Friday, December 18, 2009

Playing games with language

In the days where I was reluctantly forced into interminable business meetings, myself and some co-conspirators would try to reduce the tedium by playing little games. One such game was called "bullsh*t bingo". We would compile a list of meaningless business phrases and tick them off as they came up. "no brainer", "low-hanging fruit", "proactive", "treeing"- all would find their place in our little game.

Recently, however, I notice the spread of drivel a long way from the narrow world of business. It is not just the Dragon's Den TV show that has popularised corporate dull-speak, but across television a whole new language seems to be emerging which has very little to do with the way that people actually speak- or even think. For some reason, shampoo seems to be responsible for particularly banal phrases: "radiant shine", "dazzling" and- a particular bug-bear of mine- "fragrance".

Newspapers too- especially the tabloids- seem to have their own language too: "romp" is always a winner, along with "charms", and "manhood"- all strictly physical assets.

Now I find myself in front of the television playing the odd round of "bullsh*t bingo"- and strangely, it seems to be becoming easier and easier.

Tuesday, December 15, 2009

The calm before the fall

There have always been two schools of thought about the track of this particular crisis in the British economy. Firstly that the dramatic contraction in spending power would lead to price deflation- that the reduction in spending power would lead to a nominal fall in prices. The second was that the crisis would make money worth much less: that inflation would take a hold. Of the two, the policy makers fear deflation much more, because it is much harder to combat once it takes a hold- as the state of health of the Japanese economy has shown. Furthermore, inflation gradually reduces debt burdens, instead of increasing them- and the government has taken on a gigantic level of debt.

From the point of view of the consumer, though, inflation is quite bad news- essentially it reduces the value of holding money. This is why the inflation bears have become very strong gold-bugs, since gold typically holds its value when fiat money is being debased by inflation.

After the shocking absence of measures, in the PBR last week, to tackle the huge government deficit, perhaps we should not be surprised to see that inflation has indeed tracked up to 1.9%. The result may, however, be somewhat paradoxical and the root lies in the UK housing market. The fall in interest rates to historic lows has enabled some consumers to de-leverage, i.e. to pay back, their personal debts, but by contrast the mortgage debt market has actually recovered rapidly. We have seen increases in house prices, despite the generally poor economic outlook. To a degree, this was rational, since with the fear of deflation being so strong, it seemed that low interest rates would persist for some years. Yet it fails to take account of what is happening in the rest of the credit market.

The commercial property market in the UK is in a deep crisis: over 85% of loans granted over the past five years are in technical default. This could be simply that the value of a property has fallen below the stipulated loan to value ratio, but it clearly also includes large numbers of loans that are actually insolvent. We don't know how big a number these insolvencies may be, because the banks have taken steps - by stand-still agreements and so on- to ensure that there is not a flood of panic sellers which could undermine the whole market. We do know, however, that it was the commercial property book that destroyed HBOS. The numbers involved are therefore in the hundreds of billions of Pounds.

In the meantime, banks have been happy to lend to residential property, since they know that borrowers are highly motivated to keep paying- otherwise they lose their houses. With interest rates low, it seemed safe to maintain the stretched leverage ratios: lending five times a couple's joint earnings, for example.

However, if inflation is going to track up, interest rates will have to rise. Certainly the spike in Sterling this morning shows that the market is thinking about the prospect of higher interest rates in the UK.

Consumers in the UK have been pretty insulated from the global crisis- as long as you were in employment, low interest rates were actually making you better off. Now, it is clear that the crisis is set to move into a new phase which will substantially impact on British living standards. We already know that public sector employment is going to fall in line with some aggressive government spending cuts. Unemployment is set to rise sharply partly as a result. We already know that taxes in the UK will have to rise sharply. We already know that large numbers of high-earning foreigners are set to relocate from London in response to taxation and regulatory pressures. Now it seems that we will see a rising interest rate environment.

All of this is exceptionally negative for UK property prices. As it stands, UK property market is the most expensive market in Europe. In terms of price per square metre, London prime residential is nearly twice the comparable level for Paris and three times the level of Berlin. Yet the British economy remains in recession, while the Eurozone economies are generally recovering. This premium remains, despite the fall in the value of Sterling. Yet the supports for house prices are rotting: higher interest rates, higher unemployment, dramatic government cuts that -at best-will most likely keep the UK in a lower growth path; all seem set to create problems in the residential sector and underline the problems of the Banking sector as it still struggles to deal with the drastic weakness of the commercial property market.

The fact is that all of these policies: tax raises, expenditure cuts, and higher interest rates are necessary policy responses- but their combined impact could still be highly deflationary- at least for property prices. The distortion of the British economy by the overheated property market has been a long term problem. Now the situation is beginning to deteriorate- and that really will hurt the pockets of every property owner in the country.

The government may be trying to replay the 1970s, when high inflation reduced debt levels and made people feel richer as their houses went from being worth a few thousand Pounds to tens of thousands of Pounds- even if, in real terms, they rose much more slowly if at all. It may get 1990s Japan, when nominal prices fell.

In any event, either the price of Sterling or the price of property is going to fall dramatically. For which ever government emerges in 2010, it is political poison either way.

Saturday, December 12, 2009

Vitali Vitaliev: Life as a Literary Device

Sometimes a book comes along that defies categories and recently Vitali Vitaliev has written a truly enthralling, unique book. (Full disclosure: Vitali is an old friend of mine). I have even- for the first time- reviewed the book for Amazon.com.

Here is what I thought about the book:

"Vitali Vitaliev is used to journeys, and in this book he takes us as a companion on a journey of time and space- dozens of countries over two decades- and a journey of the mind. He is a great companion. By turns wry, tragic and laugh-out-loud funny, in the end he delivers a tour-de-force of warmth and humanity. The stream of consciousness structure creates links between places and people- Tasmania and Clive James, London and Peter Ustinov- that scintillate with wit and wisdom. he meets his triumphs and disasters and eventually treats those two impostors just the same.

Moving in a zig-zag across the globe from his native city of Kharkiv in Ukraine to Folkestone, Melbourne, the Falkland Islands, the fall of the twin towers on New York, Mount Athos, Edinburgh, Siberia, a luxury round-the-world trip, Tasmania and on to the eccentric Letchworth Garden City where he now lives, he always returns to his beloved London. The contrast of Ely Place- physically London but for a long time legally Cambridgeshire- is where he espies his own identity: a Russian from the Ukraine, of Jewish heritage with an Australian and now a British Passport.

All the time he links the experiences he gains with the books that continue to inspire him. In the end the book and life itself overlap or blur. The cornucopia of literary riches include reflections on Valentin Kataev, whose "Mauvist" ideas blurring literature and life inspired the very structure of this book; on Simon Grey's "The Smoking Diaries"; on Chekhov and his clothes, on arranging to meet Joseph Heller- author of Catch 22- the day he died; his visit to the House of Aleksander Solzhenitsyn- all these amuse-bouches are little jewels offered by a true literary connoisseur.

From Huge wealth and fame, he slowly loses everything- marriage, job, health and even his beloved children- ending in a squalid corner of Folkestone. Yet this is not the end: he emerges reborn from an operation to fix his serious heart condition reflecting that he is indeed "a very lucky boy". He determines to share his fortune with us in a series of survival tips- the survival tips of a writer facing the challenges of life and overcoming them. This is the best book that Vitali has written so far, and is a rich an warm expression of his carefully gathered literary maturity. It may have claim to be one of the most important books of the decade- it is certainly one of the most charming."

I think the reason why I think this book is important is that the structure reflects so much of what else is going on in our culture and society. The structure of Norman Davies History of Europe- small vignettes amid the text- or even the endless branching links of the Internet reflect the growing knowledge we have of how the brain stores ideas and relates them to each other. In the same way that Virginia Woolf scatters extraordinary detail in her text, with different scents being followed by the hounds of the mind, so does Vitali's book. It is an exploration of literature and life for the quantum age. Yet all the while, it holds our attention: it interests us and amuses us along the extraordinary arc of its journey.

You can see for yourself by ordering it at Amazon here.

Friday, December 11, 2009

The UK: paying the price for failure

The last week has seen a whole slew of economic figures, but much of this was drowned out by the failure of the pre-budget report to address the growing fiscal crisis in the UK. However this crisis is just one of the problems that now beset the British economy.

We have seen an increase in the gap between the value of what Britain exports and what it imports. This reflects the fact that import costs have increased as a result of weaker Sterling. Meanwhile there was the announcement that British industrial production has stagnated. Yet, this stagnation is despite the fall in the value of the Pound that should make our goods much more competitive in the global market place.

The trend is instructive: in 1980, manufacturing represented 26.5% of UK GDP, in 2005, the last year for which we have comparable figures, the figure was 13.6%. It is estimated now that manufacturing represents less than 10% of current British GDP. Whereas the United States can return to being a workshop for the world, the UK has lost the skills required to compete in global industry. The industrial base of Britain is now exceptionally small when compared to its global competitors. The country has put virtually all its eggs into the financial basket- and now the whole basis of that sector is being undermined.

