Monday, June 30, 2008

The NHS at 60

Many people will be writing histories of the NHS at 60. I thought I'd just post a graph from the FT, which looks at waiting lists. To view an enlarged graph, simply click the image. The NHS waiting list reached 1 million for the first time in 1993 and it's all-time high of 1,263,000 in 1998 as New Labour took over and struggled to turn the ship round.

The waiting list is now down to just over 500,000, the lowest it's been since the early 70's - and this despite a growth in the population to 62 million from 56 million in the early 70's, an ageing population profile, plus a myriad of medical breakthroughs and new drugs.

This was why Labour was elected in 1997 - to save the NHS. Without the election of the Labour government, the problems would have worsened and siren voices would have said that it was "impossible" to have socialised medicine and that a move to the American private insurance system was "inevitable". Indeed as late as 2004, "Orange Book" LibDems had joined the Conservatives in proposing a dismantling of the existing NHS.

All that has gone. Labour has resoundingly won the argument. David Cameron goes around the country telling people that he loves the NHS, all talk from the Tories of "starving" the NHS of funds so that private medicine becomes inevitable has died. The French have adopted the NHS's "GP gatekeeper" system as the most cost-effective way to run a tax-payer funded system, abandoning their previous free-for-all system. And the Americans are at last acknowledging that socialised healthcare is the only way to contain ballooning costs - especially as the medical industry in America has a vested interest in over-medicating people and keeping them as "patients". Our healthcare system remains the most cost-effective tax-payer funded system in the world bar the Japanese system.

The Labour party manifesto of 1997 stated simply "We will save the NHS". We've delivered on that and should be very proud.

Saturday, June 28, 2008

Boris Raises Fares for Poorest Londoners

I just wanted to highlight this article by Tory Troll, which says that Boris Johnson has confirmed in a written answer that he will scrap the half-price bus and tram fares for the 75,000 poorest Londoners.

He had prevaricated before, claiming he was "considering" alternative options. Nah. He just wanted to hurt the poor. To read the Tory Troll article, click here.

Tory Troll is becoming the main Boris-watch blogger and I recommend people read his blog.

Interesting Detail in the Mori Poll

The most recent Mori poll showed the Conservatives at 45%, Labour at 28% and the LibDems at 16%, which is pretty much standard fare in these dismal days for Labour.

However, they had some very interesting detail in the depths of the poll. They asked people, Which one of these definitions, if any, comes closest to your own political views (Question 14, table 27):

New Labour 14%
Old Labour 17%
Liberal 13%
One Nation Tory 11%
Thatcherite Tory 14%
Social Democrat 6%
Nationalist 5%
Other 2%
None of these 8%
Don't know 11%

New Labour + Old Labour = 31%
Liberal + Social Democrat = 17%
One Nation Tory + Thatcherite Tory = 25%
None of These + Don't Know = 19%

So how did this translate into a huge Tory lead in the voting intention survey? You get an idea when you look at how the voting intention figures panned out:

Identification Total% Con Lab LibDem

New Labour 14% 3% 38% 5%
Old Labour 17% 5% 39% 6%
Liberal 13% 4% 8% 56%
One Nation Tory 11% 26% - 4%
Thatcherite Tory 14% 37% 1% 2%
Social Democrat 6% 2% 5% 15%
Nationalist 5% 3% 3% 1%
Other 2% 2% * 5%
None of these 8% 9% * 3%
Don't know 11% 10% 5% 3%

It is the self-confessed non-identifiers - the None of these/don't knows, who are giving the Conservatives their current lead. Are they shy Tories (can there still be any left?) Or are they people who simply hate politicians and want to give the government a kicking by opting for their main opposition?

When it came to breakdown by age and gender it was as follows:

Identification Total% Male Female 18-34 35-54 55+

New Labour 14% 13% 14% 16% 13% 13%
Old Labour 17% 15% 19% 16% 18% 18%
Liberal 13% 14% 12% 17% 11% 12%
One Nation Tory 11% 10% 11% 9% 9% 14%
Thatcherite Tory 14% 16% 12% 7% 12% 20%
Social Democrat 6% 7% 5% 3% 7% 7%
Nationalist 5% 7% 2% 3% 7% 4%
Other 2% 3% 2% 3% 3% 1%
None of these 8% 9% 7% 8% 10% 7%
Don't know 11% 5% 16% 20% 10% 4%

Amongst the under 35's, the most popular category was "don't know" followed by Liberal and then New labour and Old Labour. Thatcherisim by contrast is most popular with the over 55's.

Given that Cameron's lead is based on the None of These/Don't Knows, it appears he is benefitting from simply being very vague indeed and deliberately not defining his policies. His chief danger is the evidence from the Telegraph that "The majority of new Conservative candidates selected to fight the next election are unabashed supporters of Margaret Thatcher's ideals".

If anything is guaranteed to frighten away the non-identifiers, it is the hard-line narrow Thatcherite vision of Tory party candidates. Therefore local Labour parties should be scrutinising the Tory candidates closely and outing their Thatcherite tendencies to the voters in their area.

