Speaking for England

Greece and Germany have two different visions of their shared currency zone and common government.

Greece, the debtor, claims that Germany must write off substantial sums which Greece owes her. In the name of solidarity within the zone, the rich country should come to the financial aid of the poorer country. In the name of common humanity Germany should allow Greece to spend more, offering free energy and food to the poor by increasing public spending. The extra spending will need to be borrowed.

If there are further troubles with people withdrawing money from Greek banks,. the European Central Bank should provide the money the Greek commercial banks need to pay out their departing depositors. Greece cannot cover the interest charges on her large debts out of tax revenue, so she thinks Germany should accept a lower interest rate or deferral of the charge on that part of the debt which is to remain.

The Greeks point out Germany has run a large trade surplus within the Eurozone since its birth. Germany has sold many cars and other products to Greece. She has had to lend Greece the money to cover the deficit. The gap cannot be closed by devaluing the Greek currency, as would happen if they still had their own money systems. So say the Greeks the gap has to be closed by writing off debt.

Germany says the opposite. When she joined the Euro she made it clear that Germany had no wish to stand behind foreign banks and foreign states within the zone. They all had to show similar discipline in their finances to Germany’s. They all had to cut their costs and raise their productivity so they could compete with Germany at the locked in effective exchange rate when they joined the Euro. Germany explained it would be a tough discipline with no bail outs.

German public opinion is against money printing by the ECB. The German economy does not need it, and Germany sees it as a soft option to help weaker countries borrow  more at low interest rates, to finance deficits which Germany thinks are too high. German public opinion is also against a Greek debt write off, as this time it will be the main creditor countries like Germany which will lose out. Last time it was the private sector that took the cuts, with states protected.

Germany lost the battle of Quantitative easing. It is gradually losing the battle to keep each country’s commercial banks apart, as the responsibility of the sponsor member state. Will it now also lose the battle over Greek debt? If so, will more Germans wish to leave the Euro? Many Germans remember just how dear the enforced merger of the Ostmark and the DM was to West Germany. They do not want the same again on the much larger scale of the Euro. The fundamental flaws in the Euro’s construction are becoming all too visible in the row between Greece and Germany. Germany has the money but it does not have many allies.

I do not see an obvious way of squaring this painful circle or reconciling these two very divergent views. Trying to resolve the two visions means deciding between a transfer union that might work, and a disciplined Euro which means more austerity and more bankruptcies.

In the late 1990s when Labour decided to offer considerable devolution to Scotland and a little devolution to Wales I wrote a book warning that such changes would fuel Scottish nationalism, not undermine it. “The death of Britain?” set out how Labour’s constitutional revolution would damage our democracy. I wrote it as a Unionist, wanting to keep our country together.

During the bruising referendum on Scottish independence last year I explained that my view now is I only support a Union of the willing. I wanted Scotland to have a good debate and make up their mind. Instead they had a huge debate, but have not really made up their mind. I fear the offer of more devolution powers has unsettled the Union further.

Labour and some others belong to the appeasement school. They believe that if they keep on offering new and greater powers to Scotland for more self government, they will keep the union together. I wanted the parties of the Union last year to say to Scotland ” We would like you to stay. You are most welcome as part of our joint country. We only want volunteers in our union, so of course you are free to leave on fair terms if that is your wish. You know what the union is like. We wish to keep it broadly the same”.

That would have prevented what happened – the outbreak of a bidding war to see who could offer more powers to Scotland. It would have told moderate SNP voters and politicians that they could not endlessly play the game of demanding independence, asking for a back up position of more home rule, and getting more powers from such a tactic. Offering more powers has reaffirmed that the Union is very fluid, that the parties of the Union lack confidence in it, and has given every reason to people in Scotland to keep seeing how far they can push it without leaving.

Appeasement has not worked as a political strategy. Far from making Labour the regular choice in Scotland, Labour’s devolution settlement created a platform for the SNP, who seized it and became the majority government in Edinburgh. Now Labour’s appeasement policy in the referendum campaign – led by Gordon Brown – has undermined support for Labour in Scotland even more. Instead of gratitude for Gordon’s Home Rule cocktail, there is a spirit abroad that too little too late was offered and there is more to be had by voting SNP.

