Tuesday, February 27, 2007

Irwin Stelzer on who should be Chancellor

Irwin Stelzer makes some interesting comments on who should be Chancellor in today's Guardian:

Which of course brings us to Ed Balls, the co-architect of many of Brown's economic policies. He is a more than capable economist; a former journalist whose already good understanding of the press is likely to increase as he comes to realise unyielding advocacy is as unproductive as, say, Peter Mandelson's bullying; a talented representative of the government to the City; and a man who knows his way around not only the Treasury, but the international agencies whose cooperation Brown will need in his fight to end world poverty.

But Balls carries three burdens. The first is that his wife - the housing minister Yvette Cooper - is so talented that she should be given a place in the cabinet. Why this is a strike against her husband I do not know. Only the egalitarians in the Labour party can believe that social justice demands greater sharing of the political spoils, and only those who don't know the Balls family can doubt that they have found what I believe it is fashionable to call a "work-life balance" that allows them to perform both their political and family obligations in high style.

The second problem with a Balls appointment is his age: he might be too old for the job. At 40, he is five years closer to a pensionable age than is his shadow, George Osborne. But the new prime minister cannot let obsolete ageism deny him the talents and advice of the most qualified man for the job.

The third is raised by Preston: Balls is so close to Brown that he will harm the prime minister if he messes up. True. But in my view that is more than offset by that most important of attributes: competence. So Balls it should be.

His argument is good. Competence is the most important thing in a chancellor, and few MP's in the Commons understand economics the way Ed Balls does. The other skills - communication, a smiling face - are secondary. You can't make an economy run well by smiling at it. But you can make it go well by sound decision-making. Balls would also show up Osborne's lack of understanding of economics.

Unfortunately such is the hostility to Stelzer (who works for Murdoch) that his endorsement may count against Balls.

But a bold choice for the new cabinet may be to have Balls as Chancellor, Milliband as Foreign Secretary and keep Reid as Home Secretary (or promote John Denham).

Sunday, February 25, 2007

Miliband's Youthful Looks

David Miliband is 41. He's a year older than Cameron but looks a good decade younger. This is probably down to clean living on Miliband's part, but it is also the reason he shouldn't be tempted to go for the Labour leadership now.

When Miliband's name is mentioned, people write things like "too young" and "callow", and even "boy". This is because the public thinks he's in his early 30's or even late 20's and they believe this is too young to be Prime Minister.

In a head-to-head with Cameron, the voters will assume that Cameron is the more experienced, even though Miliband is not just older but has cabinet minister experience.

Miliband should wait 6-7 years till he looks at least 40. By then the cabinet experience gap with Cameron will have grown (assuming Cameron stays on as leader of the opposition even if defeated at the next election). Plus Cameron will be fat and bald by then (he's thinning on top already) and his resemblance to Henry VIII will be even more pronounced. Given how much Tudor history Brits consume, they won't take kindly to the old monster reappearing on their TV screens and Miliband will romp home!

Thursday, February 22, 2007

Americans Stunned

The American Reaction to Britain reducing troops in Iraq didn't get much coverage here, but the Washington Post is reporting that they are "stunned" and the timing was "awkward".

Democrats seized on the news as evidence that Bush's international coalition is collapsing and that the United States is increasingly alone in a losing cause. Even some Republicans, and, in private, White House aides, agreed that the announcement sent an ill-timed message to the American public.

"What I'm worried about is that the American public will be quite perplexed by the president adding forces while our principal ally is subtracting forces," said Sen. John W. Warner (R-Va.), a longtime war supporter who opposes Bush's troop increase. "That is the burden we are being left with here."

White House officials said they had known for a while that the British were moving in this direction and that Prime Minister Tony Blair informed Bush of his decision during a secure videoconference Tuesday. But the rest of Washington was taken by surprise, and Republicans were put back on their heels, just as they were beginning to feel more confident that the fight over war strategy was shifting their way.

I expect Bush tried hard to disuade Blair. The interesting thing is that Blair resisted. Yay! To me this signals that Blair has his sights firmly on the end of his tenure and is determined to deal with loose ends before he goes, and neither Bush nor anyone else will be able to lean on him in the old manner to do things that interfere with this. I wish he'd been this assertive in 2003, but better late than never.

