...a blog by Richard Flowers

Thursday, September 26, 2013

Day 4651: A Reminder Of Why Hard Labour Cannot Be Allowed to Change the Argument On the Economy


This week I thought Ed Balls got something right.

It’s a good idea to get Labour’s budget plans audited by the Office for Budget Responsibility. The Liberal Democrats have long asked the IFS to check our figures; it would be very useful to voters to have an independent eye scrutinise the numbers of all the parties to have choice based on priorities not dogma. And it would make Mr Balls spell out Hard Labour’s policies well in advance of the election.

I just don’t think that makes him the fiscal paragon that Polly Toytown seems to think he is.

Iron Balls, Polly? Really?

Yes, I know I shouldn’t read the Grauniad. Especially not Pollyanna Toytown and her increasingly absurd hagiography of the Hard Labour hierarchy.

(Sunday’s Andrew Marrmite paper review where Polly’s partisan points are repeatedly punctured by Matthew Parris is moderately hilarious. It would have been funnier if she realised he was taking the proverbial.)

Ed Balls, Mr Frown’s representative on Earth and a very central part of the former Chancellor and Prime Monster’s extended campaign of attrition against anyone who looked at him funny, remains a hugely divisive figure and probably the Achilles heel of Mr Milipede’s operation. For all his undoubted political skills – as a prophet, he’s made so many claims about the economy that some of them were bound to come right – he’s played fast and loose at the Treasury (not to mention with his colleagues’ careers) too often for him to be trusted.

But this denialism about Labour’s responsibilities for what they did in government for thirteen years is all part of their plan to pin the blame on the Coalition and snatch back power in 2015. And we cannot let it stand.

The short form is “You can’t blame Labour for the Worldwide recession”, which sounds superficially reasonable, but it’s hiding some of the key facts.

It’s a bit like this:

“I went driving too fast in a snowstorm and crashed the car, but you can’t blame me for the snowstorm.”

Well, no, but you could see that it was snowing and you were driving too fast.

“But you can’t blame me for the snowstorm.”

It’s a strawman argument.

And it keeps being regurgitated like a form of self-hypnosis so that left-wing commentators, left-leaning voters and Hard Labour themselves can all permit themselves to forget that the biggest crash ever happened on their watch and excuse themselves of their culpability.

Here’s some of Polly’s take on it.

“Some primal political myths are now firmly lodged in the public mind.”
But that’s not going to stop them trying to use “big lie” techniques to try to dislodge them. Repeat this Labour-apologism often enough and maybe someone will start to believe it. What’s sinister is the way it starts out appealing to the conspiracy-theory freak tendency in the anti-establishment by accusing the accepted version of events of being “myth”.

“Labour's public spending didn't crash the economy.”
No, it was Labour’s failure to regulate the banks that crashed the economy, coupled with Labour actively encouraging a boom based on borrowing; Labour’s public spending just meant that we were in a far, far poorer position to recover afterwards. Also, who said “we’ve abolished boom and bust”?

“Labour was borrowing less than it inherited from the Tories.”
Well that’s just plain wrong because Polly’s forgotten to include the qualifier “in 2007 before the crash” from her crib card. Borrowing in 2008, ’09 and ’10 was astronomical.

But even if we give her a pass on the borrowing in 2007, what she’s saying is that at the height of the biggest boom in history when every Keynesian on the planet would tell you you should have been running a surplus, Labour were still borrowing. Yes, the Conservatives had badly lost control of the economy by 1997; that’s kind of why they lost, isn’t it. But since when did being a little less rubbish than John Major and Norman Lamont become the acme of economic prudence? It was actually by sticking to Ken Clarke’s plans in their first term – as they promised but no one, especially the Conservatories believed they’d do – that enabled Labour to pay down a reasonable sum off the national debt; but from 2001 onwards Gordon Brown did nothing but add to our borrowings.

“Osborne inherited a growing economy from Alistair Darling”
Darling borrowed 10% of GDP to generate 2% GDP growth. Any idiot could do that! But it’s not remotely sustainable is it, and of course the wheels came off again as soon as his artificial stimulus reversed. It was Darling, remember, who cancelled the capital investment program, Darling who promised “cuts deeper than Thatcher’s” and he was planning a post-election VAT rise to 20% to make the sums add up too. To the shame of both of them, Gideon being Chancellor made very little difference.