When it comes to considering English votes for English issues, some think we should go for a watered down version for fear of upsetting the Scots. I find many Scots agree with English votes for English issues. They do not want their UK MPs to be spending time on English issues. They just want them to secure a better deal for Scotland. There is no need to appease Scotland by giving England a rotten deal. The looser federal union which Labour has brought on us has to be fair to both Scotland and England. Being unfair to England will not solve the problem of Scotland, nor win anyone any extra votes north of the border.

I understand why Greeks voted in large numbers for an anti austerity party. They did so out of desperation with the misery inflicted on their lives and living standards over the last five years. A fall of one quarter in national income, massive job losses, and pay cuts for those still in work should drive any electorate to want radical change. Both their old main parties offered more of the same – sticking with the cuts, the debt control packages, the large interest bills from past excess.

The problem for them is the cruel logic of the Euro, and the imprisoning austerity of their huge debts. If the voters had chosen a party which recommended leaving the Euro it would have been better, with more hope for the future. Instead they voted for a party which both says it will not accept Euro austerity, and that it plans to stay in the Euro. How will that be possible?

Syriza hopes that Germany and the others will willingly cancel some debt and grant easier terms on the rest in the name of preserving the Euro. But why should they? How could they refuse doing the same for Spain, Portugal, Italy, Ireland and the other countries that have played by the rules and have too much debt for comfort? If Syriza is determined to stay in the Euro there is no need to offer them anything to save the currency. If Syriza works out that leaving would be better then the rest of the Euro area should help them to the door.

The Euro area may I suppose realise that this political shockwave could happen elsewhere, and may think they need to show some modest understanding of the Greek feelings. It is unlikely, however, that they could cancel enough debt or cut the Greek interest rate sufficiently to resolve the problems. Any such move may destabilise other countries, rather than calming things down.

If Greece left the Euro, devalued in line with market movements, and had access to her own Central Bank to decide how much money to create and have in circulation, she would have more chance of rebalancing her economy and meeting her large obligations. If Greece stays in the Euro and threatens default on her debts, she helps undermine the very currency zone she wishes to belong to. Without the power to create Greek money, and in the bad books of the ECB and the major countries in the zone, it could mean an even worse future for Greece than sticking with the old austerity medicine.

The joy on people’s faces when they saw the victory of Syriza was understandable. They felt they had dealt a lethal blow to austerity. The problem is, by wanting to stay in the Euro they either have to carry on with the Euro austerity policies they do not like, or follow a lonely and defiant course which will damage the Euro. Voters may think once in the Euro they can have a genuine choice if they sweep aside the conventional parties that took them in and back the scheme. In practice the challenger parties too are imprisoned by the Euro unless they want to leave.

Amidst all the arguments about the EU in the UK there is rarely much attention to what the EU really does and what people like or dilike about it. All we hear is from people who like trade who wrongly claim our trade is dependent on EU membership, when we can see many non EU members trading very successfully with the EU. So I am offering people for and against to tell us what they like and dislike about the EU.

I will start this debate by explaining the things I most dislike about the EU.
1. Its unqualified support for the Ukrainian government, which has been busy killing some of its citizens as its response to losing control of the east of its country. The rebals have resorted to violence, but the government kills too many with some of its indiscriminate violence.
2. The mass unemployment, particularly of young people, which EU policies have created in several countries. I think the disinterest in the consequences of the Euro for young people in Spain, Greece and elsewhere is a moral outrage. 50% youth unemployment is not a price worth paying for their integrationist dream
3. Dear energy. The EU’s crazy energy policies have driven more people into fuel poverty, as Labour calls it, and have driven many industrial businesses with their jobs out of the EU altogether.
4. The lack of democracy. There is no effective opposition to new proposals and laws in the EU – they proceed by cosy consensus, with the unelected Commission initiating and drafting the laws. The laws should be initiated by the elected Parliament, and vigorously opposed by parties and individuals there.
5. The lack of democracy in my country that flows from the way EU rules and laws accepted by one government cannot be repealed by a new government after an election. The EU has gravely damaged our democracy, especially because one Parliament does now bind future Parliaments if it accepts EU laws.
6.The overweening arrogance of the EU, poking its nose into all too many features and facets of our lives for no good reason.
7. The high cost of government in the EU, with too large a financial contribution placed on the UK.
8. The lack of control over our borders.

Some has asked how much the UK has at risk in the ECB. The UK’s shareholding is only 3.75% paid, so it works out at around Euro 55m or under 0.5% of the Bank’s capital. In contrast Germany has subscribed almost Euro 2bn or around 18%.

