Tuesday, March 27, 2007

Simon Heffer has convinced himself that Gordon is a "closet Tory"

Simon Heffer writing in the Telegraph, appears to have convinced himself that Gordon Brown is a "closet Tory". (Hat tip: UK Daily Pundit).

This is quite a turnaround from the recent past when Tories like Heffer believed that Brown was to the left of Blair and in the pocket of the unions. After dwelling lovingly on what he believes to be Brown's "euro-scepticism" and his friendship with Alan Greenspan, Heffer writes:

I have always wondered: is Mr Brown, who appears to be our next Prime Minister, perhaps a bit of a closet Tory?

.........Mr Brown wants nothing more than to be Prime Minister, and to be in that office for a long time.

He can only do that by trouncing the Tories in the next election. And if that in turn is going to depend on his pretending to be more Thatcherite than they are, then I fear we should consider it done.

........Dave won't believe any of this will happen. But he wouldn't believe Mr Brown would "cut" taxes - until, that is, he did.

Keep it up Simon. We want more articles like this in the next few years. The more old-style, Telegraph-reading Tories you can convince of this thesis the better - we then look forward to this group abstaining at the next election in the belief that they are better off with Uncle Gord than with Bullingdon Boy.

Northern Ireland

It turns out that the credit for the power-sharing deal that's been agreed in Northern Ireland really should go to Peter Hain, who hit on the simple but brilliant tactic of threatening to increase water bills in the province if direct rule continued, and threatening to stop the salaries of the elected men too, if they didn't get on with the business they were elected for.

Turns out that pocket-book issues win out every time!

Of course credit should also go to John Reid, who played good cop to Hain's bad cop and intervened in the last two weeks to persuade the DUP to keep talking. And to Gordon Brown for stumping up some cash to sweeten the deal and agreeing to look at variable corporate tax in N.I. (there's the money element again). And to John Major for having the courage to start the process in the first place, to Bill Clinton for appointing George Mitchel as honest broker, and George W Bush for banning American funding to the IRA (albeit he waited till after 9/11 happened, but still).

And above all credit to Tony Blair, who had the sense to back Major's efforts to the hilt, so that the Irish parties couldn't play one UK party off against another or use regime change in Westminster as an excuse to delay, and then for the patience in persuading the parties to keep talking these last ten years, on the understanding that the longer the peace held, the more the voters in Northern Ireland would get used to it and the more impatient they would get at any hint of a return to the old ways.

And we must credit the EU and the Single European Act in particular, which made corporate tax competition come into play, once other barriers to competition were stripped by the Act - if the Irish Republic had not become such a prosperous place the temptation would have been strong for the republic to dwell on old grievances (as they did most of the time during the 1980's). As it is, they have been enjoying making serious money so much, they were rather cross and alarmed at the nutty Sinn Fein seeking to gain a hold in the south and worse, join the north to the south and spoil their party with bombs and mad policies. Hence they gladly changed their constitution renouncing any claims to the north.

That's the money effect at play again. For all the high-fallutin' rhetoric, human beings are base creatures really.

Monday, March 26, 2007

10 years of New Labour - Financial Services Regulation

In 1997 financial services regulation in Britain was a grand old mess. There were 10 separate regulators with often overlapping responsibilities. Increasing cross-acquisition in the financial world meant that some firms like HSBC and Lloyds TSB (which acquired Scottish Widows) were forced to deal with several regulators at once, who didn't talk to each other.

The regulators themselves weren't very competant, and a series of scandals undermined Britain's position as a financial centre - the collapse of Barings bank; the BCCI disaster; and the pensions miss-selling scandal, where dodgy pensions salesmen were helped along by a Tory government advert which showed a person in chains breaking them off, while a voice-over proclaimed that government was freeing people from joining company pension schemes, as though employers were somehow evil to want their employees to join a scheme where said employer was paying in about 10% of pay on the employee's behalf.

The announcement that a new integrated financial regulator would be created, came just two weeks after the May 1997 election victory. As the FT says,

Aside from the creation of an independent central bank, the most decisive step of his years in office from a City perspective has been the setting up of a super-regulator, the Financial Services Authority.

