Cutting with credibility

June 8, 2010 — simonashall

The PM speaking at MK

The PM’s speech in Milton Keynes was among the most important of his political career so far. It defined his position more clearly than anything previously on the defining political question of the decade – how to get Britain back into business.

We can take from it several things – firstly that the PM will lay it on very thick about the economic crisis being Labour’s fault. I think that’s no bad thing – particularly because they are starting to come out with some pretty outrageous criticism of the coalition on a situation they helped, at least, to create. But I think he’s got to be careful and not get too free with this tactic. He needs to be the consensus man, the leader, the unifier and the solution, not the “new” problem.

Secondly, the PM is happy to tell us just how bad it is, unlike Labour. Not everyone will agree with him but it is obviously in his interest to make things seem as bad as possible. I don’t think a great deal of exaggeration is necessary – things are very, very bad – but the openness he is in a political position to afford could be something of an advantage. I think if played well, far from Mervyn King’s prediction being correct, the public could be sympathetic to the Coalition for some time to come. Honest actions go a long way in politics nowadays and the public recognise favourably politicians who are prepared to do the right, if not popular, thing.

Thirdly, Danny Alexander will be right next to him – all the way. There’s no way that the Liberal Democrats are getting off the hook with this one as full members of the Coalition and I don’t think they want to. NC has said that there will be a “cut with kindness” policy that will shield some of the most vulnerable from the worst of what needs to be done but that can only do so much – they can’t be protected from council cuts in many areas.

Nor do I think it’s a good idea for George Osborne to widely consult the public on where to save money. This is a very risky strategy that could puta very considerable rod in his back when Labour organises a Twitter campaign to get people to respond in a particular way. The results could then be FOIed and may not be where the final decision needs to be made. It could look like the public has been consulted and ignored – not great PR.

The simple answer here is that, a bit like Masterchef, this new economic future is going to “change our life”. There are opportunities for efficiency, yes, and looking at different ways of providing services. But the bottom line is that we need to get a £170bn deficit down and there’s a lot of money to hack off budgets. It must be done, it must be done quickly and there is a certainly amount of political risk that is going to come as the pay-off of winning the election (sort of).

I think the Coalition needs to remember that the public has a great deal more of a problem with dishonesty than ineffectiveness. If the government tries to mask the problem, if it breaks its promises over what it is going to cut, if there is a suspicion that certain groups are being unjustly protected or if there is any underhand treasury regulation as with the last government, the considerable goodwill that the public holds will drain quickly.

If the government is straight, calls a cut a cut and acts responsibly for the best interests of the nation, it might just find itself laying down a legacy of decency – if not prosperity – and a chance in 2015 to lead the country properly back into the new world economy with its head held high.

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Tip of the iceberg

May 26, 2010 — simonashall

One suspects that if Nick Clegg had decided after May 6 to take up Campbell and Mandelson’s grubby little offer and a Lib/Lab coalition was in power, the BBC would have reported David Laws – rather than Alistair Darling – delivering £6.2bn cuts. As it happens, no such favours are granted to the Conservatives by a corporation whose very skin has been saved by the votes that denied the PM a majority.

The savings identified by the Treasury include some really good things, such as the austerity measures put in place to stop ministers using cars all the time, the abolition of pointless quangos and renegotiating government contracts. The rest of the news emerging from the details is less welcome but regrettably necessary, not least because it goes further than the public sector. The £690m cut from the DfT means contracts put on hold, which has a knock-on effect in the private sector – the A23 scheme and the third phase of the Birmingham Box Managed Motorways project are both, for example, placed on hold and this means uncertainty for the consultants and contractors employed to deliver them.

So too Communities and Local Government, which loses £830m and will have less to spend on meeting its core objectives but also on schemes and projects that are delivered and help fuel a large – and growing – portion of the private sector. Companies like Atkins, Capita, Serco, Halcrow and Balfour Beatty are major employers and cutbacks in local government spending – further underlined by the £1.165bn in savings being expected of local authorities – will mean tougher times ahead for these businesses. The best, of course, will survive – but those who don’t can expect to shed jobs in addition to those that will be shed by the public sector.

