At least our First Minister can walk and chew gum at the same time

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Unionists aren’t exactly frothing at the mouth over yesterday’s meeting between the First Ministers of Wales, Scotland and the north of Ireland, but some seem to be getting close to doing so. The allegation, apparently, is that the leader of a party committed to independence for Wales has dared to talk to like-minded others about the difficulties placed in the way of leaving a ‘voluntary union’, despite having said that he would not call for a referendum during his government’s first term of office.

Whether winning at least two elections first was a wise caveat to place on independence aspirations is another matter. The real determinant of when we can seriously discuss holding a referendum will be when there is a majority in the Senedd in favour of doing so. Since that didn’t happen, not holding a referendum during the current Senedd term is the inevitable outcome of the election; in practical terms the caveat about two elections makes little difference. It does, though, frame the terms for debate in a way which may come back and bite us in the future.

Whatever the reason for the lack of a referendum during the current Senedd, nothing said during the election campaign precluded a party (and First Minister) committed to independence as a goal from continuing to campaign for that aim or talk about how it might come about, whilst also getting on with the day-to-day business of government. Yet that is what the government’s political opponents seem to expect. In the case of some of them, I can understand why they might have difficulty in believing that the First Minister can walk and chew gum at the same time (as Lyndon Johnson didn’t quite say); it’s not a feat which they could emulate. It’s disappointing, but by now not surprising, that a Labour Party founded on dreams of what might be is so tied in to the Overton Window that it has become incapable of even having any real long-term aspirations of its own.

The real issue being addressed yesterday was a very simple one. If the union is, as we repeatedly told, a ‘voluntary’ one (and that is arguably true in the case of Scotland – especially after the 2014 vote – albeit rather less so in the case of Wales or the north of Ireland), what is the mechanism by which the decision can be revisited? If one of the members of that union has an absolute veto on when the other members might even be ‘allowed’ to vote on the matter, in what sense is it ‘voluntary’? It’s a question to which they have no rational answer, which might explain the diversionary tactics of telling the ‘lesser’ members of the union to shut up and get back to the knitting.

The bit that really surprises me though is this: if I were a unionist and wanted to maintain the union of the UK, I’d want to hold referendums sooner rather than later, choosing the time and the question myself, as well as, perhaps, formally setting a (lengthy) timeline for any future reconsideration. It might already be too late in Scotland (although sooner rather than later might give unionists their best chance of winning), but in Wales and the north of Ireland, holding a vote whilst the majority opinion still seems to be against any change might enable the ball to be kicked further down the road than delaying a vote. Sometimes, unionists are their own worst enemies.

Distinguishing between bribes and gifts isn't as easy as we might think

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The essential difference between a bribe and a no-strings gift is not as straightforward as one might think; it appears to revolve around the presence (or absence) of a clearly stated quid pro quo. Give a politician a sum of money to change his views on an issue of importance to you, and it’s a bribe; give it instead to a politician whose policies just happen to include agreeing with you on the same issue, in order to help him win an election, and it’s just a simple gift. Haven’t all those of us who have ever donated to a political party wanted to see people who support our own personal priorities win? There might be something of a moral difference between wanting to see a party win because of a belief that it would be a good thing for people at large on the one hand, and a belief that we will gain personally on the other, but it’s hard to define – and sometimes the two things will, inevitably, overlap.

That distinction between the presence and absence of a quid pro quo might look a little different from the perspective of a mega-donor, though. Reform Ltd have stated that “Our donors want nothing and will never be given a peerage, knighthood or a government contract”. Maybe not. They don’t need government contracts, and peerages and knighthoods are over-rated anyway. Getting a government which is ‘friendly’ towards crypto-currency speculators would certainly benefit them though. Charitably, it might be possible that such a thought has never crossed the minds of either of the two mega-donors, but if we look at action and outcome from their perspective, the lack of a direct, stated quid pro quo doesn’t alter the fact that they’ve paid a lot of money in the hope of achieving a particular result from which they might just happen to benefit. Purely coincidentally, of course.

