Sunday, October 28, 2007

Kirstie Allsopp and the Tories

Last week came the news that the Tories had appointed Kirstie Allsopp of Location, Location, Location fame as their "Housing Tsar". According to the Guardian, she is to

head a review of home buying, working alongside shadow housing minister Grant Shapps, to come up with ideas which could regenerate the housing market and make it easier for first-time buyers to get a foot on the housing ladder.

Unfortunately, Kirstie Allsopp is very unpopular with first-time buyers, especially those who hang around at Housepricecrash, where she is something of a hate figure.

The spat started in 2004, when Allsopp stated that HousePriceCrash was set up with the intention of "creating panic" and that it's activities were "immoral" and would be "illegal" in the stock market. HousePriceCrash responded with a press release, where they asserted their rights of free speech, said that they were an information tool and that there are similar perfectly legal sites and boards discussing the likelihood of shares falling, and drew attention to Allsopp's conflicts of interest.

The spat has grown from there, with the forum members nicknaming her "Krusty", and starting threads with titles such as Phil and Krusty being Thick Again (posted yesterday and which dealt with Channel 4 being forced to apologise for Allsopp's error in claiming that one fifth of Stoke-on-Trent families were homesless, when that city has a total of just thirteen registered homeless families).

The HousePriceCrash people are a bit gloomy, but they are also right that relentless cheerleading from people like Allsopp is not good for the property market. The more prudent Sarah Beeny who emphasises that prices don't always go up, is more respected.

The interesting thing is that for most of this decade, the HousePriceCrash lot have blamed the government amongst others for the housing bubble (despite the govt's attempts to damp down speculation by increasing transaction costs like stamp duty on properties over 250k). These people should therefore be fertile pickings for Tories. But Cameron has shown how out-of-touch he is by appointing their hate figure to his team.

Allsopp's aims to make property transactions cheaper and quicker are of dubious help to the property market. As every market watcher knows, if you reduce transaction costs you increase churn and speculation and as a consequence, boost prices. It's bad enough that people trade houses as though they were stocks, - imagine what it would be like if transaction costs (designed to slow the process down and impress on people that housing is a long-term decision) were removed. People like Allsopp would be buying one week and selling another, in an orgy of speculation. Given her conflicts of interest, perhaps that's her aim.

Monday, October 22, 2007

The New EU Treaty's effect on the Labour Government

Some commentators are predicting that it will be like Maastricht. I don't think so. Britain has changed utterly since the early 1990's.

Though the Single European Act was signed in 1985, it didn't come into effect till 1 Jan 1993, which meant that Britain in 1991-1993 was still a country trapped on it's island looking fearfully outwards, with some older people like Nicholas Ridley muttering darkly about how the re-unification of Germany was sure to mean that World War Three was imminent. In this atmosphere, scare-mongering about Europe was easy.

In addition, when the Single Act came into force it contained many things that upset Tory little Englanders, such as health and safety regulations, which the anti-Maastricht people latched onto as a reason not to ratify any further treaties. The Sun began to campaign about the latest directive from Brussels (including many directives that didn't actually exist outside the Sun's imagination).

Stupider Tories blamed a conspiracy of eurocrats. Actually it was all the work of the Blessed Margaret, who had instigated and signed the Single Act some eight years previously. Mrs T did give a good defence of the provisions of the Treaty in her Autobiography, but few of her supporters bothered to read it. Indeed to this day they maintain that the Single Act merely removed tariff barriers. Actually tariff barriers were removed in 1968. The Single Act was about removing non-tariff barriers by harmonising health and safety and other standards. I think Tories practice self-delusion so that they don't have to admit to themselves that the only way to have stopped the EU harmonisation was to have voted for the then anti-EU Labour party in 1983.

Outside this mad Tory bubble though, Brits in general didn't fret too much about harmonisation, but focussed instead on another aspect of the Treaty which had just come into force in 1993 - freedom of movement. Booze cruises became popular overnight. Shows started to be made about the idyllic life lived by Brits in Provence. When the 1997 election came, people enthusiastically voted for New Labour's pledge to put Britain at the heart of Europe, and dumped the Tory eurosceptics.

By 1999, shows such as "A Place in the Sun" were drawing millions of viewers, and Brits had got into the habit of popping to Europe on the new low-cost airlines for their stag dos, and for any reason really. As property started to recover at home, some people cashed in to move permanently abroad. Meanwhile in France, newspapers started producing articles with titles such as "I went to London and got a job in a day!" Young Europeans moved to London and met and married Brits.

When the Eastern European countries joined, there was again a two-way movement. British property entrepreneurs went to snap up deals, and young easterners came here to work (and again, many have married Brits).

