Tuesday, 31 July 2012

Our immigration 'crackdown': absurd effects

It might have escaped your notice, but the present government is committed to reduce the numbers migrating to the UK from the hundreds of thousands 'to the tens of thousands' by the end of this Parliament. This was in the Conservative Manifesto, of course, and on the face of it they're just going about the humdrum business of implementing their programme - as they are across most of government.

But the unintended consequences of such rash pledges become ever clearer. Leave aside the fact that it's probably impossible to get down to this figure anyway - a fact that (once again) is helping to bring the very making of public policy into disrepute.

Let's narrow in a bit to look at some of the implications.

One of the main deleterious effects of this promise will be to hurt Britain's universities - which are of course one of its top ten foreign earners or exporters, and contribute many billions of pounds to the economy every year.

Because the only way that these numbers can come down is if the Government cracks down on visas for students. Not at those 'dodgy' colleges that Ministers make so much noise about - while legitimately using the police to shut them down. No, it'll be top universities, completely legitimate institutions that have been taking on foreign students by the tens of thousands because governments have told them to. It's them that'll get hurt.

Net immigration stood at 250,000 in 2010-11. So Ministers need to take 151,000 incomers out of those figures - or persuade more people to leave, a goal their economic policies may achieve if we're not careful. But leave that for another day. There are about 250,000 students coming into the country annually - the largest single group of incomers by far (and about 40 per cent of the total).

So where's the soft target - the easy win? You got it. Students. New rules limit how long they can stay, and how much paid work they can do while they're here - while choking off the numbers overall as well. Want a recent PhD or MSc from outside the EU to research for you, teach for you, work in your company? You can forget it. Great.

Students. I ask you. It's ridiculous. Students who usually don't stay anyway (only fifteen per cent of them do - so about 37,000). Students who pay for the privilege of coming here - subsidising home students. Students who've now seen a 62% fall in the number of study visas issued in the first quarter of this year alone, and a concomittant 40% fall in non-EU applications

I'll tell you what - why not just count the estimate of students who stay permanently in the figures? That would get Ministers to their total right away, and avoid the harm being done to Britain's high-end economy. The House of Lords has said so. The Business Secretary thinks it's a good idea. Sir James Dyson has spoken up for the idea. Universities UK wants this to happen.

Will it? Probably not, no. But immigration is such a hot-button issue with voters that politicians are just afraid of them. That is the bottom line. Cutting your nose off to spite your face? Certainly. Craven? Definitely. Depressing? Definitively.

Monday, 30 July 2012

Is there such a thing as the 'quality of life'?

News that the Government's new Index of Well-Being reveals a people fairly happy with their lot, but more optimistic and happier in some places than others, does not come as a vast shock to anyone who's been following these things for more than a nano-second.

Are we really a nation in retreat? Or a 'broken society'? Er, no. Three-quarters of people report that they feel, well, okay most of the time, thank you very much, and by the way, would you like a nice cup of tea?

Orkney, Shetland, the Western Isles and Aberdeenshire are the happiest placse to live - counter-intuitive results for quite dark (and not particularly wealthy) parts of the UK that wouldn't rate very highly on most southerners' lists of desirable places to live compared to - say - Marbella. But remember: these people feel like places where community still matters. Rampant inequality is alien to them - unlike, for instance, most of London and the South East. The great outdoors is on their doorstep. People have a sense of space, as well as a sense of place. Romantic nonsense? Well, the stats say no - people there really do have a more acute sense of well-being than elsewhere in the UK. And lots of studies say the same thing. Sunshine? Wealth? Bright lights and the big city? Well, this emergent social science says: you can keep them.

There are, of course, objectors to this sort of thing. One type of glumster basically says: 'leave us alone. This type of thing assumes that happiness equals the public good. Why can't we be glum? Why does the state have any right to inquire about this in any case? We should be free to be gloomy'.

Another grounds for carping is the Daily Mail's usual why-oh-why-oh-why barrage of stereotypes: 'this will encourage politicians to think they can do something about this. Better to leave all this unmeasured, than to open the door to Whitehall and Westminster interference in our inner lives'.

But you should ignore the doubters. Knowing more - understanding the emerging science (or pseudo-science, or anti-science) of happiness has to be a good thing. You can have a closer look at the academic basis for all this here, on the Office for National Statistics website, if you'd like. Some people don't want you inquiring into new ideas about well-being versus income, inequality, growth and employment. They want you to remain in the dark. Don't let them stop you - or the ONS - investigating. 

