Cancelling debt

Tweet A week or so ago, Plaid Wrecsam highlighted the campaign by the ‘Occupy’ movement to buy up, and then cancel, debt.  As a result of the uncontrolled boom in lending which contributed so much to the financial crisis, lenders have been parcelling up debts and selling them on, often at a huge discount on ‘book’ value.

The idea of buying up debt at 10% of its nominal value and then simply cancelling it sounds revolutionary at first hearing, and there are those who would see it as threatening the very foundations of our economy.  But it isn’t actually as innovative or revolutionary as it sounds – and it might, in reality, be a way of perpetuating rather than undermining our current capitalist system.

Lenders willing to sell on debts at a mere 10% of their nominal value are, in effect, writing off 90% of the asset.  It is, from their perspective, simply recognising the reality that much of the debt is, in practice, irrecoverable.  The new organisations buying the debts don’t really expect to collect all the cash and make a 900% profit either.  They’re expecting to get back more than they paid, of course, but they probably don’t really expect to get back more than around 15-20% of the nominal value – and some of them will pursue fairly aggressive recovery strategies to hit even that level.  Both sides of this commercial transaction are simply taking a rational view about how much they can get back, when, and at what cost.

So, if a non-commercial organisation such as Occupy buys the debt and cancels it, they’re really only writing off the 10% that hasn’t already been written off.  It doesn’t feel that way to the debtors, of course.  Most of them probably never fully understood that their ability to repay (collectively, if not individually) had been seriously discounted by their creditors, who had already given up hope of ever seeing 90% of their cash again.

The first way that cancellation of debt helps rather than hinders economic activity is that it widens the choice of economic stimuli available to policy makers.  The problem with non-capital stimuli (such as reductions in VAT or income tax) is that indebted people may simply use the extra cash in hand to pay down debt.  The cash goes straight back to the banks, and does little to stimulate the economy.  But freed of debt, people are more likely to spend.

Debt cancellation isn’t a particularly new idea either – it’s only in the comparatively recent past that the idea has become so commonplace that debt is inviolable and eternal.

5000 years ago, Mesopotamian rulers regularly granted amnesties which cancelled all personal (though not commercial) debt.  The clay tablets on which debt was recorded would be broken, debt slaves would be freed, and land and property seized in pursuit of debt would be returned to their previous owners.

2012 is the year of a royal jubilee, but I haven’t seen much reference to the origins of the word.  It’s a biblical term, I believe (although it may be ancient Egyptian according to some), and refers to the time when slaves were freed, and sins (and debt) pardoned.  We haven’t seen much of that sort of jubilee this year, though.

Now those ancient societies didn’t cancel debt because the lenders suddenly developed a social conscience and started to feel bad about their exploitative ways.  They did so because the increasing concentration of wealth and the subsequent rise of the dispossessed threatened the stability and cohesion of their societies.  Their economic system, in short, needed to be rebalanced from time to time.

There’s a parallel of sorts with the situation today.  And that’s the second reason why debt cancellation on a large scale might actually be in the best long term interests of the capitalists, even if they don’t immediately understand that.  We don’t always learn a great deal from history.

The Occupy initiative is something to welcome as a starting point for a wider programme of debt cancellation both nationally and internationally.  But it is almost certainly not the sort of threat to the established order which some perceive it to be.

The company's representative

Tweet The report published earlier this week on alternative proposals for exploiting the generating capacity of the Severn estuary is a welcome one.  It claims that a cheaper and less damaging approach than a large barrage across the estuary might even produce more electricity in total – and it would certainly have the potential to spread the generating capacity over a longer period rather than concentrate it at the times that the tide is most favourable.

It doesn’t compare like with like, of course; it is including the use of wind turbines in the estuary as well as tidal and wave turbines.  And I don’t know whether the claim that it will produce more power than the barrage will actually stand up to detailed examination.  Both this proposal and the barrage proposal itself still have too many uncertainties surrounding the final designs to evaluate that thoroughly at this stage.  At the very least, however, a rational approach would be to put this alternative on the table for more detailed analysis.

