Lib Dems not ready to be Ministers. The country not ready for Coalition.

Norman Baker - fighting against apartheid?!

One of the delights of starting Politics A-level at my old school was the political engagement of so many of the pupils. One of the most frustrating aspects of it though was their inability to think about politics as shades of grey, only black and white, good and bad. It's the same with the country, and in particular many parts of the media, as they try and deal with the fact that the UK is governed by a coalition. Either it is working seamlessly, or it is a "sham", with nothing in between.

This shows naivety in the least, ignorance at the worst. Or, in the case of the Telegraph reporters who targetted Liberal Democrat leaders at their constituency surgeries, a sneaky, corrosive agenda that led them onto a fishing expedition which did, in the end, come up with something important (Vince Cable's lack of partiality as Business Secretary when it came to assessing mergers), but mostly has come up with comments that show at worst that some Lib Dems don't understand their responsibilities as coalition government ministers but at best that, hey, guess what...coalition means two DIFFERENT parties with DIFFERENT beliefs working together.

As Conservative MP Peter Lilley said, "We're going to have rough waters and we've got to brace ourselves for it and not be driven off course by every ill-judged remark,". From the start, many who are against the coalition (both within the Conservative and Liberal Democrats as well as Labour) have seized upon every single disagreement as a sign it "isn't working". Yet the coalition has done far more in its first 7 months than anyone could have expected it to.

More importantly, it has done so without silencing dissent. For journalists who had to endure 13 years of media-trained New Labour automatons claiming violent agreement with every single policy announced, it must be a pleasure that Government Ministers have been allowed to talk of their misgivings about policy. Debate has been permitted, and in many cases this has resulted in the Liberal Democrats being able to significantly influence many of the policies announced, in the process possibly making them more palatable to the public than they might have been had they been pure Conservative formulations.

Yes, they were hung out to dry over tuition fees. But then again I think tuition fees was the area in which the Liberal Democrats as a party had the most learning to do if they ever want to be a party of government, which is a lot harder than being a party of protest: You can't come up with pledges and promises which would be undeliverable should you be in government....because you might end up in government. However much I might argue that those who go on about "broken promises" possibly don't understand that coalition is a compromise in which both, or all parties HAVE to break some promises, this was a particularly silly promise to make.

But to argue that, as Norman Baker (Lib Dem Transport Minister) did - that he is like Helen Suzman - the South African MP who ought the apartheid regime, is particularly far-fetched. "She got stuck in there in the South African parliament in the apartheid days as the only person there to oppose it... she stood up and championed that from inside," said Baker. Comparing the need to deal with a £160bn deficit and £1 trillion pound debt with the apartheid regime may seem ridiculous, BUT it shows the lengths that Lib Dems are having to go to justify their "collaboration" (a connotation-laden word used by John Prescott) with the Conservatives.

Then we have Deputy Leader of the House David Heath commenting that "George Osborne has a capacity to get up one's nose, doesn't he?", and Local Government Minister Andrew Stunell talking about David Cameron and saying,  "I don't know where I put him on the sincerity monitor... is he sincere? I do not know how to answer that question."

There again, James Holt, the Lib Dem head of media, did point out that "In workplaces the world over, there will be personality clashes and differences of opinion.In this case, the Liberal Democrats and the Conservatives are coming from very different points of view and they are coming together in the national interest."

And Lib Dem backbencher Adrian Sanders told BBC Radio 4's Today programme: "What is the point of being a separate political party if you don't consider that there are opponents to you? And the Conservative party is our opposition, in normal times."

The problem is that, faced by two young, female, pretty, giggling, fake Lib Dem party activists, these Lib Dem Ministers spoke completely candidly. They probably wouldn't have done so for two gnarled 60 year old bearded, sandalled Lib Dem activities, but then there wouldn't have been a story.

The Telegraph's readers don't like the Coalition, because it is watering down the Conservatism they want. That's their agenda. So they then set out to show it with this 'sting', but in the process relied upon the rest of the media and the country's lack of understanding of what coalition is and means to make it into a proper story.

Labour leader Ed Miliband has played this well, stepping into the Vince Cable affair by questioning whether his replacement on the BSkyB merger brief, Jeremy Hunt, who has been quoted on numerous occasions praising Sky, is fit to make the judgement to. He also used the word "sham" to describe the coalition, saying that "These are decisions of a Conservative-led government propped up by Liberal Democrat passengers. Passengers not in the front seat, not even in the back seat of the car, passengers who have got themselves locked in the boot," which is another open invitation to disgruntled Lib Dems to join Labour.

Miliband also opined that he would have sacked Cable for what he did. Many members of the Tory party wondered why Lord Young was relieved of his duties last month for saying something that was actually true (that some people had benefitted from the recession) yet Cable stayed within government. Miliband, of course, probably would have sacked a minister for doing what Cable did, had he been in charge of a majority Labour government. But he isn't, and neither is David Cameron, which is why it just wasn't as simple as that.

Also, Miliband is relying on everyone to believe that Coalitions are black or white. They are not. They are grey.

BAA - should it ever have been privatised?

Heathrow: stranded planes

One of the more frustrating aspects of evaluating whether certain industries should be privatised or operated under public ownership is that at first glance the basic economic analysis of the advantages of both is very similar. Proponents of both argue that both a nationalised and a privatised industry will be run more efficiently and  provide lower prices, more choice and better quality services for consumers. Those anti-to either both argue that they lead to organisations having no incentive to be any of the above. So, privatisation or nationalisation? As with many economic concepts, it depends.

Since the main argument for privatisation is to introduce competition into a market in order to force organisations to operate more efficiently, the areas in which it makes the least sense to release an industry from public ownership are those in which a natural monopoly operates. This is where there is really only room for one firm in a market. The privatisation of the railways - where only one company can operate on a particular line, is an example of this. The privatisation of water supply is another as it's not possible for a competitor to come in and lay more pipes. This is probably why rail maintenance had to be re-nationalised earlier this decade and why the regulation of water companies has been so controversial.

But in the news recently has been another great example of an industry which should perhaps have never been privatised, and in particular, the effects that privatisation with no chance of competition has on the behaviour of firms. This is BAA limited - privatised in 1986 and responsible for operating many British Airports - including Heathrow, Gatwick and Stansted.

You'll notice immediately that BAA had a virtual monopoly of London Airports. The massive start up costs of airports and the economies of scale to be gained as they grow are enormous barriers to entry into that market, so much so that Gatwick had to be forcibly sold in 2009 - which was a first admission that privatisation hadn't worked in this industry.

You'll also notice that BAA is a private limited company. It was the British Airport Authority until 1986, then BAA plc until 2006 when it was taken over by a consortium led by a Spanish company called Ferrovial and delisted from the stock exchange. This means that those who run an industry as vital to the UK's economic health as its main airports answer to no-one. Not the government, and not the shareholders, no-one.

Hence, when last year BAA were charged with making sure there wasn't a repeat of the chaos that ensued during a tough winter in which many planes were grounded, they spent a very small amount (about £600k) on equipment that, as we have just seen, was insufficient for clearing the snow and ice that again formed on the runways at Heathrow. This grounded thousands of passengers, wrecking holidays and their travel plans.

You'd have thought it would hurt BAA too. But they ALSO operate the retail locations within the airports, in which so many passengers were stranded for so long. These locations charge a premium price, for they are also a local monopoly. They would have made a killing over the past two weeks. I am not saying BAA deliberately did this. I am talking about the difficulty they must have with incentives.

BAA lack the incentive to make long-term investments to ensure that conditions at their airports are conducive to planes arriving and leaving, because they make serious money from passengers having long stays at their airport. Furthermore, even though BAA provide a vital service to the UK, there is absolutely nothing the government can do when they don't provide that service, as they are a privately run company. Hence we have had Phillip Hammond, the Secretary of State for Transport, standing around looking sadly impotent. He offered resources to BAA to clear the runways, but BAA allegedly refused (because, he said, there is equipment (e.g. lights) embedded in the runway which needs to be protected so there is a level of expertise needed for clearing the snow and ice from a runway).

