Crisis, what crisis?

OK, so I am not an economist, but having lived through the Thatcher and Major recessions, I know how bad a recession can be. Labour's support of the economy made sure that we did not suffer a recession as bad as the last two Tory-created recessions.

But are we really in such a mess as the arch-spinner Cameron claims we are? No. Here are some facts.

First, lets have a look at the figures from the IMF. Figure 4, page 13, of the Fiscal Monitor shows the debt as a percentage of GDP for several major economies. The first, here, is for the UK.

Remember, these are figures from the IMF, so they are reliable. The first thing to note is that while there are some variations the level of GDP is pretty flat between 1975 and 2007. The peak at 1995/6 is a Tory recession (in general, when you have a recession, the debt rises). The next thing to note is that Gordon Brown, as chancellor, paid down the debt so that there is a dip at 2003. The debt rises a little and tails off at 2007 at a level equivalent to the late 80s (remember, the 80s was a time when the country was awash with North Sea oil revenues - which should have been a time of plenty). The third point is that the debt rises from 2008 and is expected to peak in 2011. The final point is that this final level of debt is equivalent to the level in the mid-60s when the country was expanding higher education, the road system and rebuilding our city centres - not a time of austerity. The fact is, we should not regard our debt levels to be catastrophic, and certainly we should not be demanding austerity measures.

Now have a look at the debt of other countries. In the following graph I have copied all the other graphs from the Fiscal Monitor report, rescaled them and overlaid them.

The graph shows Japan, US, UK, Germany and Canada; as well as the G-7 average. Japan is clearly an aberration, but I have shown it here as an illustration that a country that has a high standard of living and is an economic success can still sustain a high level of debt. The main point of this graph is to show that the UK is not exceptional in its level of debt. The G-7 average and the US levels of debt are higher than the UK. Germany's debt 2010-2015 is only just behind the UK and with the problems in the Eurozone these figures are likely to be underestimates.

Far more interesting is that for the period 1990 - 2007 the UK debt was consistently lower than any of the other countries shown here, that is, the years when Brown and Darling were in charge of the Treasury, the UK's level of debt was less than our competitors. Where has Cameron ever acknowledged this sucess of the Labour administration? Since the peak after 2008 was due to the global recession, the likelihood is that the UK could return back to a low level compared to the G-7.

This is a view supported by Samuel Brittan, a monetarist economist and a supporter of the Conservatives. In the Financial Times he writes:

"What I doubt, however, is the conventional view that there is a specifically UK fiscal crisis. The nearest thing to an impartial audit comes from the new IMF Fiscal Monitor. This shows governments’ “gross financing needs” for the UK in 2010 equivalent to 20 per cent of gross domestic product. Some 11.4 per cent comes from the Budget deficit and 8.6 per cent from maturing debt. You can make the debating point that total financing needs are not far below those of Greece. But they are well below those of France, at 25.1 per cent of GDP, let alone the US (32.2 per cent) or Japan (64 per cent)." 

Let's have a look at these "financial needs", these are from Table 6 (page 21) of the Fiscal Monitor (14 May 2010) report from the IMF:

	Maturing Debt	Deficit	Gross Financing Needs	Gross Debt (2009)	Average Maturity (years)
Canada	15.9	-5.3	21.2	82.5	5.6
France	16.9	-8.2	25.1	77.4	6.5
Germany	10.2	-5.7	15.9	72.5	6.0
Greece	13.4	-8.1	21.5	115.1	7.4
Japan	54.2	-9.8	64.0	217.7	5.2
UK	8.6	-11.4	20.0	68.2	12.8
US	21.2	-11.0	32.2	83.2	4.4

Or take the gross debt-to-GDP ratio. The UK, at 68.2 per cent, emerges not merely below the US but below many other countries including Germany and Canada. Where the UK emerges with flying colours is in the average maturity of the debt, which of course determines future financing needs. This turns out at 12.8 years, while nearly every other country listed has a maturity in low single figures, such as 4.4 years for the US. The IMF analysts believe that the bulk of fiscal deterioration in most advanced countries comes neither from irresponsible spending nor fiscal stimuli, but from the automatic effects of the recession." 

Brittan clearly thinks that the UK is in a very good position compared to other leading economies. This is not a sentiment publicised by Cameron, but we know that Cameron hardly ever speaks the truth.

So, who owns this debt? Analysis from Lloyds TSB says that basically we do. Table a, page 2, gives the following figures:

	Q3 09	% Total
Insurance co's and pension funds	248.4	32.4
Overseas	216.9	28.3
Other financial institutions	97.1	12.7
Households	5.6	0.7
Building societies	12.9	1.7
Local authorities & public corporations	1.5	0.2
Banks (excl BoE)	33.1	4.3
Bank of England	151.8	19.8
Total	767.2

The interesting point is that just 28% is owned by overseas investors. 19.8% is owned by the Bank of England (presumably through quantative easing) so that means that 51.9% is owned by us. So when the government complains about the amount of money that is spent in servicing the debt, remember that just 28% of the interest payment goes out of the country and the rest comes back to us.

