Category Archives: Politics

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?

John McCallister’s reform proposals worthy of urgent consideration

Independent MLA John McCallister has unveiled a set of proposals which he wishes to turn into a Bill on reforming the structures at Stormont. These are often described loosely as “Opposition proposals”, yet in fact they are much wider-ranging than that.

I don’t think there’s any harm in noting that I met him yesterday, and constructed my own proposals in a purely personal capacity on the back of the meeting, which I have placed here.

There is the practical difficulty that they contain measures which would need to be legislated at Westminster, and others at Stormont. Let us leave that aside for now.

I emphasise my response notes here (not in italics) are in a purely personal capacity.

1. Rename the Office of the First Minister and the Deputy First Minister (OFMdFM) to Office of the First Ministers (OFM) – Coordinating Department only.

I would rename it simply the “Executive Office”, but we’ll not quibble – fundamentally this is spot on. There would, additionally, be no requirement for Junior Ministers.

2. A broad Programme for Governement (PfG) and headline budgets to be agreed during the time between election results and D’Hondt. Extend the time between election and D’Hondt by at least four to six weeks.

I would expand the time between election and “selection of Ministers” to considerably longer – maybe six months, even. However, again, the fundamental point here stands, and is very important – negotiation of Ministerial appointment follows negotiation of an agreed programme.

3. Collective Cabinet Responsibility to be enshrined in statute.

I would add to this a method of enforcing the Ministerial Code by advice of an Independent Commission – this would include the requirement for collective responsibility.

4. Election of Speaker – once elected he/she should be elevated to be the MLA for Stormont no longer representing constituents. His/her party will replace the Speaker in their constituency. The Speaker’s election, by secret ballot, should be through either a weighted majority vote or majority support within each party, ensuring the speaker gains legitimacy from across the Assembly.

To be clear, in the Republic of Ireland the Speaker is deemed non-partisan and is automatically elected if standing again, taking one of the seats allocated to that constituency. This makes sense for Northern Ireland too, at least as long as we use the same electoral system (I would be specific about this condition in legislation). I like the idea of the secret ballot (as widely used elsewhere, including within the UK). One other option would be to elect two Speakers by Single Transferable Vote to serve half the Assembly term each (this would remove the need for weighted majority).

5. (a) D’Hondt to run through from Executive to Committee Chairs and Committee make up as a single process. Therefore incentivising parties to opt out of the Executive with an enhanced role in the Assembly.

(b) Set a threshold of seats to qualify for Executive positions, possibly around 15-18 seats? May well shift if the size of the Assembly is to be reduced.

I have previously advocated that ‘D’Hondt’ be only a back-up measure if an Executive commanding “Weighted Majority” support (i.e. with support at least of a large minority of each identity bloc) cannot otherwise be agreed. I do agree, however, that first Committee positions should go to parties not forming part of the Executive (as, importantly, should the role of Chair of Public Accounts Committee, see 7 below).

6. (a) Leader of the largest political party, not in the Executive, to be recognised as the official Leader of Opposition and second largest non-executive to be Deputy.

(b) Party or grouping would need to be of sufficient size to gain these titles ie possibly greater than six Members.

This seems reasonable enough. The term “second largest non-executive” requires some expansion, however – ideally, there would be a joint Opposition Leadership in exactly the same way Joint First Ministers are proposed.

7. Chair and Deputy Chair of Public Accounts Committee must be from non-government parties.

An absolute requirement – see 5 above.

8. Assembly to have dedicated Supply days/Opposition day debates.

This is also important. I also wonder if there could be a ‘Citizen’s Initiative’ system whereby citizens could force the Assembly to debate a certain subject – requiring perhaps 25,000 signatures with at least 500 in all (or a majority of) constituencies, or some such.

9. Any Party or individual to have the right to form technical groups and to have representation on Business Committee.

This is important too, and could be quite straightforward.

10. Committee Chair gets the first Topical Question for their Department at Question Time. Opposition Leader and Deputy to get first and second questions respectively at OFM question time.

This makes sense too (the assumption is, in the main, that Committee Chairs would come from the Opposition, although it may not work out that they all are).

11. Financial support should be made available to the non-government parties.

I agree with this in principle, although I would not push it. The parties are already fairly well funded, and the Assembly has a vast (and effective) Research Service all MLAs can use.

12. A new statutory budget committee of the assembly with similar roles to that in the Scottish Parliament; particularly applicable if Government Departments are reduced.

It is crazy that this does not already exist.

13. Designation

i. Option one

(a) Remove the requirement for Community Designation in the Assembly.