And with an emergency budget in June and a Comprehensive Spending Review in October, the bad news is that £6.2bn is only the tip of the iceberg. The total deficit is £157bn and quite how this will be eradicated is anyone’s guess - even ten times what the government announced on Monday is only a third of what is needed. There is a great deal of pain to come and taking the decisions won’t be easy. Although there is a chink of good news in terms of a rise in GDP, the OECD is putting yet more pressure on George Osborne to raise interest rates and avoid cutting too quickly.

It all goes to demonstrate two things: firstly, that there has been – and will continue to be for a while – no real recovery, merely a plot by a Labour-staffed treasury to pump vast amounts of taxpayers’ existing and new money into the economy to delay the onset of recession and the necessity to make fiscal and spending adjustments until after the election. This may turn out to be more damaging than the recession itself.

Secondly, if you vote in a Labour government, sooner or later it runs out of money from which the only recovery is a Conservative government (or in this case coalition) to administer social and economic shock treatment. The only way Labour gets into power is when it promises to spend money - that is the central ethos of democratic socialism. In good times, it will always look more attractive than the more cautious Conservative within-means alternative. But there’s a catch; and we are about to find out exactly what that entails.

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You don’t con, Vince

April 1, 2010 — simonashall

It's Yoda from Star Wars - no, not really, it's Vince Cable

Just a few words about Vince Cable. I watched the Chancellor’s debate the other evening and I’m not going to claim that George Osborne wiped the floor because he didn’t.

But given that he was being ganged up on by both Alistair Darling and Vince Cable, I think he came across well enough for me not to be persuaded of the case for him being replaced by Ken Clarke. The party is lucky in Phillip Hammond and Clarke to have two minds with plenty of economic experience to back George Osborne up and Osborne himself is made of far sterner stuff than I believe is immediately apparent.

Darling, on the other hand was an utter bore. His budget speech was more interesting and yes, although he did land a hit on the Conservatives over the NI part-reduction, subsequent events may  be more significant in this regard. He wasn’t nearly commanding enough for the man holding all the aces.

Vince Cable won the debate and that’s easy enough to understand. He was able to stand in the middle and come across as the voice of reason, hopping (albeir deftly) onto the “plague on both your houses” feeling that currently pervades. But did anyone notice a policy in there? At least Darling and Osborne were discussing whether or not an extra 0.5% on NI was a good thing to do – Vince was only bashing the other two. The debate may be politics; but politics isn’t necessarily the debate.

Frankly, anyone could have done what Vince did. And I think underneath it Vince doesn’t have any more in the way of policy than anyone else. Which is less forgiveable because the Lib Dems aren’t constrained by having to say things that will ever come to pass.

Standing in the middle with nothing to lose isn’t difficult (and will no doubt be repeated by Nick Clegg in the leader debates). But sooner or later, the waiverers that the Lib Dems are hoping to attract will catch on.

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Economy’s off the scale

January 26, 2010 — admin

Well, don’t you feel better now? The UK is officially out of recession (link to The Times because the BBC’s coverage reads like a Treasury press release), so we can all get back in our cars, go back to shopping in Waitrose and start thinking about re-mortgaging the house. Not quite. Because the government has been pumping so, so much money into our economy during the past 12 months that anything other than growth – however pitifully small – would have been utter humiliation. It’s also worth pointing out that we still have January and February’s figures to come before Q4 2009 growth is confirmed.

I believe that 0.1% is rather convenient for Gordon Brown and will be revised downwards in a few weeks when the fuss has died down. But there is a fundamental distinction between the two parties on how to maintain recovery – and remember that a second “after-slump” in the face of first recovery is something that has characterised nearly all the post-war recession. Labour wants to continue to prop up the economy with taxpayers’ money and there’s nothing particularly wrong with that in such dire circumstances.

The BBC's graph is stastically nonsense

But at some point, the props have to be taken away – and at the moment, the whole thing would come crashing down if that were the case. This is the graph that the Treasury and the BBC wants people in Britain to see. It looks like we are out of the woods. With another 18 months of quantative easing and borrowing, the figure could quite easily be pushed up to 2 or 3 percent and the government given credit for not just a full recovery but a new boom.

