Damascene conversion of Nick Clegg

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At some point in early May, Nick Clegg’s economic philosophy switched from Keynesian to that of a deficit hawk. Today he completed the conversion by reiterating Margaret Thatcher’s flawed household debt metaphor.

During his speech today, Nick Clegg said:

“It’s the same as a family with earnings of £26,000 a year who are spending £32,000 a year. Even though they’re already £40,000 in debt. Imagine if that was you. You’d be crippled by the interest payments. You’d set yourself a budget. And you’d try to spend less. That is what this government is doing.”

The argument was first used by Margaret Thatcher in 1976 when she told Thames TV’s ‘This Week’:

“I think you’re tackling public expenditure from the wrong end, if I might say so. Why don’t you look at it as any housewife has to look at it? She has to look at her expenditure every week or every month, according to what she can afford to spend, and if she overspends one week or month, she’s got to economise the next.

“Now governments really ought to look at it from the viewpoint of ‘What can we afford to spend?’ They’ve already put up taxes, and yet the taxes they collect are not enough for the tremendous amount they’re spending. They’re having to borrow to a greater extent than ever before, and future generations will have to repay.”

But this line has been thoroughly debunked in recent times by The Times’ Anatole Kaletsky and New York Times’ Paul Krugman as well as by Keynes himself. Of course, until his Damascene conversion, Nick Clegg knew this. On Saturday May 1, he told Reuters that:

“My eight-year-old ought to be able to work this out – you shouldn’t start slamming on the brakes when the economy is barely growing. If you do that you create more joblessness, you create heavier costs on the state, the deficit goes up even further and the pain with dealing with it is even greater. So it is completely irrational.”

Lib Dem members tend to share this older view. AYouGov poll today found that only 29% of party members fully agree with the government’s policy of cutting spending to reduce government borrowing. An identical proportion of Lib Dem voters share Clegg’s position.

At some unknown point after the Reuters statementbut before he spoke to Mervyn King, Clegg changed his mind. With his conversion complete, the Liberal John Maynard Keynes will be turning in his grave.

Left Foot Forward

Recovery was fragile before Coalition’s cuts began to undermine confidence

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Left Foot Forward

The ice we’re skating on is getting thinner; there’s much more good news than bad in today’semployment figures, but at the same time there are warning signs that the recovery was fragile evenbefore the coalition’s enthusiasm for cuts started to undermine confidence.

The key thing to remember when reading the labour market statistics is that they are a picture of the past; in today’s case, they’re show how things stood in early summer – May to July. The headlines in the Office for National Statistics’ press release compare these figures with the previous quarter (February to April) and that is what most newspaper stories concentrate on, but it is also useful to look at changes since last month’s figures (which covered April to June.)

These are the first statistics where practically the whole period is post-election, but of course, it is too early to say they show any effect of the new government’s policies. What stands out is the strong employment performance:

• There were 29,158,000 people in employment;

— This is 184,000 higher than the previous month,

— And 286,000 higher than the previous quarter.

• The employment rate was 70.7 per cent;

— This is 0.2 points up on last month,

— And 0.4 up on the quarter.

Change-in-employment-September-2010

This performance was entirely due to a 308,000 quarterly increase in private sector employment. Public sector employment was down 39,000 on the month and 22,000 on the quarter, a figure confirmed in separate figures for public sector employment released today. Employment was down in central government, local government, the civil service – every sector except education and public corporations (which includes the nationalised banks).

Over half the increase compared with the previous quarter is accounted for by a 166,000 rise in part-time employment, but full-time employment rose by 121,000 on the quarter, 44,000 compared with last month. Temporary employment is up on the quarter (+74,000) but slightly down compared with last month (by 3,000).

