Category Archives: Economy

The case for revenue raising

When they are discussing curry and yoghurt, they are best ignored. However, when they are discussing finance and the economy, they are worth listening to. The position of the DUP is consistent and fairly standard “centre right”.

The key, therefore, is that any response to the DUP’s position has to be consistent and fairly standard. The only party which mustered that last week was the Alliance Party.

It is not difficult to see where the Finance Minister is coming from when he suggests that, as the effects of the Great Recession begin to bite through the long-delayed public spending reductions we should long since have experienced and planned for, the last thing you want to do is increase pressure on households by (in effect) raising taxes. That is a legitimate viewpoint. However, the one thing I take issue with is that by not raising taxes somehow the pain is removed. There is pain either way, and we need to be very clear about that.

The case for revenue raising is essentially that, without it, all the pain of balancing the budget is transferred to public spending reductions. This has just as direct a knock-on to household income, potentially, as raising taxes. This is not just in service reductions or cuts; there are consultants who operate with the public sector; members of public bodies; and of course those in the public sector who have to contemplate redundancy (after all, if “voluntary redundancy” doesn’t get you all the way to where you need to be, “compulsory” will have to follow).

The case for raising revenue (taxes) is threefold. Firstly, it enables a more graduated reduction in public spending, and thus more thought into how it should be reduced rather than just crude budget cuts. Secondly, it enables a fairer system of payment – for example, the regional rate (effectively a property tax) may be seen as a perfectly reasonable wealth tax. Thirdly, it will in fact make the public more aware of what money they are handing over – and thus more demanding of the very efficiency the public sector needs to deliver as budgets are reduced.

To be clear, Departmental Expenditure Limits for non-capital spending are now at roughly £10b per annum – this had reached £10.8b but for a variety of reasons (including breaching parity and hitting capital borrowing limits necessitating transfers of funds elsewhere) the £800m hit now has to be taken all at once:

  • raising the Regional Rate by 19% (as once done under Direct Rule) would raise about £115m, and removing Rates Cap another £10 million;
  • introducing water charges with few exemptions would raise about £250m;
  • re-introducing Prescription Charges as were would raise about £10m, or without exemptions about £30m;
  • introducing motorway tolls at Fortwilliam, Dunsilly and Blaris as in the Republic would raise about £50m (with the additional benefit that it would be easier to make the case to the European Investment Bank for new roads spending); and
  • raising the age of free travel from 60-65 would raise about £10m;
  • introducing nominal charges for currently free summer schemes and similar programmes, and perhaps even bin charges and Fire callout fees as in the Republic could raise another few tens of million.

It won’t get us even half way to covering the shortfall, realistically, because we won’t do all of it and, even if we did, we would phase some of it in. However, there is a debate to be had in the coming weeks. Let us have it reasonably, based on the realities of the situation we face.

The frustration of referendums

Full version of article for Stratagem NI written pre-referendum:

One of the fascinating aspects of the Scottish referendum, for me, was that it demonstrated the clash of cultures between politics and economics. The fundamental debate seems to have settled on matters economic – yet these are being debated primarily by politicians. The result is that people seemed to sense they are ill-informed and are thus growing increasingly irritated, rather than filled with passion and vigour.

Why is the focus on the currency? Throughout the campaign, polls showed around 45-50% of people certain to vote “no”, and 35-40% certain to vote “yes”. The “undecideds” were therefore crucial to the outcome.

It was expected, early on, that this would mean the focus would fall on oil revenues. However, it became rapidly apparent that oil can be argued either way – “yes” supporters argued it would make Scotland one of the wealthiest nations in the world; “no” supporters argued the oil will run out within a generation (implicitly leaving Scotland worse off than its neighbours). So the economic issue turned to currency.

It turned to currency mainly because the “no” campaign realised it could attack on the subject. Rightly or wrongly, it had long ago decided to “play for a draw” and go for an essentially cautious (perhaps negative) campaign, not least because its job has been to defend a fairly firm opinion poll lead since the outset. On currency, the main pro-”yes” party, the SNP, was clearly divided – in 2004 current SNP Education Minister Michael Russell drafted a book outlining that the first requirement of Scottish independence would be its own currency; as recently as 2009 SNP advisers briefed that they may move to a pro-euro stance; First Minister Alex Salmond settled in the end on a “Sterling Union” with the Continuing UK similar to the Eurozone, but found all three main UK parties and the UK Treasury publicly opposed. The “no” campaign wished to promote the risk and uncertainty inherent in independence, and nowhere is this more obvious than on the currency it would use (and it is possible that Mr Salmond’s “three Plan ‘B’s” may, in the cold light of day, inadvertently have served to highlight that risk and uncertainty further in voters’ minds).

