Wednesday, 20 October 2010

Not all the bankers fault...

Excellent blog from George Kendall today on the Lib Dem voice (link) which I think in many ways adds to my points regarding Labours mismanagement of the economy during our economic boom years.  He makes his points much more eloquently than myself, in particular there is the encouragement of the housing bubble following the bubble bursting which I had previously neglected to mention.

Over all I fear that despite the huge spending review today we will not be in a situation where we will have a budget surplus (and therefore able to pay back our debt rather than reissuing it) for the foreseeable future.  This means our interest payments will only go one way, though much slower than if this had been left to Labour.

I hope that the figures quoted today by Mr Osbourne are correct and that despite a reduction in the head count of public sector workers over the next four years unemployment will fall.  If it doesn't fall then our immediate economic future is fairly bleak and a lot of people will be left in very difficult situations.

Tuesday, 19 October 2010

The good and the bad of being in a coalition

Blog overload for today, three in one day!  Two very important pieces of policy have been released today, one good, one bad.  I shall start with the good.

Trident will not be recommissioned until at least after the next general election.  This is a massive win for the Liberal Democrats.  I, like most Lib Dems, am massively anti nuclear.  I cannot see any British Prime Minister ever pressing the button so to speak and giving the order.  I am in general anti war (there are some that must be fought, but lots could be avoided) and more to the point I am one for practicing what we preach.  It is one thing to tell Iran that they can't have nuclear weapons whilst still aiming ours at them, it is another to take the lead and disarm our own (the review today says that we are getting rid of 25% of our warheads, which is a start).  I am more than happy for USA, Russia and China to be armed, however I don't feel that there is a need for a country like Britain to have nuclear weapons.  It was clear Tory policy to renew trident, as such I see this as a big victory just delaying the decision - it wont be done on our watch! 

Now for the bad - Council House.  I will admit that I haven't studied this change in detail, however the headline that I see is that the government are removing the right to remain in a property goes against the supposed policies of encouraging stable families and is likely to hit those who need it most hardest.  The main benefit of a council house is that you have security, you know for the future whatever happens you have affordable housing.  I don't come across this much in Bath to say the least, but I know of quite a few low income families up north who rely on their council house and without it would struggle to get by.  If the policy is one of compulsory moves then I think it is fundamentally wrong and should be looked at again.  Doing this would break up communities just as DC is trying to promote his big society.  If however circumstances have changed and you give the people the option to say buy, or rent at the market rate then that may be different.  (Though for those renting you still have the problem of when they retire!)

So in my opinion today has been good and bad!

Spend Spend Spend...

Stephanie Flanders, the BBC's Economics correspondent has posted an excellent blog today.  I normally find her quite informative without always agreeing but this was particularly good.

The gist of the blog is providing a picture of how we have come to be in the position we are.  I think the graph she has included is quite telling.  I would have liked it to provide a trendline up to 1997 as a comparison, I think this would show much lower government spending come 2015 than is predicted.

This is the reason that I still blame Labour for our recession.  I know that this was a global crisis, however if they had been managing our countries finances better then this correction wouldn't be needed.  Labour were lucky enough to come into power in a period of economic prosperity (bar the period around 9/11) the conditions were there for consistent economic growth.  In periods like this the government shouldn't be spending everything that it receives, it should be holding a bit back for the inevitable storm that is to come.  I know I'm guilty of following along with this, as I did vote Labour in 2005 (in a Labour/Tory area).  It wasn't until the 2006 or 07 budget (after long enough studying economics) that I started to question whether Brown was as prudent as he claimed.  For as long as I could remember he had been talking about debt and how it would come down in the future, though it never seemed to.  It was this expansionary policy that has come around to bite the nation quite considerably.

It would be fair enough if we had been saddled with debt but find ourselves with state of the art services provided by the government, however I don't think we have.  The NHS eats money, and is totally inefficient (though fine institution).  Schools have improved in places, but not everywhere.  My mother works in a school, she recently had an office developed for her (was needed but it isn't front line).  She was told it had to cost at least a certain amount, if it was below that amount they couldn't class it as a capital project and get the funding for it (it would have had to come out of the normal budget - which would have reduced what could be spent on front line teaching).  Public transport is laughable.  As a commuter I have to endure delays on a regular basis, over crowded trains and spiraling prices.  The bus alternative would take much longer and just isn't feasible or desirable!  Whilst I applaud the concept of improving services it seems to me that much of these funds were wasted/swallowed up by higher wages, particularly at management level. 