Wednesday, February 21, 2007


Tories like to claim that the abolition of ACT is the reason for the disappearance of final-salary pension schemes, but is this really the case?

The main reason for the abolition of ACT was tax-simplification (which Tories claim they are in favour of). ACT was a convoluted nightmare for companies to calculate, and they welcomed abolition. However because ACT was abolished, pensions schemes could no longer reclaim the ACT that the company had paid. To compensate and make this revenue-neutral, the Treasury slashed corporation tax from 33% to 30% for large companies and from 23% to 19% for small companies. Cutting corporation tax increases a company's profits after tax, which the company can choose to either distribute as an increased dividend, (to make up for the inability to reclaim ACT) or retain within the company for future investment. As share prices are based on profits after tax (which are used to calculate Earnings Per Share), cutting corporation tax would have increased share prices, everything else remaining equal, which should have benefitted the pension schemes that had invested in them.

Therefore the abolition of ACT cannot be the reason that final salary schemes have closed. Yet it is indisputable that final salary schemes have continued to be closed to new entrants, and in some cases closed altogether. To find the true reason for this, one must go to the pensions legislation enacted by the Major government.

The first piece of legislation of importance is the Social Security Act 1990 (which came into effect in Jan 1991), which insisted that if a member left a pension scheme, their preserved benefits in addition to GMP must be revalued from the date of leaving the scheme to the date of retirement in line with the Retail Price Index. From 6/4/1997, this was changed to Limited Price Indexation (which caps the increase to 5% p.a.).

Therefore someone who had left a scheme aged 30 in 1991, with a preserved pension of £1000 p.a. would get £2097 p.a. at aged 60 if RPI averaged 2.5% p.a. between leaving and retirement. Prior to this act he would have got just £1000 p.a. at 60. This sharply bumped up the costs of final salary schemes, as most of their members are deferred pensioners (i.e. people who've left the scheme before retirement age because they've left the company).

The next piece of legislation to hit schemes was The Pension Scheme Act 1993, which insisted that the guaranteed minimum pension (GMP) part of a contracted out schemes preserved benefits, was subject to a minimum level of revaluation that applied to both public and private sector schemes. GMP accrued from 6 April 1993 up to 5 April 1997 of preserved benefits must have a revaluation equal to the Average Earnings Index (AEI) of 7.0% and from 6 April 1997 this is reduced to the RPI or a maximum of 5.0% a year..

The 1993 Act also changed the definition of Final Salary, introducing a concept called Dynamisation. The sharing pensions website says that "dynamisation allows for the definition of final remuneration for a scheme member to take into account increases in pensionable earnings that have not kept up with the retail price index (RPI). Any use of dynamisation will still be subject to the earnings cap. The earnings of the member during the definition years, say the best three years except the final year preceeding the retirement age, will be averaged and revalued in line with the increase in the RPI to give the final remuneration. Dynamisation will usually increase the retirement benefits in the form of a pension income and any commutation to a tax free lump sum for the scheme member."

Many of the provisions of the Pension Scheme Act 1993 were brought into force on 6th April 1997, (just before the general election) and all these provisions were very expensive as they sharply increased the payouts, which in turn meant that companies had to sharply increase their contributions to pay for them.

Some pension schemes were already starting to struggle under the 1990 act provisions and realised that the 1993 act provisions were unaffordable - HSBC's final salary scheme closed to new entrants on 6/4/1996 and WH Smith Pension scheme closed to new entrants in 1995. Other schemes hoped that stock market performance would increase faster than it had in the past (a fantastic expectation not borne out historically) and bail them out. But by 2001, this hope started to look forlorn and schemes such as Marks and Spencers started to revamp their final salary schemes this year.

One way to restore the viability of final salary schemes is to repeal the pension provisions of the Social Security Act 1990 and the Pensions Act 1993. But this would be very unpopular. The public expect that their preserved pensions should be revalued in the period between leaving and retirement, (which is why the Major government enacted the legislation in the first place) and they don't accept that companies can't afford them. Therefore the only option available to companies is to switch to money-purchase schemes, which will provide similar (and in some cases less) benefits to that which the member would get in a final-salary scheme if the Social Security Act 1990 and Pensions Act 1993 were repealed.