All of this serves two linked warnings about referendums which may soon apply across the UK. The first is that politicians are most comfortable when they are banding figures around and making grand economic warnings; the second is that, when they do so, there is no referee to determine the veracity or legitimacy of these figures or claims. This can turn referendums, supposedly the ultimate exercise in representative democracy, into events of great frustration and disenchantment.

As we look forward, the same warning applies to a potential ‘in/out’ referendum on the European Union. Already, we hear dire warnings from “in” campaigners about the millions of UK jobs which “depend” on EU membership; and equally dire claims from “out” campaigners about the “£17 billion” that constitutes the alleged “cost” of that membership. Most alarming of all, perhaps, is the way that each side will show absolute faith in their own side’s case, and give no credence at all to any of the other side’s. The people who determine the outcome, therefore, are people in the middle who merely become increasingly confused and disenchanted by the claim and counter-claim being thrown about by either side – that would apply to any EU referendum across the UK just as it does in Scotland currently.

We in Northern Ireland are familiar with the notion, currently being experienced in Scotland, that our side is completely right and the other side is completely wrong! It is small wonder that many people of more moderate view in Scotland came to regard themselves as insufficiently “informed”. They are! Unfortunately, we needn’t expect anything different in a prospective EU referendum across the UK later in the decade.

The West’s economic (and democratic) meltdown explained

Bankers, immigrants, the rich, the poor… it’s easy to single out a group to which we don’t belong and blame it for our economic ills. How about, instead, we deal with what has actually happened? Of course, what has actually happened is complex, but it is worth trying to simplify it…

The average Western household now contains six times as much “stuff” as it did in the 1950s.

The West has been on a consumer binge, starting in the late 1950s. As of then, most Western countries have run at a loss – both in terms of Balance of Payments (importing goods and services to a value greater than they are exporting) and in terms of National/Government Deficit (spending more on public services than they are raising in tax revenues). Of the three big Western Allies – the United States, the United Kingdom and France – not a single one has managed a balanced budget since 1962 and not a single one has managed a trade surplus since 1975. How can this be?

13% of US Federal Reserve borrowing comes directly from the People’s Bank of China.

The victorious allies after World War II went on this binge while the defeated powers ran surpluses and became economic superpowers. The standard of living, regardless of how measured, rose in West Germany, Japan and even Italy to exceed that of the United Kingdom or France by 1990. After the Fall of the Wall, while Germany and Japan stuttered and Italy’s economic fortunes went into reverse, they were replaced by China.

Then something arguably unprecedented in the history of the global economy happened. The rich world not only began to run a trade deficit with the poorer but growing economic powers (as the United States, United Kingdom and France had done with West Germany and Japan effectively in post-War trade), but it actually began to borrow money from them directly to fund public services and welfare provision. For a decade or so from the mid-1990s this option was beguiling for all concerned – China lent the United States money, and that fuelled a consumer boom with which Americans and those who traded with them most frequently (above all the British and other Europeans) bought Chinese goods.

In the Far East, you save up for your own Healthcare and Welfare provision.

With the money thus borrowed – not just by governments but also by corporations and households – the West (except Germany) went on a consumer boom and paid for welfare and health provision none of which it could actually afford on the basis of goods/services traded or (thus) tax revenue raised. The difference was made up from money borrowed both to raise tax revenue from consumer booms and directly by governments – largely, as noted above, from countries (notably in the Far East) with no heritage of government-funded health or welfare provision. Those countries could afford to lend because their people were starting from a much lower wage level and were grateful merely for the increased wages that exporting to the consumer boom gave them. In the Far East, it is typical for people to make their own savings for Healthcare and retirement, and for Social Care to be provided by the family unit.

Health and Welfare typically account for two thirds of public spending in the West. Therefore countries which do not fund this from public spending – like China – only need to raise at least a third of tax revenue per capita in order to have money over to lend to countries which do. The bizarre outcome of this is that far poorer countries (per capita) end up subsidising services in far richer countries which they do not themselves provide – but we need to understand that this is only temporary, because the money comes in the form of loans and they themselves will soon come under pressure to provide those services.