The difference between the tens, or perhaps hundreds, of pounds which many of us will have donated in any given year in the past, and the millions being placed on the table here is primarily one of scale. Scale matters, though. A party receiving thousands of small donations towards a campaign can never end up being, or merely just feeling, beholden to any one of those donors: it isn’t the same for a party whose entire election costs are being more than covered by just two donors – who just happen to have similar financial interests in the outcome. A cap on the size of any individual donation is long overdue, and the government’s prevarication on the issue is more than a little puzzling. It would be possible, of course, simply to scrap political donations altogether and fund parties from the public purse. It’s not likely to be popular and would probably create a whole industry finding work-arounds, but it’s an option.

A cap is more likely and practicable but where that cap should be set is another question, because there isn’t a clear and obvious point at which any given donation ceases to be just one of many and becomes election-changing. Maybe it should be set by reference to a variable which is outside the immediate direct control of any government or party – something like the average wage for a full-time employee. Maybe we could get lucky, and the scale of the two latest donations will have the opposite effect to that intended, and encourage Reform Ltd’s potential voters to wonder whether a party funded like that can really represent them. I won’t hold my breath, though.

A trillion here, a trillion there - pretty soon, you're talking serious money

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Sometimes, politicians’ promises are never intended to be serious, it’s more of a nod and a wink between the promiser and the electorate. Trump’s promise to pay every adult in the US a sum of $5,000 if his party wins the mid-term elections surely fits into that category. There cannot be any serious observer who believes that Trump will be able to fund a pledge which would cost more than a trillion dollars, even if he wanted to. Well, maybe Trump believes it – I suspect that he might actually believe that everything he says is true at the time he says it, but that just reflects how far gone he is.

But supposing, as a thought experiment, that he were to try and implement it, how could it be funded? Trump and the UK government operate under the same arbitrary neoliberal economic constraints so, according to them, it can only be funded by one of three routes: increasing taxes, borrowing more, or cutting other spending. Increasing taxes in order to issue cheques to citizens would be strange, to say the least. And the cuts made to date have been unpopular enough. So, in practice, the money would show in the accounts as having been ‘borrowed’ – and that means selling bonds on the market. Those bonds would be bought by those who have the money to buy them – i.e. the wealthiest, whose taxes Trump has already cut significantly. Trump has said that the richest will be excluded from his ‘dividend’, although without defining who is included in the term ‘the richest’. They are unlikely to worry, whoever they are: they might not get the $5,000, but they’ve already had the tax cuts and they’ll also get interest on the money that they deposit with the US government – together worth far more. And the bonus (for them) is that selling that amount of additional bonds will lead to an increased interest rate. What’s not to like?

For ordinary Americans, already struggling with the cost of living (exacerbated by Trump’s tariffs, wars, and cuts to health care), the promise of $5,000 might look attractive. Increasing spending power on that scale in a short time will probably lead to inflation, and in some corner of their minds they might well be conscious of the improbability of it actually happening anyway (has Trump ever made a promise that he had any attention of keeping?), but when things look hopeless, even a small spark of hope can be worth clinging to. Whether it will keep enough waverers on his side remains to be seen – it may be a reckless and unfulfillable pledge but it isn’t entirely stupid, politically.

There is a lesson for others, though. Hopelessness is a powerful emotion. Debunking an unfulfillable pledge is easy enough to do in rational terms, but even rational acceptance of the nonsensical nature of a pledge isn’t always enough to overcome the faintest of hopes that the snake oil might just work. We should have learnt that from Brexit, but I don’t always see signs that we have. Defeating those who make pledges that can never be fulfilled requires more than rationality and logic – it requires a restoration of hope. And, as Burnham will find out, restoring hope requires a bit more than smoother rhetoric.

Israel's fury is disproportionate to the substance

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It’s not quite a golden rule, more a rule of thumb; but sometimes it appears that the degree of fury surrounding an issue bears an inverse relationship to the importance of the substance. Israel’s fury at the long-overdue statement by the UK government that sanctions will be imposed on imports from illegal Israeli settlements in the West Bank is clear and visceral. The UK’s condemnation of the illegality is welcome nevertheless; the attempt to conflate disapproval of illegality with antisemitism is nonsensical but just about par for the course. But what is the substance involved?

