems really silly to me.<br /><br />* <em>See my post about predictions for <a href="http://www.johncwoodman.com/2011/02/2011.html">2011</a>: the banks are being told to do contradictory things but primarily they are being told to increase their capital and reduce risk.</em>John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-78301269909477747552011-10-25T10:06:00.000+01:002011-10-25T10:07:22.846+01:00It's my party and I'll cry if I want toSo 80 or so Tories voted for a referendum in the next parliament.<br /><br />Although they knew it could not happen: this parliament cannot bind the next.<br />Although they knew the European economy is in a bad way therefore harming the UK economy, and such a referendum would do further damage.<br />Although they knew such a referendum would weaken the Government's negotiating position at a time when real change could happen.<br />Although they knew each vote for the referendum would weaken the Government's negotiating position.<br />Although they knew that referendums aren't cheap, are a distraction and the focus at the moment should be on the economy.<br />Although they knew they are representatives meant to do the right thing rather than following the opinions of their constituency associations.<br /><br />Why? Self indulgence.<br /><br />It makes you wonder if the Conservatives can be trusted to govern if 80+ of them can behave in such a childish way. I am very occasionally ashamed to belong to the Conservative party; this is one occasion.<br /><br />What's a bit depressing is that last week was another; what possessed those people on the Tory benches to be supportive of Liam Fox? He should have resigned earlier, and been suspended if he hadn’t. It seems that being on the right wing of the party is enough to offset breaking the ministerial code in a whole number of ways.<br /><br />Westminster village commentators suggest Cameron did well to string things along until Fox was found out. Because the right wing wouldn't have accepted action until it was inevitable. In the real world people knew the whole thing stank.John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com2tag:blogger.com,1999:blog-8995697694540328378.post-14405572180061659292011-09-01T15:20:00.008+01:002011-10-24T22:11:40.547+01:00Hello againIt's been four months since I posted anything so there maybe no-one out there to read this... the trauma of being a golf club captain, and keeping that <a href="http://www.bcgccaptainsblog.blogspot.com/">blog</a> up to date, meant I didn't have time to maintain this one. But I'm no longer captain so hope to keep this up to date in future.<br /><br />A lot happened while I was away - phone hacking, riots, Eurozone collapse of confidence, never mind Libya or Syria - and I'll comment on those issues now.<br /><br />I think the main point of interest is how so 20th century they now appear. They seemed to be incredibly important at the time - headline after headline, lead item on the news for days - and yet once the news spotlight moves on no-one is really interested any more. That says a lot about the inability of news media to focus on what's important, and to keep focused even if its not topical. (I wrote that paragraph on the 1st of September, when the Eurozone crisis had slipped out of the headlines for a few weeks: I have come back to this post on the 24th October when it is certainly back in the headlines. It never went away but as far as the media is concerned, it did).<br /><br />Phone Hacking<br /><br />I watched the furore about phone hacking, the demonization and closure of the News of the World and the criticism of the News International group (“NI”) with bemusement – especially as there were so many significant things happening elsewhere - and I’m not surprised that the issue has now largely gone away.<br /><br />It seemed to be caused largely by a combination of jealousy and revenge at – two hypocritical newspapers, <a href="http://www.economist.com/blogs/bagehot/2011/09/unethical-journalism">The Guardian</a> and the <a href="http://www.economist.com/blogs/bagehot/2011/09/unethical-journalism">Independent</a>. Hypocritical and not particularly good selling as well. When the history is written, the News of the World will stand out as a great campaigning newspaper that did far more for the <a href="http://www.guardian.co.uk/media/2011/jul/09/news-of-world-last-edition">public good</a> than the Guardian could ever dream of doing and Rupert Murdoch as someone who did more for <a href="http://en.wikipedia.org/wiki/Wapping_dispute">media freedom </a>in the UK than possibly anyone else.<br /><br />And what would you expect a newspaper to do?<br />An important part of their job is to tell us things we don’t know. This includes things people don’t want known. Some of these things are justifiably private. The assessment of which those are is a critical part of a newspaper’s job, and there needs to be scope for proper appeal and compensation if a newspaper gets it badly wrong.<br /><br />But most things people don’t want known should be known and we should be grateful that many newspapers invest time and money in digging into the truth. There is a right to privacy but most of the people investigated by the press lead public lives and use their image to boost their career or status.<br /><br />Far more worrying is the growing attempt to muzzle the press by injunctions against publication, especially super-injunctions against reporting the existence of an injunction. Pre-hacking, this was the hot issue affecting the media. As most of the details leaked out it was clear that the injunctions had been brought not to protect privacy or other family members but to protect the value of the person’s image. A very few judges have been allowed to create a new branch of law to protect people with a lot of money from the public gaze.<br /><br />Unfortunately the hacking scandal has allowed the focus to switch and has taken the pressure of politicians to protecting the press. The politicians will be pleased because so many of their misdeeds have been exposed in the past. And remember many of those exposures have used dubious methods but we have been grateful for them.<br /><br />When I posted on this theme last time I mentioned the excellent BBC serial <a href="http://en.wikipedia.org/wiki/State_of_Play_(TV_serial)">State of Play</a>. I recommend watching it.<br /><br /><br /><p><br />The Riots</p><br /><p>Most people took support from the riots for their opinions about what is wrong with Britain today, from the left’s decades attack on family and responsibility causing a collapse in society’s moral fibre to the brutal impact of the cuts on the most vulnerable in society. As news trickled out about those involved, immaturity and the short term madness of crowds became more likely suspects, complemented by incompetent policing in two regards:<br />- <a href="http://www.guardian.co.uk/uk/2011/aug/08/police-apology-mark-duggan-shooting">Arrogant</a> handling of a tense situation after police had killed someone, and<br />- Insufficient focus on stopping trouble <a href="http://www.dailymail.co.uk/news/article-2024412/London-riots-Police-soft-looters-ordered-stand-observe.html">before it started</a>.<br /><br />It was worrying to see how Sir Hugh Orde in particular, the head of <a href="http://www.dailymail.co.uk/news/article-1145581/Body-charge-UK-policing-policy-18m-year-brand-charging-public-70-60p-criminal-records-check.html">ACPO</a>, the self annointed trade association for police heads, was so keen to <a href="http://www.thisislondon.co.uk/standard/article-23978059-may-hits-back-in-riot-policing-row.do">criticise politicians </a>for their role in trying to resolve the issues when it was clear that the police had lost control. Fortunately he failed to get the job of heading the Met, and hopefully his influence is waning. <br />There is an <a href="http://www.dpm.cabinetoffice.gov.uk/news/riot-communities-and-victims-panel-announced-0">investigation</a> underway into the causes of the riots and it’s better to wait for that before commenting too much; there’s not enough information yet. But I take away two things:<br />- Whatever your position on <a href="http://www.bbc.co.uk/news/uk-15426720">social exclusion</a>, the work being done by Ian Duncan Smith’s team is critical. If it is successful it will improve people’s lives immeasurably in the long term. If not, many will continue to be excluded from normal society.<br />- The current method of policing cities – hands off, CCTV, stepping as a final solution – has gone horribly wrong. Zero tolerance, involvement, visibility are words that should start being used.