Olli Rehn, the EU commissioner for economic and monetary affairs, thinks the cause-effect is clear enough:
Because there was a perception Spain was relaxing its fiscal targets for this year, there has been already a market reaction of several dozen basis points on yields of Spanish bonds.
Let us start with bonds. After 30 years when the “risk-free” cost of money has steadily declined, a reversal of this assumption would be important indeed.Mansoor Mohi-uddin of UBS made exactly that call this week, saying “this era is now set to end”. His case is as follows: “The Federal Reserve will not undertake another round of quantitative easing, the US economy shifts to a sustainable recovery, private sector credit in the US expands, China and other major emerging economies rebound after dipping in the first half of 2012, and the eurozone recession doesn’t shock the global economy.”
If all of these conditions are confirmed, then a bond bear market, with lower prices and higher yields, is inevitable.
Or it might be some of both.
Whatever the case, it is irresponsible* of Rehn to be declaring cause-effect in the interests of his beloved Fiscal Pact, when there is pretty clear counter-evidence. It suggests that he and the Merkozy camp which supports his tough line may be more interested in their own reputation for firmness than in what the markets really think of their plans to squeeze the life out of the European economy.
* I accept Barney’s charge, in a comment on my recent piece, that I was bit too quick off the mark with my own cause-effect declaration when the initial facts suited my theory in early March.
Mind you, I’m not a top dog at the European Commission, so I think I’m allowed a little more leeway.
After the weekend’s news that Peter Cruddas re-opened the cash-for-access can of worms, and the secret donor dinners at No. 10, I read with great interest the following words from a speech in July 2011:
‘People with money can get friendly with their local GP at a dinner party, maybe see them out of hours if there’s an emergency. In this world of restricted choice and freedom it’s the poorest who lose out.’
Those are the words of David Cameron accusing GPs of giving preferential access to ‘dinner party’ cliques.
The deputy editor of Pulse Magazine, Steve Nowottny, in a blog post after Cameron had made his accusation, said that Cameron was missing a trick, asking all the wrong questions. He concluded:
Lots of questions then, and no easy answers. Perhaps Mr Cameron could run them by a local GP at his next dinner party?
Not bloody likely.
Unless, of course, there are any GPs here:
Dinners in No 10 which major donors have attended:
14 July 2010 – No 10. Attendees:
Anthony & Carole Bamford
Michael & Dorothy Hintze
Murdoch & Elsa Maclennan
Lord John & Lady Sainsbury
Jill and Paul Ruddock
Mike and Jenny Farmer
Michael and Clara Freeman
28 February 2011 – flat
David Rowland and his wife. Andrew Feldman also attended.
2 November 2011 – flat. Attendees:
Henry and Dorothy Angest
Michael Farmer and wife
Ian Taylor and wife
27 February 2012 – flat
Michael Spencer and partner.
The #cashforcameron scandal offers easy picking for Labour at the moment, but it won’t last long.
The Tories are already working hard to cast Labour’s union funding arrangements in an even worse light than its own, and a compliant media will ensure that, when the dust settles, it’s a score-draw, unless Miliband changes the game now.
The Tories may have been found out on this occasion, but the political establishment as a whole will have been dragged down further into disrepute. In the end, what started out as bad news for the Tories will be even worse news for Labour, as the Tories create the space for a fuller attack on the Labour-union link.
Miliband and his team should now think strategically, not tactically.
Calling for a public inquiry is tactical response-by-numbers; the public is sick of public inquiries which never seem to change anything.
Instead, Miliband needs to act decisively, and announce that Labour plans to review its own funding processes, in a way which not only meets head-on any concerns over Labour’s policy-making probity but also – and more importantly – seeks to rejuvenate party political activity by devolving party funding to the the lowest possible party unit.
In so doing, Miliband will create clear water between Labour and the other parties on how and why it funds its politics - avoiding the false choice between donations to pary HQ or state funding, both of which are no-nos with the public. At the same time, Miliband has a golden opportunity to develop a genuinely more legitimate and equal relationship between Labour and the unions who fund it will be created.
Assiduous TCF readers will, of course, remember that I’ve been here before, but what I said back in 2010 is now even more relevant to Labour’s fortunes:
[W]e need to think radically, and soon, about how to generate additional membership/union income.
There are, I contend, two main ways in which we can increase revenue through the enhancement of party/movement democracy and a consequent increase in our activist/membership base.
Both are radical but logical steps in power devolution of the type all leadership candidates now say they espouse (though details are scant on how this will be acheived), and both will increase membership/union input substantially if they are implemented properly and in good faith.
