Tuesday, 16 October 2018

The budget dilemma

The Institute of Fiscal Studies Green Budget has been a big feature on the airwaves this morning. Understandably so, because it is authoritative and non-partisan and Spreadsheet Phil will be delivering his verdict in less than two weeks: Green Budget

I expect a holding budget with the big public expenditure decisions being delayed until next year. That is only reasonable with so much uncertainty surrounding Brexit. If we crash out, we may need a mild fiscal stimulus.

The fundamental problem is, as always, the public demand for American taxes and Scandinavian public services. Actually, the gap between UK and US taxes as a percentage of GDP has narrowed, although, of course, the US spends more on defence. We have surrendered our previous mid-Atlantic position. There is a lot of grumbling about the highest tax take since the 1940s, but tax as a percentage of GDP is still well below levels in most other European countries.

However, the challenge for Phil is to find ways of increasing taxes without upsetting voters (fuel duty levy) or Conservative voters and backbenchers (national insurance charges for pensioners, reducing tax allowances on pensions). As the IFS makes clear, just to pay the NHS bill and stop all other cuts will require significant tax increases. There are many who think that local government, the police, prisons and some aspects of education need more money.

The prime minister proclaims that austerity has ended, but when Phil reasonably points out that this will mean rowing back on some manifesto promises on tax, he gets slapped down.

Thursday, 11 October 2018

Why I read the court circular

The marriage of HRH Princess Eugenie to tequila 'brand ambassador' Jack Brooksbank today provides an opportunity to reflect on the whole issue of 'minor royals' or 'hangers on' as they are often called. It is a bit of a mystery why the Princess Royal's children do not have titles when those of the Duke of York do.

Brian has indicated that when he becomes king he will slim the family down. The extended royal family actually need a minibus to get to the Queen's commemorative service at St. Paul's. Sightings of the likes of Lady Amelia Windsor are confined to the Queen's annual Christmas lunch at Buck House. Indeed, she was not invited to the wedding and the arrival of a baby for the Duke and Duchess of Sussex will relegate her from 38th to 39th in the line of succession.

I am an avid reader of the court circular. It is a disappointment when nothing appears in August or just a notification of Divine Service at Craithie Church.

Recently I have learnt that the Earl and Countess of Wessex have been visiting Estonia. Nothing remarkable about that, you might think. What is now largely forgotten is that when Estonia became independent there were quite a few people who thought it should have a monarchy. Where do you get a monarch from? A younger son in an established royal family. Step forward (or not) HRH Prince Edward.

I recently learnt that under the guise of pitch@palace the Duke of York visited Hungary and consorted with various members of this unsavoury regime including the prime minister.

However, one of the most interesting examples of a minor royal is the Duke of Gloucester, the Queen's cousin. It is no secret that his father liked the occasional drink and the company of women. His son is a model of propriety. He was set on a career as an architect until his rakish elder brother (Prince William) was killed piloting a plane and he was called into the Firm to provide additional cover.

On an average day the Duke will perform as many as five or six engagements, including a reception or a dinner. Engaging with people in this way would drive me crazy. The other week he was carrying out engagements in Worcestershire, including unveiling a new statue of Stanley Baldwin. The glamour.

A mysterious entry said that at lunchtime he visited the town centre of Bewdley, but no engagements were specified. So did he pop into Subway for sandwich? Did he check out the charity shops? Or did he pop into Tesco Extra to get something for the microwave that evening?

Incidentally, the Duke and his Danish wife are having to downgrade to a smaller condo in Kensington Palace to make way for the Duke and Duchess of Sussex.

Finally, it should be noted that HRH Princess Eugenie is the only member of the family to have studied politics in her degree. She cannot match the Grand Duke and Duchess of Luxembourg who met studying in Geneva and are proud of their status as constitutional monarchs and political scientists.

Wednesday, 3 October 2018

Take a chance on me

Theresa May's theme tune yesterday really should have been 'Take a Chance on Me', although I know that 'Dancing Queen' is one of her favourite tracks. In any event, she didn't meet her Waterloo at the Conservative conference yesterday. Groan, but I couldn't get these jokes into my television appearances yesterday.

It was a well crafted speech and effective because it sounded authentic. (Well done, Keelan Carr - he has been very low profile before now - but other such as Gavin Barwell helped). She returned to some of the 'One Nation' narratives she talked about when she became prime minister.

Of course, rhetoric is one thing, reality is another. She talked of an end to austerity, but where is the money coming from? Fuel duty was frozen again. I appreciate that that is an unpopular tax and that oil prices are rising, but the cost could be £800m in one year.

Spreadsheet Phil looks unlikely to risk the farm at the end of October with Brexit looming. Indeed, according to the FT this morning, the Treasury is already concerned about spending pledges made at the conference. The NHS will get some extra money, but what about cash strapped local councils that have to provide social care? Their failure to do more than the legal minimum impacts the NHS.

