Why the public debt does still matter

So I'm (not-so) famous for saying that Britain shouldn't be reducing its public spending deficit as far and as fast as it is.

In fact, most of the developed economies shouldn't be cutting back right now. They should be borrowing more, spending more, printing more money. As fast as they can.

But much of this is related to the hole we find ourselves in. Basically, there's a great big hole where demand should be. Borrowing to fill it isn't stupid. It's wise. If your family was in danger of being put out on the streets because you'd lost your job, wouldn't you take out another slice of mortgage debt to tide you over? I think you would.

And the public debt is still important. And in the long run, tough and painful choices are going to have to be made - about long-term care for the elderly, pensions, and the funding of public sector capital investment.

All three (especially the first two) are precariously poised. The Office for Budget Responsibility and its head Robert Chote (above) have long-term doubts, which really apply to the period between the 2020s and the middle of the coming century, about all three. You can read its first formal and full-length report here, if you've got the time.

In the short term? We've got to borrow more than we're planning. In the long term? We've got to borrow less than projected lest the debt stock really does become a drag on growth.

It doesn't actually matter how we close that gap. For myself, I'd throw a lot of new taxes into the mix - taxes on consumption and pollution, for a start. We should renegotiate many of our PFI contracts, a process on which the coalition has made a welcome (if uneven) start. Public sector workers are going to have to pay even more for their pensions if they want them to remain anything like as generous. And long-term elderly care requires a 'New Deal' agreed between the parties to a death or inheritance bond asking for but capping payments when people pass away - an emerging and sensible consensus so carelessly scuppered before the last General Election.

The truth is, we have the will and the means to close that gap. We can do it, and we don't have to be over-macho on the public finances right now to show that we believe in wise and well-designed public policy in the future.

I don't expect politicians to grasp either of these nettles voluntarily. But grasped they must be.

Can Labour's strategy really be as threadbare as this?

The latest noises out of the Labour Party should be deeply worrying to the Party's members, supporters or wellwishers.

The Observers's Sunday scoop was to show how Shaun Woodward (above), once a Conservative but now a Labour strategist and Shadow Minister, is apparently urging Labour leader Ed Miliband to accuse David Cameron of being 'recognisably a right-winger' and 'authentically Conservative'.

Along with many other commentators, I think this is a complete non-starter. Labour people hate it. It's silly.

Shouting names like this doesn't do much for voters. It leaves them cold.

Historically, David Cameron's popularity, and the problem of his opponents, is something we've seen many times before. As Jerry Hayes points out, Harold Macmillan used to infuriate both his Right-wing backbenchers and the Left by stealing Labour clothes and talking about his 'progressive', even 'socialist' past at every opportunity. None of it hurt him one jot. Harold Wilson stole Conservative clothes when he talked about efficiency, industrial reform and the 'white heat' of scientific opportunity and white-collar expertise. Tony Blair moved blindingly fast to steal almost every Conservative image and idea he could, leaving the Tories with the age-old dilemma: do you attack your opponent for not changing, or for changing too much and having no principles? In the end, the Conservatives under John Major went for the absurd and much-maligned 'Demon Eyes' campaign in 1997, an offensive campaign that tried to have it both ways and ended up not having 'it' any way at all.

Labour's faced with the same dilemma now. Is David Cameron really 'recognisably conservative' in the same way 1980s extremists were? When he leads a coalition with the Liberal Democrats, talks about reducing reliance on CCTV, uses the NHS and encourages the adoption of gay and lesbian Prospective Parliamentary Candidates? Er, no it isn't. And pretending that it is just won't wash. It's the equivalent of Labour's apparent deficit denial - unpopular and unrecognisable to the bulk of the population. To the extent that the Government is moving to the Right, they'll be popular for doing so - on crime, immigration and welfare.

Ed Miliband has started the new political season much more cannily, calling for a post-riots vote on reductions in police numbers and pointing out that the Government's cuts will do great damage to causes the Right, as well as the Left, holds dear (in this case law and order). Long may it continue.

Dave as 'recognisably Right-wing'? In the bin, please.