One of the main advantages of having a vital industry with long-term capital investment needs in public ownership is that those long-term capital investments can be made without worrying about short-term profits to shareholders. Even though BAA is not a public company, the consortium that bought it may have incurred debts to do so which need servicing so those profits are important. In this country, the water companies have negotiated to be allowed to raise their prices to take account of the long-term capital investment needed to maintain the country's antiquated piping system. Public ownership would mean that would not be an issue.

The point is not that Heathrow airport in particular would have been able to operate all planes under public ownership. I don't need to go into the problems that lack of competition causes in public ownership. BUT since in public ownership an industry is judged by its ability to run a service for consumers, not for its profits, there would have been more incentive over the past year to have made the long-term investment (short-term rise in costs) that would have meant this year's winter problems would not have been so serious.

Even the Daily Telegraph has raised this question...so it must be a pertinent one. After all, in the last year Manchester Airport made some large investments in airfield de-icer and other equipment, enabling it to allow UK-bound flights that couldn't land in less-snowy London to land there and some Heathrow flights to have passengers bussed up to be flown out from there.

The difference between Manchester airport and the others I've mentioned? Manchester Airport is publicly owned. Profits go to Manchester Council, not to shareholders. Can I rest my case?

"I have declared war on Mr Murdoch" - Vince Cable at his best and worst

Vince Cable

The most explosive thing that Coalition Government Business Secretary Vince Cable said to the two undercover Daily Telegraph reporters in the recent sting operation was actually not immediately printed by the paper for quite an obvious reason. When asked what battles he has been fighting with the Tories he said that he has been "picking his fights" and when pressed for an example he said "I don't know if you have been following what has been happening with the Murdoch press, where I have declared war on Mr Murdoch and I think we are going to win".

Rupert Murdoch is attempting to buy the remainder of BskyB at the moment. The EU Competition Commission has said today they see no problem with this on competition grounds, so the decision on whether it can happen falls to...the Business Secretary (Cable), who can refer the case to the Competition Commission but then acts on their advice. As a Government Minister, the Business Secretary should remain above having opinions on decisions like this. But Cable says he has "declared war on Mr Murdoch" and "we are going to win" - so he obviously feels he isn't above having opinions.

Why didn't the Daily Telegraph publish these comments at first (eventually, after Robert Peston of the BBC released the comments having been passed them by a Telegraph Whistleblower, they published them at 3pm)? Well, the Daily Telegraph doesn't want Murdoch to be able to acquire BSkyB, but knew that these comments by Cable would prejudice the inquiry, and lead to News International (Murdoch's company) having immediate grounds for appeal against any decision he makes. Why doesn't the Telegraph (a newspaper group) want News International to buy BSkyB (a satelitte television company)? Well, this is where the media world is about to become really very interesting, and to explain we need to go back to an announcement by James Murdoch, son of Rupert, who was BSkyB CEO back in 2004.

James Murdoch

Having taken over from Tony Ball and observed the crumbling infrastructure around the company, both in housing employees and serving customers, James Murdoch announced that there would need to be a massive amount of investment in upgrading the ability of Sky to serve their end of 2010 customer target of 10 million, a number which seemed like pie in the sky (no pun intended) at the time. In a portent of the short-term thinking that precipitated the recent financial crisis, banking analysts said that this was absolutely the best strategy for Sky to undertake long-term, but since short-term profits would be affected, investors should sell. Sure enough, Sky shares halved in value, but now, here we are, at the end of 2010, and BSkyB have 10 million subscribers.

This means they can change their business model from acquiring customers to retaining customers, which essentially means their costs could be cut by about 80% and the profits will start to really roll in.

The issue that the other major newspaper groups have is that News International, should they acquire 100% of BSkyB, will have access to 100% of those massive profits, and COULD use them to cross-subsidise a massive price cut at the newspapers that they own (The Sun, News of the World, The Times, The Sunday Times), which account for 26% of the British Newspaper industry. This could effectively put their competitors out of business.

Rupert Murdoch

It also creates a hugh media empire, with an annual turnover of £7.5 billion, compared with £4.8 billion for the BBC. This  creates a media dominance, granting Rupert Murdoch huge power, leading to a continuance of his already enormous influence on British politics, and is why the BBC, joined with the owners of the Daily Telegraph, Daily Mail, The Guardian and the Mirror write to Vince Cable in October urging him to block the deal.

The European Commission gave the green light to the deal yesterday - although they did solely focus on competition issues, and left the way open for the UK to decide whether or not to take appropriate measures to protect media plurality (power in the media is shared by many). Ofcom, the media regulator, will advise Jeremy Hunt (the Culture Secretary who yesterday had this lumped into his intray) on what to do about any public interest issues.

The European Commission's officials have already looked into many of the issues being investigated by Ofcom. In particular the possible "bundling" of cut-price combined subscriptions to its papers and Sky Channels. They argued that "price is only one, and not the main factor in determining readers' choice of and loyalty to a newspaper." If you want to see what this means, go up to a Guardian reader (cost: £1) and offer them the Daily Telegraph for 20p instead....it's just not going to happen!

Ultimately, the case against the full takeover of BSkyB rests upon what Rupert Murdoch and News International MIGHT do once they have it. News International's entire legal defence against this could be "but we won't do that" and the Government could extract legal commitments that they won't bundle newspapers and pay-TV subscriptions and won't use predatory pricing to force others out of business. Of course, then we get into the whole issue of whether THAT is in the public interest. What if you are a Sky subscriber and a Sun or Times reader? Are you not allowed access to lower prices then?

There is also the issue of Murdoch's political influence. There is no doubt that the courting of News International's support has been one of the main strategies of political parties, certainly this year and 1997, and when that support does change it does have a huge influence on voters.

Others cite what they say is the pernicious effect on US politics of Murdoch's Fox News Channel's one-sided coverage of it. Here is a great example of where two countries are divided by a common language. In this country BBC1, BBC2 and BBC News have a 73.5% share of broadcast news viewers and Sky News has 6.3%. In this country we have proper public television stations, with a commitment to neutrality. The US don't, which is why their politics is so partisan, and this is fuelled by the extremism of both Fox News on the right and MSNBC on the left. Fox News is the result of privatising news, meaning business people use it to chase profits, and right-wing views mean money over there. So there is little here to justify the regulator turning down this deal.

As for the Business Secretary himself there are some issues here.  Once again it suggests that Cable was very comfortable in a protest party but far less comfortable in a party which shares government responsibility. It also shows him to be very aware of his own value to the success of the coalition (given he commented that he could always resign and bring the government down if he really didn't like what was happening). In fairness, it also shows Vince Cable doing what he does that made him popular, speaking candidly and openly in answers to questions. It is an unfortunate fact for Cable that the collective responsibility ethos of being a Cabinet Minister means he probably needs to stop doing that so much...especially during what he thought was a normal constituency surgery meeting.

You can't avoid tax avoidance

UK Uncut occupying Top Shop on Oxford Street

There's more than one way to skin a cat, and more than one way to correct a budget deficit. Given it's when tax revenue is dwarfed by government spending you can therefore manage both. The coalition argue that cuts in spending should bear the bulk of the deficit-cutting burden, others argue that there should be more tax rises instead. Both of these methods will, in the short-term, reduce aggregate demand and thus economic growth. But
A new pressure group - UK Uncut, has been bringing attention to a third way to do it. Don't raise tax, just stop people avoiding paying it.

UK Uncut are a rather loose coalition of left-wing groups, and their main aim is to fight the cuts in government spending announced over the past 6 months by the current UK government. The difference between them and many others is that they are combining a call to stop the cuts whilst offering an actual way to cut the deficit (take note Labour Party) by finding a solution to what they say is £25 billion of tax being avoided each year by, say UK Uncut, rich and wealthy individuals and companies. If this got paid, they argue, there would be less need for the cuts, which are mainly affecting the poor. Makes sense doesn't it?