Monday, June 23, 2008

Wimbledon - It's About the Grass

Very interesting article in Time magazine. I hadn't realised that they'd changed the grass at Wimbledon:

In 2001, Goran Ivanisevic beat Pat Rafter in a Wimbledon final that featured 38 service aces; both players favored the fast-court tactic of heading to the net to volley. A year later, however, Australian baseline specialist Lleyton Hewitt defeated Argentinian David Nalbandian in a match that featured only seven aces and not a single such serve-and-volley point.

.......In 2001, Wimbledon tore out all its courts and planted a new variety of groundcover. The new grass was 100% perennial rye; the old courts had been a mix of 70% rye and 30% creeping red fescue. The new lawn was more durable, and allowed Wimbledon's groundsmen to keep the soil underneath drier and firmer. A firmer surface causes the ball to bounce higher. A high bounce is anathema to the serve-and-volley player, who relies on approach shots skidding low through the court. What's more, rye, unlike fescue, grows in tufts that stand straight up; these tufts slow a tennis ball down as it lands.

Ivanisevic and Rafter were able to blast their way through the new grass because an exceptionally rainy two weeks had kept the courts soft. But the ground eventually dried, and baseliners have excelled since; in men's tennis, Roger Federer, who serves and volleys only around 10% of the time, has reigned supreme

Why did they do it?

"We needed a grass that could hold up for two weeks and not splinter into patches, which is what causes bad bounces," says Seaward. "That was our goal." Any change in the pattern of play, he insists, "was just a natural byproduct of being able to keep the soil firmer."

But it makes the likelihood of a McEnroe type ever winning again unlikely. Unless they change the grass again.

Sunday, June 22, 2008

YouGov Poll on Civil Liberties for the Economist

YouGov have done an opinion poll for the Economist - which you can see here.

Here's some of the questions that were asked:

Britain has more closed circuit TV cameras (CCTVs) than any other country, monitoring streets, stations, shopping centres, offices etc
Do you think…

This is broadly a good thing, as CCTV cameras help to deter criminal behaviour and catch offenders

This is broadly a bad thing, because these cameras allow the state to 'snoop' on people and invade their privacy

Don’t know

Police are relying ever more heavily on DNA to solve crimes. Britain now has the largest DNA database in the world. It includes data on people who have not been convicted of any crime Which of these statements comes closer to your view?
‘DNA data should be held only for convicted criminals. Data on everyone else's DNA should be destroyed'

‘In order to be able to catch more criminals, the police should be able to build up their DNA database, so that eventually they hold DNA data on every citizen'

Don’t know

Currently, the police may detain suspected terrorists for up to four weeks before charging or releasing them. The Government wants to extend this period to six weeks. Which of these statements comes closer to your view?
These days it can take some weeks to analyse all the evidendence against suspected terrorists; it is right to be able to detain them for up to six weeks'

It is a long-established principle of British justice that suspects should either be released or know the charge against them within days; the proposed six weeks detention period is far too long'

Don’t know

David Davis, formerly shadow home secretary, has decided to resign as MP to campaign for re-election on the issue of civil liberties. He says that the Government's policies on ID cards, DNA and biometric databases, and the time allowed to question terrorist suspects, together threaten our civil liberties.
Do you think…

He is right; and he would do more to protect our civil liberties if he were home secretary

He is right; but he would NOT do any more to protect our civil liberties if he were home secretary

He is wrong: the measures proposed to tackle terrorism, crime and identity theft will enhance, and not undermine our civil liberties

Don’t know

David Davis benefits from his quioxtic "independent stand" with plenty of people supporting him simply for doing something unusual. And he has been the sitting MP for Haltemprice and Howden since 1987, so should romp home for non-civil liberties reasons.

There is danger for the Conservatives however in that he has forced them to adopt policies they wouldn't otherwise have done so, and which the public at large wouldn't vote for in a general election.

It is therefore in Labour's interests for David Davis to win and win big, so that he is a "big beast" in the Conservative party, forcing Cameron and co to pledge to abolish CCTV, 42 days and the DNA database. I suggest that official Labour people now remain completely quiet about this and if Bob Marshall-Andrews and Tony Benn wish to do their utmost for the Labour party, they should head to Haltemprice and Howden and "help". It would be a big deal for us if the Conservatives are bounced by Davis to adopt policies that the polls are showing very clearly that people don't want.

Friday, June 20, 2008

Sarkozy is a Fool

I've written many times that Nicholas Sarkozy is a fool, but this belief was confirmed anew after Sarkozy's latest rant against Peter Mandelson because Mandelson has the termerity to support free-trade and the abolition of CAP.

Mandelson's position is not exceptional though. His predecessor as Trade Commissioner, Pascal Lamy (who was a member of Mitterand's government) was also very much in favour of abolishing CAP and pushing free-trade. And Lamy impressed so much on his free trade credentials that he was appointed to head the WTO. But then the socialists do not get votes from farmers and are not enamoured with the argument that precious resource should be diverted towards them. The Barroso Commission at large is in favour of free-trade.