Property prices in the English-speaking world have more than doubled in real terms in the past 35 years, but have remained stable in German-speaking Europe.

The consumer boom in the West, meanwhile, hailed a property boom, particularly in the English-speaking world and Spain, where property ownership is culturally the norm. Pressure on banks to fund ever increasing property prices while expanding property ownership to the masses (as “ownership” came to be seen almost as a “right”) led to ever more complex financial “products” where dodgy loans were bundled up with more secure ones and sold on, effectively as an insurance gamble. Globalised banks – even outside the English-speaking world and Iberia – got involved in this high stakes game of musical chairs and in 2007 it was in fact a French bank left standing when the music stopped. Somebody should indeed have noticed that these schemes were becoming vastly and ludicrously complex – but then somebody should also have noticed far earlier on that a single parent in the American South with four children and no education probably shouldn’t be getting or even seeking a mortgage. Most of the people who had funded and insured that mortgage (and countless others like it) didn’t even know they had…

The result was a calamity as a property prices crash meant households could no longer borrow against property, a run on the banks meant businesses could not get credit from them, and thus consumer spending and collapsed just as businesses needed it most. This then saw a knock-on collapse in tax revenues just as governments needed more money to nationalise banks.  The central issue was that, in the English-speaking world and Iberia, property was effectively being traded in a different currency – whose value then crashed meaning that anyone who had savings in it (a lot of ordinary people, frankly) got burned and anyone relying on them to pay off debt, invest in businesses or provide vital tax revenue got burned as well. (This applied right across the Western World regardless of where the mortgages were because its banking system is so interconnected.)

Overall UK debt is now approaching seven times GDP.

There is a lot of focus on “national debt” – but this applies only to public spending (exactly what that means varies from source to source). The UK’s national debt is indeed atrocious – soon to be more than two whole years’ tax revenue – yet actually by most measurements it is now fairly average in the West. Where the UK is truly awful is in overall debt – add in households debt (say on cars or holidays or new kitchens as well as mortgages) and corporate debt, and the UK’s overall debt is among the worst anywhere in recorded history.

Here is the thing: much of that “national debt” is already borrowed from Chinese interests. Much of the other debt has been accumulated buying Chinese products – from toys to smartphones.

Want a bridge built? Ask the Chinese!

In other words, what has happened over the past 20-40 years is we have been borrowing money from the Chinese (and others) to buy their products. We did this because we thought they were cheap – but having bought them, we are now going to have in effect to buy them again as we pay the debt back.

In the meantime, remember, the Chinese have been subsidising our Health and Welfare systems but they are just reaching the point where they will want those themselves. In effect, this means we will have to subsidise theirs, from now on  - after all, we are the debtors and they are the creditors.

There’s worse (from a Western perspective), because the really crucial point is yet to come.

Recently, San Francisco had to rebuild a major traffic bridge. It sought tenders from within the United States for the work, but all involved closing the bridge entirely while reconstruction took place. So they looked globally and, sure enough, a company came forward to build the bridge while maintaining the current one in place for the duration of the work – from China. Remember, the work will be paid for, in part, by money borrowed from China in the first place.

Long story short:

To cut a long story short, what has happened in the past 20 years is the East has lent the West money to maintain a lifestyle – with property, employment rights, taxpayer-funded welfare/pensions and government-funded Health services – that is highly civilised but that it has not actually earned since at least the 1970s Oil Crisis. The East has gone without all these civilising things, but has used the situation to export goods and services of increasing value to the West, thus raising its own wages and (particularly) expertise. As the East’s expertise now exceeds the West’s, it will expect its wages to do the same – creating perhaps 2 billion more “middle-class” people in the next generation or even the next decade. It no longer suits the East to subsidise Western lifestyles which it can now legitimately aspire to for its own population.

The West’s Health and Welfare systems and even its property rights derived essentially from a national profit made through trade by being smarter and more innovative than the rest of the world. This is no longer so; therefore the money to fund those systems (as they are currently delivered) no longer exists – indeed it hasn’t for some time, as it has already been being borrowed for at least a generation (from people who had every motivation to lend a generation ago, but have none now).

Ostriches will become extinct!