Those three points – “it was broken when we found it”, “we cut borrowing (if you squint at the figures)” and “Darling’s legacy of growth” – set on perpetual rinse and repeat are the clearest warning (if Damien McBride’s book was not enough) that Hard Labour have not rid themselves of the habit of spin.

Wednesday, September 25, 2013

Day 4650: Mr Ed is Mr Freeze (just don’t mention the VATman and Robbin’)


Just when you thought Hard Labour conference was going along nicely, copycatting all our Liberal Democrat policies – tax cuts for low-income workers, check; paid for by a mansion tax, check; more apprentices, check; more affordable and social houses, check; garden cities, check; votes at sixteen, check; net nannying, check (no, hang on, we voted to refer that back!) – when along comes Mr Milipede’s leader’s speech with a totally unexpected policy to capture the headlines freeze (for twenty months) the prices that companies can charge for energy.

I don’t know whether it’s a work of genius or lunacy.

It’s clearly pitched as a “game-changer”, after the fashion of Master Gideon’s 2007 Conference announcement of a cut in Inheritance Tax for dead millionaires that so derailed Mr Frown’s plans for a snap general election. As such it’s much more political than practical.

In practice it’s a four-and-a-half billion pound windfall tax on the profits of the energy companies, distributed directly to energy users.

(Obviously that’s a hugely regressive tax giveaway as it will benefit rich people with large houses and big companies with large energy bills much more than the less well off, an “energy cut for millionaires” as Hard Labour might call it, if the Coalition had suggested it.)

There’s also a serious question of who pays this four-and-a-half billion pounds. Four-and-a-half billion pounds is quite a lot of money and it’s going to come from somewhere. And the answer isn’t just “the energy companies”, because companies are just people really, and money that companies make gets paid out, either in salaries or to the shareholders. It’s not just the money paid to shareholders that is affected by this profit hit – companies may choose to cut bonuses, curb salaries, or just plain axe jobs to claw back some of the cost of Mr Milipede’s largesse with other people’s cash. But let’s assume that it mainly hit’s the shareholders: that’s fat cats in the city right? Well again, not really.

Of the “big six”, Centrica and SSE plc (formerly Scottish and Southern Energy) are British-owned, quoted on the London Stock Exchange and are FTSE100 companies; npower, as a subsidiary of RWE, and E.ON are usually described as German-owned, but like their British equivalents they are public companies listed on the German stock exchange and are members of the blue chip DAX index; similarly Scottish Power are a subsidiary of Spanish company Iberdrola who are quoted on the Spanish IBEX 35. The one of those kids doing her own thing is EDF (√Člectricit√© de France), Europe’s largest energy supplier, providing power to more than a fifth of the continent, including us (Mr Farage, take note). Although theoretically privatised and quoted on the Euronext exchange, the French government remains the largest shareholder, owning 85% of the shares.

Crudely speaking our energy generating capacity is owned by: 23% British, 34% German, 9% Spanish, 17% French and 17% smaller companies (including the Irish EDS and France’s GDF-Suez).

But because they’re almost all publically quoted, anyone with a European portfolio – and that means most British pension funds and British Insurance companies – would ultimately be affected. Yes, a fair amount of that pain would be “exported” to our no doubt very grateful friends in the European Union, so that’s fine isn’t it – let’s shaft French and German pensioners instead of our own.

And don’t think the French government wouldn’t be narked. I mean it’s not like they’ve got a history of hauling Britain in front of the European Courts… oh…

But the practical considerations of setting your face against the worldwide trend in energy inflation or launching another raid on pension funds or pissing off Europe again, even without getting into the legal challenges from the six power companies that have sewn up the UK energy market, are almost neither here nor there.

It’s bound to be very popular, isn’t it. The energy companies, after all, are disliked almost as much as Mr Milipede (maybe not as much as Cap’n Clegg). More importantly, it’s going to be popular between now and the general election in May 2015, and never mind whether or not Hard Labour ever have to implement it. (Remember, Master Gideon’s “Tax Cut for Dead Millionaires” was merrily traded away in Coalition negotiations in 2010!).

