Borrowing costs, the last defence for austerity?

 

Osborne's Autumn Statement speech revealed more borrowing

Switch in focus from growth

Austerity is still the answer but now the question has changed. ‘How do we rescue the country’s economy, eradicate the deficit, and return to growth?’ has been replaced with, ‘how do we ensure that the cost of borrowing doesn’t increase?’

 

When governments borrow money they do so by selling bonds (gilts). These can best be described as IOU’s where investors buy a certain amount of bonds to be repaid, plus interest (yield), over an arranged period of time. Keeping down this yield is paramount to a government’s ability to repay its debts. If the government becomes insolvent then it will default and trigger the kind of austerity measures currently seen in Greece.

 

Britain’s coalition is trying to ensure that the country is still seen as a safe haven for money markets. When investors suspect that a country is unlikely to be able to repay its debts then credit lines dry up and the governments have to offer higher yields to convince potential investors that the extra reward merits the enhanced risk. An example would be Italy where a lack of liquidity has led to yields of eight per cent to be repaid in just three years. This contrasts with Britain’s relatively luxurious position of selling, at just over two per cent, bonds that don’t have to be repaid for a decade.

 

So Chancellor George Osborne is understandably keen to maintain cheap borrowing levels and avoid massive interest repayments.

 

How is the coalition maintaining market confidence?

 

Just how one keeps borrowing down is the dividing point in the country’s political landscape. The Conservative led government hopes that by maintaining their austerity programme to eliminate the structural deficit over the course of the parliament, they are keeping the faith of the markets. But austerity comes hand in hand with lower investment, lower spending and lower growth. The UK economy has flat lined and as a result borrowing has to increase to fill the void left by lower tax revenues. The government’s argument is that avoiding austerity measures and allowing the yield on UK bonds to grow by just one per cent would mean every family in the country paying an extra thousand pounds so Britain could repay its debts.

 

The Director of the Institute for Fiscal Studies, Paul Johnson, appearing on the BBC’s coverage of the ‘Autumn statement’, noted that due to declining growth increasing the amount Osborne has had to borrow, he has to factor in more cuts than previously to eradicate the structural deficit:

 

“He’s had to take another 15 billion [pounds] away from public spending in the years after the next election. Now he hasn’t told us how he’s going to do that, he’s simply said that in his forecast he’s taking an extra 15 billion away, that’s enough for the OBR (Office for budget responsibility) to say he will meet his target. Had he not pencilled that in the OBR would have to have said he’s going to miss his targets.”

 

Osborne’s analysis is that should this happen the effect would be to shake the markets’ confidence.

 

 

So what of the opposition?

 

Polls are currently reflecting the public’s lack of faith in Labour’s economic plan. ComRes found that 21 per cent of people trust Labour with the economy whilst 50 per cent do not. Ed Balls’ argument for his economic philosophy has hit a wall. The party’s message is that spending more and therefore increasing borrowing costs will lead to lower borrowing costs. On the surface the claim appears illogical and they have failed dismally in getting across any sort of economic argument to support the claim.

 

The coalition has found political capital in claiming that despite inheriting a huge deficit they have maintained a low level of borrowing costs. This appears true when compared with European neighbours like Greece and Italy, but does this tell the whole story?

 

Today’s bond market:

	Price	Yield
US Gov 10 yr	100.00	2.00
UK Gov 10 yr	113.27	2.23
Ger Gov 10 yr	97.23	2.31

 

The above graph shows that the UK does indeed borrow a similar amount to both the USA and Germany. If the theory of cutting the budget deficit to increase the attraction to borrow follows, then you would expect them to have similar budget deficits:

 

Budget Deficit (% of GDP)

US	9.3
UK	8.7
Greece	7.0
Germany	1.1

 

So far so good.

 

But the US, despite the best efforts of the Republican Party, isn’t following a similar austerity plan to keep favour with the markets.

 

Upon arrival to the White House President Obama initiated an $800bn bill and recently fought hard for a $447bn package of tax cuts and government spending. Hardly austerity measures and when combined with the life and death struggle to raise the debt ceiling, which had it not been achieved would have led to an American default, would surely deter any nervy investors. Yet that isn’t the case, so Chancellor Osborne’s theory of ‘austerity or exorbitant borrowing costs’ appears to fall down.

 

The example of America’s economic situation is much more consistent with Britain’s position than the European countries. Britain hasn’t defaulted on its debts for 300 years, it has its own currency, an independent central bank and control of its own monetary policy. Our flexibility is far greater than the likes of Italy and Greece and is as such a far safer economy to invest in.

 

Economist Paul Krugman believes austerity rain will lead to an austerity flood

Labour will need to work hard to convince the country that stimulus is the way to go with even former Liberal Democrat leader and Keynesian, Lord Paddy Ashdown, subscribing to the government’s argument. During a debate with Alistair Darling in response to the ‘Autumn Statement’ he reiterated the party rhetoric; “debt as high as Italy yet borrowing rate lower than Germany.” Labour has to show that this is a distortion of cause and effect to gain any credibility for their argument. Ashdown’s party has always wanted to join the Euro despite the disadvantages of the loss of a sovereign monetary policy. These monetary conditions are again ignored in the austerity hypothesis. Italy cannot print money into the system in order to devalue; it has no control over interest rates and is tied into a political entity that is forcing austerity measures that only increase the likelihood of default and further disincentivise investors.