They give the example of Philip Green, who owns Arcadia, the shopping group. Actually he doesn't own it. He runs it. His wife, who has never worked for it and lives tax free in Monaco, actually owns Arcadia. This allowed Green to channel a £1.2 billion dividend to her in 2005, avoiding paying around £300million in income tax - enough to pay the salaries of 20,000 NHS nurses or the £9,000 tuition fees of almost 32,000 students.

They also give the example of Vodafone managing to avoid £6 billion in tax recently, that they needed to pay after their purchase of Mannesmann in 2000. They lost a court case to the HMRC, but were eventually let off with a bill of £1.2billion instead. That's £4.8billion not paid. A lot of nurses, and a lot of students.

Some interesting points can be made here:

1) Everybody avoids tax, both consciously and unconsciously. The other day I was going to buy a new kettle and some food. On the way to the shop I realised I only had enough money to buy the kettle OR the food. I chose the food and avoided paying VAT. Will UK Uncut come and occupy my home in protest? Unlikely, because as you can imagine, this is a rather unavoidable avoidance!

2) There are a lot of people working hard to avoid inheritance tax. Inheritance tax is also called "death duties" and is an example of "triple taxation" in that someone is taxed on their income, taxed on interest on their savings or capital gains and then taxed again on any left over over a certain threshold when they die. There are, however, many ways to avoid inheritance tax, and it is so common that even famous Labour politicians have done it. Many argue that inheritance tax is fair as it one of the ultimate examples of a tax on unearned income. Others say it is a tax on success and everyone should have the right to pass on their wealth to their children, especially since much of that wealth has been taxed already.This is why none of the main political parties are comfortable properly attacking it.

3) Philip Green, on the many occasions he has been asked about his actions, argues that his success with Arcadia has rescued some major companies and created many thousands of jobs, which have taken many out of unemployment and generated tax revenue in themselves. However, is it really acceptable that the price of job creation is to let the creator off paying tax? What was certainly inadvisable was the government appointing Green to oversee the search for efficiency in public service as they did last August. There are plenty of other experienced corporate operators like Terry Leahy who could have done that without having everyone carp that it would help if he paid tax properly before advising us how to cut spending.

4) Vodafone's main obligations are to their shareholders. They say themselves,  in answer to questions on the HMRC case, that "the maximisation of shareholder value will generally involve the minimisation of taxation." The point is that it isn't the company who pays the tax, it is the shareholders. These include pension funds and small shareholders who hold a few shares or an ISA - and are likely therefore to have a tiny stake in Vodafone.

5) Ultimately, the main point which ties together the above points is that this is tax "avoidance" and is legal. It is not tax "evasion" which is illegal. Philip Green and Vodafone didn't make it legal, and they are unlikely to push for these methods to become illegal. The only organisation that can do that is the Government. So however many times UK Uncut occupy one of Philip Green's or Vodafone's shops they are actually aiming at the wrong target. Tax avoidance is allowed by the government.

So, why don't the government crack down on it? Why do so many loopholes exist? I imagine the main issue here is the need to balance the need to make sure that tax revenue is maximised without reducing the incentives to entrepreneurship and whilst also being that most normative of things..."fair".

If you raise tax on certain activities people may just stop those activities, or reduces the amount of those activities. Which means tax revenues fall. Which defeats the point.

This isn't an argument not to close some of more ridiculous loopholes. This goes to show that raising tax revenue isn't as simple as that. It's a little but like one of those games where you bash an object down and another one pops up. If the government do close one loophole, there are highly paid and trained tax accountants who will find their clients another one.

So what's the answer to the deficit then? It's hard to raise tax revenue by raising tax rates, and cutting government spending could actually increase the deficit in the future if it pushes the UK into depression.

The answer is found in an unlikely place. Tony Crosland - a former Labour Government Minister who literally wrote the book on the future of socialism - argued that economic growth is a necessary precursor to wealth redistribution. So that is where the UK Uncut should be targetting their campaign. We won't need cuts if we can grow because tax revenues should rise with that growth.

How do we get that growth? Here's an interesting thought...

Why, amongst all the protests against the cuts in Ireland, are they not complaining about the country's corporation tax rate being 12%?

Why "Climate change agreement" may be an oxymoron

At the end of a lesson on environmental politics last summer a student slammed her textbook on the table and wearily commented that "the study of global politics is basically learning why nothing will ever get better". To be fair to her, we had just covered poverty and global warming, both topics rather doom-laden, but in some ways she was right.

Look at the attempts to claim that the UNFCCC (United Nations Framework Convention on Climate Change) in Cancun that finished this weekend was a success: If you had told activists two years ago that they would claim that a 2010 agreement that covered adaptation financing (which accepts climate change is happening and prepares countries for it) and technology transfer (sharing the knowledge and skills to make production greener) but doesn't commit anyone to a monitored reduction in emissions they would have thought you mad. But the car crash that was Copenhagen has refocused expectations - and it has left the simple fact that the UN is actually capable of facing in the right direction on climate change as a sign of real progress.

So why is it that we can't get a global agreement on such an important issue as how to stop climate change?

1) The question of the science - despite the sheer weight of science available to prove that climate change is happening and that it has been caused and can be reduced by human behaviour there are many who are sceptical about the science. The science community itself hasn't helped itself by seeming so unwilling to discuss and publish any sceptical studies and there has also been the "climate-gate" scandal of last year involving the alleged hiding of data which suggests there was something to hide. Something to think about is this: If climate change IS happening and we DON'T do anything about it, the results could be catastrophic for all. If climate change ISN'T happening and we DO something about it, the result could be slower economic growth for many countries. Which is worse?

2) The tragedy of the Commons - the term was coined by Garret Hardin in 1968, who said that  - "where there is unrestricted access to a resource owned by no-one, there will be an incentive for individuals to grab as much as they can, and if the resource is finite there will come a time when it is ruined by over-exploitation as the short-term interests of individual users overwhelm the longer-run collective interests" - The resource in this case is our atmosphere and the pollution caused by emissions is the problem. Hardin's solution was to 'privatise' the resource - as if someone owns something they will be incentivised to look after it long-term, and then have central world government regulate their use.  BUT the emissions causing climate change are a 'transboundary' problem - in that it crosses national borders AND it is physically impossible to enclose the area which is being polluted AND there is no effective global governance available, mainly because so many countries will not allow their sovereignty to be infringed by global governance. Many will point to the way that the 'Montreal Protocol' solved the problem of the hole in the ozone layer 20 years ago. But this was a "point-source issue" - we managed to isolate the cause of those (CFCs from aerosols and fridges) and resolve the problem. With global warming there is debate over the causes and the sources and so it is much more difficult to know what will resolve the problem.

3) Sovereignty and the national interest - the three principles of sovereignty are that nation states are responsible for their subjects' security, liberty and prosperity. During a recession in the USA is it really possible to tell senators from "rustbelt" states dependent on coal mining, steel manufacturing and heavy manufacturing that they must sign up to action on climate change which could cost many thousands of jobs? Are UK citizens going to sign up to electricity bills rising by 25% and be happy to see the economy shrink by 1% by 2020 in order to achieve emissions targets (as Lord Turner - the government's climate change adviser has admitted)?Are China's government ever going to be persuaded to allow international monitoring of their emissions, given they won't allow even internal monitoring of their actions?

4) Will governments take on consumers? - Western democracies value choice. Will consumers REALLY accept having their choices dictated by government - which is ultimately what will need to happen in order to persuade companies to change production techniques enough make the necessary emissions reductions? Given numerous surveys still put climate change as low on voters' priorities, wouldn't the restrictions on energy use required not be politically unpalatable? Will banks accept being directed to lend money for green infrastructure projects without government guarantees? Terry Leahy of Tesco says that given they operate in such a competitive market they need to give customers what they want - so he needs customers to change first. Will they do so without government coercion? Will they accept that coercion?

