How badly do we want to change?

Tweet

George Osborne’s speech in parliament yesterday has been widely reported.  And in saying that the UK should have done more to prevent the unfolding tragedy in Aleppo, I’m sure that he’ll have struck a chord with many.  He’s far from being alone in feeling frustration at what has been happening over the months and years, as well as anger and sorrow over the loss of life.

I’m not sure though that he’s offered much of an alternative.  As I understand what he’s saying, it is that lives are being lost as a result of the bombing and fighting now because the UK decided not to bomb the other side three years ago.  Now it is, of course, possible that the total number of people killed might have been lower had the UK decided to start bombing Assad’s forces (although it’s not certain – it could, on the other hand, have led to a more direct clash between Russia and the west, with even more far-reaching consequences). 

It’s certainly true that it would have been different people being killed.  However, the argument that fewer people would have been killed in total if only we’d killed different people earlier isn’t one which is going to convince any of those of us who were opposed to UK military intervention.  It’s akin to comparing two piles of bodies, and deciding that what’s ‘right’ is whatever produces the smaller pile; it reduces casualties to numbers rather than seeing them as people.

But I’m equally uncomfortable with the idea that the rest of the world should, in situations like this, stand aside and let events take their course until one side or the other emerges ‘victorious’ over the piles of rubble and human bodies.  I wish that those of us who reject the simplistic proposition of military intervention from outside could propose an equally simplistic solution which did not involve inflicting more death and destruction on a country.  The immediate problem is that there are no easy, simple, short term solutions; peace is an elusive thing which needs a great deal of human endeavour to bring about.  The bigger problem is that current international agreements and institutions barely scratch the surface of what is required. 

There are places we could start, however.  Controlling and reducing the trading and manufacture of armaments would be one good step to take; rejecting the concept of unilateral intervention in the affairs of another country would be another.  Both of those require a strengthening of international institutions, particularly the UN.  But all of those things are tackling the symptoms rather than the underlying causes, which are about power, and control of resources, and the real, or merely perceived, differences between the earth’s tribes. 

In an age where there seems to be an increasing tendency to split humanity into ‘us’ and ‘them’ rather than building an understanding that we have a shared existence on one small and fragile planet, I’m pessimistic for the future.  On this issue, as on so many others, it seems that most of humanity is currently determined to advance its own interests at the expense of those of others.  I still believe that things can be different; but presently, there just aren’t enough of us who want them to be.

Trashing the (recent) past

Tweet

It seems like only yesterday that Cameron and Osborne were telling us that cutting the deficit was an absolute priority, and that we really had no choice.  The rest of the Cabinet duly fell into line, parroting the same phrases on a daily basis.  I don’t remember this imperative being predicated on any particular set of economic or political circumstances; indeed, they even wanted to make it a legally binding requirement on future governments.

Within days of the referendum, the date by which this absolute imperative has to be achieved had been postponed, and now we learn that the Chancellor is planning to cut the government’s income by slashing Corporation Tax (although who knows whether he’ll still be in post long enough to implement the change?).

In the meantime, Stephen Crabb, one of those colleagues who have sat around the Cabinet table with him and duly repeated the mantra about needing to reduce the deficit, has proposed borrowing an extra £20 billion a year for five years – increasing the national debt by £100 billion – to fund infrastructure projects if he is elected as party leader and prime minister.

I don’t actually disagree with the Crabb proposal at all; and in principle, I don’t disagree with cutting Corporation Tax either (my reservations are to do with whether there are adequate controls to make sure that the monies saved are reinvested in expansion and job creation rather than taken out as higher salaries and dividends; something which isn’t at all straightforward to achieve).  The point is, though, that the way in which they can so easily backtrack confirms what some of us have said all along – deficit reduction is an ideological imperative, not an economic one.

There is not, and never has been, a problem with government borrowing, and there is not, and never has been, a magic number at which point borrowing becomes unsustainable.  Sensible pragmatic economic policy borrows when rates are low; it is ideology which dictates that borrowing is inherently bad.  National budgets are not like household budgets.  I’d like to believe that they’ll stop spouting nonsense about repairing roofs while the sun shines or maxing out the national credit card, but that might be a bit too much to expect.  We’ll have to settle for the tacit admission that they were just plain wrong all along.