First, the financial flows within the party need to be totally reversed.
All membership money and donations, barring a very small top slice for absolutely essential national administrative functions, should be distributed to CLPs (and possibly branch level in time) on a pro-rata basis according to membership numbers.
The CLPs, thus resourced, will then be open to ‘business plans’ from MPs/PPCs and from regional party structures/the NEC etc. which they can approve, ask to see amended, or reject as they see fit. Under your guidance, CLPs should have a mind to ensuring the smart, cost-effective campaigning you advocate. Initially, the task facing CLPs may seem overwhelming, and some central support from the top slice may be necessary.
In time, all parliamentary monies paid to MPs for running their constituency office should have automatic sequestration by CLPs and this should then be subject to the business planning process indicated above. Beyond this, MP salaries might also be taken down the same route (as would councillor allowances), with local decisions made on how much MPs are worth paying (of course, we would expect to see Labour MPs form their own union to negotiate collectively).
This devolution of power over the party’s resources will, in a fairly short space of time, create a major incentive for people to join the party, in the knowledge that they now have a local say over how the party’s resources are spent i.e. on what campaigns. In effect, local party members become Trustees of their own local party, with the MP and councillors (and other staff) acting as employees.
When back in government, Labour should also consider passing legislation which imposes the same ‘bottom-up’ funding model on all political parties with parliamentary representation in respect of all monies paid by government to parties e.g. Short monies. This funding pro-rata to membership, with memberships of the various parties then having real financial clout, will create a virtuous circle of local input-increased membership of parties-increased local input.
Second, and closely related to the first radical step, the NEC should commence work with trade unions to encourage them to disaffiliate from Labour nationally and to re-affiliate to local parties [and to take to conference a motion making this a Labour party rule].
Funding should be allocated to these local parties on the basis of satisfactory ‘business plans’ (an extension on the way in which unions already fund specific campaigns with MPs).
Again, this will enhance local input into decision making and increase party/union membership in time, creating scope for additional revenue into the party.
Clearly there will be a need to agree a transition plan which caters for the fulfilment of exisitong obligations to creditors and reassures them that this move towards localised funding arrangements will provide better guarantees of debt repayment because it creates both better revenue and better understanding within the membership of the party’s current financial obligations, leading to an enhanced willingness to contribute, fundraise and recruit.
Membership and union involvement needs to increase dramatically. This is the best way towards long term financial stability and further growth. Empowering the existing membership and union supporters is the way to do this.
Maybe this time the Labour hierarchy will listen.
There were no further changes to duty on alcohol during Osborne’s budget this week – a surprise to some. In fact, during some stolen moments during Wednesday lunchtime when I nipped into a nearby pub to watch Osborne reading out his plans there was audible joy at the move, despite cigarettes going up for smokers by 37p per pack.
To those who were happy I wanted to say – hold your horses, further plans will almost certainly be moved on prices during the alcohol strategy, out soon.
In accordance with the National Institute for Clinical Excellence’s recommendations (NICE),and against the preferred wishes of Andrew Lansley, the Prime Minister wants to see a 40p minimum price ceiling on a unit of alcohol.
I was told recently that this was a punishment on the poor for two reasons: firstly they would be hardest hit by the move as proportionate to their wages, low income earners spend more of their disposable incomings on alcohol than the wealthiest. Secondly that at a time where low income earners need a drink more, because they’ve fallen on hard times, this is a way for the government to kick them when they are down.
The problem with these reason are as follows: firstly the high price of many consumables, sadly, affect those on low incomes more. Fuel for example, proportionate to wages, tends to financially impact upon low income earners more, and inflation on that tends to disproportionately affect the elderly more.
To modify the price of alcohol so as to help low earners better afford it would mask, and distract attention from, the real problem here – that is people are paid too little to keep up with the prices of things. Particularly problematic if the only growth plan we can muster is for more people to spend money they often don’t have.
The other reason I was given for why this was a punishment on the poor I find deeply worrying. Sure it may be slightly tongue in cheek, but I’m sure it holds weight for some. Alcohol for the desperate can only bolster existing bouts of depression, not be used as a good source against them – as much as that may seem logical from time to time.
There is definitely social value to this move. The figures being used suggest there will be 50,000 fewer crimes each year and 900 fewer alcohol-related deaths per year by the end of the decade. It mustn’t however be the sum total of the move. Consultation with mental health facilities can help the government better understand the reasons people abuse alcohol if, say, they are experiencing anxiety-related problems. Equally the normalisation of alcohol misuse in the media might lead us to answering questions about how alcohol is viewed in everyday life.
