Tuesday, 30 December 2008

Tangling with the bishops

During the Thatcher government I was at a dinner for Japanese guests. The junior minister giving the after dinner speech tore up the notes written for him by his civil servants and proceeded to launch an attack on Anglican bishops. The Japanese gentleman next to me and turned me and asked, 'why minister attack bishop?'

The Church of England gave the Thatcher government a torrid time and for a while was the only effective opposition, alongside the House of Lords. Now a number of Anglican bishops have turned on the Labour government and accused it of being 'morally corrupt'.

This is a pretty direct attack on Gordon Brown's 'son of the manse' image (Mrs Thatcher wore her nonconformist affiliations very loosely). It has drawn a robust response from government ministers and MPs. John McFall, chairman of the Treasury select committee, commented: 'I don't know if at the bishops' palaces there has been too much mulled wine passed around over the last few days.'

The bishops would no doubt claim that their faith requires them to pronounce on public policy, especially when there is a social dimension. However, their grasp of economics is less sound that their understanding of theology. A central part of their argument is that people should consume less, but if that happened even more jobs would be lost.

Saturday, 27 December 2008

Bail us out say retailers

Hot on the heels of demands for a bail out for the motor industry the retail sector has asked for help to keep their three million employees in work. Admittedly their request is focused on a 5 per cent increase in business rates due in April which does seem a bit severe in current circumstances.

We are told that the motor industry has to be bailed out by taxpayers to compensate for its inability to sell its product because so many supplier firms depend on the assemblers. But then any industry has inputs of energy, raw materials, machinery and various services. However, in the case of the motor industry the casualties are more identifiable.

When I studied industrial policy, it always struck me that the focus on industries like motor vehicles and steel rather than food processing which employed just as many people had a strong gendered dimension to it. Motor vehicles was seen as a 'real industry' making things and in the 1970s the workforce was overwhelingly male: its composition has changed since then.

Any help to firms in trouble must take the form of loans to tide them through the recession. There must be no return to the days of using taxpayers' money to bail out failing companies. Unfortunately, the Americans have not set a good example. In their present form Chrysler and General Motors are simply not viable.

Tuesday, 23 December 2008

A shift in the public mood

In the run up to 1997, New Labour was helped by a shift in the public mood which considered that taxes had been cut too far and public services run down. Now a new poll in The Independent suggests a shift in the other direction.

Dave Cameron has solidified his lead at five per cent, but more important he would enjoy a 17 per cent lead if the Conservatives pledged to cut public spending and not raise taxes. More details here: Poll

Labour may be hit by a double whammy: punished for the loss of jobs and prosperity in the recession and punished for putting up taxes.

Saturday, 20 December 2008

Friday, 19 December 2008

Brave new world

The Number 10 web site has been re-branded as the 'official site of the Prime Minister's office': Official

Visitors are greeted by a large picture of Gordon Brown looking suitably authoritative and determined as he addresses the problems of the economy. But there are plenty of other pictures of Gordon, including one of him addressing a reception for military heroes who have received an award from the Sun newspaper.

If you want to see someone other than Gordon, you can see a film of the Queen's speech to Parliament (written, of course, by Gordon).

The leading video clip is the action movie 'Helicopter over Baghdad', but you can also see a number of other video clips of the prime minister's recent tour.


Saturday, 13 December 2008

It gets worse and worse

Every day brings more bad news about the economy. This is going to be a long and deep recession and it is going to take years for the public finances to recover. With interest rates moving towards zero, 'quantitative easing' is now on the agenda. In effect, this means printing money but the risk associated with it is inflation when the economy comes out of recession.

An analysis by the Financial Times shows that the economy is deteriorating even faster than the Treasury forecast as recently as two weeks ago. The Treasury also believes that the reintroduction of 17.5 per cent value added tax will hit the economy hard just before the expected date of the general election.

The National Institute is expecting the economy to shrink 1 per cent in the fourth quarter. This alone would push borrowing up by another £2bn to £3bn. The economy is expected to grow by only 0.3 per cent in the first quarter of 2010 in the run up to the general election.

Wednesday, 10 December 2008

A more coherent government

Last night I went to the House of Commons for a Hansard Society meeting to mark the publication of the Palgrave Annual Review of Politics entitled When Gordon Took the Helm. Among those on the panel was Peter Riddell of The Times who is always good value.

He emphasised the significance of the return of Peter Mandelson to the Government. It had cut the legs from under the ultra Blairites. His international experience and knowledge of business was a considerable asset.

At one time there had been a sense of incoherence about the Government. It portrayed itself as different from Tony Blair, but it was not that different. Now Brown had a clear view of what he wanted to achieve as the man who would see us through the recession. As the economic problems got worse, that would be the real political test.

Philip Cowley noted that the Parliamentary session that ended recently had been the most rebellious since 1971 when Edward Heath faced problems over British membership of the European Community. There had been more revolts than in the Maastricht session, albeit smaller ones.

Saturday, 6 December 2008

The return of industrial policy

One of the characteristics of 1970s politics was industrial policy, an attempt to bail out failing firms and industrial sectors at public expense. Subsidy policies often involve the worst forms of government failures as they create opportunities for rent seeking and political favouritism. One of the main recipients of government money was the motor industry.

Now the motor industry is in trouble again and calls for bail outs are being heard, most recently in relation to Vauxhall Motors, part of the General Motors behemoth. It is argued, with considerable justification, that today's British motor industry is leaner and fitter than it was forty years ago. Certainly the industry is in much better shape than at least two of the American big three who look likely to get help from Congress.

The Labour Government is emphasising that it is not reverting to old style interventionism and is indicating that it would support research and development activities or the promotion of environmentally friendly technologies. Without care this come close to the practice of 'picking winners' which governments are notoriously poor at it.

There is a case for providing credit lines to sound businesses hit by the downturn, but the problem is always how one decides that they are viable and this is where political criteria can start to creep in.