5) Common but differentiated responsibities - the 1992 UNFCCC ('Rio Summit') developed the key principle that although all nations had to accept responsibility for the world's climate, it was developed nations that were immediately responsible as they had benefitted from the industrialisation which was regarded as the cause of the excess CO2 emissions which had caused the climate change. The USA emits around 25% of the global total but has only 4.5% of the world's population. Chinese figures are 14% and over 20% of the world's population. The 35 least developed nations emit under 1% yet account for over 10% of the world's population. So it would have to be the developed countries that lead the way in making reductions. The Kyoto Protocol in 1997 then committed only developed countries to make reductions. This led to the US Senate passing the Byrd-Hagel resolution making it clear it would not ratify any agreement where developing nations - many of whom were already economic competitors to the US, did not also have to make emissions reductions. They have said that they want China and India to commit to emission reductions - leading to an Indian Foreign Minister saying this was like "Guys with gross obesity telling guys just emerging from emiaction to go on a major diet". Common but differentiated responsibilities sounds ok in theory but will it happen in practice?

6) The primacy of economic development - As I mentioned in an earlier article on them, China has 200m inhabitants still living in absolute poverty. The priority of their government is to remove them from that poverty. The UK once had many inhabitants in absolute poverty. They solved it by industrialising on a massive scale, regardless of the emissions that result. So did the USA. So did most of the West. Now we're expecting countries like China and India to introduce costly energy saving measures at the same time as they need to grow to take their population out of poverty. We are now at the situation where the USA won't adhere to a climate change regime without China and India signing up to it but they don't see why they should, and have a strong argument that it is not in the best interests of their population to do so.

At the end of the day we are trying to create a regime that will deal with climate change. These problems above have put us at an impasse. Any ideas?

Wikileaks, Assange and What ifs

My main problem with Wikileaks and it's founder, Julian Assange, is that I just can't work out what he is trying to achieve.

Giving him full benefit of the doubt, he is genuinely trying to create a more open political and security culture, allowing the general public to see all the information they are denied access to and to let them judge for themselves the actions of those who rule them - eventually asking those countries to take responsibility for actions that may or may not be illegal, and if not, possibly immoral.

There is certainly an importance in some of what he released recently through carefully selected media outlets. The release of the convicted Lockerbie bomber, Abdelbaset Al-megrahi, back to Libya was so suspicious that if Assange's leaks can prove one way or another whether it was related to trade or government pressure that information will do a great deal to stop things like that happening again.

But I do have the following questions, which if answered would help me make up my mind more fully on the issue.

1) How does Assange select the information Wikileaks releases, and why does he select that information? Wikileaks has released a lot of information on the conduct of the many countries on one side of what is an assymetric war. Nation states governed by the Geneva Convention are fighting terrorist organisations who will not have to explain themselves to anyone. Are Wikileaks showing us the information that incriminates one side for torture but holding onto information that might also incriminate the other side? Does Assange hold political views? Is he anti-American? Is he anti-West? How does this affect the information he seeks and then leaks? Some of what he has released puts all Westerners and those who work with the West in actual danger. This is important to know, as politics students need to question the sources they use to develop their opinions and take account of any bias before the evaluate the importance of that source to their argument. Assange complains about censorship. Is he censoring what we get to see?

2) Given Assange has said that states need to take responsibility for their actions and be held to account, why isn't he going to Sweden to face the charges of sexual assault that have been levelled against him? I am finding this whole part of this story very strange. Yes, there could be a motive behind a western government finding a way to generate a false charge against him - but Sweden? It's not their style. We have had the quite astonishing reaction of the extreme left-wing, who wish us to take every allegation of rape seriously, apart from this one.

Speaking out for Assange this week has been John Pilger. On the one hand I like politics students reading Pilger as he writes so passionately and interestingly about the issues he is shining a light upon. But I find it frustrating when students stop there and don't attempt to look at the opposite side of the story. Auberon Waugh coined the term "to Pilger" and defined it as "to present information in a sensationalist manner to reach a foregone conclusion" and Pilger certainly has a way of using only statistics that support his views whlist ignoring any that may inconveniently weaken his argument. Stepping into the Assange saga this week, Pilger offered to pay a portion of his bail, saying that although he didn't know Assange (an inconvenient statistic if there ever was one) he knew he was innocent of all charges, with little answer to the inconvenient question of how he knew this. Assange can't choose his friends, but if he wants credibility for being simply a torch shining a light on truth and freedom of information, he doesn't need Pilger as his bedfellow. 

I have been uncomfortable with many parts of this case. What Julian Assange is saying and doing, but also how it is being covered by the media and how the US authorities in particular are reacting (Robert Gates, US Defence Secretary, openly laughing when he heard that Assange had been arrested on a sexual assault charge was almost chilling).

What if Julian Assange didn't sexually assault these two women? What if the information he has released changes the way states interact for the good? If this is the case then we all need to support what he is doing.

But what if he DID sexually assault them? And what if what he really wants is the West to be crushed? The prime role of a sovereign state is to protect the security of its' subjects.

So many what ifs. Watch this space......

Clegg to decide - third party of protest or coalition partner?

The vote on tuition fees on Thursday is a chance to find out whether the Lib Dems in the coalition government really understand the choice that they made to share power. The decision they need to make is not about the moral issue of charging for university education, but about whether they would prefer to be the third party of protest or a legitimate, responsible member of the executive.

The debate on whether tuition fees should be charged at all is something I have addressed already. There is an argument against tuition fees being charged full-stop on economic and moral grounds. There is an argument that tuition fees should be nominal, so that students who benefit from university education contribute towards it, but the burden is shared with the state. There is also an argument that students should pay for their entire education, as they benefit from it, and in our current financial situation we need to ask them to do so. There are therefore legitimate grounds to oppose, abstain or vote for the rise in tuition fees. Where there is a difference is in the responsibilities of the three main parties.

Labour MPs can vote for or against and not many would bat an eyelid. It has been conveniently forgotten by many that Labour introduced tuition fees in 2002 having expressly committed in their 2001 election manifesto not to do. This, perhaps, is why they have been relatively quiet on the implications of Nick Clegg committing to oppose tuition fees then vote for them in government. Also, the rise has been suggested by Lord Browne of Madingly's commission, which was set up by the previous Labour government. However, as we know now, Labour is the party of opposition, and oppose they probably will, whether they believe it to be right or wrong.

Conservative MPs will vote for, and I imagine will be whipped into doing so, as they are the majority party in government and there should be a certain amount of discipline installed into them. They didn't make any rash promises on this issue before the election and there are few grounds of principle involved on which they can vote against or abstain.

Then there are the Lib Dems. They made their pledge to oppose tuition fees before the election. That is true, but it was the type of pledge you make when you are a third party and may never need to actually have the responsibility of government. It was an economically-irresponsible pledge considering the deficit, but it has been hung around them like a noose.  Which Lib Dem MPs vote for or against or abstain, depends on what their role is in our new political landscape. To understand what they might do, and what they should do, relies upon the clearing up of two major fallacies that many protesters are either not getting, or ignoring.

1) The Lib Dems are in government. They are in the coalition. If they hadn't joined the Conservatives in a coalition then there would be no effective government, given that minority rule in a time of economic problems is not advisable. When you join a coalition, you have to negotiate and compromise. This means you get to keep some of your promises to the electorate, you have to drop some of your promises and some of your promises will be amended. The Lib Dems secured an agreement that they could abstain in the vote on tuition fees, and Nick Clegg has offered that to his MPs, on the basis that they ALL do so. However, some Lib Dem MPs have said they will honour their pre-election pledge and vote against, thereby breaking the coalition agreement. This means Clegg cannot abstain and has a responsibility to vote for the legislation. As does every other Lib Dem government minister, and there are quite a few of them. Those Lib Dems voting against are saying that they are not prepared to be in power, and that's fine, but they must live with that decision.

2) The actual legislation being voted upon has the hallmarks of Lib Dem intervention, particularly on some of the provisions made to make it more progressive. Because you don't pay until you earn £21,000 you pay nothing unless you are in the top 60% of earners in the country - so you at that point are NOT poor. Because the interest rate charge rises as income rises there is a progressive nature to the payments, with those on higher incomes paying a higher proportion of those incomes. The Lib Dems HAVE had their influence here, and it is therefore a coalition policy, and members of the coalition government need to vote for it or shouldn't be in government. Vince Cable, for instance, should he not want to vote for the policy, needs to resign from the government payroll.