Labour should still be doing better in the polls

One of the most remarkable elements of British politics at the moment is just how robust the Conservative Party's polling numbers really are. For they've not moved much below their General Election figure of 36% - 37% at all since they entered power a year-and-a-bit ago.

And the most recent indications are that the Conservatives are catching Labour, and (among the most prestigious and accurate pollsters) may even be more popular than the only major Opposition party.

It's an enormous achievement for both the Party and their leader. Public confidence in the economy is ebbing away. Unemployment is going up. Inflation is very high by recent standards. The international economic outlook is uncertain at best, and scary at worst. There are some straws in the wind that show the Government's support ebbing in hard-hit industrial areas and in the East Midlands. But in general, the major party in power floats above it all.

At this rate, and given a redistribution of Parliamentary seats that will hurt Labour, the most likely outcome of the next General Election is a small Conservative overall majority. That'll produce its own problems for the Prime Minister. But more of that in a later post. For now, we have to ask (as historians do) the big why question: how has this been possible?

Well, post-riots public opinion seems to be running in a strongly punitive direction. And that helps both the 'natural party of law and order', and a Prime Minister who was quite willing to drop his earlier liberal rhetoric about family policy and crime and promise to 'get tough'. NATO's military intervention in Libya, for which both David Cameron and French President Nicholas Sarkozy personally pressed, does seem to have paid off. That's helped him look like a national leader.

But I think the explanation lies deeper than current events, and away from the Conservatives' and the Prime Minster's strengths. It's the significant polling weakness of the Opposition that's the most noticeable. Despite a Liberal Democrat polling implosion (reversed to some extent in recent weeks), and left-leaning voters everywhere looking for a lead, both the Labour Party and its leader have failed to make much impression.

The personal ratings of Labour leader Ed Miliabd (above), though advancing a little during his generally sure-footed handling of the 'hackgate' affair, are still poor, and poorer than the Prime Minister's. The public are still unconvinced that he's a potential national leader. This might actually help him a little in the years to come - if he can confound expectations. It might give him an opportunity in the Leaders' Debates of March/ April 2015 (if this Parliament makes it that far). If he outruns his public image as a young, slight and perhaps rather nerdy operator, he may gather momentum just when he needs it. But for now, he's a drag on the party's popularity.

Beyond this, there's the critical question of Labour's economic strategy. Polls show that Britons do indeed prefer an Osborne-Cameron team to a Balls-Miliband one when it comes to thinking about who should run the economy. Like it or not, and agree with it or not, the Coalition partners - partly by the very virtue of their partnership - have successfully painted Labour as a party of crazy spenders who 'maxed out the nation's credit card'. This is almost entirely nonsense, but Labour has little answer to it at a moment when the Party is right to argue that the Government should be spending more and intervening more to support growth.

Labour needs an updated and more credible economic strategy and rhetoric, that admits the deficit is high, accepts that any government in this Parliament would have had to make deep cuts in public spending, and talks candidly about worrying elements that don't even appear in the overall deficit figure - public sector pensions, the Private Finance Initiative, Student Loans and the prospects for elderly care among them. We're going to have make painful choices about these issues, and ignoring that will assist the Coalition in making them on the wrong ideological basis, forcing the wrong people to pay, and refusing to accept collective and collaborative solutions.

Until Labour retools in this way, the Prime Minister can recline in confidence as he does pretty much as he pleases.

The NHS is still remarkable

Here's something you don't hear all that much these days: the NHS is still an extraordinary organisation.

I've had recourse to the Service over the last few weeks, as my wife-to-be, The Educator, has broken her writst. Roller disco, would you believe. But still.

Patched up on the night, she returned to our local (big city) hospital the next day, to see a Registrar, two nurses and a radiographer within an hour or so, have an X-ray and see an expert. Then, a week later, she saw a consultant and a consultant surgeon who assessed her progress and then operated when they felt she needed a pin in the wrist.

All free at the point of use. All borne by the taxpayer. And all at a marvellous speed and level of service, if in rather sparse and threadbare surroundings. A private hospital would have laid on a nice coffee machine and some deep-pile carpet for your BUPA dues. Worth it? Nope.

