Thursday, March 27, 2008

The French State Visit

The Sarkozys are in town lavishing extravagant praise on the British. Most Brits will smile but not take it too seriously. But should they? The most interesting comment about the visit comes from Germany's Deutche Welle, which observed that:

Some political analysts have said the French president is reaching out to Brown because he does not get on well with German Chancellor Angela Merkel. Berlin and Paris traditionally dominate the European Union.

In an interview with the BBC before the trip, Sarkozy, who is scheduled to take over the European Council presidency in three months, said France's European policies would no longer be "reduced to friendship with Germany." He added that "the Paris-Berlin axis is fundamental but not sufficient."

Sarkozy and Merkel have quarrelling almost every month since Sarkozy took over the French Presidency. He's been irritating her on a personal level (eg his tendency to grab her in public, something the reserved Chancellor disapproves of), his tendency to take credit for things Germany has done the work on, and on issues such as EU competition policy and the independence of the ECB (Germany backs the ECB's stern focus on inflation).

This is a massive opportunity for the UK. Sarkozy is looking for another powerful friend and feels that Gordon Brown is the perfect foil (i.e. he won't compete on flamboyance the way say, Blair would have). Plus the UK now has the glamour of a successful economy and any European leader wanting to signal that he is reforming his country's economy does so by claiming alliance to and emulation of the UK. Mrs Merkel is looking for a sober partner who will treat her with respect - and again Gordon Brown fits the bill, given his similar upbringing to hers and similar intellectual bent.

The test of this new alignment might come in the second half of 2008, when France holds the EU rotating presidency, because budget reform will inevitably get discussed. Sarkozy has hinted at CAP reform. The question is whether he can be persuaded to deliver or whether this is merely grand talk in the Sarkozy style. Sarkozy isn't as close to the French agricultural sector as Chirac was, and his personality lends itself to making startling decisions (and for the French CAP reform would be startling), plus he wants to buddy up with the UK. Germany, the long-suffering paymaster of the EU, is likely to be quietly pleased with reform.

Of course we have been here before - Schroeder and Chirac hated each other at first, and both looked to forge a new alliance with the UK, and there were high hopes that the UK could use this position to force through some changes. Unfortunately Mr Blair shortsightedly threw away all chances of realignment by cheerleading for the Iraq War, pushing the French and Germans back into each others arms again. Lets hope Gordon Brown handles things with a little more finesse.

Thursday, March 20, 2008

The Recent Spate of Bad Opinion Polls

I'm a bit late commenting on this (and apologies to those who left pending comments for moderation on other posts, I haven't time to log in much, I usually publish comments just before I write a new post) and I expect everyone and their dog has had an opinion on why Labour sunk in the polls caried out over the weekend.

The budget last Wednesday was generally received well by the public - even in the YouGov poll which gave the worst headline results people broadly agreed with the measures Alistair Darling announced - they agreed by 68% to 28% that tax should be increased on environmentally unfriendly cars, agreed by 63% to 30% that supermarkets should charge for plastic bags, agreed by 45% to 44% that tax on flights should increase, agreed by 78% to 20% with the tax rise on cigarettes and agreed by 77% to 16% that those claiming incapacity benefit should attend an interview to check whether they should continue to claim the benefit. The only thing opposed was the tax on beer and spirits and that was narrow (48% opposed, 46% in favour).

So why the slump in voting intention figures? The US investment bank Bear Stearns required help from the Fed on Friday the 14th, while the polls were carried out, and the news was reported in the most lurid terms possible with phrases like "financial meltdown" being bandied about. The public is properly scared that there will be a recession, particularly because of the way some commentators are claiming that it is "bound" to be worse here than in the US. Robert Peston of the BBC for instance continues to use emotive language - he likes to use the word "scary" in his blog - see here. The folk in the city are scared - which makes them vunerable to malicious and false rumours like the one about HBOS yesterday, which caused their shares to drop 20%.