The fact is that Nick Clegg and the Lib Dems are socially liberal but economically conservative. Many who suggested they were a natural coalition party for Labour understood little about their politics. Clegg has managed to pull the Conservative party towards the centre, and should be applauded for that.

I completely understand the anger of students. I have students at school who want to protest and if there is anything they should protest about it is this as they are being asked to pay for the debts dropped on them by older generations.

However, they are also being asked to pay for a university system aimed at 50% of the population. If you want services like that you need money to be spent. If you want money to be spent you have to collect it in taxes. Those taxes could be paid by everyone or by those who directly benefit from the service. It has been decided that those who benefit will pay and there may be no going back on it. They need to receive a service worth paying for and £3000 a year wasn't doing that.

So, many reasons to vote against, although I would hope some of those people voting against could be bothered to understand the actual legislation. Maybe doing so would go against their "narrative". They want to call this a Thatcherite policy (which is interesting as it was a Labour policy, and Thatcher was all for investments in the supply-side of the economy - which university education is).

Let's hope the education they want us to pay for is not wasted on this quoted protester.

"There are no jobs and yet I'm being asked to take on massive debts. At £9,000 a year that's £21,000 of debt"

1) If you don't get a job after university you don't have to pay back anything
2) Do the Maths!

World Cup 2018 and 2022 - The shifting sands of global politics

The World Cup went to Russia and Qatar for partly because it hasn't been to those areas before but there are three other reasons - each with significant repercussions for global politics and economics. The Freedom of the press, location of natural resources and the consequences of an indebted West and cash-flush 'Rest' were laid bare yesterday.

1)  The results of the bids for 2018 and 2022, and especially 2018, were in inverse correlation to press freedom in that country. I would bet quite a fair amount that for the next 8 years any Russian journalist who investigates or questions FIFA will find themselves on  'holiday' in Siberia. One of the most fascinating items I read about the problems those on the FIFA committee had with the machinations of the English Press was that they assumed the criticisms of them came directly from the UK government because in many of their countries the government IS the press. In particular, their understanding of the independence of the BBC is limited so trying to explain that it isn't merely a mouthpiece of the government would be very difficult. If the World Cup came to England, the FIFA committee would expect 8 years of extreme scrutiny, and the likelihood is that their behaviour doesn't stand up to even the smallest amount of scrutiny so going to Russia and Qatar made a lot of sense. For instance, the World Cup in England would generate a lot of profit for FIFA, but they demand that any income they make during the World Cup is tax free. In a time of cuts and deficits this would not have looked good.

2) Russia is the World's largest exporter of natural gas. Qatar is the World's third largest exporter of natural gas. The World is becoming more and more dependent on natural resources as it develops and FIFA seems to have recognised the importance of this.

3) Global political power is now officially on the move. From the heavily indebted importers of the West to the cash-rich exporters of the Near, Middle and Far East. This is the clearest sign yet that the creditor is King now.

Going back to number 1. I have no problem with the accusation that the BBC and the media "lost" us the World Cup. Good. I'd rather lose the bid honestly than win it because I offer FIFA 12 years of protection from tax and press scrutiny. If the BBC had been pressured into moving their Panorama investigation and we'd won it would have been a dirty win. At the end of the day, the UK may have had the best bid, but 'best' is just different now.

Welcome to the English Baccalaureate

My first reaction on reading the Coalition government's new White Paper on Education was a massive sigh of relief, that some of the most pressing issues in state education today were about to be addressed. This was followed by a sigh of resignation, because my experience in state education suggests that there is a long way to go before most of it can be actually implemented. I'll talk about the quality of teaching and the new rules on exclusion in later articles. But where I really want to doff my cap is to the introduction of the English Baccalaureate.

The problem with setting targets is they then become what is managed. Having seen the 5 A*-C target take over Year 11 to the extent that the bottom 60 and top 60 students barely get noticed for the last 6 months there I am glad there is a new focus that might change the behaviour of some state schools.

There is an academy in Liverpool who 2 years ago achieved 91% of its students getting 5A*-C grades but only 30% of those students got 5 A*-C including english and maths. How did that happen? Students in danger of not getting the 5 good GCSEs were put on GNVQ and BTEC courses which count as four GCSEs. They then have to get a merit to get a C in this 100% coursework course and that's four of their Cs. The Labour government attempted to deal with this by saying they were only going to note the 5 A*-Cs including English and Maths. But the problem was that they allowed non-academic subjects to have equal value in GCSE tables. This encouraged schools to meet their target by entering their students for "easier" vocational qualifications (from 2,300 in 2004 to 550,000 now). This may seem good for pupils and schools but for the long term it is incentivising the de-skilling of an entire generation of our young people.

But this measure still doesn't measure the academic quality of the GCSEs taken. The English Baccalaureate does. To get it - you need to have Cs and above in English, Maths, the sciences, a modern or classical foreign language and a humanity such as Geography or History. Here are some interesting facts on this:

a) Only 15% of all GCSE students attain 5 A*-C grades in the five 'core' subjects of English, Maths, a science, a language and a humanity.

b) Only 4% of pupils on free school meals achieve this.

For the United Kingdom plc this has led to a generation of school pupils with no foreign language at GCSE, without an individual science and without an individual humanity.I'll leave it to Michael Gove - Education secretary, to comment on this:

“That really concerns me, not just because it’s bad for our economic position in the future, it actually is depriving young people of the thing that they should get from education, which is a rounded sense of how to understand this world in all its complexity and richness.”

Quite.

UNfair play at the UN Climate Change Conference

Charlie Young (5th from right) and the Kiribati delegation

An ex-student of mine is in Cancun at the moment at the UNFCCC. One the things he is doing is helping the delegation from Kiribati (one of the countries most in danger from climate change) to fulfil their obligations at the event and punch their weight. He is 18 years old and can make a difference. That is great for him but a ridiculous situation for Kiribati. His group (can be found at http://UNfairplay.info) are concentrating on how unfair these negotiations are for the small countries who end up being affected the most by climate change. I will quote directly what they say:

"At the UN climate negotiations in Cancùn, on average every 10 million people living on the African continent are represented by 2 delegates in comparison with 8 per 10 million inhabitants of the EU.
It has been announced by the secretariat that no more than 6 official meetings should go on at once, yet in Cancùn just under half of the delegations have 5 or less representatives. This means that they would have to sacrifice not only one of the main meetings but also group meetings and side events.
The countries who end up having to sacrifice meetings tend to not only be those which are least economically developed but also those which are must susceptible to the adverse affects of climate change. The Alliance of Small Island States (AOSIS), a grouping who’s uniting factor is their vulnerability to climate change, has on average 3 delegates per country whilst the EU has on average 14. Furthermore Japan, as an individual state which has just categorically ruled out committing to a 2nd period of the Kyoto Protocol, has more delegates than the entire AOSIS group of 19 countries.
In the report we also look at other issues affecting delegations from less economically developed countries, such as their ability to access information across the resource and language barriers they face. We argue that the secretariat should provide full and complete transcripts of all meetings translated promptly into all the UN languages, something currently available in the other UN meetings. As it stands now there is no effective way of accessing what was actually said in negotiations. Journalists have to quote other journalist’s paraphrasing; delegates cannot hold each other accountable verbatim and NGOs maybe forced into a bias of interpretation.
Quotes from the 40 delegates interviewed over the last year, outline among other things the remaining severity of language as barriers to participation for some delegates.
Not only does this make the process unfair but : “Increasing the negotiating capacity of underrepresented and under resourced delegations would have considerable implications on the efficiency and direction of the UNFCCC and resulting action on climate change”
In the report, we recommend seven simple and logistically feasible steps which the UNFCCC secretariat should take to make the process of climate negotiations fairer. We believe that in order to fulfill its charter the UN must truly look into and amend the functioning of the climate talks to ensure agreement with its founding charter which calls explicitly for the “sovereign equality of all its Members.”


The Guardian will give the report some coverage this weekend but it would be nice if other parts of the World's media could too.