The amount of trade between the UK and Israeli West Bank settlements is hard to calculate, but certainly tiny. It’s not as if the ‘country of origin’ of settlement-grown dates is going to be emblazoned on the packaging as ‘illegal settlements in the West Bank’. There are rules, of course, banning such goods from being labelled as ‘product of Israel’, (although it seems to be a fairly widespread practice) and perhaps, as this report from the BBC suggests, the ban will act as something of a deterrent to that, although the co-operation of the Israeli authorities is something that maybe we shouldn’t rely on too heavily. Labelling them as having been produced in ‘Palestine’ is another route currently being used, and is accurate in geographical terms at least. One assumes that the intention of the UK government is not to target Palestinian-produced produce, but, again, that’s easier to say than implement.

Al Jazeera (not always the most reliable source, but this piece seems balanced and reasonably well-researched) estimates that total UK trade with settlements amounts to around £40 million annually, but the bulk of that is exports to the settlements (which are not covered by the ban), leaving a maximum of around £6 million annually in imports, a total which may well include goods produced by Palestinians as well as those produced by Israelis. Obviously, other countries imposing a similar ban (whilst facing the same problems of correctly identifying the affected goods) will increase the extent of the economic impact, but it still looks like pretty marginal sums.

It could be argued, not unreasonably, that it’s more of a symbolic gesture than an immediately effective one. No less welcome for that, but hardly an explanation for the ferocity of the response it has provoked. I suspect that the response is aimed less at undoing the sanctions being imposed now and more at mobilising opinion against any ratcheting up of sanctions in the future, when the current sanctions will, inevitably, have proved themselves to be of minimal effectiveness. How willing the UK Government is to go further in the face of that fury is the real test.

Challenging the NATO narrative isn't supporting Putin

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Last week, Labour MP Diane Abbott was described by a Tory MP as “playing the role of Putin’s useful idiot” after saying that “the imminent threat from Russia is a NATO fiction to justify their complete capitulation to Trump's demands for more military spending”, and having previously referred to the war in Ukraine as “a Nato campaign against Russia”. Well, she certainly didn’t choose the most diplomatic of phrases, and there’s a certain lack of nuance in her utterances, but neither of those are exactly something new. But given the danger of an escalation of the conflict into something far worse, there is, surely, some scope for challenging the conventional narrative rather than dividing the world into people wearing white hats and others wearing black hats – good guys and bad guys. Calling anyone who wants to explore alternatives an apologist for Putin isn’t helpful.

That the war in Ukraine was started by Russia, in complete disregard of international law, attacking a neighbouring sovereign state is beyond dispute; it is Putin and Russia who must carry the blame for the ensuing bloodshed and destruction. Whether it was entirely unprovoked is a lot more complex. Certainly, Ukraine was attempting to ‘Ukrainify’ parts of the country which were previously largely Russophone, but the population of those areas voted overwhelmingly for independence in 1991, and there was no objective evidence suggesting that they had changed their minds about that. No excuse there for Putin. Whether there was ‘a NATO campaign against Russia’ playing out over the future status of Ukraine vis-à-vis NATO and the EU is a much harder question to answer. NATO had already expanded further eastwards than Russia had expected (and contrary to assurances which may or may not have been given after the fall of the Soviet Union); feeling threatened is not a wholly unreasonable Russian response, although, again, not enough to justify an invasion.

But where I really part company with the views which are being pushed – and tend to agree with Abbott – is over the idea that Russia poses an imminent military threat to the whole of Europe. If there’s one thing which has been clearly demonstrated by the conflict in Ukraine it is that Russian military might has been over-hyped. The idea that a country which has shown itself incapable of dominating a single smaller neighbour is somehow poised to dominate the whole of Europe is risible. Spending more on armaments as a response to the claimed threat benefits only the arms manufacturers – especially in the US, which underpins Trump’s demands for more spending. Putin does not harbour any illusions about subjugating the entire world, and missiles aren’t about to fall on London.