What was extraordinary about Sarkozy's outburst though was his piss-poor understanding of economics and the dynamics of subsidy. The whole point of CAP is that it puts a floor on prices, via the "intervention price" that protects against low global prices. The idea is that if prices get too low, farmers are tempted to abandon the land and the intervention price prevents this. Abandonment of the land is the big European fear, dating back to WW2 when food could not be imported. Land that has been concreted over is lost to food production forever - hence the intervention prices and the payments for set-aside to keep land in a condition that it can be ploughed at any time.

However, when world prices are high, the intervention price is not needed at all, and neither are the payments for set-aside. The farmer can make huge profits just by ensuring that he meets demand. Therefore Sarkozy's argument that high food prices requires more CAP is complete bull. We will never see such an auspicious time to reform CAP. It's like reforming benefits - you always do this in times of full employment because the hurt is minimised. Reforming CAP should take place now, while high world food prices mean that farmers won't really hurt from the reform at all.

The French must be really regretting electing Sarkozy. He's achieved little and managed to annoy Germany, Britain, the EU Commmission and China. His only pal is fellow conservative Dubya.

Speaking of conservatives - Sarkozy proves the principle of Vote Conservative, Get An Idiot, which we first saw in action in the USA.

Conservatism = Bush = Sarkozy = Idiots

British people should take note when they go to the polls for the general election. Don't let it happen here!

Thursday, June 19, 2008

Retail Sales Soar in May

The ONS reported today that sales volume in the three months March to May rose by 1.8 per cent compared with the previous three months. This follows 1.5 per cent growth in the three months to April.

Apparently the ONS were so surprised that they phoned round retailers to check the figures. The FT reports that the sales data is corroborated by data from the British Retail Consortium which also reported a surge in sales in May.

Everyone is attributing this to the warm weather in May, which always brings shoppers out. But the fact that they had something to spend surprised the City, who assume that everyone is sharing the travails of the financial sector. The truth is that employment is high - some 74.9% of the workforce is in work. Increasing numbers of older people are taking advantage of the government's anti-age discrimination laws, which came into effect in Octonber 2006, and staying on at work, sometimes full-time, sometimes part-time. It's no longer the case that your income has to drop when you age because you are barred from work.

People are also reacting shrewdly and rationally to the hikes in petrol and food. Processed food has shot up in price, and so people are switching to cooking from scratch. Fuel has shot up and people have reacted by driving slower and making fewer trips, to keep their bills neutral. Shops have put up prices, so people buy on the net from someone in HongKong who will absorb the cost of the fuel hikes just to make a sale. The consumer is no longer the dumb helpless creature they were in the 80's when they simply paid what they were charged. And people shouldn't underestimate how complex, resilient and robust the economy has become under Labour.

I'll stick my neck out. We will have solid growth this quarter and the next interest-rate move from the BoE will be up.

Wednesday, June 18, 2008

Gordon Brown - Leader of the Free World!

So says a poll of some 19,750 people in twenty countries across the world. Newsweek has published the complete poll - see it here - together with several articles analysing the results.

Here are the numbers for our Gordon:

Great Britain’s Prime Minister Gordon Brown

Country A lot of Some No No Response
confidence confidence Confidence decline
Argentina 4 18 45 32
Mexico 9 25 46 20
USA 6 53 35 7
France 1 34 33 33
Russia 4 16 40 40
Spain 3 19 43 35
Ukraine 3 14 26 57
Azerbaijan 17 26 32 25
Egypt 2 31 66 0
Iran 1 5 52 41
Jordan 0 5 72 22
Palestine 0 9 90 2
Turkey 1 7 65 26
Nigeria 25 34 29 11
China 8 42 21 29
India 14 23 28 35
Indonesia 10 18 43 29
SouthKorea 8 49 32 12
Thailand 4 23 26 46
Total 6 24 43 26
Britain 9 39 46 6
exc UK 6 25 44 26

The only person with an overall score better than Gordon Brown's was Ban Ki Moon, the Secretary General of the United Nations. Brown scored best of the leaders of democracies, and he would have done even better if people in the middle east didn't hate us so much (I presume those Palestinians giving him such a bad score have confused Blair, Middle East envoy with Brown, UK Prime Minister - or Brown is paying for Blair's problems in that part of the world).

59% of Americans had some confidence or a lot of confidence in Brown - very interesting given that these people will be electing a new President in Nov (probably Obama). 50% of Chinese had some confidence or a lot of confidence in Brown. 57% of South Koreans had confidence in him and 37% of Indians (though India had a lot of don't knows). This is great. Both the USA and China are de-facto superpowers and they like him. Brown has made a good impression in the far east. And they really like him in Africa (Nigeria) and central asia (Azerbaijan - a country with a lot of oil and gas).

By contrast only 18% of Americans had some confidence or a lot of confidence in Nicholas Sarkozy. Sarkozy may be Bush's new best friend, but ordinary Americans don't rate him. Only 22% of Chinese had some or a lot of confidence in Sarkozy.