One point worth noting is that men’s employment, which suffered more than women’s in the initial phase of the recession, has been increasing more in recent months:

Employment-rate-by-gender-September-2010

The unemployment figures also looked reasonably good. The Labour Force Survey measure (based on asking people if they don’t have a job, are looking for one and can start work at short notice) shows unemployment at 2,467,000. This is up 10,000 on last month’s figure (though the rate is unchanged at 7.8 per cent) but down 8,000 on the quarter (and the rate is down 0.1 points).

So far the economy has done quite well on this front – eighteen months ago I thought we would have reached 3 million unemployed by now, but so far we have (just) avoided going over the 2.5m mark. Compared with the last recession, the unemployment performance looks even better:

Unemployment-1990-2010

One driver of the good news on unemployment is the decline in redundancies. In May – July this year there were 142,000 redundancies, 10,000 fewer than in April – June, 31,000 fewer than in Feb – April and 91,000 fewer than in May to July 2009. The number of redundancies is down in every industrial category except public administration, health and education and the redundancy rate (the number of redundancies per thousand workers) is down from 9.3 a year ago to 5.8 in the latest figures.

The picture for vacancies, while not quite as cheery as this is still pretty good:

No. of vacancies No. of unemployed people per vacancy
May/Jul 2009 429,000 5.8
Feb/Apr 2010 472,000 5.2
Apr/Jun 2010 490,000 5.0
May/Jul 2010 481,000 5.1

On inactivity there is good news as well, with the number of economically inactive working age people down 88,000 compared with last month and 158,000 compared with the previous quarter. The results are more mixed for the number of economically inactive people who say they want a job, however, with a fall of 28,000 on the quarter but an increase of 23,000 from last month’s figures. This is an important figure, because it is as close as we get to a statistic for hidden unemployment and if we add it to the number unemployed we get a “want work” level of 4,829,000: up 33,000 on the previous month, but down 36,000 on the quarter.

Overall, these are quite encouraging results and Yvette Cooper could reasonably claim to have handed over a labour market that was starting to reflect the GDP recovery and in better shape than it had been at the same stage of the 1990s recession. But there are signs of fragility. First of all, notice that the comparison with the previous quarter looks better than with the previous month, especially the unemployment and “want work” levels.

Secondly, the figures for the “claimant count” measure of unemployment are not as good. For most purposes the claimant count (the numbers claiming Jobseeker’s Allowance) isn’t as useful as the LFS measure – JSA is such a lousy benefit there are plenty of genuinely unemployed people who don’t qualify. But it does have the advantage of being more up to date, with the most recent figure being for August when the figure rose for the second month in succession:

Claimant count (to 5 s.f.)
June 2010 1,460,100
July 2010 1,461,200
August 2010 1,466,300

Third up, there’s been an increase in short-term unemployment. During a recovery you would expect to see short-term unemployment (under 6 months) coming down before the number for longer durations. As fewer people come on to the register, and previous cohorts either get jobs or move into long-term unemployment this should be the first sign of an improving labour market – and indeed, this is what happened last year and at the start of this year. But this month’s figure of 1,186,00 is 27,000 higher than last month and 14,000 higher than the previous quarter. This could just be a blip, but it does worry me.

Then there’s been an increase in unemployment amongst 18 – 24 year olds. This age group tends to be first out and last in to jobs, so the 4,000 increase on last month and 16,000 increase on the quarter could be another rumble on the horizon.

Finally there’s the problem of involuntary part-time and temporary work. The improved employment figures haven’t led to a reduction in the number of people who are only doing ‘atypical’ jobs because they couldn’t find a permanent full-time job – the level and the rate are still rising:

People in involuntary
temp jobs (to 3 s.f.)		 % People in involuntary
p/t jobs (to 4 s.f.)		 %
Feb/Apr 2010 537,000 35.8% 1,083,000 14.2%
Apr/Jun 2010 565,000 35.9% 1,079,000 14.1%
May/Jul 2010 569,000 36.1% 1,116,000 14.4%

Taken together, these figures would be very encouraging if we were looking at them confident that policies to sustain the recovery were in place. But they do not indicate a labour market that’s strong enough for us to claim that growth is self-sustaining. The fact that the comparison with three months ago is stronger than with last month could even be a hint that we were already heading into stormy waters before the cuts began.

