Category: Blog

              Growth in the first quarter of 2011 was led by government spending, transport,  and financial and business services. These contributed 0.2%, 0.2% and 0.3% respectively to the GDP growth figure.  This was offset by a loss of 0.3% from construction, with 0.1% growth coming from others.  Whilst manufacturing continued some advance, mining and quarrying fell.

                So what does this tell us about the state of the UK economy?  The government can point to the fact that the economy grew 0.5% in the last quarter, and 1.8% over the last year. The opposition point to the absence of growth in  the last six months.

                Many who accept the spin will find it surprising that government made a contribution to the growth in the totals owing to increased spending. For the year as a whole government was up 1.4% after allowing for inflation, or 5.1% in cash terms for total current spending.

                  Over the last year all parts of the economy with the exception of mining and quarrying contributed to the growth.

                  The sharp falls in construction output are not surprising. Outside London there is plenty of empty retail and commercial space. Banks are reluctant to made large advances for new property developments, and are busily trying to work their way out of some of the high cost positions in property they supported in the credit bubble.  Housing volumes are well down, as a result of much less mortgage availability and the requirement for higher deposits. People find current house prices are still high relative to incomes, when banks are more cautious about how big a loan they will advance.

                   Manufacturing has had a good year with reasonable growth in each quarter. However, because manufacturing is a relatively small part of our economy after the big decline of recent years, it has not made a huge contribution to overall growth. It has added 0.1% to each of the last three quarters, and 0.2% in both the first and second quarters of 2010 during the recovery phase from the large recession it experienced in 2009.

                  In order to hit the more taxing forecasts for growth made by the OBR for 2012 onwards the service sector and private consumption are going to have to pick up speed as well as manufacturing continuing its revival. Growth over the last year is a little down on the OBR forecast, which means to hit the 5 year plan the government’s growth strategy needs to speed up growth a  bit more. The government needs to press on with its reform of the banks to ensure reasonable levels of credit for good projects, and needs to set a betetr tax and regulatory framework to make busienss investment more worthwhile.

                I did not vote for the Libyan motion when the action was first discussed in the Commons because I was worried about how we could ensure a good outcome. I wondered why Libya and not elsewhere in the Middle East, and why the UK when other countries were closer and had the military means to enforce any UN resolution. Events in Syria reinforce the question of what is special about Libya that warrants military intervention from outside.

               Today NATO seems to define success as being the end of Gaddafi’s tenure in office. Action from the air has been successful in lifting the external threat to Libya’s second city, as allied planes were able to destroy tanks and other heavy equipment on the way to attack the city. It is far more difficult to do the same at Misrata, where the Libyan government forces are already inside the town and are fighting house to house. The UN Resolution allows action to protect civilian lives, making it hazardous to attack government forces in urban areas where NATO could kill civilians near to the government forces.

                   Goverrnment Ministers and senior mililtary are well aware that they must stay within the terms of the UN Resolution. If the aim is now different to that of the Resolution, the correct thing to do is to go back to the UN and seek to persuade it to change the Resolution to allow NATO to do what it thinks now needs doing. If the UN declines, the UK could then with honour cut back its commitment. If the UN wants its forces to do more, it could identify forces closer to Libya from  other UN members that might like to take the action forward. A Resolution backing regime change would be the safest legal base for military action to remove Gaddafi.

            Michael Meacher today claims there will be another financial crisis owing to the failure of John Vickers to recommend the splitting of investment and retail banks, and owing to the growth of exchange traded funds.

             I think he is looking in the wrong direction for future financial problems. Most informed commentators are concerned about the state of the public finances in a number of countries, and the impact on banks who own large quantities of government bonds  if some of those countries default or move to substantially higher interest rates under market pressures.

             The failure to split investment from retail banking is not going to bring the system down. Large retail banks need careful regulating even without investment banking arms. Northern Rock and Lehmans were segregated.  Most Exchange Traded Funds are owned by pension funds, charities and individuals who do not borrow to buy them, and most Exchange Traded Funds are ungeared portfolios of shares. Such ungeared investments did no damage to the system in 2007-9 and there is no reason why they should in the future.

            We read that the Av campaign has just got nasty. Some tell us the Coalition is under stress owing to the new tough rows going on. I don’t think so.

             I do not believe Mr Huhne, after the referendum, will pursue the matter through the courts. When didn’t elections throw up contested claims and dubious facts? Have the Lib Dems never put out a leaflet which others thought misleading at best? How much does Mr Huhne think AV elections would cost?

