Letters to a great-granddaugher (5)

I sent a card today to Spain for my great-granddaughter's 2nd birthday.   It is three weeks away, but the time post takes to reach rural Spain is unpredictable.   I am looking forward to seeing her when I get married in May.

I think that parenting is much more difficult today than in the analogue world of the 1970s and 1980s.  Social media poses challenges for parents that I didn't have to deal with and my great-granddaughter will live in a world in which AI will probably rule supreme.   Like all technologies, it has benefits and disadvantages, but it will be challenging to regulate effectively.

I also think that a lot more is expected today of parents in terms of intervening in the lives of their children.  My approach was rather laissez-faire, 'whatever'.   There were scrapes along the way, but that is unavoidable with teenagers.   It's also easier to deal with them when you are relatively young yourself which is why I was pleased when my granddaughter had her daughter at the age of 22.

Unfortunately, though, I was still hard at work when my grandchildren were growing up which meant I wasn't able to give them as much time as I would have liked.  

One threat in the modern world that I haven't really been able to deal with (I am not a criminologist) is the rise of global criminal organizations.   Of course, they have been around for a long time but one increasingly sees them challenging the power of the state in Mexico and increasingly in France, for example.

I am not convinced that drugs policies that focus on the supply side rather than demand really work, but lifting prohibition has its many risks.  However, is cannabis really more dangerous than alcohol?  Interesting that the younger generation consumes much less alcohol, but zero or law alcohol beers have improved considerably.

All these challenges demand better political leadership and the trend towards populist authoritarian regimes is worrying and will be the subject of my last letter.

Voters do believe in the big money tree

A survey published in the Financial Times ahead of the Spring Statement is rather concerning as it shows that many voters do believe in the big money tree: https://www.ft.com/content/1581a348-41b4-4a01-b900-b7310522794e (unfortunately it is behind a pay wall, although some universities have access).

As Rob Ford of Manchester University, it shows that voters have a 'cake and eat it' approach to tax and spending.  It has long been observed that British voters want Scandinavian levels of public services and American levels of taxes.   The result is public debt at 100 per cent of GDP and a £20 billion a year bill just to service that debt.

47 per cent of voters believe that it is possible for government to reduce taxes and debt while increasing spending.  This suggests an alarming level of economic illiteracy.

What is more alarming is that younger voters are more inclined to believe this is possible: 63 per cent of 18-24 year olds and 62 per cent of 25 to 24 year olds.   The figure for those over 65 is 35 per cent as against 50 per cent who this is not possible.

What this suggests is an increasingly ungovernable country whoever is in office as voter expectations clash with economic reality.   Inflation would be one partial way out but has all sorts of economic and social costs.

Labour's fiscal dilemma

A distinguished group of economists has written to the Financial Times advising against further spending cuts and any return to austerity: https://www.ft.com/content/4b0d4ec3-cfb8-44fa-93a6-4474866dc917

They advise that further taxation is going to be necessary, but beyond stating that it should fall 'on the broadest shoulders' do not specify where it might come from.

Meanwhile a discussion on BlueSky showed Labour supporters disillusioned with what they saw as a Labour government offering more effective implementation of Tory policies.

Some argue that the fiscal rules should be abandoned, referring to what has happened in Germany.  However, that country's ratio of debt to GDP is in the low sixties in percentage terms whereas in the UK it is not far short of 100 per cent.   Abandoning the fiscal rules would certainly force up the cost of government borrowing.

The cost of benefits has risen by something like 40 per cent in real terms since 2013 and is projected to rise further despite recent policy changes: harsh on the most vulnerable or tinkering at the edges, depending on your perspective.

Labour has to exert some fiscal discipline, otherwise the cost of the welfare state will become unsustainable.  Clearly many of those unable to work need more systematic support to enable them to do so.

The left's answer is a wealth tax but the Government has no mandate for that, it would deter investment in the UK and the really wealthy would find ways of evading it.

Personally I would have increased fuel duty, a small increase would have yielded significant revenue and would have been bearable.  I would also have reversed Jeremy Hunt's unfunded cuts in employees national insurance, but Labour boxed itself in before the election.

Labour faces some difficult choices, but a large majority means rebellions will be embarrassing rather than fatal.

Letters to a great-granddaughter (4)

Measures to combat climate change are being opposed by right-wing populists everywhere, not least in the United States.  Admittedly, China continues to build coal fired power stations, but it is also investing heavily in renewables.

Opponents of climate change policies either argue that it is not happening at all or that it is not the result of human activity but is part of a normal long-run weather cycle.

I don't have the time, space or knowledge to thoroughly review the evidence, but recent reports suggest that the recommended 1.5 degree increase in global temperatures is already being exceeded. 

However, let me just feature one study published in the reputable journal Nature yesterday which suggests that the melting of glaciers is accelerating alarmingly with the equivalent of three Olympic swimming pools being lost each second.

