Thursday, February 25, 2010

On the other hand...

On the other hand...

While I’m being nasty about Gordon Brown, I will also add one thing I hears about him (God knows where) that substantially raised him in my esteem.  His small-talk introduction (when he’s having a conversation rather than just a meet-and-greet) is not the usual ‘where are you from’ ‘what do you do’ type question – which are basically pretty closed questions anyway – it is the much more interesting ‘what are you reading at the moment?’

Although there is the potential for this to be a bit of a bust (‘…um, nothing actually’) it shows an interest in the other person and has the potential to move straight in to an interesting conversation.  So, full marks for that one.

Tears before bedtime...

Tears before bedtime...

The most remarkable thing about the recent Rawnsley book is how very unremarkable its basic thrust is – at least to journalists.  Stories of Brown being, basically, bonkers have been circulating for getting on for decades now.  Tom Bower’s biography of him was unbelievably stark in its portrayal of a man who is almost entirely a stranger to restraint (I’m trying to avoid using words like proportion, as they seem a little unfair).  So stories of his ungovernable rages – of his turfing secretaries out of their chairs, of his hurling nokias, of his stapling his own hand – are not just familiar, they’ve even been reported by Bloombergs.

But looking beyond this, these stories are still extraordinary.  Leaving aside whether shouting at staff, “picking on the weakest person in the room, usually the weakest woman in the room” and generally being the worst boss imaginable is bullying (I’m of the opinion that unless this behaviour is consistently targeted at the same people, then it’s not bullying – it’s just being a shit) what on earth do these stories tell us about what sort of person Brown is?  Here’s another goodie – Brown phoning Tony Blair in reaction to a piece by Alan Milburn that suggested Blair remain as Prime Minister:

'You put fucking Milburn up to it,' Brown raged down the phone. 'This is factionalism! This is Trotskyism! It's fucking Trotskyism!'

It’s demented, that’s what it is.  Everyone, myself included, just rolls their eyes now at each new story of just how weirdly enraged Brown gets, over everything and anything.  You even have people like Peter Mandelson suggesting that it’s a good thing that the Prime Minister throws tantrums like a sugar-addled three year old – that it shows passion and commitment.  But looked at dispassionately this really is seriously odd behaviour.  Five more years?

Tuesday, February 23, 2010

Starter's orders?

Starter's orders?

Hmm.  The polls are tightening, the bullying saga doesn’t yet appear to have holed Brown below the waterline, the Tories are still struggling for traction, and the odds must be that Q1 2010’s GDP figures are going to be frightful.  Snap election anyone?

Friday, February 19, 2010

People, not props

People, not props

Gordon Brown’s rebranding efforts continued apace today with another emotional interview focusing on his family life.

A few days after the Prime Minister was broadcast speaking movingly about the death of his first-born child, he told a supermarket magazine about his other children’s birthdays and the death of his mother.

Mr Brown’s closest advisors including Lord Mandelson, Ed Balls and David Muir have succeeded in encouraging him to display a softer side.

Sometimes there really isn’t enough vomit in the world…

Purnell to stand down at election...

Purnell to stand down at election...

Well that’s a bit of a surprise…  I think there were a few (not so much in the Labour party itself mind) who were hoping that James Purnell could keep the Blairite torch alight during the dark days of opposition that lie ahead – or could at least provide some sort of balance for the dreaded prospect of a Balls leadership.  That’s gone now.  How much talent will be left after the election?  How much more leftish will the Labour Party become?  Not looking hopeful.

Back to 1982?

Back to 1982?

A faltering economy, an unpopular Prime Minister, an increasingly desperate Argentine Government making bellicose noises about their rights to the Falkland Islands…  Hey ho, back we go to 1982.  Probably not though.

Argentina, with an election of their own coming up, use the ‘Malvinas’ as a traditional patriotic rallying point.  Charter flights between the Islands and Argentina have been suspended, Argentine scientists banned from taking part in a binational commission on fishing, and now vessels sailing to the Falklands through Argentine waters will require a permit.  The oil that has been discovered in Falklands water won’t help.