It's another example of that much-cited public space, really. Despite the relative downgrading of NHS funding issues over the last two or three years (the Service is being spared the worst cuts imposed elsewhere in the public sector), great big injections of cash increasing at a real-terms rate of seven per cent increases every year has changed the NHS and the country. Prime Minister Tony Blair's 2000 pledge to raise British health spending to the European average has raised funding to historically very high levels.

Chronic illnesses used to see you wait many months to be seen by a specialist. Now? A few weeks at most.

The lessons are these. Firstly, good care costs money. For all the talk of reform and restructuring (interminably), we have to pay collectively for what we want. The UK has middling health spending and middling outcomes. There's by no means a perfect match between the two figures - the US experience shows us that - but those two numbers are related. Secondly, and this goes back to my point earlier this week about our long-distance trails and coast paths, our communal provision and shared spaces can be as enjoyable, effective, effusive and cherished as our private fiefdoms.

An optimistic thought to sign off on this week.

What is the truly public sphere?

So my holidays were really enjoyable - thanks for asking.

What they revealed to me most of all, as a historian of public policy, is the true nature of really public space.

I've been on the South West Coast Path (above) - this year's leg took me from Westward Ho! (nearly) to Boscastle, across the Devon - Cornwall 'county line'. And I've been to the Nelson Street 'See No Evil' street art festival, which has transformed a truly ugly part of central Bristol into a vibrant, colourful, multi-layered palimpsest of image and meaning.

What did I learn? Well, our society is highly ordered, very closed, and not very mobile. A great deal of our lives are spent privately - in our gardens, our houses, our armchairs, watching our TVs. You know the sort of thing.

But that means that really open spaces, areas that can be shared with other people - unexpected people, different people, interesting people - become even more charged. A couple of times on the coast path there were private gardens with chairs set out to look at the breathtaking sea and scenery - but there was a public bench right next to it, with just the same view, but 'won' by trudging through miles and miles of publicly-provided beauty. Which would I prefer? Well, I think that moving, changing, unrolling scenery better than a fixed view that was forever 'mine'.

I'll be talking about this later in the week, but it really gives the lie to all those writers who argue that the only truly defensible and cared-for spaces are those that are privately owned and individually defended. It also shows how wrong theorists of the so-called 'public sphere', such as Jurgen Harbermas, really were when they cited the heights of that phenomenon in the eighteenth century and the bourgeois salon or coffee house.

What's the most successful public sphere since modernity? For me, it's the social democratic triumphs of the National Parks Act (1949), the long-distance national trails (such as the South West Coast Path) created by the Labour Government of 1964-70, and the 'right to roam' legislation passed in the year 2000. None of these were provided by bourgeois thinkers musing away. They were built by broad progressive coalitions of the centre and the left.

That's not to say that communally-provided areas and events are better than what you can do in your private garden.

But it's to at least say this: I love them. And so do millions of others.

I'm off now...

On holiday for a week. Normal service will be resumed on Monday 22nd August!

Meanwhile, as traffic to the site grows and grows, you can read Charlie Brooker's admirable honesty about England's riots. Why did they happen? He's big enough to say he doesn't know.

See you in a week!

'Britain and the Sea': what to do with a more ambivalent review

Following the great run of reviews for Britain and the Sea since 1600, there's been a bit more of (shall we say) a measured response in The Mariner's Mirror, the journal of the Society for Nautical Research.

Hugh Murphy, of the National Maritime Museum and the University of Glasgow, and the editor of the Mirror, is certainly a bit more stinting in his praise than were The Scotsman, The English Historical Review, BBC History Magazine and the American Library Choice magazine.

Here's what he had to say towards the end of his notice:

O'Hara, in what is a well-written book of considerable schoalrship, attempts through a wide-ranging historical sweep through the centureis to contruct a new way of looking at British history in the world. This, of iteself, is an admirable aim. As an island nation, still largely devoted to free trade when nearly every other nation is not, and one which had ceded political and economic power to extra-national institutions, we have looked outward... 'Britishness', if such a term has any real currency, remains under considerable strain, particularly in Scotland. But, when attempting to construct a British identity one would expect that in any event. Understanding the past remains vital to any society.