Good Blog on HMRC

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DaveBlokefromUKPlc

11 September 2010 7:45AM

So, it looks like the government is not very good at sums.

Maybe £2 billion owed in tax because of administrative error.

Maybe £1.5 billion fiddled by benefits cheats BUT

Maybe £3.7 billion paid out wrongly through administrative error

Then a couple of real biggies, real monster doozies:

Maybe £25 billion lost to tax avoidance

Maybe £70 billion lost to tax evasion

(Nobody knows what the true figures are here because the government just assumes that the rich never pay tax and it can never be asked for. If the rich are clumsy or generous enough to sometimes pay tax, the government tugs its forelock, bows and says: “Cor, blimey, Mister, you ain’t ‘alf a gent and no mistake! Merry Christmas, sir!”).

Then an odd one. All those scrounging benefit-cheating scum of The Sun’sscreaming “Shop-a-Scrounger” (courtesy, the Honest Dave Cameron propaganda machine) phone-in headlines somehow manage, in their frenzy to steal the food out of the baby nation’s mouth, to leave behind:

Maybe £12 billion in unclaimed benefits entitlements

Now, you have to ask the question, which of these areas is going to receive the most media attention?

Will it be:

A. Ordinary people having to pay tax
B. The lovely, wonderful rich not having to pay tax
C. The filthy poor and sick who brought about global economic meltdown through their constant pilfering of public funds

Clue 1: The biggest thieves and benefits recipients are the rich – so it obviously won’t be them.

Clue 2: If you are feeling outraged that the tax man might ask you for what you owe, you are happily moving from the mindset of the poor to the mindset of the rich. How dare he, right? Take a double-score bonus and fill your boots. Success awaits your every move.

Clue 3: Why don’t we just bulldoze the filthy, bloodsucking poor into ghettos? They are bleeding the economy dry and now everyone is getting tax demands to pay for these scum’s flat-screen televisions.

Rich man, poor man, beggar man, thief.

Andrew Lansley bankrolled by private healthcare provider

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Andrew Lansley, the shadow health secretary, is being bankrolled by the head of one of the biggest private health providers to the NHS, The Daily Telegraph can disclose . http://www.telegraph.co.uk/news/newstopics/mps-expenses/6989408/Andrew-Lansley-bankrolled-by-private-healthcare-provider.html

John Nash, the chairman of Care UK, gave £21,000 to fund Andrew Lansley’s personal office in November.

Mr Nash, a private equity tycoon, also manages several other businesses providing services to the NHS and stands to be one of the biggest beneficiaries of Conservative policies to increase the use of private health providers.

Andy Burnham, the Heath Secretary, is planning to write to David Cameron, the party leader, asking for him to guarantee that Conservative health policy is not dictated by private health care companies.

A senior Labour source said: “This raises serious questions about Andrew Lansley’s judgement and it is difficult to see how he can continue on in his role as shadow health secretary when it would appear that a private health care company is helping to fund the development of Tory healthy policy.

“David Cameron claims that the Tories are now the party of the NHS – it makes his claim look more absurd than ever.

“How can the public trust Cameron on the NHS when his health secretary is hand in glove with a big beneficiary of Tory health policy?

“There is an apparent contradiction at the heart of Tory health policy and we urgently need to hear a detailed read out of what this money was donated in exchange for or the money should be refunded.”

It is the first private donation registered with the Electoral Commission by Mr Lansley since 2001 and it is not clear why he accepted the money just months before a general election. Although he will not profit from the donation, it will help bolster his political profile.

Care UK provided services for 500,000 people last year, working with all ten Strategic Health Authorities and one in three Primary Care Trusts. It runs hospitals, NHS Walk-in Centres, GPs’ practices and care homes. It currently runs 59 residential care facilities with 3,400 beds.