Inevitably added to the West’s burden is a democratic meltdown alongside the economic one.  The skills required to get elected – basically getting attention – are utterly distinct from those required to govern effectively and realistically. It is much easier to blame bankers, or immigrants, or the poor, or the rich, or some other bogeyman and thus gain attention, than it is to face the very real re-balancing of global trade, power and influence which lies directly before us as explained above. It used to be we would just about be saved by Sir Humphrey, who would at least keep things relatively stable while the West cashed in on its expertise and thus its competitive advantage – not just in terms of technology, but also social order and governing institutions. This will no longer be enough, because not only has the Far East caught up in technological expertise, but it is getting more skilled at social order and government too. It even has the advantage of skipping some of the luxuries – like free elections and state-funded welfare.

We can bury our heads in the sand or we can accept this basic problem: the term “social justice” now only has meaning if it is applied globally. The days of paying pensions or inflating wages on the back of borrowed money in the West on the back of consumer booms for products or materials bought cheaply from the East are over.

What’s the solution? Before we come to that, can we at least accept and agree on the problem?

If we in the West want a welfare system (including pensions) and public services (including Health) which are better than those in China, we will have to work harder than the Chinese.

We don’t. There’s the problem.


No longer Left/Right but Open/Closed

If Tony Blair got one thing right it was a remark he made in late 2007 shortly after handing over the Premiership, to the effect that politics is no longer “Left versus Right” but “Open versus Closed”. This is still somewhat simplistic of course, but the more I think about it the more accurate I find that to be. It also explains the imminent collapse of the UK’s political system.

I tweeted somewhat churlishly after UKIP’s big gains last month that far from Northern Ireland’s politics becoming more like England’s, in fact England’s was becoming more like Northern Ireland’s. UKIP’s fundamental appeal is to “Closed” voters – people who are disillusioned by and distrusting of everything (not just the EU).

Liberals tend to appeal to “Open” voters – the type who are typically well travelled, professional, educated (the type I have referred to as Northern Ireland’s third pillar, alongside Unionist and Nationalist). However, they don’t understand “Closed” voters at all. Closed voters don’t respond to people providing rational arguments and even less well to people piling on lots of facts and statistics – because they simply don’t believe them. Nick Clegg found that out to his cost when debating Nigel Farage.

One comment I saw recently referred to anti-water charge demonstrations in the Republic of Ireland as “left-wing”. By any definition, however, they’re not – the “left” traditionally argues for higher public spending and admits that high taxes are a prerequisite for achieving that. But here was the so-called “left” arguing against tax increases, even when it is obvious they are necessary. The demos were not, in fact “left wing”. They were populist. And they were “closed” – a rejection of the global reality that a Europe that creates only 25% of the world’s GDP can no longer afford 50% of its social spending without tax rises, and that particularly applies to Ireland where the tax take is nearer the United States average than the European Union’s (but enough with the statistics…)

Unfortunately and unusually we have been lumbered with a government in Northern Ireland dominated by two parties which are utterly anti-intellectual and “closed”. They are most comfortable with identity politics, and with localised campaigning to the extent that their constituents’ immediate short-term interests always trump longer-term considerations. They are, in other words, an awful lot like UKIP – and, as with UKIP, other parties in Northern Ireland haven’t yet come up with a way of dealing with them!

Perhaps, however, if the rest of us put away our “left versus right” prejudices – which are themselves these days identities more than meaningful political standpoints – and built an “Open” coalition we would begin to get somewhere? Is it time to stand together against the closed, unreal, anti-intellectual forces of the DUP/SF in Northern Ireland (and indeed in the latter case in the Republic) and the UKIP across the UK, as well as countless other similar examples across Europe?

No one telling the truth on public sector reform

NIPSA has once again jumped the gun by saying that public sector reform “could cost 6,000 jobs”, a quote the media were only too happy to run with one slow weekend news day. One of the reasons for the traditional media’s decline is its willingness just to report statements without even a hint of challenge – the obvious challenge here being that there is no public sector reform!

It is true that the Head of the Civil Service has been tasked to bring forward a paper on “slimmed-down government”, reported two weeks ago (more reliable journalists talk correctly of a voluntary redundancy scheme to reduce the public sector workforce by more than double the NIPSA figure). Not reported in the summer, but something which happened, was the panel of six (three from outside Northern Ireland) to make recommendations on improving public sector performance. But none of this work has actually even come close to completion, so frankly we have no idea what the outcome will be – for jobs or anything else.

