Saturday, December 24, 2011

Review of the Year 2011

Ever since the formation of the Coalition between David Cameron’s Conservatives and Nick Clegg’s Liberal Democrats in the aftermath of the May 2010 general election, British politics has by and large been dominated by two interrelated questions.

The first was whether, in spite of the obvious chemistry between the two leaders, an alliance between two parties with such vastly differing worldviews could actually come close to achieving its stated aim of governing for a full five-year Parliament.

The second was whether the tough economic measures it adopted would succeed in tackling the deficit, as the Tories had argued during the election campaign, or merely succeed in choking-off an incipient recovery, as Labour had warned.

Eighteen months on, those questions remain unresolved, but as the political year 2011 draws to a close, we are at least a little closer to knowing the answers.

On the first point, I wrote at the start of the year that if the Coalition managed to get through 2011, it would in all likelihood survive until its target date of 2015.

In making that prediction – which I may well be forced to revise over the coming 12 months - I was looking to May’s referendum on reform of the voting system as the likeliest breaking point between the two partners.

As it turned out, the Lib Dems’ crushing defeat in the referendum did not prove the Coalition breaker some of us thought it might, despite Mr Cameron having apparently given his party the green light to launch some bitter personal attacks on Mr Clegg.

And late in the year another issue emerged which on the face of it now seems much more likely to prevent the Coalition going the course: Europe.

Mr Cameron’s self-imposed isolation at this month’s European Summit capped what on the face of it was not a great year for the Prime Minister.

He found himself forced into a series of policy U-turns – over privatising forests, reducing prison sentences for defendants who plead guilty, and most notably over the ill-judged attempt to impose competition on the National Health Service.

Meanwhile the phone-hacking affair at the News of the World threw the spotlight on Mr Cameron’s close personal links with the Murdoch empire, while the travails of his defence secretary Liam Fox forced him into his first reshuffle.

And with the economy flatlining and unemployment on the rise, Chancellor George Osborne was forced to revise growth forecasts downwards and borrowing forecasts upwards as he conceded that the deficit would not, after all, be paid off in the current Parliament.

The fact that, in spite of all this, Mr Cameron ended the year ahead in the opinion polls probably says less about him that it does about the plight of the Labour opposition.

Party leader Ed Miliband’s one big success – and it was a not inconsiderable one – was to lead the attack on Murdoch and in so doing prevent him taking control of BSkyB - the first time the political establishment had stood up to the ageing media mogul in three decades.

He also made by far the most substantial of the three party leaders’ speeches in what was otherwise a distinctly unmemorable conference season, setting his face against the “fast buck culture” of the Thatcher-Blair years.

But the largely negative public reaction to the speech showed the extent of his task in winning over an electorate that still seems resolutely underwhelmed by him, and as Parliament broke up for Christmas, the muttering about his leadership in the Labour ranks was growing.

Mr Miliband’s failure to make the political weather was all the more baffling given the grim economic news, which increasingly appeared to bear out Labour’s warnings against cutting “too far, too fast.”

Inevitably the impact of the cuts was most keenly felt in the North-East, where more than 30,000 public sector jobs disappeared at a time when they were apparently still being created in other more prosperous regions.

But Labour remained hampered both by its failure to articulate a clear position on the deficit and by its perceived complicity in having created the problem in the first place.

And unless and until the public changes its collective mind about who is really to blame for the country’s economic plight, Mr Cameron’s continued political ascendancy seems assured.
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Saturday, December 17, 2011

On the big issues, is Cameron actually a worse PM than Brown?

A few weeks ago, a backbench Conservative MP got himself into a spot of bother after being caught on tape using a four-letter word to describe his leader David Cameron.

Given that the offending word used by backbencher Patrick Mercer began with an ‘a’ rather a ‘c’, the implication was not so much that he finds the Prime Minister personally unpleasant as that he regards him as a bit of a clown.

Mr Mercer’s accompanying description of Mr Cameron as “the worst Prime Minister since W.E. Gladstone” was generally viewed at the time as a rather unwarranted slur on both of these two worthy occupants of Number 10 Downing Street.