And it helps to move the agenda onto the territory that Hard Labour want to play on: away from the wreckage of the economy that they left in 2010 (and whether or not the recovery is enough to mean the Coalition have fixed it) and onto their so-called “cost of living crisis” where people as individuals feel very small and disempowered against these large (and largely privatised) companies that seem only to put their prices up and up, and widening the gap between the end of the money and the end of the month.

(Hard Labour’s part in setting up these massive near-monopolies – the mergers that turned a “Big Ten” energy companies into a “Big Six”, say, taking place between 2006 and 2010… who was Energy and Climate Change Secretary at that time? – all quietly swept under the carpet. Just as with shifting their complicity with the Banks for the crash, “Big Business = Tories” sells too easily for any blame to stick.)

Clearly it’s better to be known as “Red Ed” than as “Mr Nobody”, and – like Master Osborne – with one bound Mr Milipede has re-established his reputation. He makes a very good story out of joining the dots, too, from his “squeezed middle” via “ predators v producers” to this. (Though I’m ever so reminded of the Dr Woo story “The Curse of Fenric”: not because of “something nasty rising up from the sea” in Brighton, but for taking disparate and unconnected plot points and post-facto justifying them as a “story arc in retrospect”.)

He’s certainly created “clear red water” between himself and the Conservatories (possibly making Cap’n Clegg’s positioning of the Liberal Democrats as the moderate middle look wise in the process). And ironically – after a summer spent trying to distance himself from the Unions that got him elected – he’s made the Unions very happy with this apparent rediscovery of Socialism. Or at least Statism.

Big, sweeping State interventions are the stuff of Old Hard Labour’s Sixties and Seventies heyday, when then Industry Secretary (and now darling of the Left) Tony Benn would impose massive mergers on British industrial sectors – computing, motor cars – and… well how did that work out? Or to put it another way, why don’t we have a British computing or motor car industrial base anymore?

(There’s got to be something wrong with the thinking of a man who diagnoses the problem as “the Civil Service stands in the way of progressive change” and the cure as “Nationalise all industry… into the hands of the Civil Service”. Maybe get back to us on that, Tony.)

There’s even an element of the Social Market in it that might appeal to Liberal Democrat hearts – note that even I’m not wholly ruling this out as an idea – with Milipede justifying his sweeping – and entirely arbitrary – market intervention as a “correction” when the market has “failed”. How exactly has the market “failed” though? Repeated MMC investigations have failed to turn up evidence that the power companies are collaborating. And Tesco makes a higher profit margin that several of the “Big Six”. Are we suggesting that the government should freeze Tesco’s prices too? I suppose, every little helps.

But it doesn’t just end there, does it. If Mr Milipede can wave his wand and, on a whim, freeze the price of one group of supposedly private companies, why not wave it again over the price of, say, houses? Everyone agrees that house prices are too high, so how would you feel if Prime Monster Milipede just declared that the value of your house was halved? (Not your mortgage, just the house. Can you say: whoops negative equity?) Not similar? Well, people will have paid money for shares in the power companies; arbitrarily freezing the income of those companies cuts the value of those shares just like that too. Pity if it was your pension pot that suddenly fell short.

This is where we get to the real problem – and the real danger - of Mr Milipede’s rabbit-from-the-hat policy announcement. In the Sixties and Seventies, the government thought it could “pick winners” and it did it very badly. Mr Milipede thinks that he can “pick villains”. What if he is just as wrong?

When that other Phoney Tony, Lord Blairimort (what is it with Tony B’s?) got into Downing St, New Hard Labour discovered that pulling the levers of government didn’t change things as quickly as they wanted, if at all. Their solution? More levers!

Mr Milipede appears to have discovered the Mother of all levers.

It is genius. But it is lunacy.


Edited to add:

Beaten to the punch by Alisdair at Lib Dem Voice with similar points: "terrible economics but excellent politics".

Factcheck response: "skeptical".

Sunday, September 15, 2013

Day 4641: A Doctor Woo Metaphor for Conference


If the Conservatories are the dastardly DALEKS… and Hard Labour are the soulless CYBERMEN… are the Liberal Democrats:

a) The SILURIANS – green-tinged former rulers of Earth; now caught in a suspended animation time-warp…

b) The SONTARANS – bit shouty; always keen for a fight; treated as a bit of a joke by everyone else…


c) The WEEPING ANGELS – kill you with kindness; change position suddenly when you’re not looking; can’t even look at each other…

Monday, September 02, 2013