The only thing we can be sure of is that both processes will result in an outcome which is theoretically sound but politically nigh impossible. Implicit in NIPSA’s intervention was an opening bid that it would not accept job losses (a line the SDLP, utterly laughably, has also previously stated) – yet even the loss of 13000 jobs would only return us to the level of public sector employment which existed at the end of the Troubles (a period during which, for understandable reasons, the public sector became vastly inflated by any remotely reasonable peace-time standards).

Politically impossible, that is, unless someone is prepared to point to the truth. No one in politics fancying their electoral chances will do so – I tried once myself and it didn’t go so well! No, voters across the Western World have settled on a preference for low taxes and high public spending – an obvious nonsense but one which they determine can always wait another five years before anyone needs to do anything about it (while introducing lots of bogeymen – from bankers to immigrants – to fill the intervening time).

Even though I have no intention of standing for election, I’ll stick to just one reality. Health Minister Jim Wells’ suggestion that Health (and Care) costs are currently rising 6% every year is likely accurate – in fact, that is more or less the case in real terms in every comparable jurisdiction across Western Europe and North America. Here’s the thing – that means, in a decade, that Health costs will likely rise over 60%!

The Health Department’s budget is 41% of Northern Ireland Departments’ current expenditure; it includes some emergency service provision, but even without that it accounts for over a third of current expenditure, which currently comes to around £10 billion. This means, within a decade, in real terms Health and Care spending is due to rise from around £3.5 million to around £5.5 billion – taking a full £2 billion (over 30%) from all other devolved departments (and thus from all other devolved services – schools, social housing, policing, infrastructure etc.)

Assuming we don’t want to lose that 30% off public service provision in the next decade, there are two principal ways we can deal with this problem.

Firstly, we can raise revenue – for example, doubling the regional rate would mean we could retain current Justice spending with a bit left over for fire and rescue; introducing water charges and tolling roads while re-negotiating capital spending limits based on that may enable infrastructure to be built and maintained for next to nothing (user pays), cutting any losses there; re-introducing prescription charges, raising tuition fees, removing rates caps and so on would add a few more quid at the edges. All of this would, however, at best recover a few hundred million – we are still well short.

Secondly, we can reform public services…

  • a single NI Executive Treasury rather than every Department having a full finance department (with separate grant systems etc);
  • competitive tendering to deliver public services, including some currently delivered internally, driving up efficiency and driving down costs;
  • removal of at least two Executive Departments (frankly six, including Justice, would probably do – causing not just savings but also more streamlined cooperation);
  • removal of at least two Civil Service (and comparison) grades;
  • a streamlined planning system – no more meetings with three different agencies and two or three departments on every case;
  • no more local Council “mission creep” – Councils don’t need “European Officers” and Councillors don’t need to discuss Gaza;
  • full and complete integration of teacher training, and subsequently of course the schools they are teaching in.

Here’s the truth – even that gets us nothing near the £2 billion we need by this time next decade… and that’s without welfare, which is a completely separate funding stream…

(By the way, the answer to this is not to “stop foreign wars”. Defence costs NI around £55 million, barely half this year’s shortfall alone – less, in fact, then the A5 dual carriageway has cost in preparation costs without a metre if it being built! So let’s stop the irresponsible fantasies and move on to reality!)

Never waste a good crisis

I am a big fan of the Irish economic commentator David McWilliams, not least of his brilliant ability to state my views much better than I can and his essential maxim that “what is important is never complicated and what is complicated is never important”. He recently won the award for Ireland’s “‘most influential Tweeter”. If only! Ireland (North and South) would be an awful lot better if he had more real influence!

I agree with him almost entirely again here - it’s really, really worth a listen. He most particularly challenges economists for ghetto-ising their knowledge by surrounding it in impenetrable jargon, leading to a lot of impotence and anger among the public.

The article’s headline is a little misleading. Mr McWilliams doesn’t quite say that humanity is incapable of learning from mistakes (admittedly he does flippantly say we don’t learn anything; a little extreme!) – quite evidently it is capable of doing so. What is true is that people are emotional; and also implicitly that we are products of our culture – the framework for our own actions/emotions and the actions/emotions of others. Entire societies function in this way.

Trying not to be simplistic but… the United States is flavoured by the fact it was founded by people at great risk spreading west across a continent, so of course it has a gun culture and an individualistic attitude to health; Germany is flavoured by wild inflation and a mad murderous dictator, so of course it is austere and prefers consensus to “charismatic leadership” now; England does evolution not revolution, so surely you didn’t seriously believe the “Vow” for vast constitutional change within months?!