But in the wake of his potentially career-defining veto at last week’s EU summit on the future of the Eurozone, the question ‘Is Cameron actually any good?’ has suddenly assumed an added pertinence.

It is, of course, far too early to tell whether the Prime Minister did the right thing by blocking the proposed Treaty on stabilising the currency or whether it will turn out to be, in the words of his own deputy Nick Clegg, “bad for Britain.”

It may be a decade or more before we are able to arrive at a settled historical judgement on the issue, by which time Mr Cameron will almost certainly no longer be in office.

Will Hutton, the former Observer editor and author of influential 1990s tome ‘The State We’re In,’ believes it will turn out to be a mistake of historic proportions, and that by 2020 a flatbroke Britain will be begging to join a newly-thriving Eurozone.

This is however currently very much a minority view. Mr Cameron may have turned us into what one Cabinet minister this week called ‘the Billy No Mates of Europe,’ but if the opinion polls are anything to go by, the public seems to be applauding rather than condemning him for that.

As far as short-term tactical considerations are concerned, Mr Cameron’s actions at the summit cannot be faulted.

He knew that if he agreed to the proposed Treaty, his party’s increasingly self-confident right-wing would use it as an excuse to demand a referendum on Britain’s membership of the EU – the last thing Mr Cameron wants to see.

Rather than entertain that possibility, he chose instead to risk infuriating his Liberal Democrat coalition partners, knowing full well that they are in no position to bring down the government and fight a general election, especially over the issue of Europe.

Political pundits who tell us that Europe is a potential coalition-breaker are forgetting the fact that the Lib Dems’ pro-Europeanism is wildly unpopular in the Southern seats where the Tories are their main opponents.

So looked at purely from a domestic political point of view, Mr Cameron’s gamble seems so far to be duly paying off.

After a fortnight in which the Chancellor admitted his borrowing forecasts were wildly off course, unions staged the biggest strikes seen in a generation, and the Prime Minister was outvoted 26-1 at an important international gathering, the Tories pulled two points ahead of Labour in the polls.

This is a deeply worrying state of affairs for Labour leader Ed Miliband, one which victory in the Feltham and Heston by-election on Thursday night will have done little to alleviate.

As I wrote in this column the week before last, Labour ought to have a compelling narrative on the economy, but the public is currently not listening. So too it is with Europe.

Ultimately, however, Prime Ministers are not judged on whether or not they manage to secure a short-term tactical advantage over their opponents, but on whether or not they are seen to have acted in the national interest – a judgement that will rest in part on consequences as yet unseen.

It is already clear, for instance, that Scottish First Minister Alex Salmond intends to use the issue to ratchet up calls for full-blown Scottish independence, arguing that the UK’s new-found isolation will harm the economy north of the border.

For Mr Cameron, who leads what is still nominally called the Conservative and Unionist Party, this would be as perfect an illustration of the law of unintended political consequences as you are ever likely to see.

Perhaps the so-called ‘Little Englanders’ in his ranks should be careful what they wish for.

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Saturday, December 03, 2011

A large slice of humble pie for Osborne - but was it really a game changer?

An extra £111bn of borrowing over the next five years. A fresh squeeze on public spending. No prospect of any tax cuts before the next general election.

It is easy to see why many commentators have described Tuesday’s Autumn Statement by Chancellor George Osborne as a ‘game changer’ in British politics.

Here we have a government that was elected in order to sort out the nation’s finances and eliminate the budget deficit by 2015 admitting that it will fail in that central objective.

Far from the being able to fight the next election on the sunlit uplands of fresh economic growth following the hard years of austerity, it will now have to do so against a continuing backdrop of cuts.

As the BBC’s James Landale put it on Tuesday evening: “Just as the facts have changed, so must the politics.”

“Until this morning, the assumption had been that the election would be about which party was best placed to use the proceeds of an incipient recovery – what taxes would they cut and what spending would they increase. That debate is now for the birds.”

And yet, and yet…I wonder if the Chancellor’s statement really has altered the terms of the underlying political debate about the country’s economic prospects all that much.