Citizens, voters and experts are talking more and more about the quality of life: about the right to die when it is felt that your loved ones' lives fall below an acceptable standard, for instance. About the link between happiness and years spent in formal education systems that are supposed to unleash your personality and talent, but can feel constricting and instrumental (er, there's no link at all, as it happens). Political scientists have show recently that 'irrational' and unrelated events (for instance sporting success) can affect poll ratings. Labour certainly thought that England's ejection from the 1970 World Cup harmed their chances in the General Election held just a few days later. Academic debate has raged for decades about the so-called 'Easterlin paradox' - that above a certain level, countries getting richer do not get happier. Now you can see that playing out, here and now. Now that's being given life, and it's taking on flesh. That might be why the doomsters don't like it.

So the answer to the question, 'is there such a thing as the "quality of life"?' is: yes there is.

But its mechanisms? How it works? Well, we're only just starting to unravel those, but we're getting somewhere, and these numbers will help.

Thursday, 26 July 2012

Mr Osborne: doing almost anything would be better than nothing

 Oh dear. Britain's economy is stuck, and the wheels (political as well as economic) are spinning in the ditch. Gunning the engine and talking about 'growth' and 'the march of the makers' seems only to dig us deeper into the quicksands.

The news that Britain's recession is deepening is the most depressing public policy detail of recent years. It's an appalling situation. There's been no growth at all - overall - since early 2010. We're still not as wealthy, as a people, as we were in 2007-2008. It's the longest recession in our history. It just makes anyone who actually has an economics training want to run out, grab people by the lapels (especially Ministers) and shout: 'we told you so! We told you so! We told you so!' and so on. And on. Honestly. The urge to run outside and shake one's fists at the sky is almost irresistible.

But that won't help. It'll make me feel a bit better, no doubt. But ranting isn't everything. I suppose.

To be honest, we're now desperate. Recover will take hold eventually. It always does. We were all in despair in 1932-33, 1973-74, 1981-82 and 1992-93. But each time human ingenuity and human creativity pulled us out. As it might again, as Britain's economy is fundamentally quite strong. Ignore all those Ministers going round with long faces saying: 'ah, well it's all deep-seated, you see... productivity... banking unwind... blah blah blah'. The truth is that Britain grew strongly for nearly a decade and a half because her industrial and service record got better, and stayed better. And those fundamentals have not gone away.

This rapid cuts strategy was never going to work, leaving us further and further from our deficit reduction targets, the Chancellor discredited, and the Prime Minister talking about further cuts all the way through to 2020. That won't wash any more.

We're close to the time when doing almost anything that will stimulate activity and confidence would be good - no matter what. The reader will know that this column takes a spend-spend-spend Keynesian approach, focusing on infrastructure and more borrowing. But that needn't be the only way that this works. We could go down a right-wing or a neo-liberal route if you really want. Sweep away more of the restrictions on housebuilding, the low levels of which are a national scandal. Cut taxes. Abolish National Insurance for firms taking on young people from work schemes. Lower interest rates to 0.25 per cent - or even to zero. But for the love of God, stop digging us into this mess any further.

Meanwhile, it's real people - and real businesses - who suffer. All that pain, all those sleepless nights worrying, all that getting on bikes and looking for jobs. What a shame. What a tragedy.

Monday, 23 July 2012

The UK economy: get ready for more action

I don't know if you missed this amidst all the sport (bravo, Bradley Wiggins), but even the International Monetary Fund is becoming increasingly sceptical about the UK's economic policies.Their report last week made absolutely clear that, should there be any more deterioration in the situation, budgetary loosening (i.e. slower cuts) should be implemented.

This does not, by means, add up to a complete vindication of the Labour Party's constant opposition to these budget cuts - for as the IMF notes, if the UK economy is actually beginning to recover (albeit slowly), then there's less need for fiscal action. Some of the unemployment numbers recently might suggest that something is happening out there, though on the other hand this recession has been less awful on this front than previou downturns from the start.

Part of this is all politics, of course. Christine Lagarde (above), the IMF's head, is a centre-right politician in rather more Gaullist mode than her British neo-liberal counterparts. She's praised them in the past, giving them the soundbite they wanted about the need for 'fiscal discipline' back in May. Now she damns them with faint praise - and picks some of the Conservatives' own favoured instruments (quantitative easing - basically printing money - and tax cuts) to get us out of this mess. Along with yet another interest rate cut - what Keynes would have called 'pushing on a string'.