The response to these numbers is usually that manufacturing- being polluting and dirty- is far better off being relocated to China or India, while the high value added service of design and the control of intellectual property that this comprises remains in the UK. However, we are now seeing that this rests upon a fundamental fallacy: that the quality of design in the manufacturing sites cannot rise to match that of the West, and from mobile phones to automotive products we are now seeing not just competitive products, but competitive brands emerging from the emerging economies. In the same way that Japanese auto brands, Toyota, Honda, Datsun/Nissan emerged to compete and then destroy the previously dominant brands such as Austin, Riley or Triumph, now we even see Western brands, such as Jaguar, coming under Indian control.

The British have happily auctioned off their core brands, from Rowntree to Marconi. Control of intellectual capital is following industrial production in leaving these shores.

Yet we have been free to fall into every single one of these elephant traps because at every crisis since the Second World War, we have chosen to take the soft option. Instead of challenging the communist cadres who, funded by the Kremlin, were the root of much the British industrial unrest in the 1960s and 1970s, we compromised. Instead of using our capital as an endowment, we chose instead to eat our seed corn. We failed to invest in capital infrastructure and instead chose to generously fund welfare provision: a current expenditure that only had a current benefit. All of this was short term decision making based on the swing of the political pendulum. It was said of the 1930s that they were the years which the locusts did eat up; how much more true was this of the post war world of "Butskillism".

Perhaps the great measure of this industrial failure was in our currency. In the world of fixed currencies, Sterling did not move much for decades. Whether linked through gold or the managed system of Bretton Woods, Sterling kept its value. Yet even during that time Sterling devalued substantially. When my Grandfather was at sea in the 1920s, the Dollar exchange rate was $4.85. In 1940, as part of lend-lease the ratio was pegged at $4.03. In 1947, began the first policy of devaluation, with the Labour government re-pegging the currency at $2.80. In 1967 came a further crisis and a further devaluation, this time to $2.40. After Sterling floated, it began a steady fall to near-parity before settling in a trading range of $1.40-$1.60. Each devaluation could have been a breathing space to allow restructuring to improve the productivity and competitiveness of the British economy. Each time, that breathing space was wasted.

I am often asked how countries can stay members of the Eurozone. Lacking the ability to competitively devalue- people suggest- is a fundamental weakness. However, what a fixed currency forces is the discipline to be flexible in every other sphere. Meanwhile, the ability to devalue allows crucial decisions to be put off- exactly as has been done in the UK. The state of health of the British economy is a classic example of why flexibility without discipline equals failure. At every turn the British have taken the soft option of reducing the value of their currency- and this latest crisis is no exception. From roughly €1.40 to the Pound, we have seen the single European currency rise nearly 30% to around €1.10.

Despite that 30% fall in the value of the UK currency, exports have stagnated and imports have actually risen. Industries have continued to contract, inward investment has continued to fall. Even with a 30% fall in the currency and the concomitant improvement in productivity that should represent, our economy has continued to contract.

On top of the fiscal crisis generated by the rescue of the banks we have an industrial crisis. Despite interest rates practically at an all time low, our economy has continued to contract. Only the public sector has continued to boom- and that is a sure way to perdition.

We have devoted all our energy to the property market- but there is no value added in that sector- it is only a rent seeker. The huge allocation of resources to a property market that has been distorted by centralised planning has massively inflated costs across the whole economy- and is a massive competitive disadvantage.

After a half century the decline of Britain as a significant industrial power is now almost complete. Over 80% of British economic activity is services. I feel a little like we are the inhabitants of the Golgafrincham B Ark - the useless third of the economy that the Golgafrichamites chose to blast into space.

I, for one, would not want a child of mine to have as their highest aspiration the ambition to be...

An Estate Agent.

Thursday, December 10, 2009

PBR?!.... RIP!

The Pre-Budget Review in the UK is a fiasco.

The policy measures announced are either pointless- the change in the Bingo levy, for goodness sakes- or dangerous- the increase in National Insurance. There is much rhetoric about cuts, no actual delivery. Even the "Banker's Bonus Tax" will raise nothing, and, by the way, similar measures were abandoned in both France and Germany (neither exactly "the Bankers Friend"), because they were thought to be unconstitutional. Taxes are supposed to be levied on the general population, if you start levying specific taxes, how long can it be before they become arbitrary, populist attacks on the chosen "people's enemy" of the day. Oh, wait a minute...

The real terror of this PBR, however, is in the detailed numbers on the economy.

When the UK stayed unexpectedly in recession last quarter, we were told that this was probably just "technical", and that the economy would be shown to have actually emerged from recession with later revisions of the numbers. What Mr. Darling's announcements show is that despite all of the huge increases in liquidity, the UK is still in recession- and one that is deeper than we had previously thought. Meanwhile, as my friend Mark Bathgate notes in the Spectator Coffee House blog, the debt numbers that were announced were not the complete picture. Mr. Darling suggested that the ultimate cost of the bank bail-out would be only around £10 billion- which looks like pure wishful thinking in the face of the hundreds of billions that have -so far- been required to prop up the system. The announced debt numbers are therefore based on a pinch of fairy dust rather than any realistic assessment of the crisis.

The determination of the government to hand out a few paltry goodies to their core voters is simply contemptible. The crisis is so severe that Draconian cuts across the board are going to have to be made. Of course that is before we take into account the unfunded public sector pension liabilities that already total 50% of GDP. There is no comfort zone, no safety, anywhere in the UK economy.

Over the past four years, this blog has discussed the approaching economic crisis. Now, I fear that over the course of the next six months, London is set to become ground zero of a fundamental, systemic challenge that will blow away any remaining illusions about the staggering decline of the United Kingdom. From the first and largest economy in the world we may well have fallen to somewhere in the teens before this next decade is out.

The chickens are coming home to roost: taking soft options, imposing little or no financial discipline, turning a blind eye to incompetence, the greed of speculators, poor industrial management, Kremlin funded trade unions, civil servants building empires that would make "Sir Humphrey" blush, all have had their part to play in this sorry tale of decline.

The blame, though, will fall upon those who tempted the Gods by declaring "an end to boom and bust", and who by taxing pension savings ensured that prudence was never their real watch word. As Tony Blair collects some further five figure speaking fee, he may reflect that he sowed the wind, but his country is set to reap the whirlwind.

Wednesday, December 09, 2009

Shock News: Telegraph gets it right!

I don't usually agree with Op-Ed pieces in the Daily Telegraph.

This morning, however, there is a very good piece from Philip Johnston.

He points out that the repeated promises -over decades- from politicians of all stripes to make "efficiency savings" are actually impossible to deliver without a radical reform of the system of public expenditure.

The Civil Service is only interested in controlling the costs of expenditure in the current system. They are not interested in whether the system should be changed or even whether much of what government is prescribing is actually necessary at all.

What today's Pre-Budget report is going to show is that the British cupboard- apart from some mouldy crumbs of envy taxes- is totally empty. Unless we tackle the systemic costs of the public sector we are going to face even more rapid economic decline.

Over the long term, the burden of sustaining an extraordinary wasteful state sector is going to fall on a declining number of increasingly impoverished private pension holders. There is no option: in the 19th century, at the height of the British Empire, the state sector represented 10% of GDP, after the First World War it had grown to 20%. After the Second War, it was close to half. In the past year it has grown by 11% to just a shade under 60%, but that does not include a £500 billion unfunded state pension liability. The size of the British public sector is now quite close to that of a Communist state such as East Germany.

It is not sustainable.

We are reaching the end of the road.

Tuesday, December 08, 2009

Time for some tough talking

I joined the Liberal Party in 1979. I have been a Liberal Democrat since the foundation of the party. I have been a passionate and avowed Liberal Democrat and a liberal of a fairly libertarian stripe all my adult life.

My family have been committed to the party not just in recent wilderness years but all through the real darkness of the 1950s and indeed over four generations back to the beginning of the twentieth century. I have stood for innumerable, unwinable, elections and donated, over the years, many thousands of pounds to a cause that I deeply believe in. I have seen seven leaders come and go, some of them I have known quite well and respected, some perhaps less so.

Such devotion to a political party is not unique to the Liberal Democrats, but being a supporter of our party has not usually been a matter of the calculation of political advantage- it has been a stand of principle and not of patronage. Our party devoted attention to ideas. Our policies on such issues as devolution or the environment have been well crafted and fully thought out- and usually well ahead of the sloppy me too-ism that sometimes strikes either the Conservatives or Labour. It was not an accident that the average level of education of Liberal Democrats was above the other two parties- we had an open policy process where all intelligent contributions have been welcome. I have often been proud of the quality of thinking that I have found in our party.

Now, the Liberal Democrats are inching up in the opinion polls- the idea of a hung Parliament is now being discussed, not as a nebulous threat, but as a very real and positive possibility. There is every chance that the Liberal Democrats will gain a higher vote- possibly significantly higher- than the 22.1% we gained in 2005, or even our post-war high of 25.4% in 1983. We could end up with a slew of gains across the country and in a position to press for the constitutional change and political reform that we believe is now critical for the future of the United Kingdom.

