A Eurozone break-up would come with eye-watering costs

 Economists have been looking over the edge of Euro collapse for some time, competing, for instance, to see how the effects could be mitigated. Given that those deleterious effects might amount to an economic nuclear bomb ten times worse than the collapse of Lehman Brothers in 2008, that's no wonder.

The scenarios are mind-numbing. The collapse of most British, French and even German banks, and their effective total nationalisation. A deep renewed recession would ensue, much more frightening than the UK's current problems, amounting to the loss of five per cent of GDP. British exports and her stock market would probably plunge. There would have to be a new and unprecedented round of quantitative easing - money-printing by the Bank of England. Finance and trade for and in the developing world - just starting to power ahead - would dry up. The global depression would last for years.

Now of course banks and their economists issue these reports from their own perspective - and while fearing for their own jobs. Would UBS, for instance, survive the breakdown of Germany's financial structure in 'Latin' Europe? Could French and Italian banks look with equanimity on Spain or Greece leaving the Euro? No. They'd be hammered. So the rescue job is on - including frightening the horses as much as possible.

Plenty of monetary unions have broken up in the past and, though the short-run outlook would be incredibly bleak, growth would still resume in the long run. Argentina broke away from the dollar and defaulted from its debts in 2001. The Latin Monetary Union of the nineteenth century broke up and was reformed again and again. The Irish Republic broke its one-for-one link with sterling in the 1970s.

But all those changes came with big, big costs. Argentine savers lost all their money. The Latin Monetary Union was stalled at birth, and remained a common rather than a single currency due to political differences over the role of gold and the French Franc, and it was strained by a series of wars - including the Franco-Prussian War of 1870-71. The Irish currency fluctuated wildly against sterling during the 1980s. Those assertions of financial independence were no panacea. The problem, as Keynes of course had it, is that 'in the long run we are all dead'. Does anyone really think we can wait five to ten years for strong renewed growth? No, I didn't think so.

But one thing is sure - there would be vast costs to a Euro break-up, and Britain would also be plunged into a new and much deeper recession in the short run. Governments would fall. Britain's Coalition would come under immense strain. It would be extremely unlikely to win the next election - which depends critically on economic recovery, of some sort, and at some point, in the next eighteen months to two years.

Conservative Euro-sceptics currently licking their lips about the collapse of the Euro: be careful what you wish for!

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.

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.

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.

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.

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.

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?