Posts tagged "Vince Cable"

Double Dip? Double take more like!

Yesterday’s figures from the Office of National Statistics show that the economy shrank by 0.2% in the first quarter of 2012. Officially a double dip recession, then. It was predictable that Labour would seize on these figures to explain how awful the Coalition Government is and how wrongly they are handling the economy.

But, whoa there nelly. Lets look at this situation again. Lets do the thing which few appear to be willing do. Lets examine the context of these economic figures.

Anybody remember Gordon Brown promising, as Chancellor, “no more boom and bust”? Brown was right to highlight the cyclical pattern of boom and bust under whichever Tory/Labour Government of the day as a problem. But he was wrong to believe his own spin that he could overcome this cycle.

We all know what happened next, though it would be churlish to claim that Labour is responsible for all our economic woes.

The UK economy is tightly interwoven with that of Europe and the US, and increasingly so with China, as well as being reliant upon Middle Eastern oil. Regardless of what the UK does as a Sovereign State, it’s unlikely that we will ever be able to insulate ourselves from all of the variables that lead to the contraction of economies elsewhere which in turn slow our own economic growth.

In this context, Labour can hide from their responsibilities. They can pretend that the current economic woe was an unforeseeable event that no one could have predicted. A great tidal wave of economic devastation which Labour were powerless to prevent.

Enter, Vince Cable, who told Gordon Brown, on 13 November 2003:

…is not the brutal truth that with investment, exports and manufacturing output stagnating or falling, the growth of the British economy is sustained by consumer spending pinned against record levels of personal debt, which is secured, if at all, against house prices that the Bank of England describes as well above equilibrium level? If the Bank of England is correct in its expectations of a market correction and rising interest rates, what action will the Chancellor take on the problem of consumer debt, which is rapidly rising, with 8 million annual visits from the bailiff?

Cable was not referring to external economies, but pointing to the frailties in our own economy. Gordon Brown - in a classic case of ‘Emperor’s New Clothes -  dismissed this idea, and accused Vince Cable of:

[spreading] alarm, without substance, about the state of the British economy

Had Brown taken the hint from Cable - who had actually studied and worked in the field of economics - we might well be in a different place now.

So again, we can’t blame the double-dip in it’s entirety on Labour, but we cannot ignore the demonstrable lack of foresight and understanding of the economy by Gordon Brown as Chancellor as a major factor in constraining our ability to recover.

We are well placed in Reading to weather this economic storm, being as we are a high-tech hub, but also geographically close enough to London to benefit from any halo-effect in terms of jobs.

Locally, the previous Lib Dem-Consevative coalition Council produced the first 0% Council Tax rise seen in Reading, and a responsible overall budget in 2011 that allowed the minority Labour-run Council to keep to a 0% Council Tax raise in 2012. 

Liberal Democrats nationally, and locally in Reading, should embrace Labour supporters wanting to compare economic credentials. It’s a cake walk for Lib Dems, to say otherwise is to wilfully ignore the wider context.

Local Labour Councillor, Rachel Eden, claims that the Government “has to be robust”. She quotes Nobel Prize winner, Paul Krugman who complains:

The defense I hear from Cameron apologists is that the austerity mostly hasn’t even hit yet. But that’s really not much of a defense. Remember, the austerity was supposed to work by inspiring confidence; where’s the confidence?

Well, that’s an easy one to put to bed, you might have noticed that the UK credit rating is AAA. It is not possible to get more confidence in the UK than that. And this is whilst the credit rating of the US is a slightly lower AA+. So much for the UK catching a cold when the US sneezes. You would have thought that, being American, Krugman would have remembered that.

Rachel Eden offers her own remedies for the Coalition Government:

…it’s time to change course and return to reform of financial services, investing in infrastructure and giving our young people (and others including older workers) the skills they need in today’s and tomorrow’s economy.

To which my response would be, welcome, Rachel! Come on in, the water’s fine.

You want reform of financial services? That’s great. That reform began in June 2010. The Financial Services Authority will be split up. A new Financial Conduct Authority will “ensure fair, efficient and transparent markets in financial services”.

Additionally, you’ll see that Mervyn King is getting ready to be ushered quietly out of the back door of the Bank of England. New broom sweeps clean, so they say.

You want infrastructure investment? Look no further than Reading station which received nearly £10m for upgrades from central Government in 2011. Sticking with the train theme, what about HST? Isn’t that an infrastructure investment? And Crossrail? 21km of tunnels being dug underneath london. And electrification of 800 miles of railway in the next 5 years?

What about digital infrastructure? The Coalition Government, through Broadband Delivery UK, is investing £530m of funding into super fast broadband for a third of UK homes that would otherwise miss out on it.

Finally, Rachel wants investment to give both our young and old people the skills they need for “today and tomorrow’s economy.” That’s a big ask, frankly, we don’t know what tommorrow’s economy will look like, but I think the Government has taken a pretty good stab so far.

The stand out item in the budget for me was the tax breaks given to the animation and video games industries. Not many people realise that the Tomb Raider and Grand Theft Auto games began life in the UK, and I was glad to learn that the tax relief offered would create an estimated 4,700 jobs in the UK in just the kind of high-tech industry that the UK has always excelled at.  