Some of this might actually be helpful to the Chancellor in the end - because it gives him yet more ammunition to cover his retreat, should he want to institute a 'Plan B'.

Meanwhile, the Chancellor is now looking fairly unlikely to hit his target of the national debt falling by 2015/16: something that tells this correspodent, at least, that most of this effort wasn't worth it in the first place. As the IMF report makes clear, 2.5 per cent of GDP has been wiped out by the Government's cuts so far - with more to come. You know what? That makes most of them useless in cutting the key debt-to-GDP ratio, since GDP is smaller than it would otherwise have been.

Remember: we told you here first.

Friday, 20 July 2012

Is Obama's newfound aggression a good idea?

 So the latest news in the American Presidential election campaign is that the Obama machine are firing volley after volley at Mitt Romney's personal financial situation. Release your tax returns, they say; come clean about when you worked at your private equity firm; tell us where all your money comes from (and goes to); and so on. Self-appointed 'experts' among the commentariat in Washington are shaking their heads about the Romney team. They're all over the place, and day after day their man is taking (to coin a phrase) a terrible beating.

There's a long history to this, of course. I know I always say that, but it's true. Lyndon Johnson obliterated Barry Goldwater's right-wing campaign in the 1964 election via a series of broadasts playing a dread-inducing nuclear countdown over pictures of a little girl with a flower. The message: you can't trust Goldwater. You know he's crazy. Then there was Democrat Michael Dukakis and the prison passes he was in favour of while a Governor - allowing out one inmate who went on to rape and stab a young couple. Bush Senior's campaign made mincemeat of him on that one in 1988. Bush Junior's campaign blunted John Kerry's greatest advantage - the fact he was a bona fide war hero - by 'swiftboating' him in 2004, raising question after question about his 'real' record in Vietnam. Most of this was a load of bogus hooey, but it stuck.

But Obama ran in 2008 as the candidate of 'Hope'. Of changing Washington and its culture. Part of his appeal is that he's reasoned, calm and good in a crisis. And his likeability ratings are almost certainly buoying up his numbers even among voters who don't like his policies. Will slinging mud and pointing the finger at his rich, 'privileged' opponent really help him all that much?

It certainly doesn't seem to have done in the polls, in which the President's numbers have even sagged a little. The Obama team, of course, want to paint their opponent as a rich plutocrat who doesn't care much about the average American - an impression he's given before. But the risk is that they come across as just a bunch of revenge-crazy street-fighters out to prove that they can't be pushed around (unlike Dukakis and Kerry).

I wonder. I just wonder. That's all I'm saying.

Wednesday, 18 July 2012

The final Lib Dem totals... And they're not pretty

 So, as part four in the series on Lib Dem losses under the old Parliamentary boundaries, we come to the East, Midlands and North of England. I'll stop all the detail after this, I promise, and get back to some more history, but why stop when you're on a roll? I also genuinely wanted to get to the end of the process and make a ballpark 'call' of possible Lib Dem numbers in the next House of Commons. Their prospects don't look good, as if you didn't know.

In the East of England, three of the party's four MPs - in Cambridge, Colchester and Norfolk North - look pretty entrenched, but Norwich South is going to be lost back to Labour, from whom it was won in 2010.

It's a more grisly picture in the Midlands. Birmingham Yardley and leafy surburban Solihull will probably go to Labour and the Conservatives respectively, wiping out the party's Parliamentary representation from (literally) Middle England.

In the North of England, Bradford East will be going back to Labour (Nick Clegg - above - is probably safe enough from a strong Conservative or Labour challenge in Sheffield Hallam). So will Burnley, Manchester Withington and Redcar in the North-East (which they lost last time due to the closure of the Corus plant in the town). The Conservatives will pick up Cheadle and Hazel Grove in suburban Manchester.

Okay. So where have we got to? That gives us Lib Dems losses in Eastern, Midland and Northern England amounting to nine seats.

Totting these up with the totals we reached in the last three posts, we get a net total of 35 Lib Dem losses. That would leave the party with 22 seats - down nearly two-thirds on their House of Commons numbers now. Which, incidentally, isn't far from the situation you would project by just using a crude or uniform 'swing'.