Mr Brown was heavily involved in this, down to the detail of choosing its name. When first proposed in October 1997 the FSA caused a good deal of nervousness in the City, based on its potential to become a bureaucratic juggernaut.

Some would claim it is that today – or, at least, that the FSA can be ineffectual or interfering in detail. But the more important point – one that does much to account for London’s rise on the international financial scene – is that the FSA has become the champion of so-called light touch regulation.

This became particularly relevant with the passing of the Sarbanes-Oxley Act in the US, which drew attention to the shortcomings of the more heavy-handed and rules-based US system of regulation. Hence the remarkable fact that London, not New York, was last year the world’s most popular home for new company listings. And the listings authority, of course, is the FSA.

Some in the City have also resented Mr Brown’s propensity to draft in his chosen helpers to tackle City issues, such as Paul Myners on institutional investment and Sir Derek Higgs on non-executive directors. In some cases the results were initially criticised as political correctness but, on corporate governance, the overall result has played in the City’s favour. The Combined Code, introduced in 1998 after the earlier Cadbury, Greenbury and Hampel reports and revised in 2003 in the light of Higgs, is a notable example of principles-based, light-touch regulation. Companies must either comply with the code or explain why they are not doing so. The leeway this gives has been one reason for London’s popularity among foreign companies looking to come to the market.

The FSA works in that it is successfully protecting investors from the disasters seen in the 1990's, while at the same time not stifling business. The government has also strengthened shareholders rights by legislating so that from 2002, shareholders of firms registered in the UK have a non-binding annual vote on executive pay. In practice, no company has ever ignored the results of the vote, which has seen pay-deals scuppered, notably the excessive pay-package of Jean-Pierre Garnier, GlaxoSmithKline's chief executive, in 2003 after shareholders voted against it. Following the UK's example, Australia, the Netherlands and Sweden legislated to allow shareholders a vote and there is pressure building for the USA to do the same, with a bill working it's way through the House of Representatives.

The result of integrated, principles-based, light-touch regulation, combined with sensible legislation on the rights of shareholders, has transformed London into the world's premier financial services centre. A large part of the credit for that goes to New Labour.

Previous articles in this series:
Economic Growth since 1997
10 Years of New Labour - Employment

Friday, March 23, 2007

You Gov Post Budget Poll

You Gov's post budget poll is now on their website (see here). The detail is rather interesting. Here's some of the bits not given much coverage in the Telegraph article:

*Voting Intention was as follows:

Conservative 39%
Labour 31%
Lib Dem 16%
Other 14%

*As you know Mr Brown has been Chancellor for nearly 10 years now. Looking back, how would you rate his performance as Chancellor overall?

Excellent 10%
Good 27%
Fair 29%
Poor 19%
Very Poor 10%
Don't know 6%

*Gordon Brown has been accused of "Stalinist ruthlessness", and riding roughshod over other ministers. Others praise him for being tough and having a clear vision of the policies he believes are right for Britain. From what you know,

Brown behaves properly in being tough and having a clear vision 39%
He behaves improperly with "Stalinist ruthlessness" 25%
He is neither tough nor ruthless 18%
Don't know 18%

*Mr Brown announced that the tax on large "gas-guzzling" cars will almost double over the next two years, to £400 a year, while the tax on "green" fuel-efficient cars will fall from £50 to £35 a year. Do you think the Chancellor ...?

Is right to make these changes 46%
Is right - but should have gone further to penalise the owners of large cars 23%
Is wrong to increase the tax on large cars 25%
Don't know 6%

*The Chancellor announced a 2p cut in income tax from next year. Overall do you think he...?

Should have cut income tax more and announced smaller increases in overall spending 33%
Should NOT have cut income tax and spent MORE on public services 27%
Got the balance about right 29%
Don't know 12%

The figures rating the chancellor's performance over the last ten years are great. 66% think his performance was fair or better - not bad for someone who's done a notoriously tough job for a decade. I think Labour should emphasise this, and try and refer to Chancellor Brown (and when he is PM, ex-Chancellor Brown), so that people are reminded of the word "chancellor".