Putin scored well with the Chinese and central asians (but badly in Europe and USA) and Hu Jintao was bigged up by support in the middle east (Egypt and Iran). As expected Bush did badly.

After lamenting at how popular Putin and Hu Jintao are in the world, and how badly the USA and France are doing, Newsweek takes comfort from Gordon Brown's steady popularity:

If this all sounds like bad news for the West, it is. Yet there's one hopeful sign in the numbers if you look hard enough. The one major democrat who did score well was Britain's Gordon Brown (never mind that his numbers are tanking at home). That's important, for Brown happens to be the one national leader who's staked his reputation on finding new, cooperative solutions to a range of global ills. As Holbrooke puts it, "Brown is the person on the list who's by far the most identified with solving transnational problems, such as climate change, HIV/AIDS, African development and so on." Princeton's Slaughter agrees: "Brown is less interested in his country's narrow interests than genuinely trying to address" global crises. Britain's prime minister, she argues, "is giving effective voice to the aspirations of the world's poorest people, to billions who often feel they have no say."

....As Daalder puts it, there's a "yearning for new leadership" to help the planet through its multiple messes. Anyone who takes up the mantle is likely to be rewarded.

They go onto suggest that the next US president should try to copy our Gordon:

But the right person with the right message—say, a certain young senator who preaches a gospel of hope, or his colleague from Arizona, who's promised to take on "restore the world's faith" in the United States and its principles by working closely with U.S. allies—may find a surprisingly attentive audience.

All of which is good stuff. Gordon Brown is proving good at solid, unflashy diplomacy (the best kind) and is making sure that we have good relations with all those countries that really matter. And he's now a model for the new American president, whoever he is, to copy! You can't hope for better than that! ;-)

Tuesday, June 17, 2008

What would Paul Volcker do?

Paul Volcker is the legendary Federal Reserve Chairman who was appointed by Jimmy Carter in 1979, a role he served in till 1987.

The Federal Reserve Bank has two objectives which often conflict - to control inflation and to keep unemployment low. Prior to Volcker, Fed chairmen always concentrated on keeping unemployment low, particularly as terrific pressure was put on the Fed by politicians in the White House and in Congress.

Volcker decided that inflation was the primary evil and set upon squeezing it out of the system with high interest rates, annoying everyone in the process, from the farmers who tried to drive their tractors into the Fed building in protest, to the politicians. However, he got inflation down in the USA from 13.5% to 3.2% by 1983 - and given how the USA tends to export inflation, this was immensely important for the world economy. Most other important central bankers, particularly the Bundesbank, agreed with his strategy. Volcker was only 60 when he stepped down from the Fed - he should really have been reappointed for another term - but by then the Reagan White House had had it's fill of this life-long Democrat with a hatred for inflation, and replaced him with the more amenable Alan Greenspan.

The problems we're are seeing with global inflation go straight back to Greenspan's decision to keep US interest rates at 1% from 2003 to 2004, at a time when US CPI was running at 2% (i.e. real interest rates were -1%, which is inflationary in the extreme). The graph shows real interest rates in the USA. Everytime US real interest rates get negative, the rest of the world suffers from inflation, even if other countries are being prudent in their monetary policy. But all Greenspan was thinking about was unemployment and how to get the US to recover from her short recession. At the time the ECB refused to cut interest rates below 2%, arguing that it was dangerous to have real interest rates below zero. The ECB was able to take this stand because they look at inflation alone, and their robust independence meant they could ignore unemployment of 10% in Germany and the attendant abuse from politicians.

As mentioned in my previous post, we again have a divergence between the USA and Europe. The ECB has announced that it will raise interest rates next month. The market acted surprised, but they shouldn't have been. Interest rates are 4% in the euro-zone and CPI there is 3.7%, which gives a real interest rate of 0.3%, dangerously close to zero. There is no way the ECB would allow the real rate to get to zero, particularly as the eurozone economy is more robust than in 2003. In the UK, interest rates are 5% and CPI is 3.3%, which gives a real interest rate of 1.7%. This too is a little uncomfortable for the BoE, as they like a real rate of at least 2%, especially as we are near full employment. Through most of this decade the BoE has kept the real interest rate at about 3%, which is far higher than the Americans have averaged.

In the USA however, we have interest rates of 2% and a CPI of 3.9%, giving a real interest rate of -1.9%. This is actually worse than their policy in 2003/4. No wonder we are have a global commodity inflation situation. It is becoming increasingly clear that the Fed will have to raise interest rates. Apart from the fact that they are destabalising the world economy in order to gee up domestic employment, it is clear that their policy is hurting the USA itself.

As Volcker understood in the 80's, inflation is worse than temporary unemployment. In April 2005, when US real interest rates were still below zero, he wrote an interesting article in the Washington Post, where he said

At some point, the sense of confidence in capital markets that today so benignly supports the flow of funds to the United States and the growing world economy could fade. Then some event, or combination of events, could come along to disturb markets, with damaging volatility in both exchange markets and interest rates. We had a taste of that in the stagflation of the 1970s -- a volatile and depressed dollar, inflationary pressures, a sudden increase in interest rates and a couple of big recessions.