<br /></p><br /><p>The Eurozone<br /></p><br /><p>Where to start? The simple thing is that the Euro was a mistake from the beginning, at least in involving countries with very different economies. A "core Euro" of France, Germany and Benelux might have worked. But the differences between those countries and the other 12 were too great; things onluy worked for as long as they did because the lenders were happy to provide finance while the world was going through an economic boom - or a bubble. Once that confidence evaporated, the scale of Government debt (made worse in some cases by guaranteeing the debts of banks) meant that the question of who stood behind the Euro could not be avoided. And as we saw in Yugoslavia, if you put things together that should not be together the eventual parting will be painful.</p><br /><p>So who does stand behind the Euro? Inevitably, Germany is the only country that can and the question is the price it will extract for doing so. It is inevitable that if the Euro is to be a stable currency that there has to be some form of political as well as economic union - without a common fiscal and central bank policy there cannot be a stable currency region. I think those who doubt the future of the Euro underestimate the willingness of the European governing elite to ensure its survival and the survival of the European dream.</p><br /><p>It is inevitable that the Greek Government will default on its debts; hopefully others will not have to as well. But I think it very unlikely that they will leave the Euro: the cost to them and potentially to others would be too great.</p><br /><p>The cost of the default will mostly fall on European banks, who will have to be bailed out to some extent by other countries. Mostly Germany.</p><br /><p>The treaty changes necessary to implement a co-ordinated form of economic governance in Europe provide the UK with the best chance in years to re-negotiate its involvement in Europe. I have long thought that the solution to our difficulties in Europe is to recognise a two-speed Europe, or an inner and outer core. We should welcome the creation of a more harmonised Europe for those who want it and we should take our proper place in the slow lane.</p><br /><p>Libya/Syria?</p><br /><p>The intervention has worked. Despite a lot of criticism of Cameron and Sarkozy at the beginning, their humanitarian instincts have helped successfully depose an evil man and we should be grateful to them (as should the Libyans, who should now get on with running their country). Syria seems to tied up with Russia and Iran to be given a similar level of help. Its hard to understand why Russia doesn't want to get on the right side of history, but hopefully Libya will motivate Syrians go continue their struggle.</p>John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-32871576733268086242011-04-26T10:36:00.002+01:002011-04-26T10:37:51.877+01:00AV scamQuick update on AV; thanks to Guido I saw <a href="http://www.spectator.co.uk/coffeehouse/6893578/exclusive-yes-to-av-leaflets-printed-on-ballot-machines.thtml">this article</a> about the serious conflict between the yes campaign, the referendum and the profits people hope to make out of a change to the system.John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com2tag:blogger.com,1999:blog-8995697694540328378.post-59255712248638021402011-04-20T09:09:00.006+01:002011-04-21T10:07:24.937+01:00AV or not AV?I haven't posted on the referendum for two reasons: first because my focus has been on posting about life as a <a href="http://www.bcgccaptainsblog.blogspot.com/">golf club captain</a> and second because I hadn't fully made up my mind.<br /><br /><a href="http://aceproject.org/main/english/es/esd03.htm">AV</a> has a whiff of fairness about it, but it also brings with it complexity, a change to something that doesn't really need fixing and an increase in the power of parties over individuals.<br /><br />The more I've thought about it - and have looked at the <a href="http://yes2av.wordpress.com/yes-to-fairer-votes-official-site-yes-2-av/">respective</a> <a href="http://www.no2av.org/">campaigns</a> - neither of which have been impressive - the more I think the flaws of <a href="http://aceproject.org/ace-en/topics/es/esd/esd01/esd01d">AV</a> outweigh the benefits and will vote no.<br /><br />There <a href="http://www.aph.gov.au/library/pubs/RB/2005-06/06rb10.htm">are problems</a> with most forms of democratic voting systems (where the area is bigger than an area where people know each other well); problems of not identifying with the MP, not having equal representation (Labour need many fewer votes per MP than Tories or Lib Dems), under-representation of extremists (many would see that as a good point), MPs not being selected by more than 50% of the votes, MPs being selected by small groups of people because they are good party people (eg MEPs); and so on. Volumes of words have been written on the subject. AV solves none of them - not even being selected by more than 50% of voters, because you don't have to cast more than one vote.<br /><br />Which is why, until the yes campaign kicked off, most of its current suppporters did not support it.<br /><br />There's another reason some of the <a href="http://order-order.com/2011/03/17/kinnock-supports-yes-to-avpockets-103000-in-fees-from-electronic-voting-lobbyists/">current supporters</a> changed their minds having previously been negative: <a href="http://www.edms.org.uk/2010-2011/1550.htm">money</a>. The<a href="http://www.no2av.org/02/why-our-country-cant-afford-av/"> cost of running an AV election</a> will be substantial (<a href="http://www.independent.co.uk/news/uk/politics/av/nick-clegg-denounces-claims-that-av-would-cost-250m-2263317.html">£250m+). </a>A main financial promotor of the AV campaign is an organisation (the <a href="http://www.dailymail.co.uk/news/article-1377037/AV-referendum-Electoral-Reform-Society-profit-Yes-vote.html?ITO=1490">electoral reform society</a>) that will <a href="http://www.telegraph.co.uk/news/politics/av-referendum/8409824/AV-referendum-row-over-Yes-to-AV-donations.html">profit from the change.</a><br /><br />Many supporters say that although AV is not perfect, it is at least a change from the current system. These tend to be LibDems - although there has been <a href="http://news.bbc.co.uk/1/hi/uk_politics/8506306.stm">research</a> into the effect AV would have had on past elections, it's hard to work it out accurately. The effect seems to be that when there's a significant swing in mood (eg to Thatcher or Blair) AV would emphasise that swing and when there isn't it would emphasise the middle. But the party that would do best out of it in general seems to be the LibDems. The result is therefore likely to be less effective opposition or coalitions based on party negotiations.<br /><br />I don't really accept the "no" campaign's argument that the system is too complicated to explain - and yet: remember the significant number of <a href="http://scotlandonsunday.scotsman.com/holyroodelections/Ballot-paper-design-at-fault.3298355.jp">spoiled ballots</a> in Scotland in the 2007 election? Complexity really did have a negative impact.<br /><br /><p>Our current system is one of the better alternatives. There has to be a clear reason to change. AV doesn't solve most electoral problems, it will cost a lot and is likely to lead to more power for political parties rather than less. (I will always remember the photo of Nick Clegg's coalition negotiating notes showing he was mostly concerned with the Lib Dems status rather than policy).</p><br /><p>I have another problem with the vote: I think important changes should be carefully considered. I don't like the idea of referendums deciding something unless there are some safeguards: a certain % of people should vote; the majority should be more than 50% to take account of the fact that some people won't vote; ideally there should be two referendums for major changes, say 5 years apart, so the result isn't swayed by short term issues. The thing about change is you can't put it back. But you can always change in the future.</p><br /><p>So in the absence of clear reasons to change - and because there are some good reasons not to - I'm voting no.</p>John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-58772835791103923962011-02-09T15:52:00.008+00:002011-02-10T12:44:39.668+00:002011Predictions are best made after the event so (even with the advantage of being 8% of the way through the year) I will instead highlight what I think will be the important issues of 2011.