The omni shambles and Labour’s difficulty capatilising

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The omni shambles which is the current government seems to continue. I mentioned the disaster which was the budget and the spin surrounding it recently. Jeremy Hunt and his special advisor have yet again shone a spotlight on the relationship between Rupert Murdock’s media empire and politicians (though of course the Tories were far from the only political party with close links to News International – take a bow Alex Salmond). It has been suggested that Hunt is being kept on at least for the mean time to function as a human shield for Cameron lest the focus turn to his links to News International both via Andy Coulson his former communications advisor and his personal friendship with his Chipping Norton neighbour Rebekah Brooks.

The Hunt saga, difficult as it may be for the government, distracted some attention away from what probably should be the bigger story: namely that the UK has returned to recession. If this news was taken relatively calmly it is no doubt because the stagnation of the last 2 years has meant that few people felt that we were ever out of recession.

Nadine Dorries one of the Tories loosest cannons launched a pretty scathing attack on BBC Radio 2 saying:

“I think that not only are Cameron and Osborne two posh boys who don’t know the price of milk, but they are two arrogant posh boys who show no remorse, no contrition, and no passion to want to understand the lives of others – and that is their real crime.”

It is probably unfair to say that Cameron and Osborne do not care: more accurately they seem to feel that there is simply no alternative to austerity. There is some truth in that and Labour proposed cuts as well, though not as fast. Furthermore although there may be no “Plan B” it may be that there will be a “Plan A2” with more infrastructure spending (Keynes lite). In the context of a double dip recession, giving large sums of money to the IMF at this phase of the economic cycle may seem a little foolish, unless its real reason is against the possibility not of further IMF borrowing by the EU but IMF borrowing by ourselves.

The economic case that austerity weakens the economy, prevents growth and, hence, worsens the deficit has been rejected by Osborne but is looking more likely to be correct. However, as mentioned above Cameron and Osborne genuinely seem to feel that there is no alternative. That smacks not of economic illiteracy but semi literacy. Again that could be said to be back to the theme of a dilettante government. Maybe even PPE could be blamed for providing self confidence and surface knowledge in the absence of a fuller understanding (though Osborne did History not PPE).

More than anything the current government’s travails make it seem to have limited control of the situation. It harks back to Norman Lamont’s resignation comment on the Major government that is was “In office but not in power”. If that was a fair critique of Major’s government it is and much more so of the current administration.

In light of the omni shambles it is unsurprising that Labour is ahead in the opinion polls: what is surprising is that they are not further ahead. Blair made mincemeat of the Tories in the run up to the 1997 election over their lack of competence yet currently Milliband seems to be having difficulty doing that level of damage. It is suggested that Ed Milliband feels that over the next two years the public impression of the incompetence of the Tories will harden and Labour will win. Thus far, however, the opinion polls still rate confidence in the woeful economic performance of Cameron and Osborne above such confidence in Milliband and Balls. This may change but at this mid point in the electoral cycle and with this degree of chaos Labour should expect to be much further ahead especially on the economy. It seems as if Ed Balls’s diagnosis is much more convincing than his prescription. Labour may win next time but one gets the general feeling that over the next few years the Tories’ popularity will rally and they may well win: if so essentially by default.

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  • http://nalil.blogspot.com Nevin

    “Blair made mincemeat of the Tories in the run up to the 1997 election”

    with a little help from Rupert Murdoch from at least the summer of 1995. Perhaps the Lamont comment could be posed as a question, “In office but who’s in power?”.

  • andnowwhat

    Nice blog Turgon. Chris Bryan has it summed up in his term #clustershambles. The Hunt affair has become an issue for Cameron due to Dave giving him such support. On the Daily Politics, a talking head said that he see’s Hunt being kept on until this week’s elections are over. If Cameron sees that as being a smart tactic, he’s very wrong. He could have got rid of Hunt and been seen as intolerant of Blairist style shennanigans. Of course, that was never on the cards as Dave is firmly within the Brooks/Murdcoh sphere.

    As I have alluded to previously, there is a sleeping issue in the form of the Andy Coulson, another case were Cameron exposed the ties he has to the coterie, which may well explode again at Levenson.

    The idea that ordinary people are not meant to see Dave flaunting his prejudices whilst reducing tax on the wealthy and at the other end, attacking the unemployed whilst deliberately creating more unemployment is frankly insulting.