I therefore blame Labour for letting spending get away from them, on things that shouldn't have been priorities (such as ID cards) or inefficiently spent and not saving enough when they had a chance.  If we had been running a budget surplus then we would have had no problems borrowing money to "bail out the banks", with that having the potential to make money rather than costing money.  It would have saved us a fortune in debt financing and we could have used standard Keynesian economics to spend our way out of recession.  It may not have been hitting us as bad, countries like Canada and Australia have come out of this fairly unscathed.  Although this is unlikely with our reliance on the banking sector, the government could have been better positioned to act.

What I have described, what Labour should have done is in an ideal world.  Unfortunately, we have a system where by a new government is elected every at least every 5 years.  Therefore there is no incentive for the party in power to actually practice fiscal prudence.  They know that their best bet on winning the next election is a generous budget (spending lots, taxing little), if they lose it's then on the other party(ies) to sort out.  The Labour government (as I have said before) were only concerned with power and did what they needed to do (or thought they needed to do) to stay in power.  Basic principal agent theory shows that governments will never be perfect, the principal (the electorate) and the agent (the government) have different utility curves/factors motivating them, however I think the way Labour handled their 13 years in power was incredibly short sighted and means I will probably never trust them again.

Policy that is just wrong!

There was an excellent article on the FT website at the start of the month, which can be read here (however it is behind their paywall).  I think it does an excellent job at removing some of the fallacies that surround immigration whilst at the same time admitting the problems it creates.

Firstly, there is the common complaint that people only come to our country in order to claim benefits.  According to the data in the article if a migrant (from one of the A8 countries) is in the UK for more than two years there is a 20.2% chance they will be claiming a benefit (that means 4 in 5 aren't!) this compares with 39.7% of "native" Britons, almost double.  In addition to this they are net contributors to public services, paying on average £1.37 of tax for every £1 of public service they use.  Native Briton's are net users at £0.80 of tax for every £1.  

These figures of course only from the A8 countries: Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia.  The government can do nothing about this migration.  

More importantly in my opinion was the details on the effect of income.  

Particularly of interest is the graph on the left.  This shows that there is a negative influence on wages of those who are in the lowest 20% of earners from migration.  I guess this is intuitive as migrants are often willing to work for less.  However above this figure it is actually positive.  Remember, the government cannot do anything about European migration and has already stopped unskilled migrants from entering the country, therefore the policy of reducing the skilled migrants entering the country makes no sense.  

The Tory policy is that of halving the net migration figures will therefore damage the economy.  We have seen it with scientists who have been unable to obtain a visa and as such have gone to prestigious universities else where to continue their research.  I am also witnessing it first hand at work, where a very hard working (normally the first into the office and almost always still there when I leave) and capable employee of Asian descent working for our Asia division is struggling to get a visa to continue to work in the UK.  This is despite her being here for numerous years, earning all of her money and spending it here, paying taxes, speaking perfect English and building a life here.  It would be wrong to say that a British person couldn't do her job, however I can't see them doing it better.  Our business is helped by the fact we are a multicultural firm, with native French, Spanish, Italian, Swedish, Chinese and Czech employees, as most of our business is done in conjunction with the EC and with projects carried out in countries where it helps to have the local knowledge.

These skilled workers are going to be squeezed even more when you consider how feasible David Cameron's proposal is.  Mark Easton posted an excellent blog on the BBC in August (here) which illustrates how much of our immigration is down to students.  In a time where tuition fees is a hot topic, can we really turn away people who already pay more than £10k a year to study in our universities?

My opposition to the Tory policy however doesn't boil down to evidence of what is good or bad for our economy (though I think the evidence proves that the policy will be bad), it boils down a matter of principle.  I am a liberal, I believe in people living the way they choose.  The Liberal Democrats claim to be working towards removing any misfortune of birth, I see this as one of the biggest.  There is a big wide world out there and I would hate for someone to tell me that I couldn't live where I wanted to just because I wasn't born there.  Protectionism may (or may not) be good for a country but it is not good for the planet.  All the divisions and secularism only builds walls between people, leading to discourse and hatred.  We should be working towards a world (in this globalised age) where we are one community that respect other people's beliefs, traditions and customs. 

Thursday, 14 October 2010

More thoughts on higher education...

Something I totally didn't consider in my last blog was the externalities of higher education.  I focused solely on the benefit to the individual.  My thoughts being that the most rewarding courses would probably cost the most.

However to society, the most rewarding courses are probably doctors.  As a career however they would not be as rewarding, the cost would also be much higher to train a doctor.  As such making people pay the cost of their course would have someone with a debt hanging over them throughout the majority of their career.  This would decentivise most people from entering the profession.  As a result the positive externality needs to be taken into account by the government.  Further subsidies need to be given to courses of social importance.
As such I reiterate what I've said previously, that I am yet to hear a fully workable and affordable policy on this that is also progressive and fair!

Wednesday, 13 October 2010

A bright future?