It was disappointing, though hardly unsurprising, to read the response of our former Secretary of State, Peter Hain.  ‘Dismissive’ would be something of an understatement.  Yet again, it looks as though his commitment to one proposal and the company backing it is over-riding any ability to look at the issue objectively.  It continues to surprise me that there has been, apparently, so little concern within the Labour Party at the extent to which such a prominent figure is now acting first and foremost as the parliamentary representative of a commercial organisation. It's surely not what he was elected to do.

Opinion masquerading as information

Tweet It’s not unusual for communities in Wales these days to produce websites promoting themselves and community events.  Most of them are informative, and are community ventures, and many make at least an effort to reflect the bilingual nature of the communities they serve.

There are exceptions, though.  Some provide very little detail about who has produced them and why.  The other day, I happened to stumble across this website for Llanegwad.  At first sight, it’s little different from many others, listing all sorts of useful information.  It even has a section about the Welsh language, and some helpful guidance to the meaning of some place names.

It goes downhill rather, however, when it comes to this little piece about the Language and People.  It reflects a viewpoint, of course (and although it’s a rarer viewpoint now than it used to be, we’d be deluding ourselves if we didn’t understand that it’s not as rare as we might like).  And it’s a viewpoint which people have a right to express. 

Quite how it fits into the idea of a community information website is rather a different question - 'information' it is not.  It is opinion masquerading as fact.  I can’t really believe that it reflects the reality of opinion in Llanegwad.

Creeping centralism

Tweet One of the disappointments of devolution for me has been the way in which politicians who appear to be decentralists at a UK level end up being centralists at a Wales level.  Perhaps it’s just that politicians usually believe that power should be wielded by themselves, and should therefore reside at whatever level they happen to be operating – and I really wish that I could dismiss that thought as just a bit of unnecessary cynicism.

The latest evidence of creeping centralism down in the Bay is the proposal floated by Leighton Andrews to centralise the provision of education services under the control of the Assembly Government.  I don’t disagree with everything he says; like him, if I were designing a way of delivering services such as education, I wouldn’t have come up with the idea of 22 authorities within Wales.  And, like him, I’m unhappy at the performance of the education system in Wales.

What I’m not so convinced about, however, is that the answer to those problems lies in the organisational structure.  I have seen no evidence to support the proposition that a centrally managed service will of necessity produce results which are any better than we are seeing now.  I certainly don’t accept the utter self-confidence with which so many AMs seem to assume that services run by them will deliver better results than those same services run by someone else.

One of my major problems with the centralising proposal is the implicit assumption that education authorities are accountable to the minister for their performance, rather than to the electorate in the areas they serve.  AMs are, quite rightly, quick enough to bridle at any suggestion that they are accountable to the UK Government for their performance; why are they so ready to defend their own electoral mandate whilst denying that of local councillors?

But the biggest problem that I have with what is being suggested is that it looks like reorganising local government in Wales by the back door, without proper discussion or consideration.  According to the glossy leaflet which Carmarthenshire issued with my council tax bill, marginally over half of all expenditure paid for by council tax goes on education and children’s services.  Education alone probably accounts for 30 – 40% of what the county council does.  Taking that away from local government is a huge – and unprecedented – reduction in the scope and powers of local authorities, and doing it in isolation without consideration of the wider impact looks to be very rash.

I’m not wedded to the idea that there should be 22 local authorities in Wales; nor am I wedded to the idea that their responsibilities and powers are immutable and set in stone.  But I am wedded to the idea that there is a value to local democracy, to devolution of power within Wales, not just to Wales, and that local exercise of power, if it is meaningful, has to include the right to do things differently rather than simply adhere to standards and processes laid down elsewhere. 

My politics starts from the notion that sovereignty resides with the people, and that we can choose how that should be pooled and where; AMs, like MPs, seem increasingly to believe that sovereignty is theirs to divvy out – or retain – as they wish.  The gulf between those viewpoints is far from being a small one, and unless we are careful, Wales could end up being more centralised than the unitary British state ever managed to be.

Following the rules

Tweet There was a story in the Western Mail a few weeks ago about the WW2 veterans who were being prevented from receiving medals from Russia by what seemed to be a rather arcane rule laid down by the UK Government.  It wasn’t until I read this follow-up story in Saturday’s paper that I realised that I had a ‘family interest’ in the matter, as it were.

