Tag Archives: Nick Clegg

Putting Humpty Together Again

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4th February, 2011


Nick Clegg, speaking on Radio 4’s Today Programme this morning, came out fighting with a “new model” for economic growth.


Or, if not yet a new model, it will be, when they’ve come up with it.  It seems coming up with a plan “is not an overnight job” and “you can’t just put Humpty Dumpty back together again”.


The economy, he argued, needs rebalancing.  It has been overly focussed on financial services.  It has been fuelled by indebtedness.  We’ve had growth “on the never-never”.  It is unsustainable.


I don’t think anyone could argue that it wouldn’t be nice to have more industry and less reliance on services in our economy.  Unfortunately we were deindustrialised by the Tories… but if there’s a way to get manufacturing going again, hurrah.


I don’t think anyone could argue that the private sector is not massively indebted; this is perhaps an unfortunate product of stability and particularly interest-rate stability.  Cheap – reliably cheap – money.  It’s hard not to feel jittery about that as the spectre of stagflation looms.


Trouble is, noticing that we have been over-exposed to the financial sector, or that cheap money has produced an indebted private sector, doesn’t amount to a plan for growth.


Mr Clegg suggests there are four elements to such a plan:


1) to wean the economy off debt-financed growth


2) to invest in infrastructure, skills and education


3) to boost competitiveness by reducing regulation and tax


4) to balance growth across regions and sectors


On 1) (weaning the economy off debt-financed growth) it is hard to square this idea with the constant calls for the banks to lend more to business.  Perhaps consumers are also borrowing too much, with cheap money fuelling a housing boom.  But mortgages are now very hard to get and the housing market is in dire straits.  Whichever way you look at it, debt-fuelled over-consumption seems to be the least of our problems.


On 2) (investing in infrastructure, skills and education) it is hard to see this government investing in anything.  School rebuilding has been abandoned.  Crossrail survived by the skin of its teeth, as did the high speed rail plans.  What new infrastructure might we expect?  Don’t hold your breath, dear reader.  As for “skills and education” the intentions of the Tory-led government are very clear.  They’ve completely withdrawn funding for whole swathes of higher education.


On 3) (reducing regulation and tax) these sound good.  Who likes regulation and tax?  But what does this really mean?  Are we going to reduce regulation of the banks?  I doubt it.  Regulation is there for a reason.


Are we going to reduce tax?  It doesn’t look like we can afford to.  Taxes, in fact, are going up.  Personally I don’t worry about that, because I don’t think slackening the tax regime helps growth.  Investment is driven by the desire for profit.  Spotting the chance to make a buck.  And that needs a vibrant economy – people with money in their pockets, willing to spend.  Sure tax plays a part in determining costs and profit, but if nobody has any money to buy my ice cream, you can cut my taxes all you like, I still have no sales, no profit, no tax.  Costs matter, but demand matters more.  And demand comes first.


On 4) rebalancing the economy, oh, go on then.  Let’s have some industry and not just a service economy.  And let the north thrive.  Might be a good idea to fund some regional development agencies to make that happen.  Oh no – we already have those.  Created in 1998.   Abolished on 22 June 2010. Closing soon.



The Tory-led government believes in the ‘crowding-out argument’ which I have discussed elsewhere in this blog.  When demand drops out of the economy, those who believe in the “crowding out” credo jump into action.  They cut demand even more, by slashing government spending and throwing people onto the dole.    Nick Clegg says, “we can’t just put Humpty Dumpty together again” as if that justified what they are doing to Humpty – namely to kick seven shades of shit out of him. 


The truth is I’m being mischievous when I scrutinize Clegg’s “plan”.  And so is Labour and everyone else who asks the government “where’s your plan for growth?”  Because we all know that the credo cannot allow alternatives.  The deficit reduction drive IS the plan for growth.  The dismantling of the state IS the plan for growth.  The stepping-back of government in order for the private sector to “do its thing” (or not) IS the plan for growth.


There’s no Plan B for Humpty.  We all know that.  Would somebody please tell Nick Clegg?



 


 

 

 

Shock report reveals truth on economy

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16 June, 2010

 

I’m pleased to say that, pretty much, my prediction was wrong, and the press and broadcast media did not embarrass themselves by misrepresenting the OBR report.  No shock horror headlines.


The front pages were varied, covering the imminent Bloody Sunday report and the BP debacle, alongside Nick Clegg’s ugly assault on public sector pensions.


The Daily Mail succumbed to a front page diatribe, screaming about the OBR’s “devastating analysis” but by and large, nobody was fooled by the spin.  Indeed, some commentators were saying that the OBR’s figures were “too rosy”, which I think means they didn’t discredit Labour in the way that some had hoped.