In a recent interview, a senior director of the firm said that 96 per cent of Care UK’s business, which amounted to more than £400 million last year, came from the NHS.

Earlier this month, the Conservatives pledged to increase the use of private providers if elected.

In the draft manifesto published by the Conservatives, the party promised to “open up the NHS to include new independent and voluntary sector providers.”

In official company documents, Mr Nash, who is also a major shareholder in Care UK, praised reforms proposed by the Conservative party.

“We welcome recent policy statements by the opposition Conservative Party in the UK which have substantially strengthened their commitment to more open market reform to allow new providers of NHS services and for greater freedom for patients to choose their GP and hospital provider,” he said.

Mr Nash, 60, also founded the private equity fund Sovereign Capital in 1988, which owns several healthcare companies, as well as the independent schools group Alpha Plus.

Along with his wife, Caroline, Mr Nash sponsors a city academy in Pimlico, London through their charity Future.

Mr Nash previously worked at Advent, the private equity firm, and Lazard, the investment bank. He has been the chairman of the British Venture Capital Association.

Mrs Nash gave the Conservative party £60,000 last September and Mr Nash gave £6,000 to held fund David Davis’ unsuccessful leadership campaign against David Cameron in 2006.

The donation comes amid growing scrutiny of Conservative backers in the run-up to the election. Unlike most Labour ministers, senior Conservatives routinely accept money to help run their private offices from wealthy individuals or companies. Some Labour MPs receive such assistance from trade unions.

However, there have previously been concerns over potential conflicts of interest from the Conservatives’ funding arrangements.

Alan Duncan, the then Energy spokesman, was heavily criticised after it emerged that his private office was being funded by Ian Taylor, the chairman of Vitol, a firm of oil traders.

The private office of George Osborne, the shadow chancellor, is funded by the hedge-fund bosses Michael Hintze of CQS and Hugh Sloane of Sloane Robinson.

A spokesman for the Conservative party said: “We have been completely transparent about this donation. It has been properly registered with the parliamentary register as well as with the Electoral Commission and is therefore fully within the rules.

“John Nash and his wife have a wide range of interests, of which CARE UK is just one. This donation to support Mr Lansley’s office was made through CCHQ. Mr Lansley did not solicit this donation. Donations from private individuals in no way influence policy making decisions.”

Down and dirty with the Lib Dems

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Mehdi Hasan
Published 08 July 2010 New Statesman

The Lib Dems have shown themselves to be adept at the manipulative and dark arts of British politics.

After every high is the inevitable comedown. The Lib Dems have slumped to 15 per cent in the latest polls. So much for political honeymoons. But let’s not be under any illusions. To form a coalition is a messy and arduous affair, made more difficult still by a tribal political system that favours single-party (over multiparty) governments. For two parties to come together and compromise on a range of issues, after a hard-fought election campaign in which their leaders berated and mocked one another, was a near-impossible task. It was inevitable that there would be cries of betrayal and a backlash from supporters on both sides.

Yet the Tories’ poll ratings are up, while the Lib Dems’ are down. I suspect that this is because the public holds the latter to higher standards. The third party, after all, positioned itself as a fresh, honest and decent alternative for voters disillusioned by the cynical and negative triangulations of the two main parties. The Lib Dems were the insurgents promising reform and renewal. To vote for Nick Clegg and Vince Cable was to vote for a “new politics”, or so they wanted us to believe. Yet, after only two months in office, it has become obvious that the Liberal Democrats are as disingenuous and as ruthless as their rivals.

On-message
Take the issue of public spending cuts to reduce the Budget deficit. The Lib Dems campaigned against, in the words of Cable, “cutting too soon” and too fast, as well as the Tory plans for “job cuts”. They have since U-turned on both the timing and the scale of the austerity measures; Cable claims he was persuaded of the case for deep and early cuts, “not by other politicians, but by talking to the most senior officials in the government and the central bank [who said] that we had to act”.