The question on "stalinist tendencies" was also interesting. I think the British people rather like the idea that Brown is tough, and they are fully aware that leadership involves doing hard things and that leaders shouldn't put the feelings of civil servants above the needs of the voters. It was said that Mrs T benefited enormously by being depicted in Spitting Image as the "only man in the cabinet", and perhaps Brown would benefit if people kept helpfully emphasising how tough he is - Andrew Turnbull here's your cue! Labour should also emphasise Mr Cameron's weakness (caving on his EPP promise, caving on his A list etc).

On the 2p cut, it looks like a big majority are secretly pleased that he did it. So much for the opposition believing that people oppose this.

Wednesday, March 21, 2007

The Budget

What a great budget! It recalls the budgets of Labour's first term. It's morning again in Britain, and roll on a fourth term!

Update 22/03/07: Just an observation based on anecdotal evidence, but the reaction to the budget from right wing voters I've spoken to, (as opposed to Tory activists), was interesting. They had geared themselves up prior to the budget for tax rises, and the budget itself came as a shock. First reaction was spluttering as they felt put-out they couldn't spout the anti-Gordon bile they so enjoy. Then they claimed it was all smoke and mirrors and that no-one benefited. Then after crunching numbers the reaction was "f***k me I'm better off". Then it was "I'll believe it when I see it in my pay-cheque". Then there was grudging acknowledgement that it was a very clever budget, and good to ordinary basic rate taxpayers and that the tax simplification was a genuine advance. There was acknowledgement that Cameron had fluffed his budget response, and that the Tories were boxed into a corner (couldn't cut the basic rate further, couldn't abolish tax credits after making a fuss about the low-paid). This group of people doesn't rate Cameron much anyway, and his poor performance was another black mark. If they feel that they won't be worse off under Gordon (their big fear is that with Tone gone the supposedly left-wing Gordon will emerge), and possibly better off under him, they will probably feel comfortable following their instincts and abstaining at the next election. Which is what Labour wants.

Mr Brown's Personality

Here we go again, with the so-called personality issues. We now have an ex-civil service man Andrew Turnbull, dissing Brown, to add to the group who've popped up to have a go at old Gordie.

Charles Clarke once said that he wished Blair had taken on Gordon Brown in the 1994 leadership election - in Clarke's opinion Brown would have been "humiliated", and hence not had any influence over government. It's worth exploring this issue - "the Deal" - as it goes to the heart of New Labour these last ten years.

It's perfectly true that Brown wouldn't have won a leadership contest in 1994. He knew this, and set about negotiating with Blair the terms on which he wouldn't run. He negotiated and played a weak hand extremely well, winning complete freedom of action at the Treasury (unprecedented in post-war Britain) in return for not standing against Blair. His behaviour was perfectly rational and normal - most good politicians in his position would have tried to win the position Brown won.

What was odd about "the deal" was Blair in agreeing to it. If he was in such a commanding lead in the leadership race and didn't want to share power with Brown, why didn't he just take him on in a contest? Was he worried about the votes on the right of the party being split? Or was it something else?

I believe that Blair in 1994 was acutely aware that he himself didn't understand economics(being smart enough to know what he didn't know) and wanted to put the responsibility for the economy on someone else. In 1994, the Tories had just come out of a severe recession they themselves had caused through incompetance, the civil servants in the Treasury (which boasted such people as Andrew Turnbull) clearly had no idea on how to properly advise government on the economy either, hence the repeated messes since the 1970's. And Labour governments in the past had fallen because of economic crises. It probably looked in 1994 as though there was no one at all in Britain who knew how to run an economy.

Blair's calculation was that if he gave Brown control over the Treasury and made it clear to everyone that a deal was in place, if things went wrong with the economy, he could point to Brown. If things went well, then the next general election was in the bag - and despite the landslide victory in 1997, New Labour was on probation in the first term - if the economy had been cocked up, as the Tories expected it would be, Labour would have been out on it's ear in 2001.