Yet, I am now beginning to feel more than a prickle of unease at the prospect. As Mike Smithson suggested on his politicalbetting.com blog yesterday, a hung Parliament could be a catastrophe for the Liberal Democrats and split the party. As it happens I don't share his view, but I am increasingly concerned with what I see as a gimmicky and vapid approach to politics in some quarters of our party. The obsession with candidates who are "local" is not unique to the Liberal Democrats- even if it does occasionally sound like an episode from the League of Gentlemen- but I expect more intelligence from my party. Too many candidates look at politics "through the wrong end of a municipal drain pipe"- and in the meantime, as I say repeatedly on this blog, our country faces an existential crisis. We need intelligence and vision, not tokenism and quota filling in our selection of general election candidates.

Concerning the thing that once made my proud- our policies- I now too often find myself thinking "yes, but". We are the inheritors of a proud Liberal tradition and yet we seem to be declining into a mushy mess of contradictory, vaguely left wing ideas. As Charlotte Gore wrote on her blog the other day, she simply can not defend mushy, sloppy and incoherent thinking. Neither can I, and neither should our party. The Leadership- as all leaderships do- has retreated into a bunker- and blasts of empty rhetoric based on pseudo-populist, muddled thinking waft across the political ether. It is just not good enough- if our party does not stand up for tough principles based on intelligent thinking, then the future of this country- let alone this party- is pretty bleak.

I don't want political thinking to simply emote - it has to offer rigorous intellectual coherence. If we are going to be in office after the next election we will be crucified unless we are resolutely focused on our key ideas: constitutional reform, environmental protection and individual freedom- including freedom from state interference and control: core Liberal Democrat values.

Some have tried to convince me that the key is that the populist tone that now emerges from Cowley Street is popular. "First" several of my friends argue "we have to win enough power, and without it all the right policies in the world will not really be relevant". Superficially it is a persuasive argument. Yet to my mind the rage we see in the electorate is the result of too many years of half truths and whole lies being told to them by politicians. I believe that a bracing dose of reality is precisely what the electorate is asking for and which they would vote for- if it were on offer. Vince Cable is our most popular politician- and he has been pretty terse in his description of the problems of the economy.

If we do become part of a coalition in June 2010, we must be braced for a hurricane of awful economic news. Britain is on course for the rocks, and some absolutely agonising political choices are going to have to be made by the next Parliament. Cuts that would have been previously unthinkable will have to be made. The impact of these decisions will have a significance that could last for decades- and either lead to our recovery or our ruin. In the meantime, party members are encouraged to twitter- how apt that word seems- about education, health and even some environmental policies that -at best- need substantial work or even a total rethink. Unlike Charlotte, I expect to have to support some policy positions I do not agree with but I do not expect to be asked to leave my critical faculties at home. The Leadership - you might think- would be consulting policy experts, as they may not have time to do after the election, and developing strategies to face the future possibilities. If this is happening, I see no evidence of it. I see the Leader's Office in full campaign mode- without being sure precisely what they are campaigning for.

I am not a "my party: right or wrong" man, no Liberal is. I can not simply watch Liberal principles being drowned in a mire of muddle headed, faintly do-gooding drivel, which apes the sanctimoniousness of the worst of the politically correct brigade. We could have the opportunity of a generation in six months time. We could achieve power and then in a fit of absent minded waffle, we could blow it. All that long march -over decades- to regain a Liberal voice in government, all the effort, all the hope; all of it could be wasted because at the last we chose to act, behave and -worst of all- even think like the other parties. Defeats, we have had plenty of them over the last 80 years, but to squander a victory- that would be an act of blackest betrayal.

Dear Britain,

I have been thinking about us. Things have not been working out for us for a while now. We have been spending more and more time apart. I find I just can't understand you any more.

You seem embarked on a mission of self destruction. In particular I find it extraordinary that you keep flirting with wholly unsuitable men. A few years ago you fell for the public school charms of Tony Blair. "This time" you said "it is different. We can have a caring, Socialist government and still have a good economy". As we now both know, the reality was rather different. With his dubious friends, led by Peter Mandelson, he let you down. Bloodied and crying you now think of him with tearful rage "He's a war criminal!" you cry. "He led me into an illegal war". Meanwhile his hand picked successor is a humourless, vaguely paranoid figure with none of that dangerous, sexy charisma that first attracted you to Tony Blair. I could warn you about David Cameron, yet another public schoolboy with a veneer of glamour- I'll certainly say you've got a "type"- but as surely as day follows night, if you fall for the shallow charms of Mr Cameron you will come back crying- just like last time.

It is not just the company that you keep, Britain, that is cooling what we once had. I don't mean to be tactless about your addictions, but your house price dependency is now almost out of control. Even as the housing markets of the rest of the world have cooled, and in the US practically collapsed, you have continued to make property the centre of your world. I had hoped that the credit crunch would wean you off this poison, but I underestimated the hold that estate agents- your pushers- had over you. Even now, as mortgage offers return to 5x joint earnings, I see you sneaking out to catch a Grand Designs roadshow or an episode of Location, Location, Location- you know the harm it does to your children, but you just can't help yourself. From a Nation of Traders you have become a nation of Estate Agents- adding no value, with an inane vapidness masked by a large measure of bullshit. Worse, you have exported your addiction to other countries. Bulgaria complains that the real estate boom that you engendered has forced her children, either to stay living at home, while some guy from Bracknell buys a tourist house off-plan which, despite his hopes of instant wealth, has still not yet got electricity or water plumbed in, or to leave the country.

Which brings me to another matter of your behaviour. Bringing home the Daily Mail and the Daily Express, with their potty mouths and appalling manners is just not on. The Guardian's learning difficulties are notorious- it is so backward it cannot even spell. As for the other newspapers whose company you keep, from the Sun to the Times- well you know that they come from a broken home. Mr. Murdoch sold his Australian birthright in order to kow-tow to the thugs in China- you do not need to follow his example. You were educated to be fair minded and tolerant, you know that you yourself are responsible for much of the immigration that your "friends" complain about- you despoiled continents and ruled the waves- you cannot pretend that this is something you can just ignore when dealing with other countries or their people who want to visit you.

And yet of course you do pretend this, just as you pretend that actions do not have consequences, that bills do not have to be paid, that everyone should win prizes and eat jelly and ice cream and go to University. You pretend that you can afford to pay people to be unemployed, you pretend that the blizzard of blank cheques that you are writing for pensions and the public sector will never need to be cashed. Yet the Bank manager already has a gleam in his eye- your AAA credit rating will not survive 2010. The price of your politically correct blindness is beyond your means. I can not afford to stay living with you.

So I've been thinking.

I need to spend time apart. I will always love you, but I can not stand by and watch your willful slide into oblivion. You need a dose of tough love and I need to find out who I really am. I will come back for Christmas- for the sake of the kids- but after January I won't be around to watch the beautiful land with its kindly and decent people, fall prey to your addictions to fraudulent politics, poisonous money and disgusting attitudes.

I'm sorry, but unless you start to help yourself, I can not do it for you.

Cicero

Monday, December 07, 2009

Where does Britain go from here?

Britain invented industry and the modern capitalist economy. Our inventions include: smelting iron with coke, the metal lathe, steel, steam power, the railways, modern textile production, bicycles, television, telephone, the jet engine, the submarine, the hovercraft, toilet paper, the world wide web and even this list barely scratches the surface.

In "soft power", our philosophers include John Locke, the apostle of Liberalism, John Stuart Mill, Sir Karl Popper and Sir Isiah Berlin. The cultural impact of our country is extraordinary: our language is universal and most of the last four decades has been dominated by music from the Beatles to Pink Floyd that is British.

Yet Britain now faces an existential crisis. We are told that whereas our economy was the fourth largest in 2005, by 2015- on current trends- it will no longer be in the top ten. Our industrial base has shrunk dramatically. we no longer produce cars or bicycles or pianos or many other things that our country was once famous for. We no longer produce commercial jet airliners without collaboration. We can not produce many products vital for our national defence.

Is Britain doomed to decline?

There are certainly many who think so- and not just the defeatists that seem to populate so much of our commentariat. Many Americans have publicly written off Britain as a credible global partner. They have viewed with dismay our failure to tackle military equipment shortages in Afghanistan. They have viewed with contempt the venal imbroglio of the Parliamentary expenses scandal.

Liberal Democrats believe that there is a clear need for a root and branch constitutional reform of the UK. yet that alone cannot transform our sense of defeat and failure. That is a project that will require the British people to take responsibility into their own hands. The removal of this discredited government is merely the first step towards a policy of national renewal.

That could be a very long journey. However without it, we will continue our blind drift into failure and powerlessness.

Friday, December 04, 2009

A Constitution for Liberty

The British press have been raising the subject of the number of innocent people who have been taking photographs who have been questioned by Police. On the face of it, it is wholly appropriate for the Police to be vigilant against the threat of terrorism, however the framing of the anti-terror legislation has been sloppy and open ended. In fact this is the defining characteristic of Nu Labour legislation across the board. The determination to pass legislation with minimum scrutiny has led to a huge amount of badly drafted bills being signed into law, and has required repeated repair to unworkable or prohibitively expensive measures.