A large body of opinion has it that British claims to the Falklands are weak – based as they are only on occupancy and sovereignty since 1833.  Argentina, on the other hand, points out that the Islands are a touch closer to Argentina than they are to the UK and that there was briefly an Argentine penal colony before the re-assumed British occupation.  They did try to settle the issue once, but were notably unsuccessful.

Bien-pensant opinion on this has been clear for decades, and is admirably summed up in the Guardian today.

Patriotism and posturing on both sides has obstructed what would otherwise be the natural way forward, a pooling of sovereignty that would allow the islands to develop normal relations with their nearest neighbour.

Leaving aside the fact that the thing that would best enable the Islanders to develop normal relations with their nearest neighbour would be that nearest neighbour growing up a bit and stopping placing so many petty restrictions on the Islands, there is another fly in the ointment.  The inhabitants of the Falkland Islands are full British citizens.  There can be no transfer of sovereignty unless they agree to it.  And they don’t.  It can be inconvenient, democracy, but we are stuck with it.  The Guardian may deplore that fact, but that’s where we are.

To cut or not to cut?

To cut or not to cut?

I have to say, having loved Lord Skidelsky’s biographies of Keynes and Oswald Mosley, I was rather disappointed by his interview on Today this morning.  As I am too with his co-signed letter to the FT.  Absolutely, it ought to be a priority to restore robust economic growth, and absolutely, drastic cuts in public expenditure pose a risk to any recovery.

But there really is an elephant in the room here.  Skidelsky et al criticise the ‘financial markets’ for their lack of foresight:

In urging a faster pace of deficit reduction to reassure the financial markets, the signatories of the Sunday Times letter implicitly accept as binding the views of the same financial markets whose mistakes precipitated the crisis in the first place!

What would really strangle an economic recovery would be a spike in interest rates.  The reason that this recession has felt less awful for those of us who have managed to stay in work is that interest rates are so low.  Mortgages are relatively affordable, and outstanding debts are less crippling.  If interest rates were to return even to long-term trend rates of 5% or so, let alone the 10-15% that previous recessions have brought, lots of us – businesses and individuals – would be absolutely destroyed.

What might cause such a spike?  Two things.  Inflation – which despite the recent rises is probably not a medium-term threat, given the huge surplus capacity in the economy – and the cost of borrowing on the markets.  It is the latter that should be worrying us.  If the markets start to believe that the Government will default in the medium term (by inflating away its debts – an actual default is vanishingly unlikely) then it will require a higher risk premium, making borrowing more expensive.  And when Govt borrowing becomes more expensive, interest rates go up. 

This, effectively, is what the group of 20 said in their letter to the Sunday Times.  The way to assuage the worries of the bond market is to set out a credible plan for deficit reduction in the medium term.  The way to show that this plan is believable is to make a start on it early.  But how credible is it that the markets really will lose confidence in HMT and increase the cost of borrowing?  Well…

The yield on Britain’s 10-year gilt just shot up to about 4.2 per cent, according to Reuters data…Using the 4.2 per cent Reuters yield, then, the spread between 10-year gilts and German bunds is now about 100bps. Oh dear.

As Gary Jenkins at Evolution Securities puts it:

10 year Greek government bonds currently yield 6.5%, the Portuguese yield is around 4.65% and 10 year Gilts trade at 4.20% While it is still more likely than not that the rating agencies will wait until after the general election to put any pressure on the AAA/Aaa ratings these numbers are so bad that we cannot rule out them taking a look at the rating pre election.

While I suspect that economists would agree that, other things being equal, it is better to cut public spending only when the economy is sufficiently robust to take it, it is becoming increasingly clear that the UK simply does not possess the requisite freedom of action to follow this plan.  If the Government – any Government – does not set out a reassuringly credible plan to eliminate the structural deficit within the life of the next Parliament, then you can bet your bottom dollar (maybe the Aussie dollar, now trading at about its highest level against sterling ever) that the IMF will do it for us.