The veteran who died on Remembrance Sunday was an uncle of mine.  Uncle Don was an officer in the Merchant Navy and spent much of the war on convoys running supplies through the Arctic to Russia.  With his death at the age of 92, it seems that there are now only a dozen convoy veterans left in South Wales – and it’s obviously one of those numbers which changes in only one direction.

Perhaps the Russians should simply decide to pop a few medals in the post to the remaining veterans.  I’m not sure who would be committing the offence if they did.  Would it be the Russians for sending them, or the aging veterans for receiving them?  Either way, the probability of anyone launching a prosecution seems rather slim to me – the publicity would make anyone who took such a decision look a complete idiot.  And I can’t believe that the UK Government would really want to provoke a diplomatic spat with Russia over such a trivial matter either.

What I really don’t understand is the rationale behind the rule.  Usually, I can see some sense or logic behind decisions made by those in authority, even if I disagree with them, but in this case, I just can’t.  It’s not that the UK Government is opposed to foreign governments giving awards to UK citizens; they’ve just decided that it must be within 5 years of the service of the individuals concerned.  Why 5?  Why not 4, or 6, or 10?  Why have a time limit at all, once the principle is recognised?

Trivial it may be to the governments concerned; but it matters to those involved.  I find it hard to believe that the UK Government can be so intransigent over such a wholly arbitrary time limit on a matter of such little import other than to those directly involved.

Karl Marx, Brian Rix, and Carwyn Jones

Tweet The publication of the Silk report this week marks yet another step along the road to a sensible and coherent devolution settlement for Wales.  But it does seem to be more of a stumble than a step.  And, not for the first time, I think that the finger of suspicion for yet another fudge points firmly in the direction of the Labour Party, even if they’ve managed to get away with hiding the fact behind an ‘all-party’ commission.

It’s true, of course, that we would still be without an Assembly of any kind in Wales were it not for the Labour Party.  But it has always looked as though devolution for Wales was something into which they were bounced by the enthusiasm of the late John Smith and others in Scotland, and bounced reluctantly to boot.  So whilst the fact of devolution is down to the Labour Party, so is its form, and particularly the painfully slow progress, with each step marking yet another attempt to paper over that party’s internal disagreements.

That it makes sense for any elected government spending large sums of money to have at least a degree of responsibility for raising the money that it spends rather than holding out a begging bowl is obvious to most.  But the miserable little collection of minor taxes which might potentially be devolved without holding another referendum simply does not achieve that objective.  Without the devolution of at least one major tax, such as income tax, any expectation that it will make much of a difference is misplaced.

Of course, I’m in favour of devolving all taxes, so the Mandy Rice Davies response would be a natural one, but in all seriousness, the ability to modify the rate of landfill tax will neither make the Welsh Government more accountable nor give it much of a lever for economic policy.

I don’t entirely disagree with the assertion by Carwyn Jones and the Labour Party that there are dangers in not resolving the Barnett issue first.  Of course there are, but when we know that there’s no hope of any early resolution of the Barnett issue, it looks as though that question is being used as more of a fig leaf to hide opposition to tax-varying powers.  Both issues need resolving, but the link is by no means as absolute as is being claimed.

It was of course Carwyn Jones who claimed during the last referendum campaign that taxation powers would ‘require’ a referendum.  It was a ‘requirement’ based more on the timid pragmatism of himself and his government and his own party’s continued internal disagreements over devolution than one based on any great constitutional principle.  But once he’d stated it, it was always going to be difficult to do a u-turn later.

Reports suggest that the Silk Commission was unanimous in its recommendations and had no difficulty reaching that unanimity.  How much of that ‘unanimity’ was real hard agreement as opposed to a pragmatic recognition that Labour Party support was dependent on coming up with the ‘right’ answers isn’t clear – and may not be so for some time, I’d guess.  But it’s hard to see any logic other than such pragmatism in the referendum proposal.  And it’s even harder to see any logic at all in the proposed multiple locks which all need to be opened before we can even hold a vote – it all looks more like an attempt to block taxation powers than to devolve them.