The problem that the British parliament has is that there are few if any guiding principles that can help create consistency of legislation. The result is a large mass of conflicting statutes that create enormous complications. As technology has developed, much in law has failed to match these developments. Whereas privacy was the assumed fundamental position, the ability of the Internet to cross the previous boundaries of privacy is creating a threat that citizens might be maliciously targeted by thieves, blackmailers or the government. The repeated loss of government data does not give confidence that the state respects individual privacy.

The scale of information that is now held by the state is expanding dramatically. Whereas once only speeding cars would have their number plates registered by roadside cameras, the advent of average speed cameras means that every car numberplate is registered- and that data can be held for at least two years. The gigantic level of public surveillance is usually noted as being 14 million CCTV cameras in the UK- but that is a number that is already several years out of date.

The terms of the debate are now very far ranging- and at every stage the government deems yet more information must be given by the individual to the state.

The roots of this problem lies, I believe, in the fact that we do not have an explicit contract between citizen and state, in other words a constitution that sets the limits of state power and control. Many, especially Conservatives argue that a constitution is unnecessary and that the unwritten conventions of the nineteenth century are still adequate for the purpose of twenty-first century administration. Th idea of common sense, they argue, will see us through. The response to that is that so little legislation, from education to health and safety is actually drafted with common sense principles. The urge to meddle, amongst so many politicians, is so strong that legislation now states most of its first principles up front, rather than assuming that constitutional principles are implicit. The result is that many constitutional first principles: such as the Police not being able to question without due suspicions, have been lost.

An explicit, written constitution is now necessary to define the relationships between citizen and government and indeed between the new governments of Wales, Northern Ireland and Scotland and the central government of the United Kingdom.

The key principles behind such a document must be to incorporate the Universal declaration of Human rights. In my view there should also be added an explicit right to privacy, and the handling of government information about the individual should be controlled by legislation that admits this right.

Even David Cameron admits that a new British Bill of Rights should be the subject of debate- primarily in order to repeal the European Human Rights legislation now in force- and Labour, for cynical electoral reasons has introduced the idea of electoral reform so it is clear that across the political spectrum, a debate is already taking place.

This is a constitutional debate that is long overdue. However, it is the Liberal Democrats who can best take this debate to the the people. We, as a party, have made the issue of constitutional reform a major part of our policy platform. Our ideas are rooted in long debate and not short term political advantage. It is time to bring forward one of the central planks of our party platform. As the public views with increasing anger the antics of the political establishment, it is time for us to explain why our ideas can bring the executive to account and give citizens more control.

These are ideas whose time has come. It is time to put forward the Constitution for Liberty.

Wednesday, December 02, 2009

Tea on Today

Perhaps because Central & Eastern Europe is a relatively obscure topic, I often find myself asked to comment on events by different television channels. It is an interesting contrast. For example, Bloomberg television is very high-tech, CNN far less so, while BBC Television is positively spartan, not even having a "green room" where one can wait before being interviewed. Over the past few days the events in Dubai have caused the global markets to examine the finances of Greece and Hungary. As a result I have been called by several media outlets. Yesterday I did the early morning slot for BBC TV news. This morning I was called in to talk to the Today Programme on BBC Radio 4.

"Today" does have a green room, and given that it is radio, one can take notes into the studio- as a couple of fellow guests did. The green room even has breakfast, including yogurt and toast- a distinct improvement on the simple dab of make up powder that television provided yesterday. It was obvious which of the two media has the better budget: clearly radio. More importantly, the response to events from radio was much more immediate: running orders were changing and new guests were being organised even as the programme was on air. The more cumbersome television shows are much slower to respond to events than the immediacy of radio allows.

As I nursed my first cup of tea of the day, I was quizzed by Adam Shaw on the subject of how the crisis in Dubai might pan out for other countries, in particular Greece. The interrogation was sharper than I usually get on television, and one got the impression that the radio programme was more on top of its brief. I am usually discouraged from using business expressions - even simple ones like basis point or yield- with Today, my impression was that such simplification was not part of their brief. It was, frankly, a relief. Although I listen to the programme regularly, going live to the studio one notices much more strongly some verbal ticks in the programme: in particular how the presenters end each segment by thanking the contributor- it is polite, but it is not in accord with the rather abrasive image of the programme. One also noticed the long gaps where each presenter is not contributing: Justin Webb barely spoke while I was in the studio, while Sarah Montague was even able to leave the studio. So, the power of each voice is rationed quite sparingly.

Even still, it is next to impossible to explain complicated issues in less than two minutes. Although Adam Shaw understood that the situation is perhaps more a function of journalistic speculation rather than market fundamentals, the key point was to underline that countries outside the Eurozone- including the United Kingdom- are more exposed to the gyrations of the global markets even than Greece is. So, perhaps the only point that I could make was that if you are not scared about the position of Britain, then you probably do not understand the mathematics of the situation. Perhaps at 6.20 in the morning it was the best that I could manage.

Tuesday, December 01, 2009

Credit Crunch 2.0

Over the course of the third quarter of this year, the impact of the financial tsunami which hit the global economy in 2008 has appeared to stabilise. Banks whose balance sheets have been severely damaged by the crisis have been forcibly merged, restructured or taken into public ownership. The single major player- Lehman- that went under caused so much damage that policy makers have vowed not to repeat that mistake. As banks struggled to retrench without increasing the global problems, the monetary authorities released huge amounts of liquidity. The result has been a rally in asset prices as the availability of credit, while not at the levels of 2007, is at least more predictable.

However, by taking on so much extra debt onto government books, the problem has not been diminished, but only moved around. Whereas the shareholders of banks had been looking at taking the impact of large loan losses, their place has been taken by tax payers. In some cases, this has been a great success: tax payers have even made a profit from the disposal of their interests in such firms as Goldman Sachs, for example. However, there is still a huge amount of work to do before the work-out of the damaged banks can be completed.

Unfortunately, governments are now facing a new pressure: there is a limit to the scale of borrowing that they can undertake before the market will demand a higher price to reflect the increasing risks, or even cease to supply credit to a risk that it considers unacceptable. Historically banking crises do lead to sovereign debt crises and we now appear to be seeing the global credit crisis about to take on a new character. The emergency credit standstill demanded by the state corporations of Dubai does not in itself cover a particularly large amount of money. However, it is a signal that the crisis is now moving into a new phase where government action is coming under considerable scrutiny from the markets.

As I discussed on BBC news this morning, questions are now being asked of countries like Greece which has a stubbornly high government deficit and seems to lack the political will to deal with its problems. That Greece is also exposed to the property markets of Bulgaria, through the lending of its major banks, is simply another point of concern. Greek government debt is high and its deficit is unsustainable in the long term. Nevertheless the country has the breathing space provided by its membership of the Eurozone, which is why the country has not had the same mark down as, for example Hungary, which remains outwith the single currency. However one of the primary moves last week was a significant increase in the risk premium that investors want in order to hold onto Greek government paper. Euro membership can only provide a breathing space, and the newly installed Greek government will not have long to offer a credible programme to bring its finances into line.

However what should appal people in Britain is the inexorable rise in the profile of the problems of the UK. Goldman Sachs continues to publish reassuring research papers on the British economy, but a cynic might ask "cui bono?" given the close relationship between that finance house and the work they are undertaking with the British government. Today's research paper by Morgan Stanley comes as a strong antidote to such reassurance. Indeed it comes as a bucket of cold water in the face to the more rosy scenarios of British recovery.

In short Morgan Stanley suggests that the UK is out of rope in terms of its ability to continue to raise further money in international markets, and the prized AAA credit rating is now at serious risk of downgrade, with the substantial increase in borrowing costs that this would trigger. The near doubling of the national debt over the past 18 months and an unsustainable deficit, which at 14% is 2% higher than Greece, can no longer be regarded as a credible policy mix. The UK is going to have to budget to take a serious hit from write-offs in the banking sector.

2010 is an election year and the fact is increasingly clear that any incoming government is going to have to take emergency action to reduce the government deficit. Not only must tax revenues increase, but government expenditure must be slashed. The choices that will now have to be made are truly agonising.

As the attention of the global markets moves from the failure of banks towards the financial capacity of those that back them, the United Kingdom is coming into the firing line. The next six months could be very uncomfortable indeed.

Monday, November 30, 2009

I fear the Greeks...

As the markets scratch their heads about the impact of the suspension of debt payments by Dubai, several other markets are coming into question.

One of these is Greece.

The fact that the Greeks are members of the Eurozone has certainly provided protection in the eyes of global investors. Other markets, such as the Baltic states of Estonia, Latvia and Lithuania were said to be more vulnerable, yet now that Latvia has been refinanced by a syndicate including the ECB, IMF and several other states, led by Sweden, attention is turning to other countries. Whereas Hungary and Poland have devalued, Greece has not been able to, and now questions are being asked about the national debt capacity of the country.