 

The 2008 Nobel Prize winning economist Paul Krugman states in his blog: “it turns out contractionary policy is contractionary after all. As a result, despite all the austerity, deficits remain high. So what is to be done? More austerity!”

 

Perhaps the Labour Party would be well served to adopt this point in favour of the distinctly less successful ‘too far too fast’ campaign.

 

 

 

The world leaders need a leader

 

Is this the international leader the world requires?

The world calls for a leader as governments across Europe collapse, yet it may be that the man for the moment was the first to fall victim to the economic crisis.

 

Gordon Brown had a turbulent three years as Prime Minister and domestically it all went wrong from him. The 10p tax fiasco undermined his government, his inability to appease his cabinet undermined his party and by calling a ‘lil old lady’ a bigot, he undermined his relationship with the public.

 

But whilst Brown failed to find his feet as a domestic Prime Minister, he did much to bolster his curriculum vitae as an international leader to call on when there is a crisis. As Prime Minister he convinced Europeans that the banking crisis was a global problem, stabilised devolution in Northern Ireland, and even got the Chinese to agree (in principle…. kind of) to the Copenhagen climate agreement.  But his greatest achievement was the G20 summit in London where the leading nations agreed to inject $1 trillion into the global economy.

 

Perhaps the most lasting achievement of Brown’s international ventures was his ability to pull China into the negotiations. The rising superpower has over $3 trillion in reserves and is the key to economic recovery; it must be pulled, tugged and cajoled into opening up its chequebook and buying foreign goods. The problem is that the country is export driven and wants to keep its currency artificially low to protect this interest. But the leadership can be forced into realising that it is in their interests to intervene as a strong Europe and America mean a strong market for Chinese goods.

 

But as with Churchill before him, Brown’s successes on an international stage were not enough to ensure a further term as Prime Minister. So where will the leadership come from?

 

China must be thrust to the forefront of the G20. This is what Obama and Brown realised and did so brilliantly in 2009 but seems to have been a lesson not heeded, as the latest instalment in Cannes was really the France, Germany and Greece show. China does not willingly push to spend its money externally without a guarantee of a return, so when austerity measures are placed at the heart of a meeting their politicians will happily take a further step back.

 

The traditional world leader is of course the United States of America, but President Obama is in no position to take up the mantle. The ‘greatest democracy in the world’ continues to fail as a system. He’s struggling to operate due to the severe restraints of a filibustering Republican House of Representatives home to a lunatic fringe of ‘Tea Party’ politicians. An approaching election will do nothing to free up time to rally the world behind a common cause.

 

So attention shifts from the leader of the free world to the leader of the Eurozone. Germany is the main European power and the head of the Eurozone, it needs to be strong and proactive but its leadership is floundering. Merkel is clearly an indecisive character by nature and it doesn’t help that the country she represents burdens here with a weighty recent history. Memories of the Weimar Republic and the hyperinflation that destroyed the German currency have, in the minds of the political elite, ruled out the use of the ECB as a lender of last resort. To expose the central bank to huge lending, quantitative easing and inflation is still a terrifying prospect for a country where a loaf of bread used to cost a wheelbarrow full of money.

So is there another British Prime Minister to rise to the challenge? Categorically no.

 

The UK has an awkward international position. Obama has made it a point of policy to look to the east making it difficult for the Prime Minister to maintain the ‘special relationship’. At the same time our European neighbours are increasingly focussing internally, decreasing the UK’s influence on the continent.  Gordon Brown maintained very close relationships with both Chancellor Merkel and President Sarkozy earning their respect and their ear. Cameron has largely undone Brown’s meticulous work, earning the title ‘lightweight’ from Obama and being told to ‘shut up’ by Sarkozy. Though this country’s days of controlling an empire is a distant memory, Gordon Brown showed that Britain could still have a profound effect on global politics. But Prime Minister Cameron, aided by his vociferous Eurosceptic party, hasn’t made friends with anybody and is more isolated than any UK leader in memory.

 

Chancellor Merkel is the unwilling incumbent of the hot seat and though incredibly hesitant must eventually place her faith in the ECB. Whilst this may prove to take a long time to achieve, the wonderful truth about continuously doing the wrong thing is that eventually you are forced to do the right thing.

Reaction to the elections now the dust has settled

The people have spoken and they have unanimously decided…. NO!!!

No to what? Well obviously no to political reform. But also a great big vocal no to politics as a whole. Here are some of the other questions posed at the ballot that were rejected.

Q. Do you have any sympathy for Nick Clegg’s scapegoat status?

A. NO!! One thing is for sure, Liberals got hammered in England, Scotland and Wales.

Q. Have you given up on government?

A. NO!! In England Tories are still firmly in control of local councils and whilst they expected to lose hundreds of seats they actually gained 81.