Elected Lords = Emasculated Democracy

Those who repeatedly bleat about their wish of a completed elected House of Lords are asking for one of the most important checks on government power to be completely emasculated under the guise of "greater democracy". This is what happens when good intentions meets lack of political knowledge. 

A lot of people make comments about politics with little understanding of politics. For instance, they criticise the Lib Dems for "breaking election promises" on tuition fees without recognition that when you enter a coalition you have to negotiate and the result is a joint manifesto in which both sides have to drop elements of their manifesto and get to keep others. But in this case there is a real need for those campaigning to arm themselves with that political understanding, because the consequences of this particular change are particularly dangerous for the way our country runs itself.

The House of Lords is known by many other names, but one of them is as an 'amending' chamber. They possess no governmental power whatsoever apart from the ability to delay a bill passed by the House of Commons. But this power is absolutely vital. They scrutinise every piece of legislation created and if they don't feel it is right will send it back to the Commons to be redrafted.

This has all come to the forefront of our minds by the naming of new working peers by the parties over the past week which redressed the balance of peers to the point where the coalition government is in the majority, having had a Labour majority in the Lords for a long time. Opponents of the way the Lords is run have argued that this appointment by political dictat is one of the problems with the House of Lords.

The Lords consists of 26 'Lords spritiual' - senior bishops in the United Kingdom. Then there are the 'Lords Temporal' appointed by the Queens through the political parties and also called 'Life Peers'. Finally we have the 'hereditary peers' who sit in the Lord as a right of birth. Following a series of reforms under Labour we are down to 91 hereditary peers out currently 738 members, and that list will get smaller. The fact that this country has 26 Lords appointed from the church is obviously controversial given our ethnic mix, but this argument about membership is really about the temporal Lords.

Opponents of the temporal Lords argue that Lords should be elected by the population. On first sight this makes sense. Why shouldn't we the people elect them? The answer is because if they did then the government would quite simply no longer be held to account, and democracy would lose out.

Why? Because the Lords - even though many are appointed by political parties - take their roles very seriously and revel in their independence. Tony Blair's Labour government were defeated over 400 times in the House of Lords even though it there were more Labour-appointed peers than anyone else. For example, we would have 42 days detention without charge for terrorist suspects if it wasn't for the House of Lords. It is precisely because they DON'T have to rely on their party for re-election and other jobs that they will act with such independence.

There was an early Coalition Cabinet meeting when the Academies Bill was being discussed and David Cameron allegedly turned to Lord Strathclyde (Conservative Leader of the House of Lords) and asked if Strathclyde could "get his people into line on this". Lord Strathclyde's answer was "“Er, that’s not quite how it works in our place, Prime Minister.” This shows that even the most senior politicians forget what the Lords is for sometimes. 

If the Lords were elected - let's say every five years - the following would happen. They would become reliant on their political parties for money and campaign expertise and could not afford to rebel against them. The Lords, effectively, would reflect the Commons in terms of party balance and whichever party was in government would see their legislation sail through relatively unchallenged.

The Lords at the moment is made up of a far older group of people, most of whom have had actual life experience in the outside world.  As Rachel Sylvester pointed out in The Times recently - "An elected senate would not have Lord Winston, the fertility doctor, to comment on medical ethics or Baroness Manningham-Buller, the former head of MI5, to discuss anti-terror laws. It would be deprived of Lord Guthrie of Craigiebank, the former head of the Armed Forces, asking about Afghanistan, and Lord Woolf, the former Lord Chief Justice, raising concerns about sentencing guidelines. It would miss out on Lord Browne of Madingley, the former head of BP, and Lord Macdonald of River Glaven, the former Director of Public Prosecutions, and Lord Darzi of Denham, the surgeon who once saved the life of a fellow peer having a heart attack in the Lords."

The alternative is for the Lords to become elected, but basically a dumping ground for professional politicians with no experience outside politics and who had failed to get elected. I realise that on the recent list is Oona King, who has made a career out of failing to get elected so needed to get appointed....but she is an exception to the rule that the House of Lords is a good thing for this country's democracy, and until someone can persuade me that an elected Lords will improve our democracy I hope it stays just how it is.

Should we tax fat?

BBC's 'Panorama' programme this week raised the prospect of a "fat tax" being applied to junk foods that contribute to obesity in the UK. This is a fascinating debate which brings forth arguments about the justification for and effectiveness of government intervention on this issue as well as the fairness of a particular tax.

The economic justification for government intervention in this instance is that obesity has 'social costs'. This means that the cost of obesity is greater to society than the 'private cost' to the person who carries the weight. The difference between the two is the 'external cost'. Those external costs might be the extra burden on the NHS from treating obesity but also possibly sick days through related illnesses down to something as simple as the difficulties someone who is overweight may have playing a constructive role in many of society's activities.

2007: Plenty of fat to tax!

A 'fat tax' would suggest that the government feel that fatty foods are overconsumed and this is causing obesity. If the government can find a way to reduce the amount consumed then that would be better for society. If they can raise revenue from a tax to cover those external costs of overconsumption then that makes sense too.

So far, so economically rational. But does a tax on fatty foods actually solve the problem? And is there a chance it will create other problems?

I must declare an interest here because two years ago I would have been a 'target' for this tax. I am 6 foot tall and used to weigh 17 stones (107 kilogrames). I am now 14 stone (88 kilogrammes). How did I do it? By eating less calories and doing more exercise. Why did I do it? Because I was fed up of looking at a fat bloke in the mirror, because my daughter was starting to run around and I couldn't keep up with her, and because there's only so many times you can put up with being drawn as a

2009: calories in < calories out

big blob by a four year old child when on holiday with your friends' families.

Did eating less cost me less? No it didn't. It is a sad fact that eating healthily in this country is more expensive. Also, I spent a lot of money on getting the right clothes and shoes and equipment for exercise as well as gym membership.

Furthermore, I read a lot of magazines and websites about how to get fit and eat properly and I kept a daily diary of everything I ate and did exercise wise.

Put all that together and it worked. Took me 9 months to lose 3 stone and I ran a half-marathon comfortably at the end of those 9 months having not run for 18 years.

The point of this story? For people to lose weight and get fit, they need to have money, and they need to have the right information. A 'fat tax' would give them neither.

If you put a tax on fatty foods you will make them more expensive which should mean that people will swap to more healthy foods. But the difference in cost is large enough that it would have to be a large tax.  That would leave BOTH cheap fatty foods and healthier foods more expensive. Food is a need, so by making all types of food more expensive you are lowering living standards.

And this is where we get to 'fairness'. I hate to generalise, but obesity is more of a problem in this country for people on low incomes than those on high incomes. So a 'fat tax' will hit the poor harder, and is therefore regressive. The consequences of that could be uncomfortable for a government attempting to present themselves as fair and progressive.

What's more, many fatty foods are rather addictive, and quite frankly rather nice. Translated into economic terms - the quantity demanded of them would not go down anywhere near as much as the tax would take their price up. In other words, demand for fatty foods is 'inelastic'. The way tax works in this country, firms collect tax for the government - which means that taxes affect the supply of a good first, UNLESS they can pass on the entire tax to consumers - which in the case of fatty foods, they can, as demand won't fall by as much as the tax applied. So the quantity of fatty food eaten won't drop much.  What will happen is that government will get a lot of tax revenue.

Therefore, government intervention to solve the problem of obesity solely by way of a tax on fatty foods would not be effective and could result in further problems.

However, many say that the tax would be like a 'nudge' in a particular direction. Well, why not give consumers a nudge away from fatty foods and a further nudge towards healthy ones. The government could subsidise healthy foods, based upon the argument that they will gain that back through less cost to the NHS and less sick days from employees.

Also, as I said, it was information that really helped me. Government could make sure that everyone who wants to lose weight has access to the right information presented in accessible ways to help them. Much of this is already out there. But there is a lot about healthy eating, but is there really enough about the benefits of what really made a difference for me, exercise. So they can provide a lot of information about that too.

So, they could also subsidise gym membership, although the problem with that would be that people would still have to go to the gym once they are members - which has always been a problem. They could subsidise running clothes and shoes, although again the key is getting people out running.