And now we have this new reform Treaty that will make the EU more efficient, and the euro-sceptic newspapers are promising to oppose it every bit as much as they did Maastricht in 1992, some of them using the same tired arguments as in 1992.

Only the readership of these newspapers has declined sharply since then, even while the population has increased, and Brits are enjoying their EU benefits and european connections too much to stir up angst over Europe (polls show that Europe hardly features in people's list of concerns). Besides, the euro-sceptic press didn't really make a difference to public opinion in the 1990s - people voted in droves for Blair's europhile New Labour and proudly watched him go to France and make a speech in French. So why should they make a difference now, when we are so much more integrated with Europe? There's a reason that 1983 Labour manifesto is known as the longest suicide note in history - it would be lovely if Tories adopted it's anti-EU provisions for the next election...

Saturday, October 20, 2007

GDP grew faster than expected in third quarter

GDP grew faster than expected in the Third quarter at 0.8% per quarter, which is 3.3% faster than a year ago.

According to the detail supplied by the ONS, the best performance came from business services and finance (in particular architects, engineers and management consultants), which grew a strong 1.7% per quarter. Distribution, hotels and restaurants grew by 1.1% in the quarter. By contrast growth in government and other services slowed, with zero growth, compared with a rise of 0.1 per cent in the second quarter. For the first time in a while ALL the growth is coming from the private sector.

This all came as a bit of a surprise to economists, who were expecting a slowdown due to a knock in confidence after the turmoil in capital markets, and the Northern Rock business. The Bank of England too had estimated slower growth in the third quarter in their August inflation report.

How to explain the robustness of the consumer? Part of it is that people have confidence in the abilities of the Labour government to protect them from a downturn. Part of it is that unemployment continues to drop. According to the ONS, the number of vacancies stands at 668,800 in the three months to Sept 2007, the highest since 2001. There is work out there for whoever wants it, including taking on a second job if interest rates are biting.

The global economy could still derail us - I've been worrying since April whether the American economy will affect ours. Plus there is oil, and the delayed effects of interest rate rises.

It's almost a certainty that interest rates will be held next month though, despite RPI dropping and CPI being unchanged for August at 1.8%.

Maybe the much predicted slowdown will come in the fourth quarter, with a rate cut in January.

Friday, October 19, 2007

Older People Working

If Nick Clegg is elected as leader of the Liberal Democrats, then Labour will have the oldest leader of the three political parties. It's almost a certainty that the other parties will begin taunts about "age" in an effort to injure Mr Brown in the way Ming Campbell was injured.

However, this presents an opportunity for Labour. Legislation against Age Discrimimation came into effect in December 2006. It's not just that the Labour government thinks it is wrong to discriminate against the old, the govt thinks that the survival of our welfare state depends on people working longer.

The old-age dependency ratio is the proportion of pensioners to people of working age. This ratio has been stable because though we have more pensioners, the number of people of working age increased sharply due to the baby boomers joining the workforce. These baby-boomers though are due to retire shortly, and there arn't enough young people to take their place in the workforce ( according to the ONS, the % of people under 16 has fallen from 26% in mid 1971 to 19% in mid-2006).

Another way of looking at it is the ageing index - this is the proportion of older people to children - this has jumped sharply from 64.0 in 1971 to 97.8 in 2006. This has big implications for the NHS. Most serious illness occurs in the last decade of life, which means the old are heavy users of the NHS. Children by contrast are light users - there's usually just the birth to worry about, and the coughs and colds of childhood illness are easily dealt with by GPs.

The obvious solution is to persuade the baby boomers to continue working (and paying taxes). Government has already announced that the state retirement age for men and women will be equalised at 65 from 2020, and has given people the right to ask their employers if they can work beyond 65, with an obligation on the employer to seriously consider the request. And age discrimination has been outlawed for those under 65.

But all of the above legislation comes to nought if society itself continues to discriminate against the old. If people start attacking the Prime Minister for being too old in his mere mid-fifties, then what chance does someone aged 60 have of getting work?

We in Britain need to have a serious discussion about our attitudes to age, and in particular about how much money discrimination against the old will cost. An ageing population means that the demand will outstrip our ability to increase spending on the NHS. To some extent we see this already - people ask "where has the money in the NHS gone" - answer, treating record numbers of people as the ageing index has jumped in the last 15 years. If we can't get older people to work longer, the alternative is a lower level of public services or a higher amount of taxation on those who are younger.

A general election would be a good time to have this debate. Let the opposition accuse the Prime Minister of being too old, so that we may have the opportunity of explaining to the electorate that the opposition's ageist attitude will be the ruin of Britain.

Tuesday, October 16, 2007

Poor Ming

He didn't even last two years.