A study by the Joseph Rowntree Foundation found, in 2011, that:
alcohol is the most prominent substance and beverage portrayed in TV programmes watched by young people. Alcohol is frequently depicted as a normal part of the characters’ lives and social interactions. However, the effects and consequences of drinking were only shown in about 10 per cent of the drinking acts featured in the programmes analysed, and focused on either positive or extreme negative effects (e.g. laughing, alcohol dependence, violence).
Another benefit of the price ceiling, often overlooked but is nonetheless concerned about, is the state of our communities and the “community pub”.
While local pubs have suffered financially over the past few years, and around 16 pubs close on average every week, the only drinking establishments available to many are the big chain pubs, devoid of atmosphere, and protected from being priced out of the market when selling drink promotions.
Rather than being a burden, Rick Muir from the ippr found that community pubs generate between £20,000 and £120,000 of ‘social value’ each year for their local communities. Their rapid closures have a detrimental effect on local economies.
One of the barriers to these pubs staying in the market, as well as their chain pub competitors, are supermarkets who can afford to sell at very low-cost prices. One of the recommendations in Muir’s report was to set a “minimum price per unit of alcohol should be introduced to prevent irresponsible promotions and close the gap between the on and the off trades.”
Supermarkets don’t sell alcohol for responsible prices now because if they did, the next supermarket down the road would go lower and the first one would lose out. Consequently, however, no supermarket makes what it potentially could on alcohol. It has to be said that supermarkets will benefit from this move because they can raise prices while their competitors are also obliged to. But this move has other, beneficial, consequences.
We cannot pick on one or two isolated issues where the poor disproportionately pay more – this needs a far wider approach, asking why the poor are “priced-out” in general. On the other hand the NHS will save money, crime will almost certainly be reduced, and we could potentially see a pub closure reversal, particularly for community pubs which generate social value. These new moves on price minimums are surely not all bad.
“Forget rising tax allowance. VAT hike, real terms cuts to tax credits, Child and Council Tax benefit mean poor getting poorer” tweets Owen Jones.
Owen is, I think, quite wrong. The personal allowance is the last thing we should be forgetting. This is the key to the Tories’ claim that this a fair budget, and it needs to be challenged for what it is.
The Labour leadership, and the Labour PR machine under its instruction, will almost certainly focus its fire on the lowering of the basic tax rate, and on the huge hit on pensioners’ tax allowances. This is classic squeezed middle territory (remember that we’re talking second, not state, pensions here).
Meanwhile, the Tory party and its press will focus its narrative on the decision to raise the personal allowance to £9,205.
As George Eaton identified this morning, the personal allowance hike may be bad policy but it’s great politics; the distributional effects may well be skewed to the upper earning centiles, but it’s easy to understand and voters are already in favour of it. In general, people are interested less in how the benefit might be distributed than in the idea that they might at least get some.
So while Labour is busy working out complicated ways to show how “average” hard working families and pensioners are hit (e.g. the claim that average families will end up £235 per year worse off), the Tories will be able to get on with their simple, effective message that it’s they who are the real party of the poor. It’s already happening, as this tweet indicates:
The Coalition Govt has now HALVED the income tax bill of a full-time employee on the minimum wage.
So what should Labour (and Owen) do differently?
The answer is to tackle the personal allowance issue head on, with examples that people can readily understand.
Here’s one I prepared earlier.
Take a single parent dad with two school age children, working full-time on just £12,000 per year (before deductions) as of April 2013, when the allowance announced today comes in.
The new personal tax allowance from 2013-14 will be £,9,205. This means that he’ll have (£12,000 – £9,205) £2,795 to pay tax on and a tax bill of (£2,795×20%) £559.
This compares with a tax bill for 2012-13, during which the personal allowance is £8,105 of ((£12,000 – £8,105) x20%) £779.
So the tax saved is £779 – £559 – a not massive £220.
This isn’t the whole story, though. To get a proper sense of how this family will fare, we need to take into account a) the three year freeze on child benefit effective from April 2011; b) the new freeze on working tax credit to which this family would be entitled.
Child benefit remains at £20.30 for the first child and £13.40 for the second (£33.70 total). If you calculate what the benefit rate would have been if it had been inflation rated from 2011-14 (at, say, 5%, 5% and 3% per year as inflation drops), you find that child benefit that would have been totalled £1,995.5 in 2014 actually totals £1,752.40. That’s a loss to the family of some £245 per year.
Then there’s the working tax credit freeze. You can put the information into this handy government calculator, and you find that without inflation rises in 2012 and 2013, the family ends up a further £29 out of pocket.