<br /><br />In the UK:<br /><br /><strong>The AV Vote</strong><br /><br />Although most people have given this topic little thought, the <a href="http://en.wikipedia.org/wiki/United_Kingdom_alternative_vote_referendum">vote in May</a> will be very relevant to the future of the coalition. And future Parliaments.<br /><br />If there is a no vote, then proportional representation will be unlikely for many years. This would be a hard blow for the LibDems and would make many wonder what they have got out of the coalition (apart of course from helping to salvage the economy). Given that the coalition will be at its most unpopular the temptation for some to bail out will be high. Even if they don’t, many will be sullen and uncooperative. The opposite would be the case if there’s a yes vote: a lot of Conservatives will be fed up and see yet another (as they see it) LibDem victory. So whatever the result, the <a href="http://www.thisislondon.co.uk/standard/article-23906316-coalition-leaders-warned-of-hostility-from-backbenchers.do">tensions</a> on the back benches will increase. I think it’s most likely that the coalition will continue but there’ll be more <a href="http://www.guardian.co.uk/politics/2010/nov/08/backbench-rebellion-postwar-high-coalition">discontent</a> which will make it harder to achieve its aims.<br /><br />As far as the future is concerned, it seems to be hard to predict the impact of AV – especially as there’ll be fewer and hopefully more consistent constituencies. Some think it’ll have little impact, but it’s more likely to increase the <a href="http://www.guardian.co.uk/politics/2010/may/10/alternative-vote-minimal-impact-general-election">chance of coalitions</a>. This one has worked surprisingly well so far. But it’s not obvious we need lots more.<br /><br /><strong>The slight reduction in the growth of public expenditure (aka The Cuts):<br /><br />The impact on the economy</strong><br />The key is <a href="http://www.johnredwoodsdiary.com/2011/02/03/the-squeeze-some-simple-arithmetic/">confidence</a>.<br />Acting quickly to get the deficit under control was good. It gave investors – the people who fund our deficit – confidence in the country. It has allowed us to keep funding the deficit without paying high interest rates, the costs of which would add to the deficit. It allowed business to feel that the Government was getting a grip and that they in turn could invest to re-balance the economy to one of wealth creation rather than public waste.<br /><br />Although the <a href="http://order-order.com/2010/04/10/those-massive-tory-cuts-in-full/">scale of the cuts</a> is small, changing<a href="http://order-order.com/2010/08/14/spending-cuts-real-or-unreal/"> the trend</a> from massive growth in public spending to a standstill or slight reduction is like turning an ocean liner. There will be unemployment, projects will stop (although infrastructure investment is continuing) and people will be nervous. As the global economy has picked up, so has inflation especially in raw materials, exaggerated in the UK by a weaker pound which <a href="http://www.bbc.co.uk/news/business-12413773">complicates the reaction</a> of the Bank of England’s monetary policy committee. Nervousness – a lack of confidence - could constrain spending and investment and therefore damage growth.<br /><br />As the cuts start to come into effect this year, the interplay of these two impacts on confidence will be critical to whether we see growth returning in the UK in 2011/12.<br /><br /><strong>The impact on social cohesion</strong><br />Many people will be using the cuts to ferment trouble: ultimately the cuts threaten an end to all those who live off the culture of dependency, especially Labour. But the degree of change requires a broad public sympathy – not necessarily a majority agreement, but some respect that the right things is being done. Initially, that sympathy is there. Will it stay as the cuts bite?<br />The first sets of demonstrations, about changes to the funding of university students, were if anything beneficial to the Government. The sight of privileged youths creating a mess on the whole increased support for the proposals. And the public sector unions run major risk if they inconvenience the public too much by what are perceived to be political demonstrations.<br /><br />But: if the cuts impact too much on front line staff then public sympathy could shift. There’s a growing feeling that there is total lack of joined-up thinking to the cuts, with every arm of government looking to its own interests, in particular with councils cutting charity and voluntary funding much more sharply than their own, because it preserves their empires and saves them redundancy costs. Coupled with silly things like the sale of woodland and rushed changes to the NHS, all this could change attitudes and make it impossible to implement the cuts effectively.<br /><br />2011 will tell.<br /><br /><strong><br />The Royal Wedding</strong><br /><br />This is a good news event; it’ll give a feel-good factor. The sales of <a href="http://www.zazzle.com/kate+and+wills+gifts">commemorative</a> tea-towels and mugs will all help boost the economy as will the influx of tourists. It’ll also be good for our national image increasing tourism on a longer term basis.<br />I think in fact it’ll be much more useful than the Olympics in the following year, which will probably be an <a href="http://www.telegraph.co.uk/news/uknews/1549319/Ministers-raid-grassroots-sport-for-525m-to-pay-Olympics-bill.html">expensive</a> <a href="http://news.bbc.co.uk/1/hi/england/london/8343784.stm">damp squib</a>. The happy couple have chosen a good time to increase our national morale and – hopefully – confidence.<br /><br /><br /><strong>Bankers</strong><br /><br />London is one of the two major financial centres in the world – probably the major international one. The financial services business generates substantial employment from those who support it ranging from lawyers and accountants to restaurants and builders. It is the driving force of the UK economy, one of the few businesses where we are world leaders. It is also much wider than just “banks”.<br /><br />Yet popular opinion seems to despise bankers, far more than in any other country – even the US, where the devastation from the house price collapse was worse than the UK. As regular readers know, I think the banks made major mistakes in the last few years and that as a country we did not exact enough reward for bailing some of them out. However, the banks were neither wholly or primarily to blame for the “credit crisis”, and it is likely that we will make a profit on the bail outs we did make. The US <a href="http://www.fcic.gov/report">investigation</a> into the <a href="http://www.guardian.co.uk/business/2011/jan/27/financial-crisis-inquiry-commission-report-findings">causes blames</a> a number of factors, primarily lax Government policy; the best explanation I have seen came from Michael Geoghegan, ex-CEO of HSBC (with JP Morgan one of only two Western banks that truly did not need help; he can therefore be dispassionate):<br /><br />"The financial crisis was a heady cocktail of western governments voted in on consumer agendas, and financed by banks in the western world that didn’t have domestic savers’ deposits to fund the growth in consumer lending and then relied on foreign wholesale deposits which were quickly withdrawn when doubts about the western financial system arose”.<br /><br />So why do we hate bankers so much more in the UK than elsewhere? I think there are three reasons:<br />- Our Government was more to blame than most for the crisis in the UK (because of its uncontrolled public sector expenditure, the lax regulatory system it set up and the inadequate responsibilities of the monetary policy committee). It therefore made much more effort to blame the banks than other Governments, and in the heat of the crisis the opposition had to follow suit;<br />- The UK has a limited number of big banks, which most people bank with. And often have bad consumer experiences with. These banks are involved in wholesale international markets as well. In the US, the banks involved in international markets tend not to be those most people bank with and so the issues are more distant.<br />- The disadvantage of a vibrant press in the UK is that they rarely let facts get in the way of a good story.