Month: April 2011

              Yesterday was a national celebration. In many communities street parties sprung up without official assistance, subsidy or guidance on how to do them. In many cases people probably just shut their side street and got on with, safe in the knowledge that the pettifogging Inspectors were likely to be having the day off. It was a day when the Union flag predominated and was flown with pride.

              What was so good was the celebration of the amateur, the work of the unsung heroine or hero locally who organised and arranged the party, and the loving hard work of the many who baked cakes, made sandwiches, assembled garden  tables and flat packed  chairs and converted their Close or Avenue into an out doors venue.

             It was a treat to have a day without money. The street parties were there  just to enjoy and to discover our common enthusiaism for our country and its ancient ceremonies. No colecting tins were rattled, no entrance fees requested. We knew we could rely on each other to supply our share of the fare and to enjoy the shared occasion.

               It was day for the amateur. It was a day for over the top home baked cakes, that lacked the mechanical precison of the shop cake but gave us something more precious – the love and flavour of home baking. It was day for party games and sports , a day to meet and talk to the neighbours, a day to put the car away and enjoy a slower pace of life. It was a day for colourful bunting and childrens’ drawings.

Let street parties thrive. I hope many  enjoy their extra day’s holiday, and wish the Prince and his bride a long and happy marriage. We should say “Thank you” to all who are working today to keep the country’s services running.

    The USA has just had its bad winter moment. Its first quarter 2011  GDP figures were disappointing, with the snow as the leading suspect.  Parts of the USA had a savage winter with snow disrupting activity despite better preparation and mechanisation to handle it than in the UK.    

         Inflation is also on the rise in the USA. If you print enough extra dollars, and drive the value of the currency down enough, you will discover as the UK has done that things get dearer when you import. Japan has just had another debt warning, as the amounts she needs to borrow to repair the damage of the tsunami and earthquake mounts. At least Japan so far has borrowed the money the state needs from Japanese savers, leaving her less vulnerable than European countries that have a penchant for spending foreigners’ money.

             There are plenty of critics around saying China is past her best and will encounter problems from here. The latest argument is that China now has an ageing population which will be less energetic and successful than the youngsters who have powered Chinese growth to date. I think these critics are a few years too early. They underestimate the driving force of seeking better living standards in a state without generous welfare benefits on western lines. There are still millions of people to come off the land and into better paid factory jobs, and many wage rises ahead for those already in the urban areas. The Chinese five year plan assumes a huge increase in living standards over the next plan period. It got off to a flying start with a 20% increase in the minimum wage this year. Under the last five year plan many Chinese got higher wages by making things the west wanted to buy on borrowed money. Over the next five years more and more Chinese will earn better money from making things their neighbours want to buy using hard earned money.

          The west is still busy with Midle Eastern wars and wrestling with its huge debts. Meanwhile the emerging economies are still growing very strongly and showing every intention of working their way to much greater prosperity. If the west is serious about maintaining and improving  its living standards and getting more people into jobs, it has to take this competition seriously. That requires western governments to become much more business friendly, to attract the jobs, capital and enterprise to western places, or merely to keep here what we already enjoy. It  also requires having plenty of friends around the world who want to buy our goods and services.

             It is typical of modern spin led politics that the Prime Minister’s choice of this catch phrase to a noisy Commons should be regarded as so significant. Whilst it is a phrase that the rest of us do not normally use, it is hardly the cruellest put down.

            The country is at war in two Middle Eastern countries. The country is seeking to recover from a huge debt and banking crisis. The government is embarked on reforms of the NHS, benefits system and education. We are a few days away from a referendum on our voting system and from numerous Council elections about local services and the Council Tax. Yet the thing which gets the Opposition Spin doctors into orbit is the use of the phrase “Calm down dear”.

              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?