  • http://redfellow.blogspot.com Malcolm Redfellow

    Tut, tut, Turgon-the-Wise: Labour’s difficulty capatilising. I have a horrible feeling that means Labour has difficulties being a wall-flower (as in Erysimum capitatum). In which case, we are into JFK and mythical doughnut territory.

    More generally, I cannot help reflecting that this effort is well below Turgon-the-Wise‘s usually-excellent standard. Yet it offers a range of starting points.

    First: the five-year parliament was the initial (and, I suspect, disastrous) political mistake. It sold out a PM’s ability to match the electoral cycle with the economic one. In May 2010 Cameron and Osborne were betting the farm on the economic and public-opinion climate being positive in May 2015. Hmm … I know that “a week is a” etc. is on John Rentoul’s banned list of clichés, but 250+ weeks? (That’s once). Cameron could likely have had Number 10 for the price of a “confidence and supply” agreement with the LibDems and/or SNP, done a Wilson ’66 and ’74, and come back with the makings of a majority. Especially had he played the EU-veto card more tactically (he won’t get that chance again). In 2010-11 only the Tories had the resources for a second General Election.

    Second (i), we already have heavy dissatisfaction with the Tory élite, inside and out of Westminster. The dissatisfaction within the parliamentary party grows as Cameron delays his inevitable reshuffle. There are a mass of Tory MPs who feel a pressing need for one of those totemic red boxes, and see them possessed by (e.g.) Lynne Featherstone and Sarah Teather.

    Second (ii), what “Mad Nads” Dorries is saying is far milder than constituency association types have been muttering for some time — I was hearing it as far back as that “Turnip Taliban” business in 2009, but perhaps I frequent the wrong bars. After this week there will be several hundred Tory ex-councillors who have been occupied with civic business these last four years now looking for someone to blame for having to spend more time with their families.

    For all of that, why would Labour be wanting to peak too early? A government, like a great tree, dies from the top; and has to be chopped down as expertly. Watch and wait ….

    Third, there seems growing evidence that the people of the EU are turning against austerity: Greece, Spain, Ireland, France, the Netherlands … can Germany and the UK be far behind? When (not if) that emotional moment happens, offering a palliative “Plan A2″ will not stop the electoral tumbrils rolling.

    Two final “by the ways”:

    ¶ If “in office but not in power” is not on Rentoul’s list (that’s twice), there are three-quarters of a million Google “hits” which suggest it should be.

    Nevin might also refer to Rentoul’s post (there’s number three) on Which Labour leader stood up to Murdoch?

  • andnowwhat

    I saw a talking head from the 1922 committee on TV today and was waiting for him to dissent. He didn’t but my BS meter was in overdrive.

    It kind of reminded me of when the poor Simon Hughes is pushed to the media to say things he clearly does not believe as punishment for being the first to dissent, a thoroughly nice and well meaning man, thrown to the dogs by the traitor, Clegg

  • http://nalil.blogspot.com Nevin

    Lance Price [puppets article]: “In 2004, the News of the World called Blair a ‘traitor’ for refusing a referendum on the new European constitution. Murdoch himself approved the word. One of his trusted confidants then told the Prime Minister he wouldn’t get the backing of News International titles in the upcoming General Election unless he did a U-turn.

    He did, and within days The Sun secured the scoop.”

    So who was the trust confidant, the go-between?

  • http://redfellow.blogspot.com Malcolm Redfellow

    Nevin @ 12:22 am:

    Murdoch has been, over time, as multi-armed as a small battalion of Hindu deities. In this case, it is Irwin Stelzer whom you seek.

  • http://nalil.blogspot.com Nevin

    Thanks, Malcolm, I’d spotted Irwin** as one of the ‘movers and shakers’ during some exchanges a few years ago. From your link I spotted this:

    Now based in Washington and St James’s in London, Stelzer is a director of economic policy studies at the Hudson Institute think tank, a columnist in Murdoch newspapers and the editor of Neoconservatism, a collection of essays published by Atlantic Books tomorrow.

    and remembered that other New Labour ‘mover and shaker’, Peter Mandelson, visited the Institute whilst on a ‘sabbatical’ from government:

    8 March 1999, to Madrid to speak at The Economist, Agenda 2000 Conference. Travel expenses and fee paid for by The Economist. (Registered 22 March 1999)

    18-20 April 1999, to Washington, to speak at The Hudson Institute International Regulatory Forum. Travel and expenses and accommodation paid for by the Hudson Institute. (Registered 21 April 1999)