The problem is now not just the perennial political instability of the country and how that has led to a failure to tackle the structural deficit, but also the exposure of the domestic banking market to the problems of the country's northern neighbours. The puncturing of the Bulgarian property bubble has been particularly painful to banks like NBG that had invested substantially in the Balkan markets.

More problems may be in sight.

I will be discussing this on the BBC early morning business news tomorrow.

Monday, November 23, 2009

Getting Real about Climate Change

In 2001 the English version of The Skeptical Environmentalist by the Danish statistician, Bjorn Lomborg, was published. It marked the beginning of an increasingly vehement debate about the impact of Human activity upon the levels of Carbon Dioxide in the atmosphere and the potential that this has for changing the climate of the Planet. Lomborg himself was skeptical about some of the findings of others, and he was able to highlight some weaknesses in some of the work that had been conducted up until then. In turn, however, the response to The Skeptical Environmentalist, was extremely hostile. Lomborg's scientific skills, indeed his very integrity were bitterly attacked. Yet, in fact much of Lomborg's work underlined the very high likelihood that CO2 emissions were the result of the activity of man, and that they could in turn lead to significant alterations in climate.

The scientific work in studying the climate contains some of the most difficult mathematical questions that humans have faced. The extraordinary complexity of the planetary climate requires huge computing power even to approximately model it- and the most sophisticated climate modelling programs can outstrip even economic modelling in their detail and complexity. It is- in short- a very serious business.

Furthermore, the fundamental question is not whether or not human activity alters the climate- the evidence is utterly overwhelming that it does. The question is how much human activity is changing the incredibly complicated and interlinked systems that allow life to flourish on Earth as- so far as we can tell- no where else. As one of the Apollo Astronauts said "we are living in the Garden of Eden- and we don't take very good care of it".

Scientists owe some of their understanding of the atmospheric greenhouse effect by the pure research done on the atmosphere of Venus. The consequences of a runaway greenhouse effect have been to bake Venus at extraordinary high temperatures and render Earth's near twin uninhabitable to any life form that we can recognise. We do not know what the impact of large scale release of CO2 by mankind is, but we have seen on Venus that the consequences could include impairing or even ending the capacity of the Planet to support mankind, even if the risks of this may be quite small, the fact is that we are playing a game a game of Russian roulette and we do not understand how many bullets are in the chamber nor how many chambers there actually are.

In that sense the large number of "climate change deniers" are kind of missing the point. They may dispute the meaning of data, they may imply that a few scientists have done poor work and that they manipulate results that are biased against the "climate change denier" lobby. However there is no scientific doubt whatsoever that human activity has changed and is changing the climate. They may dispute how much it matters, but they cannot- indeed do not- dispute that it happens. The problem is that if it does matter, it matters a lot. We are injecting great instability into a fiercely complicated system, that we still do not fully understand. It is a matter of simple prudence that we should try to moderate human impact on the atmosphere.

Then there is a second, allied, aspect to the debate about climate change: it is the issue of sustainability. We have created a society that is not just profligate in energy use, but in many other resources. We do not know how much oil and gas or coal exists in the Earth's crust, but we do know that it is finite. We do not know how many metals, from Iron to Platinum to Uranium exist, but we know that these are finite too.

Humans are a very young species- perhaps not older than 100,000 years in our modern form. civilisation, including agriculture is far younger than that: less than 10,000 years. Compared to the roughly 4.5 billion years of the existence of the solar system, and our planet amongst it, or the roughly 500 million years since the explosion of life in the Cambrian era, we are mere mayflies. As a matter of common sense we should be reusing the resources that we have and conducting our economic business in a way that allows us to continue to benefit from the bounty that the earth provides us with. That means using constantly renewed sources of energy, such as solar, and it also means using more living things to serve our purposes. For example, bacteria or plants that can breakdown waste products so that they are no longer toxic, perhaps even breaking down CO2 itself. We do not have to reject technology in order to create sustainable ways of doing things, although in some ways we simply need to relearn old technologies: the creation of modern maritime wind power could reduce the third of CO2 emissions that come from shipping for example.

As we await the deliberations of the Copenhagen summit, we already know what we have to do, we just have to make the decisions to do it. If we do things now, the costs and consequences are likely to be dramatically lower than if we wait. It is time to be quite clear: even if the total risks arising from the dramatic elevation in CO2 may be small (which is debatable), some of the potential consequences are so severe as to be unacceptable. As for sustainability: it is already a certainty that we are using up finite resources. It is only a matter of time before we will be forced to take action- now might be a good time to act while we still have some cushions and margins for error.

We need to get into better habits and avoid the kind of waste that our rather short-sighted, disposable culture is embedding in our social values. This is a process of reform that could take a while. Human beings may take time to see that their short term wishes may not be in the interests of their long term survival.

Friday, November 20, 2009

When it comes to supervising the Police, many heads are better than one

Sir Hugh Orde, the chairman of the Association of Chief Police Officers (ACPO), has had a pretty successful career in the Police, handling difficult jobs like the inquiry into the the circumstances of the murder of Stephen Lawrence and ultimately becoming second head of the Police Service of Northern Ireland. He is not a man with a political axe to grind.

Therefore, his forceful criticism of Conservative proposals to place local Police forces under the control of new directly elected commissioners should be taken seriously. In recent years, there has been much discussion of the problems of modern policing. The challenges of international terrorism, drug trafficking and organised crime are said to require a wholesale reform to the smaller county-based forces that are the backbone of British crime fighting. Leaving aside the fact that the largest crime investigation of recent years- the search for the Lockerbie bombers- was led by the smallest force, that of Dumfries and Galloway, there clearly are questions about how the pooling of expensive resources such as forensics can be done in the most effective way.

Despite this emerging debate around policing, public accountability is not the major problem. Police Forces are already supervised by local Police Authorities which are made up of elected local councillors and independent members who are appointed through public advertisements and at least one of which should be a Magistrate. The role of these Independent Police Authorities is to set the policies and the budget for local forces and ensure that it is followed. The Authority already has the power to hire and fire chief constables.

On the face of it, the Conservative proposal to replace this committee system with directly elected commissioners looks like gimmickry in its purest form. Sir Hugh Orde is right to point out that this commissioner would be a political figure that would not supervise but essentially command the force- and this breaks a fundamental principle that underlies the non-political operations of Policing in the UK.

The Tories say they would "consult" on this proposal, but the fact that they say that they "remain committed" to Commissioners suggests that this will be a pretty one-sided exercise. A real consultation would focus on issues of resources rather than on issues of public accountability. When senior professional Police officers say that they would rather resign rather than operate under a system of commissioners, it is not just minor adjustments to the idea that are needed- it should be sent straight back to the drawing board.

Policing is too important to be subjected to the half thought out and unworkable gimmickry dreamed up by the adolescent back rooms of Conservative think tanks.

Wednesday, November 18, 2009

But we really mean it...

The Queens speech is set to be one that Her Majesty will have to read through clenched teeth. Leaving aside the fact that there are only seventy days left in the Parliamentary session before it is prorogued, the fact is that the "gracious speech" is set to contain yet more evidence of the moral and intellectual bankruptcy of New Labour.

We are told that the government will introduce legislation to guarantee the right to a good education and to guarantee- with legal force behind it- that the deficit will be reduced.

Could it be that ,like some kind of wavering alcoholic, the government doubts its own commitment to existing policies? In any event how can any government leaving binding commitments to its successors? The Parliament is sovereign and may change laws at any time as it sees fit.

The fact is that the government knows that the public no longer- if it ever did- believes that it can fulfil its promises, and by trying to back its promises with the force of law it rather gives the game away, for it shows that the government itself recognises this.

It is, however, a travesty that the government resorts to force of legal decree when it knows that the issues are not simply a matter of black and white. Imposing new legislation will, at best, distort the policies they are trying to get through. It is simply trying to railroad things that should always be a matter of common commitment and ultimately of general consensus. Using the legal process where it is not need causes more harm than good.

These are also the actions of a bully that resorts to force when it fails to persuade.

More and more I think that there should be a wholesale review of legislation at the earliest opportunity with a view to the abolition of the obsolete, intrusive, and badly thought out legislation that has been put onto the statute book without even a proper vote in Parliament.

The government currently controls parliament- it is time that it was the other way around.

Tuesday, November 17, 2009

Low Expectations

The latest poll apparently show that voters believe that David Cameron is thought to be a better leader than Gordon Brown, and much is being made of the idea that Mr. Cameron has "sealed the deal" with the British people.

The reality is of course rather different. As someone said to me the other day: "If Cameron or Brown are the answer, then Goodness knows what the question was!". The fact is that the voters have not forgotten the chaotic and sleazy end to the last Conservative administration, and the fact that Labour has got itself into something like the same kind of trouble is creating a certain resigned despair amongst the electorate.

The failure of the constitution and the creation of an isolated political class is leading to exceptionally low expectations of our political leaders, and even these vanishingly small hopes are usually crushed.