The Guardian's graph not only shows us where we actually are but compares with other recessions

This, though, is the Grauniad’s somewhat more realistic assessment of the situation that shows the recession has wiped out all the growth in the British economy since 2005. I have heard both George Osborne and Phillip Hammond in the media today say that the only thing that will keep us out of recession is the private sector’s profits, jobs and tax revenues and that interest rates must stay low to stimulate that growth. We need to cut the defecit to bolster our credit rating and boost our floundering currency.

A rise in interest rates, which would have an adverse affect on people’s spending power, is the most serious threat to our sustained economic recovery – apart from a fourth term for Labour. More borrowing could mean a softening of Britain’s credit rating and devaluing of the pound, which would make government guilts and bonds less attractive to investors. The government desperately needs to harden these investments to pass Britain’s debt onto those with the money to buy it; cuts in spending alone coupled with tax increases will not be enough to pay off our borrowings.

I want to see Ken Clarke and Phillip Hammond blast through Labour bluster about recovery and remind people that whatever Labour has done to bring us out of recession – and you can argue about the effectiveness vs cost of that – it’s nothing compared to the damage they have done to British business and trade, as well as landing us with a huge debt to pay off. I want to see people reminded about this until Gordon Brown doesn’t want to talk about the economy anymore. Brown’s plans to continue to spend his way out of recession and worry about the economic consequences later should convince that he can’t be trusted on this.

He’s been saying for ages that the Conservatives have made the wrong call on the economy every time. It’s not true and it’s time we hit back. He wants to continue to mollycoddle the nation and extend the pain for longer. The Conservative approach is not just a self-flagellating short, sharp shock; it makes absolute economic sense and it’s about time we said so.

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I should hope not

January 3, 2010 — admin

The man who nose - Ken Clarke

As well as spinning madly about security, Labour’s press team has also been trying to get stuff into the paper along the lines that the Conservative will be cutting spending and raising taxes after Ken Clarke said it would be “folly” to rule out tax increases. The BBC has dutifully responded with just such a story.

First of all, I should hope that no promises whatsoever will be made on tax increases or otherwise until George Osborne is able to see the proper and full government account – including all the off balance sheet PFI liabilities. It would be totally stupid to make any pledges on the overall tax burden until the Conservatives know just what a state the country is in. Ken Clarke is absolutely right and I hope that even tax-cutting Tories can see the logic in that position – or at least appreciate the total illogicality of promising to maintain or cut tax rates at this stage.

Secondly, the BBC has a long memory when it comes to Mrs Thatcher and the poll tax or John Major and sleaze but a very short one when it comes to recalling just who on earth plunged this country into near-bankruptcy to begin with. Every economically active person played a small part, certain larger players in the economy such as the banks and the regulators played a far more significant role but the one institution that has to carry the can for such throwaway mismanagement is HM Government.

For two years, Labour has spun that the banks were to blame and the price of the banks readily shouldering that blame has been £60bn of taxpayers’ money to make them competitive again. Those that wouldn’t play ball, like Sir Fred Goodwin, were fed to the media in a frenzy of inflammatory briefings that if they had been conducted by a private citizen on another private citizen would have been on the edge of legality.

The BBC, Grauniad and others have happily swallowed that line to the point where most of the British public believe that the banks were more or just as responsible as the government for the recession. Rubbish.

A few banks don’t make a recession, no matter how dodgy the loans. The recession was caused by a framework of poor decisions, insufficient regulation, faulty economic plans and over-optimistic projections. It was also caused because western governments were too complacent and arrogant to understand that their economies must shift to work around the emerging markets of the East rather than just continuing as per the past 50 years. The person responsible for the poor economic planning, the lack of realpolitick, the poor regulation and stoking up of the boom was not Sir Fred or any other banker. It was Gordon Brown the chancellor and Gordon Brown the PM.

Yet somehow it will be the fault of the Conservative Party if, after the next election, taxes need to rise and spending be cut. Well, spending will be cut after the next election because our national debt needs to be controlled. And taxes will rise as well because cuts alone won’t deliver the massive amounts of money that need to be raised.

DC is concerned that people will see the Conservatives offering only a decade of downbeat austerity and vote for Gordon who wants more borrowing to keep spending. It is a worry but in the end you have to trust the electorate to do what is right. And I think they will understand that a decade of different economic behaviour – most of it bearable, much of it positive but some of it unwelcome – is the price of the Noughties Boom.