Q. So do you support the government?

A. NO!! We hate tuition fees, we don’t like the cuts but we blame the Lib Dems and Labour so Tories have got through the local council elections unscathed.

Q. Have you forgiven Labour?

A. NO!! Labour fell well short of the 1,000 extra councillors they wanted to gain in England and they took a beating in Scotland courtesy of the SNP.

The public may not know what it wants but they know what they don’t want and that’s everything currently being offered.

The traditional progressive movement in England has been given a resounding kicking. The Liberal Democrats got annihilated in the local council elections losing just shy of 700 seats and 9 councils. Even here in Sheffield, where it was expected that things would be bad with Labour gaining control of the council, it was far worse than expected. Nine councillors were lost and many other wards saw Sheffield’s lowly conservatives overtake Clegg’s men.

And then there was AV. The polls seemed to agree that there was no hope for the attempt at political progression putting it 18 points behind the No2AV campaign. In actuality it was far worse than this as 68 per cent voted against thus giving Clegg his second kicking and leaving his party at a crossroads.

Can he lead Scotland to Independence?

Scotland

The one concrete result we have got is in Scotland. Ed Miliband wanted the Labour recovery that aims to eventually see them retake Westminster, to begin in Scotland. Such talk indicating Miliband’s patronising belief in Scotland’s subsidiary status didn’t have the desired effect and pushed the voters towards Alex Salmond’s ‘putting Scotland first’ approach. The Scottish Nationalist Party stormed to an impressive electoral dominance destroying the labour party who so long have ruled the lands north of the border. However, whilst the SNP are experiencing a surge in support, this may not actually point to a thirst for progression. Whilst the First Minister, Alex Salmond, now has a position to implement a referendum for independence it is not at all certain that if he does he will win. The result was massive for the party but if they don’t win a referendum on independence then it could be assumed that the results of the Scottish assembly elections were an anti labour and Westminster vote more than a victory for SNP. Salmond is a heavyweight politician operating in a pool of small fish. And whilst clearly he has voter appeal he may have benefited more from poor labour tactics than having successfully united his country over political reform.

England

Liberal Democrat attention is now being switched to the next great battle. NHS reforms will serve as the latest battleground in order to refocus and regroup the party. I have always resisted previous talk of the coalition government not lasting as ‘too early to say’ but now the government is ‘mission creep-ing’ its way to internal crisis. Divisions that were previously confined to the backroom are now open to the public. Aside from the AV campaigns and figures such as Chris Huhne, and Paddy Ashdown throwing tantrums the formerly silent but lurking Tory backbenchers are creeping into the limelight. When asked about the longevity of the coalition government conservative Peter Bone MP said: “I don’t think it will go on for the full five years that’s for sure. The only reason for the coalition was to come together and sort out the economic mess that labour left this country and once that’s done there’s absolutely no need to continue with the coalition.” He went on to say: “Liberals have got to row in behind the government and stop bleating”. This opinion is reflective of so many Tory backbenchers who don’t see this as a coalition government, but a conservative one with a few refugees thrown in to provide Mr Cameron with the votes he needs to do the bidding of middle England.

Liberal Democrat MP Norman Lamb, most famous for threatening to resign unless changes were implemented to Andrew Lansley’s NHS reforms, stated today: “We have become a human shield for the conservatives”. There is no doubt this is true and it’s hard to see what they can do to change that whilst remaining in government. Mr Cameron won’t throw them any bones. The Tory backbenchers won’t allow it. They’ve come to the fore as they did to derail John Major over the EU. The current PM will be wary of his history, internal party rebellions destroyed the two previous conservative PM’s and now that the Liberal Democrats are so weak and Labour are still a long way back on their road to recovery, his primary concern is to appease his own party.

AV – A date with destiny for Nick Clegg

What is the point of first past the post? It doesn’t represent the public. It serves only to represent a single political group as the winner rarely gains a majority worthy to represent its constituency and insures safe seats for politicians. This allows them to feel free to use public money to fund anything from pornography to duck houses.

The arguments from the No2AV campaign have relied on an advert portraying people being too stupid to understand a format requiring the writing of numbers in order: http://www.youtube.com/watch?v=-obZ9OG_XKA

And a poster showing a boxer being knocked out by an opponent and still winning despite this being impossible under AV as boxing is a one on one situation: http://www.youtube.com/watch?v=NVRtL20Ue54&feature=player_embedded

But the argument that winning a foot race, even by a nose, is justifiable as being fully representative seems to be doing enough to win with the ‘No’ campaign in the lead by anything from 5 to 10 percentage points depending on the poll.

Why?

The King is born!!! Oh, the King is dead....already

The public have no appetite for change. People will complain about politicians and the press will get delirious with rage at expenses scandals but it means nothing come election time. We’ve become an old country set in its ways. We alternate our governments between labour and conservative as their main competition has been over who can be closer to the political centre ground. We have a monarchy that trudges on despite holding no influence over the country and its subjects anymore. The economy is lurching in the face of competition from China, India and Brazil. Our place as a ‘former’ world power is at last truly dawning and there doesn’t seem to be any enthusiasm to snap the country back into life.