<br /><br />But even with these reasons I don’t understand the depth of dislike. It has two bad consequences for the UK:<br /><br />- If you don’t understand what went wrong, the remedies will <a href="http://www.cityam.com/news-and-analysis/allister-heath/the-top-ten-real-causes-the-crisis">also be wrong</a>; we won’t put in place the right structures to minimise the risks in future. This is particularly worrying because the world has not by any means finished working its way through the debt problem.<br />- Over time, the negative feelings will cause international financial services to drift away. Most other countries are putting in place favourable tax and regulatory regimes to take the business away just as we are doing the opposite. Good riddance, people cry. But in ten years or so time, when our tax and employment base is much less, and the centre of international commercialism has shifted so our influence and involvement in the world economy is less, we will suffer. Not the ex-bankers by the way – they’ll be fine. The general public.<br /><br />Will 2011 be a year when banker bashing becomes less emotional? I doubt it. But for the long term future of the UK I hope so.<br /><br /><br />Briefly, elsewhere:<br /><strong><br />Freedom of information</strong><br /><br />Wikileaks' publication of a mass of stolen emails from the US Government caused split views: a bold campaigner for truth and freedom of expression? Or a careless exploiter of stolen information?<br /><br />The thing that worried me about Wikileaks’ supporters was their conflation between freedom of expression – and important right that people should be able to say what they think – and freedom of information, defined as the right to have all information even if it is private. Or, to repeat the point, stolen. The right to take and use what isn’t yours isn’t a good thing and labelling it as freedom of expressions does not make it so.<br /><br />We live in a world where people are more and more inclined to make information about themselves public, even if they later come to regret it. This attitude will permeate society and generally this is a good thing. Transparency especially over Government activity is a good thing. But not to an unlimited extent. People have to have private discussions and thoughts before they make decisions. As we put more of our information into databases we don’t control we will lose control of our information. I don’t know the end game, but I am sure that the trend will continue in 2011 and I am nervous about the consequences. I think we’ll be more manipulated than free. And the distinction between private and public remarks will diminsh to the loss of all of us.<br /><br /><br /><strong>The Euro</strong><br /><br />Will it survive? There were many doubters last year as investors in various countries’ government debt lost confidence in their ability to repay, demanding higher interest rates and eventually causing bail-outs. Each country had different reasons for the problem, from Greece’s original unsuitability to be a member of the Euro-zone to Ireland’s decision to fully guarantee its banks. All highlighted the problems of the original Euro project: to have a common currency amongst countries with insufficient economic convergence, with no proper assessment of the extent of the convergence and no common governance process to monitor each other’s economies and to transfer money from one country to another. If things were left alone, almost certainly countries would have to leave the Euro-zone and the project would be damaged (although had the Euro originally just been a core group of about four or five countries aligned with the German economy it probably would have not come under strain).<br /><br />However, it is unlikely that they will be left alone: there is a tremendous political pressure in Germany and France to keep the Euro going and the effectiveness of that pressure should never be doubted. It does seem that the two countries will force through <a href="http://www.bloomberg.com/news/2011-02-04/merkel-sarkozy-call-euro-region-march-summit-on-economic-competitiveness.html">governance changes</a> which will solve some of the original problems, with mechanisms for transfer payments in return for tighter central controls over countries’ economies. And there may be a partial default or two. The long term result should be good for Europe’s economies.<br /><br /><br />I don’t think we should be part of this process, I think as a result we will shift to an outer tier of European harmonisation but I think that will be very healthy. We needn’t integrate as closely as others would like, but we needn’t be a drag on those who want to. We will always be a large player and therefore with influence.<br /><br /><br /><strong>Afpak”</strong><br /><br />Just as last year, this region is at the heart of the problem of terrorism driven by Islamic fundamentalism. Pakistan has a massive population, problems of poverty, a poor education system, corruption and a military whose paranoia over India and Kashmir has caused it (mostly indirectly) to be a prime sponsor of terrorism. It also has nuclear weapons. I don’t think anyone knows what to do: I think the only hope is that Pakistan’s educated middle class can act as a calming influence to bring aspects of the country together over time, and in the meantime there are no regional outbursts that that add to the tension.<br /><br />Historic links with Saudi Arabia, which has funded most of the extremist schools, bring the problem closer to the Middle East where Israel continues to have a short term view of the situation: its oppression of the Palestinians continues to breed longer term problems.<br /><br />I write this as the situation in Egypt remains uncertain; and what happens there will affect other Arab dictatorships. As well as Israel. 2011 doesn’t seem like a calm year in the Middle East.<br /><br /><strong><br />China</strong><br /><br />Economically, only one country counts: China. Its economic growth, the size of its savings which are largely funding the US and the increase in average wealth of the population are the main things that will determine the world’s economy in 2011. That’s not to diminish the importance of other emerging economies, or the likely recovery in America, but China will dominate the out-turn.<br /><br />It faces three broad questions: how it controls the economy without an excessive boom leading to bust (many think this is inevitable); how it balances a growing middle class and personal wealth with state control and a lack of political freedom; and how it chooses to use its influence in world politics – whether it continues to be largely impartial to world events or whether it seeks to use its influence – and if the latter, how. We will all be impacted by those questions.<br /><br /><br />To close: a quote from Warren Buffet: forecasts are a better guide to the forecaster than the future.John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-42863240562603981862011-01-30T13:48:00.009+00:002011-02-03T19:35:41.736+00:00One quarter doesn't make a recessionBut it's half of one.<br /><br />The fall in GDP in Q4 2010, coupled with more aggressive PR from Labour because of Ed Balls' appointment as Shadow Chancellor and <a href="http://www.dailymail.co.uk/news/article-1339702/Meet-champagne-coke-snorting-socialist-Labours-new-Alastair-Campbell.html">Tom Baldwin's</a> appointment as director of strategy (aka press manager) has changed the mood music around the coalition's attempt to get public finances in order. There's a bit more questioning of the approach: previously there was sympathy for the view that the priority was reducing the deficit, now there seems a bit more concern about growth. Mood music matters for two reasons:<br /><br />- confidence is an important driver of growth. It's not enough on it's own, but it's necessary. The more nervous people (including companies) are about the future the less they will invest, spend, consume.<br /><br />- although the "cuts" aren't big in themselves. they do change the direction of public expenditure. Big changes need some form of public acceptance to work. The coalition did get more votes than the opposition and has a mandate but it is fragile. It doesn't need to top the opinion polls to implement its policies but it does need at the least a grudging respect and acceptance. So far, it has this. But if we were to move into recession and there was much more questioning this respect and acceptance could disappear.