Friday, February 12, 2010

Hanging on the telephone

Hanging on the telephone

Interesting piece in today’s Independent by Andreas Whittam Smith, arguing that the basic incompetence and inefficiency of Government and Government services is acting as a drain on the nation, and that it is partly a result of the Government/media relationship, where the media demands 24 hour interaction, and the Government responds by, effectively, running a permanent campaign rather than an administration.  One part in particular rang true:

Could this be connected with the HMRC's inability to perform even the simplest tasks, such as answering the telephone? Another enquiry found that in its Customer Contact Directorate only 57 per cent of 103 million call attempts made last year were answered. That means that a staggering total of 44 million calls to HMRC rang and rang until the exasperated caller put down the phone.

HMRC, especially since the merger of the IR and Customs, have sought to replace the classic ‘everything not expressly prohibited is permitted’ attitude with regard to taxation with a requirement to clear any new scheme with themselves before doing it.  This involves junior lawyers and accountants ringing up HMRC offices, explaining a complex transaction several times and then getting a deeply equivocal answer from someone only prepared to give their first name.  The lawyer then writes an attendance note that says, in effect, we are confident that the client’s £600 million takeover structure is legitimate from a tax perspective because Julie in Glasgow said she couldn’t see anything obviously wrong with it.  This was my job for six months three years ago.

It usually took about an hour to find a phone line where someone would pick up.  In other words, on average you could expect to ring HMRC five or six times before being answered, letting the phone ring off the hook each time.  I’m surprised that their answering rate is as high as 57%.

Monday, February 08, 2010

Questions to which the answer is no...

Questions to which the answer is no...

John Rentoul has been running (and running, and running) a sporadically amusing series of ‘Questions to which the answer is no’ on his Indy blog – a task made mildly easier by the fact that more or less every headline posed as a question should be answered in the negative.

It is, therefore, rather disappointing that he funked the opportunity to star in his own series.  In the latest round of his spat with Fraser Nelson, Rentoul states

Fraser Nelson, the Sarah Palin of the Tory party

Well, is he?  Or course he isn’t.  It is also, incidentally, about the thinnest justification for such a comparison imaginable.  In response to Nelson’s argument that he doesn’t want policies that are necessarily more right-wing, just different policies to the ones that are currently on offer, Rentoul comments

Sounds like Sarah Palin to me: different for the sake of clear blue water.

In other words, disagreeing with any aspect of the Tory leadership turns you into Sarah Palin.  Right. 

While I suppose it is understandable that Rentoul should recoil at the thought of disagreement from the machine (he is, after all, the Bormann of the Blairites) it is still a little dispiriting that the merest whisperings of criticism should give rise to such a hysterical over-reaction.  Something to bear in mind when the ‘Tory splits’ headlines come round again.

Jittery January

Jittery January

It has been a bit of a wobbly month for the Tories – which, for those of us who are left gasping daily at the sheer levels of ineptitude and dishonesty emanating from this discredited rump of a Government, takes some explaining.  Why has the polling lead shrunk from big double digits to between 7 and 9?  Are we now heading for a hung parliament?  What’s gone wrong?

Well, first things first: lets get things into a bit of perspective.  The polls are really not as bad as the reports are suggesting.  Labour are stuck at around 30% in the polls, the Tories fluctuate around the 40% mark.  And it is still worth bearing in mind that since 1987 only one pre-election poll has ever underestimated Labour – there almost certainly remains some degree of pro-Labour bias in the polls.  Even saying that, the most consistent pollster, Angus Reid, has had the Tories maintaining a 16 point lead for months now.

The second point is that, although it now appears to be common wisdom that the Tories need at least a ten point lead in the polls to get a majority of even one seat, this is not necessarily the case.  I have thought for a long time that differential swings in marginal seats would give the Tories a much larger majority than a standard UNS analysis would suggest.  This was, obviously, based on nothing more than gut instinct – not a notably robust form of psephological analysis – so it was something of a relief to note Andy Cooke’s analysis on politicalbetting this morning saying much the same thing in a far more technically accomplished fashion.