His problem I think, was that he looked much older than he was, with the classic old man's hunch of the shoulders. And Britain is a country that doesn't value the old (unlike say Italy). The LibDems could have protected him by publicising the fact that he'd just recently recovered from serious illness (cancer I think) - the public tend to be very kind and sympathetic to people bravely carrying on in the face of illness. And they could have sent him to a deportment class to make him stand straight and not hunch. But they didn't. Instead we kept seeing black-and-white footage of him at the Olympics in by-gone times. As the black-and-white era is pre-history as far as most people are concerned, it made Ming seem even older.

So the LibDems are shortly going to have their third leader this parliament. They need to make sure that whomever they elect lasts at least five years, else they stand a good chance of being thought of as cavalier as the Tories.

At least this leadership election should keep the press busy. Let's hope it lasts for a good six months.

Sunday, October 14, 2007

The return of the TBGBs - or an attempt by the press to stir up trouble?

The Sunday Times leads today with the dramatic headline Blair rounds on 'empty' Gordon Brown but the article itself contained no such comment from Blair. Instead they quoted a conveniently un-named "friend" of Blair.

The Guardian too headlined with breathless speculation that the old Blairite trio, Byers, Milburn and Clarke are thinking about speaking out. But even the Guardian stops to add that

last night Blair's spokesman said: 'When he stood down Tony Blair said he would be completely supportive of Gordon Brown and that is what he continues to be.'

This view is confirmed by Matthew D'Ancona in the Telegraph who says that

Tony Blair has been telling his allies that they must under no circumstances join in the Gordon-bashing that is now all the rage.

This is probably correct. New Labour watched with horrified fascination when a deposed Thatcher helped to destroy the Tory party. The whole business of the seamless transition, painstakingly engineered earlier this year, was to prevent the type of bitterness caused by Thatcher's decapitation, and Blair certainly has a horror of being thought of as being so needy and desperate for power that he tries to do a back-seat driver number on his succesor the way Thatcher did to Major.

So where have these stories come from? We get a clue from John Rentoul in the Independent:

I have spoken to some of Blair's most loyal lieutenants who have been inundated by media requests for interviews – more than 200 in one case. Would they like to speak about the election timing or the Pre-Budget Report? No, they would not. They know that their interviewers are interested in only one story: Blair says Brown is useless.

200 requests for interviews! Undoubtedly one person has succumbed - but he probably speaks only for himself.

As for the Sunday Times and the Guardian, they have their own agendas. The Sunday Times is openly hostile to Labour and has been for some time. The Guardian isn't really a Labour paper, it's SDP, and since the demise of the SDP they've grudgingly given Labour some support, but always managed to find some excuse to fall out with the party. They fell out with Blair and campaigned strongly against Brown becoming leader while fawning over David Cameron in the first year after he became leader. Hardly the behavior of a Labour paper.

There is only one Labour paper, and that is The Mirror (which very helpfully broke the story of David Cameron's Lexus following his bike to work). The rest are at best lukewarm and at worst openly hostile. This is how it's been for ages, and we'll have to live with it. One thing Labour should do is not give ammunition to hostile papers that don't have our interests at heart. Blair's "friends" should take notice of Blair when he says Don't Talk. He really means it.

Sunday, October 07, 2007

This Election Business

So we're not going to have an autumn election. It's the right decision and will chime with voters' opinions. Polls showed substantial numbers unenthusiastic about having an election so early. Voters have got used to the Labour government going to the polls every four years in the spring and believe that the only reason to deviate from this cycle is if there is a crisis that urgently needs the voters verdict, and there is none now.

As to the volatility of the polls and the "embarassment" of having to say there will be no election - it will probably do Labour good. The Labour party works best when it thinks elections are on a knife-edge. Though Labour was strongly ahead in the polls in the run-up to the 1997 election, nobody believed it, and everybody worked to the bone and campaigned as though there were only a couple of points in it. And though Labour got a huge majority in 1997, the government behaved cautiously, as though things were finely balanced. The lead-up to the 2001 election was full of fretting from Labour about foot-and-mouth and fuel prices. The 2005 election was overshadowed with fretting about Iraq, and the recent Ealing-Southall by-election was fought with the sounds of crowing Tories ringing in Labour activists' ears.

Labour won all the above. But when we allow ourselves to believe it's in the bag, we get careless, we say things we shouldn't, and we lose. Think 1992. All the caution that Labour has shown in the last ten years has been correct. Voters really are brutal and un-sentimental. Look at what happened in 1992. Look at what the voters did to the Tories in 1997.

Voters don't like it when parties talk about "smashing" each other. They don't like it now and they didn't like it in the 80's when David Owen said Labour was "finished" or when Thatcher wrote in 1991 that it was unlikely Britain would ever see a Labour government again. Voters want all parties to be viable in case something goes wrong with the government, so that they have the option of changing government. When they hear talk of "smashing" they shift in the polls to give the would-be smasher a swift shock.