All this scaremongering has an effect on the public. The YouGov poll showed that 18% were worried about losing their job. 18% unemployment is Great Depression stuff. Only a moment's rational thought will tell you that we are miles from that. Commentators in the media like to talk to talking heads in the City, and because the City is scared they assume that the whole UK is in trouble. But if the City can get it so wrong about the state of HBOS who is to say they are right about anything else? And there is more to the UK than the City. Other commentators like to look at drops in the FTSE 100 as evidence that the UK economy is in trouble - but the FTSE 100 no longer reflects UK PLC. Components of the Index like HSBC, Vodafone and Glaxo get most of their earnings outside the UK, and the mining firms like BHP Billiton and Rio Tinto make their money mining in Australia and South Africa and selling to China - so much of the FTSE100 now reflects international business that movements of the index are useless in telling us what is going on in the UK.

So what is going on in the real UK economy? Retail sales grew strongly in February and January's figures had to be revised up. Food stores did well, as did "non-store retailing" aka online stores. The only retail sector struggling is household goods. Earlier in the month we got news that service sector activity was up.

I wonder if all the doom-mongers in the press will do stories headlined "we were being muppets" when the supposed "worse than the US" recession doesn't materialize. And will they admit they were deliberately trying to talk up a recession to hammer the government? I'm not holding my breath. When we get through this and can point to solid evidence that the recession didn't happen after all, the government should excoriate those who predicted one and they should certainly laugh at those who panicked. Government is no place for panicky people (aka Tories).

Wednesday, March 12, 2008

How the Spitzer thing affects Hillary

There were two reactions to Eliot Spitzer's prostitute problem - the initial one was pure schadenfreude. People then moved on quickly to pity for his wife who had the painful job of standing next to him while he made his statement.

On the Newsweek site the article on Wronged Wives is the second most popular. People increasingly feel that the poor wives should not be dragged out like this. And of course all discussions of the wronged wife recall the most famous wronged wife of them all - one Hillary Rodham Clinton. She too was sent to defend Bill when the Lewinsky allegations first broke, and she did her best, telling the Today show that it was all one "vast right-wing conspiracy". She probably believed it too, till Bill was forced later to come clean (even Hillary didn't think Bill would be so dumb as to risk his presidency for sex).

It's hard to get wronged wives to talk - who would want the extra humiliation? - but another wronged wife, Dina McGreevey, who was dragged out to stand by her husband (the former Governor of New Jersey) while he admitted that he was a "gay American" in 2004, has come forward and been all over the newspapers, magazines and TV giving her opinions. In her Newsweek interview she says that after her dreadful stand-by-your-man press conference, she consulted Hillary, who told her to look out for herself and to "get your own counsel, don't rely on his advisers". McGreevey took it to heart and has just concluded a spectacular divorce from her husband.

How will these reminders of Hillary's painful past play with American voters? Another Newsweek article points out that voters have repeatedly shown that they don't much like it when they perceive Hillary to be attacked or to be hurting:

For much of 1992, the campaign's internal polling showed Hillary had significantly high negatives. Then a remarkable thing happened—the Republican National Convention. As would be expected, Bill Clinton took much of the Republican assault. But a special scorn, shrill and almost comically over the top, was reserved for Hillary. Almost overnight her negatives dropped, and for the rest of that campaign most voters viewed her favorably. It happened again during the impeachment saga of her husband, and we have since seen it more than once. Nothing helps her more than to be attacked by her enemies (think of the phenomenon as a slightly bizarre twist on FDR's maxim about an unsavory Latin American potentate: "He may be an S.O.B., but he's our S.O.B.").

Michelle Obama has in the past taken a shot at Hillary's marital problems saying "if you can't run your own house, you can't run the White House" - her view is not shared, most people thought it was well below the belt. Sympathy for the Wronged Wives is at an all time high, and while Hillary might feel embarassed at having her past dragged up again because of the Spitzer affair, it might actually help her.

The Budget

Nice steady performance from Alistair Darling. I thought he explained things very well - the point that we had the best growth last year in the G7 is one that's not heard much.

Most people will find themselves unaffected by this budget. No one will mind - given world turmoil, people simply want steadiness from government till we know more about how things will pan out. Binge drinkers will hate the budget - but they can always save themselves some money by cutting down, people in city centres will be grateful for it.

Monday, March 10, 2008

Eliot Spitzer - the moral for our times

I had to comment on Eliot Spitzer's woes. For those not following the story, Eliot Spitzer is the Governor of New York, who got caught soliciting a prostitute. As prostitution is illegal in New York state, that's the end of him.