So for all Osborne’s fine words, a single parent family wioth two children surviving on £12,000 per year will be £274 per year worse off simply as a result of Osborne’s recent tax and benefit changes, and before any of the other factors like general cost of living increases, and VAT, are taken into account.
This is one angle in which we should be taking on the government when it talks about how it has lifted low earnersout of tax: it’s smoke and mirrors.
But the other way – to make the personal allowance hike relative to the 50p tax reduction for high earners – may be more effective.
The maths are simple. Someone who earns £1m per year will now pay £42, 500 less tax. The personal allowance rise means someone on £12,000 will pay £220 less tax if you leave the previous freezes out of the equation.
Someone earning a million earns 83 times as much as someone on £12,000, but will save 193 times as much in tax. A simple measure of how regressive this is simple: 83/193 = the rich are being treated at least (193/83) 2.3 times better than the poor by today’s budget.
Of course, this is the dull maths, and someone in the Labour team will need to make the points a good deal more snappily than I can. But the point remains that we shouldn’t just be letting the Tories get away with their lie that their personal allowance rise is doing anything at all for those on low incomes.
Will wonders never cease.
I’m sure a blog post could be achieved hourly on the state of the Daily Mail’s comments thread, but this one deserves highlighting.
A young woman met a young man, Peter Ramsey, on the internet before going on a date, which they arranged through messages.
They went on said date, he offered to walk her home, she accepted, he tried to kiss her, she refused, he punched her, raped her, and made her face “unrecognisable” – according to a police statement.
The following pictures are screengrabs of the comments
The privatisation of our roads is a little way off, and it’s still not clear what Cameron’s initial announcement actually means.
The two key questions are whether any new programme will be for a large part of the existing network (rather than new roads and “pinch points” and whether the longer term plan is to do with tolling/roadpricing, or just another expression of what Chris calls “irrational debt phobia”, whereby what could be achieved by borrowing through the gilt market is instead put out to much more expensive PFI so as to keep it off the balance sheet.
We’re unlikely to know much more on this until the Autumn when the Treasury and the Department for Transport report back with their feasibility study. Nevertheless, on the pretty reasonable assumption that what is announced later may be just as bad as we think it might, it’s wise to start thinking about how any privatisation might be resisted.
The most obvious spanner for the works, it seems to me, is the “community right to bid” provisions set out in the Localism Act, which came into force in late 2011. I’ve covered the basics of what those provision are (and aren’t) here.
Under these provisions, local community groups and parish councils etc. have the right to request that any “assets of community value” be placed on a register of same by their local authority. If the local authority agrees to place these assets on the register, they then become subject to the “community right to bid” process.
This means that when any owner wishes to dispose of any such asset, s/he must first observe a moratorium period during which community groups get the chance to express an interest in their purchase, and if they do express an interest a further time period must be given to allow for a business plan to be developed and bid submitted.
Now clearly, it can be argued that a road is an “asset of community value”. Without access to it, people within that community can’t get from A to B.
If, therefore, lots of local authorities start putting their entire road network on the Register of Assets of Community Value – a register they are required by law to draw up – their sale becomes an interesting question.
With a typical trunk road passing through, let’s say, 10 local authority areas, of which five non-Tory ones choose to put their bit of road on the Register, the government would be legally obliged to go through five different moratorium/business plan processes, during which time community activists could come together with local authorities to develop a “buy back” offer, whereby central government has to pay them for maintenance rather than a private contractor (though as now maintenance would be done by contractors anyway).
Even the thought of having to compete for stretches of road, and the fear that a 10 mile stretch out of a 100 mile highway might end up in the “wrong hands” might well be enough to put sovereign wealth funds off the whole idea in the first place.
Worth thinking through, anyway…..
In the meantime, it’ll be worth seeing the extent to which the DfT’s feasibility study takes into account another new piece of legislation: the Public Services (Social Value) Act 2012, which became law on 8th March 2012.
Under this Act, if a “relevant authority proposes to procure or make arrangements for procuring the provision of services, or the provision of services together with the purchase or hire of goods or the carrying out of works”, then that authority must consider:
(a) how what is proposed to be procured might improve the economic, social and environmental well-being of the relevant area, and
(b) how, in conducting the process of procurement, it might act with a view to securing that improvement.
The selling off of our roads would, to say the least, be an interesting test of the application of this Act. Failure to apply it before flogging off the highways would surely lead to Judicial Review action against the government by one or more of the larger campaign groups, perhaps in conjunction with some of the more pro-active local authorities.