So what’s this about never wasting a good crisis? If I were advising, say, a Commission set up to advise the potential next UK Government on the NI Economy I would suggest two things are core to this before we even begin:

- Northern Ireland has its own culture within which solutions must operate (theoretical academic solutions are hopeless, we need practical solutions in tune with our emotions about who we are and what is feasible); and

- keep it simple (leave out the complex stuff, just focus on the simple issues of revenue and spending, exporting and importing, receiving and contributing).

What is really necessary is a 30-year vision for Northern Ireland. If you go long term, you actually find it easier to get buy-in. Then, focus on the simple points. These include:

- you cannot spend money you don’t have (it doesn’t matter why you don’t have it);

- when you do spend, it should be on the basis of value (there’s no point spending “on the basis of need” if it doesn’t solve that need);

- it’s easier to raise revenue than reduce spending (remember the endowment effect – people value what they have more than what they could have, so once something is done “by the State” it becomes almost impossible to suggest subsequently that it shouldn’t be);

- to deliver change you have to make choices and these will make you unpopular (unpopularity is a sign you are doing something right – but is distinct from disengagement, which isn’t);

- people will support change they feel involved in even if they disagree with it instinctively (and they will oppose change they feel detached from even if they agree with it instinctively); and

- emotions (including issues of identity and religion) matter to people – they are what makes us interesting humans rather than boring robots.

Can we agree these things for the future and thus not waste the current crisis?

Borrowing key, not Corporation Tax

This piece on a “Federal UK” requires some more thought on the fiscal issues. Frankly, I am no expert on these!

However, I am increasingly of the view that the only two taxes really in play for devolution are duties (on drinks or flights or whatever) and income tax. 

Listening to interviews with the key decision makers on this issue, the relevant point here is that corporation tax is always assumed to be remaining UK-wide (except, naturally, by Northern Ireland’s First Minister in the Assembly yesterday). There is an understandable wariness to devolve this (at least in totality), partly because it is complex (for example, you have to stop Tesco, BP or HSBC just moving its office of registration) but mainly because it would simply encourage a “race to the bottom”.

There is just about the possibility now that Corporation Tax powers could be devolved to Northern Ireland alone as part of a “scatter gun approach”. This would be an error – the fundamental lesson must be that each of the four countries should have the same powers exactly (whether they choose to use them is up to them). However, the strong probability is that Corporation Tax powers will in fact be taken off the table – possibly replaced by income tax powers.

With regard to VAT, I should emphasise that, despite the First Minister’s positivity, I never saw it as a candidate for devolution either (again, just too complex). However, I do see scope to enable any growth in VAT receipts in a particular region to be retained b the region delivering the growth – potentially that even includes City Regions, not just devolved countries.

Note that the likeliest thing is that income tax will be set at 10 percentage points below the current rate, with each country then entitled to raise the remainder as it sees fit.

For all that, the very biggest fiscal requirement for me is one which is never mentioned - borrowing powers. There are two aspects to this:

  • each devolved country should be able to retain any under-spend at the end of each financial year to put into its own pot the following year (currently, except where specifically negotiated, any money left over is returned to the Treasury; the result of this is the mad February/March spending sprees we see to get the money spent, which means it is often spent in a very short-termist and ineffective way – on programmes which don’t help or pavements which don’t need repaired);
  • each devolved country should be able to borrow money, probably from the Treasury (which would need a contingency of its own), or to bid jointly for money from a “Federal Programme Fund” (say for cross-border roads, ferry subsidies or whatever).

It is these borrowing powers, combined with a non-requirement to return under-spends, which would probably make the biggest practical difference – boringly technocratic though they sound!

Scotland should vote for compromise and Currency Union – and thus vote “no”

Well this has been fascinating. The Scottish referendum has been lost by politicians, and won by democratic dialogue in the bars, allotments and social clubs of Scotland. It has taken twists and turns which no one – certainly not I – predicted.

Today is decision time. At its best, “Yes” puts forward a highly attractive argument that Scotland should stand on its own two feet; at its worst, it forgets that “independence” is a ridiculous and alarmingly parochial concept in a globalised world dominated by corporations, not states. At its best, “No” puts forward a highly attractive argument for maintaining a historically hugely successful and influential multinational liberal state (with none more influential within it than Scots); at its worst, it has resorted to nonsensical scare tactics which demean the obvious brilliance of the Scottish nation.