So what? He's just another American politician, right? Well his story is interesting because of the way he tried to set himself apart from "establishment" politicians. He ran on a "change" ticket - he promised to "change the ethics of Albany [the state capital of New York]". Sounds familiar? The great and the good rushed to endorse him, including Bill Richardson (Governor of New Mexico and a possible Vice Presidential candidate) who declared Spitzer was the "future of the Democratic party".

People in New York state lapped it up and elected him in 2006 with a stonking 69% of the vote. Things started to go wrong almost straight away. Apparently he thought "change" meant not consulting or compromising with the state legislature on all sorts of issues big and small, from health-care bills to drivers licences to the budget. He upset Democrats as well as Republicans and his approval rating sank to 33% before the news broke about his links to prostitution.

The moral of the story? Don't believe politicians who say they are "different" and be suspicious when they claim the are above politics and for hope and change and all that good stuff. Not only do they never live up to the rhetoric, they tend to be worse than the usual politician, partly because they believe they are so special/gifted/different they think they can get away with anything.

Your average establishment politician on the other hand, who has worked his way up the ranks, gaining experience all the way about how politics is about compromise, and how political decisions are often about making painful choices between something bad and something awful - they tend to turn out OK. They won't wow you with grand flying rhetoric, and their policy proposals might seem like the most boring things since sliced bread, but they do try to deliver them and you know exactly what to expect. It's time everyone grew up and realised that politics is desperately bread-and-butter, and expecting every politician to be Pericles/The Saviour/Alexander the Great is to doom yourself to disappointment.

Friday, March 07, 2008

The Richest Regions in Europe

Eurostat looks at the regions of Europe every year and calculates the GDP per inhabitant of the region based on a Purchasing Power Standard, and then expresses this as a % of the average for the EU 27 nations.

The average for the EU-27 is set at 100. The richest region turns out to be Inner London, with a value of 302.7. The next richest region in the EU is Luxembourg with a value of 264.3. The Eastern European regions came up below average as expected, with North East Romania the poorest with a score of 24.2.

The surprising thing for me was how many regions in the UK are below the EU average, especially as the EU-27 average is depressed by the accession of the eastern europeans countries. Here's the list:

Tees Valley and Durham 85.9
Northumberland, Tyne and Wear 105.1
Cumbria 90.2
Cheshire 132.8
Greater Manchester 110.0
Lancashire 97.2
Merseyside 84.8
East Yorkshire and Northern Lincolnshire 97.6
North Yorkshire 105.8
South Yorkshire 92.7
West Yorkshire 110.1
Derbyshire and Nottinghamshire 109.1
Leicestershire, Rutland and Northants 118.6
Lincolnshire 86.5
Herefordshire, Worcestershire and Warks 108.9
Shropshire and Staffordshire 92.6
West Midlands 112.4
East Anglia 107.9
Bedfordshire, Hertfordshire 136.1
Essex 99.3
Inner London 302.7
Outer London 108.5
Berkshire, Bucks and Oxfordshire 168.0
Surrey, East and West Sussex 123.7
Hampshire and Isle of Wight 120.2
Kent 101.0
Gloucestershire, Wiltshire and Bristol/Bath area 133.9
Dorset and Somerset 102.8
Cornwall and Isles of Scilly 77.4
Devon 92.5
West Wales and The Valleys 79.0
East Wales 115.2
Eastern Scotland 116.1
South Western Scotland 107.1
Northern Ireland 97.0

For instance Cornwall and the Isles of Scilly with a score of 77.4 is poorer than the Algarve (Portugal) which has a score of 79.6. Outside Inner London there are only pockets of success - Berkshire, Bucks and Oxfordshire with a score of 168.0, Bedfordshire, Hertfordshire with a score of 136.1, Gloucestershire, Wiltshire and Bristol/Bath area with a score of 133.9 and Cheshire with a score of 132.8. And Scotland is clearly far from the basket-case that the English like to pretend it is.