(b) Establish a new mechanism for minority protection based on weighted majority voting, initiated by 30 signatures from at least two different parties. A new Assembly should determine what percentage the weighted majority should be for that Assembly term – with 60% being a minimum.

(c) Ensure the PfG and the Budget can be passed by a simple majority of Assembly members.

(d) Accelerated passage would automatically trigger weighted majority vote.

13.ii. Option two

(a) Limit the current use of Petition of Concern mechanism to primary legislation only. When a Petition of Concern is initiated an Ad hoc Committee must be established to examine the issue as per the Good Friday Agreement.

(b) Establish a parallel Petition of Concern mechanism based on weighted majority voting, initiated by 30 signatures from at least two different parties (29+1 sufficient). A new Assembly should determine what percentage the weighted majority should be for that Assembly term – with 60% being a minimum.

(c) Ensure PfG and the Budget can be passed by a simple majority of Assembly members.

(d) Accelerated passage would automatically trigger weighted majority vote.

I’m not sure I’ve fully understood these, as (c) seems to clash directly with (d) in each case (perhaps the requirement for a Budget Committee reduces this contradiction). However, (d) is important.

If I have understood (a) and (b) in each case, I don’t see why they couldn’t be merged – although on reflection, I think that there should be at least two signatures from two parties. For any hope of Nationalist support, I think the “Weighted Majority” would have to be established in advance (i.e. within the actual legislation).

It seems to me that the way to achieve this is as follows:

a) remove designation;

b) reduce the Assembly to 90 members;

c) establish the Petition of Concern as above (requiring a third of signatures, i.e. 30, with at least two from two different parties); and

d) in addition to allowing Petitions of Concern to delay potentially controversial legislation by sending it to an ad hoc committee (as already envisaged), three specific things can be blocked by Petitions of Concern:

  • Programmes for Government (and associated Legislative Programmes) and Budgets,
  • Legislation which is either outwith Programmes for Government and Budget or being passed by Accelerated Passage, and
  • Certain appointments (e.g. Attorney General, perhaps First Ministers and/or Justice Ministers).

The Bill

Overall, the proposals are fundamentally sound and important.

I do think there is a clash between the absolute requirement to run d’Hondt on one hand, and the requirement to agree a Government Programme before appointing Ministers on the other. I would argue (as I did here) that John McCallister’s requirement to provide Sinn Fein and other Nationalists with assurance is met by the potential to use d’Hondt as a back-up means of forming an Executive; but that there does need to be potential to negotiate Executive positions against policies in the Government programme. The lower sections, severely limiting capacity to govern if more than a third of Assembly members are opposed, provide further insurance.

It is important also that these proposals are seen for what they are – an attempt to make the Assembly and Executive work better for the people who elect them. It is not so much about “Opposition” as, in fact, about “good government”. The word “Opposition” is relevant, but should be limited in any discussion of the proposals – the real issue we have currently is not that we lack an “Opposition”, but that we lack a government! (Of course, the likelihood is that one would help bring about the other.)

Whether they agree with the proposals or not, other parties should place the basics into any Talks process, and the Business Committee should bring them forward for debate urgently – otherwise it will look like other parties have something to hide and that they fear the electorate being given a real choice…

What on earth is going on in Catalonia?

I am fortunate enough to have several contacts in Catalonia, the region around Barcelona – fortunate because they are a fascinating people and I had occasion to visit the region on average every other year from 1992 to 2008. However, since 2008 things have changed unbelievably.

The old line was that “Everyone knows the Catalans want independence, they just don’t like to talk about it”. To be fair, even that wasn’t strictly true. One host family told me (at least I think they did, they insisted on speaking Catalan a language I partially understand but don’t actually speak!) that what they really wanted was a properly diverse Spain, where for example they could use their own language (Catalan) in the Cortes in Madrid (the Spanish Parliament). The fact is, however, that patience is wearing thin.

To cut a long story outrageously short, contemporary Iberia could be said to consist of three linguistic nations (although even that is ludicrously simplistic), who reconquered the peninsula from the Muslim Moors in the centuries up to 1492. To the west, there were the Leonese/Galicians; in the middle the Castilians; and to the east the Aragonese/Catalans. Those who moved south on the western (Atlantic) side formed the Kingdom of Portugal; in the middle formed the Kingdom of Castile; and on the eastern (Mediterranean) side to Kingdom of Aragon incorporating the Duchy of Catalonia. Ultimately those who did not move south on the western side came together with those in the middle in a powerful kingdom with its capital eventually in Madrid, which through the usual combination of royal marriage and militaristic opportunism eventually also came to incorporate Aragon-Catalonia from the early 18th century (and that means incorporate fully – unlike Scotland, Aragon-Catalonia did not retain its laws or legal system). Thus the whole of Iberia except the area occupied by the Galician speakers who did move south early in the second millennium became “Spain”; those Galician speakers who did move came to form “Portugal”.