That’s not to say that there is zero threat of anything. There can be little doubt that Putin would prefer a divided and weakened Europe which presents no potential threat to Russia, nor that he would like to disrupt the flow or weaponry and support to Kyiv. I’m willing to believe, even without detailed hard evidence, that Russia is behind at least some acts of sabotage and cyber attacks. A country at war can easily see some things as legitimate targets (which is to explain, not justify, such actions). But buying more tanks, fighter jets, ships and missiles neither prevents nor deters such actions – that merely increases the perceived threat to Russia. The likeliest causes of a wider war in Europe remain as they have been for a long time – a miscalculation or a belief (rational or otherwise) that ‘the other side’ is about to attack, provoking a ‘use it or lose it’ response. What is needed is dialogue and de-escalation, not more weaponry. On that, Abbott is closer to the mark than those rushing to condemn her words.

Things don't just 'happen' in a vacuum

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It would be an understatement to say that it isn’t often that I agree with anything said by US Vice-President JD Vance. There is, though, an exception to every rule, and his comment that “sometimes things happen” during a war is surely true. For all the talk of precision munitions, the reality is that, once a shooting war starts, there will be casualties outside the armed forces of the states involved. Whether it’s human error, equipment malfunction, or outdated targeting information matters little – non-combatants will inevitably be killed or injured. “Things happen”.

It’s standard practice for both sides in every conflict to point to things done by the other side and shout ‘war crime’. And there is no doubt that war crimes, as defined under international law, are almost invariably committed by all sides in any armed conflict. I wonder, though, how useful the distinction is. In what sense, for instance, is a reluctant teenage conscript who has had a gun thrust into his or her hand before being sent to the front line any less ‘innocent’ than the family and friends they left behind? Wars aren’t started by soldiers, whether voluntary or conscripted: the soldiers are simply the ones sent to kill or be killed by the rulers of the state in which they happen to live, or have been born. Maybe we should draw a distinction between the volunteers and the conscripts in terms of their degree of innocence, maybe not: those signing on are as likely to have done so out of hopelessness about the economic situation in their communities as out of any desire to go out and kill.

The real war crimes are committed by those who start the wars in the first place, and those who commit or commission violent attacks which stop short of actual war but which provoke an even more violent reaction. Vance might be right to say that ‘things happen’, but that doesn’t excuse those who created the situation in which they happen. Preventing ‘things’ from happening depends on moving away from violence as a means of resolving disputes – and Vance has no excuse for the actions and decisions of the government of which he has been a part.

There's not a lot of democracy about in Reform Ltd.

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In the light of the growing scandal around the sources of finance for Reform Ltd – an issue which seems unlikely to go away anytime soon – it looks as though at least some of his acolytes are getting restless enough to seek to depose him as leader. A report a few days ago suggested that Zia Yusuf is pitching to replace him, from an even more extreme political standpoint. Farage himself has made some noises about having considered giving up and going back to make (even more) money outside politics. If he doesn’t decide to stand aside, it’s hard to see how his company/party can replace him against his will.

There was a bit of a fanfare last year when he restructured the company to be a ‘not-for-profit’ without shareholders, which was presented as giving ownership to the members. It was a form of ownership that didn’t involve control, though. The leader can only be removed if either 50% of all members indicate that they want a confidence vote to be held, or 50% of all MPs do the same (however, that latter provision only applies if there are 100 or more MPs – not an imminent probability). As for the membership provision, it really does seem that the leader has absolute power to remove membership from anyone to whom he takes a dislike: even if it were possible to overcome the practical issues in getting 50% to sign up for a proposition, whether they’d all still be members when it was formally presented is another question.

A leadership vacancy would also expose another quirk of the ‘democratisation’ of the party. The new leader would not be chosen by the membership in a vote, but by the ruling board of the company – most of the members of which are appointed by the leader. If and when he’s ready to go, effectively he gets to choose the people who would appoint his successor. The reason he gave for this approach was that, in one of his previous parties, having an elected body in control meant that the party "became completely and utterly and totally ungovernable". That seems to be code for not doing what he told them to do. He expects, instead, "There has to be some degree of trust amongst the members in the leader…”. Democracy is fine, it seems, as long as it invests total power in one individual. That probably tells us all we need to know about the likely nature of a government led by Farage – an eventuality which, whilst it can’t yet be ruled out, certainly seems to be receding at present.