So it turns out Blair's behaviour wasn't odd at all, he too was acting perfectly rationally. The "deal" was win-win and they both knew what they were doing.

As for lack of collegiality - we know that Blair and Brown have had umpteen meetings in private with no third parties present over the last fifteen years. We've had collegiate government - collegiality between two people.

The other question is whether Brown is more authoritarian and more ruthless than Blair. Again, probably not. It's worth noting that Charles Clarke was brought down by his own mistakes and was sacked by Blair, after Blair had promised to stick by him. It wasn't Brown's doing, and Clarke is acting deeply irrationally in projecting his resentment onto Brown. Similarly, Blair has shown vindictiveness in not promoting people like Yvette Cooper simply because she is married to Ed Balls who happens to be close to Brown. And the decision over Iraq was taken by Blair alone in Sept 2002, while visiting Bush, indeed foreign policy has been decided by Blair alone and the foreign secretary has been just a factotum carrying out instructions. So much for collegiality.

So we have had at the top of government two men, Blair and Brown, who are clever, rational and ruthless, and Labour has done well out of it.

Of course those on the receiving side of their decisions haven't taken it well. Mandarins like Turnbull probably felt their egos bruised because they weren't consulted as much - but the result has been an economy that has run smoothly, so perhaps we need more of not pandering to civil service egos. Eddie George was upset when banking supervision had been removed from the BoE and given to the FSA - but as a result, regulation has improved and we haven't had such disasters like Barings or BCCI. Control of interest rates was removed from the civil servants at the Treasury who suffered from group-think and given to a committee at the independent Bank of England, membership of which was rotated every few years with outside economists from around the world being brought in to combat the danger of ossified thinking - and Britain has prospered.

As for the vitriol towards Brown from Tories - well of course they hate him. If he hadn't run the economy so well, they'd have been back in government by now after a short rest. The very sight of him must make them twisted with frustration, especially as he has established the new received wisdom that Labour is the party of economic competance and the Tories are the party of recessions.

Gordon Brown had been doing what he was elected to do - put the interests of the voters above the egos of some of the less than competant people around him. His critics are irrational to expect otherwise. It's worth noting that Blair behaves the same way, it's just that he smiles a bit more when wielding the axe.

We are in a parliamentary democracy rather than a direct democracy for a reason - not everyone in the population undertands the finer details of policy. This point is sometimes lost in the clamour for consultation, localisation and collegiality, with some people who are unable to run a cake stall, demanding input. In our system the electorate makes one big decision every four to five years - which party is the most competant - and then leaves it to the elected representatives to do the rest. And this system works better than any other. The issue at the next election will not be about who smiles most or who is kindest to government officials who make mistakes, but who is the most competant and who can take the tough decisions.

Monday, March 12, 2007

International Agreements are the only way to solve Global Warming

The clue lies in the word "Global" - it affects the entire planet, so only international agreements to sort it out will make a difference. Anyone who thinks they can make a global difference by simply punishing Brits has got rocks in their head.

The Labour government has already made some progress in assenting to such international agreements. The most important recent one was Britain's assent in December 2006 to a new EU directive on aviation. You can read the whole thing here, but the most important bit is the following:

The proposed directive will cover emissions from flights within the EU from 2011 and all flights to and from EU airports from 2012. Both EU and foreign aircraft operators would be covered. Like the industrial companies already covered by the EU ETS, airlines will be able to sell surplus allowances if they reduce their emissions and will need to buy additional allowances if their emissions grow

This is huge, because most of the major airlines on earth fly to Europe, which means that most of the airlines in the world will be part of the scheme. In one fell swoop this scheme deals with the problem of some countries free-riding on the green efforts of others. It creates a level playing field for all airlines, so there won't be any competitive disadvantage arising to European fleets. It's flexible in that it leaves it up to the airline to decide the most efficient way to meet the target, whether it is new fuel efficient planes or carbon-trading. Most importantly, because it covers the most of the planes on earth, it has a good chance of actually being effective.