It was Marx who said that history always repeats itself twice, the first time as tragedy, the second as farce.  Farce may turn out to be an understated description of the proposal to hold yet another referendum, learning nothing from the last.  How many farces can Labour stage before the audience realises that the butt of the joke is us?

Magical mandates

Tweet The widely-expected low turnout in the Police Commissioner elections last week has led to the equally predictable claim by some politicians that those elected ‘have no mandate’.  It’s easy to see how someone can claim that being elected with 50% plus 1 of the vote on a 15% turnout doesn’t amount to a whole pile of beans, let alone a vote of confidence, but at what point does this magical thing called a ‘mandate’ suddenly disappear?

One of those leading the ‘no-mandate’ charge was the former Labour MP Charles Clarke.  He lost his own seat in 2010, but in the last election that he won, in 2005, he received 38% of the vote on a 65% turnout in his constituency.  So, rather less that 25% of those eligible to vote gave him their support.  I’m assuming that he never doubted for one moment that he had one of these mandate thingies, so the cut-off point for having one must be, in his view, somewhere between 7.5% and 25% of those eligible to vote; it clearly does not require majority support.

Or perhaps it’s the level of turnout which invalidates any mandate – 65% is obviously a much better turnout that 15%.  But local council elections often drop to around 30%, and that doesn’t seem to invalidate the mandate held by local councillors.  So on turnout, again, the cut-off must fall somewhere between 15% and 30% - no majority seems to be required here either.

Of course, I don’t really expect anyone to give an answer to the question of where the line falls, because the claim of not having a mandate isn’t a serious one; it’s just one of those political sound bites which politicians love.  Under what passes for democracy in these islands, the only requirement is to get more votes than the other fellow.  Those who don’t vote in an election can no more be assumed to be supporters of the losing side than can those who fail to vote in a referendum, however much some people might try and argue the contrary.

That’s not so say that the low level of turnout isn’t an issue which should just be ignored.  There are serious questions to be answered.  I’m far from convinced that it’s all the government’s fault for not publicising the elections more, or the candidates’ fault for being so uninspiring, or the electors’ fault for not bothering to read such information as was available, or even the media’s fault for not giving the elections much attention.

What about the rather radical possibility that most of us might just possibly have been perspicacious enough to have decided that the whole thing was a waste of time, and that little would change whoever was elected?

End, stick, wrong

Tweet A report commissioned by the Welsh Government suggested that scrapping the tolls would be worth £107m a year to the Welsh economy.  The response of the First Minister has been to demand that the tolls from the Severn bridges should be redirected to Wales once the bridges revert to public ownership.  I’m struggling a little to understand the logical process which got him from the one to the other.

There is a good – albeit highly unpopular - argument for road tolls on environmental grounds, as a deterrent to the use of road transportation, whether for people or for goods.  There’s also a logical argument for tolls on the basis that people should pay for the public services they use at the point of use rather than through taxation, although it’s not a view with which I agree. 

I have never, though, understood the principle behind charging only for those bits of road which happen to go over bridges or through tunnels.  Certainly, bridges and tunnels can be more expensive to construct than nice straight bits of road on flat land, but they’re pretty much useless without those roads leading to them. Certainly, the bridges will continue to need maintenance once they are in public ownership, but then, so will the rest of the motorways of which they form a part.  Considering them other than as an integral part of the whole route seems to be an odd way of looking at them.

I’m also confused by the arguments put forward by the First Minister in justification for the tolls being diverted to Wales.  He seems to be arguing that tolls should be reduced to the level necessary to maintain the bridges, but that if it was paid to the UK Government, that money would then be perceived as being used to fund Department for Transport funding in England.  That's more an argument about whether we trust the people setting the tolls than it is for who should get the lolly. 

If the tolls are set at no more than the level required for maintenance (assuming that one can justify that logic for tolls in the first place), and if whichever government receives the tolls is also responsible for the maintenance, then does it make any difference at all which government that should be?  It makes sense only if government is actually planning to set the tolls higher than the level required for maintenance and use the cash for something else - which seems to be as much part of the planning of the Welsh Government as it does of the UK Government.  It’s a plan for a backdoor tax; but there is no more logic in that backdoor tax belonging exclusively to Wales than there is in it belonging exclusively to England.