All spending is income to someone

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One of the simplest rules in economics is that all spending by one person or organisation becomes income for another person or organisation. I frequently wonder how well understood it is, but it is an unavoidable fact. And what applies to spending by individuals or companies also applies to governments – all public spending becomes income to someone, somewhere. The corollary is that any reduction in public spending cuts the income of someone, somewhere – the only question is who and where.

Yesterday, Kemi Badenoch told us that a government led by her would cut spending on benefits in order to increase spending on defence. Assuming that the cut and increase match pound for pound, then the overall total of money injected into the economy by the government – becoming income for others – would remain the same. What would change, though, is the who and where receiving that income. Income which previously went to recipients of benefits would instead become income for the likes of arms companies and military personnel from where it would flow into the wider economy as it is spent again. Benefit recipients lose income, armaments companies gain income. None of that is, or can be, arguable – it’s simply a statement of fact.

Unless, of course, you happen to be the leader of the Tory Party, who said that this wasn’t targeting the poorest members of society because the welfare system “doesn’t make any sense”. Now, she might actually have a point, of sorts, about whether the welfare system works as well as it should, or is targeted as well as it could be. But unless we choose to believe that most of the benefits – and therefore the savings she is proposing (although she hasn’t actually spelt them out) – are not in fact going to the poorest in society, then it is inevitably the case that cuts will reduce the income of the poorest. Badenoch’s statement is complete nonsense. But the problem isn’t just Badenoch – all those Labour ministers and politicians calling for welfare cuts are effectively proposing the same thing. The only way of avoiding that is if the reductions in benefits are matched by increases in income for the same groups from other sources.

It is a cart-and-horses issue. If those receiving benefits start receiving at least an equivalent amount of income from other sources (such as employment), then it doesn’t need government action to cut benefits spending: it will fall automatically. But if the jobs aren’t available, or the people can’t do them (for whatever reason), then a cut in benefits takes income way from the poorest. Put another way, the issue isn’t really about benefits at all (leaving aside some tinkering with the rules to better achieve the intended outcomes) – it’s an employment/wages problem. It’s a much harder problem to tackle – not least because our politicians are wedded to the idea that governments can’t actually do much because of arbitrary fiscal rules – but looking at benefits solely as a question of ‘unsustainable government expenditure’ is, however they choose to spin it, an argument for making some of the most disadvantaged in society even poorer. It could not be otherwise. We need to start in the right place, which isn’t about the benefits system at all.

Simply locking people up and throwing the key away doesn't work.

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There are at least four different reasons why a society might decide to imprison those who break its agreed rules, and the debate about an early release scheme – driven not by any concerns about justice or fairness, but by a lack of places in which to lock up even more offenders – doesn’t really seem to have paid a lot of attention to the balance between them.

The first is as a form of punishment, and this is the one which seems to have attracted all of the attention. Indeed, most demands for ‘justice’ seem to revolve around the length of a prison sentence handed down to an offender, with the degree of ‘justice’ delivered apparently depending mostly on the length of that sentence. And most of the outcry against the early release scheme has related to the idea that the level of punishment is being reduced.

The second reason is about public protection / prevention of re-offending. When it comes to the question of whether or not ‘prison works’, this is the one area in which one can say unequivocally that it does indeed work, because an individual locked in a cell cannot re-offend during the period of incarceration. Whether (s)he would have done so unincarcerated is much harder to answer.

The third reason is about deterrence. The underlying rationale is that if someone commits a crime and gets a lengthy sentence as a result, then it will deter others from committing the same crime. It is far from clear that this actually works, given that it assumes that the criminal is carefully weighing up the odds of being caught and found guilty before taking a rational decision as to whether to offend or not. A lot of crime (admittedly not all) is either opportunistic or committed in the heat of the moment – ‘deterrence’ is unlikely to make much of a difference.

The fourth reason is about rehabilitation / re-education – trying to ensure that offenders are unlikely to re-offend when released and can more easily re-assume their place in society. It’s an area where the UK justice system is notoriously bad – offenders are more likely to learn new ways of offending than new skills for their future.