Despite all the economic doom and gloom, and the large slice of humble pie that the Chancellor has been forced to swallow this week, nothing has yet happened to demonstrate beyond doubt either that the government’s prescription is mistaken, or that a better alternative exists.

On the face of it, Labour’s narrative ought to be a compelling one. It is that an incipient recovery that was already under way by the time of the last election was then choked-off by a combination of spending cutbacks and “austerity rhetoric.”

But the public remains to be convinced that Labour’s more limited ambition to halve rather than eliminate the deficit in four years would not have landed us with a different set of problems.

There is also, still, a powerful residual feeling that Labour is really to blame for the country’s economic plight, even though history will surely show that Gordon Brown’s actions at the height of the banking crisis in 2008 saved us from a far worse fate.

This is a large part of the reason why, for all Mr Osborne’s difficulties, the opinion polls continue to show that Ed Miliband and Ed Balls are still less trusted on the economy than their Conservative counterparts.

A real political game changer is the kind of event which transforms the fortunes of the key players involved almost overnight.

Sadly for Mr Brown, his decision not to hold an election in the autumn of 2007 was one such example. After that self—inflicted humiliation, the public never saw him in the same light again and nothing he did was able to reverse that negative perception.

For the Tories, the ejection of the UK from the Exchange Rate Mechanism in 1992 is the one that sticks in the mind, destroying in one fell swoop the party’s hitherto prized reputation for economic competence.

I’m no apologist for George Osborne, but I don’t think being forced to downgrade the growth forecast for 2012 from 2.5pc to 0.7pc or even up the public sector borrowing requirement by £111bn quite falls into the same category.

For all the talk of game changers and transformed political landscapes, I actually find myself wondering whether this week’s events might not help the Conservatives in the longer-run.

If history is any guide, it suggests the answer might be yes. While voters appear to have a habit of ditching Labour governments at times of economic difficulty (1979, 2010) they seem more inclined to stick with Conservative ones (1983, 1992).

The Tories will of course hope that some of the pro-growth measures announced this week – for instance bringing forward £5bn of spending on infrastructure improvements – will have made at least some impact by the time we come to go to the polls again, even if few in this part of the world will have been fooled by the reannouncement of some old money for the Tyne and Wear Metro.

But if not, they could find that their most potent message come 2015 could well be that familiar old refrain: “Keep hold of nurse for fear of something worse.”

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Saturday, November 26, 2011

Osborne's date with political destiny

‘Make or break’ is doubtless an overused term in politics. Many are the times when it is said that a politician needs to make the “speech of his life” on such and such a day, only for the same old cliché to be trotted out again the next time he makes one.

Yet for Chancellor George Osborne, this Tuesday’s autumn statement on the economy is genuinely shaping up to be one of those dates with political destiny.

For years, Mr Osborne has been the man with the plan as far as the Tory Party is concerned, and his plan on taking over at No 11 Downing Street in May last year was straightforward and simple.

It was: sort out the deficit in the first couple of years, wait for economic growth to start kicking in again, sprinkle some carefully-targeted tax cuts around, and then win the next election hands down.

But it’s all gone horribly wrong. Far from providing a platform for new growth, 18 months of austerity measures have pitchforked the economy back towards the ultimate horror of a double-dip recession.

As such Mr Osborne’s masterplan for economic recovery – and outright Tory victory in 2015 – now looks hopelessly optimistic.

And of course, it is not just the fate of the economy and the government that is at stake here, but Mr Osborne’s own chances of succeeding David Cameron as Tory leader.

If recovery comes and the Tories win an overall majority next time, there will be nothing to stand between him and No 10. But if they lose – or are forced into another five years of coalition - it will be Mr Osborne who gets the blame.

All of which make Tuesday’s statement if not quite the “speech of his life” then certainly the most important he has made since that Tory conference address of 2007 which frightened Gordon Brown off from holding an election.

To succeed, he must somehow manage to reconcile two seemingly contradictory goals.

Firstly – and this almost goes without saying - he must manage to reassure the markets that the government remains serious about tackling the deficit.

But equally, he now needs to reassure an increasingly sceptical public that the government has a plan for growth – if not a ‘Plan B’ as Labour still insists on calling it, then at least a Plan A-Plus.