We really need to be asking ourselves why places like Cornwall, Devon, Cumbria, Merseyside, Tees Valley and Durham are doing so badly. Durham is an old mining and shipbuilding area that still hasn't found any other industry to replace them. Cumbria, Durham and Merseyside are represented by Labour MPs and they can and should be pressing the Labour government for help as agressively as possible. Cities like Bristol and Manchester have shown how well an effective local Labour government combined with Labour MPs can build up the area's economy. Instead of Frank Field wasting his time writing fanciful pamphlets on how MPs should be selected by primaries (and pray who would pay for these primaries?), he should be concentrating on lobbying business to invest in his area. Perhaps poor performance in these areas is an indication that the MP's haven't been cheerleading for their areas as much as they should, and should be de-selected and someone more effective put in?

Cornwall and Devon are agricultural and tourist areas and have suffered from UK tourists deciding to holiday in the Mediterranean instead. Devon and Cornwall also dominated by the LibDems, which suggests people there have opted out of UK politics in that the LibDems will never be part of any government, and will thus never have the clout to drive investment and regeneration towards their area.

All the areas scoring below 100 are entitled to EU Objective 2 help. (Objective 2 regions are not in as dire need as Objection 1 regions. All Objective 1 regions are in Eastern Europe).

To look at the full EU regional list click here.

Wednesday, March 05, 2008

UK service sector activity accelerates

The FT reports today that UK service sector activity for February accelerated:

The Chartered Institute of Purchasing and Supply and NTC Research said their index of service sector activity rose from 52.5 in January to 54 last month, indicating faster expansion. Analysts had expected the index to weaken to 52.

So much for the supposed "slowdown" that the more excitable parts of the press are reporting.

As I've said before, keep an eye on the oil price. In the absence of a supply shock, a strong oil price indicates strong demand and that the world economy is growing. During recessions, when the world economy contracts, the oil price always drops - because among other things there are far fewer trips made by distributors from warehouses to stores in recessions.

The American services sector also performed better than expected. I think history may judge that the Bank of England and the European Central Bank called it right when they refused to panic by cutting interest rates sharply during last year's credit turmoil. The US Federal Reserve though may have cut rates too much.

Sunday, March 02, 2008

Conservatives using council tax for propaganda purposes?

Southampton has a hung council, with 18 Conservatives, 18 Labour councillors and 12 Lib-Dems. Labour should have formed the administration in May 2007 as they hold the position of Mayor, but one Lib-Dem voted with the Conservatives to put them into power.

In November 2007, the conservative-run council sent out a letter to all the council tax payers stating what their budget proposals would be - a 10% cut for the over 65's. They state in the letter that "At the moment this new discount is only a proposal and the final decision to introduce it will not be made by the city council until February 2008". They intended to pay for the discount with £8 million of cuts, mainly attacking children's services and schools (i.e. the discount for the old was to be paid for by hurting the young), but this was not unveiled till Jan 2008.

The Tories knew that they wouldn't be able to pass the budget which is subject to a full vote of the council - they had only 18 seats out of the 48 (37.5%). So why send out the letter? To publicise their council tax plans, and hopefully to convince some old people that the discount will go ahead if they vote Tory in 2008. It cost the council £100,000 to pay for this mailshot.

The trouble is that it is not clear that it was legal to send out this mailshot. In 1986, Margaret Thatcher passed legislation banning councils from issuing party political literature on the rates. Once a budget has passed it is OK to send out letters explaining changes if they have been substantial. But you shouldn't send out the letter beforehand, knowing that you have absolutely no chance of passing the budget, purely to get party political material out there at the council tax-payer's expense.

I think there should be an investigation into improper use of council tax money, and that the Tories should pay the council back the £100,000.

Some people reading this will be thinking tax cuts? spending cuts? Are these David Cameron's compassionate conservatives or old-fashioned Thatcherite Tories? Well they don't fit in with the touchy feely image the national party is putting about, that's for sure. Maybe the touchy feely stuff is just PR propaganda and the Tories will drop "compassion" just as quicky as Dubya did after being elected in 2000. The local Tories are not even very sensible - the worst decision being to hand two schools to an evangelical Christian consortium to be run, instead of to the trust run by Southampton University (the preferred choice of Labour).

What is becoming clear from the budget choices is that Conservatives are increasingly enagaged in old people v young people politics, where Conservatives = Old People.