The Americans are predictably cross and will fight to scupper this - but all the more reason for Brits to get behind this plan. Yet the press have been silent about it, so most Brits don't even know about it. Perhaps the plan is just too sensible to make good newspaper copy. I've started to notice that the only green issues that get covered are those that give the copy writers the chance to produce lurid headlines of the "Brits to be PUNISHED under new green initiative!" type. Anything sensible that looks like it will work without being punitive is ignored.

David Cameron's latest policies are punitive though. Given the above directive, why does he need to over-egg things by targeting flying even further? In an interview he said that it would pay for tax cuts for married people. Great, some middle-aged married couple with no children will find themselves subsidised by an unmarried couple with children who have the termerity to go on holiday!

And what's with the rationing? That went out in the 1940's. It's hard not to suspect that some Etonians are attracted to the idea of rationing for the poor, simply because they think the hoi polloi are getting uppity and going on holiday too much. But he'll need a massive ID database to keep track of it all.

Sunday, March 11, 2007

10 Years of New Labour - Employment

Eurostat publish figures on the Labour Participation rate - that is, the percentage of those aged 15 to 64 who are employed. (Those who don't participate are made up of the unemployed, housewives, those who are ill and those who've taken early retirement). As before, the comparison is with other mature economies with a similar sized population.

Year UK USA France Germany Spain Italy Japan

1994 67.9% 72.0% 59.1% 64.7% 46.1% 51.4% 69.3%
1995 68.5% 72.5% 59.5% 64.6% 46.9% 51.0% 69.2%
1996 69.0% 72.9% 59.5% 64.1% 47.9% 51.2% 69.5%
1997 69.9% 73.5% 59.6% 63.7% 49.5% 51.3% 70.0%
1998 70.5% 73.8% 60.0% 63.9% 51.3% 51.9% 69.5%
1999 71.0% 73.9% 60.9% 65.2% 53.8% 52.7% 68.9%
2000 71.2% 74.1% 62.1% 65.6% 56.3% 53.7% 68.9%
2001 71.4% 73.1% 62.8% 65.8% 57.8% 54.8% 68.8%
2002 71.3% 71.9% 63.0% 65.4% 58.5% 55.5% 68.2%
2003 71.5% 71.2% 63.3% 65.0% 59.8% 56.1% 68.4%
2004 71.6% 71.2% 63.1% 65.0% 61.1% 57.6% 68.7%
2005 71.7% 71.5% 63.1% 65.4% 63.3% 57.6% 69.3%

The Eurostat figures for the whole of Europe, are only available to 2005, once they update with 2006, I will add them to my table (ONS figures show that employment improved in the UK in 2006).

The UK shows steady improvement throughout. We go from a participation rate of 69.0% at the end of 1996, to 71.7% at the end of 2005, an improvement of 2.7%. Because these figures only look at those aged 15 to 64, they don't capture the increasing trend of those aged over 64 to work. The other "Anglo-Saxon" economy, the USA, shows a decline over time, which becomes pronounced when the conservative George Bush takes office. This is a warning to us, as many during the 2000 election assumed that the Clinton conditions would continue even without him. New Labour economics are of course modelled on Clinton's. The UK has been ahead of the USA since 2003.

The Japanese also stay stagnant, but all the Europeans improve their participation rates (albeit they are starting from a lower base). As ever the prize goes to Spain - they manage to improve their participation rate by a stonking 17.2% in just over a decade. They've caught up with France and Germany and the challenge over the next decade must be for them to see if catch up with the UK.

Previous articles in this series:
Economic Growth since 1997

Saturday, March 10, 2007


Eurosceptics, most of whom are currently Tories, tend to complain that the current EU is nothing like the EEC that Britain joined in 1972, and they tend to blame Ted Heath for "lying". But of course in a system that worked on unanimity like the EEC, changes only happened because someone instigated the changes and then signed the Treaty that enshrined them, and that someone was Margaret Thatcher.

I am currently reading Margaret Thatcher's autobiography The Downing Street Years, and it turns out that the move towards the Single European Act happened because of a paper she circulated calling for greater political co-operation between the EEC states. She was initially prompted by the circumstances surrounding the Falklands War, where France had been a staunch ally, but other Europeans had wavered, and some like the Irish had been hostile. She felt that if a member of the community was attacked all the others should be in agreement to immediately support them.