            I do not believe Dr Cable will resign because he thinks the government ought to let in more migrants than Mr Cameron will allow. I am still trying to work out why he thinks the Lib Dems are stopping unpopular policies within government, when he was the architect of the higher tuition fees policy which so far has aroused more protest than anything else. Nor do I think Mr Clegg really believes our present system of voting is a right wing plot, when it has been accepted by most people for many decades, and has elected socialist as well as Conservative governments.

            The Lib Dems have to stick with the Coalition, whatever the result on 5 May. They after all are the believers in Coalition politics, so they have to go the extra mile to show us how it’s done in the national interest. They signed up to a 5 year Parliament and a 5 year programme, and voted through a piece of legislation to reinforce the 5 year run. Surely they would not tear up such a promise so soon after making it? How could they be trusted in any future coalition talks if that is the way they behaved this time round? What would they say to the electors about such a U turn, when the deal was a referendum on AV, not a guaranteed victory for AV.

                Whilst the eyes of the world and the media have been turned to Libya, the EU has been busily beavering away to strengthen its control over EU memebr states economies. The EU is close to agreeing six powerful new measures to control EU economies, and to create something like a single economic policy for the whole zone.

              Shocked by the debt and deficit crisis enveloping it, France and Germany have encouraged the Commission and Parliament to come up with ways of enforcing the favoured debt and deficit ratios of the EU, and ways to proceed to a full blown common economic policy, including social and wage policy as well as overall levels of spending, borrowing and taxing.

               The EU proposes an economic semester. This is a posh way of saying member states have to submit their national budgets as homework to be marked by the Commission. If the Commission disagree they can order the member state to change their approach. The EU wishes to enforce the old rules of  deficits below 3% GDP per annum, and total state debt below 60% of GDP. They intend to fine member states who do not achieve this or who do not follow an agreed plan to sachieve it. The latest version proposes a 0.5% GDP fine for fudging accounts, and a variable fine of 0.1% or 0.3% of GDP for failure to follow the policy. Members outside the Euro may remain beyond the fines, but there is talk of them losing EU spending instead.

             There will be an imbalances and excessive imbalances procedure to allow the Commission to intervene in most aspects of economic governance. The Europact which is also being floated goes even further and brings together social and wages policies for all participants.

                We will be told that as the official sancitons do not apply to the UK outside the Eurozone we should not worry. We need to read the final small print, but it looks as if these proposals will represent a further major extension fo EU power which is danger of dragging us in even though we are not members of the Euro.

                   The EU is creating an economic sovereign to seek to rule its unruly states and currency. Some of its rules make sense, but if we wish to remain in something like a sovereign country we should make it clear none of these new economic government rules apply to us. Just exempting ourselves from the larger sanctions is not sufficient.

Mr Clegg’s attack on the No to AV campaign was wrong. “This nice little racket” as he calls it  is not confined to  right of centre support. Hasn’t he heard that Margaret Beckett and John Prescott, along with many other figures of the left, are also in favour of keeping our present system of elections? Most other democracies use our system or a proportional system  and not AV. Who is doing the misleading he complains about?

                  I read that Ed Balls is querying the wisdom of the UK helping Portugal with a bail out. As an opponent of expensive bails outs in general – they do not solve the underlying problems – I welcome that. As a  stronger opponent of UK contributions to Euro bail outs –  as we are not part of the folly of a currency in search of a country to control it – I welcome this for its own sake.

                I also welcome it, in case it is part of a new approach to the EU  by Her Majesty’s Opposition. For too long in the UK we have had two parties that accept more or less anything coming from the EU, and just shout at the Tories that they are being underminded by Eurosceptics. This was factually untrue, but it conspired at many crucial times to ensure the UK signed up to more and more of the federal plans from the EU against the wishes of the majority of voters. When it came to elections voters voted for the two  federalist parties  in sufficient numbers to keep the UK establishment on track with the main thrust of the EU plan. The reasoned Euroscepticism of the overwhelming  majority of Conservatives was unable to deploy to drive national policy for lack of numbers, and owing to the leadership’s past response to the majority  national politicians’ mood of collaboration. The Euroscepticism of many Labour and Union members was suppressed, as a supposed way of dealing with the Tories.

                Today both Labour and C onservative leaderships seem to sense a new national mood which is sceptical of the high spending plans of the EU, and worried about the way the UK is being drawn into financing and guaranteeing the borrowing of a number of EU states. The mood on the doorsteps is clear. Many do think the UK has to rein in its own state spending and borrowing. Most think charity begins at home, and dislike any suggestion that we should be involved in higher spending and borrowing to help relatively rich countries on the continent, especially as much of that spending is of questionable value and purpose.