These losses can be seen as a canary in the coal mine with implications for the melting of the ice sheets in Greenland and the Antarctic which would lead to a rise in global sea levels affecting vulnerable islands and coastal areas (not to mention flood defences in the River Thames).

What we are also seeing is an increase in the incidence of extreme weather incidents, notably floods.  These had a devastating effect close to my great-granddaughter's home in the Valencia region of Spain.

Admittedly, some of the policy responses to global warming have been defective.   Investing in heat pumps is of little use if houses are not properly insulated.   The UK has the oldest housing stock in Europe and as someone who lives in a 150 year old house, I know how difficult and expensive it is to exclude draughts.

For me carbon capture is still an unproven technology which requires further development to establish that it offers a long-term solution rather than a quick fix.

I also think that some of the direct action taken by climate change activists is counter productive.  Disrupting people's lives does not persuade them of the case for effective policy.

Some young people think that climate change is a real threat to their survival.  If unchecked, it is going to cause some very serious problems and the chances of effective international cooperation are not good.    Firms like BP are under shareholder pressure to invest in fossil fuels rather than renewables.

Recent international developments persuade me that nuclear war is a greater and more proximate threat. Without the US defence umbrella, and its own conventional land forces beset with challenges, Europe might be tempted to resort to a nuclear response to an invasion of its territory.   But the 515 or so nuclear weapons possessed by Britain and France are strategic and they lack the tactical weapons possessed by the United States and Russia.  These are worrying enough, but they are a stage short of all out escalatio.

In defence of 'Rachel from accounts'

The media love to campaign against a particular minister and bring them down to demonstrate their power.  Tulip Siddiq, the Economic Secretary to the Treasury, is in their sights at the moment.  KemiKaze has called for Starmer to dismiss her. She has reported herself for investigation and in any case is a minor prize.

The major target is Rachel Reeves with the right-wing media gleefully reporting that she will be out of a job in a year. Quite a bit of this commentary is misogynistic, not least from buffoon Boris Johnson whio likes to call her 'Rachel from Accounts'.   

As she is lockstep with Keir Starmer, he is the real target.   There have been allegations online that a prominent British commentator is colluding with Elon Musk to find ways of bringing down a legitimately elected government.  I didn't hear so many complaints about the first past the post system when the referendum to make a modest reform of ir was voted down.

There have been a few missteps.   Limiting the winter fuel allowance was the right decision but too politically costly for the sums saved.   It was not a measure targeted on those who needed it: last year I had to spend time and effort researching energy charities to give away the money I had received as a higher rate taxpayer.

As for the employers' national insurance surcharge, I am surprised that larger companies with substantial profits such as retailers cannot absorb it.   As for smaller business, to judge by the town I live in, the hospitality industry has substantial structural overcapacity.   Business has not made any constructive suggestions about how the fiscal gap might otherwise be filled.

Reeves is alleged to have 'fled' to Beijing on a prearranged visit because of some turmoil in the gilts markets which was evident in the equivalents in France and Germany.   The real issue here is concern about the impact of the Trump presidency on the US economy with tariffs stoking inflation and hence affecting the willingness of the Federal Reserve to reduce interest rates which in turn has global impacts.

Comparisons with the IMF intervention in 1976 are invalid.   In ant case, the subsequent literature shows that the extent and depth of the problem then was exaggerated, but played into the hands of those who wanted to cut public expenditure.

David Smith in the Sunday Times today offers a balanced, informed and proportionate analysis of recent events.  He points out that although the pound has weakened against a strong dollar, although less so against the euro.   He comments: 'Comparisons with the autumn of 2022, when Liz Truss was prime minister and there was a loss of control of fiscal policy, are silly. Although gilt yields are higher now than then, they are close to the level of short-term official interest rates, the 4.75 per cent Bank rate.'

What we need to do, as Smith urges, is to focus on the underlying causes of our present problems: weak economic growth and very weak productivity.   I agree, but these problems predate the arrival of Rachel from Accounts.  

Farmers voted Tory after all

After many declaring that they were fed up with the Conservatives, the majority of farmers stayed close to their traditional allegiance and voted for the Tories in the 2024 general elecion after all, according to a survey conducted by Farmers Weekly.  (N = 767, 'strong spread by region and farm type', but owner-occupiers may be over represented. Self-selected sample).

Prospective voting surveys showed farmer support for the Conservatives decline from 72 per cent in 2020 to just over 40 per cent in 2024 before the general election.

In the event 57 per cent voted Conservative, while 15 per cent opted for Reform.   Despite the success of the Liberal Democrats in rural constituencies, only 8 per cent voted for them.  4 per cent voted for other (probably mainly the Plaid and the Scottish Nationalists).   Just 4 per cent voted for Labour with the balance made up by non voters and 'prefer not to say'.