Voters don't like it when they hear talk about the "next ten years" or of people "going on and on". They might give us another ten years, but only if we don't take them for granted and don't act like it's in the bag. When they think people take them for granted, they have an irresistable urge to administer a good kick.

We saw what hubris did to the Tories in the early 90's. The good news is that while they delivered five full years of it, we've just had a couple of days of it at the conference. If we can end it now and go back to being our cautious New Labour selves, all will be well. We haven't lost an election, we've just had a few red faces and some people laugh at us.

We learn from it, and move on. And if the Tories want to be triumphant, let them. We all know where that leads.

Tuesday, October 02, 2007

Family Matters

For all the talk of the death of socialism, there is one social unit that remains as socialist as ever: the family. Husbands subsidise wives (and vice versa); siblings lend each other help and money when profit-motivated organisations such as banks refuse; parents try to help out the weakest child in the hopes of achieving equality among their children despite varying ability or effort; the black sheep gets bailed out in circumstances they wouldn't be if their situation was objectively assessed.

The tradition of family socialism goes back millenia, probably to when homo sapiens first appeared, and there was good reason for it - it was a way of ensuring that the old, the sick and the weak were taken care of.

More recently, we've had the phenomenon of perfectly healthy able-bodied people relying on their wealthy parents to subsidise their standard of living - something that was characterised as "Economic Outpatient Care" by American professors Thomas Stanley and William Danko in their book The Millionaire Next Door. It can be simple (and beneficial) starter help such as parents paying for university or helping their children to buy a home with the gift of a deposit, or the more destructive version where adult children live expensively and run up debt in the belief that inheritance from their parents will clear it.

Stanley and Danko observed that too much help from parents weakens the ability of their off-spring to cope when the parents pass away, as by then they are too old to learn how to survive on their own. The annals of the rich are full of stories of the next generation unhappily frittering away their wealth through dissipation and lack of drive. Indeed this was what motivated Bill Gates to decide to give away most of his money - he didn't want to weaken his children by removing their motivation. The best parents are the ones who push their children out of their nest and force them to stand on their own two feet, and the earlier they do this the better, as the parent is still around to watch progress, offer advice and if the child stumbles really badly, pick them up: what usually happens in these circumstances is that the young adult struggles mightily at first, and then gets the hang of it and begins to thrive and prosper.

As the welfare state sprung up, we've also begun to see conflicts between the powerful pure socialism that exists within the family and the much weaker state version. For instance, many elderly people are outraged that they have to sell their houses to pay for their nursing care at the end of their lives. They demand that the state (i.e. other people's children) pay for the nursing care, so that they can provide substantial socialism in the form of inheritance to their own children.

And so we come to the issue of inheritance. Here several threads merge powerfully - the tradition of family socialism, the fact that parents worry about their offspring, and as mortality approaches, seek to protect them from beyond the grave. It's not accidental that the people who worry the most about inheritance taxes are the elderly, even though it arises after their deaths. And not many are as clear-headed and logical as Bill Gates on how inheritance could hurt their children.

Family socialism has the same strengths and weaknesses as the state version. As a support system, nothing beats the family, especially if you are ill or disabled. But families can also be indulgent, enabling and entrenching bad habits and laziness - giving is equated to loving, so you see poor mothers running up debts to buy their children the latest toys instead of simply saying, no, we can't afford it, we're on a budget. And you see adults "counting" on inheritance to bail them out of their problems instead of striving to solve them themselves. If critics of state socialism say that it demotivates and weakens the recipients of it, family socialism does this a hundred-fold.

The only way to resolve this would be to go back to the original purpose of family socialism - to protect the old and the sick. I would be in favour of inheritance going completely tax-free into a family fund if it could only be drawn on for the purposes of paying for nursing care, supporting an ill/disabled family member and to provide an income in old age, and that if the family fund was drawn on in this way, you got an offsetting reduction in benefits from the state. It would solve the problem of an aging population needing nursing care. It would solve the problem of people not thinking about their income needs in old age. It would solve the problem of parents desperately worried about offspring who are ill. It would remove some of the imbalance in society where some people get a capital leg up in enterprise. And if it turned out that you were one of those rare people who enjoyed perfect health in your lifetime and worked to the end, then you simply pass the family fund untouched to the next generation. Over the decades and centuries, someone among your descendents will get old or ill and draw on it.

Obviously people who are living high in the hopes of getting "free" and unearned money from their parents will hate this. For many people though, they just want to know that they are protecting their descendents from the ills life can throw at them, and they will be satisfied. The big question is which group is the biggest? The first group would prefer the current system where you get free money and simply spend it as you like, including blowing it all and having the state look after you at the end, and sadly this group is probably too big for my idea to ever get off the ground.