Because her paper was a departure from the provisions of the Treaty of Rome, an Inter-Governmental Conference was held to discuss them, and naturally moved to discuss other ways in which co-operation could be extended.

She writes the following interesting passage on page 553 (Chapter 18):

I had one overriding positive goal. This was to create a single Common Market. the Community's internal tarriffs on goods had been abolished by July 1968. At the same time it had become a customs union, which Britian had fully accepted in July 1977. What remained were the so-called 'non-tariff' barriers. These came in a great variety of more or less subtle forms. Different national standards on matters ranging from safety to health, regulations discriminating against foreign products, public procurement policies, delays and overelaborate procedures at customs posts - all these and many others served to frustrate the existence of a real Common Market................. The price which we would have to pay to achieve a Single Market with all its economic benefits, though, was more majority voting in the Community. There was no escape from that, because otherwise particular countries would succumb to domestic pressures and prevent the opening-up of their markets. It also required more power for the European Commission.

The above is perfectly sensible. Thatcher in the mid-80's was a euro-phile. It's only when she went mad in the 90's that anti-europe mania manifested.

When euro-sceptics talk about how we shouldn't have to quote metric measurements on goods along-side the imperial ones, they are trying to reintroduce the "different national standards" that frustrate free trade. Under the current system, a manufacturer can produce in bulk and distribute the goods all over the continent. Under the euro-sceptic version, they would have the increased costs of producing different standards and weights for different countries. Ditto their complaints about common safety and health standards, and their complaints about the Social Chapter.

There is much argument about what the Labour and Tory parties have contributed to Britain. When the definitive book is written about the last 60 years, I believe that Labour's contribution will be seen to be the Welfare State, which provides a safety-net under people, providing education and health-care and eliminating the grim poverty trap that existed in the 1930's and before. New Labour then cracks the conumdrum about how to achieve Atlee's dream of full employment without stimulating inflation (something that was thought impossible to do before 1997 - see Lamont's comments about unemployment being the price worth paying).

The Tory contribution has been to integrate us into Europe and bring the EU and all it's benefits into our lives. Ted Heath skillfully broke down French resistence and got us into the club. And then Thatcher helps change the community and signs the Single European Act, which is a masterpiece of a treaty. John Major brings us Maastricht, which introduces the Social Chapter (and the euro, but this is of less importance to Britain as we have not joined).

The Tories should be as proud of their achievements on Europe as Labour is proud of the Welfare State and full employment. But curiously they are not. Which is a problem for them. Both the Welfare State and Europe are settled policies - the third rail of British life, as any political party that threatens to dismantle either of these policies finds themselves in opposition.

As things stand, only Labour promises to defend both the Welfare State and full-employment, and membership of the EU, including participating in the Social Chapter. The Tories are finally realising that the welfare state is here to stay (at least in their rhetoric - it's not clear that this has been translated into policy). But they still haven't got it regarding Europe. I'm also pretty sure the penny won't have dropped by the next election.

Sunday, March 04, 2007

Economic Growth since 1997

Given that Labour is coming up to ten years in power, I thought I'd post some stats occasionally on how the government has done.

Here's some figures on Britain's economic growth, in comparison to other mature economies countries with similar population size (the figures come from Eurostat):

Year UK USA France Unified Spain Italy Japan

1997 3.0% 4.5% 2.2% 1.8% 3.9% 1.9% 1.6%
1998 3.3% 4.2% 3.5% 2.0% 4.5% 1.4% -2.0%
1999 3.0% 4.4% 3.2% 2.0% 4.7% 1.9% -0.1%
2000 3.8% 3.7% 4.0% 3.2% 5.0% 3.6% 2.9%
2001 2.4% 0.8% 1.9% 1.2% 3.6% 1.8% 0.2%
2002 2.1% 1.6% 1.0% 0.0% 2.7% 0.3% 0.3%
2003 2.7% 2.5% 1.1% -0.2% 3.0% 0.0% 1.4%
2004 3.3% 3.9% 2.3% 1.2% 3.2% 1.2% 2.7%
2005 1.9% 3.2% 1.2% 0.9% 3.5% 0.1% 1.9%
2006 2.8% 3.3% 2.2% 2.7% 3.9% 1.9% 2.2%