None of which stopped George Osborne shaking his fists and saying, “never again will a government be allowed to fiddle the figures.”


Comments like that, in the teeth of the evidence, are going to seriously undermine Osborne’s credibility.  They’re also old, old, old politics.  There is still room for Labour to answer the public’s call for more decency in the way Westminster goes about its business.


Which is why we need a new Labour leader now, not in September.


Speaking of which, there was much complaint online about Newsnight’s poor production values, and Paxman’s chairmanship of the Labour leaders’ debate.  Ed Balls was surprisingly winning.  Andy Burnham was cruelly described online as looking like a Thunderbird puppet (Troy!).  Diane is Diane, and if you like her, you’ll still like her after that performance – but if you don’t, you’ll be feeling unmoved.  Ed M looked like somebody’s younger brother, and I know how that feels.  David Miliband is the next leader, that is very clear.  At one point he spoke, quite effortlessly, on behalf of the whole panel.  He’s just got it.


The prospect of months of further hustings fills me with dread; there is no need for prolonged introspection.  Look how fast the Coalition moved to get itself into No 10.  With a new leader, Labour can move fast too.  In these crucial months, while Labour wonders who said what to whom in Cabinet, and the candidates mess about on swings, the Coalition is getting away with murder.


The OBR report didn’t do it, but there IS a new report out which damns the Government.  But it damns the new Government, not the old one.  The Chartered Institute of Personnel and Development (CIPD) was forecasting unemployment of 2.65m this year.  In the light of the Coalition’s emphasis on public sector cuts, they have revised their figure upwards to 2.95m.


Between friends, let’s call it 3m.  Unemployed.  This year.


It begins.

The cuts bandwagon

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14 June, 2010


The excellent Larry Elliott – Economics Editor of The Guardian – warns that the ‘Deficit Hawks’ need their talons clipped.


It is clear to him, as it is to me, that the current clamour for cuts at all costs is either economically naive, or politically wilful.  Is “the real agenda to finish the demolition job on the welfare state that began in the 1980s”?


Mr Elliott asks why the economic literates in government aren’t piping up to stop the madness.  Where is Vince Cable?  Where is Chris Huhne?


Good questions.  We are sleep-walking with Europe and the rest of G20 into another recession, but this time it will be entirely self-inflicted.


Today, the newly-created Office for Budget Responsibility (sounds Pythonesque) produced some really quite boring figures.  See for instance the summary by the BBC’s Stephanie Flanders.


I even bothered to look at the report itself.  Interestingly, it is based on the old Goverment’s policies, not the Coalition’s.  That makes it, already, hideously out of date.   I wonder how much it cost to produce a document based on a reality which already did not pertain even when it was commissioned?


Given the report’s built-in obsolence, if I were George Osborne, I’d be hoping for some really juicy ammunition to come out of it.  But sadly for him, it is lacking in tidbits.


Growth predictions are down a tiny bit from Alastair Darling’s numbers.  Eg, he predicted 3.5% for 2011, and based his maths on a conservative 3%.  OBR is now forecasting 2.5% growth.  But many other figures are now predicted to turn out better than predicted under Darling.  The net effect of these revised predictions is pretty much nil over the five years: OBR predicts a rise in the structural deficit by 2015 of only 0.3% of GDP – less than £5bn.


Stephanie Flanders reports that Sir Alan Budd and the authors have conceded, on questioning, that:

“that 2015 figure means that the OBR does think that Labour’s policies would have eliminated a large part of the structural deficit by the end of the next Parliament. The OBR expects it to go from 8.8% of GDP in 2009-10 to 2.8% in 2014-15.”


So, basically, no news in these figures at all.


Let’s see how tonight’s news reports the figures, then.  Let’s see how tomorrow’s papers headline them.


Call me cynical, but I’m guessing: doom and portent.


Mr Osborne, predictably, claims: “It’s damning evidence that the mess the previous government left behind is even bigger than we thought”.


But elsewhere, I’m already seeing:


“The OBR report strengthens the case for cuts.”


“Britain’s debt levels rising faster than expected.”


“UK has bigger fiscal hole to fill.”

  

Some of that is of course to be expected.  What worries me is it’s everywhere.  Even The Guardian, in which Mr Elliott complains about the deficit hawks going unopposed, is on the band-wagon.  Mr Elliott’s on page 27.  Here, meanwhile, is the front page:



So whatever the press says tonight and tomorrow, don’t be fooled.  The markets weren’t. 


Following the report’s release today, the pound rose against the dollar.