We’ve had two by-elections recently in Barnsley and Oldham East after the previous Labour MPs were imprisoned. You would have thought that criminally pissing away voters’ money would deter the people from entrusting your party again, at least for the foreseeable future. But Labour not only held onto the seats but actually increased their share of the vote by over 10 per cent in each district.

The voters trundled into the booths and collectively put a cross in the box next to Labour because that’s what they’re supposed to do. “We’re from the north. We vote labour. We don’t want Thatcher’s Britain.” The same happens in the south with middle England as staunchly conservative as ever only to be riled out of their dozy middle class lifestyles if there is a perceived threat to…..trees.

AV won’t win because the politicians don’t want it to. The Tories like their safe seats. They represent the moderate right against the left wing. If the voting system represented a straight fight between the right and the left, then labour and lib dem votes would be intertwined possibly decimating the Tories in a number of their close seats.

Labour are split over the issue because they realise the above, but they also don’t like the idea of losing votes to the lib dems who are often the common mans’ second favourite party and could do well under AV.

It could all have been so different……

For real reform it takes a leader who can win the support of the public and develop enough energy to encourage people to act in the name of progression. Think Martin Luther King, Emmeline Pankhurst or Vladimir Lenin. Nick Clegg could have been that man. For a while he was the knight in shining armour destined to lead the country to greener pastures. He fearlessly strode into the field of conflict (TV leadership debate) and after a ferocious battle where much blood was spilt (some verbals and polite disagreements) the gallant knight emerged heroic and victorious (1% gain in vote).

But then it went wrong.

Mel Gibson ain't no English Bitch

I don’t remember Mel Gibson signing an agreement at the end of Braveheart saying: “Fair cop mate, your English boys won. It was a good fight (but never really that close). Do us a favour sport (King Edward), I’ll be your deputy if you fancy?” It wouldn’t have gone down well with the Scots and would probably have confused the film critics. But that’s what Clegg did because he hadn’t seen Braveheart. He fucking hates Mel Gibson films.

Since then he’s had to choke on tuition fee increases that decimated his strong student support and battle his own party about Andrew Lansley’s proposals for reforms to the NHS. Clegg’s Merry Men aren’t happy. Vince Cable (Friar Tuck) is getting into arguments with David Cameron about immigration speeches. Danny Alexander (the ginger merry man) is falling out with George Osborne about ‘dirty tricks’ in the AV campaign. All the while the liberal democrat Godfathers Emperor Ming Campbell and Charles Kennedy are hardly thrilled about the whole coalition deal.

Clegg could have pushed through electoral form. He could have ridden the crest of a liberal wave that refused to elect the Tories outright despite knowing labour were not so much a dead horse but long decayed. His victory is that there is a referendum on electoral form. He has taken it this far but to ensure this he had to sign his political life away. Now Ed Miliband won’t even share a platform with him during the YES2AV campaign. It’s a sad state of affairs for a man who sacrificed his party to gain power and attempt to make real change to the country. If AV wins it will now be Miliband’s victory. If it doesn’t then Clegg’s surely done as a political force. Tuition Fees increased, Trident will be replaced rather than scrapped and electoral reform has slipped away.

America wanted to act in Libya but was in no position to admit it

The President needs to step up to the Libya challenge

 

Legitimacy is key

Gaddafi’s brutal regime has been murdering the Libyan people for weeks as the dictator took advantage of the outside world’s reluctance to step in. Despite requests from the rebels themselves for an implementation of a no-fly zone, world leaders (particularly in America) were keen to distance themselves from thoughts of intervention. The protests began in Benghazi and overturned the government nationwide to within thirty miles of the capital city, Tripoli. The west has been keen to provide vocal support to the rebels and advised the Libyan Dictator of forty two years, Colonel Muammar Gaddafi, to stand down in the hope that the transition would progress like the stepping down of President Zine El Abidine Ben Ali in Tunisia and President Mubararak in Egypt. But in Gaddafi the world had underestimated the will and insanity of a determined dictator who, amongst other ridiculous statements, claimed that he had the full support of his people and that the protestors were all drugs addicts.

Since then the Libyan loyalists have retaliated with vengeance sweeping aside an unorganised and ill-equipped rebel ‘army’ and almost reaching the epicentre of unrest Benghazi. Gaddafi has stated that the rebels will be severely punished and there have been numerous reports of bloody violence. Yet until now the international community had not stepped in.

The problem is history. The normally trigger happy Americans are currently embroiled in two unpopular wars with the conflict in Iraq in particular being a publicity disaster. The US is incredibly unpopular in the Middle East and after claims of an illegal invasion, the blight of continuing military losses, civilian deaths and terrorism there was not much appetite for war.