Point is, it all goes back to each and every individual. Every time I bring up a solution I seem to be bringing up an argument against it. This is why we have ended up back at the 'fat tax', because if we can't get people to lose weight, let's at least try and raise the money from them to pay for the problems their weight causes, right?

The proof, on this issue, will be in the (gluten and sugar-free) pudding (yuk!)

The child that benefits should need it.

Everytime I find myself wondering about universal benefits, I think of the wonderful support staff at my school, many of whom work on far lower wages than I ever have, and yet are funding the child benefit  of multi-millionaires. Is this really what William Beveridge envisaged all those years ago as what the welfare state was for? I sincerely doubt it. Did he also imagine the UK would find itself over a trillion pounds in debt? Unlikely. So we can't keep harking back to what the welfare state was created to do, the country has changed. And so, surely, must benefits.

It was fascinating to watch the new leadership of the Labour Party take the bait and fall into the trap of 'over-opposition' - where they simply oppose in a knee-jerk fashion every policy the coalition come up with. Are they, the party that calls itself the progressive option, really going to justify taking money from the public purse to give child benefit to hedge fund managers? Oh yes they were. Thankfully, it may well be that opposing every cut was just a 'holding position' and now they have their shadow cabinet together we have Douglas Alexander, with the work and pensions brief, tentatively supporting Iain Duncan-Smith's welfare reform.

But back to benefits. The idea is that from 2013 those households with one person earning the higher rate of tax (at the moment this means they earn £44,000) will not receive child benefit. There is a lot to commend in this idea, but the devil will be in its' implementation.

The main argument against it was that a couple earning £43,000 each (£86,000) would not lose their child benefit (£33 a week for 2 children) but if one person earns £44,000 they would. This seemed not to make sense at first and was highlighted as 'unfair'.

But if you think about it, a couple who are both earning £43,000 a year are most likely to both be working for a reason, but are not likely to be very "rich". These couples - who would therefore have their children in full-time childcare - which is expensive - cannot be very numerous, and also there is an argument that the government would like them both to be working as productive members of society as it helps with employment numbers.

But if you have a couple where one earns over £44,000 and the other doesn't you have a large net in which you can catch the couples consisting of one who earns hundreds of thousands, if not millions, and the other who doesn't have to work as their partner earns so much. They should not be receiving child benefit, and this way they won't. So in that way it can be seen to be a progressive policy.

When I say the devil is in the implementation, I mean that the current way child benefit is collected and administered means it is not possible to automatically stop paying it. It is paid to the mother of the child, (allegedly because the father wouldn't be trusted to spend it on the child instead of drink) and the mother does not have to tell the father they are getting it. This led to an amusing discussion on air between Radio DJ Chris Evans and his wife when the news broke which was the first time he found out she actually got child benefit.

Anyway, the only way child benefit won't be paid is if someone in the household earns over £44,000, which could be found out by the Inland Revenue through PAYE if you work full-time, or your self-assessment if you are self-employed. But if it's the man who earns over £44,000 they would have to say whether their partner receives child benefit (even if you are married you have separate tax arrangements obviously) and a man could justfiably say "I don't know" then get out of paying it. They can't legally be forced to ask their wife.

Additionally, should the mother of the children earn below the threshold they might be asked whether their partner earns over £44,000, but tax affairs are private, for data protection reasons if nothing else. So the mother could say they don't know and that's that.

David Cameron suggested that the British public could be trusted to tell the truth but how far they'll go to tell the truth, given it penalises them a considerable amount of money remains to be seen.

I have no doubt we need to do something about the transfer of money from someone earning £10,000 a year to someone earning £10,000 a day. By 2013 hopefully they'll work out what to do. Meanwhile, coffee shops must prepare for a drop in machiatto sales, ballet classes might have slightly less demand, and Gymboree may have to reconsider it's entire business model.

Next stop should be Winter Fuel payments and free London transport passes for FTSE Chief-Executives and retired barristers. Oh no, wait a minute, they are old, and they vote in their droves.................

Why Ireland's cuts are sinking them and the UK's aren't

There are many genuine, economically literate arguments against the spending cuts being imposed by the UK coalition government at the moment. Not least the issue of reducing aggregate demand through government spending and relying on the private sector to fill that gap when its' major trading partners in Europe and the USA are also struggling economically (hence the recent cap-in-hand visits by David Cameron to both India and China).

Then there some economically illiterate arguments against the spending cuts. Step forward the "look what's happening in the Republic of Ireland" brigade.

Just to fill you in, Ireland has the highest bank debt in the world of €50 billion, and a budget deficit of 32% of GNP - ten times the eurozone's deficit ceiling. More importantly for this discussion, all this has been exacerbated by the steps that the Irish government felt no choice but to make. They slashed public sector pay by 10% and are taking more than 8% of GNP out of the economy in spending cuts. The point is - the cuts seem to have made things a lot worse, ergo the argument that the UK should observe Ireland and not make similar cuts.

The reason why this is economically illiterate is because of the enormous differences between the Irish economy and the UK's.

1) The boom in Ireland was hugely accounted for by the property sector - which by the time recession hit accounted for 25% of the Irish economy, whilst it was only 10% of the UKs even after our property boom. This was unbalanced growth in the first place. Worse, it was funded by huge lending of low-interest mortgages to borrowers who required no money down. These unpaid debts are what is now holding back the banks from growing again. We don't have this in the UK, where our banks ran into problems from dud investments in dodgy derivatives.

2) Ireland is in the Euro. This means two very important things:

a) They cannot use monetary policy to reflate their economy as monetary policy is controlled by the European Central Bank, so they only have fiscal policy with which to operate their economy (hence raising taxes and cutting spending to reduce the deficit). Not being able to lower interest rates, but possibly more importantly not being able to increase the money supply through quantitative easing is an enormous restriction on the economic control of the Irish government. The irony of this is that it was the lowering of EU interest rates at the beginning of the millenium that caused the boom in Ireland - its' inflation (and that of Greece, Portugal, Italy and Spain) was already high when the ECB lowered interest rates to try and inflate the French and German economies, a good example of the problem of central monetary policy being applied without central fiscal policy

b) They cannot allow their currency to devalue in order to boost exports. Since the start of the recession, Pound Sterling has fallen in value by nearly 25% against other currencies. Ireland has seen the Euro strengthen during this time. This takes away another engine of possible economic growth which might have raised money to help with their debts.

So, the upshot of this is that the IMF has praised the actions of the UK government whilst preparations are being made for what many are seeing as an inevitable moment where Ireland will need to go cap in hand to the European Financial Stability Facility, which has already helped out Greece. Both governments have taken similar actions, but it isn't working for Ireland.

As Ed Balls has pointed out many times recently, the five tests that Gordon Brown and his team came up with that more or less ensured the UK didn't join the Euro have probably been our saving grace as we fight our way out of the mountain of debt we have.

You only have to look across the Irish Sea to see the difference that it made.

The China Conundrum

Interesting watching David Cameron attempting to negotiate his trip to China through the clarion calls for him to speak up about human rights abuses. As was rightly pointed out on 'Question Time' last night, he does have a choice between 'money' and 'human rights' in that if he wants trade deals with China right now that might lead to jobs being created in the UK through China's export demand he needs to prioritise that over the human rights issue.

There is a point to be made there that right now the priority IS jobs. We've just come out of a recession and have a large amount of unemployment and a huge deficit and we need demand to come from somewhere given the cuts in the public sector.

But actually for me this is not about David Cameron, who will probably be damned whatever he does, but about China. It is about what we in the West regard as the most important human rights, and what we in the West expect of countries who are yet to develop fully economically.

There is a lot of misunderstanding in the UK about China. First of all - they may have the World's second highest GDP but this is shared amongst such a large population that they have a GDP per capita of around $3,000 a year (World Bank estimate). Ours in the UK is over $40,000. Most of all - they have over 200 million of their population still living in absolute poverty. That means they survive on less than $1.25 a day, the amount the World Bank feels is needed to enable a person to fulfill their needs of food, water, shelter, warmth and clothing.