<br /><br /><br /><br />There are two problems for the coalition:<br />- One quarter of negative growth was always possible - but no-one expected it to be this one, the quarter before VAT increased, when people should have been out spending. The weather does seem to have made <a href="http://www.livecharts.co.uk/livewire/2011/02/03/sterling-stages-surprising-recovery/">the difference</a>, but the reason isn't relevant. The trouble is that if this quarter (Q1 2011), when there is a VAT increase as well as bad weather, also has negative growth then we are into two quarters of negative growth and a recession.<br /><br />- They have not sold their approach recently, in fact for the last few months. They need to get on the front foot. I don't think it's enough to simply say, we must see the cuts through, we will not change course, The headlines need to explain <strong>why</strong> the approach is good for the economy. Even <a href="http://www.guardian.co.uk/commentisfree/2011/jan/30/growth-best-state-does-nothing">the Guardian</a> (or at least one of their columnists) agrees that the state cannot do much to improve things. It's the private sector that will.<br /><br />There are some positive points for the coalition:<br />- We won't know the final Q4 2010 figure until Spring, and it may improve;<br /><br />- Subject to coalition breaking up, they won't face re-election till 2015. This is plenty of time for their policy to work. And if the world economy has recovered by then, the coalition will get the credit in Britain.<br /><br />- Their approach is funadmentally right. They are at risk from external events - but fundamentally the interest burden (which I covered previously <a href="http://www.johncwoodman.com/2010/04/economic-growth-i-dont-agree-with.html">here</a>) on our borrowings means the deficit has to be got under control, and the quicker that happens the quicker the recovery will come.John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-55422267555168209062011-01-30T13:07:00.002+00:002011-01-30T13:47:56.060+00:00State of PlayI've just finished rewatching <a href="http://en.wikipedia.org/wiki/State_of_Play_(TV_serial)">State of Play</a> - the original TV series not the disappointing film. I thought it was (apart obviously from <a href="http://en.wikipedia.org/wiki/24_(season_5)">24 series 5</a>) the best thing I've seen on TV. A brilliant twisting tale about how the journalist heroes uncover details of political deceit and corporate corruption, even murder.<br /><br />It made me ponder the <a href="http://www.bbc.co.uk/news/uk-politics-12253968">phone-hacking scandal</a>. The press is very powerful. I'd hate to be on the <a href="http://www.google.co.uk/imgres?imgurl=http://www.corbisimages.com/images/67/28E4AF07-023A-4F34-8485-26807F7007A8/AADS004479.jpg&imgrefurl=http://www.corbisimages.com/Enlargement/AADS004479.html&usg=__Vj-qHo4xp2mDZOuC796qmlu6rkE=&h=427&w=640&sz=118&hl=en&start=148&sig2=ulMLYE_hzx3to5PWUPsjdw&zoom=1&um=1&itbs=1&tbnid=m62geoJnXqvmGM:&tbnh=91&tbnw=137&prev=/images%3Fq%3Dpress%2Bphotographers%26start%3D140%26um%3D1%26hl%3Den%26sa%3DN%26rlz%3D1I7GGLL_en-GB%26ndsp%3D20%26tbs%3Disch:1&ei=0WtFTbzxKdKGhQevp9yzAQ">wrong side</a> of it, especially if I didn't have the resource to protect me or the opportunity to benefit from any resulting publicity. It also doesn't always decide to follow things up and it can focus on irrelevancies. But there's no doubt that a free cynical and aggressive media keeps the body politic honest.<br /><br />And is hacking into voice messages really different from rooting through dustbins? Or pretending to be someone else to get an interview? Or misrepresenting information to get hold of incriminating documents? (Things I admired in State of Play). No; this is a case of the end justifying the means. If a story is good enough then we should accept journalists have to overstep the mark to get the results.<br /><br />There is a question about whether the News of the World's hacking (and I am sure most other papers do this as well) is focused on good stories; it's hard to imagine Kelly Hoppen, Sienna Miller, John Prescott or Gordon Brown having interesting messages, and the saga supposedly began with as tory about Prince Willaim's knee. But I suspect the underlying theme of such celebrity stories would be hypocrisy; they all benefit from publicity but they all complain when it's not good.<br /><br />Hypocrisy underlies the News of the World story. The Guardian has made the most running; had it not been for the ex-editor being Cameron's press adviser, would they have bothered? They are after all the paper that linked with Wikileaks, relying on stolen information broadcast without care, to sell papers. Phone hacking is minor misbehaviour compared to theirs.John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-43060688115318387572011-01-03T18:49:00.007+00:002011-01-06T20:05:11.903+00:002010 repriseLast year I avoided making predictions but <a href="http://www.johncwoodman.com/2010/01/2010.html">set out a few issues</a> I thought would be important, and promised to review them at the end of the year.<br /><br /><strong>Should you cut Government deficits in a recession?</strong><br /><br />I thought that the contrast between Eire - which had take action to sort out it's deficit but was constrained by being in the Euro - and the UK - which could devalue its currency but had out of control public spending - would be interesting. In the event the situation reversed: the UK got a new Government which took firm action that increased its credibility allowing it to continue borrowing and at lower interest rates. Eire got in a mess because its banks were in a much worse state than people thought and the Government provided a guarantee for all their debts. This has seriously damaged their credit rating - initially, things were looking reasonable but as the full horror of their banks unfolded they needed help. I suspect they would have been better allowing the banks to default (although protecting depositors) rather than <a href="http://order-order.com/2010/11/30/iceland-shows-the-way-for-irelanddecouple-default-devalue-and-develop/">hurting taxpayers</a>, but that would have badly hurt banks in other European countries - <a href="http://order-order.com/2010/10/15/anglo-irish-bondholders-should-take-the-lossesis-the-ecb-forcing-ireland-to-protect-german-investments/">especially Germany</a>. And that would not have been popular.<br /><br />So the question is unresolved: I remain convinced that sometimes you should cut deficits, and both the UK and Eire were right to do so, and will benefit compared with other indebted European countries. 2011 should show the result.<br /><br /><strong>Does the public sector serve us - or is it the other way round?</strong><br /><br />I suggested that the public sector - and I really mean the management of the public sector - had forgotten why it existed, which is to provide efficient public service. (See last year's post for links to examples). I hoped that 2010 would be a year when the public started to take back control., accepting that the culture of low productivity and indifference to the public had taken years to create and would take years to disappear. I'm not sure there has been <a href="http://www.bbc.co.uk/news/uk-scotland-north-east-orkney-shetland-12110270">much progress</a> on this; the flurry of press interest in this topic has largely disappeared and there will be a major media push by public sector unions about the unfairness of expenditure cuts, which will probably become the new story.<br /><br />However, there is hope: Eric Pickles, the "Communities Secretary", has pushed for much <a href="http://conservativehome.blogs.com/localgovernment/2011/01/144-councils-have-opened-up-their-books.html">more openness</a> about Local Authority spending and the coalition has reduced the number of quangos if not had a bonfire of them. The philosophy of most of the coalition is to support localism, the Big Society, community involvement. Little things like giving local areas the power to determine housing needs rather than having them set by distant regional development agencies all help the trend towards reducing the power of the public sector. And a lack of money helps. So although there's been little progress the change of Government has kept the pressure on.<br /><br /><strong>Is global cooling the new global warming?