Re-reading what I've written, I'm conscious that I have included a lot of dense detail: but it's important people realise just how generous were the benefits introduced by the Major government, and how this contributed to making final-salary schemes unaffordable. I don't think Major's intentions were bad - like most people, he felt provisions and protections should increase with time. The lesson is perhaps that you can't go on increasing the benefits people get - at some point you have to say, this is the maximum we can provide.

Monday, February 19, 2007

Tuition fees return to some German Universities

From Bloomberg:

A push to match the quality of higher education in the U.S. and U.K. is driving colleges that taught the likes of Friedrich Nietzsche and Karl Marx to charge tuition for the first time in almost 40 years

......Students in Germany paid for their classes until October 1970, when states unanimously abolished fees to make higher education available to more people. The U.K. introduced undergraduate fees in 1998. Italy and Spain also charge university students.

In seven of Germany's 16 states, university students now must pay as much as 1,000 euros ($1,300) a year. In contrast, tuition and fees in the U.S. average $10,700 annually at public universities and $25,000 at private universities, according to Federal Student Aid, the student-loan office of the U.S. Education Department.

Goethe University spent about 10,126 euros, or $13,200, per student in 2006, compared with $149,686 at Harvard University in Cambridge, Massachusetts, according to information on their Web sites.

``Other universities are clearly better equipped, for example when you look at the U.S.,'' said Udo Corts, Hesse's minister for higher education. ``We want to, and have to, offer an education that is competitive. Students are looking at where they get the best education, and equipment plays a role.''

State governments rather than the federal government fund tertiary education, and they're struggling to keep up with the rising costs of maintaining facilities and upgrading equipment.

It will be interesting to see how this pans out - it sounds like German universities are under the same financial pressures as UK universities. I was also interested to learn that the German post-war-miracle generation from 1945 to 1970 paid for their own education, while Brits of that same period got their education free but achieved less economically. When oppositions moan about the "burden Labour has put on students", perhaps they should think about that.

Saturday, February 17, 2007

Was David Cameron having a go at his Father?

Speaking of the drug-related murders in Peckham, Cameron said:

"Children learn their morals, no less than their manners, from their parents. And that means both parents - including fathers."

Interesting. While he was a similar age to the boys in Peckham (age 15), Cameron too got embroiled in drugs. Was it his dad's fault for "abandoning" him by sending him to that den of iniquity, Eton boarding school? Did his dad not emphasise morals enough to him? Is that why his son ended up on drugs and joining "lets damage property" clubs like Bullingdon?

Just what was going on in the Cameron household? Come on Cameron, give an interview, come clean and tell us all.

Thursday, February 15, 2007

The Bullingdon Club

The Telegraph did everyone a favour and published this photo of David Cameron in fancy dress as part of the Bullingdon Club in the late 1980's. The "man of the people" turns out to be very alien indeed.

The Bullingdon Club is an exclusive Oxford "drinking" club, who's motto is "I like the sound of breaking glass". Their modus operandi is to damage other people's property, unprovoked, and then to pay, the idea being to demonstrate that they are above the law and can do whatever they like and then buy people off.

The Oxford Student has a revealing article on what they get up to:

Last December[2005], images of snivelling Bullingdon members were splashed all over the tabloids after all 17 members were arrested for wrecking the cellar of the 15th century pub, the White Hart, in Fyfi eld.

17 bottles of wine were smashed into the walls of the pub after the civility of a gourmet meal descended into a brawl, leaving a trail of debris that was compared by eye-witnesses to a scene from the blitz. The inebriated members started fi ghting, leaving one with a deep cut to the cheek, and the landlord recalls attempting to pull apart the fi ghting parties, only to have them set on each other once more, exclaiming, “Sorry old chap, just a bit of high spirits".

.........‘At another infamous Bullingdon garden party, the club invited a string band to play and proceeded to destroy all of the instruments, including a Stradivarius.