    April 1999, to Corfu and Albania, to visit the Butrint Foundation. Travel and accommodation provided by Lord Rothschild**. (Registered 2 July 1999)

    23-24 May 1999, to Madrid, to speak at “The Mexico and Europe, economic and political scenario Conference”. Travel expenses, accommodation and fee paid for by the Euroamerica Foundation. (Registered 26 May 1999)

    28-31 May 1999, to Georgia, USA, for The Howard Gilman Symposium. Travel expenses and accommodation paid for by The Progressive Foundation and Firstmark Communications (US). (Registered 16 June 1999)

    June 1999, to Portugal, to attend Bilderberg Conference. Travel and accommodation paid by organisers. (Registered 2 July 1999)

    He then became Secretary of State for Northern Ireland :)

    ** according to his Wiki entry Irwin ‘has served as a managing director of the investment banking firm of Rothschild Inc’

  • http://andrewg.wordpress.com Andrew Gallagher

    Turgon:

    The economic case that austerity weakens the economy, prevents growth and, hence, worsens the deficit has been rejected by Osborne but is looking more likely to be correct

    Of course austerity weakens the economy, that’s not in dispute. Cutting up the credit card is never painless. The question is whether it’s better to take action or keep kicking the can down the road. At some point you run out of road.

    Malcolm:

    the five-year parliament was the initial (and, I suspect, disastrous) political mistake. It sold out a PM’s ability to match the electoral cycle with the economic one.

    The economic cycle is generally around 10 years – the last few recessions started in 1980, 1990 and 2008. PMs can’t hope to match it, but they can take advantage of temporary blips, particularly if they’ve engineered them. Anything that removes the PM’s discretionary powers in this regard can only be a good thing.

  • http://redfellow.blogspot.com Malcolm Redfellow

    Andrew Gallagher @ 3:57 pm:

    The question is whether it’s better to take action or keep kicking the can down the road.

    The whole point is that the UK economy is chronically constipated. The laxative would be money flowing through the system. Banks and companies have the money in their balance sheets; but won’t use it — except to lend to other banks. Get some of that money from the haves (banks, corporations) to the have-nots (the unemployed, the “squeezed middle”) and normal processes are restored.

    Get hold of Scott Barber’s graph for the Reuters blog, Real GDP rebased to 100 in 2003. It clearly shows that, under this UK government, the economy has faired worse than either the US or the €-zone. Nobody is saying (yet) “Damn the (ratings agencies’) torpedoes, full speed ahead!” What is being said, and by increasingly more observers, is that the UK economic digestive system needs Plan B — the Treasury/BoE prescribing a mild dose of monetary Exlax.

    Anything that removes the PM’s discretionary powers in this regard can only be a good thing.

    Morally admirable; but still a “political” mistake (which is what I wrote, meant and stand by). Every incoming administration, especially one as inexperienced as the ConDems, learns the hard way that Augustinian maxim, “Lord make me good, but not yet.”

  • http://andrewg.wordpress.com Andrew Gallagher

    Malcolm,

    The BoE can do that by printing money. The Treasury has considerably less elbow room. Perhaps the argument should not be austerity or reflation, but austerity and reflation.

  • http://redfellow.blogspot.com Malcolm Redfellow

    Andrew Gallagher @ 5:31 pm:

    Indeed, and that’s what QE is all about. The BoE buys gilts from the banks (that’s where £198.3 bn of £199.4 bn has gone so far), the banks then either sit on the money or lend it to other banks who … well, buy gilts as often as not. That keeps yields low, cuts interest rates across the economy, and benefits Joe and Jane Citizen (that “squeezed middle”) hardly at all.

    Now, if some of that money was by-passing the banks, and going directly to the private sector (e.g. by big capital projects), it could amount to economic Exlax (see above). And the Exchequer can do just that.

    Note that Osborne has now changed his phrase: he now talks of “credit easing”, but that suggests 70 million tons of pennies (so far, and not counting) have finally dropped.

  • http://andrewg.wordpress.com Andrew Gallagher

    Now, if some of that money was by-passing the banks, and going directly to the private sector (e.g. by big capital projects), it could amount to economic Exlax (see above). And the Exchequer can do just that

    That’s not “going directly to the private sector”! That’s the state printing money to pay for pet projects, which completely negates the point of austerity.