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Finished in America

December 23, 2009 — admin

A little while ago, the PM liked to remind us how the recession started in America and wasn’t really the fault of anyone in the UK (even the bankers). He also assured us that the UK was best placed to deal with the recession and that we would come out of it strongly, ahead of other less well-prepared economies.

Yesterday’s announcement that the UK is still in recession while the Americans are now growing at 2.2% won’t damage Labour politically any further because their economic incompetence is already reflected in their current poll rating. But it will make it more difficult to hold an early election in March because the Conservatives will be able to argue on these figures and no further ones are due before a March campaign would be well underway.

There again, if the PM wants to wait until May – and his indecisiveness makes this the most likely option – he will have to deliver a gloom-filled budget that will overshadow any official news of recession exit and a small overall growth in the economy. The real damage of this recession was never going to be fully apparent during its duration but rather in the years that will follow.

In all fairness, I don’t think the PM and this Labour government have earned the right to manage the recovery and believe that voters will see it that way during an election too. It remains for DC and George Osborne to convince that they have the approach to see the country onto a even footing and the imagination to maintain growth in the face of the crippling debts that Labour have left to us.

The debt is the price of the PM trying to force an early recovery – increasing spending and refusing to exercise restraint. In addition, all the money that has been printed is a serious inflation risk in 2010/11 and the public and private sector have to show moderation and pay restraint during the first years of recovery. Working for a company that provides support services largely to government clients, I include myself in that too.

The dishonesty of the PM in misrepresenting the UK’s strength to fight the recession has been one if its most unedifying features.

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Policy exchange, Darling?

November 16, 2009 — admin

I spotted this earlier on in The Telegraph, taking a brief break from its one decent scoop of the decade. Back in April, the Treasury apparently levvied a £30,000 standard charge on all non-domiciles, regardless of income in exchange for not paying income or capital gains tax.

How interesting. I seem to recall this policy from somewhere else, namely here (read down page), George Osborne’s brilliant party conference announcement in 2007 on Inheritance Tax, which confused the PM enough for him to bottle a November general election he would probably have won.

At the time, Alistair Darling said the £25,000 levy “would raise only a fraction of [the money] needed and said Mr Osborne had inflated the number of non-domicile people.”

“Yet again, this is an example of where the Tories are making promises on tax which they can’t afford to pay for. He is making a promise he hasn’t got the money to pay for. If you do that, you create the very instability which is the last thing the economy needs and people in this country would pay for that.”

Clearly, it wasn’t such a bad idea after all. At least in Mr Darling’s mind.

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Treasury trolls?

October 26, 2009 — admin

The week got off to a bang this morning with the Boy George going around every media outlet and explaining his bright new policy about limiting High Street banks’ bonuses to £2,000.

What a silly idea. Well, actually, it’s quite a good idea but it was hardly going to be popular with the bank workers who unsuprisingly prefer cash to shares and it completely misses the point that it is the investment banks rather than the High Street ones that had a destructive bonus culture.

More importantly, the BBC has allowed Liam Byrne and Vince Cable more airtime to criticise the idea on subsequent bulletins than they allowed Osborne time to explain it initially. That’s the BBC for you, as we’ve seen in other areas over the past few days – about as balanced as Mohammed Al Fayed and often a good deal less intelligent. Osborne (who is sounding more credible than he was six months ago even if today’s idea was shaky) and DC have to learn to say nothing when they’ve nothing worth saying.

But the biggest ear-opener for me was “The Treasury” slamming the idea. I though the “The Treasury” was a government department staffed by politically neutral civil servants whose job it was to help the Chancellor of the Exchequer and the First Lord of the Treasury deliver government fiscal policy? I thought that political statements were there to be made by useful people like Mr Byrne. Or is the BBC misreporting this?

Whatever the reason, I think trolls in the Treasury would be almost as bad as bats in the belfry.

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The seventeen-point strategy

October 9, 2009 — simonashall

I didn’t get too excited about the nine-point lead yesterday and I won’t get any more excited about a 17-point lead today. It’s still daily poll, about which I am yet to be convinced, and it comes on the day when DC has received more press coverage – largely positive – than any other.

We saw George Osborne’s speech following by a bounce and then a reality-checking un-bounce. The Labour spinners are out in force over DC – that he has called every single economic decision wrong (although the public appears to reject that) and that his wealth means he can’t understand the concerns of ordinary people. I think this last point will have some resonance but generally only to reinforce antipathy in the minds of those already likely to vote against him ie people will agree with it but still vote for him.