The biggest problem with the UK government’s early release scheme is that it is primarily based on considering the category of crime committed rather than looking at all the circumstances of the offenders. So when an offender is considered by the public at large to be unsuitable for release, the government resorts to excluding all those who have committed the same or a similar crime. Even leaving aside the question about whether public rage (often whipped up by the tabloid press) is the right basis to determine whether an individual should or should not be released early, treating all those who have committed similar crimes in the way that the public demands one of them should be treated is a bit like abdicating responsibility to a mob.

Instead of debating whether we should really be locking up so many people (more than many other European countries), politicians have chosen to invent more crimes and equate ‘justice’ with longer terms in prison, competing to see who can mandate the longest and harshest sentences (in the belief that it will be popular), during which those imprisoned not only contribute nothing to society but also cost an ever-increasing sum to keep them economically inactive. Without building the extra spaces that such an approach inevitably requires. The result is a panic last minute response to a crisis of their own making which finds them with neither the time nor the resources to make a proper assessment of which prisoners should be released early and which should not. It’s a response which serves the interests of neither the prisoners themselves nor society at large. And there’s still no sign that the problem is really being recognised.

They're sharks, not vigilantes

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Talk of ‘bond vigilantes’ has risen again this week in the light of a significant sell-off of government bonds, not just in the UK but in other major economies as well. The term is one we should reject absolutely: the word vigilante makes them sound like some sort of irregular financial police, doing their bit to keep the politicians in line and on track. It’s a complete misnomer – they’re profit-hungry sharks seeing an opportunity to make more profit for themselves by extracting interest from governments.

The first thing that we need to understand is that for every bond which is sold, someone has to buy it. No buyer = no sale. Those selling bonds are deliberately selling at a loss; someone who sells £1,000 worth of bonds (which the government has committed to redeeming for £1,000 at maturity) for £800 is crystalising a loss of £200. If the rate of interest on the bond is 3%, they would expect to receive £30 a year in interest. Since that amount of interest is fixed, the person buying the bond will now receive £30 a year on a holding they bought for £800 – a rate of interest of 3.75% - and still expect to get £1,000 back at maturity. Not a bad deal for them. It’s worth noting, though, that for all the talk of increasing rates of interest on bonds, the amount being paid by the government each year hasn’t changed by a single penny. A fall in the price of traded bonds does not cause an increase in the cost of existing borrowing.

So why would someone sell a safe asset for less than its nominal value? Well, if they believe that the government will have to respond by paying that higher rate of 3.75% on any new bonds issued, they will end up with a better-paying asset. And in that case, for new bonds issued, the cost of government borrowing has indeed increased. Both seller and buyer have managed to increase their income from interest paid on their bonds as a result. They will have seen an opportunity to make money and taken it. In none of these transactions is there any moral or economic judgement about government fiscal policy, let alone any attempt to enforce a particular policy. Indeed, it’s almost the reverse – the impact of fiscal policy is merely to create a belief that interest rates will have to rise, and the consequent belief that ‘other people’ will seek to take advantage of that increase, causing the whole herd to move. The belief, based entirely on the notion that government funding is dependent on bond issues, becomes self-fulfilling. Far from enforcing stability and discipline, the profit-seekers positively benefit from instability and chaos.

The conventional neoliberal economists and pundits tell us that, in order to avoid those rises in interest rates, governments must never ‘upset the markets’. What they mean by that is that governments must never take any actions which might create an opportunity for the traders to push interest rates higher. That in turn is based entirely on the assumption that governments must always borrow, on the markets, any money that they do not raise in taxes – in short, the assumption that the household analogy for government finances is true. But what if it isn’t true? What if the government does not need to balance its budget and can simply run an overdraft with the central bank? That goes to the heart of the debate about what money is and how it works. What gives the bond markets their alleged power is the adherence of governments to the household analogy for government finance, not some universal law of nature. An approach to economics which recognises that the constraint isn’t the availability of money but the availability of resources which can usefully be deployed would strip that power away. Neoliberal ideology is artificially constraining governments – we should be asking who benefits.