The good ship Lib Dem lurches beneath the waves...

HMS ship-of-the-line Liberal Democrat Hopes has been holed on a number of occasions, almost always on account of its stout attempts to defend Admiral Dave's flagship The Coalition from serious damage.

One thinks of the Battle of Tuition Fees Bay, where the Liberal Democrat Hopes change tack 180 degrees and heaved itself bravely across the path of Coalition giving priceless protective cover from enemy fire. The damage from that encounter was considerable but Liberal Democrat Hopes stayed afloat and seemingly still under the control of Lieutenant Clegg, its flawed but once-promising First Officer.

Before that there was the volley of defensive cover that the ship fired, allowing Coalition to launch its gunboat Too far Too fast with devastating effect on an unsuspecting economy.

There have been a number of skirmishes since, in many of which the selfless sacrifices of the Liberal Democrat Hopes have been vital to keeping The Coalition afloat.

This week has seen some decisive action that threatens to sink the valiant vessel at last. The first serious damage, and it is below the water line, comes from Tuesday's all out volley on the good ship the NHS Bill. The rebel Labour crew had battled through a series of bloody encounters to sink the poisonous Bill. Many times it seemed that emissaries from Labour were close to subverting the crew of the Liberal Democrat Hopes to support their efforts, but each time the officers of the Liberal Democrat Hopes have succeeded in whipping their recalcitrant crew into line.

Yesterday they were given one last chance to sink the NHS Bill with an effort being made by Labour to release the sealed orders governing its passage and revealing the risks to life and limb of staying on the chosen course. They failed to grasp the chance: there were of course the usual wavering speeches and wringing of hands and voices from the back whispering "we're agin' it". But, when the crew cast its vote, they stayed faithful to their flagship and cast in their lot with the commanders of The Coalition. Thanks to the intervention of the Liberal Democrat Hopes the NHS Bill sailed safely into port with its cargo of cutters and a full complement of privatisers.

Today Liberal Democrat Hope limps into the Battle of the Budget, seriously damaged and with all hands bailing as fast and as furiously as they can, but still defiant in its stubborn defence of the flagship Coalition. It seems that promises from Admiral Dave and Commander Gideon on an increase in pay and rations of the cabin boys and lower deck hands has been bartered in favour of the Liberal Democrat Hopes' flying the flag for the abolition of the ten bob tax, which The Coalition sees as an odious imposition on rich people.

Will they do it? Will Lieutenant Clegg sail his ship through the choppy waters of Tory Canyon to sail to the rescue of plutocrats and oligarchs and wallpaper millionaires? The betting is that they will. But at what cost?

Can Liberal Democrat Hopes recover from the damage it is inflicting upon itself, its officers and its crew in defence of the indefensible? Is the battle worth the injury? Or will today's encounter be the final salvo, the valedictory, for the brave but ultimately suicidal crew of Liberal Democrat Hopes?

P.S. (or should that be P.B. for Post Budget?)...  the ship's rats ratted.... predicable but sad. What now for any of the LibDem crew who still have a residue of backbone...??

Osborne's Moody Swings...

George Osborne has now had three tries, in less than a year, at addressing the problems in the economy: the June  2010 emergency budget, the autumn statement and yesterday's full annual budget statement.

Whereas the economy that Osborne took over was clearly the legacy of Alasdair Darling and Gordon Brown, the Chancellor has scorned the efforts of his predecessors and progressively put his own stamp on the economic situation: the economy of today is George Osborne's, and no-one else's.

The economy that Osborne took over was going through a slow and halting recovery with some growth in activity and a slowing of unemployment. Osborne took control with the vow to concentrate on growth. But since he has been in charge growth has stalled and unemployment has increased. Osborne also used the fear of the UK losing its "AAA" rating from the credit agencies as a prime reason for "cut fast and deep" strategy. We were in danger of losing our AAA rating, Osborne warned, and that would severely hamper any recovery by making debt more expensive to service, said George, so we had to be ruthless..