The Euro is a political project. It may masquerade as a high design created by independent and talented experts, but in the end it will be judged by unruly electorates by whether it helps make them more prosperous or not. The problem for the ECB and the other custodians of the Euro flame is how to reconcile the wishes and needs of the debtor nations with the wishes and needs of the richer surplus countries within the zone. If they get this balance wrong, or fail to meet enough of the legitimate and often conflicting wishes of the two groups, the scheme will perish by the votes of countries driven to elect non believing governments keen to push the Euro too far or even wanting out.

The other way the Euro could be lost is technical incompetence by the governing class. They demonstrated this in 2011 when the Euro was beset by a rolling crisis, as country after country amongst the financially weaker nations experienced large sell offs in their state debt markets, leading to a crisis in how to finance government in these territories.It was demonstrated again when the Cypriot banks got into trouble, and the Euro architects decided not to stand behind the Cyprus Euro or Cyprus banks within the system. They weathered both these crises by compromise and by diluting the pure doctrine of each state and bank having to run itself prudently so it does not strain the system.

The creation of E1.08 trillion will ease some of the tensions within the financial system. There is insufficient money and credit in circulation in several of the weaker states. That is thanks to the need for public and private sector austerity at the same time. The states have been spending too much and have to cut their budgets to cut their deficits, at the same time as the ECB is reining in their commercial banks, cutting private sector credit. The result is mass unemployment and long recessions in the worst affected countries. Printing money and trying to get some of it into these states will be a modest offset to the crunch created by the austerity policies. I have likened it before to the ECB and EU authorities driving the economies of Greece and Italy with the foot firmly on the brake – they are now pressing the other foot on the money accelerator.

The problem comes for them with the politics. The easing may not be enough to transform the economic prospects of the struggling small businesses and the unemployed of Greece or Italy or Portugal. It is quite enough to alarm a lot of Germans. Whilst the ECB claims they have avoided putting German taxes behind most of their interventions, time will tell if that is true. It is likely to mean court case challenges to the actions of the ECB. The main winners of all this are likely to be the lawyers. This action is sufficient to keep the Euro going, but not early enough clarity or action to solve the underlying structural problems of the Euro. It is only when the full weight of German taxes and revenues is put behind the currency and used in the poorer areas that it can start to work properly.

This week there was a final round of consultations of Conservative MPs by William Hague in order to make decisions on the implementation of the recent White Paper on English votes for English issues.

It is clear that the Conservative leadership now agree that we do not want a narrow English votes for English laws but the wider English votes for English issues. The question, for example, of how the English local government grant monies voted by the Union Parliament are divided up between the various English Councils should be a matter for English MPs alone, as the Scottish Parliament and Welsh Assembly make the comparable decisions in their parts of the UK. England’s rate of Income Tax should not be voted on by Scottish MPs as Scotland will choose her own Income Tax rate.

The leadership also seems to agree that the obvious way to bring about English votes for English issues quickly and simply is to amend the Standing Orders of the House. Most Conservatives wish the House to have an early opportunity to debate and vote on this matter.

The leadership also seems to agree that the second of their three options, the weakest version of English votes for English issues, is not the one to adopt.

The remaining question lies between Option One, straightforward English votes for all English issues, and Option 3 which introduced an English veto on Bills prior to third reading, along with other measures. I favour the simple and general English votes for English issues, and hope they will conclude in favour of that one. It is the one that seems closest to the Prime Minister’s promises in the Downing Street speech, and to past Manifesto wording.

On Monday at lunch time I joined an invited audience in the Speaker’s House in the Commons to debate democracy for the BBC. They filmed and recorded 90 minutes of debate.

They invited an American Professor to lead the discussion. He was intelligent and articulate but not grounded in the realities of UK democracy. His starting issue was John Stuart Mill’s idea that well educated people should have more votes than anyone else. This out of date and unpopular idea was never going to fly, but he was determined to find someone in the audience who would argue for it, for no obvious reason. We wasted the opening minutes on an anachronism.

I was not allowed to comment throughout most of the programme despite trying to do so. I listened patiently to a long debate about proportional representation and new systems of voting. Some there seemed to think this would solve the problem of the disjunction between many voters and current politics. The Professor seemed in BBC style to encourage this viewpoint, and he had himself introduced the topic as his second important issue. He did not of course point out we have recently had a national debate about this and voted against a change in voting system. Nor did he or anyone allowed to speak on this topic point out that where different voting systems have been adopted – for EU and devolved Parliament elections – it has not resolved the problem of the gap between voters and politicians.