As Nick Clegg noted the other day, the state of our Constitution amounts to an emergency, and yet the cosy cabal of LabCon will not reform a system that gives them- and them alone- all the power and privileges of government, even when they themselves know that they do not have the competence to rule.

As the long and grinding election campaign gets under way, only the Liberal Democrats are prepared to offer genuine reform- and that is a message of hope that might yet confound the low expectations of the voters.

Monday, November 16, 2009

"Because the stakes are so low.."

Although the attribution is contested, the aphorism "Academic politics is the most bitter and vicious form of politics, because the stakes are so low" is nowadays usually credited to Wallace Sayre, a political scientist at Columbia in the mid sixties.

British politics is increasingly shrill, and as we enter the long run into the general election in 2010, it is already clear that we can expect the battle between Mr. Brown and Mr. Cameron to be one of the dirtiest campaigns on record. Yet in fact, although the struggle may be noisy, in the end it may ultimately change very little. The problem is now not so much the party of government, but the system of government that offers up such limited political choices. The current government has governed by ignoring the will of Parliament and the Conservatives, with their cosmetic commitment to local devolution will inflict further damage on Parliamentary authority. Of course, many will say that the expenses scandal means that Parliament has brought this upon itself.

Yet the fact is that we face a crisis of the constitution. The fundamental basis of our democracy is under attack. The increasing lack of accountability of government to anyone except itself is creating unresponsive and occasionally despotic decision making. The lack of privacy of citizens in the face of state snooping is already undermining the fundamental ideas of our constitution. Our intrusive libel system is undermining the right to free speech. The public sector expenses dwarf those of Parliament, and they remain unchallenged.

The immediate response to the expenses scandal has been to ask MPs to wear a hair shirt, and for a while this is certainly appropriate. However the fact is it is absurd to pay MPs less than an executive at a medium sized council. With many people at the state owned broadcaster, the BBC, being paid more than the Prime Minister, we are at least entitled to question whether these priorities are morally right, never mind whether they are a good use of taxpayers and license payers money. The loose expenses regime was an attempt to compensate MPs when it proved politically inconvenient to pay them the salaries of comparable civil servants. Yet the Office expenses, as opposed to the living expenses, while they may seem lavish in monetary terms are barely enough to deal employ enough staff to run a constituency office on top of a secretary at Westminster. A few intern style researchers is hardly lavish when compared to the resources available to most other democratic Parliamentarians. Of course this suits the government of the day very well, because greater resources available to MPs would allow them to impose greater oversight over the administration.

And that is what is needed. The Labour government has rammed through expensive and ill thought out legislation at a truly hectic rate- guillotining and curtailing discussion as it thought fit. The government has passed more criminal justice legislation in twelve years than was thought necessary throughout the twentieth century- and much of this legislation requires repeated amendment to get it to work. Parliamentarians- under resourced and whipped in by the parties- have an ever decreasing input into the legislation that under our constitution they are supposed to author and to scrutinise.

The evidence is growing that Mr. Cameron's instincts are to be equally contemptuous of the House of Commons- to the great detriment of our democracy. Changing the party of government will not restore the democratic power of the legislature, but increase the unelected patronage of Quangos and lobbyists- of which of course Mr. Cameron was once one himself.

The election will be shrill, but unless the power of the House of Commons can be restored, it will indeed be a battle of low stakes, for membership of Parliament will continue to be a matter of opprobrium, while it ill only be being a member of the government that will be a matter of power- and as Peter Mandelson repeatedly proves, you don't have to be elected to have that.

Wednesday, November 11, 2009

Rights and Freedoms

The continued determination of the British state to hold on to the DNA of innocent people in the face of huge opposition reflects the tenacity of a certain mindset. This same mindset insists that the intrusive and expensive positive vetting of anyone who comes into the slightest contact with children is the only way to protect kids from potential abusers. The fact that it patently does no such thing and effectively brands everyone as a criminal unless they can prove they are not, thus breaking the fundamental rule of justice: innocent until proven guilty, is answered with a shrug. Even so fundamental a rule should surely be ignored because "the kids" must be protected at all costs.

This is the way to total subservience to the state. Instead of society being based on a fundamental contract amongst free citizens, there are now large new areas of law which demand complete obedience. Whether the insulting anti-paedophile laws or the draconian anti terrorism laws, the last few years have seen a huge extension of state power. This power has not only come at the expense of the rights of individuals, but also at a huge financial cost too. The costs of administering the mechanisms of legal intrusion and economic dependency have turned Britain from one of the cheapest countries to administer into one of the most expensive- and this fiscal drag is undermining our economic competitiveness dramatically.

It is not just a matter of the moral benefits of freedom, the costs of the creation of the suspicious, and snooping society so beloved of Labour apparatchiks are well beyond our financial capacities too.

Thursday, November 05, 2009

Castrating Parliament

In the 19th century MPs were not paid at all, but Parliament was at the centre of national life.

Over time as the Parliament of landowners and lawyers also began to include simple employees, a small stipend was granted- and it remained small. Even now, back bench MPs only earn £64,766 a year. Meanwhile, even with allowances, they usually have to fund two places to live and two offices- in London and in their constituencies. They have to employ staff in both places too. By contrast all of the senior civil service grades earn a lot more than this, and of course do not have to fund their own office costs.

As the journalists of the Daily Telegraph relish the power that their scoop on MPs expenses has brought them they should reflect that most of them too are better paid than MPs are. Now the Kelly report proposes to cut back MPs compensation still further. For example, it is suggested that Parliament will only pay for a rented one bedroom flat in London. This, together with the ban on employing spouses, will severely damage the family life of MPs. Personally I think that the price of being an MP- in terms of the isolation that living away from ones family- creates enough problems as it is: marriage break downs and alcoholism are just two of the known consequences of such isolation. As MPs return to their single flats after the House rises at 10 PM, it would be hard for them to consider that they were being treated in any way except shabbily.

In my view by trampling on the prestige of Parliament and treating MPs in this way, we are in grave danger of getting at best a distorted representative body, at worst one that is positively dysfunctional. MPs should be paid properly- well above the civil servants (after all even a GP can be earning more than twice what an MP does)- and they should not be expected to destroy their families to serve their constituencies.

It is healthy to be sceptical about or political leaders, it is extremely dangerous to treat them with such contempt- and very hypocritical of the journalists who are doing the kicking to avoid mentioning the absurd compensation packages that media personalities in their own world can command.

Tuesday, November 03, 2009

The Treaty of Lisbon ratified

"Gentlemen, you are trying to negotiate something you will never be able to negotiate. If negotiated, it will not be ratified. and if ratified, it will not work"

Thus spoke the British civil servant, Russell Bretherton, who had been sent to represent Britain at the Messina conference in 1955. The other six countries represented at that conference: Belgium, France, (West) Germany, Italy, Luxembourg and the Netherlands had sent their foreign ministers. The UK sent this relatively minor civil servant who essentially boycotted the discussions. It was the beginning of a continuously fraught relationship between Britain and the rest of the European Union.

In the same way that the UK tried to ignore the reality of the early moves for European co-operation, so it has tried to ignore the reality of the treaty of Lisbon. At the signing ceremony, 26 European leaders celebrated with a formal signing ceremony followed by a formal dinner. One- Gordon Brown- arrived deliberately late and did not want to be photographed with the other leaders. In the face of the substantial reorganisation of the European Union that the treaty will now require neither Labour, nor -especially- the Conservatives have had the slightest positive thing to say. Indeed the majority of Conservatives profoundly oppose the very basis of the treaty. David Cameron demanded a referendum and publicly urged President Vaclav Klaus of the Czech Republic to veto the treaty, irrespective of the Czech constitution, which was frankly outrageous.

Now the treaty has come into force and the -pretty unedifying- jockeying for position in the new set up will begin. Nevertheless, the time has come for the United Kingdom to grow up about our relations with the rest of the EU. This organisation, for all its faults, is being developed to allow the relatively smaller states of Europe to work together to avoid being pressured by the larger global states such as China, India, the United States, Russia, and increasingly even Brazil. It makes sense strategically and economically for relatively small powers- of which the UK is clearly one- to work closely with our neighbours and major economic partners to promote our common interests. Of course the great diversity of European societies especially with so many languages, ensures that there is a clear limit to the level of integration that can be achieved.

Nevertheless the benefits have been palpable and significant.

All of the European Union members have recognised that membership of the organisation has benefited their own national interests significantly. Britain, pretty much alone, continues to regard membership as a challenge to its national interest and even a threat to its identity. We lost an Empire and then found that the denominations of our money- L.s.d- our measurements system- Imperial and even the idea of the Pound Sterling itself, were hindrances to our economy. We have still not yet found a role and have become passive in the face of own decline.

Yet there is a role waiting for our country. It was after all Winston Churchill himself who first mooted the idea of a United States of Europe. Britain has been in the forefront of a far more fundamental integration: the integration of European defence forces both within and beyond NATO- and is recognised as a leader in this sphere because of this. By failing to lead Europe in other fields and be clinging to an increasingly one sided unilateral alliance with the United States, our country has forfited the respect of our allies, even including the US.