And the big winners? Well, if there were no changes from the 2010 balance between Blue and Red teams, that would be the Conservatives, picking up 20 seats from the carcass. Labour would not be far behind on 14, and the SNP would possibly gain another couple of seats.

It would mean a House of Commons made up of 326 Conservatives, faced by 272 Labour MPs, 22 Lib Dems, eight Scottish Nationalists and some others. Meaning an absolute Conservative majority of, er, one. Maybe another coalition, or at least a Confidence and Supply arrangement, in which the Lib Dems agree not to vote down a Conservative Budget. Just about the last thing the Lib Dems themselves would want after such a kicking - one administered in large part for joining up with the Tories in the first place.

It looks pretty grim for them, doesn't it?

Tuesday, 17 July 2012

Lib Dems at Risk, Number Three: London and the South East

So for my third trick, let's look at the Lib Dems' likely losses in London and the South East. Here, they've got some massive majorities - but also some MPs who should be burnishing their CVs and furiously networking, because they're going to need a new job in May 2015 at the latest.

In London, the Lib Dems are probably toast in Kingston and Surbiton, Sutton and Cheam, Carshalton and Wallington - all of which they'll lose to the Conservatives. They'll also certainly lose Brent Central, and probably Hornsey and Wood Green, to Labour. So that's five losses here - three to the Tories, and two to Labour. Only Vince Cable in Twickenham, and Simon Hughes in Bermondsey, will be saved by their personal votes.

In the wider South East region, the Lib Dems have fewer seats to lose, but I fear Chris Huhne may lose his Eastleigh seat, Mike Hancock in Portsmouth South may be kicked out (both MPs have, of course, been afflicted by scandals of different sorts), and their surprising gain of Eastbourne in 2010 will be reversed. All three seats will go to the Conservatives - bringing their likely net gain today to six, and Labour's to two.

Overall, that gives us Lib Dem losses so far, even on the old boundaries, of nineteen so far and eight more today. That's 27 losses, by my maths, with one more post to go. It's not looking good, is it?

Later in the week: the English Midlands and the North.

Monday, 16 July 2012

The Lib Dems in Scotland and Wales

So I thought I'd continue my short series looking at the Lib Dems' chances in the next General Election even without the boundary changes that look no more than a 50-50 chance at the moment. The latest news is that the Prime Minister is thinking of dropping the whole subject. Certainly the threats are coming thicker and faster that, without House of Lords reform, the Lib Dems will simply not vote for the new constituency boundaries that the Conservatives so desparately (and probably mistakenly) believe will give them the next election on a plate. It'll be painful, and it'll take Lib Dem Ministerial sackings and resignations if it comes to it, but no-one can see a way around the impasse at the moment. And remember: there'll be some Tories voting against boundary reform, too, because it will destroy some of their seats (and jobs).

Anyway, on today's Lib Dem agenda: Scotland and Wales.

In Wales, the Lib Dems hold only three seats, and one of them is as good as lost: Cardiff Central to Labour, especially given the size of its student vote. In Brecon and Radnorshire things will be closer, and Kirsty Williams, the leader of the Welsh part of the Lib Dems, did quite well here against the Conservatives in last year's Welsh Assembly Election. I think they might cling on here, and they almost certainly will in Ceredigion, given Plaid Cymru's rather watery performance in the polls.

The Lib Dems in Scotland have long held many more seats - eleven at the last count. Here I think they are in real trouble, and they're likely to lose Edinburgh West, Dunbartonshire East, (probably) Argyll and Bute and Inverness to Labour, Aberdeenshire West and Kinkardine to the Conservatives (given how far their vote will fall), Gordon and (possibly) Caithness, Sutherland and Easter Ross to the Scottish Nationalists. There's precedent for this. The party's performance in the Scottish Parliament Elections in 2011 was abysmal, and more recent polls have seen no evidence of a recovery at all. Getting into bed with a Conservative Party that is basically now anathema to Scottish national political culture might well lead to a long, slow and lingering death for the Lib Dems north of Berwick and Carlisle, and they know it. Losing seven of their eleven seats in Scotland sounds like getting away lightly in this context.

So that's a net loss of eight seats in Wales and Scotland: five to Labour, possibly one to the Conservatives, and two to the SNP. Taken together with the losses we predicted in the South West on Friday (eleven), that already sees the party losing nineteen seats in the South West, Wales and Scotland. They only have 57 to lose, by the way.