.........Cameron was member of the club at a time when it was de rigeur to engage in the ‘man of the people’ pursuits of washing down “a cocktail of drugs with an honest, working class box of chips and a fi ve pound bottle of wine”.

.........A large part of the members’ motivation is the feudal idea that its quite alright to inflict damage on peasants’ property, provided one is able to pay for it.

Did Cameron as an adult vandalise other people's property? If he did, we should know about it. The type of person who thinks it's OK to damage other people's property, is also the type who thinks drugs laws don't apply to him, indeed this is a mindset that believes the law doesn't apply to them at all.

What sort of person would willingly join such a club and participate in such things? What sort of person destroys a Stradivarius? Someone nasty and arrogant, with a sense of entitlement?

I believe the next election will revolve around questions of Cameron's character and whether he is a fit person to be PM. Questions about vandalism, questions about drug-taking, possibly questions about other things that will crawl out as stones are unturned.

Tories are already trying to spin this by saying "Blair was at Oxford too". It's true that Blair was at Oxford, but he wasn't very active, he didn't even join any political parties. (Edit: I understand that the BBC have a photo of him at a dining club). Instead, he seems to have started getting serious about religion at Oxford (which precluded any drug-taking, let alone vandalism) and spent much of his time hanging out with lefty Aussies (Blair spent his early childhood in Australia, and all his life has been drawn to the sunny egalitarianism of Australians).

Related articles:
Bullingdon photo now censored
Bullingdon again - Osborne was a member too

Monday, February 12, 2007

On "Normality"

Several bloggers have been trying to spin the Cannabis Cameron story by claiming that taking drugs is "normal".

And it's not just bloggers. Peter Ainsworth, Shadow Secretary of State for Environment, Food and Rural Affairs, got in the act, saying:

To be quite honest, most of our generation did (smoke cannabis). I mean it was kind of the odd ones out who didn't

(Hat-tip: UK Daily Pundit )

I object to people trying to use the word “normal” to justify drug-taking. “Normal” is a loaded word. Everyone wants to be normal, so to describe any behaviour as normal is to promote it. Society also never punishes the normal, it’s always the abnormal that is punished.

Two-thirds of adult Brits have never taken any drugs, including myself - are we, the majority, not normal? I've been accused of being "petit bourgeoisie" about this. And you know what? I am petit bourgeoisie and so are a lot of Labour voters. Not for us the elitist Cameron-style casualness towards drugs. Labour mothers do not want their children told, "you're not normal unless you take drugs" or "you're a weirdo/oddball if you refuse". Drug taking destroys lives, destroys braincells and we don't want it glamourised. I guess this means I belong to the puritan wing of the Labour party.

Sunday, February 11, 2007

Cameron and Drugs

The Independent published an article today about David Cameron being caught using cannabis at Eton aged 15.

The general consensus among pundits is that this is a "youthful indiscretion". But this isn't the first time Cameron's drug habits have been raised. During the Conservative leadership contest, he claimed to have had the "normal university experience" and then flatly refused to answer questions, claiming the right to privacy about his past. At the time, the assumption was that any drug-taking was confined to 3-4 years at university. Now we know the problem started much earlier in school.

He did give a revealing interview to Channel 4 news about his habits:

During the interview, which took place in October last year, following the election of the Conservative party leader, interviewer Alex Thomson said to Cameron: "You say you want to listen. So if or when a constituency says to you ‘David Cameron, have you ever taken class A drugs as an MP?' would you answer that question?"

Cameron responded: "I've always said law makers can't be law breakers. All I've said about my past though is what's private in the past should remain private."

Thomson went on: "Well, if I asked you if you snorted cocaine as an MP you'd therefore say no, wouldn't you?"

Cameron said: "That's right, but please, I think we've dealt with this."

He continued: "I've absolutely answered your question." Thomson said: "So, say ‘No'." Cameron answered: "I've just said ‘No'."

According to the Press Gazette, from which the above excerpt is taken, the interview was pre-recorded and Cameron's press officers then contacted the program and demanded the above section to be pulled.