In the beginning David Cameron was a lone voice in calling for a no-fly zone over Libya. Despite an increasing humanitarian crisis and human rights violations the international community continued in its laissez faire approach. But now, with French and British leadership, the UN has finally given its backing to military action and suddenly America is right at the forefront.

The shift in position is a stark one and it reflects the difference between how the American government wanted to act and the awareness of its largely negative perception abroad.

The problem was legitimacy. Iraq was quite possibly an illegal war sold to the public on false information about nonexistent WMD’s. There is a strong argument that President Bush and Prime Minister Blair were looking for a reason to remove Saddam Hussein partly to right the wrongs of the first Gulf War and possibly to secure oil resources. It is an argument historians of the pessimistic and optimistic inclinations will debate for years and one I shan’t dwell on now. The Iraq war was not backed by the UN not even independently supported by France or many other nations and was unpopular in Britain. As a result the already negative public image of the west was worsened in the Middle East and Obama’s administration did not feel confident enough to push the debate on Libya.

President Obama’s election represented a realisation of optimism in the United States. His rise to power was seen to represent ‘change’ and brought a belief that things would get better. This was not just a domestic hope. Across the globe his appointment was welcomed and on his Presidential visits he has been welcomed with ringing endorsements from a world that needs a strong America but also one that engages with its neighbours rather than independently doing as it sees fit. Obama was wary of this position and he didn’t want to do anything to jeopardise it. Forcing the issue on Libya could have backfired at that early stage and trying to convince the UN to go along with another American led campaign may have appeared to be an unnecessary headache.

The UN Security Council voted in favour of Resolution 1973 despite abstentions from Germany, India, Brazil, China and Russia. But the fact that the African members Lebanon, Nigeria and Gabon were all in favour was a valuable coup for the pro action members and indicated that the intervention would be welcomed by the African people. Such support was markedly absent in the case of Iraq.

The initial details of putting the resolution into action seemed to involve Britain, France and their Arab allies leading the way. However the Americans were launching missiles on up to twenty locations yesterday as the US war machine was unleashed once more, this time with international backing.

The change in dynamic is an interesting one now that the US has been let loose. They are the ones now forcing the issue and talking about ground troops. On Wednesday evening the US Ambassador to the UN Susan Rice said: “the US view is that we need to be prepared to contemplate steps that include but perhaps go beyond a no fly zone.” She went further towards indicating the deployment of ground troops saying: “A no fly zone has inherent limitations in terms of protection of civilians at immediate risk.”

It is important to remember that the Defence Secretary Robert Gates was not so long ago decrying “loose talk” from David Cameron. Now it is the Prime Minister showing caution with the Chancellor George Osborne being far more hesitant about the possibility of soldiers during an interview with Andrew Marr. He said: “We are not considering ground forces at the moment…..we are enforcing the United Nations resolution and we are acting as part of an incredibly broad coalition of nations.”

The reason the American position has shifted so far in just a matter of weeks is due to external factors. They always wanted to act. They still see themselves as the great superpower that can save the world despite no one wanting them to. The political climate required that this time UN approval had to be gained and Britain and France ensured that this was achieved. Expect America to drive forward now that the difficult political machine has set the wheels in motion for action. America has an opportunity to enhance its position internationally, particularly in the Middle East, and President Obama will be keen to exploit it. It was foreign policy upon which Presidents Kennedy and Nixon based their legacies unfortunately the same can be said for the Bushs’.

The nature of this conflict could be a game changer in terms of Britain and America’s standing in the world. Mistakes made in Iraq have been learned from in this situation. The gaining of the UN backing has been put a requirement for action to be taken. Mr Cameron has announced that legal consultations will be published. It has been a smart play by the Prime Minister who has pumped up his leadership credentials when Obama has been lagging behind. The US are sending in the troops quickly and starting to talk big in order to regain the impetus and the glory. But Mr Cameron doesn’t need to do much more. By mobilising the UN he already has a victory. It’s now up to the UN and America as to whether this no fly zone replicates the capture of Milosevic or the failure of the Gulf War.

Bored of the Blame Game

The Public is tired of the same old excuse

The beginning of every government has a honeymoon period of being able to blame any problem on the actions of its predecessor. The current mob have been feeding off the line; “the deficit we inherited from Labour” on a daily basis. But there is only so long that the same song can be sung before the people get tired of hearing it. Eventually everyone got sick of Wet Wet Wet and Bryan Adams. With the economy shrinking in the last quarter by 0.6% the government is losing the sympathy of the public and it now appears that the use of this slogan is toxic for a politician.

Welsh Secretary of State Cheryl Gillian was the latest to suffer for daring to use the excuse on Thursday’s Question Time. The political version of Rome’s gladiatorial games is far better at gauging the mood of the country than the Eton school boy one-upmanship disguised as Prime Ministers Questions and the audience voiced made its displeasure apparent.