It is already clear from several strategically-placed leaks that switching more spending into capital investment in infrastructure is going to be central to Mr Osborne’s plans.

It all seems a far cry from the days when Margaret Thatcher commented sniffily: “You and I come by road or rail, economists travel on infrastructure” – but no matter.

Chief Secretary to the Treasury Danny Alexander gave an insight into the government’s thinking in a speech to the National Association of Housebuilders on Wednesday.

"We are shaking the Whitehall tree to make sure no-one is stockpiling capital that can be put to good use today. That's why next week's announcement will switch funds to capital spending plans,” he said.

This is all of a piece with Mr Cameron’s speech on Monday setting out measures to boost the housing market, both by encouraging the construction of more homes and by helping first-time buyers obtain mortgages.

And yesterday Deputy Prime Minister Nick Clegg got in on the act by pre-announcing a £1bn scheme to help the young unemployed, apparently to be paid for by further savings in other areas.

The risk for the government is that it will all be too little, too late to counteract the chilling effects of 18 months of what Labour leader Ed Miliband this week called “austerity rhetoric.”

But if he can use Tuesday’s statement to get the economy moving again at last, then it may yet all come right – for the coalition, for Mr Osborne, and most importantly for the long-suffering British public.

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Saturday, November 19, 2011

Lost North jobs still seen as a 'price worth paying'

Youth unemployment topping 1m. An additional 129,000 people out of work in the past month. The overall number of jobless at its highest level since 1994. This week’s unemployment figures told their own story.

If people were not already sufficiently well-appraised of the dire state of the British economy, Wednesday’s figures, coupled with more downbeat forecasts from the governor of the Bank of England, will surely have removed any lingering doubts.

Yet in the North-East, as is customarily the case when the economy as a whole is struggling, the picture is even bleaker still.

As The Journal reported on its front page the Monday before last, this region has seen a staggering 32,000 public sector jobs lost in the past year, while, public spending cuts notwithstanding, the number in London and the South East has actually risen by the same amount.

It is now more than a decade since the launch of The Journal’s original Case for the North campaign aimed at closing the economic divide with the South.

At the time, it was estimated that if economic growth continued at the same rate, it would take around 30 years to bridge the gap – a state of affairs which many of the region’s MPs and other political leaders regarded as intolerable.

I have to confess I don’t know whether any subsequent analysis has been carried out as to how long it would now take, but I don’t find it easy to hazard a guess as to how many more decades might have been added to that figure.

Back then, I wrote that the North-East cannot be expected to tolerate as a matter of course systemic imbalances in economic growth between regions, but in fact that has since become the unspoken policy of the British Government under both Labour and Tory administrations.

All of which makes the continuing debate over the direction of the economy perhaps more pertinent in this region than in any other.

For months, this debate has been stuck in a kind of stasis in which Labour endlessly and increasingly fatuously calls on the Government to adopt a ‘Plan B’ while the Government equally stubbornly insists it must stick to its course.

But this is now becoming more than just an arid intellectual battle between rival economic theories. People’s jobs, businesses and livelihoods are at stake.

The plaintive tone of Labour leader Ed Miliband’s speech to the Social Market Foundation on Thursday certainly conveyed the sense that a crisis point has been reached.

"Austerity at home, collective austerity abroad is no solution to the problems of jobs, growth or the deficit,” he said.

“Don't believe those who will tell you that any change in course will make us like Greece. The markets are as worried about the lack of growth in the economy as they are about debt levels.

"Knowing what we know now, about our economy, about growth prospects, about unemployment, about higher than expected borrowing, it would be the height of irresponsibility for the government to carry on regardless.

"I urge David Cameron: change course now, change course for the sake of our young people, change course for the sake of the country."

As it is, Mr Miliband is pushing at a partially open door in seeking a shift in the Government’s emphasis from deficit reduction to growth.

Chancellor George Osborne is understood to be working on a package of pro-growth measures to be unveiled in the autumn statement later this month.

They are likely to include a new job-creation initiative for the young unemployed, incentives for private companies to invest in big infrastructure projects, and a scheme to under-write mortgages for first-time buyers.