The speech was, of course, significant for what was not said. There was no mention of the C-word. The strategy appears to be to stand up to the EU in the hope that they will cave in. 'I am standing up for Britain', 'we must keep our nerve' etc. But any hope of a compromise on Northern Ireland has been undermined by the Democratic Unionists going into 'no surrender' mode.

If she can get a deal, Conservative backbenchers would need to think carefully about voting it down. Some Labour MPs would probably support the Government. However, the risk of crashing out remains real and preparations are still inadequate.

I think the proposed festival is a gimmick. I remember the 1951 one which was fun at the time because of the Battersea funfair and it was a sign that the end of wartime austerity might be in sight. Churchill thought it was an advert for socialism, and I suppose in a way it was.

BTW, as an article in The Times pointed out yesterday, time is running out if a second referendum is to be held before March given the relevant legislation and the role of the Electoral Commission.

If legislation was introduced when Parliament convenes next week, the earliest date on which a referendum could be held would be March 28th: How long would it take

Friday, 28 September 2018

Curtice responds to Morgan letter

Nicky Morgan, as chair of the Commons Treasury Committee, sent a severe letter to John Curtice as president of the British Polling Council: Curtis [sic]

I understand that he has given a robust response on the Today programme, but I haven't been able to trace a clip yet.

Friday, 21 September 2018

The recall election that didn't happen

Recall elections were a feature of Californian politics when I taught that, but they are new to British politics. The attempt to hold one in Northern Ireland is here examined by Jon Tonge who explains why Ian Paisley had a narrow escape: Preposterous secrecy

Wednesday, 19 September 2018

Robert Skidelsky's new book

Yesterday I attended an 'in conversation' event in which Robert Skidelksy (Lord Skidelsky of Tilton) presented his latest book, Money and Government: a Challenge to Mainstream Economics. Of course, challenges to mainstream economics have been circulating ever since the financial crisis and there have been new developments in economics such as behavioural economics which draws on the insights of psychology.

In the book, Lord Skidelsky says that he has been chiefly influenced by the insights of Keynes. His biography of him is well known and it was interesting to see Bill Clinton congratulate him when he came to Warwick University to give his last speech as US President. However, Skidelsky also says that he has been influenced by the insights of Polanyi who is certainly 'dans le vent.'

Someone asked me afterwards if I agreed with what he said and I replied, 'Up to a point.' There is no doubt that serious errors were made in the run up to the financial crash in 2008 by both policy-makers and academics. It is also evident that more needs to be done to improve global regulatory supervision of the financial sector, but the willingness for international cooperation is declining, particularly from the United States. What remained of the post-war economic world order is being dismantled.

I think that he was correct in saying that cheap credit became a replacement for the old social contract. Whilst he is critical of the 'fine tuning' Keynesianism of the 1950s and 1960s, he thinks that the collapse of Keynesianism was more the product of a particular conjuncture than systemic. Its collapse may have been hastened by particular events, but from my perspective, neo-corporatism as a political project was flawed (at least in the UK) and could not sustain the weight placed upon it.

He also got in a good dig at The Economist which always proclaims its current line with confidence while insisting that it has been consistent in its faith in liberalism for 175 years. In fact, as he illustrated, the line it takes is inconsistent.

The Conservatives had managed to give austerity a compelling political narrative in 2009. However, the problem was one of private not public debt. He favoured higher levels of public investment, possibly involving a National Investment Bank as advocated by Keynes. In response to a question, he said that there was no magic number for the public debt/GDP ratio, particularly in terms of its effect on growth, although he did mention a figure of 90 per cent.

What would concern me is the proportion of public expenditure devoted to debt servicing, although I can see the case for public expenditure in infrastructure when interest rates are low. However, in my view too many 'grand projets' (Crossrail, HST2) inevitably run over their time and money budgets and fail to deliver a sufficient rate of return.

When I asked him whether there would be another crisis, and, if so, what was the important thing we could do to prevent it, he reasonably enough said that we could not predict the timing or nature of a future crisis, although there could be a series of smaller ones. Earlier he had said that breaking up global banks was unfinished business.

He was more critical of the role of an independent central bank than I would be, although I accept that there has been too much emphasis on the inflation objective. He thinks that interest rates should be decided by politicians and if people don't like what they do, they can throw them out at the next election. This is a rather crude form of control as many factors affect voting decisions.

He argued that politicians were not as bad as many people said, it was essentially an American-based narrative that they were corrupt. I don't think they are corrupt, but they can be influenced by short-term electoral considerations or simply gaining advantage over colleagues. As Alan Watkins, sadly no longer with us, said: 'Politics is a rough old trade.' The evidence on the political budget cycle is mixed to say the least, but that does not mean that the temptation to manipulate economic variables is absent.

He argued that central bankers are accountable to no one, but I think that the Treasury Committee of the House of Commons has subjected the Bank of England to close scrutiny.