The beginning of the end for the line can be identified as the 11^th of February edition of Question time when Cabinet Minister Frances Maude was subjected to a barrage of abuse from an audience irate at his reference to the previous government’s responsibility for the current levels of debt. The anger of the crowd was such that Jacquie Smith got away with faming boredom by pretending to yawn. When a representative of the mess makers is able to mock the recipients of the mess it goes a long way to showing how unpopular the excuse is. The scene was a remarkable one. Shouts of discontent rang around the room as the top finally blew off a populous increasingly disenfranchised by government policy. Cries of “bankers’ bonuses” rang out in an unusual example of audience misbehaviour that required David Dimbleby to act the stern headmaster before order was restored.

Whilst many see it as a tired argument there is no doubting its validity. I would number the factors why but then I would fall foul of repeating the very mistake I am highlighting. The important factor is that the Government has lost this advantage over Labour and the Big Society debate seems to have been the tipping point. The public had so far put up with the slashing of government funding through a number of departments but it seems that their patience has finally been breached in the face of the apparent hypocrisy of Mr Cameron’s flagship policy.

The Prime Minister’s aim is to recreate the communities of old where neighbours looked after each other and families took care of their elders. Government increasingly took over the role of caring for the people as Labour welfare policies engulfed the state. Welfare was becoming the same financial black hole that the NHS is. By slashing funding to charities and local government the Government is directly affecting the care homes and libraries that many see as fundamental to society. The smell of hypocrisy is in the air and this was exacerbated by Dame Elisabeth Hoodless, the retiring executive director of Community Service Volunteers. The much respected servant to volunteering who had voiced her support for the policy when it was announced has now become a harsh critic claiming that the cuts are “destroying the big society.”

But the presumably circumcised Dame Hoodless misses the point when she complains about budget cuts in volunteering. Volunteering and charities by definition shouldn’t rely on government funding. They are not supposed to be reliant on state funding otherwise they would just be part of the welfare system. It’s a mark of the size of government that charities are so dependent on it. According to the Times charities receive more money from government than public donations, £11bn as opposed to £10bn. Big society is as much about devolving the big government that grew to an incredibly bloated scale under the Labour years as it is about increasing the size of volunteer groups.

The government line about being left in recession and massive debt by the Labour party is undoubtedly stale. The problem is that it is true and it’s applicable to nearly every policy the coalition government is producing. They make cuts, the question ‘why’ is asked, and then the tired old argument is presented. It’s a horrible cycle that everyone is trapped in. The Government won’t change the line because it validates the majority of their changes.

The problem is the nature of party politics. British politics is far too tribal and that issue has been exacerbated now two of the big three parties are on the same side. It is very much an ‘us’ against ‘them’ climate in Westminster and this is obvious in practically every answer any politician gives. If you ask a coalition MP about a policy they will prioritise more time to pointing out how it is a response to a mistake by Labour rather than speak about the merits of the policy.

The nature of the Coalition’s defensiveness has been its weakness. Cameron has been very forthright in his beliefs and the strengths of the policy he wants to make, but the rest of his party, and the Liberal Democrats in particular, have been hesitant to endorse the merits of government policy. This was fundamental to the failure of transmitting the merits of their tuition fees to the public. The NUS is now privately backing the changes yet the perception is that everyone was against them. The same communication problems have haunted the planned forest sales which highlighted a major failing by Caroline Spelman to explain the policy to the masses. It appears that the whole scheme is going to be scrapped because of miscommunication in this very sensitive area. The British public was always likely to object to anything that could be perceived as a threat to the much loved woodlands and this government has not shown itself to be anything like adept at dealing with such issues.

Margaret Thatcher and Tony Blair were both hugely successful by gauging the public mood and selling them their ideas; Cameron has yet to learn this art. As a result it seems that the Government is going to continue to relax in its comfort zone blaming Gordon Brown’s economic policy for cutbacks rather than spending time explaining the merits of the action it is taking. If this is the case then the state of the economy will have to improve and unemployment must fall.

Labour Retain Seat!! A Great Victory?

A Victoy that will bring more Relief than Joy

It’s over, Miliband is the way forward. The British people have lost all faith in the Coalition Government. As Ed says the people are disgusted by V.A.T. increases and broken promises and have turned to him to be their saviour. The evidence would appear to support this claim as the seat of Oldham East and Saddleworth, with an electorate of 72,000 and an MP from the only major party not be in government, is the key indicator of the state of politics in the country today.

The Labour MP Emily Thornbury appeared on the Daily Politics Show revelling in the success of her party. Somewhere between branding the Oldham by-election result as “spectacular” and denying the Labour government’s role in the country’s financial disaster, she claimed that this was a “rejection of a terrible government.” It wasn’t. In fact if you add up the Coalition vote they polled 15,641 as opposed to Labour’s 14,718, but Cameron won’t be claiming this victory.

The result of this by-election was essentially honours even. It was not a great victory for Labour, it wasn’t as good a result for the Liberal Democrats as it appears, and it is not as poor as a 7,000 vote loss would appear for the Conservatives. The easiest way to demonstrate this is to look at each party in turn and my life’s work is to search for the easiest way to do anything.

