Bashing Bozza

Channel 4's Dispatches did a hatchet job programme on Boris Johnson as London mayor last night. It's evident that Bozza has his faults: no overall strategy; too keen on getting in the media (but which politician isn't); and obsessed with bendy buses which are not as problematic as he claims.

However, this problem lacked any balance whatsoever and I thought that Channel 4 had a public service obligation. It even dragged up a conversation that Boris had had years ago with a friend subsequently convicted of fraud. This was trailed as a great revelation given that the friend was proposing to have a journalist worked over, but Bozza seemed to be trying to restrain him, at least in terms of the level of violence applied.

At the start of the programme Bozza was blamed for not doing anything about the global financial crisis, although quite what the Mayor of London is supposed to do about that, or what powers he has to do anything, escaped me. In many ways, although there are considerable planning powers attached to the post, it is a symbolic role.

Bozza was also quite right in one of his major decisions, to get rid of the Metropolitan Police Commissioner. Whatever the Minister for London (who has hardly covered himself in glory over his expenses) may say, the post was politicised under New Labour.

Quite understandably Bozza got a bit irritated at the television team that trailed him and I ended up feeling sorry for him which I am sure was not the programme maker's intention. Ken only made a brief appearance, but I am sure he enjoyed the programme.

Hamish and Kirsty go bust

I advised a family member that a Scottish mutual would be a safe place for their money and now the Dunfermline Building Society, the largest in Scotland, has gone bust. Investors will, of course, be protected and the profitable parts of the business sold off. However, the fact that such a body could go under does bring home the extent and depth of the financial crisis.

A senior executive of the Society was on television this evening complaining that 'faceless mandarins' in London had failed to bail out his society. Admittedly at £60m the cost is small compared to some financial bail outs. But why should taxpayers shell out to save an institution which has been caught out by risky commercial lending, as well as other failings?

There is a Scottish politics dimension to all this. Dunfermline is next door to the prime minister's constituency and there will be job losses. The Scottish Government has been involved in discussions about the Society's future. However, it may be that the Government feels that it owes them no favours, particularly when it comes to the independence of Scottish financial institutions.

Michelle trips up Gordon

The writer (centre) enjoys one of the best glasses of red wine he has ever had in the courtyard of Chile's presidential palace

Gordon Brown's quest for support ahead of the G20 summit has taken him as far south as Chile. Nothing wrong with that: Chile is a country I like a lot and I am looking forward to returning there in July.

Gordon denied that he was going round the world looking for comminqués, but probably did not expect a rebuke from Chilean president Michelle Bachelet. Ms Bachelet pointed out that Chile had saved revenues from its copper exports 'during the good times', enabling it to put in place a fiscal stimulus package worth 2.8 per cent of GDP.

Britain is now running out of money for any substantial further fiscal package and George Soros has raised the spectre of a bailout by the International Monetary Fund. 'You couldn't make it up,' chortled shadow chancellor George Osborne. 'Gordon Brown is getting lessons from the Latin Americans about sound public finances.'

Bash a banker

It's always interesting when you are out of the country for a week and stories develop a momentum without you being fully aware of them. Clearly there's something of a 'bash a banker' mood in the UK (and in the US). This has been to some extent whipped up by politicians who see them as convenient and popular targets that can distract attention from their own mistakes. However, now they are starting to think that this might have developed to such a stage that it could impede financial recovery.

What used to be called a day of action is in preparation in connection with the G20 summit and there is quite an interesting story here:
Protest

It would be very difficult to defend the claiming of rewards for failure in the banking sector, although some of the mechanisms that have been proposed to deal with this in both the US and the UK are unconstitutional/illegal and represent an unwelcome return of punitive taxation. An uncomfortable fact about capitalism is that 'greed' is what actually drives it to a large extent.

A spectre is haunting Europe

There is a spectre haunting Europe and it is the spectre of industrial policy. Some of the more ambitious dirigiste aims of President Sarkozy have been tamed by the European Commission, but there is no doubt that interventionism is back in town. I even heard someone argue the other day that the market is finished as a form of social organisation.