It is therefore ironic in the extreme that both the main credit agencies, Moody's and Fitch, have chosen today to issue warnings about the forecasts for growth that accompany Osborne's budget.

Moody's is clear about the problem:

"Although the weaker economic growth prospects in 2011 and 2012 do not directly cast doubt on the UK's sovereign rating level, we believe that slower growth combined with weaker-than-expected fiscal consolidation could cause the UK's debt metrics to deteriorate to a point that would be inconsistent with a AAA rating," 

Yesterdays' budget was seen by commentators as being broadly neutral: in other words, there would be no noticeable stimulus to the economy and there were no identifiable measures that would provide that growth, and it came on the back of weakening economic figures and pessimistic forecasts.

Osborne told parliament on Wednesday that the UK economy would grow by 1.7% this year, and by 2.5% in 2012, predictions which are still more optimistic than the latest assessment from the OECD, which  predicted last week that the UK would expand by 1.5% during 2011, and 2.0% in 2012.

Fitch, a rival credit rating agency, has already warned that Osborne may have to impose further austerity measures if GDP growth is slower than expected, or if inflation continues to run much higher than official targets.


Standards & Poor, the third main ratings agency, made noises in May 2009 about reducing the UK's credit rating, much to George's approbation.

Wouldn't it be ironic if all of George's efforts to appease the markets were to result in the very rejection by the markets that he has been using as the excuse for his extreme cuts strategy in the first place...???

To Lose one Minister...

..is unfortunate. To lose two is careless...

Isn't it slightly weird  the way people you've never been aware of before suddenly become Government Ministers and start popping up on telly talking about things they obviously only learned by rote ten minutes before the programme started? But it's even more weird when these people you never heard of who are now Ministers, cock up so blatantly on their first outing that they get the sack and you never see them again...

The coalition has already lost David Laws, the "Orange Book" Lib Dem/Tory cross-breed finance minister. No sooner had he given a beaming first (and sadly for him last) press conference than the hook came out from the flies and off he went to MPs expenses purgatory. Oh well, cheerio then.

Tonight I believe we saw the next candidate for ejection: a certain Finanace Minister Mr Mark Hoban, who looked so flummoxed and out of his depth on Newsnight trying to explain why the budget is progressive to Emily Maitland. "As I sad Emily", he said, and then he said it again and again... he must have said it half a dozen times as he waved and drowned and went down for the third time still bubbling "As I said, glug, Emily, glug.....".

The sight of  a once-promising career sinking beneath the waves on its maiden voyage... ghastly and fascinating and a bit sad.

Still. Mustn't grumble. Another one bites the dust....

Tories in Budget Denial

The Guardian has a nice juxtaposition on its front page today...

And it's not just the Guardian, the Telegraph (Torygraph) has the same stories and photograph with almost the same headlines.... the question is: is it deliberate?

It's great that the PM has a new child, particularly given the family tragedy of the death of his young son, so it might seem churlish to add an "ah-but"....

But (nevertheless) the timing of this happy family event is a reminder that this Tory Government has launched a budget which damages British families, with what the Institute for Fiscal Studies has shown to be a very regressive attack on the poorest families, who will lose much more in total and in proportion to their already very small incomes.

"The IFS said it had always been sceptical about Osborne's claim that the budget was "progressive" but added that this instant judgment had been reinforced by a study of proposed changes to housing benefit, disability allowances and tax credits due to come in between now and 2015".

and...

"Passing judgment that is likely to make uncomfortable reading for the Liberal Democrats, the IFS concluded: "Once all of the benefit cuts are considered, the tax and benefit changes announced in the emergency budget are clearly regressive as, on average, they hit the poorest households more than those in the upper middle of the income distribution in cash, let alone percentage, terms".

In other words the poorest lose most in cash terms and in percentage terms. The richest lose a lot less.