Labour’s vote rose from last year’s election total of 14,186 to 14,718. A respectable rise of 500 but certainly not enough to suggest a massive populist shift back to Miliband’s crew and the turning of backs on the coalition. Labour held onto a seat they have held since 1997 and even the collapse of the party last year didn’t do enough to lose it. But a majority of 3,500 is a good one and it is a much needed result for Ed Miliband.

The Liberal Democrats were also under severe pressure going into the by-election. This is a seat that by rights should have been theirs. The results of Phil Woolas’ slanderous attacks on the party during the general election are unquantifiable but there were only 103 votes in it. An outright disqualification was called for by many, and had the by-election happened sooner this would have been a shoe in for Elwyn Watkins. But the tide has definitely turned against Clegg whose party have capitulated in the polls. This result appears to have kept the pressure at bay as they have retained a 31% share of the vote. But in actuality 3,000 votes have been lost and of the 7,000 that drained from the Conservatives, how many of them were tactical and reflect a political astuteness of voters? The Liberal side of the Government have escaped this one but the pressure is still on and political victories are required.

The Conservatives, as has been the case so often lately, have taken a back seat in the political sphere. Despite Cameron’s party being in charge and initiating a swathe of cuts they are under much less pressure than the other parties. Even to the extent that they can act charitably towards the Liberals. The Coalition is on rocky ground if the Lib Dems have nothing to gain from it, and whilst they are making an impact on policy making, back benchers and Liberal die hards are not keen on the alliance with the right. A result in Oldham was required and the Tories were shrewd enough to realise that an incredibly outside chance of winning a seat was not important enough to work for. Despite confusing claims to contrary, the appearance has been of a soft campaign going through the motions but not as pressing as it may have been. A loss of 14% of the vote would in other circumstances seem telling, but in this case was an easy burden to bear. Whilst their candidate Kashif Ali may not be best pleased, it will have bounced off Cameron.

The most telling statistic is the turnout. A General election figure of 61.2 per cent has dropped within a year to 48. This is a reflection of a loss of faith in politics and the people who practice it. The Liberal Democrats were at the forefront of a renewed interest and an atmosphere of change developed across the country. Nowhere would have felt it more than the constituency of Oldham East and Saddleworth where the Liberal Democrats have been big players. As it was all that really happened was that 3,000 voters shifted from Labour to Conservative, yet the big turnout was endemic of a renewed vigour for voting. But this constituency has been flattened more than most since the Coalition Government began. Clegg’s party are polling in single figures after the perceived tuition fees “betrayal” whilst the other big party in Oldham, Labour, had their MP Phil Woolas barred from public office for three years after it turned out that he had run a disgraceful election campaign including manipulating images of his Lib Dem opponent Elwyn Watkins.

Ed Miliband’s reaction to the result is reflective of the result. The overriding emotion will not be of celebration but relief. He didn’t even bother to go up to Oldham today and pull a cracker with Debbie Abrahams. Labour can just be relieved that they have won the seat whilst the Coalition can relax having spared further pressure on Clegg and knowing that the country hasn’t yet turned to the only opposition party remaining.

Beware Of The Right

Cameron's own party may be the problem

Analysis of the state of the Conservative Party in this coalition government has been pushed to the side as Nick Clegg’s Liberal Democrats have borne the brunt of the media’s gazing eye.

David Cameron has many reasons to be wary of his coalition being derailed. Liberal Democrats are coming under increasing pressure in the face of plummeting support in the polls and though they have held on so far there surely must be a breaking point. Whilst students saw the Tuition Fees as the beginning and end of the party, the other key Liberal principle was the voting change. And though they have just about survived the Tuition Fees debacle, if they lose on the forthcoming AV referendum then surely they can’t limp on any further in their current form. There is also the nagging threat of the Labour party’s intent to oppose the government through weaselling out Lib Dem MPs with deals as opposed to providing a better option to voters. However, the key danger to Cameron centres not on an external threat or even one from within his cabinet but, as so often in recent history, his right wing backbenchers.

The same internal divisions that ripped the party apart in the nineties over the European Union appear to remain. Issues such as the voting change, tuition fees and control orders show that whilst the leaders may be more liberal than we’re used to from a Conservative party, the grass roots remain firmly fortified upon the land laying to the right of centre. There is a constant undertone of grumblings within the party suggesting distaste towards sharing government with a group of Liberals. Yet it must be remembered that without them they couldn’t have formed as strong a government.

The Conservatives didn’t win the election. They didn’t gain the number of seats required to create a single party government, and they failed to do so despite their opposition boasting an unelected, disliked Gordon Brown with a party legacy whose main achievements were an illegal and deeply unpopular war and a global financial crisis. In fact pre election polls suggested that instead of voters flocking back to the Tories, it appeared that the people would turn on mass to Nick Clegg’s wandering band of nomads who until then were firmly placed in the political wilderness. As it turned out that didn’t happen but the whole saga shows a political sea change in the UK.