Wales and Scotland have long been the fortresses of a muscular and dissenting liberalism - even in the Liberals' darkest days. Now they look likely to almost entirely reject the party that's represented their national hopes (without being too Nationalist with a capital 'N') for so many decades. What a doleful prospect.

Friday, 13 July 2012

Stopping boundary reform may not save the Lib Dems anyway

Well, I blogged yesterday about boundary reform, and the day before on House of Lords reform.

In the minds of Liberal Democrats - though not explicitly in their Coalition Agreement with the Conservatives - the two political changes are linked. Without the latter, the Tories won't get the former - not that it will help them as much as they think, but still.

Why do the Lib Dems find boundary reform difficult? Well, it's because they'll be the big losers. Not only does it look as if they'll lose many votes, but their ability to hang onto their seats will be diluted. Sitting MPs will have to take on chunks of other constituencies, loosening their ability to cling, limpet-like, to their seats. In the spring, we learned that the Lib Dems might hold only eleven seats (down from 57) on their polling then. With the Conservatives now down on where they stood then, after a series of near-comedic blunders, they might hold onto a few more. But losing two-thirds to three-quarters of your seats? It's not likely to make a new (but minority) Miliband Labour Government pick up the phone, is it?

Things might actually be a bit worse than this when we look at the House of Commons at a 'micro' level: from the ground up, as it were. Even on the old boundaries, Lib Dems might get chased out of lots of the seats that they hold. Now, the evidence is that many left-leaning voters are still willing to 'lend' Liberal Democrats their votes when the Conservatives are the only alternative in that area. But far fewer will be likely to do so in 2015, after five years of Right-leaning government, than in 2010, when the Lib Dems claimed to be a party of the Left.

Come down to my neck of the woods - the South-West of England, the party's 'fortress', which they hope to defend with some success. Even supposing that boundary reform is blocked (likely at the moment), they're defending 15 seats here.

I think they'll struggle to hang on to most of them. Mid Dorset and Poole North; Chippenham; Bristol West (though it'll be close); Somerton and Frome; Devon North; Torbay; Cornwall North; St Austell and Newquay; Taunton Deane;Wells; and St Ives: I fear they all look doomed, good as many of their Members of Parliament are.

That'll leave them with only Thornbury and Yate; Bath; and Yeovil. A dispiriting return for so many years of local effort.

That'll provide a net boost to the Conservatives of ten seats, and one for Labour, in the South-West of England alone.

So the Conservatives could be nearly as close to a majority as they are now, even if they lose seats to Labour in Wales (four, probably) and the North of England (maybe ten to fifteen).

It's a funny old game, this First Past the Post.

Thursday, 12 July 2012

Boundary reform: not much of a big bang

 One rather esoteric element of the current stand-off about House of Lords reforms fascinates academics and political anoraks.

It's boundary reform - which the Liberal Democrats have been threatening to block if they don't get their way on changes to the upper chamber.

The Conservatives are desperate to secure these changes. They think that they are disadvantaged by an electoral system that means that they have to secure something like a nine-point lead over Labour to gain an overall working majority in the House of Commons. Clearly that's very unlikely any time soon, and they don't want to go on relying on the Liberal Democrats forever - especially since the smaller coalition party looks likely to lose many of its seats in the next General Election.

The reasoning goes like this. Very gradually, most of Britain's cities are emptying out, meaning that the seats in city centres (usually Labour-held) contain fewer and fewer voters. In the past, the Electoral Commission hasn't been able to keep pace with these changes, and therefore it takes far fewer votes to win a Labour-leaning urban seat than a suburban or rural Conservative one.

But hold your horses. More sophisticated analysis shows that this isn't the main reason for the electoral 'bias' in our system. Turnout is low in urban seats, meaning that fewer votes are needed among voters who would probably come out and put a cross next to a Labour candidate anyway. Tactical voting is low, because many of these seats (for instance in northern English and Scottish cities) are very safe. And some areas of the country are over-represented for historic reasons (Wales, for instance) - something that the new system is supposed to lessen, but not bring to an end.

So the real effect of electoral 'reform' for the Commons, speeding up the process and lessening the number of seats? Well, if you watch this video by Plymouth University academic Michael Thrasher, very little indeed. Maybe just a few seats. At the cost, as Nottingham Politics academics have recently pointed out, of fracturing historic seats, especially in urban areas, crossing borough and even county lines, and weakening the link between MPs and people that Conservatives always say they care so much about. If you've got a subscription to a journals service, you can read the whole paper here.