.....What is required is a willingness to act now -- and next year, and the following year, and to act even when, on the surface, everything seems so placid and favorable.

.....What I am talking about really boils down to the oldest lesson of economic policy: a strong sense of monetary discipline

Of course Greenspan and Bernanke ignored him. The chief lesson Greenspan learned from the Volcker era seems to have been that you have a short career at the Fed if you annoy the politicians by being too hawkish on inflation. As for Bernanke, he seems too academic and gentle for the job. In particular he seems to be intimidated by Wall Street and their cries for more interest rate cuts to bail them out. The heirs to Volcker are in Europe, but Europeans need to put pressure on the Americans to stiffen their spines. It's no good us standing firm here while the Americans are intent on cancelling out everything we achieve, and more. The Americans need another Volcker.

Sunday, June 15, 2008

David Davis used to support CCTV and the DNA database

Interesting looking back at the Conservative Party Manifesto 1997:

* Closed circuit television has proved enormously successful in increasing public safety.

We will fulfil the Prime Minister's pledge to support the installation of 10,000 CCTV cameras in town centres and public places in the 3 years to 1999. We will provide £75 million over the lifetime of the next parliament to continue extending CCTV to town centres, villages and housing estates up and down the country that want to bid for support.

* Our national DNA database - the first in the world - now has over 112,000 samples on it. 3,300 matches have so far been made between suspects and crime stains.

David Davis ran on this manifesto and the voters in his constituency endorsed it - so was he fibbing to them all along? We should know. If he felt so strongly, why didn't he make a protest to John Major, right at the inception of this project?

Of course the Labour government kept the DNA database and CCTV. They were good ideas. DNA is simply a biometric marker, just like fingerprints. No-one is arguing for the fingerprint database to be scrapped. Perhaps people simply think the word "DNA" sounds all science-fiction and scary, whereas the word "fingerprint" is familiar. But should policy be made based on whether certain words frighten the public?

Interesting to note that of the 112,000 samples collected prior to 1997 from "suspects", only 3000 were found to be a match (i.e. 3000 people out of the 112,000 were guilty). This is a similar ratio to that of fingerprints collected. You usually have to check out loads of people to find the one guilty person. This is normal. Why are Tories suddenly being so silly about this? Especially as they pioneered the use of CCTV and the DNA database?

The other point to make is that most CCTV is actually used by private companies. Bluewater for instance has CCTV everywhere - it helps them monitor shop-lifting and the like. Marks and Spencers and other retailers have CCTV in all their stores. Would the Tory campaign against CCTV compel these companies to remove them? What does business think about this all? Businesses would never spend hard cash on the cameras and for CCTV upgrades unless they felt that it really helped them.

Friday, June 13, 2008

David Davis reminds me of Kilroy

Reading the BBC's HaveYourSay I had a sudden sense of déjà vu. The championing of David Davis by HaveYourSay folk is very similar to the support they gave Kilroy when he first appeared on the scene.

HaveYourSay is generally quite strange as message boards go. If that was all you read over the last four years, you would have concluded at various points that Kilroy was about to become Prime Minister, UKIP was about to replace the Conservative Party, and that the BNP were about to be the largest party in local government. The HaveYourSay crowd is so right-wing that even paid-up Conservatives shudder and recoil in fright.

Of course HaveYourSay is in favour of David Davis - he's exactly their type. A lone, mad, maverick with a big ego who comes on like the Messiah and promises to be "pure" and make no compromises. Exactly like Kilroy.

There is an anarchic part of the population that is anti-everything. They hated the Tories when they were in power, Labour is the new enemy now that they are in government. They hate the establishment - so Westminster is vilified, political parties are vilified, political parties making compromises are vilified, the EU is vilified, the USA is vilified, Murdoch is particularly vilified, as is "Bilderberg" whatever that is (the American version of this group hates the "Beltway", Congress and Wall-Street). You name it, if you hold some authority you are vilified.

They make a massive amount of noise but arn't supported by the electorate at large. The Ron Paul phenomenon in the USA was like this. If all you did was surf the net, you would have been convinced he was about to win. By contrast no-one talked about McCain. Certain elements of the Obama phenomenon also had this fervent belief in the Saviour. Obama was lucky that so many contests were held in January and February when hype was at it's zenith. As time wore on he was fading. And if Dem contest rules were like the Republican rules, Hillary would have definitely won.

Kilroy eventually came a cropper at the ballot box (to his enormous surprise) - though like Obama he actually managed to win an election in 2004 when the hype for him was at it's strongest. Ron Paul crashed and burned. Most of the people championed by this vocal anarchic group on the net come to nothing, and this will be David Davis' fate too. The public at large is simply too sensible to believe in knights on white horses or a world without compromise or to invest everything in a single person as opposed to a political party.

If David Davis was really serious about opposing 42 days, he'd have stayed on as Shadow Home Secretary to see the bill opposed in the Lords, and he'd have been the Conservative spokesman at the general election on this issue. The general election will happen shortly after the bill comes on the books after all.