Lisbon, with all its faults, is ratified. This should not be seen as a threat to the United Kingdom, but now an opportunity. In the same way that British leadership, in the shape of the Cockfield plan, created the single market, so we should now take the opportunity to shape the European Union in a way that emphasises the value of free and open markets- including the financial markets.

The history of the British relationship with the EU is a litany of misunderstanding and failures by the British to recognise the values but also the agenda of our fellow members. The time has come for the British to reappraise their whole relationship with the EU: and to "reset" it as the current jargon has it.

If that requires a referendum to confirm our membership, then so be it. I am confident that people like Dan Hannan, whose world view so resembles that of Russell Bretherton, can be taken on and defeated.

Sunday, November 01, 2009

David Cameron faces a challenge

Oh dear! the deselection of Liz Truss by Norfolk Conservatives is something of a challenge for the so-called modernisers around David Cameron. To most people these days, the deselection of someone because they had an extra-marital affair several years ago looks pretty absurd. These days the majority of the population are understanding about the pressures that can cause marriages to fail, and know that the idea of blaming someone is often wide of the mark.

Nevertheless it is only to be expected that Conservatives would be more concerned about the issue of marriage and morality. Social Conservatives pay a great deal of attention to institutions, and are naturally conservative about maintaining them. There is indeed a real cost to society from the failure of such institutions, but while Conservatives try to defend the institutions themselves, a Liberal will focus of the role of individual rights and responsibilities, rather than an imposed sense of -often hypocritical- social morality.

Given that Ms. Truss's affair was extremely public, and details could be found in a single google search, one can only assume that there may be another agenda amongst the local Conservatives. Mr. Cameron, by forcing candidates on local parties is breaking an old tradition amongst both Conservatives and Liberal Democrats- the local party is the final arbiter in the selection of a candidate. Personally I think that David Cameron, by forcing all women short lists on an unwilling party, is sending a message that a candidate's gender is more important that their character- which is why the Liberal Democrats don't make their candidate selections based on gender preference, but gender balance in the selection process. In any event, in virtually any other job, an employer that expresses such a gender preference, irrespective of merit, is breaking the law.

It seems to me that the deselection of Ms. Truss underlines the huge gap that has opened up between the "Notting Hill Set" and the rest of the Conservative Party. The leadership is already making the bedrock of the Conservatives nervous with his talk of social liberalism: the majority of the Conservative Party remains socially, well, conservative. Frankly Cameron's views on imposing all women short lists, apart from being a challenge to the independence of local parties, also puts him well to the left, not only his own party, but a significant swathe of Liberal Democrats and even some Socialists.

With growing suspicions about his views on the EU, Mr. Cameron may face a series of rebellions from his local parties. Given the scale of the job that is need for the Conservatives to get a working majority, there is real danger that such rebellions could undermine party unity and leave the Tories short of their majority.

David Cameron will only have himself to blame his he continues to tread on the toes of his own party. Liz Truss may be simply the first casualty of the growing discontent at the Conservtative grass roots against the self-styled "heir to Blair".

Wednesday, October 28, 2009

Tony Blair: a warning for Europe

In the just over two years since Tony Blair stepped down from the office of British Prime Minister, the state of his reputation in the country has not improved. Reviled in office as the man who committed the UK to a war that was not endorsed by the United Nations, his activities since strike the majority in our country as little better than sordid money grubbing.

As Prime Minister, Tony Blair had an unerring sense for the political, that is to say how things appeared rather than how they actually were. The obsession with appearances created a dangerous disconnect between what his government said and what it actually did. In the end the whole theatre of "spin" and presentation made the British people jaded and increasingly cynical about politics. In short "spin" became, in the eyes of the electorate, just another word for lie.

Although Mr. Blair now speaks a great deal about his religious faith, in office he did nothing to alter the constitutional bans that still officially exist against Roman Catholics. Indeed, it seems quite clear that Tony Blair broke these constitutional bans himself by occasionally taking Catholic communion. It may seem perhaps a small point, but it shows a man unwilling to make moral choices and content to break or bend rules when the moral choice would have been to change those rules. Given the importance that Roman Catholics place on Communion it is hard to forgive a man who built his government on lies and who now preaches loudly about faith.

The pernicious impact of Blairism on British politics can be seen in the way that David Milliband was being talked up as potential first holder of the office of President of the European Council- a transparent attempt by Gordon Brown to get a rival out of the way.

Now, we are told, it is Tony Blair who wishes to reenter the world of high level politics by becoming the first so-called "President of Europe". The ironic thing is that other EU countries think that by offering Mr. Blair the job, they are paying some kind of respect to the United Kingdom. In fact Mr. Blair remains deeply unpopular in Britain- and even after the two disastrous years of Gordon Brown, the British have still not forgiven a man rightly regarded as one of the most unscrupulous, false and damaging Prime Ministers in British history. In fact, the appointment of Mr. Blair to the office of President would be extremely damaging to the standing of the European Union in Britain - a standing which is hardly very high as it is.

There are plenty of people who think that, far from rewarding this man with the bevy of sinecures that he has managed to procure on the back of having been Prime Minister, the international community should instead charge Tony Blair as a criminal. Choosing Tony Blair as EU President would certainly infuriate most people in the UK and severely damage the relationship of the country with the EU. It would be a dangerously wrong decision.

Meanwhile the British government has now announced that it has pledged to support Mr. Blair's bid for office. Given Gordon Brown's unerring nose for failure, I think we can assume that the chances of Tony Blair actually getting the job are now pretty damaged- as they should be.

Monday, October 26, 2009

Bank Bonuses: Why Osborne makes it worse

Even though the latest bank bonus payments have been greeted with predictable outrage in the usual quarters, in this case the "usual suspects" have a point. The concern about the financial industry for some time has been that the owners of bank capital have had their returns hijacked by bank staff. Certainly even before the crisis, the return on capital of banks over the past decade- mostly in single figures after bonuses- looked pretty anaemic. By contrast the payments to staff at banks have been substantially higher than investor returns. In the end, as we now know, the return on capital over the past two years has been so negative as to wipe out the balance sheets of several financial institutions. This has required the injection of billions from the taxpayers of the United States, United Kingdom and several other countries.

Several banks are now either owned by the state or rely on the state for their survival through a variety of measures- including the extremely expensive rescue of AIG. This, however, has not stopped the payment of this injected capital still going to staff rather than to rebuild bank balance sheets. When the bonus pool is larger than the value of state support, as it is in several instances, then effectively the shareholders -i.e. the state- are being robbed by the management and staff that they employ.

Neither, by the way, is the delayed payment of bonuses in shares a solution- it simply takes away a cash cost and replaces it with a dilution of the share capital- and the effect on shareholders can often be worse than if they paid out in cash. Thus George Osborne's demand that bonuses above £2000 should be paid in shares is not much of a solution.

By paying out bonuses on such a scale to employees who are only able to do business because of government capital, the management of these banks are flying in the face of the very capitalism that they purport to defend. If they choose to make such payouts as a private company, that is a matter for the shareholders- who are obviously happy to be ripped off. As the trustees of the state, it is extraordinary that government representatives did not reject the idea that the bonus pools should not be funded from profit, but from capital. It is creating the ultimate moral hazard in the financial system.

That is a significant cause of the original crisis: and has fed irresponsibility across the board. Osborne- as is becoming usual with his policy pronouncements- is taking aim at the wrong target. Instead of demanding that the total bonus pool be paid out of a fixed percentage of profits made, he has accepted that it should be paid out of capital- albeit in shares rather than cash. By setting the individual limit at £2000, he is only allowing the lowest clerks to get cash, but in any event it is more expensive to administer share payments rather than cash payments. Osborne's idea does nothing to address the fundamental problem that staff are generally being favoured at the expense of shareholders. Indeed by increasing costs and not reducing the overall pool to reflect profits, he ensures that the taxpayer gets an even worse deal.

As Mr. Osborne makes a speech in the City this morning, he may reflect that he is not particularly respected amongst the financial community. He is likely to continue to fail to assert his authority with this further badly thought out and even counter productive initiative.