The very feeling of community on which the 'Big Society' (remember that?) is supposed to rest is under threat, without wresting power away from political parties in an overly-hasty and confused rush to draw new lines on the map.

There's a little-understood payoff to all this. If the Lib Dems are only holding a spud gun to his head, why shouldn't David Cameron go to the country earlier than May 2015? Assume that, under the Fixed Term Parliament Act, Labour will also vote for a poll to avoid appearing frightened of a contest. It's possible. It's often thought that the Prime Minister is holding on, waiting for the new boundaries. But what if they won't really avail him anyway? What's really to stop him pulling the rug out from his Lib Dem 'partners'?

At the moment, the conventional wisdom is that this can't happen because of the overriding political and economic need for deficit reduction, and the need for our leaders to look statesmanlike rather than like a bunch of squabbling schoolchildren. It's a view well put by Danny Finkelstein on Newsnight last night.

But what if that's wrong? It was devolution that brought down James Callaghan in 1979, not the Winter of Discontent. It was Irish Home Rule that broke up the Gladstonian Liberal Party, not levels of taxation .

Watch this space.

Wednesday, 11 July 2012

House of Lords reform? Don't hold your breath

Last night's Parliamentary debacle over House of Lords reform is entirely unsurprising to anyone who's been paying attention (wake up there at the back).

Not only had this outcome been long predicted (though it had). To us historians, the whole rigmarole looks like a re-tread of crises we've had before. Most vividly, it recalls the Labour Government's attempt to force through Lords reform in 1968-69, talked out by an unholy alliance of right- and left-wingers, uniting Michael Foot and Enoch Powell, and ultimately abandoned unloved on April Fool's Day 1969.

What happened then? Er, well, the Government benches were divided between compromisers and root-and-branch reformers. The Opposition smelt an opportunity. Common cause was made among implacable foes across the House of Commons chamber. And the administration of the day lost its business.

Sound familiar, anyone?

There are lots of reasons for this slow-motion replay of debates we've in 1909-11, in the 1940s, in the 1960s and then again under New Labour. It's just a really emotive subject for the political classes - though not, I think, the public. It touches on the nature of the constitution and the powers of the Commons - both subjects close to MPs' hearts. It's an area where there can be so many shades of opinion - 49% elected? 51% elected? 60%? 80%? 100% - that it's almost impossible to reach agreement. So it's proving now, despite the inherent worthiness of electing your legislators.

Meanwhile, last night's retreat really hurts this administration. Not only does it mean that the Coalition itself is looking increasingly rocky (more of this tomorrow). But Ministers now face weeks of talking, and months of gumming up the Government's business - as the Maastrict rebels managed to do in 1992-93.If they can't get a programme motion in the autumn - and there's absolutely no reason why they should - then they probably won't bother, to the Liberal Democrats fury.

And that's even before Nick Clegg's Bill gets to the House of Lords, who will predictably savage the whole project. Or to the public in any referendum that the rebels force out of the Government (which will almost certainly be lost). Both have the capacity to obliterate the idea.

House of Lords reform? Don't hold your breath (or waste it either).

Monday, 9 July 2012

Whitehall underspends: even more room for manoeuvre

 The news that Whitehall underspent by more than £3bn last year (above) - helping to bring up a great big total of nearly £7bn more cuts than forecast - has brought one shocking realisation to the fore: the Chancellor's hands are not tied.

Remember, you heard it here first. But you say it also in the fuel tax debacle that saw a junior Minister hung out to dry by her bosses, sent out to explan where they could magically suddenly find hundreds of millions of pounds from to placate a campaign in The Sun.

To be honest, underspends are normal. Ask yourself this: would you rather tell your bosses that you'd spent 99% of the budget, or 101%? Yes, me too. And when you're spending billions and billions, like the health service, that's going to add up to a lot of money very quickly. Underspends have long been endemnic, as I showed myself in one of the chapters of my first book. Whitehall also finds it difficult to react quickly to changing circumstances - so what we're seeing now is a reaction to the 'cut everything' fervour of late 2010, rather than the more nuanced position taken by Ministers over the last few months.