Now, you and I might say "so far so Tory", and even "so what?". But the fact is that George Osborne stood in Parliament and said "My budget is a progressive budget. It will hit the poorest least". Now it transpires that the Treasury was being economical with the truth...by choosing to end its analysis at 2012 and by excluding some measures from the calculation, it has given the impression that there will be relatively progressive outcomes. But the budget regulates tax and spending until 2015. And after 2012 the effect on the poorest becomes much clearer.

Nick Clegg, in his defence of George Osborne, claimed that the budget had "fairness in its bones". But he was apparently lying through his teeth mistaken.

We know that Tories "in their bones", care little for the poor, but the Lib Dems have spent decades broadcasting their "caring" credentials. Now that the truth has been revealed, where does that leave the bleeding heart crocodile tears so-called caring Liberal Democrats? In a very uncomfortable place if my judgement is right.

So do they really care? It's my belief that, if this revelation from the IFS does not prompt defections of the Liberal Democrats MPs to Labour, we can consign the "caring Lib Dems" to the dustbin of betrayal and broken promises.

For the last few weeks the Tories have been throwing out the accusation that Labour is in "deficit denial". It looks like they are now in "budget denial"...

This Budget kills the recovery at birth...

A couple of days ago I posted this, showing some Newsnight footage and an interview with the Japanese economist Richard Koo. The basic message was the Treasury's new belief that exports will provide the growth to drag us out of recession, and a warning that the budget cuts risk delivering a Japanese nightmare of a decade or more of non-growth.

Today Professor David Blanchflower has an article in the New Statesman. It has the rather forbidding headline "This Budget kills the recovery at birth" .

I'm no economist, so I'll let you read it for yourself. Just let me quote a few sentences...

"I am now convinced that as a result of this reckless Budget the UK will suffer a double-dip recession or worse, not least because there is no room for interest-rate cuts, although lots of additional quantitative easing (QE) from the Bank of England could soften the blow."

and

"....on 22 June, Budget Day, the OBR produced a second forecast taking into account the Chancellor's new fiscal measures and showing lower growth in 2010 and 2011 but higher growth after that. The OBR's central projection is that growth will be 1.2 per cent in 2010, 2.3 per cent in 2011 and 2.8 per cent in 2012. That implies quarterly growth rates of 0.6 per cent from the second quarter of 2010. But these forecasts have large margins of error, and indeed in each of these years there is a significant probability in the OBR forecast that growth rates could be zero or lower, before the cuts have even kicked in."

Note that "before the cuts have even kicked in".....

Anyway, it seems clear that there is a large body of economic opinion that believes that Mr Osborne has greatly over-egged the cuts and that the danger of a double-dip or worse is greatly heightened by his budget.

You can't help hoping that these predictions are wrong, but the Conservatives have form in using ideological cuts to achieve political ends regardless of the costs to society...

They have always believed, after all the "unemplyment is a price worth paying".

Your unemployment of course, not theirs....

Canada or Japan...?

A fascinating piece of journalism on the budget by Paul Mason and Jeremy Paxman on Newsnight last night.

Paul Mason showed a Treasury pie-chart of the factors producing growth in the economy for the last ten years, and then the same pie chart as a forecast for the budget period. In the budget forecast, the piece of the “pie” that previously represented “housing” is magically doubled to 20%, “investment” triples and, most bizarrely of all, the piece that represented “government spending” (about 25% of overall growth) has been replaced by a category called “exports”.

it’s here, at 25mins in to the programme;

In other words, the UK will grow by a growth in the housing market that is not yet evident in the figures or predictions, an investment boom (when banks are not lending and companies are not borrowing for investmemnt) and an export miracle that is not even a gren shoot in any economic model other than the governments.  There is absolutely no indication in any budget documents of how these changes will be achieved. And they are based on massive assumptions of changes in behaviour by individuals, companies and banks. Paul Mason made no attempt to explain it beyond saying that the government believed that Canada had used a similar model to get out of recession in the ’90s, but he looked as puzzled as I was watching him describe it……

The rest of the piece was a Paxman interview with a Japanese economist who said we were making exactly the same mistake they did in the 80s and they are only now coming out of recession…..”you don’t cut government spending when the private sector is deleveraging” were his words, and that is exactly what we are proposing to do…. he also mentioned an "economy in tailspin"...

