American Capitalism

I was struck by the following passage in a column by Washington Post columnist Harold Meyerson:

On March 28, Circuit City announced that it was laying off 3,400 of its salesclerks. Not because they had poor performance records, mind you: Their performance was utterly beside the point. They were shown the door, said the chain, simply because they were the highest-salaried salesclerks that Circuit City employed.

Their positions were not eliminated. Rather, the store announced that it would hire their replacements at the normal starting salary. One can only imagine the effect of Circuit City's announcement on the morale of the workers who didn't get fired. The remaining salesclerks can only conclude: Do a good job, get promoted, and you're outta here.

It was, in short, just a normal day in contemporary American capitalism.

Over at Wal-Mart, the employer that increasingly sets the labor standards for millions of our compatriots, wage caps have been set for certain jobs, and many longtime employees are now required to work weekends and nights in the hope that they'll quit. A memo prepared by a Wal-Mart executive in 2005 for the company's board noted that, "the cost of an associate with 7 years of tenure is almost 55 percent more than the cost of an associate with 1 year of tenure, yet there is no difference in his or her productivity."

The above could never happen in Britain. Labour laws plus the Social Chapter means that you can only be made redundant if the position itself is eliminated, and if you are made redundant you have to be compensated with a redundancy payment (something that doesn't happen in the USA).

There's a world of difference between American capitalism and the British version, something that those who carelessly lump the two countries together should note.

Americans traditionally put up with the harshness of their job market because salaries and job opportunities in general were higher than in Europe. What was the point of job protection if you couldn't get a job in the first place, the argument went, and they used to point to the high unemployment in Britain and Europe through the 80's and early 90's.

But they are no longer better off compared to Britain. Here at last there are jobs aplenty, higher incomes, combined with solid social protection. Under New Labour there is no longer any need to choose between opportunity and a safety net. We are currently among the luckiest people on earth, with an effective and indulgent government that runs the economy well, protects us and patiently puts up with our grumbling. Our prime minister even lets people shout at him in studios, to submit petitions for him to "stand on his head juggling icecream", does skits to entertain the populace on Comic Relief, and indulges the rank and file in the army when they want to sell their stories about how they got neck-flicked by Iranians. Is there another government on earth as indulgent?

And yet still we gripe. The danger is that as a nation we discount all the good things and get so caught up at being cross that the government has not delivered the bliss of nirvana itself, that we ditch what the rest of the would literally die to have. We are at the same point the Americans were at the end of the Clinton administration, when a spoilt nation's obsession with trivia led the population to change party, seduced by the thought that nirvana lay in "compassionate conservatism". There were warning signals about Bush's character (eg his fondness for executions) but the Americans ignored them and instead of nirvana, they got a version of hell.

We are currently living in one of the balmiest periods of British history. The question is, are we smart enough to realise this and to make sure it continues, or will we foolishly throw it all away? There are warning signals about the characters of the Bullingdon Boys too. Are Brits shrewd enough to heed them?

10 Years of New Labour - Debt as a % of GDP

Labour's critics like to claim that the reason that the economy has done well in the last ten years is because government debt has increased. But how true is this?

The following table on debt as a % of GDP comes from Eurostat. Please note that in accordance with EU code ESA95, Eurostat includes all PFI debt as part of consolidated government debt. Therefore the figures quoted for the UK will be higher than those produced by the UK Treasury. The figures also include all local government debt and state government debt as well as federal government debt, therefore the figures for the USA will be higher than those generally published by the US Treasury, which quote federal debt but not state debts. The aim behind these figures is to give a true picture of debt by including all possible sources of government debt. All figures are as at December 31st of the year in question.

As before, the comparison in the following table is with other mature economies with a similar sized population (to see the entire EU's data, click the link above).

Year  UK     USA    France  Germany  Spain  Italy   Japan

1994  48.6%  74.6%  48.4%   49.3%    61.1%  124.8%   79.7%
1995  51.8%  74.2%  54.6%   57.0%    63.9%  124.3%   87.1%
1996  52.3%  73.4%  57.1%   59.8%    68.1%  123.1%   93.9%
1997  50.8%  70.9%  59.3%   61.0%    66.6%  120.5%  100.3%
1998  47.7%  67.7%  59.5%   60.9%    64.6%  116.7%  112.2%
1999  45.1%  64.1%  58.5%   61.2%    63.1%  115.5%  125.7%
2000  42.0%  58.2%  56.8%   60.2%    61.1%  111.2%  134.1%
2001  38.7%  57.9%  56.8%   59.6%    56.3%  110.9%  142.3%
2002  37.5%  60.2%  58.2%   60.3%    52.5%  105.6%  149.5%
2003  38.9%  62.5%  62.4%   63.9%    48.7%  104.3%  157.6%
2004  40.4%  63.4%  64.4%   65.7%    46.2%  103.9%  164.0%
2005  42.4%  *      66.6%   67.9%    43.1%  106.6%  *
                                                         