Supporting British jobs

Tweet There seem to be few people in Wales supporting the construction of the HS2 rail link, most of them preferring to argue that Wales should have its share of the money and use it for other purposes.  I disagree – not because I expect Wales to get any benefit from HS2 itself, but because, unless we are going to prevent people from travelling at all, the alternative to better and faster rail links is more runways and aeroplanes.  So I’d prefer to see Wales making the case for HS4 (we’ve already missed the boat for HS3 which is likely to serve Scotland) so that we become part of the high speed network rather than whinging on the side-lines.  And the only way that HS3 and HS4 will happen if they are treated as part of a UK network rather than seeing the three projects as entirely self-contained.

Where I find myself more in line with mainstream opinion in Wales is with the idea that infrastructure projects (of which HS2 is one) are a good way of boosting a flagging economy, and that investing in them can create economic growth and jobs, as well as boosting skills and knowledge in the economy.  It was in that context that I was astounded to see that on his trade mission to China, the Chancellor has urged Chinese firms to bid for construction contracts on the project.

‘Scope creep’ is one of those things which can all too easily happen on any project, but for it to lead to the mission becoming the opposite of the original intention is a rare achievement.  Osborne went to China to drum up business for British companies, with the stated aim of China becoming the second biggest customer for British companies.  There is currently a significant gap between the level of the UK's exports to China (at around £16.7 billion), and imports from China (t around £37.6 billion) - see Figure 2 here, so his aim of increasing UK exports to China is a wholly reasonable one.   But, instead of that, he’s ended up trying to drum up business for Chinese companies in the UK.  Even if the Chinese companies would employ local workers to carry out the work, the profits (and the tax on them) would still end up being syphoned out the UK economy rather than reinvested here.

It’s another take on being ‘business-friendly’ I suppose – it’s just other countries’ businesses that he’s supporting.

It's about politics, not economics

Tweet Later today, the Chancellor will make his autumn statement.  There’s plenty of speculation about what will be in it, along with a great deal of pre-announcing as the government tries to maximise the impact of the good news bits.  There seems little doubt that his message will be, in essence, that the current account deficit has not gone down as planned, but that there’s money available for some gimmicky giveaways and re-announcements.

He will, of course, blame factors beyond his control for the first part, and claim all the credit for the second.  (Whilst his coalition partners will claim that the second is all down to their moderating influence)

The real announcement is the one that he won’t make, which is that he’s known all along that current account deficit reduction is not as important as he told us it was.  In fact, it hardly matters at all.

In that sense, the Tories have pulled off a political master stroke.  They’ve succeeded in persuading the media and the other parties to obsess endlessly about how to reduce the deficit, whilst they carry on running one.  They’ve used the excuse of the deficit to mount an ideologically motivated attack on the welfare state, and managed to get the main opposition parties to commit to continuing largely the same policies.  Even if they lose, they win.  And we let them.

Taking a cut

Tweet I’ve been a bit uneasy from the outset about Osborne’s decision to give people more freedom about how they should use their pension pots.  On the one hand, it’s difficult to argue with the idea that people should have more freedom about the ways in which they use their own money.  But on the other, those accumulating large pension pots have done so partly on the basis of preferential tax treatment of the money salted away.  That preferential treatment was given on the basis that people were prudently saving for retirement, and would never have been granted to anyone who said they were simply saving for a Ferrari.

Part of my unease is about people taking the ‘wrong’ decisions about how to use their pension pots; but neither am I convinced that the state always knows best when it comes to people making decisions about their own retirement.  Governments don’t exactly have an unblemished track record when it comes to taking decisions for us.

My unease was increased recently as the result of a marketing mail shot which I received from a financial services company.  Other than the fact that my age puts me in the right demographic, they’ve clearly done no research or pre-qualification whatsoever before telling me how they can help me access tax free sums from my pension without even having retired.  The company concerned would, of course, help themselves to 5% of the sum released, and, apparently, an annual fee for reviewing the pension.  (Although that’s only found in the small print at the bottom of the last of 4 pages of blurb.  And they don’t tell me anywhere that actually I could do exactly the same without any help from them, and keep my 5% to boot.)

It may, as I’m sure that the government would argue, be invalid for us to stop people doing as they wish with their own money just because it might not be their most sensible decision.  The right to take decisions must always include the right to take silly ones.  But surely it is an entirely proper political concern to ask whether financial services companies are pushing people in a particular direction in order to take an unnecessary slice off savings which people have taken decades to accumulate? 

It may be that Osborne’s intention from the outset was to benefit his friends in the financial services industry.  Some of them certainly lobbied hard for the decision he took.  But even if we give him the benefit of the doubt on that, and assume that his aim really was to give those with a big enough pension pot to make it worthwhile more freedom on how they use it, he has potentially opened the door to yet another mis-selling scandal, as companies keen to make profits target a wider and wider potential market.  How many people will have lost out before action is taken?