Murphy's main problems are with the publisher's blurb on the cover, which claims more than he would wish about Sea's status as a 'general' history; about what he calls my 'Gordon Brown moment' in trying to define 'Britishness' without reference to differential ideas of that concept in Scotland, Ireland and Wales; and some neglect in the book of the difference between coastal and estuarine communities and Britons who lived in more landlocked areas.

The lessons? Well, first and foremost, you can't please all of the people, all of the time. There's certainly, and secondly, a grain of truth in the argument that the book might have treated different parts of the island(s) in a more sensitive manner. Though in a book aimed (as Murphy notes) at undergraduates and the general reader, it's difficult to strike the right note and lever in as much detail as one would like. Thirdly, as Murphy again himself notes, 'trying to put [any history] into a particular overarching context is notoriously difficult to achieve'.

All in all? A fair appraisal. There's much more to say. Let's say it. As Murphy says at the end of his review, the 'rationale is to give the wider academic maritime history community "a star to steer by". We shall see how well that star shines or dulls in the coming years'.

Politicians and the riots: does no-one have anything helpful to say?

One of the most depressing things about England's recent riots is the reaction of politicians.

They've never been at a lower ebb. Their expenses shenanigans wounded their class more than they know. Their robotic way of speaking, exemplified by an Ed Miliband interview where he gave the same answer over and over again, sets them apart from a populace that has stopped listening to them.

Indeed, there's a sense that all the centres of authority in our society - Parliament after expenses, the press after 'hackgate', the police after well, take your pick really - have dissolved or rather slunk away. That's part of our rudderless sense of non-direction right now.

But they haven't made things better in their stupid, idiotic, laughable, childish response to the present civil disturbances across England.

It's easily summed up in a now-notorious exchange between pint-sized verbal pugilist Michael Gove (above) and a chillier-than-thou Harriet Harman on Newsnight the other day. She says: 'cuts' are to blame. He gets red-eyed and angry, saying 'she's talking out of both sides of her mouth', he has 'no respect' for her any more, and that the riots were purely, completely 'criminality' that have no more explanation than that. Harman unconvincingly claims that the abolition of Educational Maintenance Allowance, the trebling of student fees and the closing of Job Centres has led to the violence. Er, I doubt it. Gove then counters that there's nothing to this but sheer wanton looting and greed. Hmm, not very persuasive either. You can watch the unedifying spectacle here if you really want.

Is it too much to ask that we move beyond such platitudes of Left and Right and start to actually think? Gove says 'tighten discipline in schools'. Miliband blames 'gang culture'. Boris Johnson, Mayor of London, says 'don't cut police numbers'. The Prime Minister himself argues that a tougher approach on the streets will work. Which probably it will if we're talking about reducing lawlessless and disorder in the short term, but really - aren't we entitled to ask for more from our leaders?

There's a lot of thought out there on both Left and Right. Most of it may be wrong. Some of it certainly is. Neo-liberals stress the fear of getting caught and punished as a key determinant of the 'decision' to risk criminal activity. Not, you note, crude police numbers. More socially-minded conservatives stress the bleeding away of a sense of shared responsibility for one another. Neo-Keynesian economists are minded to blame long-term unemployment and the crushing waste of hope and talent that represents. Marxists and Socialists argue that the grotesque growth of inequality over the last thirty years, and our society's constant stress on consumerism and display, must have played a role. Thoughtful policemen talk about redoubling efforts to understand 'their' areas, and the challenges of grass-roots policing, which obviously hasn't been the success that everyone thought.

I suspect that, well... they're all a bit right, and we should talk about it in an adult and mature manner.

What do we get instead? Politicians circling each other, talking about 'criminality' versus 'cuts', two entirely inappropriate categories - Conservatives stressing threat and fear to shore up their electoral base, Labour hoping to make capital out of the situation, Boris stalking the Prime Minister and hoping eventually to replace him.

How sad.

Another good review for 'Britain and the Sea'!

OK, I know this is shameful self-promotion, but as the Times Higher has recently noted, it's partly up to authors to drum up interest in their own works. We can't leave it all to publishers.

So it's gratifying to see another good review for the present blogger's Britain and the Sea since 1600, released last year. Hot on the heels of good write-ups in The Scotsman, BBC History Magazine and The English Historical Review, it's all a pay-off for years of hard work on the book.