               The UK needs to be able to have an intelligent debate on what its relationship should be with the emerging country of the Eurozone. All parties say they agree the UK should not join a political or monetary union. One is forming rapidly on the continent. The six pack of economic governance measures, and the financial structure of bail out and bind in for Euro members takes that process much further. If the UK have an Opposition that welcomes that debate and asks some tough questions of the government about the UK’s role within or outside that development Parliament will do a better job. I suspect some Euroscepticism will make Labour more popular, but that is a price worth paying for proper scrutiny of these crucial issues.

               Only if the Opposition in Parliament is prepared occasionally to question and vote against the drive to EU and Euro union will the British public have more reassurance that we cannot be bundled into a financial union by stealth or absent mindedness, or by a government saying it cannot keep out owing to EU qualified  majority voting and past agreements of the previous government.

              To have both main parties querying the size and the expansion plans of the EU budget, and to have both saying they are worried about the Portuguese bail out is progress. They are both getting closer to the national mood. Let us hope they keep this sensible approach up after May 5th. Let us hope when Parliament is allowed to reconvene there is a new realism about the UK’s future relationship with the Eurozone. Above all let us hope stricter limits are placed on how much the UK contributes financially to this dangerous and economically damaging continental  monetary experiment.

                   NATO is clearly looking for new ways to continue its intervention in Libya. We have heard of the use of drones and military advisers in recent days.  It needs to remember it is operating under a UN Resolution which only allows it to help save civilian lives. It does not have legal cover to kill civilians, to intervene on one side in the civil war or to enforce regime change.

                 Using air power only allows the destruction of heavy weaponry from the air when it is not close to civilians. As Libyan government forces now mainly operate street by street within cities it cannot be used to hold them back. Using drones is going to be difficult in such circumstances as well. They may be better targetted than bombs from warplanes, but there is still a danger of civilians being killed when letting them off in congested areas and narrow streets.

                 So why doesn’t the UN or NATO consider talks with the cause of their grief, the Libyan government? As NATO are not allowed to use all means to defeat him owing to the UN constraint and the wish to avoid more civilian deaths at the hands of NATO, wouldn’t it make sense to talk to the Libyan regime to see if there can be any diplomatic way of relieving the pressure on certain Libyan civilians from their government? What is there to lose from such an approach? How else is this all going to end, if the people of Libya are not about to evict their ruler, and if the friends and allies of Gaddafi still intend to keep him in power?

               Yesterday’s news broadcasts usually referred to the 0.2% increase in retail spending in March. I did not hear any BBC news broadcast mention the fact that public spending was 5.1% higher in 2010-11 than the previous year, though that too was announced yesterday.

            As the BBC seem to welcome every spending increase and condemn every cut, you would have thought they would welcome such news and want people to know that more of their money was being spent.  Nor did I hear them tell us that we had all paid 6.9% more in tax last year than the year before. Again you would have thought they would be ringing bells in joy at this, as so many of their broadcasts seem to urge higher taxation, to pay for the higher spending they favour.

                Easter is a  bitter sweet festival. First comes the grim Friday. Churches are stripped bare. Christians are in mourning. The Gospel story is at its most harrowing, the story of the judicial killing of  a man who had done no criminal wrong. For the rest of the country it is a day off.

               Then comes the joy of Easter Sunday. The Christian message of resurrection becomes entwined with old pagan rites of Spring, new birth and revival. A modern commercial festival of shopping and indulgence is built on the back of the twin origins. The chocolate makers share the day with the egg producers, the spring lamb farmers and the poultry magnates. The many  celebrate plenty around the Easter table.

              Almost 2000 years on from the cruel events in Jerusalem it is one of those ironies that conflict and violent death still cluster around the streets of some Middle Eastern towns. In 33 AD the Romans were finding decision making as the colonial government difficult with a noisy crowd wanting to influence decisions of life and death. In 2011 AD the western powers want to influence the government of Libya, but do not wish to put troops on the ground as the Romans did, and as the allies have done very recently in Iraq and Afghanistan.

                Today’s Romans are more circumspect about military involvement, preferring to leave the difficult engagements to the French, British and Americans. Maybe the poor press Pontius Pilate received for harnessing popular opinion to guide his decisions as a judge have left a long shadow. It has taught latter day Romans how difficult it is to govern another’s country.  Maybe it is just more prosaic worries about the impact on trade and migrant flows if Italy were to take a tougher line.

                 The Easter stories provide a background to  what should be a happy festival, about new life and the triumph of good over evil. The problem this Easter, as on so many other occasions, is the West is still finding it difficult to learn from the problems of the past when it comes to intervening in the government of the Middle East. The Easter present I would like is acknowledgement that the West cannot settle the government of Libya. The UN should  not go beyond a No fly zone, which should be policed by the near neighbours, not the UK.