Even this brief outline is a gross injustice to Spain’s complexities. For example, where foreigners see Real Madrid versus Barcelona as the clash between “Castile” and “Catalonia”, it is also a clash between “Right” and “Left”; and between “Centralist” and “Regionalist”; and between “Unity” and “Multi-cultural”; and all sorts of other things. This becomes even more complex when you note the Balearic Islands and Valencian Region are also partly (historically majority) “Catalan”-speaking (as opposed to Spanish), yet many in those regions consider themselves absolutely Spanish (but not Castilian); still others consider themselves specifically Balearic (even, say, Majorcan) or specifically Valencian with no real credence given to shared linguistic and cultural heritage with the Barcelona area.

Why raise all this? Firstly, I am wary of the seemingly obvious parallel to Scotland. From 1707, Scotland remained a country, clearly distinct from England not least because it maintained its own laws and legal system; furthermore, there is little serious dispute about where the boundaries of that country are, and that it is also culturally distinct. This is quite different, in fact, from Catalonia even though it suits Nationalists in both to promote the similarities. Catalonia did not retain its own laws and legal system (that is not to say it did not retain its own customs); yet unlike Scotland its own language is flourishing, albeit spoken by a minority as a first language even now. Also, very notably, it is unclear where the boundaries of Catalonia are: if they are to include only the current Spanish region that seems a remarkable cession to Spain and to decisions made by the rest of Spain; on the other hand, the maximalist approach which would include Valencia, the Balearics, perhaps part of Aragon and also probably part of southern France (the French city of Perpignan/Perpinya and the surrounding area is traditionally culturally Catalan to a large extent) would be obviously ludicrous.

Secondly, there are significantly greater centralising forces on the Spanish Right (these forces are now, thankfully, merely political). The current Prime Minister who is resolutely determined that a separation referendum would be illegal is himself from Galicia. When he speaks, he does represent a significant section of the population in the entire country, including in Catalonia itself – not least a significant minority of the population who are (or whose family is) recent immigrants from elsewhere in Spain. Unlike, say, English people who move to Scotland accepting entirely that it is a different country, Spaniards moving to Catalonia have had no such sense – such a status is still contested. That is to leave aside those proud Catalans – by linguistic and cultural heritage – who would really prefer a properly federal Spain respecting their cultural and linguistic rights to outright separation (but who are currently swinging towards outright separation in frustration that those cultural and linguistic rights are not respected in much of the rest of Spain).

Thirdly, and most markedly, is that Catalan separatists have done much less planning for “independence”, and are perhaps as a consequence much more divided, than in Scotland. In some ways they are more like Irish Nationalists, using cultural and linguistic distinctiveness to make the case for separation while never really getting around to the practical legal and economic details. To be clear, an independent Catalonia could without question form an economically viable European state if it put its mind to it; but the details of how this should come to pass have never really been considered. What about a diplomatic corps? What about immigration control? What about FC Barcelona having to leave “La Liga”?

It is perhaps small wonder, then, that the recent conversation went something like this: Catalan government “We want a referendum on independence”; Spanish government “You can’t have one”; Catalan government “Er, okay then”. Politics is always a facade – but like Gaudi’s cathedral, in Catalonia it is particularly incomplete.

I am a huge admirer of the linguistic development of Catalan and of Catalan culture and architecture – it’s hard not to be. It is also, of course, the greatest single footballing region on the planet – what could be better than that?! However I can’t help, albeit from afar, still take the view that everyone knows Catalans want independence, but they don’t like to talk about it…

The Left needs to get moral, not moralistic

I am wary of ever quoting Daniel Hannan after his outrageous attack on the NHS on Fox News some years ago. However, his articles are usually thoughtful and always challenging – none more so than this one where he challenges the Right to be consistent on capitalism and its rewards, and the Left to be moral rather than moralistic. It’s a bit one-sided and simplistic, but contains an alarming kernel of truth.

In Northern Ireland I suspect more people see themselves on the “Left” than on the “Right”, though I must say this is a self-identification. There are people on the “Left” that I hear stating views which are well to the “Right” no matter how defined; yet also people who deny the label “Left” who take fundamentally socially responsible and surely by any definition “leftist” positions. My own position is essentially that I’d love to be on the “Left”, if only I thought people really believed in it. But when it comes to action, it is clear to me most people are actually to the “Right”, almost regardless of definition. This is often for the reasons Mr Hannan suggests.