The ludicrous argument of Osborne is that the interest payments are a problem, whereas in fact this is the kind of tax redistribution that he approves of: more money into pension funds at a time when the government is desperate for us to save more for our pensions, more money to reward savings when the government wants us to save more.

Isn't it about time that Cameron and Osborne started telling the truth about the economy?

New Politics?

Last week on the first session in Parliament David Blunkett said:

Despite this, it would appear that major constitutional announcements about the House, the voting system and the House of Lords; on spending cuts; and on how the House might rid itself of a Government that no longer had its confidence – all three appear to have been made prior to Parliament convening next week.


We look to the Speaker to defend our interest as backbenchers. But we look forward most of all to him reasserting the ideas promoted before the election – that we should not be engaged in fixes, not have the old caballing; that we should have open, honest, forthright debate and that parliamentarians should genuinely be able to hold this new coalition to account.

In other words, Blunkett was saying that Parliament should be informed first.

So what do we find today? We find that the entire legislature programme for the next Parliament has been leaked to the press. A leak, of course, is an unplanned announcement. Exactly the sort of thing that Blunkett was warning about. I wonder if Mr Speaker will ask questions of the ConDem government and get them to assure us that theirs will not be a government of "leaks".

CCTV Cameras

"We will further regulate CCTV"

So says the coalition agreement. Why? How?

The fact is, most CCTV cameras are on private land: they are in shopping malls, in shops, in office car parks. If the government tries to regulate those cameras then they will get huge opposition from the retail trade who will quite rightly argue that the cameras deter shop lifting and crimes like pickpocketing.

The reason for the inclusion of the statement in the coalition agreement is the Daily Mail bugbear of public bodies operating CCTV cameras: the police, local councils and authorities like the British Transport Police. The Daily Mail and their ilk inflate the numbers of such cameras. The Daily Mail claims that there are 4.2 million such cameras. This is pure nonsense. No one really knows the actual figure because (as I said above) most are privately owned, but security professionals argue that the figure is around 1.2 million, less than a third the Daily Mail figure.

So where does the 4.2 million figure come from? Well according to Wikipedia:

"The exact number of CCTV cameras in the UK is not known but a 2002 working paper by Michael McCahill and Clive Norris of UrbanEye, based on a small sample in Putney High Street, estimated the number of surveillance cameras in private premises in London is around 500,000 and the total number of cameras in the UK is around 4,200,000." 

This is not acceptable at all! Putney High Street is not representative of all UK shopping streets and is not representative of all UK streets, so it is lazy and inaccurate to extrapolate the survey to the entire country.

A figure of 4.2 million cameras works out as 71 per 1000 people (1.2 million is 20 per 1000). Remember, this is the supposed figure as an average over all 60 million of us, so in an area of dense population there will be, well thousands of the things. By rights you would not be able to move for them in central London! When you sit down and think sensibly about the issues, there are far fewer CCTV cameras than the right wing press insist there are.

In an attempt to get a measure of the cameras operated by public bodies (which I think will be the target of any new regulation) the BBC conducted a survey. For county councils they found:

"West Sussex has the highest number of CCTV cameras in the sample of English counties, with 0.52 per 1,000 people. "

Note that figure: the highest number for a county council is 0.52 per 1000, as opposed to the Daily Mail's average of 71. So the Mail's average is a factor of 137 larger tnan the county with the most cameras!

But what about cities. Well London, as the nation's capital with foreign embassies and government buildings, is likely to have more cameras than most cities. The BBC survey says that Wandsworth has the highest number of cameras with just under 4 per 1000 people. Again, the Mail's figure of 71 is 7.6 times larger than the actual figure for the borough with the most number of cameras.

These figures show that there are a lot fewer CCTV cameras than the Daily Mail insists. If you scale up the highest county council figure then there are a maximum of 31,000 publicly operated cameras in the UK, or if you take the Wandsworth figure then there are a maximum of 240,000 publicly operated cameras in the UK. The figure I gave above, of 1.2 million cameras shows that the vast majority (over a million or five times as many as publicly owned) cameras are privately owned. So the claims of "the state spying on us" is nonsense, it is the private sector spying on us!

Do people dislike CCTV cameras? The evidence is that people like cameras. The Home Office surveyed people and found that 70% of people were in favour of them.