Only Spain manages to consistently outperform us (we
managed to grow faster than them in only one year, 2003). It's worth noting however that Spain has been a net receiver of EU funds these last ten years, as has Italy. EU fund transfers to the western european states stops in 2007, when the money redirects east, so we will have to see how well Spain performs without this. Our record against the USA improves; from 2000 onwards, we outperform them in four out of the seven years, and are likely to outperform them in 2007. Against France too, we are clearly ahead of them from 2001 onwards (though they do well prior to this). Against Germany, Japan and Italy, we show a clean pair of heels.

Above all our growth is steady - we don't experience the wild swings that can be so distressing to households and business.

Friday, March 02, 2007

Bullingdon Photo Censored

The BBC is reporting that the owners of the infamous Cameron Bullingdon photo, the Oxford based Gillman and Soame, have announced that no further permissions would be granted to publish the photo.

They claim they made the decision on "commercial grounds". As Conservative Home says wryly, " I guess someone paid them a lot of money to withdraw it from circulation".

Shades of how Bullingdon works I guess (you buy people off afterwards).

Luckily however, the Telegraph still has the photo on their website and you can view it here.

I'm not sure this helps Cameron though. It just gives new life to the story. My site meter has gone crazy today - I've had 200 hits so far and it's only lunchtime, and they're all from Google searches looking for "Bullingdon" and clicking onto my previous article on it.

Thursday, March 01, 2007

Public Sector Pay

Gordon Brown today announced that he would be holding public sector pay rises to 1.9% p.a. Accoding to the Guardian,

The Department of Health said the minimum starting pay for a basic grade newly-qualified nurse will be over £19,600 from November, an increase of £479 on current rates and a 59% increase on 1997 rates.

Typical pay for doctors in their first post will be £31,578 from April and £32,087 from November, an increase of 3.1% on current rates and a 48% increase since 1997. A consultant on the minimum pay scale will get £71,822 from April, a 64% increase in cash terms from 1997, and matrons will start on around £35,700 from April, and £36,112 from November, with the potential to earn up to around £43,000 a year.

The 59% increase for nurses since 1997 equates to an average of 4.75% p.a., the 48% rise for doctors in their first post equates to an average of 4% per annum, and the 64% rise in consultant's pay equates to 5.07% per annum. All of which is pretty respectable.

The latest public sector rises are also in line with manufacturing pay. The FT reports that EEF, a manufacturers employers’ organisation, said that more than half of the annual pay rises in its sector in the quarter to the end of January were for 3 per cent or less.

Of course the unions are complaining (it's their job to do so), however the Treasury is more concerned about helping out the Bank of England, which has said they will be watching pay settlements closely, because of fears that inflated pay-rises will feed into price inflation.

This is particularly important, as the huge US economy looks like it might go into recession at the end of the year, slowing the whole global economy while they are at it - which will probably require the BoE to lower interest rates to protect us. However the bank will be unable to move if inflation is bubbling away, and the Treasury wants to prevent a situation where the bank is forced to hold interest rates high amidst a slowdown.

This isn't the first time the Treasury has leaned in the same direction as the Bank. During Labour's first term, amidst torrid economic growth, Gordon Brown firmly held down public spending, falling out with colleagues as a result. The reason was that the newly independent Bank at the time, was struggling to break the back of inflation once and for all, and history had shown that loosening fiscal policy during periods of strong growth results in inflation (notably Nigel Lawson's term in the late 80's when he loosened fiscal policy and cut taxes during a period of strong growth with disastrous results for inflation). Some of Brown's colleagues still haven't forgiven him for his decisions that first term, perhaps because they fail to grasp the economic reasons for them, but Labour's two subsequent victories were built on the resulting non-inflationary growth. Hopefully the unions will be more sensible than these silly ex-cabinet ministers.