Around 45% is where the Conservative Party needs to be in order to be sure of a decent majority in May. I believe the chances that we will be the largest party after the next election are 99.9% – something extraordinary would have to happen to prevent that. But the electoral system is weighted hugely in Labour’s favour – as I mentioned yesterday, 40% for the Conservatives and 31% for Labour produces a Tory majority of four; if you reverse those figures, Labour gets a majority of 124. There is still a significant chance that despite a good poll lead, DC could face a hung Parliament.

Polls tend to tighten as we go into elections. Sometimes they come out again, as in 1992 and 1997. But in 2005, they got even closer. Conservative high command needs to know that until we are on 45% regularly, anything can happen. They need a really, really effective campaign lined up – with a Cameron bounce every day – to be sure of a majority in the House of Commons worth having.

And in the Parliament we’ve got coming, it’s really important that we don’t end up with a minority government that can be blocked into a stalemate. There’s a lot of hard work ahead in every consistuency.

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Cam's the man

October 8, 2009 — simonashall
The Camerons after DC's speech

The Camerons after DC's speech

I’ve now had a chance to watch DC today and I’ve got to say that I was pretty impressed overall. To a certain extent, he’s played it safe – no new policy and not too much fire in the belly (no-one likes an angry man) except for poverty, where people will think he’s right to be angry. I was impressed with his fluency as always and also with his humanity and straightforwardness. The voters wanted honest, they wanted straightforward, they wanted transparent. Is DC perfect? No – but I think this is about as close as we’re going to get to any leader meeting those requirements.

So overall I was very happy with his vision and values – he appears to understand that voters want a Conservative government that belives in free enterprise, in wealth creation, a small government and low-tax economy but they will not tolerate that at the expense of social injustice, reduced public services, increasing gap between rich and poor and unfettered corporate greed. I think DC projected that sentiment well today.

But he has got a couple of challenges. Firstly, like any opposition leader he can’t show that he is as good as his word until he gets elected – but he would find it easier to be elected if he could demonstrate he was as good as his word. Trust is an important factor in any opposition leader – and let’s not forget no Conservative has been elected from opposition for 30 years. DC has that trust personally but I don’t think the public yet trust the Conservative Party corporately in the same way; it’s a very fine line to tread and there is opportunity here for PM and the PM to locate inconsistency. And every inconsistency will have a dampening effect on DC’s personal trust level, even if it’s nothing to do with him. We need to stay consistent to maintain trust.

In addition, I still feel that the economy is weak point – unusually – for the Conservatives at the moment. Back in 1998/9, when Tony Blair wiped the floor with us about who was more trusted to run the NHS, the education system etc, the economy was usually the only element on which the Conservatives scored well. Ironically, it’s now the one area where Labour still has a chance – partly because of the above ie they’ve had the opportunity to demonstrate action but also because we have a Shadow Chancellor who’s about as economically literate as I am. Luckily, we also have Philip Hammond and Ken Clarke on board, who do understand economics - but it’s hardly ideal.

Finally, there’s the wealth thing. DC isn’t going to escape the jibes over his privileged upbringing or personal wealth (or that of SamCam). I have to say I find it very strange that Labour and the Liberal Democrats think it’s okay to say someone isn’t fit to govern because of their background or schooling. We don’t say that Labour MPs are unfit because they grew up in poverty on a council estate or Liberal Democrats because they went to third-rate universities – so why should it make a difference that DC went to Eton and Oxford?

Many great PMs have come from Eton and Oxford and most have had comfortable, if not substantial wealth – if he’s up to the job what’s the problem? I don’t believe you have to be on a low income to understand the problems of it – nor do I believe you have to be state-educated to be passionate about state education, nor a user of the NHS to “love” the NHS (as it happens, DC has been a user of the NHS). To my mind, reverse snobbery is just snobbery – and I think people will see through it a la Crewe and Nantwich.

I think the Conservative conference has undoubtedly been the most successful of the three. There is still work to do to cement the trust with voters and DC will be vulnerable to certain lines of attack. But I think he’s done enough to convince people he deserves a chance as the next PM.

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