Friday, October 23, 2009

Jan Moir: Strange, Lonely and troubling

The news of Jan Moir's profound homophobia was deeply unshocking. It was not just that another young star has been pilloried by bigots.
Through the recent travails and sad ends of the careers of assorted hacks, fans know to expect the usual drivel dipped in poison - particularly if those journalists live a life that is shadowed by dark appetites or fractured by private vice.
There are dozens of journalists out there with secret and not-so-secret troubles, or damaging habits both past and present ; we all know who they are. And we are not being ghoulish to anticipate, or to be mentally braced for, their bad end: a long night, a mysterious stranger in the Groucho club, an odd set of circumstances that herald a sudden end to a once glittering career.
In the morning, the page has already been turned over before anyone reads the lofty concerns of a self appointed hypocrite. It is not exactly a new storyline, is it?
In fact, it is rather depressingly familiar, and somehow we completely expected it of her. Always her. But then I'm definitely not thinking what she's thinking.
In the nastiness around the Daily Mail, Moir was always bitchy, stupid and vile.
A founder member of Britain's Glenda Slagg tribute band, she was the group's self appointed queen bitch, even though her intelligence was too small to fit inside a Louis Vuitton credit card holder.
She was the excrement of the Daily Mail, an unpopular and illiterate additional after thought.
Moir came out as a bigot in 2009 after discovering that someone was planning to pay her lots of money to write in a newspaper.
Although she was had little intelligent and nothing nice to say, she became the meddlesome self publicist of sleazy journalism, albeit a deeply unreluctant one.
At the time, Moir worried that the revelations might end her ultra-right wing career as a put-down merchant, but she received an overwhelmingly positive response from the BNP. In fact, it only made them love her more.
All the official reports point to a natural death, with no suspicious circumstances, but that doesn't stop Moir - perhaps unforgivably - from stirring the grief of the family before Stephen Gately is even buried by trying to pin their boy's demise on the national consciousness as just punishment for gays and not a tragic accident.
Even before the post-mortem and toxicology reports were released by the Spanish authorities, she launched into rant mode.
But, hang on a minute. Something was terribly wrong with the way this incident could not be milked to make more money for Jan Moir, so she shaped and spun it into much more than a broken teacup in the rented cottage of journalistic standards.
Consider the way it has been largely reported, as if a menopausal hot flush in the grounds of the Bide-a-Wee rest home while hoeing the sweet pea patch could be taken as serious commentary.
The bile on this hypocrisy is so crusty-thick that it fails to obscure the bitter truth that lies beneath.
Daily Mail journalists don't give a toss about the truth but invent lies to fit their nasty, blinkered right wing bigotries. It is a shame that healthy and fit 33-year-old men who have just died can get no respect from the rancid nastiness that is routine in female journalists of a certain age.

Moir's family have always maintained that drink was not involved in the death wish of her career, but it has just been revealed that she had at least three gins on the night she wrote.
Another real sadness about Moir's career near-death is that it strikes another blow to the "we are not bigots" myth of the Daily Mail.
Gay activists are always calling for tolerance and understanding about right wing journalists, arguing that they are just the same as normal people. Not everyone, they say, is like Richard Littlejohn.
Of course, in many cases this may be true. Yet the recent career near-death of Chris Moyles, and now the dubious events of Moirs's last column raise troubling questions about what is happening.
It is important that the truth comes out about the exact circumstances of her acquiring this strange and lonely world view.
As a human being, I am sure she would want to set an example to any impressionable young journalist who may want to emulate what they might see as her glamorous byline.
For once again, under the carapace of glittering hedonistic pseudo celebrity, the ooze of a very different and more dangerous journalism has seeped out for all to see.

Sunday, October 18, 2009

So what if we get a hung Parliament in 2010?

The conference season has come and gone with very little real impact on the overall state of play in the run of opinion polls. Even this relatively small fall in its support would see the Labour Party lose the election. However that is not the same thing as saying the Conservatives will win it. The distortions of our electoral system mean that in order to gain a majority of 2, the Conservatives need a swing of nearly seven percent- the second highest swing in recent electoral history. Yet the polls, while charting a solid lead for the Tories in the popular vote, are far less certain about whether their lead in votes can be converted into a working majority of seats. Neither do the polls show great enthusiasm for the prospect of a Conservative government and much may happen between now and Thursday June 3rd 2010 which is the last date by which the election must be held.

What happens if Labour do indeed lose but the Conservatives can not gain a majority?

For the Liberal Democrats such a scenario could have many opportunities, but would also be fraught with peril. If the party has been resilient in holding its seats and the Parliament is evenly balanced, then Nick Clegg could have a certain freedom of movement. If, however, the Lib Dems have lost a large number of seats and the party can give neither side a mandate by themselves, then the Liberal Democrats face something close to a nightmare scenario: they become the victims of a hung parliament and not its arbitrators

Meanwhile, an inconclusive election would create political uncertainty at just the point when the economic crisis will have entered a new stage, with unemployment rising and government expenditure being forced up to match it. The negotiations for a new government may be taking place in an atmosphere close to crisis: Sterling would come under pressure and the markets would react poorly. If David Cameron was the leader of the largest party, the Queen is obliged to call him first to form an administration unless its is quite clear that he could not or would not take the mandate. The Conservatives could be in a position to form a minority government.

The problem for the Conservatives would be that they would probably not be able to get measures such as significant expenditure cuts through Parliament without the support of other parties. Cameron might defy Parliament and dare it to bring down his newly minted government in the hope that a second election could give him a majority. To my mind, this is the most likely scenario. It also demonstrates just how narrow the window of opportunity for the Liberal Democrats actually is- unless the second election returns a further inconclusive result.

In the end the Lib Dems want constitutional reform, and in particular the single transferable vote in General Elections. In my view, the public are more ready to accept that the constitutional system needs changing than they have ever been: it therefore makes sense to place these constitutional ideas at the forefront of the Liberal Democrat campaign. It gives the voters clarity about the key priorities for the party - and this also gives political legitimacy to demands for such changes in any possible coalition negotiations.

The way in which any inconclusive election result works out is critically dependent on small details that are essentially impossible to forecast: regional swing, value of incumbency, the relative strength of support of the third party and so on. However the Liberal Democrats are not doing themselves any favours by putting constitutional reform at the back of their list of priorities when for good reasons of political tactics as well as of political principle they should be at the front.

One hung Parliament might not be enough to gain the traction that the party needs to get the changes we think are necessary for our country. Two hung Parliaments would be an unarguable choice by the electorate in favour of political change. It is a moot point as to which way the voters will jump in 2010 and afterwards.

Wednesday, October 14, 2009

A New House of Commons

There has been a certain glee in the air about the return of the British parliamentary expenses scandal back on to the political agenda. Journalists, whose own misdemeanours in this field are proverbial, have delighted in the humiliations that have beset the political class.

The reaction from the voters has been, to coin a phrase, "they're all in it together". Rarely have politicians been held in lower public esteem. The general conventional wisdom is that an MP is probably a greedy rogue who seeks to put their own interest first and country second, if at all. The time has come- seems to be the conventional wisdom- for a new broom to clean out the political class bag and baggage.

Many commentators like Rachel Sylvester believe that politics is set to be transformed by an influx of political virgins into the House of Commons, that indeed the next election will transform the conduct of British politics.

I wish I could share this view.

As Steve Richards points out in the Independent, the selection of candidates by parties has created a cadre of mediocre place holders- and with the exception of a few rather gimmicky open primaries, it will be those selected by a small number of party stalwarts that will form the bulk of the new intake.

Here, of course, is the the rub: it is not the electorate that chooses most of the MPs, it is the small number of party members in each constituency, and as the membership of every party falls, the number of appropriate candidates falls too- and the selectors come from an ever narrower background. The stranglehold of the two and a half party system is reducing the quality of the House of Commons to that of a sixth form debating society. The qualities that make a successful politician: party loyalty, and an avoidance of controversy are not the qualities that make for outstanding or inspirational leadership. Churchill, who famously "ratted and then re-ratted" would not even make the short list of most party selection committees.

The professionalisation of politics has created an insipid and ignorant political class, and really what can one really know about politics, if all you know is politics. Outside experience in the new House of Commons will be even rarer than it is at present. Unless the new intake are prepared to rebel against the straight jacket of the party whip a lot more often, and their electorate are prepared to support them, the British Parliament will be ever more irrelevant and powerless.

The treatment that the Sir Thomas Legg has meted out to MPs may satisfy some inchoate sense of vengeance, but it is patently unfair to arbitrarily apply retrospective rules. The inquiry was supposed to single out the most egregious wrong doers and punish them. In fact it has been a full frontal assault on all MPs, regardless of their wrong doings.

Doubtless there will be a big influx of new MPs at the next election as a result, but the authority of Parliament has been undermined by the misjudgements of an elderly civil servant and the foolish Prime Minister who gave him an unclear mandate. As we contemplate a Parliament of political virgins, it seems pretty unlikely that they will be wise, and almost certain that they will be foolish.

I almost feel that the United Kingdom is taking on the character of the drunk and lecherous uncle at a wedding. Wrapped up in a sense of victimhood and self righteousness, we no longer accept responsibility for our own actions.

On Saturday the usual bunch of British stags were drinking in the old town of Tallinn. The Stag himself was wearing a Borat style man-kini- as close to naked as seemed to make no difference (it was 8 degrees). His middle aged and flabby body (I assume a second marriage) was a pretty revolting sight. The Brits were too drunk to even to notice the Bosnian football fans at the very next bar, it was after all already 11.00 in the morning. They did not notice that the rest of the square was looking at them with mild disgust and a certain pity.

It seemed a metaphor for the whole condition of Britain. Our MPS represent US. If we will neither punish nor reward the individual MPs, but continue to vote for a given party regardless, then we deserve nothing more than the government and the opposition that we have. The political sphere will shrink further, the country will continue its decline unchecked.

We will have only ourselves to blame.