If the coalition government bring in further regulation what will the effect be? The first thing to say is that the government is unlikely to regulate the use on private property. Since that is where most of the cameras are used, it just shows how ineffective the legislation will be. Of the relatively few publicly operated cameras the effect will be that Tube and railway stations will close earlier, and late bus services around the country will be removed. In cities there will be an increase in petty crimes like pickpocketing, "dipping" and bag snatching. In residential areas women in particular, will feel more vulnerable.

Nick Clegg's attempt to cosy-up to the Daily Mail ranters will have a detrimental affect on our society.

What the LibDems Think

Well, the LibDems are now Tories so I may as well have a look at their health policy. You can find their thinking at CentreForum. If you have read my analysis of the Conservative health policies then you will find The NHS: a liberal blueprint familiar.

Let me give you a starter, this is the LibDem future for NHS hospitals:

We should introduce a mechanism to allow staff to vote for their hospital trust to become a wholly owned employee trust.

Sound familiar? Yes this is exactly what Andrew Lansley was saying in his "Big Society" manifesto launch when he said that he would "invite in co-ops of doctors to take over hospital services".

Further, the LibDems introduce Circle Health as justification:

Half (49.9 per cent) of Circle is owned by Circle Partnership Ltd, which belongs to everyone who works in clinical services, directly or indirectly and at every level.

The other half 50.1% is owned by Circle International plc. which their website describes as "the investment vehicle that blue chip City institutional investors have subscribed to for shares by providing the capital for Circle".

So what they are saying is that half of the profits go into some "blue chip City institutional investors" rather than back into healthcare. Right. Nice to know that under the Circle model yet more of out tax contributions will be going into the pockets of City investors. New Politics? Pah!

We should not be worried about the Conservative plans for the NHS, it is the LibDems we should be afraid of.

Biometric Passports

This is from the "coalition agreement" indicating the schemes that the ConDems will abolish:

The scrapping of the ID card scheme, the national identity register, the next generation of biometric passports and the Contact Point database;

Fine, I disliked all of those but look at the weasel words. Not "scrap biometric passports", but "next-gen biometric passports". So no change there then.

Why do we have to have bio-metric passports? Well, have a look on the US Embassy website:


If the passport was issued, renewed/extended between October 26, 2005 and October 25, 2006 it must contain a digital photograph. If the passport was issued, renewed/extended on or after October 26, 2006, it must be electronic. Electronic passports include an integrated circuit chip capable of storing the biographic information from the data page, a digitized photograph and other biometric information. 

The fact is that to travel to the US you have to have a biometric passport, so the pledge to scrap the "next-gen" passports is a hollow promise. You will still have biometric data taken from you, and it will still be stored on a computer.

NHS Cuts Are On The Way

The new Con-Dem love in was sealed with an agreement document (you can find it here on the Guardian website). Apparently a more detailed document will be made available tomorrow.

There are two things to mention. Scan this to see what they have agreed about the NHS, what can you see? That's right, there is just one mention of the department that takes a sixth of government spending and it is this:

The parties agree that funding for the NHS should increase in real terms in each year of the parliament, while recognising the impact this decision would have on other departments.

This echoes what Cameron has said throughout the election. However, there are no details about the restructuring of the NHS, all the "Big Society" guff, outcomes, GP fundholding, "inviting in the private sector". Nothing. That sounds suspicious. Basically the LibDems will not prevent Lansley's damaging plans to turn the NHS into a commissioning-only organisation, and allowing the private sector to cherry pick services from our NHS hospitals.

The second thing is this article from the FT Cameron drops pledge to raise NHS spending in real terms:

The coalition document is yet to be published. But I’ve been told that the ring-fence on NHS funding has been lifted.  The exact wording is:

    “We will increase NHS spending in every year of the parliament.”

This meets the Lib Dem policy of not protecting any department from public spending cuts, while guaranteeing that health funding will at least be flat in cash terms . The Tory manifesto had, of course, promised real terms increases in the health budget.

The concession won’t make a big difference to the spending round. On average other departments will suffer bigger cuts than health.

But the politics is important. This was Cameron’s totemic health pledge, plastered on posters around the country. Now he will be cutting the deficit and health spending (at least in real terms).

I always thought that Osborne would say on day one in the Treasury "I've seen the books, and we will not be able to honour the NHS ring fence". The reason is that Lansley always talked about the ring fence in terms of "depending on what George sees when he's seen the books". It seems that the LibDems have forced Cameron's hand and they will now be blamed for the NHS cuts.

It looks like Hannan's "sixty year mistake" will not survive the next five years.

What is Facebook trying to tell me?

I have just posted my status on Facebook and I was asked to fill in a CAPTCHA. Look what it asked me to type:

LOL! I think that we will all be saying this in the next few months.

Tories and Statistics

Tories just love misusing statistics. Every time Cameron gives a statistic I expect his nose to grow a bit more. If that happened then after the election campaign he would be able to pole vault with his nose.