But despite that, the Tories have definitely had a rocky January.  I think there are really two reasons for this.  The first is that, by starting their campaign early, the Tories have presented their opponents with a string of targets.  Gaffes, some manufactured some not, have increased this sort of vulnerability.  Labour, on the other hand, have reverted to a de facto opposition strategy of critiquing Tory policies without feeling the need to present alternatives.  The second is that, rather than policy presentation, Labour have focused on international grandstanding of one type or another – from Northern Ireland to Greece (where Gordon Brown is going to lecture the Greek Prime Minister on the dangers of running an out-of-control fiscal deficit.  Satire is dead.  Again) – where Brown can look like a statesman, and the Tories are shut out altogether.

This is effective for Labour, but really can’t last.  Eventually they will have to get into the ring, and it is at that point that the effectiveness of the rival campaigns will be properly tested.  One delayed advantage of going in early for the Tories should be that they are immunised to a degree from the charge of being policy-light.  They will be able to respond that they have been setting out their policies for months, and where are Labour’s?

Ultimately, of course, this election will be won and lost on one slogan: Gordon Brown, five more years!  For all the showy optimism of the last few weeks, Bruce Anderson’s anonymous cabinet minister captures the real mood = far more accurately:

The other day, a Cabinet minister had lunch with a journalist. "What happens if you win?" enquired the hack. The minister looked astonished. It was clear that this possibility had not occurred to him. Having regained the power of speech, he replied: "There'd be an immediate leadership challenge". Mandelson may be running the election campaign, but Gordon Brown will be leading it. That is a challenge beyond even Lord Mandy's powers.

Friday, February 05, 2010

Blood in the water

Blood in the water

Back in December I posed the following question:

The only net buyers of UK gilts this year are the Bank of England (through Quantitative Easing) and UK banks, thanks to a Govt. requirement to improve their capital adequacy.  Fund managers and overseas investors are net sellers.  When QE stops, who is going to do the buying?  And at what price?

Well, QE has just stopped – for the time being at least.  So it looks like we’re going to find out.  The initial prognostications are not good, to say the least.

Managers like Threadneedle, Schroders and Sarasin are underweight, short duration, or shorting UK gilts, concerned that as the BoE ceases quantitative easing (QE) and issuance builds, buyers will refuse to play ball.

"The market has moved to a defensive posture," said Quentin Fitzsimmons, executive director, fixed income, Threadneedle. "If investors go on a buyers' strike, prices could fall sharply and yields could rise."

If investors go on a buyers' strike then we are all in a lot of trouble.  Have a look at this (horrifying) chart of sovereign risk – what’s really noticeable is that the UK deficit is up in a toxic group of four – Spain, Greece, Ireland and us.  Why are we the odd one out there?  The others have all had their credit ratings downgraded.  The markets simply will not continue to view this sort of deficit with equanimity: the UK is beginning to look like a really bad risk.  Once that happens, the spiral is quick and painful.

The Keynsian argument that a recession is the worst time to cut spending remains as true as it has ever been.  Unfortunately the counter-argument – that if we do not cut spending our debt will be down-graded making it more expensive to borrow,  meaning that we will have to borrow even more – is coming ever more sharply into focus.  As Churchill said:

You cannot ignore the facts, for they glare upon you.

Thursday, February 04, 2010

It's the end of the world (as we know it (again))

It's the end of the world (as we know it (again))

You sometimes have to worry about the mental fragility of the left.  Not just Gordon of course, although God knows there’s enough to worry about there, but the whole damn mindset itself.  Remember May 2008, when lefties were fighting a desperate last-ditch defence of Ken Livingstone?  The Guardian decided that sanity was no longer required, and conjured up desperate doom-laden images of what the future had in store under a new Borisian overlord.  The best of these was undoubtedly Arabella Weir’s pledge:

I will go on hunger strike and throw myself in front of the next horse at Ascot if he wins.