The Browne Report has been issued and for the first time I find myself massively disagreeing with the coalition's stance and the Liberal role in the coalition.  My initial objection is not what the best policy is, I am yet to hear a policy that I think is workable and desirable, my objection is a matter of principle.  

The Liberal Democrat MPs, all 57 of them (including Nick and Vince) ran on a campaign of a plan to eventually reduce student fees down to £0.  They said this plan was fully costed and worked out.  They also signed a pledge stating that they would vote against any raise in tuition fees for the entire length of the parliament.  Therefore I don't see how any of the MPs can not vote against any measure (correctly or otherwise) and retain their credibility.
This isn't a make or break issue for me, mainly (selfishly) because I am no longer affected, however it will throw doubt on the party as a whole, it will also decimate our vote in the next election.  I haven't been too perturbed by our ratings in the poles as I fancied that if the coalition does a decent job, gets the deficit down and has a growing economy in 2015 we should be able to campaign on the back of a successful mission in government, however renege on this promise and I cannot see younger voters voting for the Lib Dems again.  This is an issue that is very close to their hearts because it matters to them.  People may argue that they don't get involved in politics but those who go to university are more likely to vote than those who don't.  

Take a town like Bath for example, the population is around 85,000, of that there is around 16,000 students.  I'm not naive enough to think that every student votes for the Liberal Democrats, but the proportion is a lot higher.  Should he not vote against the rise I can see Don Foster really struggling in 2015.
I know the Conservatives can twist the knife by forcing those in ministerial positions to follow the coalition vote (or face losing their well paid positions, I'm getting cynical now).  I reckon they will have enough support from Labour to get the motion through with the Lib Dems abstaining as after all, they introduced the fees and were in favour of scrapping the cap all together, plus many of their shadow cabinet don't agree with Ed over a graduate tax.  The problem comes with the Tories being able to use this as a possible reason to end the coalition, they can say that the Lib Dems had only promised to abstain on any vote, so basically they are between a rock and a hard place.  

I will reitterate though that the only thing I think is feasible is for all Lib Dem MPs to vote against the proposal.  Otherwise our reputation as a party will be damaged, probably beyond repair.

I know that no final legislation has been drawn up yet, but the only thing that Vince can recommend is something progressive, the current recommendations aren't progressive enough.  Yes they charge interest on those who earn more than £21,000 above the level of inflation, however someone earning £50,000 will pay back less than someone earning £22,000, and will do so much quicker.  I definitely would not advocate the prospect of people being penalised for paying it back early, this is a question of fairness, for everyone not just the poorest.  This is not like a bank issuing a mortgage, they do this for pure profit, a government issuing such a loan is doing so at a subsidised rate and not doing so for profit, these should be there to help those who need it, not penalise those who don't. Also many current proposals have money recouped through the tax system, this doesn't then account for those who go on to work overseas, which effectively would result in them receiving a free education.

I am aware that this blog is a bit of a jumble of thoughts but here is what I think about the system.
  • There is a cost that is associated with someone being provided with an education.  These costs should be looked at to see if they are reasonable and if they can be reduced in any way.
  • A student is the person that benefits most from their education, this is a choice they make and shouldn't be 'free for all'.
  • Different courses obviously have different costs and values attached to them and as such should charge different amounts.  I think it is clear that a degree from Oxford in Law should cost a lot more than a degree in media studies from Teesside.  These should be monitered independently in order to ensure fairness.
  • How much money you have should not be a barrier for entry when applying for university.
  • Therefore government assistance should be given to those who need it - in the amounts they need it to meet these costs.  
  • Students should not be penalised for taking government help and therefore the loan should only rise with the rate of inflation.  
  • The only staggering I feel that should be done is the amount paid back should be increased as your wage increases.  For example 2% of income between £15k & £20k, 5% between £20k and £30k, 10% between £30k and £40k and 15% for higher.  
Those are just my thoughts, I'm sure better qualified people could come up with a better solution - however I maintain that the Lib Dem MPs cannot justify anything but voting against an increase given their previous pledges.

Sunday, 3 October 2010

Faith divides us, death unites us.

I've been thinking a lot about religion since the Pope's visit (and a brief association with someone who had religious beliefs).  Those who know me know that I am very anti religion.  I see it as a means to control the masses.  You get those less learned people (in the old days) to do what you want them to do with the promise of good things if they do and eternal damnation if they don't.  The whole premise of this is a bit ridiculous.  Think of the suicide bomber who is expecting 72 virgins when they reach 'Heaven' - it hardly sounds like heaven for those 72 virgins!  

I worry about people blindly following things that were said 2,000 years ago (and prior to that with the Old Testament).  I am not an expert on the history of these things but I don't think it has ever been proven who wrote the original versions or the motives behind it.  I believe that originally it was thought that the first five chapters (Genesis - Deuteronomy) were originally written by Moses, but it has since been proven that this couldn't be the case.  I think my problem with this is just the general lack of questioning.  