Too many people self-identifying with the “Left” frankly do exactly what he says – because, for example, they’ve called for higher taxes it is then perfectly reasonable for them to spend “their own” money on a Spanish villa rather than on setting up a charity, for example, to help the (genuinely) fuel poor. I have long pondered, indeed, whether it is possible to have a second home and still be “left wing”; and I think I’ve decided: no, it isn’t. “It’s my own money, I earned it, I can spend it on whatever I like” is perfectly reasonable logic, if you are on the political “right“. But if you are serious about redistribution of wealth, it is outrageous to invest in a second home when you could instead spend it helping people out there lacking even a first home.

The straightforward truth is we are all very happy to argue the case for good causes provided it is other people’s money which will be spent on them. We all define “the rich” as people who are richer than we are. In the end, if we’re asked to put our own hand in our pocket for some vague good cause in preference to that long weekend in Mallorca, well, who else is putting their hand in their pocket, eh?

The only people who can be taken seriously as “left-wing” are the small minority who set up the charities, raise the money, and physically redistribute income including their own. (Very often, these are actually Churches – themselves oft maligned by many on the “Left”.) If you are waiting for “the State” to do it all while sipping on that Prosecco on a balcony on the Cote d’Azur, I say fair play to you, you probably earned it – but please don’t insult us by calling yourself “left wing”.

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?

Conservatives are two separate parties – in England

Why is it the Conservatives score much better in England than in the rest of the UK in the 21st century? I would suggest it is because the Conservatives consist of a coalition effectively of two parties – one centre-right pro-business near-liberal; the other essentially Nationalist (and now under severe challenge from UKIP).

When “Nationalist” really meant “Imperialist”, these two did not jar as obviously. Broadly, the Empire was in businesses’ interests, and thus the two clearly belonged to the same side.

Additionally, UK politics even after the War consisted essentially of Socialists (Labour) and Not-Socialists. What is now registered in the record books as “Conservative” was actually a conglomeration. Michael Heseltine was initially “National Liberal”; Neville Chamberlain, representing Birmingham, described himself as “Unionist”; there were other descriptions too. In some cities, Conservatives even stood aside for Liberals in return for a safe neighbouring seat.

Over time, however, the interests of business have begun to diverge as Imperialism has given way to “Euroscepticism” – perhaps better termed British (or even English) Nationalism. Conservatives in metropolitan areas such as Zac Goldsmith are a million miles from the likes of Edward Leigh in more rural constituencies. As ever these things are generalisms, but the Conservative benches thus consist of two very different types of MP – the Classical Liberal internationalist on one hand, and the English Nationalist on the other. The current conundrum is that UKIP is snapping at the latter, making English nationalism effectively the centre-right battleground, much to the bemusement of the Classical Liberal Internationalists who cannot comprehend this at all.

This explains also why the Conservatives do much worse in Scotland and Wales, where the “Nationalist” market is already spoken for by the SNP and Plaid, who have both also emerged as pro-EU. In Northern Ireland, of course, a wide range of Nationalist (in the broadest sense) options already exists – and precious little else! Thus, outside England, Conservatives are only in the “Classical Liberal Internationalist” market – the very market being ignored by the Leadership as it tries to resolve its obsession on its Nationalist-Eurosceptic (English only) side.

In other words, the type of person who regularly votes SNP or Plaid in Scotland and Wales actually votes for Conservative English Nationalists in England – particularly in rural areas. This means that the Conservatives are only half the party in Scotland and Wales that they are in England. It is also why they continue to run the risk of becoming completely England-only – another challenge to the very viability of the UK itself.

Northern Irish need to learn not to vote for gridlock

Never has faith in Stormont been so low screamed the Belfast Telegraph on the basis of a Lucid Talk poll last week – and no doubt it is true. Yet the very same poll showed that if an election were held tomorrow, the DUP and Sinn Fein – the parties responsible for Stormont and thus for that low faith – would romp home with half the vote.

This is plainly senseless. Yet still it seems a majority of us outside the DUP and Sinn Fein don’t understand this “democracy” lark.