There may also be a rebate for high-energy using industries to alleviate the impact of green taxes, blamed by RTZ Alcan for Thursday’s decision to close its plant in Northumberland.

Some of that will doubtless help the North-East, as will Thursday’s announcement that Virgin Money, newly-enlarged with the acquisition of Northern Rock, will have its headquarters in Newcastle.

But it scarcely amounts to a regional economic policy, still less a strategy for tackling the enduring North-South divide.

Thirteen years ago, lost North-East jobs were seen by the then governor of the Bank of England as an “acceptable” price to pay for preventing the South-East economy from overheating.

Now it seems they are once again being viewed as a price worth paying.

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Saturday, November 12, 2011

Theresa May faces long-drawn-out demise

To kick off this week’s column, here are a couple of questions for political anoraks with long memories or people who were paying attention in school history lessons.

Number One: Who was the last British politician to move directly from the office of Secretary of State for the Home Department to that of First Lord of Treasury and Prime Minister?

Number Two: What do Reginald Maudling, Kenneth Baker, Charles Clarke and Jacqui Smith all have in common?

The answer to the first question is Viscount Palmerston in 1855. The answer to the second is that all four found that the job of Home Secretary proved to be their political graveyard, the exit route out of government from once-promising careers.

Before they came to grief, at least three of the above named had previously been mentioned as potential leaders of their parties - as indeed was the current incumbent, Theresa May, when David Cameron got into difficulties over his relationship with Rupert Murdoch’s media empire earlier this summer.

But such is the extent to which the Home Office is subject to sudden
political storms which seemingly blow up out of nowhere that it is scarcely surprising that Lord Palmerston’s 156-year-old record remains intact.

Ms Smith put it well in an article this week which simultaneously expressed sisterly sympathy for Mrs May while also gently managing to twist the knife.

"What is it about the Home Office that means we’re unsurprised to see the headlines explode in a frenzy of finger pointing, accusations, leaks and denials? More than any other British political institution, it has been the mirror that reflects back to people the things they worry about most – crime and punishment, equality and injustice, homegrown terrorists, noisy neighbours."

On the face of it, the similarities between the difficulties now facing Mrs May and those that brought down Mr Clarke in 2006 are striking.

Mr Clarke had to go after the Home Office took its eye off the ball over border checks and ended up letting a small number of individuals into the country who had been convicted of crimes overseas.

Granted, we don’t yet know whether any foreign criminals have been allowed into the UK as a result of the latest relaxation of border controls that occurred on Mrs May’s watch this summer.

But since we have no idea at all who actually was allowed in, this is surely just a matter of time and chance.

The key point at issue appears to be what degree of personal responsibility Mrs May exercised over the decision to relax border checks and whether operational staff went beyond what she actually asked for.

Brodie Clarke has quit as head of the UK Border Force after being accused by the Home Secretary of doing precisely that, although he vigorously denies acting improperly.

The argument has distinct echoes of another past Home Office debacle – the sacking of Derek Lewis as head of the prison service by Michael Howard in the mid-1990s.

On that occasion Mr Howard said Mr Lewis had had full operational responsibility for deciding whether to suspend the governor of Parkhurst Prison. Mr Lewis claimed that Mr Howard had overruled him.

So where does this current story go from here? Well, unlike many Home Office firestorms, this one could prove to be a slow burner.

Mr Clark will put his side of the story in an appearance before the Home Affairs Select Committee next week that is certain to make uncomfortable listening for Mrs May.

Even more ominously for the Home Secretary, he is threatening to lodge a claim for constructive dismissal - a case which Mrs May’s Labour predecessor Alan Johnson believes he stands a good chance of winning.

My own view for what it’s worth is that Mrs May has committed two cardinal political errors which may well ultimately cost her her job.

She has attempted to blame officials rather than accept that as a minister, the buck stops with her, and has thereby admitted that she is not actually in control of her department.

As Ms Smith put it: "In British politics, it has never proven a robust defence to admit that you don’t know the numbers on immigration, or to give any impression other than that you’re in control and becoming more controlling."

The story probably still has a fair way to run, but I suspect this may ultimately prove to be the decisive word on the matter.

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