The Western Mail’s editorial used an analogy with a castle, saying that “just as it would be ludicrous for the occupants of a castle not to have control of a drawbridge, so it makes sense that the Welsh Government should have a strong say on the future of the Severn Crossing”.  It’s not an analogy that worked terribly well for me – the point about a drawbridge is that it’s as much a barrier as it is a conduit.  In the case of a castle drawbridge the castle's occupants are hardly likely to want to share control of that drawbridge with those outside the castle walls.  (And who decides which side of the estuary is the castle?)

What Wales needs is good unhindered access to markets, on the same financial (i.e. toll) basis as the South West of England, rather than the highly uneven playing field which bridge tolls have created.  What we don’t need is politicians and parties squabbling over who should get the profit from restricting that access.

Is it all just a game?

Tweet The story about London councils preparing to move “thousands of London’s homeless families” to Wales has provoked an entirely unsurprising response of outrage in Wales – and probably also in those areas of England which the London councils have singled out for similar attention.  I found myself wondering, though, whether the story has been over-hyped somewhat.

Partly, that’s simply because I find it hard to believe that any part of the UK state could really, in the twenty first century, be planning to uproot families and move them hundreds of miles into areas where it is highly unlikely that they will stand any chance of finding the employment which is ultimately the only way of improving their situation. 

I can’t think of many parallels for such a forced movement of people in any democratic state.  Families have been forcibly moved en mass for projects such as slum clearance, but have almost always been rehoused either close by or else in the new homes constructed on the site.  Children were evacuated from London during the second world war; but it was done for their safety, and was always understood to be a temporary measure.

But thousands of families given the choice of homelessness where they are or moved hundreds of miles to the cheapest housing which can be purchased, purely on economic grounds?  I can’t think of a parallel in recent times which comes close.

Then I wondered whether this might not be more of a political game than a real prospect, and from two different aspects.  The first is that it’s far from unheard of, sadly, for local authorities to propose something outrageous, either to attract such opposition as to persuade the central government to back down on some policy or other, or else to enable it later to propose something not quite so outrageous so that people accept the lesser of two evils.  Either seems possible in this case.

The second is, of course, that offering a London family a house in somewhere like Merthyr might well lead to a refusal; and people who refuse the offer of ‘suitable’ accommodation can then be deleted from the waiting list.  And that’s just another way of making homelessness someone else’s problem, even though some of us might think that there’s rather more to the definition of ‘suitable’ than having four walls and a roof.

I’m not sure which is worst – seriously proposing such a policy, or unseriously suggesting it in order to achieve other aims.  In either case, they’re treating those families unfortunate enough to be homeless in London in an utterly shameful fashion; more as commodities or problems than as people with human needs. 

Beware the siren voices

Tweet No surprise that I’m far from being as thrilled as others seem to be about the phoenix-like resurrection of the Horizon project for another nuclear power station on Ynys Môn.  There’s more to energy policy than jobs, but this is not only not the best energy policy for Wales, it’s not even the best way to generate jobs in the energy industry in Wales.

The game is far from over however; it will be some time before the fat lady can commence her aria.  There are still many hurdles for the project to overcome, not the least of them being the unanswered questions about how it will be funded.  The official line about no public subsidies for new nuclear is simply not credible; without subsidies, whether hidden or open, there will be no new build.

At a time when most of the rest of the world is turning its back on nuclear stations (well, uranium-powered ones at least), it’s hard to believe that any project run by a company whose own country has turned its back on the technology will actually come to fruition.

There is a real need for jobs on Ynys Môn, but there is a real danger in the apparently unqualified welcome given by many politicians to this scheme.  That danger is, simply, that they will count their chickens too soon and take their eyes off the ball, if that’s not mixing too many metaphors.  Assuming that these jobs are ‘in the bag’ would be the greatest disservice that anyone could do to the people of the island, since if (or when, as I tend to believe) the project collapses, there would be no plan B.

People should be vary careful about believing the siren voices of the short-termists who seem to be claiming that the island’s problems are about to be solved.