* indicates data unavailable

Germany's position deteriorates as a direct result of unification, when they embark on massive construction projects in Eastern Germany. Debt starts to fall as Schroeder takes over in 1998. but the post 2002 recession scuppers progress. Miterrand hands over a pretty good position to Chirac in early 1995, but things immediately deteriorate, with the post 2001 recession worsening things. Italy however makes valiant efforts to reduce debt, regardless of recession. In the USA, in the Clinton years debt starts to fall, but post 2001-recession means that debt starts to rise again. Much US debt is hidden in the state finances, and their overall position is not much that different to France and Germany, ironical given how Americans like to criticize the French and Germans. Japan is a complete and utter horror story - like Italy they face an aging population with the overall population falling, but unlike Italy, they worsened the level of debt that their future smaller population will have to bear.

Spain achieves stonking success - but it's worth noting that they are net recipient of EU funds, whereas the UK taxpayer managed to reduce debt even while being net contributers to the EU. However if Spain manages to keep up their record when EU funds are withdrawn this year, they are surely contenders to become one of the most important EU countries in the next decade, especially as they have a substantial population (circa 40 million).

The UK makes solid progress in reducing debt as a % of GDP, even while spending a lot on new hospitals and schools. One could argue that if no new schools and hospitals were built the debt would be even lower - but can a civilised country continue with it's infrastructure crumbling? The rebuilding of the last decade rivals that of the public building done during the late Victorian period. I believe that people in future decades will benefit and be grateful for it in a similar way that mid-20th century people were grateful for the Victorian expenditure. Debt in the UK too has crept up in response to the global recession of 2001-3. But fiscal policy is being tightened over the next three years, and debt should start falling again. And it's worth pointing out that in 2005, debt as a % of GDP was a full 9.9% lower than at the end of 1996. Something the Tories would be crowing about if it was they who had achieved it. Overall New Labour has improved the position compared to the one they inherited, even while rebuilding the infrastructure, and they have also kept debt lower than all other major economies of a similar size, bar Spain. People across the planet would give their limbs for such a record.

Previous articles in this series:
10 years of New Labour - Labour Productivity
10 Years of New Labour - Financial Services Regulation
10 Years of New Labour - Economic Growth Since 1997
10 Years of New Labour - Employment

Bullingdon again - Osborne was a member too

The Daily Mail reveals (complete with photo) that Gideon George Osborne was a member of the Bullingdon Club too, in 1992. As the Mail says, it deals a blow to the Tory attempts to portray the current version of their party as "classless", especially as Bullingdon is "open only to sons of aristocratic families and the super-rich.".

As described in the previous post on Cameron, Bullingdon specialises in the feudal pursuit of trashing other people's property for the "fun" of distressing them (Bullingdon destruction has included smashing up 17th century restaurants and destroying a Stradivarius), and then buying them off to demonstrate the members are above thelaw and can do whatever they want.

What is it about the characters of the current Tory leadership that draws them to clubs like Bullingdon? I can't imagine Mrs Thatcher or John Major joining any club that indulged in vandalism (indeed the very idea of people destroying private property would have horrified Thatcher's bourgeoisie sensibilities).

Tories are trying to spin the disapproval in the Mail and elsewhere as class envy. Actually it is not. Nobody minds if someone is born rich. What they mind is rich people refusing to socialise with middle-class and poor people (Bullingdon for instance wouldn't have admitted Stephen Hawking as a member) and they mind rich people treating the poor and their property with disrespect.

There is a world of difference between someone like Bill Gates, who was born to a wealthy background, channelled his energies into building a company that revolutionised the way people used IT and then started giving his money away to the poor in a massive attempt at philanthropy; and someone like Gideon Osborne, born to a wealthy family, joined a club exclusively for the rich that specialises in distressing the poor by vandalising their property, and now spends most of his time in childish sneering at more talented people.

A Bill Gates would be worthy of leadership, a Gideon Osborne shouldn't be let anywhere near power. Liberal democracy is all about protecting people's private property. It's only in feudal societies and dictatorships where your property can be destroyed or confiscated at will. Trashing property for fun is the sort of thing Kim Jong-il would enjoy.

I also feel very sorry for ordinary Tory members who come from the middle and working classes. How dreadful it must be for them to know that no matter how talented and clever they are, they have no place at the Tory top table (as evidenced by Cameron freezing them out in favour of ex-Etonians and other public school people). But you can't help wondering at their cowed spirits. Why don't they stick up for themselves? Why don't they demand that the shadow cabinet is more representative of the Tory party as a whole. Do they like being second-class in their own party? Do they like doffing their caps to Gideon and co? If so they have even less in common with the rest of Britain in the 21st century than first appeared.

