The Two Faces of Labour

The gaffe and very humble apology later by Gordon Brown may have a significant impact on the General Election. But, as I wrote on John Redwood’s blog, there is a deeper public v private face to the Labour campaign.

In recent years our politics has become too like those of the countries that have defaulted in the past – like Brazil, Argentina and like Greece has become now. It has become about presenting a public face of concern and competency, whilst privately just wanting power and prestige. It is also about defending of that image by denigrating the opposition and distorting the reality of events to an extent that George Orwell would not have imagined.

 As a result, we had a structural deficit built up in the boom years and a refusal to recognize that growing debt was an issue. We have delay upon delay about tackling the issue, or even recognizing the problem. Now every minor proposal to tackle it is met with cries of destroying public services and ruined lives.

 The false face of the boom years and the delayed recognition means we have a much bigger problem. It will mean more painful cuts and more growth-damaging tax rises. However, like with personal debt problems, being open and honest there is a severe problem is the first step to solving it. Then you prioritize what is most important, both by area and within each area. That priority should be based on meeting needs – on serving the public – and not on maintaining jobs.

 As part of that recognition, we should divide the deficit between the structural part (using OECD guidelines) and the cyclical part.

 Like with a financial plan for families who have got into debt, we can see, year-by-year, how that deficit is reducing. It should not be enshrined in law, but at least will show how the pain of narrowing the deficit is bringing the nation back to financial health. Then we can also explain how targets are not being met – e.g. through growth faltering, or failing to meet targets.

We need, as a nation, to admit to the false face that all put on. We should now shun the spin, and recognise the poor state of the public finances so that we can repair the damage with the minimum of adverse consequences.

Labour Totally Loses It

Labour seem to have totally lost any sense of proportion when

  1. They talk about less than cuts of 0.5% of GDP sending the UK back into recession when most of that will due to not replacing leavers.
  2. When Gordon Brown is angry about other parties proposed Cuts in child Tax Credits and trust funds. Something that would hit the wealthier families. Or Ed Balls saying it was a “mistake to ghettoise the welfare state”.
  3. They attack the Conservatives innovative education policies, that could push up standards, because of potential minor budget cuts in LEAs that lost pupils.
  4. On cancer care, the target of seeing a specialist within two weeks is mostly met, but survival rates for most cancers are amongst the lowest in Europe.

 

Until last autumn they refused to discuss how to tackle the £70bn structural deficit they created in the boom years, instead parroting on about “Labour Investment v. Tory Cuts”. They then refused to have a full spending review until after the election.

Labour have further refused to answer questions on the Banks and the Deficit.

Labour are desperate. If they come third, they will be racked by in-fighting more gruesome than in the early 80s. The Lib-Dems will overtake them as the major left-of-centre party.

As a result, Labour lack any sense of proportion. Their very desperation makes them unqualified to govern, or even represent any of the constituencies.

 

(this is an updated version of a comment made on John Redwood’s blog today)

Why Labour has not the Courage to cut Public Expenditure

18 months ago, I voted on the Congestion Charge. I went into the ballot box having been promised  

 ‘There’s no Plan B. If we vote NO in December the money goes back to Government, all £3 billion of it.’

  See wevoteyes facts 09 Nov 08

I was one of the 812,815 who voted against, a staggering 78.8% of the votes cast.

Depite this promise, six  months later Manchester gets the Metro extensions – the big ticket item. Costing £1.4bn. South Manchester Reporter had the story here.

 

We now have a huge deficit to tackle. If Gordon Brown cannot keep to a firm promise in the face of strong opposition, how resolute will he be on the unspecified commitments to cut the deficit?

 NB the pdf is from wevoteyes.co.uk. This website has now been taken down. For the full story see http://en.wikipedia.org/wiki/Greater_Manchester_congestion_charge

Education – A small innovation or extra costs?

There have been claims today that the Gove school plan is flawed as school budgets will suffer. (See BBC & ASI Blog). The comments are put out by those who cannot see the twin advantages of such a policy – Of raising standards and raising productivity. Like in Sweden, it will serve to provide better value for the taxpayer and provide local communities with more diversity and innovation.

 

As I wrote in response to Hopi Sen’s article.

The claim that LEA schools budgets will suffer if schools go independent is only valid for fixed costs.

For instance, suppose an existing school 2 class per year primary school, loses 50% of its pupils to a start-up next door. Leaving aside the one-off costs of redundancies etc, the major costs are variable – the teaching staff. However the fixed costs (heating, maintenance, LEA admin) will go unchanged, so cost per pupil will rise. A 10% drop in pupil numbers may cause a 3% to 5% rise in costs per pupil.

However, this could be offset by three things.