My opinion of the Bible however is that it is the greatest story ever written.  That is not to say I believe it happened, I do however think that it acts as great moral guidance but should not be taken literally.  At the same time I think this links to my problem with religions people in general.  They in general appear to be good people, however again I question motive.  A Christian (for instance) may perform the exact same act as an atheist however they could have totally different motives.  The Christian may have done it because it's the Christian thing to do, as a result will improve their chances of going to heaven and reduce the chance of them going to hell - a selfish reason for performing the act; however an atheist has no such considerations and is much more likely to do the same thing simply because it is right to do so.  Therefore I would rather have an atheist person offering to help because you know that their offer is genuine.

Having said that, I'm jealous.  The one thing that tends to be common amongst all people of religion is their blind faith that at the end of it all there is something better.  Now I believe in living life to the fullest because you don't know when it will end or what will happen once it does, these people know (rightly or wrongly) what will happen after it ends, that must be some comfort.  In the dark depths of night, what comfort is there in being right? Not following the herd and questioning other people's assumptions?  Who is the happier person.  I am reminded of something that was said on 'Shameless' by Frank Gallagher (who I'm sure is always remembered for his wisdom), it was something along the lines of:

"In the deep dark depths of night, even the most devout atheist has doubts"

Red Ed...

Unlike John Rentoul (bias political commentator for the Independent - not even party bias, Blairite bias!) I will not make a habit of calling Ed Miliband childish names.  I've had a while to think on it now so I wanted to give my two cents regarding his opening speech and on him in general.

First I do find it a little rich that a 40 year old classes himself as a new generation, and then goes to say that the new generation has nothing to do with age.  It is a strange set of affairs when a generation isn't even generational.

I did like the fact that he spoke more about himself.  Many people have been critical of this, that there wasn't enough policy, however he didn't even have his shadow cabinet so how could he have been expected to form detailed policy.  Most of those who had been critical were from the right wing media, who seem to have conveniently forgotten that David 'chameleon' Cameron had no policies for a long time after he was appointed leader of the opposition - in fact they hardly had any in the general election campaign!

I totally object to the following line:
"And let me tell you, there is nothing good about opposition."

Opposition is a crucial part of our political system, it is needed to scrutinise government policies and make those in government think about alternate points of view.  The good thing about opposition is that you were still elected to represent your constituencies and put across their points of view in parliament.  

It was good to see him publicly denouncing strikes, however his overall views on the deficit didn't go far enough.  Yes he said they wouldn't oppose all cuts but there seemed to be no real grasp on the fact that the situation is so bad because of the Labour Governments budget deficits before the crisis.  That was a time when the country was going through an economic boom with good growth, as such the government should have been saving rather than expecting this to continue exponentially.  Don't get me wrong, he is a step up from Ed Balls in this regard, however I don't see him advocating deficit reduction enough.

It is also good to see him publicly back AV, hopefully this means he will put the Labour Whip onto it, with Labour actively campaigning for it.  This is the only possible way I can see it happening.  It would be a massive chance missed if we fail to change the voting system.  Nobody really knows what it would do to the results, it could reinforce the two party system or totally break it down, but it has to be better to have an MP that most of the public prefer and as such it's a step closer towards PR.  
A negative is that he states that to change Britain we need new politics.  He seems to have failed to notice that we have a peace time coalition government who wouldn't naturally work together.  That is new politics.

Also he seems to think that people will have forgotten about the past 13 years and that he was a part (since 2005) of the Government who oversaw the biggest invasion into our personal/social freedoms.  He voted for ID cards and other invasions and doesn't appear to regret all of them!  In addition to this he also voted to reduce scrutiny on Government actions and was for nuclear power.  He may argue that he was bound by collective responsibility which to an extent I can understand.  

This however makes me wonder about his anti Iraq stance.  If he always felt bound by collective responsibility (only ever 3 votes against the Labour majority vote) would he have been as against Iraq as he claims.  Again, it is good that the leader of the opposition is now taking the stance that the Lib Dems have always taken, that the Iraq war was wrong - but I don't think he'd have voted against it.  There hasn't been a vote cast by Ed that has been against the war/for an inquiry into it etc.  This brings me to my main problem with the Labour party:

David Miliband: "Why are you clapping, you voted for it"
Harriet Harman: "Because he's leader"

No Harriet, that's the wrong answer.  The correct answer is: "Although I believed it to be the correct decision at the time with the information available it has subsequently become apparent that we made the wrong choice".  People like Harriet are incapable of admitting they were wrong, she is not alone on this, but quite clearly she is a person who will just echo the leader's opinions in public and probably in private in order not to hamper her own career.