It was a polished performance by someone who is widely read, as I know from teaching with him. The political weather is shifting in his direction. I suppose that my fundamental disagreement would be that I think government failure is a more systemic problem than he allows.

Nevertheless, if anything, global political arrangements to curb the excesses of globalisation are slipping away. In particular, what has recently been called 'Moneyland', an unregulated offshore economy continues to go largely unchallenged, allowing global companies to arrange their tax affairs to their advantage. I always saw one of the main benefits of the EU as being its ability to offer some resistance to the worst effects of globalisation, but its political effectiveness and legitimacy is being challenged by populist movements that offer simple solutions to the challenges that people face in their lives.

If you want to watch the event, you can do so here: Institute for Government

What does it mean to be a 'political economist'?

Over the years at Warwick I had the privilege of teaching with many distinguished economists, among them Nick Crafts, Mark Harrison and Ben Lockwood. I also taught with Professor Lord Skidelsky and I attended an 'in conversation' event involving him in London yesterday to celebrate the publication of his latest book. I have a signed copy, but I am yet to read it.

The economists I have taught with over the years have always been polite about political science, but I suspect they were rather sceptical about it. I did once give a presentation at the Agricultural Economics Society (of which I am a member) on what political science had done for the study of agricultural economics which at least historically has been a policy oriented branch of the discipline. One distinguished agricultural economist got up and said 'Nothing!' and one had to admire his honesty (the paper has subsequently been published).

One of my economics colleagues was generous enough to say that I thought that I was literate in economics in the sense that I understood the terminology and had a basic grasp of theory. I would admit that I probably learnt more from them than they did from me.

When I started doing work with life scientists, the impression I got was that at least some of them thought that political science had something new to offer, primarily in terms of how issues are 'framed'. For example, in our work on cattle diseases, they could see how the myth of the 'rogue badger', a deviant badger that was supposedly terrorising the countryside, had influenced policy.

I was able to ask the first question at Lord Skidelsky's presentation yesterday, and he was gracious enough to acknowledge my book on 'the politics of economic policy'. In fact there were three books. The first was written with Shiv Nath which I think was the one that Robert read and he said to me at the time that he wondered how we had managed to write a book together as it was evident that we disagreed so much.

I then wrote a short book on 'The Politics of Economic Policy' which was reliant on a ruthless intellectual pillage of the work of Nick Crafts. Finally, I wrote a book on 'Economic Policy in Britain' which was my attempt at a more mature reflection on the subject matter. It has been overtaken by events such as the crash and Brexit, but still sells some copies and hopefully still has some insights to offer.'

I try to make some claim to be a 'political economist', most recently in some work I have been doing on football (Nick Crafts has actually written about the turf). In essence what I think I am doing is examining the interaction between the market and the state within the context of globalisation, although that has been encountering increasing resistance with the resurgence of nationalism as in 'America First'.

But what theoretical perspective can be deployed to assist this task? Robert Skidelsky would still advance the claims of Keynes, although his reflections on political matters in the General Theory were largely confined to an admittedly interesting appendix. Keynes wrote very extensively, e.g., on football and the shortcomings of Ramsgate (the editor of the Charlton fanzine lives in Ramsgate so I often draw his attention to what Keynes had to say). However, it is possible to read what you want into Keynes and we have been reliant on those who chosen to interpret him, in very different ways over time since his untimely death. This has allowed commentators to present themselves as Keynes's representative on Earth.

Another claim is for Marxist economics. Although I am no Marxist, there are some valuable insights to be derived. I think that crisis is endemic to capitalism, but it can also have valuable purgative effects, admittedly at great cost to individuals (which is where effective government comes in).

There is then public choice which I taught about with Ben Lockwood. This has become indelibly associated with neo-liberalism, but that was really the Virginia School. Ben and I took the view (as did Patrick Dunleavy) that it could be deployed as a neutral toolkit that enabled you to ask some challenging questions. Colin Hay sees it as highly politicised and having a harmful effect.

One would also have to acknowledge the work of Polanyi, which at the very least has been marketed very well in recent years, but also contains some important insights about different types of capital. Last but not least, I would mention the work of Elinor Ostrom which won her a share of a Nobel prize in economics, a rare accolade for a political scientist (Herbert Simon, whose work influenced me, was another example). I think that Ostrom's work is flawed, particularly methodologically, but in an interesting way that allows us to look at problems in a fresh light.

Where this ends up is with an eclecticism that is both a strength and a weakness of political science. One area in which I have attempted to work is the development of a political theory of a firm which I explore with David Coen and Graham Wilson in our Oxford Handbook of Business and Government. I have to admit we didn't get very far beyond sketching out the challenge.

So perhaps what I have been doing is examining the politics of economic policy, although that is something that needs to be done. I will write subsequently about what Robert Skidelksy had to say.