1. Efficiency savings / productivity increases. Given that we have had 13 years of a government who throws money at problems, there should be plenty of opportunities for this.

2. Start-up schools being given tighter budgets from the outset.

3. In the long run, all fixed costs are variable. In other words, unpopular schools will close, LEAs will shrink their staff etc.

 

Hopi – You are right when you say that the education budget will be cut, like much else. The structural deficit created in the boom years will not be eliminated by a strong recovery. The best way to minimise the impact on public services is to first understand the nature of the costs and then find ways of improving productivity. Like in many areas of the private sector, this is by allowing for different types of solutions to a particular issue, initiated by people on the ground.

 

This country needs change, not because the Labour Government has run out of ideas, but because their top-down ideas do not exploit the real changes brought by utilising the best and most innovative talents in improving their own circumstances. In education, the Gove plan makes a start in this direction.

Alex Salmond’s anti-democratic spoiling tactics

Alex Salmond’s claim that he should take part in the British Political Leaders Debates is not just invalid, it is anti-democratic.

1. He represents a party that is only standing in less than 10% of the total constituencies.  (59 out of 650). If you are concerned about getting people interested in the political issues, then his utterances will be largely irrelevent.

2. This is a fraction of the candidates of UKIP (500+), the BNP (339) or the Green Party (300+).

2. If those three parties look at the European Elections in 2009, they can also claim to appeal to more people.  The fringe parties 31.3% of the vote verses 2.1% for the SNP. The English Democrats got 1.8%.

3. More importantly, many of the issues, such as Education and Health Services, are English issues. On the majority of the questions the SNP would have to be silent.

The only valid reason that the SNP taking part in the three main debates is to generate such a loathing for Scotland that the English public will want to throw them out. But British democracy is already weak and should not be weakened further.

Risk, Volcanic Ash, Regulation and the Leaders debate 2

John Redwood today makes some brilliant observations on “Bash the banks and Praise the Regulators”. His comparison with the ash cloud and the banking regulation is particularly apt. But it is not just the cost of inappropriate regulation that there is a similarity. The leaders’ debate of tonight showed crystallised the issue for me. It is how do the authorities deal with an unprecedented situation? The risk-averse say let us do nothing until there is full information. On the financial system, nothing was done to control the excesses. On the ash cloud everything was stopped until the scope of the problem could be assessed by the experts.

There is a way of going into the unknown without full information. You set general rules and assess the magnitude of any problem.

-         On the ash cloud, you compare the risk with the size of the eruption, the size of the particles and the distance from the volcano. From this, you would have found no evidence of large jet aircraft getting into emergency situations 1,000 miles from an eruption, in an ash cloud that is hardly visible.

-         From the financial system, the situation was evident that house prices and consumer borrowing was going to unsustainable levels on an unprecedented scale from 2003 onwards. The 0% interest credit cards and the large discounts for changing mortgages were evidence of this in the UK. The sub-prime boom, with mortgages deals agreed whereby in 3 years the borrowers could not meet their repayments was evidence of this in the USA. It was the very magnitude of the problem that should have merited special attention. The action should have been to raise interest rates and increase cash requirements for banks.

On the surface the action was the opposite – One to stop what was already happening, the other that immediately stopped anything from happening. But the cause is the same – by requiring detailed rules and acting on how others will perceive our actions, the authorities took wrong course of action.

 The Leader’s debate crystallised it for me. There was one leader who stood out. His reaction to any problem is not to take any risks.

-         He will not risk safety by letting planes fly.

-         He will not start cuts now to risk the recovery.

-         He will not risk banks ever getting into trouble again.

-         He will not risk a foreigner being unidentified.

-         He will not risk existing jobs.

-         He will not risk offending our European neighbours by disagreeing with them.

-         He will not risk independent MPs, by banning them from second jobs and monitoring every penny they spend.

-         He will not risk independent thought, by stipulating what religions should believe.

-         He will not risk diversity in education by allowing independent schools to be formed in the state sector.

 In so doing, after another 5 years of his leadership we will have no recovery; we will have no decision-makers in government – just be taking orders from Brussels and the IMF; we will have no risk-takers in business as most will not want to overcome the ever-higher regulatory hurdles for achievements that are taxed away and vilified.

We will also have no future.

Nick Clegg’s confusion on total and absolute heating costs

Nick Clegg has made a mistake on the leader’s debate.

He said that an old couple in a small house are paying more for their heating than somebody in a bit mansion. This is simply not true. A large home costs far more to heat than a small one. What is true is that

a) You pay a fixed charge per property. Some companies spread this over the first few units. Therefore the average overall cost per unit is less.

b) Some of the poor who have a poor or no payment history have to use pre-payment meters. This does not include the settled poor, who have faithfully paid their bills all their lives.

c) The rates paid are hugely different between those who shop around and those who do not. If you know of people who are unable to effectively shop around, then do, as I have, and help them switch. For instance uswitch.com is a good starting point.