Really? Why then had the Lib Dem negotiators already acceded to a “significantly accelerated” deficit reduction plan involving “cuts of £6bn . . . within the financial year 2010-2011” in the coalition agreement document that they signed with the Tories, prior to a single member of their party stepping foot inside a government department or having a conversation with Mervyn King, the governor of the Bank of England ? Why did they urge Labour, in parallel coalition negotiations, to make cuts sooner than planned? “I was incredulous when David Laws and Danny Alexander made it clear that they wanted substantial cuts this year,” the shadow education secretary, Ed Balls, told me. “And Chris [Huhne] was supporting them.” Balls added: “I said it would be a breach of both our manifestos, but they didn’t seem too bothered about going against their own manifesto.”

Then there is the issue of the VAT increase to 20 per cent. “Unavoidable,” squealed Alexander, the Lib Dems’ placeman at the Treasury, echoing the Tory line. But he knows that the regressive VAT hike was entirely avoidable. Whatever happened, for example, to the mansion tax on properties worth more than £2m or restricting tax relief on pensions to the basic rate of income tax – both commitments included in the Liberal Democrat manifesto?

A recent YouGov survey showed that 48 per cent of those who voted Lib Dem were less inclined to do so again as a direct result of the rise in VAT. The party leadership could have held its hands up and apologised for running pre-election posters warning of a “Tory VAT bombshell” – which the Lib Dems have since helped detonate. Instead, Clegg chose cynically to pretend that his party had always backed the principle behind such a move. “When it comes to a choice between taxing what people choose to buy and taxing work,” wrote the Deputy Prime Minister in the Independent on Sunday on 27 June, “it is liberal to come down on the side of consumption rather than payroll taxes. It has been part of a long liberal tradition, from John Stuart Mill to Jo Grimond . . .”

Hmm. Does the Lib Dem leader need to be reminded of Lloyd George and his People’s Budget of 1909, which introduced a “super-tax” on the highest earners? “Clegg is rewriting history to suit himself,” says the political historian and SDP founder member David Marquand. “By the early 20th century, radical and progressive Liberals did not just support direct taxation; they deliberately increased direct taxation on the rich so as to pay for social reforms.”

But not any longer. As the vice-chair of the Liberal Democrats’ Federal Policy Committee Richard Grayson explains on page 30: “While many Liberal Democrats see the coalition as a creature of circumstance, its ideological basis lies in a strain of centre-right, small-state liberalism in the leadership of the Liberal Democrats.” And it is a leadership intent on making this centre-right coalition work, no matter what the future electoral cost will be to the party itself. Dissent is slowly being marginalised and, in the words of a source on the left of the party: “The inner Clegg circle is now in the ‘control the message’, top-down phase of the early New Labour years.”

It is said that, in private, Clegg’s allies have described Lib Dem MPs allied to the Social Liberal Forum – the centre-left, internal party pressure group that has been critical of the Budget – as “idiots”. Meanwhile, those Lib Dem backbenchers sceptical of the coalition’s plans to introduce Swedish-style “free schools” are being frogmarched by the party’s high command into the Department of Education. They emerge, according to one source, “starry-eyed from meetings with Michael Gove. They’ve gone in wanting to hate him but come out in awe of him.”

Dark arts
For years, the Liberal Democrats have piously presented themselves at the national level as whiter than white, while engaging in ruthless, negative and often dirty campaigns at the local level. But no more. Nationally, the party in government has shown itself to be adept at the manipulative and dark arts of British politics.

“This is more like the old politics than the new,” says a disgruntled Lib Dem source who believes that Clegg, like Tony Blair in his pomp, will strike a confrontational pose at the party’s annual conference in Liverpool and face down activists unhappy with the Budget and his political marriage with the Conservatives.

Back in 2001, addressing the Labour party conference in Brighton, Blair rejected the accusation that the New Labour project had simply been an election-winning ploy: “It’s worse than you think. I really do believe in it.” It’s a line that Clegg might consider borrowing for his own conference speech this year.