Instead he's gone for this stunt. Perhaps he didn't believe he would be Home Secretary in a Cameron government. Perhaps he thought this was the only way to force Cameron to pledge to repeal 42 days. Perhaps he wanted to embarass Cameron. Perhaps for all the Tory talk about winning the next general election, he didn't think it would actually happen. Or perhaps like Kilroy he thought he was a new type of politician/new Messiah.

Conservatives must be thinking they dodged a bullet by not electing him as leader. At least Cameron looks stable by contrast.

Thursday, June 12, 2008

The David Davis Stunt

David Davis is so concerned over what he sees as threats to the Magna Carta that he has resigned his seat to recontest it. Unfortunately he apparently hadn't heard of Magna Carta when he voted in favour of 28 day detention.

The brave man phoned Nick Clegg to make sure the LibDems (the main opposition in his constituency) wouldn't stand against him, before making his annoucement. After all it's no fun really putting your job on the line. (At the last election Davis got 47.5% of the vote, the LibDems got 36.8% of the vote and Labour 12.7% in that constituency).

I don't know what to make of Davis. He claims he is in favour of Magna Carta, but was happy to ditch it when voting in favour of 28 day detention. He is favour of Capital Punishment, where an innocent man can get hung by mistake (as has happened in the past), but is against extending detention by two weeks to 42 days (even though if the person concerned is innocent they will get compensated at eye-watering rates, which means the crown will only take the step if they are really worried). Which is worse - being detained by mistake for two extra weeks with compensation or being hung by mistake?

What a mish-mash of principles. I think what is really going on is that he had a bust-up with David Cameron. That's the only way to explain it - because if the Tories are so sure they are going to win a general election, and certain that 42 days is wrong, then why not simply wait till after the election and repeal the Act?

This action of Davis makes sense only if David Cameron has signalled to him that he has no intention of repealing 42 days. Which means Gordon Brown was right that the Tories were being hypocrites in the House last night - and inspired for quoted Conservative Home at the Conservatives.

I think Labour should not contest this election as it is clearly a private battle between Davis and Cameron. It will be fun watching Davis tilt windmills against UKIP and the Monster Raving Loony Party.

One thing is sure - Davis' career as shadow home secretary is over. Considering how many Labour scalps he's taken, the Home Secretary will be very cheerful today.

Wednesday, June 11, 2008

Why Labour Should Rebuff Union Attempts to Dictate Labour Policy

There are three main groups in the Labour party: the constituency parties, the elected members of parliament (the parliamentary party) and the affiliates (the unions, Co-operative society and other groups).

The unions, taking advantage of Labour's poor financial situation, are agitating to dictate policy. The GMB has decided to cut funding to MPs who support Labour party policies that the union disaproves off. Instead they intend to "to put more cash into encouraging its members to take more control over constituency parties so the union has more influence over party policies".

This is a direct threat to the primacy of the constituency parties who select and support MPs/parliamentary candidates, help formulate policy and do the donkey work at elections. Here's the reason why this would be a bad thing.

Firstly, the unions only represent a narrow section of the population. Union membership has been declining over time (see graph). According to the ONS, union membership was 28.4% of employees as at December 2006. Given that the workforce is some 29.5 million, union membership is around 8.3 million. Worse only 25% of those aged between 25 and 34 are union members and only 21.4% of employees in the south east are union members. In addition union membership is concentrated in certain areas - public sector workers, factories, cleaners. Whole industries such as the IT industry are non-unionised.

Constituency party members on the other hand come from all walks of life, all professions, all demographics and Labour has a constituency party in every single part of Great Britain. Constituency members are therefore better placed to reflect and represent the population at large. As soon as John Smith wrested control of the Labour party away from the unions and gave it to the constituency members, party policy began to be attractive to voters and Labour won three consecutive general elections.

44 million people are eligible to vote in the UK. We cannot just concentrate on the needs of 8.3 million union members. If we ignore the 35.7 non-union voters (some of whom are retired) then we doom ourselves to defeat. This is not to say that we ignore the needs of unions entirely - we should take the approach taken in 1997 where we had some policies for every group, including unions. But we cannot formulate policy soley with reference to the unions.

However Labour does have a funding problem. How to solve this? The only rational answer is to expand the membership of the constituencies. I would expect any future leader of the Labour party to come up with a strategy to do this, including a Labour version of the donation model pioneered by Barack Obama, which he has used to great success.

Potential leaders putting forward the tired old formula of "let's get closer to the unions, we need their money" or "let's focus on getting big donations from millionaires" will get short shrift. Potential leaders who can formulate an effective strategy to increase the party's membership base and introduce online fund-raising will get the nod. I know this seems like a huge ask, given where the Labour party is at the moment, but we might as well make these demands from those who would lead us - it's the only way to ensure we get elected to government.

Saturday, June 07, 2008

The European Central Bank - The Most Credible Bank in the World

The European Central Bank is ten years old this month. And they celebrated by demonstrating effortless superiority over the Federal Reserve Bank of America this week in a verbal duel over inflation.