Liberalism is on the up. The Conservatives can no longer rely on the middle classes and their traditional support base to supply them with enough votes to win elections. Their right wing history is their weakness as attested to by the sheer failure to attract new voters. There were no big gains in Scotland, Northern England or Wales. The reason the Liberal Democrats failed was not as a result of their politics, it was their hopelessness. The old cliché that a vote for Clegg’s party was a wasted vote is still true, no matter how unpopular the big two are, regardless of performances on television debates, there was still no gain in backing the outsider as it could never win. If a dead horse comes back to life that doesn’t mean it will win the Derby. In the end, come Election Day the public stuck with what they knew.

Yet the result was a government that effectively mirrored the public state of mind. The Tories are in charge but they have to change. There is no longer a place in government for the likes of Widdecombe or Tebbit voting against civil marriages, decrying female priests and suggesting the unemployed should “get on their bike and look for work.” The current crop of Conservatives needs to step out of the shadows of those prominent figures. The public attitude is a more liberal one and old ideologies will not do. The right need to understand that they did not win the election and the Coalition Government is presenting them with the unique opportunity to reinvent itself whilst still in power.

Ideology or pragmatism?

Tuition Fees Demonstration (courtesy of Flickr)

The toughest task for a government is to deliver on its election promises. An election manifesto is usually pretty true to the principals of the party in order to appeal to those who are politically aligned. There will be some watering down so as not to isolate themselves from everyone else, but essentially it will reflect the policies the prospective government would want to implement. The problem is that when you are in government you are expected to fulfil the promises your election campaign was founded on, when you fail to do so you are seen to be failing. This has been made abundantly clear in the recent Lib Deb tuition fees fall out. But is that fair? And is that right?

I am a sceptic but I do believe that when one enters politics, whilst there are numerous other benefits, one does so to make a difference and is, at least at first, ideologically motivated. Ideology is at the core of a politician, without it they stand for nothing. How much it takes to force a politician to admit that they are wrong has been seen again and again by a Labour government that refused to use the word “sorry” or admit wrongdoing as though to accept it would be to condemn them to death. So when so many of the Liberal Democrats make a u-turn as significant as the one they have made recently, are they to be castigated or commended?

We know why free tuition is unworkable, we understand that higher education needs increased funding in a time of budget cuts; we generally accept that budget cuts need to be made, yet as soon as it happens these practical realities seem to be cast aside in the name of ideology. “HOW COULD YOU GO BACK ON YOUR WORD!” roar the student protestors whose political interest was revitalised by a third option not yet tarred by the brush of political scepticism. Whilst the Tories and Labour parties are perennially mistrusted and demonised, the Liberals were seen as white knights coming to clean up parliament with good faith and honesty. There was a definite sense of fresh optimism during the election as the Liberals were seen as having a chance. Polls saw them as making giant leaps, Nick Clegg was the undisputed king of the television debates. And then, by hook or by crook, they were involved in a coalition government and they were in a position to make a difference.

However, suddenly problems arose. The party that rode on the crest of a wave of student votes had to appease their vital supply of support. The key issue for the lifeblood of Liberal politics would of course be tuition fees which for so many students appears to have been the sole cause for voting. Apparently, aside from that one policy, the entirety of the Liberal Democrat manifesto could have been thrown out and it would still have satisfied the tens of thousands who have marched and protested.

Free tuition is not viable. I’m not saying that because of the current economic climate, I’m saying that because of the bloated nature of higher education in this country. Whilst Labour was commendable in pushing more and more people into university, it has resulted in a great deal of unsustainable institutions wholly dependent on government funding. Wiping out tuition fees would put even greater stress on a government that is already slashing its budgets across all departments. So why are people upset that this unworkable and frankly ridiculous pledge is not coming to fruition? Because they said they would. The idea appears to be that the Liberal Democrats should ignore context and practical issues and push for free education simply because they pledged to do so. It’s almost as though Clegg and Vince Cable wanted to screw over their supporters. It must be the hardest decision in the world to sacrifice your party credibility in order to serve the government and the country, yet the protestors reject this. It seems to have been taken as a personal attack rather than a sign of competent governing.

So were the Liberal Democrats wrong to promise something they could never have delivered? Of course they were, but is it not better that they have admitted their mistake and progressed in another direction, rather than refusing to give up on its policies and desperately flog a severely dead horse. Labour wouldn’t have admitted they were wrong they would have delayed the implementation of the policy until the next election. When they were elected, they campaigned on welfare and making society fairer. It was thrown more and more money and grew and grew until it was a massive inefficient black hole of public spending. Yet rather than admitting it was bloated and failing, they threw more money at it. Wars were started on false pretences and apologies or admissions of guilt were hardly forthcoming.

Is it not refreshing that the likes of Nick Clegg and Vince Cable are showing that unlike their predecessors, they can admit when they were wrong and are practical enough to look at another solution? Those who feel deeply wronged are acting as a child who was promised a new bike but only got an apple. “Sorry son, but Daddy isn’t that well off at the moment”. Unfortunately in this country it appears that to admit guilt is worse than to blindly deny it and as a result the Liberal Democrat party would do very well to recover from the tuition fees debacle.