When I was finally allowed to speak at the very end of the session I made two big points. The UK debate about accountability, relevance and the relationship between electors and elected is dominated today by the questions of who is the demos and what powers remain for the government? The Professor had not mentioned or called anyone else likely to mention the words European Union or devolved governments. You cannot today talk about democracy in the UK unless you examine the transfer of substantial powers to the EU and ask what that has done to democratic accountability. Nor can you understand UK democracy without examining the relative and changing roles of the Scottish Parliament, the Northern Irish and Welsh Assemblies and the Westminster Parliament.

The rule of law and habeas corpus democracy is 800 years old this year, and the English Parliament at least 750 years old. On these large anniversaries we need to ask ourselves the fundamental question, is our democratic inheritance compatible with our current terms of EU membership? What do we do about all those laws and decisions that are made by the EU, which we cannot change if we change the MPs and government in the next Parliament? Those self same laws cannot be changed by our MEPs either. When if ever will there be an EU demos? And do we want to be part of it?

Maybe it was accident that these matters did not get discussed. Maybe it was by design. Maybe next time the BBC could ask one of us UK acadmeics and political thinkers to lead the discussion, or at least to be allowed to point out what the real UK issues are today. They are certainly not the question of giving educated people more votes. They include do we get a vote at all to influence the European laws that rule us? And does England get a vote to decide its issues?

In today’s debate on the NHS in Parliament I asked Labour why they only wish to talk about England’s NHS when we are in the run up to a UK election, and why they do not explain the poorer performance of the Welsh NHS over waiting times and A and E. The following figures illustrate the differences:

Waiting times
To start treatment Wales 13.7 per cent of patients waiting more than 26 weeks.[1]
England 12.5 per cent of patients waiting more than 18 weeks.[2]
A&E Wales 19.0 per cent of patients waiting more than 4 hours in December 2014[3] England 10.2 per cent of patients waiting more than 4 hours.[4]
Diagnostic and therapy services
Wales 31.0 per cent of diagnostic patients were waiting more than 8 weeks.[8] England 1.2 per cent of diagnostic patients were waiting 6 weeks or longer at the end of November.[9]

Ambulance Responses (category A calls)
Wales 56.9 per cent of ambulances arrived at the scene within 8 minutes.[10] England 71.8 per cent of Red 1 & 68.4 per cent of Red 2 ambulances arrived on the scene within 8 minutes.[11]

There is a big battle going on over the future of the Euro. If the easy money people win, the issue is will Germany stand behind all those bonds the ECB buys up? Will German taxpayers after all be expected to stand behind Greek and Spanish banks if they get into trouble? Will the Euro architects find a way of allowing newly created Euros to find their way, if indirectly – into financing the deficits of less fiscally prudent countries within the zone?

Indeed, the question is how can Germany avoid being dragged in to Quantitative easing if the zone as a whole decides on that route? By virtue of being the largest shareholder in the ECB, Germany will become the proud part owner of a wide range of government bonds from other countries in the zone as the ECB seeks to do what the Fed, Bank of Japan and the Bank of England have already done. If those bonds subsequently lose money, Germany surely loses as well.

Some say they have found a way round this dilemma. Why not, they say, empower the individual national central banks of the zone to simply buy up their own government debt, and to take the losses if losses there subsequently are. However, the individual central banks do not have the power to create euros. So presumably they will have to borrow the euros from the ECB to buy these bonds. What if they get into trouble? How do they repay the ECB? Surely there has to be recourse by the national central banks to the ECB, so in the end Germany will be pushed into supporting the whole edifice.

There is also the little problem of the Swiss franc. When the Swiss authorities wisely decided to quit their link to the Euro, their currency shot up. Markets revealed just how depressed the Swiss unit was by its forced association with the Euro. Imagine what the value of the DM would now be against the Euro if Germany had done what Switzerland did, and declined to actually join the Euro.

The Swiss event and the agony of QE reveal the continuing strains of the Euro project. If it is to work in the longer term Germany has to put her tax revenue and banking system behind it. She is still reluctant to do so. It is a bit like London refusing to stand behind the rest of the UK – an absurd idea which would damage the pound greatly if anyone tried it.