The chairman of the Federal Reserve Bank, Ben Bernanke, unexpectedly made a speech last Wednesday on the dollar. He acknowledged that the slump in the dollar had triggered an "unwelcome" spike in inflation and the cost of imports into the USA. "We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations," Mr. Bernanke said and wowed that the Fed would "formulate policy" that took account of the weak dollar's input into inflation.

The dollar soared on news of the speech.

But on Thursday, at the customary news conference following the European Central Bank's monthly meeting, Jean-Claude Trichet also talked about inflation and revealed that the ECB's members had discussed raising rates and were seriously considering doing so next month. This came as a shock to many US analysts who had predicted that the ECB would "have" to follow the Fed and cut rates and thereby take pressure off the dollar, so the US could have both low rates and a strong dollar containing inflation.

The markets had to decide who was the most credible, Trichet or Bernanke. Trichet won hands down. Everyone knows that when Trichet mentions something in his monthly conference it is likely to happen. Bernanke's talk of "formulating policy" to take account of the weak dollar was judged to be just talk. The dollar slumped - making poor Bernanke's inflation problems even worse, as the oil price (which is priced in dollars) climbed in concert with the dollar's drop. There is not going to be any easy get-out for the Americans. If they want inflation to drop they are going to have to take some bitter medicine.

Given that the Federal Reserve Bank of America has been top dog for so long, this is a remarkable turn about, a historic event. Particularly as all the nay-sayers thought that the ECB and the euro project would never get off the ground. "I congratulate you on your impossible job!" said Nobel Economics Laureate Milton Friedman to the European Central Bank’s first chief economist, Ottmar Issing, in 1998.

Despite the Maastricht treaty being signed in 1992, and ratified by referendum in France (one of the countries joining the euro), many American (and some British) commentators continued to insist that the euro would not come into effect. But the ECB was born in June 1998, and the euro came into effect on 1st Jan 1999, with notes and coins coming into effect in 2002. The naysayers continued to predict doom - the press predicted chaos when the notes and coins came into effect (perhaps because the British press cannot imagine rolling out such a project among some 300 million people). But it went remarkably smoothly - perhaps a testament to the administrative skills of those Frankfurters at the ECB.

But the credibility of the ECB really took off when Jean-Claude Trichet took over as chairman in 2003. The Frenchman shared the desire of the Bundesbank members of the ECB for stern anti-inflation policy (when he was chairman of the Bank of France he operated the Franc Fort policy of using a strong currency to bring down inflation). But unlike the Germans (or his Dutch ECB predecessor Wim Duisenberg) he demonstrated an ablity to communicate with the markets. Instead of minutes being released, the ECB has a press conference straight after their meeting, where the chairman tells the press what has been decided and signals what will happen in the future. (The reason minutes are not released is to protect individual board members from undue pressure in home states, once a decision on rates is made, the ECB presents a united front). No other central bank holds such a monthly press conference and no other central banker takes questions from the press. Trichet's skill in negotiating the press conferences helped to anchor expectations on inflation and interest rates both among the eurozone public and in the markets.

The ECB's reputation rests on how it conducts monetary policy. Unique among central banks it sets it's own targets. And opted for the toughest targets around - a dual target of keeping CPI below 2% and monitoring money supply. They flatly refused to follow the Fed in cutting interest rates to 1% following 9/11, despite slower growth in the eurozone and near deflationary conditions in Germany, and determindly increased rates at the end of 2005 despite critics claiming the eurozone economy was too weak (the critics were wrong and the ECB was right).

Further the ECB was the first central bank to react to the credit crisis last year, providing swift liquidity to the markets when Ben Bernanke and Mervyn King dithered. As a result the euro-zone hasn't experienced a Northern Rock situation (and if only Northern Rock had a branch in the euro-zone, they'd have been able to borrow discreetly from the ECB and avoided the crisis altogether, in the way Barclays and others did - something all British banks will have noted). On the other hand the ECB hasn't made panic cuts in interest rates like the Federal Reserve which has cut from 5.25% to 2% in about six months. The ECB has held interest rates at 4% - providing operational flexibility combined with monetary hawkishnes.

The ECB's latest hawkish stance on inflation is very important for the world at large. The eurozone has grown to some 320 million people - they are a big enough market to affect global prices (unlike us in the UK). If the ECB in raising rates pulls off a lowering of commodity prices by slowing demand, they really will be the new masters of planet earth.

The ECB often comes under attack from economically illiterate politicians - especially that fool Sarkozy - but her growing reputation makes her more and more invulnerable. The euro project itself has had beneficial side effects. 16 million jobs have been created in the eurozone (more than in the USA despite the USA having a higher population growth rate). The original eleven countries have been joined by a further four countries, with Slovakia waiting to join shortly and Estonia, Latvia and Lithuania in the wings.

Many people wonder what would have happened if the UK had joined. Well the UK is such a large economy, the ECB would have had to take account of it when setting rates, which means that interest rates would have been higher in the eurozone if we were part of it - luckily for the europeans that we didn't join! Under Gordon Brown there are no plans to join at all. Future potential pro-European leaders of Labour like David Miliband will come up against resistance from anti-euro MPs like Ed Balls. But Labour is above all the pragmatic party. It all depends on events.