Luckily, of course, none of it happened (even the hunger strike – poor old Arabella was still complaining about being a bit fat two months later.  You think eight weeks of solid hunger striking would have shifted some of the flab), and Zoe Williams even, and rather decently, recanted the most bilious of her attacks, and suggested that Boris was just mildly out of his depth.  The world, at any rate, had failed to cease to turn in its orbit.

It’s not a delusion limited to Guardian journos either.  John Rentoul, the Martin Bormann of the Blair bunker (and I mean that in the nicest possible way), wrote an even more bizarre ‘looking into the future’ piece about Boris’s victory in London, in which he stated that it was Boris’s policy of urban fox-hunting that allowed David Miliband (with, oddly, Chancellor Ruth Kelly at his side) to pull off a 2012 election win.  Rentoul’s epic predictive powers are amply displayed later in that piece:

"President McCain called to offer his sympathy," said the private secretary in the front.


Anyway, in for a penny, in for a pound.  Rounding off the trio of lefty gobshite papers is the New Statesman.  Unusually, this time the epic political and journalistic powers of James Macintyre are not at issue.  Instead, that shonky crystal-ball gets dusted off once again, this time explaining why David Cameron is, like, the worst person in the world EVAH and, like, we’ll all be sorry when we’re dead.  It starts with a, presumably unintentional, trick:

In a few months' time, we will face one of the biggest political choices in living memory. For the past few years, Britain has stumbled from crisis to crisis under the direction of one of the worst governments any of us can remember. Our economy is hamstrung by recession and public debt, many of our best-known retailers have been wiped off the high street, and the vacant eyes of the young men on street corners testify to the devastating impact of high unemployment.

Indeed.  Not, in fact, a bad summary of where we are. 

This is David Cameron's broken Britain in 2015. How did we come to this?  To contemplate the state of the nation today is to gaze upon a picture of near-unrelieved misery.

Oh.  Plus ca change eh?  What terrible things have the Tories done to bring us to such a state?  Well, among other things, the eeeevil Tories have made local councils subcontract their gritting services to private firms (the bastards), they rushed into a punitive and misguided package of spending cuts worth as much as £30bn (lets see how that one goes shall we?), and free admission to most museums and galleries disappeared (my God!  Nooooo!).  But the real clincher was Lord Hannan of Brighton's presence in the cabinet since July 2011.  In my opinion, Daniel Hannan and the left in general should just book a room and get on with it.  It might mean that Dan’s a bit busy for the next few months, but really, this much pent-up attraction is just dangerous.  Incidentally, why Brighton?  Wouldn’t Lord Bassam get upset?

The rest of the prophesy is just a bit… odd.

Britain remains the only EU member not to have signed the Budapest Treaty, last year's crucial document reforming Brussels institutions, and Cameron has already stated that he has no intention of submitting it to a referendum.

Why?  No European Treaty will ever pass a referendum here – so why wouldn’t he put it to referendum?  Internal logic fail…

The Murdoch newspapers and Sky News - whose strident tone is increasingly set by star presenters such as Rod Liddle and Jeremy Clarkson - openly tout the Prime Minister as a courageous and reforming historical figure.

Blimey, Hannan, Liddle and Clarkson all in the same piece.  Are we sure Sunny Hundal didn’t write this?

OK, I’ll stop.  Fish in a barrel and all that.  But lets leave it with one more fabulous combination of ignorance and idiocy:

With the deep cuts in news services, radio and factual television, many of the jewels in the BBC's crown have already disappeared. The World Service might be better renamed the Skeleton Service; the Proms have been severely curtailed; and as for the mainstream channels, who could enjoy such a relentless diet of Horne and Corden?

    1. The World Service is not funded by the BBC;
    2. The BBC have been running the proms since 1927 when, I hazard, funding was rather tighter than it is now;
    3. What?  Horne & Corden, ghastly as they are, are ‘star’ BBC performers.  Don’t blame mythical future Tories for them.

Note to lefties – the world did not begin in 1997, springing fully formed from the forehead of Tony Blair.  Nor will it end in 2010, with the fall of the one-eyed king of the Labour Gods.  Perspective: it’s a good thing.  Get some.