Nick Clegg’s mistake is to confuse marginal and actual costs.

But remember – when all the political leader tout their green credentials, they are actually saying that they will increase the costing of heating. Wind power, or nuclear, or tidal, or solar panels are all far more costly than coal and oil.

Iceland’s Volcanic Eruption in Perspective

A couple of days ago I wrote on John Redwood’s blog

“Nowadays we appear to be too risk averse. The two examples of aircraft suffering from engine failure as a result of flying through an volcanic ash clouds were both (most probably) within a few miles of the volcano. The current volcanic particles could be bigger, but the density of the clouds will be lower a thousand miles or more from the volcano. The risk to an engine going down is very small, especially if the more concentrated areas are avoided.”

In today’s Times, under “Government ‘too cautious’ over ash cloud, Adonis admits” we have the following:-

“Britain was among the last European countries to lift flying restrictions as the first flight touched down at Heathrow just before 10pm yesterday.”

Last night the Civil Aviation Authority accepted evidence from airlines and manufacturers that flights could pass through low-density ash cloud without risking passengers’ safety

“Mr Brown said: “You have got to make sure that people are safe and secure.”

“We would never be forgiven if we had let planes fly and there was a real danger to people’s lives.”

 

I am not a scientist, merely an accountant who tries to put things in perspective. What drives Gordon Brown’s thinking is not to be perceived to be taking risks. This has cost us dearly in the reaction to terrorist attacks (even incompetent ones like the shoe-bomber and someone setting fire to their underpants); the reaction to swine flu and the reaction to climate change. Good decision-making is not a matter of how it will be perceived, or waiting until the evidence all goes one-way. Good decision-making through assessing the magnitude of risks with limited information.

Ken Clarke is right on the IMF

Ken Clarke is correct to state that there is a risk of the UK having to call in the IMF if there is a hung parliament. The reason is simple. The Budget Forecast was that the National debt would reach £1400bn in 2014. This will be around 85% of GDP. For this to be a peak the following has to happen.

  1. The economic recovery has to be rapid. Yet IMF thinks Darlings forecasts too optimistic.  
  2. Most of the deficit reductions come from this strong economic growth, not from expenditure cuts and tax rises.
  3. A hung parliament would mean including the Liberal-Democrats. Their tax increases rely on cutting tax avoidance and increasing taxes to the rich. Such tax rises are unlikely to generate the necessary revenue AND they would be a disincentive to invest in the UK.
  4. Labour sharing power might be worse than Labour on their own for indecision. They have put off a comprehensive spending review, despite a huge change in the Government’s finances. Further they may further put off starting cutting expenditure. It will be damage a party who has said for so long “Labour Investment or Tory cuts” to start cutting.
  5. Further, if they sincerely believe £6bn (0.5% of GDP) cut in waste might tip the economy into recession, then they would also baulk at real cuts necessary to make the deficit peak at 85% of GDP.
  6. The main spending cuts are unspecified. A coalition government might dither at signs of protests from much of the state sector. The IMF could be called in the muscle through the necessary cuts.
  7. There could be another external shock. If interest rates rise, then consumer spending will fall. Also house prices could resume their downward path. Also interest rates rising will also mean an increased deficit. By 2014 each 1% rise in the average level of interest on the debt will add £14bn to the deficit.

 

Extending the period of cutting the deficit, has a compound effect. If each year the target deficit is missed by 1% of GDP, then after 5 years it is over 5% of GBP extra.

Icelandic Volcanoes – Climate Change in Proportion

Climate Change is not completely wrong. It simply exaggerates the impact rising temperatures, the greenhouse effect on those changes and then ability of human beings to change that.

An (extreme) example is the attempt to link the frequency of volcanic eruptions in Iceland due to the thinning ice caps.

This proposition is “As the ice melts the rock can melt because the pressure decreases,”

Wattsupwiththat try to put this in perspective through a two-step process.

1. Estimate the change in rock temperature melt point as the pressure decreases. This is estimated at 0.0013°C per metre of ice, so the disappearance of the entire 500m thick ice sheet would decrease the melting point of the magma beneath by around 0.5°C, or less than 0.05%. The actual loss is estimated at 10%.

2. In terms  of pressure, 500m of ice is equivalent to 20m or less of rock. However, volcanic eruptions are caused by magma rising to the surface from many kilometres down. 20m of rock is hardly significant in this.

However, the current problem of steam/ash clouds is caused by the magma being rapidly cooled by the ice. So without glaciers we would not have the current problem of planes being grounded.

What is important is the lack of perspective that the researchers have shown.  

Using a research

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