</strong><br /><br /><p>I wondered if 2010 would become a year when it became respectable to be a climate change denier. I think it did: there has been an increasing realisation that the statistics and climate readings have been over-exaggerated by those with an interest in promoting expenditure on yet more research or in developing businesses on the back of fear of temperature increases. (Micheal Crichton wrote an interesting book "<a href="http://en.wikipedia.org/wiki/State_of_Fear">State of Fear</a>" which suggest that Governments also wanted to promote the concept because by making people worried it allowed them to increase their control over the public. He also cautions about the <a href="http://www.crichton-official.com/books-stateoffear-policy.html">politicisation of science</a> - a timely caution many scientists ignored). As other topics which allow them to increase public worry - the economy, terrorism - come to the fore, Governments are less interested in climate change.)<br /><br />I still think it sensible to invest in energy efficiency, and in the reduction of the use of coal, oil and gas, but for <a href="http://www.guardian.co.uk/environment/2008/sep/17/renewableenergy.fossilfuels">economic</a>, environmental and <a href="http://www.iags.org/fuelingterror.html">energy security</a> reasons. The hijacking of the debate by climate scientists has devalued these worthy objectives.<br /><br /><strong>Labour or Tory?</strong><br /></p><p>I did make a prediction here: I thought there'd be a hung Parliament (because the swing to the Tories would have been to much to realistically expect) but I also thoiught the LibDems would support Labour. In fact, thanks to a focus on the importance of sorting out the UK economy by senior Tory and LibDem leaders, the coalition agreement was put in place and has lasted well so far. Selfish MPs on both the Tory and LibDem side like to rock the boat from time to time but absent a really serious disagreement on an unexpected item, the agreement looks likely to stick. Probably because the electorate would punish those who caused any break-up.</p><br /><p>It's a relief to see a Government that cares about the economy in charge. Cameron has settled into the job - and where is Gordon Brown? It's interesting how quickly important people fade away if their bubble is burst (in all fields not just politics).</p><br /><p>Internationally, I noted the importance of:<br /><strong></strong></p><p><strong>US Mid-Terms</strong></p>I wondered whether Obama would have made progress in dealing with the mess Bush's team left behind, and whether that progress would be accepted by the US electorate. I think he did, but the electorate certainly didn't accept he had. However, I suspect he will do well over the next two years because the Republicans will either have to co-operate or be shown to be bankrupt of ideas. In either case, as the global economy picks up Obama will get the credit (probably unfairly, but that's fair as he's being unfairly blamed for things going wrong now).<br /><p></p><p>I also said: "It usually takes two or three years for a change of Government to have any impact – so the problems in the first two or three years of a Government are usually those of the last one." Still true.<br /></p><p><strong>Iran</strong></p><p>I wondered if a new regime to emerge. It nearly did. But the old one relied on the armed forces and brute force to keep it in place. I still hope that this basically civilised country can re-emerge as a force for good in the region: rebellion remains in the air and needs to be softly encouraged by the West.<br /><strong></strong></p><p><strong>"AfPak"</strong></p><p>My closing thought for 2010 was that it is hard to see a good outcome here. And that remains my thought: Pakistan continues to have deep divisions, an unsuitable Government, an intelligence service that faces two ways and an unnatural distrust of India fermenting its desire to see a destablised Afghanistan. Which in turn has a dodgy Government that doesn't control most of the country. The West has wasted billions here, has made itslef deeply unpopular and has no real plan for a constructive escape.</p><br />Thoughts for 2011 will follow shortly.John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-57386793010741948982010-10-26T22:51:00.005+01:002010-10-27T13:17:59.390+01:00The Comprehensive Spending ReviewAn <a href="http://www.bbc.co.uk/news/uk-politics-11585312">awful lot</a> has been written about the <a href="http://www.hm-treasury.gov.uk/spend_index.htm">comprehensive spending review</a>, so much so that it’s quite hard to think of anything new to say. However, I did actually listen to George Osborne’s speech and because it was supposedly the start of the roll back of the state it was important enough to be worth a comment.<br /><br />And I did feel real anger about the review: not at the cuts, but at the reaction from various Labour politicians and commentators complaining about the increase in unemployment that will follow. They are the ones who wrecked the economy, leaving the UK with a massive debt burden. They are the ones who <a href="http://www.publicservice.co.uk/news_story.asp?id=14524">recklessly signed</a> contracts they knew could not be afforded, leaving defence in particular in a mess. They are the ones who have left a blighted <a href="http://www.spectator.co.uk/article_assets/articledir_1/652/The_Underclass_and_Crime%20final.pdf">underclass</a> without access to education and social skills to let them escape. They are the ones who left more people unemployed than when they came into office – as indeed every Labour Government has. Let’s repeat that: the people criticising the coalition for putting jobs at risk are the people who every single time they come to power make more people unemployed.<br /><br />The comment I enjoyed most came from Giles Coren in the Times (I can’t link to it because of the Times firewall, presumably designed to devalue the worth of its authors by limiting their exposure). The heading was Let the Posh Boys Sort it Out; in summary it was saying that there is some relief, having watched a supposedly meritocratic group make a complete mess of things, in seeing some people born to rule getting a grip. I’m not sure if he was being ironic or not but he has a point.<br /><br />One of Alan Johnson’s criticisms of the speech was the reaction of the Tory backbenchers appearing to relish the “cuts”; I’d certainly agree that Osborne was unnecessarily partisan in what should have been a sober assessment of the situation. Some of us do delight in seeing the state become less important, and in the sound of interest groups bleating about the problems that will arise from them having less money to waste. But that is a Tory, a partisan, perspective: there is also a wider national interest at stake which is much more important. I’ve written many times before about the need to get a grip on spending because of the size of the <a href="http://www.telegraph.co.uk/finance/economics/8077278/Surprise-as-UK-public-borrowing-hits-record-high.html">interest burden</a> which flows out of the country and because of the requirement to keep finding other people to <a href="http://www.hm-treasury.gov.uk/spend_sr2010_keyannouncements.htm">fund our borrowings</a>. Proving that we can sort ourselves out is crucial to that and it is why something on the scale of the CSR was essential.<br /><br />Other brief thoughts:<br />- There’s a lot to criticise - aircraft carriers with no planes, reducing spending on Scotland by less than the rest of the country – but it is a great achievement to have got agreement within a coalition to do as much as they have;<br />- The LibDems may be unpopular now, but as the “cuts” start to work they will get some of the credit and will be back as a credible third party by the time of the next election;<br />- As again many have written, these are <a href="http://www.johnredwoodsdiary.com/2010/08/12/the-cuts/">not “cuts”, </a>they are reductions in the growth of spending. Cuts would have been desirable had the economy been in a better state. Because confidence is poor the reductions are probably as much as is possible.<br />- It would have been easy – as Labour did a couple of times – to reduce capital spending keeping running costs unchanged. But the review has kept a number of <a href="http://www.architectsjournal.co.uk/news/daily-news/spending-review-2-billion-capital-boost-saves-flagship-projects/8607176.article">infrastructure projects</a> in place, as well as investment in longer term intellectual capital. This reinforces the coalition’s desire to support <a href="http://www.hm-treasury.gov.uk/spend_sr2010_growth.htm">private sector growth</a>.<br />- The long term success of this Government will be driven by its ability to reform the welfare system by simplifying it and creating an incentive to work. The CSR provided some <a href="http://www.guardian.co.uk/commentisfree/2010/oct/24/chris-grayling-welfare-reform">first steps </a>in this direction – a sign of intent – but much remains to be done.