That is their priority. Simple as that. We can make trite comments like that of an unnamed US negotiator who returned from last year's failed Copenhagen climate conference having not achieved any kind of agreement with China and muttered that it "shows what happens when you try to negotiate with a nation of only children". Or we can understand the following:

1) China's priority needs to be developing their country to the stage where they do not have citizens in absolute poverty.

2) As part of this they need to provide jobs for their population, food for their population and energy for their population.

3) Committing to a deal to limit their carbon emissions at the expense of their development would be tantamount to a form of 'sovereignty suicide' - their first priority is the prosperity of their citizens, given they have very little security issues. Their citizens need the fruits of development and growth and need them now, far more than we do in the UK.

4) Futhermore, they may also need to import food, raw materials and energy from countries regarded by the West as 'rogue'  states. They can get those vital resources cheaply and they can provide them for a population that actually needs them to live.

5) China's idea of 'human rights' may well be the right to live. It is generally thought that democracy may not be appropriate at times of either war or where economic development needs take priority. They do take priority, so when China complain that people don't understand the concept of 'human rights' the same as they do they are probably right.

I am not an apologist for the way China treats its' citizens who ask for democracy. I am not an apologist for their actions over Tibet. I am, though, prepared to understand from an economics point of view why China acts they way it does.

Sometimes, those who complain the loudest about China  need to put themselves in the position of their leaders. Leadership is an onerous responsibility, and sometimes you have to make unpalatable choices.

Do we really have any better ideas? 200 million people would like to hear them.

Jon Cruddas - "I didn't stand because I might have won"

Today we at Latymer's JS Mill Society had the honour of welcoming one of those politicians who give the profession a good name to talk to us. Jon Cruddas MP has built a reputation as someone with the rare attitude in UK political discourse that if someone disagrees with you they are not wicked, just merely wrong. Such is his appeal across political lines that the Times, right-wing house paper of the Conservative Party though it is, endorsed him during the recent general election as just the sort of politician who should be in the Houses of Parliament.

And yet, despite his cross-party appeal, he resisted loud calls to stand in the recent Labour leadership election. I took the opportunity over lunch, and a student did during his talk, to ask him why. His answer was instructive about where politics is in this country today.

His basic answer was "but I might have won". Cruddas believes that his personal politics would make the Labour party unelectable so he stood aside so that they might elect someone that would help them back to power. This is an admirable sacrifice for someone who clearly loves his political party and he explained it well in terms of what they need to happen.

When there is a political vacuum, it gets filled. Cruddas believes that during the 1980s, when Labour retreated to the left, it left a vacuum filled by the militants and rioters we see in films of the era instead of genuine political discourse. He feels that Labour needs to come from the centre-left as the left won't be elected and he can't move the electorate on that. He felt that going on a self-indulgent journey to the leadership would not be in the best interests of the Labour party and therefore of those he wants to see represented, given he does feel Labour government is the best route to social justice.

How sad. Is it really true that Tony Blair's victory in 1997 over a crushed and dysfunctional Tory party was purely because he found a centre-left (nearing centre-right) ideology that the electorate would vote for? Isn't it more true that an opposition party led by a bunch of incoherent Giraffes would have knocked the Tory party out of power in 1997, so weak were they.

Before the 2010 election Mervyn King, Governor of the Bank of England, opined that whichever party won the election would probably be unelectable in 2015 because the chalice they would be picking up was so poisoned, and the measures they would have to put in place to clear up the economic mess so divisive that the opposition of the time would almost certainly win.

So far, King has been right. The chalice is poisoned, and the measures are divisive. This means that a Labour Party offering a credible alternative should get elected. Surely no time would have been better than now for Jon Cruddas to have been party leader. He is credible, he has an alternative and he is someone the electorate can and would relate to.

The words of Hillel come to mind..""If I am not for myself, who will be for me? But if I am only for myself, who am I? If not now, when?"

For Jon Cruddas, it was now.

'Fund our pot noodles or Millbank gets it' - The Tuition fees debate

So yesterday was the big protest about the increasing of tuition fees for university students in the future. The rise - is certainly controversial, yet, like most issues, has two sides both politically and economically.

First, it is vital to explain what is being proposed. This has sometimes been obscured by people who do not wish to have a proper debate, so it's worth making it clear.

The proposals allow universities to charge up to £9,000 per year, raising the cap from its current level of £3,290. The government would continue to loan students the money for fees. The threshold at which graduates have to start paying their loans back would be raised from £15,000 to £21,000.
Graduates would pay back 9% of their income each month above that threshold.The subsidised interest rate at which the repayments are made - currently 1.5% - will be raised. Under a "progressive tapering" system, the interest rate will rise from 0 for incomes of £21,000, to 3% plus inflation (RPI) for incomes above £41,000. If the debt were not cleared 30 years after graduation, it would be wiped out.

Right - so let's break this down:

The argument against tuition fees being raised

1. Education is vitally important to UK society. How much do we value having our citizens university educated? A well educated population should be more productive, which should lead to aggregate supply being increased without population increasing, which should allow for there to be sustainable economic growth without inflationary pressure.

2. University education is also a force for social mobility, so should we not pay for as many of our population as possible, whatever their background, to go to university, with the cost being no obstacle to them going?

3. The cost of free university education is a few billion a year, which is small compared to how much the UK spends on items which are surely worth less to British society, such as for instance aircraft carriers that will never be used?

4. Taking 9% of someone's income when they leave university will stop them being able to build up a deposit to get on the housing ladder, so this policy distorts the housing market.

5. Universities train our doctors, our nurses,our teachers and other vital members of our society. They should not be discouraged from these noble professions by the cost of it.

The argument for tuition fees being raised

1. Something has to be done about the deficit, and therefore the government has to be careful about what it is spending its' money on. Universities need to be properly funded, and asking those who benefit from it is surely the best way to do that.

2. Those who go to university benefit from it. Those who don't do not. So is it right to ask someone who earns a little bit more than minimum wage and thus pays a little bit of tax to fund the attempts by others to get themselves a higher wage? So this makes the taxpayer fully funding university a regressive tax.

3. How can tuition fees stop poorer people going to university? You do not pay it back UNTIL you are earning £21,000, which is close the median wage of the country - putting you already in the top 60% of earners. So you ONLY pay it back should you "benefit" from it in terms of future income - which will mean you aren't "poor" any more. Should your income fall below £21,000 you don't have to pay it so it is NOT like a mortgage. So it is actually progressive

4. Universities that charge over £6,000 would have to undertake measures, such as offering bursaries, summer schools and outreach programmes, to encourage students from poorer backgrounds to apply. Difference being they would have the money to be able to offer these schemes properly.

Some thoughts

It is interesting to look at the way that this gets organised in terms of the political continuum. Students tend to be left-wing. Why? Well, being left-wing is being optimistic in some way and looking for a utopia, which is fine. But just about everybody on that march yesterday have never paid a penny of tax, and it is often said that people get right-wing as they get older, and one of the main reasons is that they see tax literally taking the food off the plate of their children and being spent in dubious ways and they want it controlled. Students don't have these worries.

But actually, I think this could be more about what a university education actually does. Jon Cruddas, the highly-respected Labour MP who came to Latymer this afternoon was asked about this issue and he told the story of his family. 5 children - all with degrees, 2 PhDs and 2 Masters added to those. All without paying a penny. They didn't do those degrees for money, they did them to gain knowledge and wisdom and having inhabitants of our country with knowledge and wisdom is surely in the interests of society.

It's interesting the mess that the Liberal Democrats have got into over this. The problem with being a small third party in opposition is that sometimes you practice opposition for opposition's sake, thinking you will never get into government so it doesn't matter. To insist on full opposition for tuition fees in the middle of a massive receession without providing an economically sensical alternative runs the risk of exactly what has happened, which is that you may end up in power and having to act responsibly.

It's difficult for me, I got my university education free. I wish all my students could get one too. If this causes even one bright student not to go to university when it would have been right for them then I have a problem with the long-term consequences of that for the UK's prosperity. I go back to basic economics here - the opportunity costs of providing free university education could be large. The opportunity cost of not could be even larger.