It's not certain why. Perhaps he felt that an admission that he'd not taken drugs while an MP (he became an MP in 2001) was by implication an admission he'd been taking drugs up until then. If that's the case, he'd have been taking drugs from the age of 15 to the age of 34 (19 years). Or perhaps he was worried that his assertion that he'd not taken drugs as an MP was a hostage to fortune, leaving him vulnerable should someone be able prove otherwise.

If either of these scenarios is true, it puts a very different spin on Cameron's drug-taking. Youthful indiscretion or taking drugs while at university is one thing. But taking drugs for two decades, or taking drugs while an MP is quite another. Taking cannabis and cocaine remains illegal. The hunt must now be on to see if any other stories can be dug up.

Saturday, February 10, 2007

Deputy Leadership

An MP posting as "Red Sky" on Political Betting, has posted the following comment on the Labour deputy Leadership:

A couple of deputy leadership updates. And the folks who said one can’t nominate two are right. Sorry!
1. Hazel Blears now expected to stand, as maybe is Caroline Flint. But Jack Straw decided some months ago not to, as he’s more interested in the deputy PM side than the campaigning-round-the-party side that Gordon clearly has in mind.
2. Alan Johnson has opened up a lead in MP support - close to 100.
3. Nobody else is yet in a position to declare 44 supporters. The Hain and Cruddas camps claim to be over the top, and both will porbably make it, but some just don’t want to go public at this stage.
4. Not clear that Harman is close to 44, and Benn might not make it either.There is a lot of disinformation around, so treat all this with caution.
by Red Sky MP February 10th, 2007 at 1:05 pm

I was interested to see that Caroline Flint may be standing. I hope she does, and I hope that female Labour people will back her. I think she's a very competant minister (she manages difficult questioning on TV on the NHS much more effectively than Patricia Hewitt). Her look is typical of a lot of women in their thirties and forties, a managerial type, she's representative of our generation in a way that Hazel Blears is not, we can relate to her. This is important because this cohort of females will decide the next election. She is also good-looking and has a large male following (particularly among Lib Dem males), which can't hurt. I hope Labour people realise that we have to choose a deputy leader who will enhance our chances of winning the next election, and not base the choice on internal factional issues. I hope she stands and I hope she wins.

To read the Political Betting thread in full, click here. Red Sky's comment is number 102.

Saturday, February 03, 2007

The Usual Rant from Matthew Parris

Matthew Parris writes his usual anti-Blair-anti-Brown rant in the Times today. Apparently Mr Brown is a "coward" for not taking advantage of the hounding of Mr Blair by the press, to put the knife in.

If you look at the situation objectively, it makes no difference to the Labour party, or to the country at large, if Mr Blair goes now or in the summer. It takes a long time to organise a Labour leadership contest in any case. And in the meanwhile, the economy continues to grow, the sun continues to rise each morning and the earth continues to spin on it's axis. So why the agitation for Blair to go right now?

I believe that Tories like Parris are twisted with frustration that Labour has not humiliated Blair the way the Tories humiliated Thatcher. All this hounding is aimed at goading the Labour party into a repeat performance of 1990.

As usual though, Parris displays his ignorance of the Labour party. All this vitriol would be just the thing to motivate Tories into attacking their leader (that blood-thirsty lot hardly need an excuse). But it has the opposite effect on the Labour party which is more tribal.

I can't remember when I last felt so protective towards Mr Blair. Given that I was against the Iraq war and angrily voted LibDem in 2005 as a protest, this is quite an achievement of Mr Parris. I doubt I'm the only person feeling this way. The public not only dislike it when people turn on their leader, they dislike unfairly smearing someone and pronouncing them guilty when they not even been charged, let alone tried and convicted. And they are also aware of the pointlessness of this agitation for Blair to leave, especially as he's said he's leaving anyway.

Friday, February 02, 2007

The Hounding of Tony Blair

I have just this to say: he's not even been arrested and charged, let alone tried and convicted. In Britain you are still innocent till proven guilty.

It's interesting that the Tories have gone all continental on this. Are they secretly planning to harmonise our legal system with that of France, do you think?