Corporate Profitability at a Record High

The FT today reports that corporate profitability is at a record high:

Official figures on Tuesday showed the net rate of return on capital in non-oil UK companies rose to 14.7 per cent in the fourth quarter last year; the highest rate of profitability since quarterly figures were first published in 1989.

Including profits made on North Sea operations, the 15.1 per cent net rate of return for the whole of 2006 showed UK corporate profitability was at its highest level for more than 40 years.

I thought it was important to point this out amidst the ongoing row about the pensions crisis. It's hard to believe pension funds are in "crisis" when the shares they invest in are so profitable. Return on capital is calculated based on pre-tax operating profit, but the overall corporate tax framework and macroeconomic conditions play their part in increasing operating profit.

There had been a lot of emphasis on the abolition of ACT, but no coverage at all of the fact that it was done to simplify corporate taxation and it was accompanied by and paid for a cut in corporation tax. Dividends to shareholders (including pension funds) are paid out from profits after tax. A cut in corporation tax means that companies can either choose to pay a higher dividend, or to retain the money within the company to grow the business to improve future profits and hence future dividends. In the long term this is better for the pension fund shareholders than keeping corporate tax high to pay for a tax credit to pension funds.

The fact that corporate profitability is at a 40 year high proves that the government's strategy of cutting corporation tax (which is now 28% compared to 33% in 1997), combined with providing a steady macroeconomic framework, is the correct one for the long term health of Britain. Is there anyone out there who wants to put corporation tax back to 33% to pay to reinstate the dividend tax credit for pension funds? I doubt it.

10 Years of New Labour - Labour Productivity

It is often noted that British productivity per hour is lower than that of other major developed countries, and the Labour government's stated aim was to improve this. So how has the government done?

Eurostat have calculated productivity based on GDP in Purchasing Power Standards (to remove currency distortions), per hour worked, relative to the EU-15 (i.e. relative to the average of the 15 Western Europe EU member states). The index is set at 100, and if the index of a country is higher than 100, the country's GDP per hour worked is higher than the EU-15 average and vice versa. As before, the comparison in the following table is with other mature economies with a similar sized population (to see the entire EU's data, click the link above).

Year   UK    USA    France  Germany  Spain  Italy  Japan

1995   89.9  109.5  116.0   108.9    93.6   104.9  76.4
1996   90.8  110.6  115.3   109.8    93.0   103.2  77.0
1997   91.8  110.1  116.9   109.1    90.4   102.5  77.3
1998   92.7  111.0  118.3   108.2    89.6   102.6  76.4
1999   93.4  112.3  117.6   107.9    90.2   101.9  77.3
2000   94.4  111.5  119.2   106.7    87.5   101.1  77.2
2001   95.7  112.2  120.4   106.6    87.7    99.9  77.4
2002   98.3  111.9  120.8   106.3    88.4    96.9  77.1
2003   98.0  113.6  116.8   111.2    88.9    92.5  77.3
2004   99.7  115.3  117.3   109.7    88.5    90.9  80.8
2005   *     116.7  *       109.3    89.1    89.8  *
                                                

* indicates data unavailable.

Britain's story is one of steady improvement. Unlike our competitors, we never really falter. This has a lot to do with how steadily the UK economy has performed. As noted in The Times last August, "It is well known that when markets droop, employers are initially disinclined to shed labour. They fear that if and when business improves, their good workers may be difficult to recover. Consequently, in a recession either working hours or working rates must be cut." This explains the faltering in France, Germany, the USA and Italy after 2000.

Of course Spain has had steady growth throughout this period too, but their productivity falls. But this could be explained by the extraordinary change in their labour participation rates (see previous post). Employers always pick the best staff first, but as labour markets tighten, they end up being forced to employ the not-so-productuve. The challenge when you have tight labour markets, is how to improve training, so that the less productive can be brought up to scratch, and how to automate things, so you are less dependent on unproductive people. Productivity in Britain improves faster after 2000 than before, mainly due to the huge take up of IT around the millenium, and the introduction of IT into the public services.

The conclusion must be that the Labour government has largely achieved their goal of improving productivity and has brought Britain to the EU-15 average. We've improved the most out of the countries listed above (productivity per hour in 2004 is 10.9% higher than in 1995). The pivotal achievement again seems to be avoiding the world recession of 2001 - if we hadn't our productivity would have fallen as it did in France. Governments show their mettle by how they perform when world conditions get tough. The other theme emerging from this series is steadiness. Growth has been steady, improvements in employment have been steady, improvements in labour productivity have been steady. Perhaps we should nickname this period "The Great Steadiness".

Previous articles in this series:
10 Years of New Labour - Financial Services Regulation
10 Years of New Labour - Economic Growth Since 1997
10 Years of New Labour - Employment

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.

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

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.

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.

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.

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

Europe

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.

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
                            Germany

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.

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.

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.

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).

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!

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.

Pensions

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.

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.

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.

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

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.

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.

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.

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.

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?