The American Library Association's Choice magazine is really very nice about Britain and the Sea:

This book provides a useful reminder of the intensity of British engagement with the sea and its shaping role in British culture beginning in early modern times. O'Hara... offers a splendid example of the revolution that has taken place over the past generation or so in maritime history, a subject becoming far more comprehensive in its scope. Contemporary scholarship is taking the matter far beyond men commanding ships into a wider saltwater spectrum of economic and social history, environmental studies, and cultural affairs, along the way looking at hitherto neglected groups and individuals, all placed within a global perspective. The result is a book exceptionally rich, with fresh information carrying readers down to the present.

So it's good news from this blog! After a few doom-laden entries, I thought you'd like to hear it.

The emerging consensus we musn't accept

For my hundredth blog, I thought I'd look at a bit of emerging conventional wisdom.

Like most sayings familiar to the man on the streett, and like many nuggets of falsehood we examine on this blog, it's well wide of the mark. But it contains enough truth to look plausible. Other examples include the mythical 50% target for Higher Education entrance that undermine vocational education (complete nonsense), the 'war of old against young' involved in intergenerational transfers (a series of inappropriate analogies), and the destruction of European fisheries wrought only and forever by the European Commission (a huge exaggeration eagerly accepted by guilty-faced consumers who then go and buy more cod).

The one to look out for at the moment looks something like this. Well, Ireland, Greece, Portugal, Italy and Spain have got themselves in a pickle by borrowing too much. Good job old George Osborne and Nick Clegg run the economy, eh? They've saved us from all that via their pre-emptive austerity. Instead of debt rising for most of this Parliament, it'll be falling by its end. And unlike those squabbling Americans, we've been given a strong lead from 'the top', which means everyone can trust our direction of march.

Well, pah. Maybe a three out of ten for the politics, but about one of ten for the economics.

For one thing, there is absolutely no truth whatsoever in the view that the level of UK debt was unsustainably high, either in terms of short-term history, or since the 1970s, in the long run since the nineteenth century, or indeed as compared with that in other countries with deficit problems but with less room for manouevre. Secondly, the idea that the structural deficit will be eliminated by 2015, and that therefore the general debt stock will be on the way down, is highly questionable.

But I digress.

Even more importantly, take a moment to look at the graph above. What it basically shows is the reason why the UK's great recession didn't turn into a great depression. Government borrowing almost exactly matches corporate saving. While companies built up inventories and surpluses, held onto workers by freezing or cutting wages, and put off investment, the Brown administration went on a great big investment spree to plug the gap. It just about worked. Unemployment didn't rise as fast or as far as in the early 80s or early 90s.

Who's going to plug this great demand gap now that the pink line at the bottom of the graph is going to head remorselessly upwards? Who's going to do the spending that the NHS, police, schools and local authorities will not?

Well, if you're a UK consumer, you are supposed to put your finger in the dyke. Personal indebtedness will have to rise, and rise by quite a lot, to take up the slack. Sorry about the mixed metaphors there, but you get the point. You can read the official numbers and comments of the Office for Budget Responsibility here, by the way.

All this at a time when households are going to be way, way worse off, and while as Nick Cohen puts it in The Observer today, a good slice of the population is living in 'quiet desperation' about how to make ends meet - not mounting the barricades or besieging the dole office yet, but running down savings, cancelling spending, scouring the shelves for good savings deals. These are the people who are going to have to borrow our way out of recession - to build up the debt that the Government, manifestly much better able to do so, will not.

Think it's possible? No, neither do I. And that's why the conventional widsom of the moment is wrong. As usual.

Can decent Higher Education really be built on competition?

The Minister for Universities and Science, David Willetts (above) recently wrote an extremely revealing letter to the London Review of Books.

In it, he revealed some of the central tenets of his thinking - elements that have, perhaps deliberately, been left dormant up until now.

The Minister's argument goes like this. The Research Assessment Exercise, in which British universities are graded (and funded) every few years on the basis of their research, has caused a really vibrant research culture - competitive, adversarial, lean and hungry. We must now do the same for teaching so that the 'market' incentives in teaching match those for research. So academic departments talk all the time about boosting teaching quality, as they bid for places, just as research managers come round the corridors asking how many publications and funding bids you've fired off that week.