<br />- There is a debate about whether the "cuts" are fair. <a href="http://iaindale.blogspot.com/2010/10/draconian-housing-benefit-cuts-do-us.html">“Fair”</a> can mean many things. It’s as <a href="http://www.sabian.org/Alice/lgchap06.htm">Lewis Carroll</a> said. The coalition will hope that most voters share their meaning of the word: <a href="http://conservativehome.blogs.com/thetorydiary/2010/10/first-post-spending-review-poll-finds-growing-support-for-cuts-in-principle-and-divided-blame-for-ye.html">early indications</a> are that they do, but it's subject to <a href="http://www.guardian.co.uk/politics/2010/oct/25/guardian-icm-poll-tories-ahead">change</a>. In the end this will depend on the performance of the economy.<br /><br />Overall a pretty good start.John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com2tag:blogger.com,1999:blog-8995697694540328378.post-37259565772804836612010-09-30T19:16:00.002+01:002010-10-01T10:39:37.316+01:00CircumspiceThere seems to be a strong consensus that the economic problems are due to bankers. A recent <a href="http://www.opinion.co.uk/Newsroom_details.aspx?NewsId=170">poll</a> showed this, Vince Cable showed his economic competence by conflating bankers spivs and gamblers crippling the British economy, Finance Ministers across the world are trying to restrict bonuses to financiers (actually, apart from in the UK they aren’t, but they are talking about it).<br />This worries me; not because the bankers will be upset – they will cope particularly as they will continue to earn lots of money, but because misunderstanding the cause of the problems makes it more likely we will do the wrong things to so solve them.<br /><br />The real problem was that we all borrowed too much – individuals, banks and especially governments. We spent money we didn’t have causing house prices in particular – but all assets as well – to artificially rise. This was enabled because governments encouraged banks to gear up, to lend more, to need less capital to support their business. Governments did this because the resulting short term boom made them look good. I say Governments: not all did this; many Asian ones didn’t, not all Europeans did. Iceland was the poster boy for carelessness, but the US, the UK and Eire were not far behind.<br /><br />I know the banks did some very stupid things – not all of them; for example JP Morgan and HSBC had a “good crisis”- but many lent foolishly, created products their managers didn’t understand and effectively went bankrupt; their shareholders have generally suffered as a result. But the rest of us did stupid things as well, and so did our Governments who not only encouraged the excess but also increased their own borrowings. They also did not get a decent reward for the guarantees they provided the banking system. And who voted for those Governments? Supported their public spending? We did.<br /><br />If we want to know the cause of the problem: look around.<br /><br /><br /> The UK's public sector deficit is because public spending got out of control. The banks were bailed out but mostly by guarantees which have lapsed; some taxpayer money was invested directly, but a small amount compared with the deficit and it is likley to be recovered at a profit. The bankers therefore played a small part in the problem and in fact there are three ways the banks and bankers are helping us get out of our economic problems:<br />- As they become profitable, the money we put into them becomes worth more. The state will profit from their investment;<br />- Banks employ a lot of people and finance and associated services remain one of our few world leading businesses which generate a lot of earnings from overseas;<br />- Banks and bankers pay a lot of tax.<br />We would miss them if they went. It’s easy to say we wouldn’t: but who would then pay the bills?<br /><br />The problem we have to solve is one of excessive consumption – by ourselves but mainly by our Government. That is the problem that needs fixing. Punishing bankers for our mistakes may make us feel better but will stop them from supporting the economy.John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-7773853422451939282010-09-29T16:39:00.004+01:002010-09-30T18:12:17.265+01:00Ed or Dead?It's too soon to say whether Ed Miliband's election as Labour leader is good for Labour or not.<br /><br />In the short term it is good for the Tories because Labour have elected someone who was the second choice of most MPs and activists and someone who is clearly in the pockets of the trade unions. He is also inexperienced and lacks charisma. And lastly, he gives the impression of not liking people like me - middle class, slightly successful, workers (I'm not a swing voter but many people like me are). As a member of the establishment intelligensia he looks down on us: we are only fit for whatever cash he can extract from us. I talked about him with a Labour supporting friend, who thought he was sincere: but was that because she agreed with what he was saying? He strikes me as deeply insincere.<br /><br />BUT... deeply insincere is another way of saying ruthless. He is clearly ruthless. And that ruthlessness may cause him to dump the unions, he may learn to look as though he likes me (and people like me), he will get experience and he may absorb character. And therefore become a successful leader. His brother has done him a big favour by moving to the back benches - it is possible he could become a really useful informal <a href="http://en.wikipedia.org/wiki/Consigliere">consigliere</a> unless there is now a major family rift. So<br /><br />The key to his success, however, has nothing to do with him: it is whether the economy recovers during 2013 and 2014. If it does, then the coalition will get a lot of credit and Labour's opposition to getting public finances under control will be seen as silly. If it doesn't, then Labour will have a chance to rebound by saying that the coalition damaged the recovery by cutting public expenditure growth too strongly before the private sector had started to recover.<br /><br />But at least his appointment will give the coalition some breathing space as things get difficult.John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0tag:blogger.com,1999:blog-8995697694540328378.post-65669686763234545692010-08-18T22:49:00.005+01:002010-08-19T12:14:45.157+01:00100 DaysWhat is the significance of 100 days? It is 2,400 hours. Or 3 months and 8 days. It's a meaningless period of time which has yet become, <a href="http://en.wikipedia.org/wiki/Hundred_Days_(disambiguation)">through history</a>, a period to judge a new situation.<br /><br /><br />JFK said in his <a href="http://www.life.com/image/50478239/in-gallery/25841/jfk-the-first-100-days">inauguration</a> speech: "All this will not be finished in the first 100 days. Nor will it be finished in the first 1,000 days; nor in the life of this administration. Nor even perhaps in our lifetime on this planet. But let us begin.” Perhaps the most sensible thing he ever said; policies - especially changes in policies - take much longer to implement than they do to describe.<br /><br />So how has the Government done in its first 100 days? Pretty well, I think.<br /><br />- the coalition has worked so far, proving doubters like myself wrong. I'm sure this is part personal chemistry and part developing firm "rules of engagement" between the parties right at the start. Both parties benefit from being in Government; the Tories benefit in two additional ways: they can be harsher with the budget than if they were on their own because they have cover from the LibDems, and their lunatic fringe cannot hold them to ransom as easily. The LibDems are suffering in the polls at the moment but I suspect they will benefit later as the economy improves.<br /><br />- they have started to get to grip with the budget deficit. Amidst a lot of noise about "cuts" a limited number of commentators (<a href="http://www.johnredwoodsdiary.com/?p=6798">John Redwood </a>most concisely) have noted that Governmengt spending is not being cut at all, rather the rate of growth is being slowed a bit. But what they are doing is better than nothing, and better than the alternative, and as I noted in my previous post the country is benefitting from lower interest rates and from being given the time to manage things ourselves. Even if there is a double dip recession (not very likely), it's unlikely that reducing the scale of Government expenditure in the UK will be a major cause.