Finally, in pieces like this where you heap praise on Europeans, it is customary to find something, well British about them. I am happy to report that Trichet hails from Brittany (aka Little Britain) and is therefore a Celt and is therefore One of Us! ;-)

Thursday, June 05, 2008


The talk after PMQs was all about David Cameron's hair. No, not his bald patch, his parting. He keeps changing it. God knows why. Perhaps his hairdresser is artistic? Perhaps he believes you are so last week if you haven't changed your hair a few times? As the Times put it, The Prime Minister may be unpopular but at least he doesn't look like a prat

Knowing Cameron's penchant to copy other politicians - witness how his gestures are so similar to Blair's he must have practised them in the mirror - I wonder if this time he was copying Nick Clegg? Take a look at the picture right. Clegg has many faults, but he is genuinely good-looking, one of the few people who can pull off a centre parting. Poor Cameron is not quite the pin-up his spin doctors try to make him out to be.

Monday, June 02, 2008

Telephone Calls from Gordon

I had to smile when I read the story that Gordon Brown telephones some of the people who write to him with complaints. There is somthing amusing about people picking up the phone only to find the Downing Street switchboard with Gordon on the line. The press predictably reacted with derision, but the practice of senior people phoning customers who've written in with complaints is quite common in the better private sector companies.

I used to work for a very senior manager who not only phoned people when a complaint was received, she usually sent them a bouquet of flowers or a bottle of champagne after she'd resolved the complaint for them. Because of her position in the organisation, the only complaints that reached her were explosive in nature, where the customer was so fed-up they were on the point of going to the ombudsman or the press. The company concerned had a horror of bad press - the rule was to avoid this at all cost. We also all knew that if the complaint got to the ombudsman, the ombudsman charged you an administrative fee just for handling the case, and would very likely find against you and award compensation to the customer on top. So, the senior manager reasoned, she might as well spend what she would have done on the ombudsman handling fee making the customer happy. It was a spectacularly successful technique. Most customers went away converted into hard-core fans of the company.

Behind this is a principle known as "service retrieval". There are essentially two types of angry customers. The first experiences a cold implacable sort of anger. If they are unhappy with your service they simply walk away to a competitor. The second sort gets furious and complains, angrily, hotly, vocally and often in purple prose.

Of the two types the first is the worst. Often you don't realize that problems have arisen in a particular area or division till the sales figures come in, at which point the damage has not only been done, but allowed to spread to other customers, and you still have no information why they walked away. The second vocal customer is great. Their anger is a function of their unwillingness to sever the relationship. Instead they contact you and give you a chance to put things right, whilst letting off steam and they tell you in great detail exactly what is wrong. The best companies seize this chance with both hands, because resolving the dispute well means that you not only keep the customer, they usually turn into loyal repeat customers, spreading word-of-mouth goodwill.

Voters are much the same. The ones who give you a scolding on the doorstep are engaging with you, giving you feedback and a chance to retrieve the situation. The ones who are blank and indifferent are the ones to worry about.

Of course the columnists in Fleet Street scorn this technique. Most are too grand to even reply to the comments that readers leave on their articles (maybe they feel they have jobs for life even if they write tripe). It must feel odd to them that the Prime Minister is prepared to engage with people like that. Actually life would go much more smoothly if more businesses copied the Prime Minister (Orange Broadband, I'm thinking of you!).

My only point of concern is that it got into the press. The company I mentioned at the top of this piece would never in a million years have publicised that they dealt with customers in that way - it would have encouraged those who didn't have a complaint to write in just to get their champagne, and it would have been hard to distinguish between the real complainants, who have important information about where your organisation is going wrong, and the chancers. No matter how good an idea is, it's value is nullified as soon as you publicise the technique.

I'm disturbed at the amount of stuff that seems to end up in PR Week. These PR people don't seem to understand the first principle of PR, which is that the PR person stays in the background and the techniques are not displayed because that defeats the purpose. Gordon Brown appointed Steven Carter and his people in January. In December 2007, just before their appointment, YouGov was showing Labour just five points behind in the polls, which is manageable for mid-term. The latest YouGov poll showed Labour at 24 points behind.

It's hard not to conclude that the new PR isn't working, that while Gordon Brown has made mistakes, the effect has been compounded and magnified by leaks and bad PR advice. Gordon Brown in fact did better when he was "just Gordon", and relying on trustworthy Labour party advisors who would have put their eyes out before they leaked to the press. People knew he was a bit grumpy and a bit hopeless with presentation, and they didn't mind. Remember when he first became PM, and he did a presentation with the screen obscuring his face? PR Week might have curled their lip at the amateurishness of the in-house Labour team, but the public just shrugged and smiled. By contrast the electorate are thoroughly irritated with the constant re-launches that have become a feature of Steven Carter's regime.

My advice to Gordon would be to sack his PR team, stop touring the studios and simply get on with running the country. The country will thank him for it.