TBH, it was quite frightening ....

Dr Dracula and the Lib Dem Blood Bank

Memo to my Lib Dem friends:

If you invite Dr. Dracula to perform the operation, don't complain if he drains your blood in the process.

George Osborne

Lib Dem Chancellor

During the election campaign both Labour and Tories used the formula that they "had no plans to increase VAT". Labour probably meant it, and would have worked hard to avoid increasing VAT. The Tories obviously did not mean it, as George Osborne has shown by his enthusiastic raising of VAT from 17.5% to 20%, a huge hike.

But the Lib Dems were adamant: they would not raise VAT. It was and is a regressive tax, it hits the poor much harder than it hits the rich. If you earn £200 a week you will spend all of it on subsistence. If VAT goes up by 2.5% it takes an immediate 2.5% out of your pocket, and if you spend all of your income just to survive, then it is  a very hard hit indeed. All of which was true then and is true now.

So who should we blame for the VAT increase? The Tories are the Tories, and the nasty party can be expected to act nastily. That's not to excuse, but to explain. If you invite Dr. Dracula to perform the operation, don't complain if he drains your blood in the process.

It's the Lib Dems that have most questions to answer: they opposed VAT increases with a vehemence that was wonderful to behold. Now they embrace it with exactly the same enthusiasm.

Simon Hughes, Vince Cable, even Nick Clegg, they all looked very uncomfortable as Harriet Harman challenged Lib Dem MPs to vote for the budget with its enormous benefits cuts and VAT rises. The question is: will the MPsfollow their leaders into the Tory lobby in the budget votes, or will they follow their conscience and their election promises and vote it down?

And as the Lib Dem blood drains away, will the Tories fatten on the feast...?

George Unravels: the Budget.

George Osborne has claimed that the budget has completely unravelled...

here

Given Osborne's dithering and weak performance as shadow chancellor over the last year, here's a quiz:

"The budget has completely unravelled":

"I have completely unravelled the budget":

"I have completely unravelled:"

- George Osborne.

Which of these statements do you think is most true?

Henry or Stan, who has the Bottom?

Just watched Osborne and Darling on BBC News24 and there is no doubt that Darling is the more impressive figure, by a factor of 10.

As well as looking typically weak and peeevish, Osborne shot himself in the foot by asking the rhetorical questions: "where is the energy, where is the vision, where is the competence?"

To which the smart answer is : obviously not with you George!

Watching the performance of the rivals was like watching a contest in trustworthiness between Henry Fonda and a Stan Laurel. Nothing against Stan Laurel, he's quite a pleasant fellow....

....but you wouldn't want him driving the bus...

The Budget....is that it?

I watched the budget. I listened to the Chancellor. Almost every word.

Usually you get a "steer" from the wording and the emphasis of the speech. The "steer" would be what the Chancellor wants you to think, the message he wants to send, the headlines he wants to read in the evening papers, whatever else is the real meat of the budget.

But this time..... I really got no impression. No spin. No "steer" from the politicos.

Except that we're in a really bad place. We have to borrow eye-watering amounts to stay afloat. And we hope to be out of it soon.....

On the other hand, the budget will not balance again before 2015/16, which seems an awfully long time....

One thing is clear though, and that's the weakness of the Conservative position. Cameron made a stinging attack on an open door, on the lines of "the situation is dire". But since the Chancellor had already admitted that the situation is dire, the Cameron angle, - "I agree, it really is dire" - seemed blunted and obvious. And it exposed the fact that he had no realistic alternative proposals.

Because the Tories seem to oppose measures to boost spending, they seem to prefer "responsibility" (i.e. cuts, or at least no easing) but they have no detailed, worked out, spelled out, policy alternative.

If the situation really is dire, shouting out as loud as you can "it's really dire", is not a solution.