One Belfast Telegraph correspondent openly called for Direct Rule. That would be Direct Rule by a Conservative-led administration, despite the Conservatives being rejected at every post-Agreement election in Northern Ireland. At the last European election, they came last, securing less than half the vote of a new party which had imploded the day before polling. If we wanted a Conservative-led administration locally or in Europe, we could have voted for one – yet we didn’t. It is thus fundamentally undemocratic to argue that we should get one (other than at UK level – we have accepted that by accepting that we should remain within the UK at a referendum in 1998). We have tried ignoring the fundamentals of democracy before – it gave us half a century of incompetent single-party rule followed by a generation of terror. I wouldn’t recommend we try it again.

Others demand we reform the institutions. Of course, I have recommended reform myself. But the are not going to be reformed by those who benefit politically from leaving them the way they are – namely the DUP and Sinn Fein. They will coolly blame each other of course, but the reality is no party or coalition willingly changes the system through which it gained power… unless it becomes genuinely scared that it will soon lose it…

It is a strange form of democracy admittedly. This is not because it is a “mandatory coalition” (firstly because it isn’t; and secondly because Grand Coalitions are quite normal in Europe); it is because parties are entirely communal and derive power from playing the blame game against each other. This is quite normal politics of course, but in our case they are obliged to stay together – frankly for the quite sensible reason that power-sharing is necessary in a society whose past consists of violence founded upon segregation and consequent ignorance and hatred. So to be clear power-sharing and Grand Coalition devolved government are the only show in town – if you want people to work them better, you want people to reform them at the edges, and frankly you want people who are more representative (we need more women for an obvious start), we need to stop just talking about it. Get out and campaign and stand and vote for change!

This is the point. We need to face the fact that we have gridlock because that is what we voted for – and apparently would continue to vote for. If you want proper government rather than gridlock, don’t vote for the parties which have delivered it. If you want reform of the structures, don’t vote for those who derive their power from the current structures. If you want better politicians, well, it is your responsibility to get them elected.

US cannot sort out Syria on its own in multi-power world

20 years on from the terrorist ceasefires, Northern Ireland is definitely a safer place. 13 years on from 9/11, however, the world most certainly isn’t. As ever, the problem for the West is politics. Politics requires the perception that we are safe; yet perception is vastly different from reality.

Just over a year ago the UK Parliament stopped proposed military action in Syria. This was a very good thing – intelligence from research I myself was doing for a client in London indicated that the premise used to promote the proposed intervention (that Assad had used chemical weapons) was incorrect, just as in 2003 with the “weapons of mass destruction”. In fact, all the intelligence said that the Syrian opposition had used chemical weapons, not Assad. Is it not now interesting that we have come to view that opposition, not Assad, as the problem?

Last week I reluctantly supported military action. When genocide is ongoing within a democratic state which requests your assistance to stop it and you have the capacity to assist, you assist. However, no one supporting that assistance is suggesting a few RAF bombs will solve the problem; they are but a tiny part of a long-term and complex solution.

We still like to think we live in a binary world of “goodies” and “baddies”, but it’s a lot more complex than that – and actually there are a lot of “baddies” out there. To base intervention on particular atrocities would see intervention on different sides of the same conflict, so that’s useless (which was why I opposed intervention in either Iraq or Syria). To base intervention on which side suits the West only creates further outrage and fundamentalist opposition to the West in the long run. And the “sides” change all the time anyway!

The other issue, which I raised last month, is that the United States is no longer politically (or arguably even financially) in a position to sort these things out alone. Indeed, it never was – it has only been the sole superpower for two decades (while the Cold War looked and felt dangerous at the time, actually two superpowers provide enough coverage and a surprisingly secure sort of equilibrium which we haven’t had since 1991). Those two decades have seen the United States directly attacked, and then become embroiled in conflicts which served no purpose, cost lives, and reduced Allies – many countries involved in the first Gulf War had dropped out of the Western Alliance by the second.

Barack Obama was a horribly inexperienced President right from the outset, but even the greatest Foreign Affairs genius of all time in the White House could not solve the basic problem that is unclear what the United States should do; and it is clear that there are significant practical limitations on what it can do. Europeans now spent woefully little on their military to be of any real use as allies; and the IS surge in Iraq/Syria is in any case tied in all kinds of ways (primarily religious and trade) with conflicts ongoing all the way from the Sahara to the Black Sea.

What we are seeing in the world in 2014 is a shift to multi-powers, with the rise of China and perhaps other BRIC countries (with insecurity enhanced by their own and their neighbours’ jostling for power as others, including religious zealots, fill various new voids left by American inability or unwillingness to act decisively). It does look alarmingly like 1914, when a similar shift from Pax Britannica to the Cold War began and the lamps went out for a generation. It is extraordinarily difficult to see what we should do about it, however – the only thing which is clear is that if we are waiting for the United States to do it all, it will be a forlorn wait.

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