Look at his latest statement:

"At yesterday’s general election the Conservative Party gained more seats than at any in election for the last 80 years."

The intention is to make you thibnk, "gosh, it has been 80 years since a party has won so many seats in an election, that must be a huge swing". Although that is what they want you to think, that is not what they are actually saying. However, I have seen many people tweet, erroneously, that there has not been such a large swing for 80 years. And what is the bet that The Sun will say that too, tomorrow?

Look at the statement again.

At yesterday’s general election the Conservative Party gained more seats than at any in election for the last 80 years."

In other words, the Tories have never been able to gain as many seats as 80 before, (well done, pat on the back). He omitted to say that the Labour party has achioeved much bigger swings. For example, in 1997 Labour gained 147 seats.

Election	Labour Seats	Change	Cons Seats	Change
1945	393	+239	197	-190
1950	315	-78	282	+85
1951	295	-20	321	+22
1955	277	-18	345	+23
1959	258	+9	365	+20
1964	317	+59	304	-61
1966	364	+48	253	-52
1970	288	-77	330	+69
Feb 1974	301	+13	297	-33
Oct 1974	319	+18	297	-20
1979	269	-50	339	+62
1983	209	-60	397	+58
1987	229	+20	376	-21
1992	271	+42	336	-40
1997	418	+147	165	-171
2001	413	-3	166	+1
2005	356	-47	198	+33
2010	258	-91	306	+97

So why didn't Cameron compare his gains in 2010 with the Labour gains in 1945, 65 years ago? Well that may be because the Labour gain that year was two and a half times more!

This is the sort of misleading statistics that we have learned to expect from the Tories. Imagine Osborne manipulating Treasury figures like this? They are clearly incapable of governing.

The Corrupt Ratings Agencies

I have written about George Osborne's ludicrous "New Economic Model" before, but I want to return back to one of his "benchmarks" and discuss it in light of a new article by Nobel Laureate Paul Krugman.

Osborne's first "benchmark" was to "ensure macroeconomic stability". Osborne said:

"We will safeguard Britain's credit rating with a credible plan to eliminate a large part of the structural deficit over a Parliament."

As I pointed out in my earlier post, the credit rating agencies are self appointed, there is no accreditation other than they have customers who pay for their services. Osborne seems to think that it is important to structure our economy according to what these self-appointed people think, and not according to what is best for the country. 

But let's have a look at what Krugman has to say about them. Commenting on their behaviour during the sub-prime crisis he says:

"of AAA-rated subprime-mortgage-backed securities issued in 2006, 93 percent — 93 percent! — have now been downgraded to junk status."

So clearly the ratings agencies got the sub-prime market totally wrong. This is important because it was the sub-prime market that caused the financial crisis, so the one area where the rating agencies could have saved their clients billions of dollars (and taxpayers too) they were totally wrong.  Was this incompetence? Well, no, as Krugman explains, it was corruption, yet Osborne is betting our economy on them.

Krugman is extremely damning of these agencies:

"The rating agencies began as market researchers, selling assessments of corporate debt to people considering whether to buy that debt. Eventually, however, they morphed into something quite different: companies that were hired by the people selling debt to give that debt a seal of approval. "

Can you trust people who are supposed to give you advice but are actually recommending something that they are paid to push? Krugman further highlights the corruption of the rating companies:

"The Senate subcommittee has focused its investigations on the two biggest credit rating agencies, Moody’s and Standard & Poor’s; what it has found confirms our worst suspicions. In one e-mail message, an S.& P. employee explains that a meeting is necessary to “discuss adjusting criteria” for assessing housing-backed securities “because of the ongoing threat of losing deals.” Another message complains of having to use resources “to massage the sub-prime and alt-A numbers to preserve market share.” Clearly, the rating agencies skewed their assessments to please their clients."

Frankly this is saying that in future when you see a pronouncement by S&P or Moody's you cannot regard it as being an unbiased, expert decision based on the actual value of the product, but instead as being what they have been paid to say about the product. They are simply salesmen of someone else's products, without actually mentioning who is paying them. So the pronouncements of such agencies on UK debt will have more to do with the benefits of skewing the market to the advantage of their real client (someone intending to make a profit from UK gilts) than on the actual value of those gilts. Should we trust our economy to such people?

According to Krugman the current senate bill will have little effect on this corruption. Krugman gives another option (from Matthew Richardson) where there will be a level of accreditation in that the Securities and Exchange Commission determines which rating agencies are allowed to rate bonds. However, Krugman  comments that although this is something, it will not completely solve the issue. 

However, what is clear is that the rating agencies have too much power already and it is simply reckless to base government economic decisions on rating agencies. But that is what Osborne says he will do.