As it happens, given the fairly uninspirational nature of its campaign, if I were in Scotland I would be trudging along to vote “no”. Ironically, I would be doing so as it offers the best route to an option which satisfies the aspirations of the large majority of Scots (enhanced powers without the risks), and because of a case made by the “Yes” campaign!

The case is this: for all its talk about becoming Scandinavia or making its own choices, the “Yes” campaign argues nevertheless that it wishes to share the pound sterling, share the Bank of England, and share England’s monetary policy in their entirety because their economies are so inextricably linked. This is their case for a “currency union”. Yet this is also a case for a “political union”!

It is not just an economic point. It is also a political one – for there is something mischievous about essentially suggesting you can be independent and have everything bad change but everything good remain. We have to ask why Scotland wouldn’t have its own currency to be truly “independent” or why it would not join the Eurozone like Ireland? If the answer is that it is far more like the rest of the UK than elsewhere, then why on earth leave? If the answer is that using sterling is temporary, then why not be up front about it? All of this hints at an underlying uncertainty or even deviousness about what people are really being asked to vote for.

It is also divisive. The problem with referendums is that they are “Yes/No” and thus offer no means of compromise. The best compromise – the one the vast majority of Scots could easily tolerate – is enhanced powers without the risks of “independence” in an uncertain world. You don’t get that by voting “yes”; you probably do by voting “no”. It’s all a bit messy and last-minute, but then compromise often is.

In the end, therefore, I come down on the side of those who suggest that Scotland has more in common with the rest of the UK than anywhere else and should therefore share a currency with it. The easiest way to do that is by remaining in the UK! I accept Scotland has already psychologically left the UK but I would urge Scots therefore to vote “no” – and then let 63 million people rebuild a properly federal, progressive UK together.

Fetishisation of spending the root of all our ills

This is, perhaps, the single greatest article I’ve ever read about sport, or perhaps even anything!

Nominally, the article notes that “Transfer Deadline Day” has become a huge footballing event in its own right (rivalling Cup Finals and such like), even though actually all it is is the day which determines how much money various teams have spent. Supporters watch events unfold as if merely buying a player whose wages would pay for 140 nurses is the cure of all their ills. It is ludicrous. In fact it’s a moral crime, and not a victimless crime at that.

The article nailed my discomfort at “Transfer Deadline Day” perfectly. It was a discomfort I had never previously been able to nail (and thus never previously been able to put into writing). Yet I cannot help but feel it is the same discomfort I feel at Christmas.

For, when you think about it, Christmas is an awful lot like “Transfer Deadline Day”. Ultimately the objective is for people, predominantly children, to compare notes on how much their parents have spent, not unlike supporters comparing notes on how much their clubs have spent. Crudely, it is as if by buying loads of “stuff” we can deliver stability, love and affection; the same way that buying a £50 million player is supposed to guarantee trophies. In the same way managers don’t want to let supporters down by buying no one (even if there’s no one worth buying really), parents don’t like to let children down by not spending hundreds of pounds on a raft of Christmas presents (even if the child already has every X-box, iPhone and lego set going). The very term used in the article, the “fetishisation of spending”, sums it all up. It’s morally corrupt and it is the fundamental cause of all our economic (and arguably social) ills.

Again, the article on “Transfer Deadline Day” makes the point that clubs are recklessly spending our money – the money we spend at the turnstiles, on the shirts, or on the TV subscriptions (at least I have abandoned the latter in disgust, though not yet the first two I confess); and the money we lavish on the advertisers who keep it all going (not least at Christmas). Likewise at Christmas, the billions spent are mostly wasted – a huge proportion on “stuff” children never needed and never subsequently touch – when they could be put to far better use in our health service, in our schools or in assisting job creation. But let’s be clear: we choose this madness!

It is a madness which is grossly unfair too, of course. Clubs such as Leeds have gone bust trying to keep up with Manchester United despite lacking its resources; much more seriously, thousands of families across the British Isles go bust every year buying “stuff” for Christmas trying to keep up with people who earn considerably more than they do. Yet again, those at the poorer end of the spectrum suffer most.

It would be interesting to set up a movement, as happens in one edition of Family Guy of all things, to buy just one Christmas present per person. This would have the benefit of limiting peer pressure and ensuring people could remain within their means without feeling that they are somehow letting their children down. Who knows, it may even lead us recognise that there is more to Christmas, and indeed life, than “getting stuff”!