This is so far off the mark that one doesn't even know where to begin. For one thing, Britain has always been at the forefront of world research. This has deep historical roots. Britain is free, liberal, English-speaking and rich - all facts that attracted the best and the brightest to the country to conduct research, and still does. She has universities of great repute and reknown, and always has. The country has a strong science base - one enormously boosted since the 1990s by a great deal of sustained central government spending (and which Willetts himself has tried to protect). The country is small, dense and 'clustered'. It sits at the heart of the sea and the air lanes.

Is any element of this to do with the game-playing, largely-discredited, crude, out-of-date and bureaucratic RAE? I think not.

In fact, the RAE and its successor, REF 2014, have come increasingly under fire in recent years. They have very little intellectual credibility left - at least as an 'objective' test of 'quality'. They may well be useful in directing a second stream of cash to universities above and beyond the monies esearchers have to bid for case-by-case. It might be that this allows 'pockets of excellence' to be recognised, leaving aside the process of peer review of individual bids that can often advantage the big, the brash and the famous. Someone has to audit the money.

But the cause of Britain's research dynamism? Please. Give me a break. There are historical reasons for this, and historians are good people to ask about them. Not Ministers.

Away from the brink, but into the quagmire

So, American politicians did a deal on their debts after all. It looked like they might not there, for just a while.

Sigh of relief? Well, yes - for the consequences of a debt default, or even a partial mess of a deal and a debt downgrading might have been near-catastrophic for the world economy as a whole. I might have lost my job in the economic ice age that could have followed. So might you.

So one-and-a-half cheers for the Congress and the President of the United States (above).

Why only one-and-a-half? Because this deal will further slow the American economy; raises the prospect of worldwide economic sluggishness for years to come; and might leave us right back in this horrible mess when we approach the debt 'ceiling' once more.

Americans' problem is a lack of demand - not enough spending, not enough investment, too few consumers. How to remedy this? Well, quite a few economic commentators and experts - including Nobel Laureates - would say exactly what I'd say about the UK. Cut less; borrow more; raise some taxes as part of the mix (because you can then spend the surplus that might otherwise have been saved, boosting demand). But this deal radically tightens American budgetary policy, reduces the federal government's room for manouevre if the economic downturn begins to look gloomier than it already does, and contains absolutely no specific plans for tax rises. None. Nada. There's going to be a trillion dollars of cuts right away, and then negotiations about about another trillion and a half of 'deficit reduction', which may well mean 'cuts' as well. Put all this together, and the United States is not going to be tugging any of us towards recovery any time soon.

Paul Krugman's excoriating op-ed piece for the New York Times might go a little far on all these fronts. I don't think 'surrender' is quite the right word. There is at least a possibility that those 'second stage' negotiations, to be conducted by a joint committee of both Houses of Congress, will allow liberals and centrists to fight another day. Recommending another great big slice of cuts won't sit well with most voters, and the President and his party do live to see yet another round of wearying arguments. They'll attempt to turn the debate over that second round into a row about threats to valued social programmes - though their record in this respect hasn't been great over the last two or three years. And when the debt ceiling does come up for renewal in 2013, it'll be in synch with Bush-era tax cuts for the rich, meaning that President Obama will be able to sell ending the latter as part of a general deal. Assuming he's still President by then, of course.

But over-caution; retreat; downright weak-willed, weak-kneed loss of fighting ardour in the face of a bunch of crazy ideas? These certainly are terms we can use.

As for the politics of this, as the President in fact put it eloquently the other day, America has a triple 'A' credit rating, but not a triple 'A' political system. There's plenty of room for the parties to fall out in the Congressional 'super-committee' and walk away from a deal, especially in the months leading up to a Presidential election. And consider the longer-term consequences of making what has always been a technical vote into a bitter partisan test of loyalty. Think Democrats are going to forgive and forget this one when a Republican sits in the White House two, six or ten years from now? When they are so, so angry right now? Nope.

So we are in for some low growth. And year after year of budgetary crises and blowups.

We've stepped away from the brink, but into the quagmire.