<br /><br />- they have started to get a grip on the absurdities of the last few years of Labour - dumping inefficient school funding programme, getting rid of public bodies paying external people to lobby other public bodies and so on. Everyone has a view on what the Big Society means: to me it means removing the attitude of public sector management that they have an entitlement to direct the public, rather than a duty to serve them. This is a massive cultural change and it wuill take time to implement. But you can sense the tide is about to turn.<br /><br />- they made a great move in putting Ian Duncan Smith in charge of <a href="http://www.centreforsocialjustice.org.uk/default.asp">welfare reform</a>, and (for reasons of getting support in implementation) complementing this with various <a href="http://www.frankfield.co.uk/blog/">Labour advisers</a>. But this is one area where the jury is out: it is critical to take a long term view of welfare reform if the cycle of dependency in many parts of Britain is to be reversed. Improving education will not be enough. But welfare reform will costs money, which is why the issue has been blocked for many years. Cameron must ensure IDS can take a long term view.<br /><br />- the approach to international affairs seems suitably pragmatic for a medium sized power: we should not expect or demand too much, but our history and culture - and armed forces - mean we have a lot to offer if we have the confidence to do so. They have so far not been waylaid by silly Euro-sceptic issues - the LibDems probably help here.<br /><br />- I do worry about the NHS reforms that have been announced. I am sure the principle - of localisation and removing the Primary Care trusts - is very sensible, but surely the last thing the NHS needs is a lot of expensive further reform. This smacks of a bored minister looking to make a name for himself.<br /><br />- given that the Government has started to do a lot, it is very refreshing that it is also fairly quiet. We do not have daily headlines about how wonderful they are. To me, that smacks of quiet competence, a focus on delivery not presentation and on letting people get on with their lives. Perhaps that is naively optimistic, but it is a good change.<br /><br />The best thing for me, though, is to read the daily whinges of the quangocracy - people like the <a href="http://www.acpo.police.uk/pressrelease.asp?PR_GUID={CD321C44-FE8D-4B3E-A263-8F888C6FD54E}">association of chief police officers</a>, the <a href="http://order-order.com/2010/08/18/uk-film-council-caught-red-handed-lobbying-against-government/">UK Film Council</a> and so on -who have drained so much energy and money from the country. They are suddenly realising they have to justify what they do. And most of the can't. These daily headlines are a joy to read.<br /><br />So overall - a good start.<br /><br />But to channel JFK: 100 days isn't very long. There's a long way to go.John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com1tag:blogger.com,1999:blog-8995697694540328378.post-5413711088905432762010-06-23T22:13:00.003+01:002010-06-23T22:17:09.311+01:00The first coalition budgetIn the bad old days of Brown’s budgets, and to a lesser extent Darling’s, it was a mistake to comment too soon because the problems were always hidden in the small print released afterwards. George Osborne has admirably been straight with his presentation so it is easy to see the impact quickly.<br /><div><br />The headline comments have been about the increase in VAT to 20%; the headline criticisms that this and the cutbacks will damage the economic recovery and impact poorer people more.</div><br /><div><br />I think there are more points of underlying importance than this:<br />- The budget has started to get to grips with our budget deficit. As I said earlier, it is so big that interest costs are a major outflow from the economy – and a growing part of the deficit. Early action matters, and the quick next day assessment of the budget by the gilt market was good; the UK’s funding costs have reduced slightly. </div><img id="BLOGGER_PHOTO_ID_5486080842902699570" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 355px; CURSOR: hand; HEIGHT: 204px; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLHHxh3SPSTP3mMBI_KwFQHbbP7uPRRgGVQFNqtk61QFA_RXAgE-lRgWfMMWFlQo8O3eSGzJ5xbMjOLy_CNdVnTDrVbbrPja0TQb8ad1AxjNMqhX2IwOYGoliu0jIJddTf4RuXyBrDt14/s400/Uk-10-year-gilt-June-23-2010%5B1%5D.jpg" border="0" /><br />- Some of the apparently softer cuts will have a big impact on the deficit: a two year restriction on public sector pay increases –with none for employees earning over £21,000 – and increasing benefits by the <a href="http://news.bbc.co.uk/1/hi/business/6266733.stm">CPI rather than RPI</a> will save a lot of money quickly.<br /><br />- The budget sets a positive direction for businesses in terms of tax reduction and simplification. The most important way we will get out of the current mess is for the private sector to grow. Lower and simpler taxes help confidence. This is the first budget for years to have an approach of freeing the private sector rather than tinkering with it.<br /><div><br />I think the criticisms are overstated. The VAT rate will not increase until January 2011, which gives time for the confidence boosting measures to work; it is also likely to bring forward spending to benefit the economy in 2010. Less wealthy people tend to spend a greater proportion of their income on non-vatable goods, and so it is less regressive than you might think. In addition, there are specific measures (tax thresholds; housing benefits) targeted at the poor. </div><div><br />I think the main criticism is that the details of the tax cuts are still to come, in the Autumn expenditure review. This delay is inevitable but still permits uncertainty till then.</div><div><br />Overall, it is refreshing to have a budget that is transparent, focused on sorting out the problems and giving an optimistic direction for private sector growth.</div>John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com1tag:blogger.com,1999:blog-8995697694540328378.post-68091696077205857492010-06-01T21:21:00.003+01:002010-06-01T21:58:17.697+01:00Capital: A Tax on GainsI don't understand the fuss being made about an increase in capital gains tax - or rather I do, I piut it down to mischevious Tories trying to spoil the coalition. I would exempt people like John Redwood making <a href="http://www.johnredwoodsdiary.com/?p=6322">constructive comments</a> about to improve the situation.<br /><br />The fact that capital gains are taxed at a very different rate from income is very new - it was brought in in 2008, mainly to help some of Gordon Brown's main funders. Nigel Lawson, as part of his tax simplification process, had equalised the rates. This remained the case for over 20 years. There were allowances for the time the asset was held, and some exemptions for entrepreneurial assets.<br /><br />Those protesting against the increase mainly focus on two issues:<br />Some r<a href="http://adamsmith.org/files/capital-gains-tax.pdf">esearch</a> suggests that lower rates bring in more money. However, this is not conclusive as small changes probably don't effect behaviour and wider economic trends have at least as much impact.<br /><br />The special pleading about middle class second home owners and shareholders is too self serving. Firstly, more tax on gains on such assets is no hardship. Second, if they were bought pre-2008 they were bought under a regime where income and capital tax rates were the same. So the proposed change is no change. If they were bought after 2008 then (in most cases) there will have been minimal gains if not losses so people can readjust their savings now without any serious penalty.<br /><br />The different rates have caused a big tax avoidance industry to try to turn income into capital. This is both unfair and unproductive. We should want the tax system to be simpler, and harmonising rates is the way to go. I do think it is fair to differentiate some business assets and to encourage saving by having reliefs according to how long assets are held. But these are the points that Tories should focus on (as Redwood has), and we should be grateful the Lib Dems have suggested rate harmonisation. This fits our principles.<br /><br />Again, I see this as jealous Tories stirring for the sake of it.John Woodmanhttp://www.blogger.com/profile/16679169985121897581noreply@blogger.com0