What we do about football is where I have no ideas – but it is a somewhat lesser concern, and we could start by remembering that too!

Myths about Scottish independence

There are some unbelievable myths being peddled about “Scottish independence”. It is worth nailing a few of them – if only so that those repeating them can be placed on the list of “those too lazy to do their own research who should probably never be paid as commentators”…

1. England would always elect Conservative governments.

The Labour Party “would die” according to one Sky News commentator. Utter codswallop! In England alone (even excluding Wales), Tony Blair would have headed a Labour-led administration for each of the three elections from 1997 just as he did; just as David Cameron would be Prime Minister now. Yes, Mr Blair would have needed a coalition in 2005 (though including Wales even then he had a majority) and David Cameron would not need one now, but it would still have been the same party’s Prime Minister in Number 10. Some “death”!

In any case, Labour would merely move slightly to the right to re-align politics marginally – just as it had to after the “Longest suicide note in history” election of 1983.

2. Scots would be “foreigners”.

This is lovely and emotive and maybe strictly true, but are the Irish “foreigners”? Actually current UK citizenship law views Irish nationals as having the same rights and responsibilities as UK nationals within the UK almost without exception; and it is already the case that any EU national can use consular services of any EU member state. Thus, with the safe assumption that UK citizenship law treats Scots the same way and the fairly safe assumption that Scotland becomes an EU member state, it would be much the same. Unless the Continuing UK is idiotic enough to leave the EU, of course…

This is also not unlike arrangements between the Nordic Countries or between the Czech Republic and Slovakia or Australia and New Zealand. In each case, people from the other state are not really “foreign”, as they possess all the same rights and responsibilities.

3. Scotland would move to a Scandinavian model.

I’ll return to this, but in fact there is no evidence it would. All proponents of a “yes” vote talk of reducing taxes, not increasing them; the SNP in office has centralised power and engaged in middle-class giveaways; and an iScotland would be dominated by oil, finance and drinks sectors none of whom would allow such a dramatic change of economic and social model. If anything, the evidence is an iScotland would be more Liberal in many ways, including economically.

4. Scotland could not use the pound.

Of course Scotland could use the pound. Actually no one with any authority has said otherwise.

What it could not do is retain influence on the pound – including on interest rates, revaluations or whatever. There may also be some difficulty with joining the EU; although this could probably be solved by setting up Scotland’s own currency which happened, initially, to be pegged to the pound.

5. Independence is the only way to save the NHS in Scotland.

On the contrary, independence is the only thing which puts it in any danger.

The difficulty here is that increasing moves towards private care provision are being referred to as “privatisation” by some – an utterly misleading term as that provision is still funded from the public purse.

Thus, the retention of public funding for all aspects of the Health Service means there is and remains exactly the same amount available for Health in Scotland (actually more per person, as Scotland’s public spending per head is higher within the UK). In fact, interestingly, the SNP has chosen to take money away from the NHS for other departments. Health accounts for 22% of public spending in England but just 20% in Scotland – a differential which has opened up under the SNP administration.

With the trend already being towards comparatively lower Health spending by advocates of independence themselves, and uncertainty over future oil revenues (plus inevitable costs of setting up a new military, a new diplomatic service and so on), it is clear objectively that the strain on the NHS would come with independence, not without it.

6. Scotland would remain in the EU.

This isn’t the worst myth but it is not straightforward and we should be clear about that. To be in the EU, you have to be a member state. An independent Scotland would have opted to leave a member state, and thus to leave the EU. It may of course then apply to become a member state and I would hope everyone would see the sense in fast-tracking the process prior to the date of independence – but it may not be possible to conclude this by March 2016.

This is similar to the nonsense that the pound is “also Scotland’s currency”. No it isn’t – it is the currency of the UK governed by the UK’s Central Bank. Scotland would leave the UK and thus no longer have that Central Bank, nor therefore its currency. As noted above, it could peg its own currency to Sterling or try to negotiate a Sterling Zone similar to the Eurozone – but as of March 2016 it would, failing the latter, cease to have the UK currency as its currency for the simple reason that it would have left the UK.

It is somewhat bizarre that those in favour of “independence” are so wary of being clear about what leaving the UK means!

7. Alex Salmond is a Social Democrat.

Just because you don’t like Margaret Thatcher doesn’t make you a Social Democrat!

Which is the crux of the issue, really, isn’t it?!


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