Whether politicians and bureaucrats can make better decisions is far from proven: rather the contrary. Those of us who studied industrial policy in the 1970s came to the conclusion that it was a highly dysfunctional form of policy for the following principal reasons:

1. It enables multinational companies to play one country off against another to extract funds (which is why we need an EU state aids policy).
2. It is very difficult to demonstrate 'additionality', i.e. that the additional funds made available lead to investment that would not otherwise occur.
3. It is very difficult for politicians and bureaucrats to pick winners (or 'losers')
4. Often decisions are made on electoral grounds, e.g., the sensitivity of a particular constituency or region.
5. Often investments were replicated in different parts of the country for political reasons when there was no good economic case: steel and aluminium provide good examples.
6. Large companies were generally favoured over smaller countries.
7. Industrial structures were ossified, particularly in terms of over capacity.

The political pressures to 'save jobs' are nevertheless enormous which is why it was encouraging last week to hear Lord Mandelson say that government (or the taxpayer) is not a huge bail out fund.

Capitalism has recurrent crises, but they also have a purgative effect, producing a leaner and fitter economy. In this respect I await one of the first books by a leading political economy academic on the global financial crisis. The Spectre at the Feast by Professor Andrew Gamble FBA of Cambridge University will appear from Palgrave-Macmillan in the next couple of months. Gamble

Labor wins in Queensland

Brussels: Labor has retained office in Queensland with a reduced majority. The merged Liberal National Party, with a singularly uncharismatic farmer as leader, was unable to make enough headway in urban electorates in and around Brisbane.

In Beaudesert, right-wing populist Pauline Hanson was defeated with 22 per cent of the vote. She blamed her defeat on hounding by the media and in particular the publication of fake photos purporting to show her in the company of a black adult actor with the stage name of Long Dong Silver.

The market for populism more generally remains buoyant in the recession and we can expect to see it as a strong force in the European Parliament elections, not least in Britain. What's wrong with populism in a democracy? It appeals to baser human instincts and pretends that there are simple solutions to complex problems.

Dave sets out his stall

The extent of the problems facing the British economy in particular in the global recession are increasingly becoming apparent. Claims that it was particularly well placed to withstand the recession do not stand up to scrutiny. When I get time I will try and work through the evidence, but one only has to look at reports from the IMF or the ITEM club of economists.

Whichever government is in office after the next general election, it is going to have to raise taxes and cut public expenditure (in real terms when one takes account of the demands on services like the NHS). The key question is how one does it. Given that Dave Cameron is the most likely next British prime minister, a major economic policy speech by him last week is of considerable importance.

The only protected areas of public spending under the Conservatives would be health and the small overseas aid budget. The commitment to ring fence defence and schools spending will be withdrawn in April 2010, just before the likely election date. The commitment to sharing the proceeds of growth between spending and tax cuts has been abandoned. The priority will be to reduce the level of government debt.

It is hoped that savings can be made by scrapping the expensive identity cards project. However, Dave also pointed out that tax credits to help the poor had been extended to the point where they can reach people earning over £50,000 a year, so we can expect some cuts there.

Dave was careful not to rule out tax rises and made it clear that 'the richest in our society must bear a fair share of the burden'. Whilst the commitment to raise inheritance tax threshholds, which plays well in southern England, remains in place, the Conservatives will not reverse the 45p rate of income tax for those earning over £150,000 that is due to come into place in 2011. It's hardly punitive taxation, but it is a reversal of the policy started by Mrs Thatcher to reduce the higher rate of tax (which, in any case, has brought increasingly large numbers of people within its grasp).

The Conservatives believe that the electoral appetite of the last decade for more spending on public services has been sated. I think they are right in this assessment for a number of reasons. First, much of the increased spending does not seem to have had the desired effect if one looks at the problems at Birmingham Children's Hospital and in Staffordshire. Second, there is increasing resentment of what is portrayed by the media as a protected public sector, particularly in terms of fewer job losses in the recession and index linked final salary pensions. Dave has been able to make good use of the high salaries paid at Ofcom.

In 1997 one of the drivers that brought Labour into office was concern about the state of public services. The reverse effect is now happening. However, once a Conservative Government starts to make unavoidable savings, they may find themselves challenged by the unions and others and their popularity could quickly suffer. That is not to say that they should avoid difficult decisions and we are now getting more detail about what they would do as part of a deliberate process of lowering expectations.