  • http://redfellow.blogspot.com Malcolm Redfellow

    Andrew Gallagher @ 6:24 pm:

    I spent a fair bit of Thursday in the Hagia Sophia. Undoubtedly a “pet project” of Flavius Petrus Sabbatius Iustinianus Augustus. Justinian hired Isidoros and Anthemios to do the planning — let’s assume they were private sector, shall we? In turn the edifice must have provided considerable employment then, and repeatedly since, down to the present day. At 20TL a head (no discounts available that I saw) it looks as if Justinian, sixteen and a half centuries ago, had the foresight to make a substantial contribution to the modern Turkish economy.

    So what’s wrong with “pet projects”, per se?

  • http://andrewg.wordpress.com Andrew Gallagher

    So what’s wrong with “pet projects”, per se?

    Because the vast majority of them are not the Hagia Sofia.

  • http://redfellow.blogspot.com Malcolm Redfellow

    In Justinian’s case — see Procopius, De aedificiisthe vast majority of them included a decent water supply and storage (still there today, and it kept Constantinople supplied through decades of sieges), bridges, orphanages, hotels as well as all that religious stuff (though he did manage to annoy the Pope, while also expelling the pagans). Yes, it would get up the noses of the 6th-century IMF (had they been around) as much as the tax-payers’ alliance of the Eastern Empire. But it worked. And amounts to gifts that go on giving.

    Similarly, we still benefit from Victorian drains, national electrification (e.g. the CEB and the National Grid of 1926, cf: the Shannon scheme, which, as much as anything, built a nation), FDR’s Depression-Era projects, the NHS, Harold Macmillan’s house-building (1951-4), most airports and rapid transit systems around the world, and much, much more. All, arguably, were “pet projects”.

    Many were built in times (and because) of economic stress.

    Join the dots.

  • http://andrewg.wordpress.com Andrew Gallagher

    Flippant replies not appreciated, then. OK.

    Yes, we have of course benifited from previous generations’ pet projects. I’m not against pet projects if we can afford them – the motorway construction programme in the Republic during the Celtic Tiger was a fantastic investment for example, and the government should have been doing more of the same instead of stoking the property bubble.

    What I was originally trying to point out was that printing money to fill government coffers is a step backwards. QE is a gamble, but so long as it feeds the private sector and not the government it is relatively safe. Once you cross the line of allowing the government to use it as discretionary spending then it becomes a deceptively easy source of revenue. What’s the practical difference between what you suggest and the stagflationary policies of the 70s?

  • http://redfellow.blogspot.com Malcolm Redfellow

    Andrew Gallagher @ 2:27 am:

    Last time I tried flippancy in these parts earned me a yellow card. I believe that’s an application of Poe’s Law — Murphy’s Law applied to web chat irony.

    So, we need to compare cats with dogs, chalk with cheese, 1970s with 2010s?

    Try looking at GDP growth and unemployment at the start of the 1970s — all were in positive territory compared to now. What went wrong was not TU power, but rising wages (to pay for all that loose credit, mortgages, Barclaycards … the un-unionised middle classes leading the way), the Barber budget and the “dash for growth” of 1972, the Oil Shock of 1973. By the end of the decade (i.e. pre-Thatcher) inflation was coming down, unemployment up (but by present standards, containable) and the UK was a net exporter of Scottish oil.

    Then, of course, we had to have Milady’s sado-masochistic monetarism, the lower orders smacked back into their servility, Colombian child-labour supplanting Yorkshire pitmen, heavy industry blitzed, the odd colonial war …

    Meanwhile, back at the ranch, we are saddled with a do-nothing government, energy costs and raw materials on an escalator driven by Far Eastern demand, falling spending power and rising prices, SMEs unable to borrow, the only big capital projects in prospect the vapourware likes of HS2 and Borisport-on-sea (now there are a couple of vanity projects), while the lights are due to go out in the second half of the decade:

    … think tank CEBR warns that the UK will struggle to grow at all over the coming years, achieving a maximum annual growth rate of 1% until 2016.
    And it gets worse. Unemployment, currently at 2.65 million, is going to keep creeping up, hitting 3 million this year and staying at that level for at least three years. Inflation’s inflating too: CEBR has revised its forecast for the final quarter of 2012 to 2.7%, up from the original 1.7%. And there’s nothing that our economists or the Monetary Policy Committee can do to stop inflation rising.

    Welcome to the wonderful world made by Cam, Oz, Nick and Noddy.