Rachel will know that apprenticeships in Reading increased under the previous coalition Council, and under the Coalition Government adult apprenticeships across the UK went up by 103,000 in the UK overall in the 2010-11 financial year.

Students of all ages benefit from the new rules around students loans that enable part-time students to benefit from tuition fee loans from the Student Loan Company. So, no matter what age you are, those who need to work part-time, or who need to fit education around childcare, get a much fairer deal overall.

Broadly speaking, the Coalition Government is being ‘robust’ in it’s response to the global economic crises, the long term picture is looking good (our AAA rating is the analyst’s view of our long term picture). Financial services reform. Infrastructure investment. Incentives for industry and individuals wanting education.

On a personal level, I detest having to stomach some of the things Liberal Democrats are obliged to support in the Coalition, but there are no short cuts to success. For political reasons Labour are clearly jumping up and down pointing at the flat economy, but the public needs a more nuanced answer to these problems.

We are trying to shift the bias of the economy away from financial services, and this is not a quick-fix kind of problem.

Those who think the Government should not be cutting services and should be doing or spending more are obliged to also explain exactly what else should be done and where they would make public spending cuts in order to fund those promises, or else tell us where additional money will come from to pay for further projects in addition to the investments already being made.

At the same time as spending on infrastructure projects, investing in education and giving tax breaks to business, we need to also be servicing the huge debt that the UK has amassed, which brings me back full circle to the AAA rating, which we only have because the financial markets from which the UK borrows have confidence that we can repay what we borrow. Borrowing huge amounts more will reduce confidence that the UK will be able to repay, which will lead to a reduction in our credit rating and an increase in the interest rate we will be asked to pay to borrow, which is a downward spiral we need to avoid.

If there really is concern about a plan for growth, lets just recall the quick-fix plan for growth the last time the Conservatives held unfettered Governmental office. It was the deregulation of the finacial markets, or the ‘Big Bang’, that sowed the seeds for the over-reliance of the UK on the finance industry which needs to now be corrected.

It’s reasonable to talk about the big picture, but not simply in the context of the run up to an election, and not simply making policy promises without explaining how the UK can afford to keep those promises.

Who are these ‘Special Advisors’ anyway?

So, Adam Smith, Jeremy Hunt’s ‘Special Advisor’ (or ‘SPAD’ as they are known in Westminster) has fallen on his sword following allegations of impropriety against his former boss in the way he handled the takeover bid by News Corporation of BSkyB.

The evidence obtained by the ongoing Leveson enquiry shows a huge amount of e-mail traffic between Adam Smith and Frederic Michel who was News Corporation’s Director of Public Affairs in Europe during the News Corporation proposed bid for BSkyB.

The sheer amount of e-mails between Adam Smith and Frederic Michel alone rings alarm bells.

This was supposed to be a ‘quasi-judicial' role that Jeremy Hunt was undertaking, but the volume of conversation between Smith and Michel is a cause for concern as who in their right mind would not think that sustained and multiple e-mail contacts on a daily basis would not give rise to suspicion of impropriety, even if there was no impropriety to speak of.

Any information required by Jeremy Hunt about what could have been one of - if not the - largest media deals in UK history should have been formally requested of News Corporation and not batted about as part of informal chatter between a Special Advisor and a PR head.

It’s surely not the role of a Special Advisor to give daily progress reports about anything to anyone but his employer?

And I’ve not even mentioned apparent reference to Smith and Hunt being invited to a Take That concert with Frederic Michel.

Compare this with the fact that Vince Cable and his SPAD, Giles Wilkes, actively avoided communication with the Murdoch empire so as to avoid controversy.

Michel considered and tried multiple different tactics to meet with Cable. These included

  • asking him to meet with a newspaper editor under the pretence of other business, 
  • contacting other Liberal Democrat MPs who might act as a go between to induce Cable to meet with News Corporation representatives, 
  • trying to contact Nick Clegg to ‘insist’ that Cable meet with News Corporation regarding the BSkyB bid.

All of which failed, but once Cable was removed from the BSkyBid proposal process following his ‘declaration of war' with the Murdoch Empire, the way was apparently left open for lots of communication between big business and Government.

There are lots of lessons to be learnt here. Many obvious, some less so. My concern in all this is? Who are these unelected Special Advisors? What qualifies them to be Special Advisors? How was it possible for a ‘rogue’ advisor to spend so much Taxpayer time and money passing information and apparently co-ordinating actions with a commercially driven organisation?

How can it be that Adam Smith - in his role as Special Advisor to Jeremy Hunt - could potentially have skewed the playing field towards News Corporation (intentionally or not!) in its planned bid for BSkyB? He was passing on the names of other people and processes that could, in their turn, have been courted by Frederic Michel.

Adam Smith was one Special Advisor. It’s clear that he had a lot of knowledge of how the process of judging the BSky bid proposal was going. To what extent do other Special Advisors have that kind of knowledge and power to influence a decision right under the nose of an elected MP?

There are other special interests quite apart from commercial ones. Let us take, for instance, the current debate around the Communications Capability Development Programme. Could you imagine the impact a ‘rogue’ advisor may have on that? An advisor who eases the way between the instincts of security forces - to apparently collect more data on more people - and the instincts of Liberal Democrat MPs, who must not only be impartial, but be seen to be impartial.

view archive

About Me