But it does provide some breathing space in 'core' departmental budgets, apart from the so-called 'automatic' budgets that go up and down with the economy (social security, for instance). It's a lot of money that could be used, rather than being clawed back by the Treasury. Very little will stay with departments - basically, a billion and a half that they've already agreed.

More could be done with that cash, right now.

£3bn-£4bn in immediate spending wouldn't break the bank. As the Institute for Fiscal Studies pointed out when publishing this data, the economic risks facing us are 'on the downside'. If the eurozone crisis goes on much longer, or gets much worse, the economy will be in big trouble. All bets will be off (though I would say that will require less austerity, not more). For now, though, no-one thinks we should go on a great big spending spree. But letting out the Chancellor's austerity rainment makes sense. Today. Or, preferably, yesterday.

Instead, we go on and on with the austerity - hammering Britain's poorest regions with the 'localisation' and 'standardisation', of business and council taxes, creating perverse incentives in the National Health Service and elsewhere (ask for cash towards the end of the tax year - you're more likely to get it), and adding immeasurably to the general gloom of an economy that still seems to be slowing.

But there are alternatives. There always are.

Friday, 6 July 2012

Financial scandals: not new, but revealing

The intricate news of Barclays' manifold dodgy practices, and the subsequent 'easing-out' of the bank's Chief Executive, Bob Diamond (above), is in some ways a not-so-shocking example of humdrum normality.

Shocked at financial misbehaviour, we always seem to remember that such behaviour is an example of everyday corruption. Remember Enron? Remember BCCI? Remember the Mirror Pensioners? I could go on, of course, if you're really unlucky, but the point is made I hope.

What's really interesting, for a historian, is to look at the conditions in which corruption of all sorts - and I don't just mean letter-of-the-law formal rulebreaking - becomes endemic. What we're experiencing now is worse than those episodic examples of waste and fraud. The West's banking system had become fundamentally distorted by the time of the great 2007-2008 liquidity crisis, and all of us little people will be paying the price for years, and perhaps decades, to come.

How did it happen?

Well, there are lots of historical conditions for this (low interest rates sustained for many years, and the consequent gouging of savers, is one of them, but that's for another day). But a glimpse at nineteenth-century financial scandals (Overend Gurney's collapse in 1866 being the most famous), and some more recent economic history too, gives us some generalities we might just dredge up and use. Have a look at these three necessary-but-not-sufficient conditions for widespread corruption and then failure:

Asset price bubbles. House and land prices rose precipitously across the West in the years leading up to the Great Recession, encouraged by governments' own policies as well as by economic growth. Overly restrictive planning policies; middle class fortress mentalities; absurdly generous lending criteria: it was all bound to end in tears, like the railway boom of the 1850s and 1860s. When it did, and in the US housing market in particular, it deflated the great big bubble along with it. Housing market crashes have long been endemic in British economic history; successive waves of property speculation have done great damage (see the crises of 1972-73, 1980-82, 1989-92 to name but three). Now everyone else knows how it feels.

Gross inequality. The UK is now so absurdly unequal that it hardly matters how hard you work. Inheritance taxes are so low, parental house prices so high, top schools so powerful, unpaid internships so critical to the early stages of a career, and regional disparities so grotesque that you're unlikely to work your way out of poverty. We're back to a very similar income profile to that of the Victorian era (an outcome our welfarist and reformist forebears would have deplored) - causing panicky behaviour amongst everyone near the top; a culture of excess and of conspicuous consumption; and a winner-takes-all mentality that's so likely to lead to bad behaviour and an implosion that it's a surprise it didn't happen earlier.

Lax regulation. It's difficult to imageine a more eye-watering set of revelations than we've faced since this crisis hit us. It's become just as much a question of morality and probity as of economics, because almost everyone was asleep at the wheel. Parliamentary expenses; the media scrum over Leveson; bankers' relationship with politicians and civil servants. All of them look pretty grim from the outside. It turns out, dear reader, that many among the three to five thousand people who form the political, economic and media elite have basically been taking everyone else for a ride. No, I'm not surprised either - and nor would anyone else be if they were familiar with Gladstone's ownership of Suez Canal Shares, Lloyd George and the Marconi Scandal, Anthony Eden's behaviour over the Suez Crisis, and so on ad infinitum.

Lessons? Dissaude citizens from borrowing too much in the good times. Reduce social inequality. Regulate more tightly, and prosecute more.

Easier said than done, of course.