Deficit and debt: Does anyone know the difference?

“OK, so there’s the water in the tub…”

In a recent conversation, a Labour Party member told me that the coalition was “borrowing more than we did in power”. I pointed out that this was wrong, that the deficit, what we are “borrowing”, is, in fact, down by a third under this government. He replied: “The deficit may be but the current government is still borrowing more money than the last government.”

You could write this off as simply the pig-headed economic illiteracy of a paid-up member of the party that helped us into the current mess. After all, Ed Balls, Labour’s man on the economy, can stand up in front of Parliament and say “The national deficit is not rising…er…is rising, not falling” (he was right the first time). But then you hear Nick Clegg say that the coalition is working to “wipe the slate clean for our children and our grandchildren”. Even David Cameron himself announced that “We’re paying down Britain’s debts”.

You begin to wonder if anyone knows what they are talking about. I’ve addressed the issue of what exactly is happening to the British government’s finances before but it seems it needs repeating.

We have two concepts here: a stock and a flow. Think of it like a bathtub. The stock is the water in the bathtub, the flow is the water either flowing in or out of the tub through the taps or plughole.

In this analogy the debt is the stock, the water in the tub; the deficit is the flow, the water pouring in from the tap (if our government was running a budget surplus water would be flowing out through the plughole but we’re some way off worrying about that). In other words, the deficit (flow) is the amount by which the debt (stock) is increasing.

Thus, it is possible to have a situation like we have now where the debt is increasing while the deficit is decreasing (imagine yourself turning off the tap and seeing the flow of water dwindle – water is still flowing into the tub). Borrowing is down, what has been borrowed is up.

In the final year of the last Labour government Alistair Darling borrowed £156 billion. In 2012 George Osborne borrowed £99 billion. The deficit had fallen but while ever there is any deficit at all debt will be rising. Another way of putting it is to say that in his last year Darling increased the debt by £156 billion and last year Osborne increased it by £99 billion.

This is why you can have a chart like this…

showing falling deficits coexisting with a chart like this…

showing rising debt.

This might all sound a rather long-winded way of stating the obvious but a ComRes poll late last year found that 49 percent of people wrongly think “The Coalition Government is planning to REDUCE the national debt by around £600 billion between 2010 and the end of this Parliament in 2015”. The correct answer, that “The Coalition Government is planning to INCREASE the national debt by around £600 billion between 2010 and the end of this Parliament in 2015”, was given by just 6 percent.

The British government’s out of control spending is the central issue in British politics today yet there is mass ignorance as to what is really going on with it. In large part this can be attributed to the misleading statements pumped out by the sloppy Cameron and Clegg and the dishonest Balls.

What actually is happening to the British government’s finances under Cameron and Clegg is that the debt is growing and will continue to grow but the pace at which it grows, the deficit, is declining. This is simple stuff even if our politicians struggle with it.

This article originally appeared at The Commentator

Referendum reaction

The three stooges

There’s been more than enough reaction to Cameron’s referendum speech today without me clogging up your bandwidth with my two penneth. But, for the lulz, I thought I’d offer you this from my statist friend…

“I think the average person’s attitude to an EU referendum would be “well, if Miliband, Cameron and Clegg are in favour and Nadine Dorries, Nigel Farage and Bob Crow are against, then given that by and large the former appear to know what they are talking about and have positions of responsibility and by and large the latter are raving nutters who you wouldn’t trust to run a whelk stall, and as I can’t be arsed to go onto the intricacies of the argument myself, I am going to vote to stay in”

Yes, you read that right. Someone saying that Cameron, Clegg, and Miliband “know what they are talking about” I don’t know about you, but if any of them told me the sky was blue I’d want to go out and check for myself.

Paddy Pantsdown’s poetical problems

Always worth another airing

The British public was never too impressed with Paddy Ashdown. By turns sanctimonious and silly, Paddy Pantsdown, as the tabloids memorably christened him after an affair, took the Liberal Democrats from 25.4% of the popular vote which their predecessors, the Alliance, won in the election before he took over to 17.8% of the vote in his first election in charge and 17.8% again in his last election in charge. This lack of political achievement hasn’t stopped him sounding off in the wake of the Liberal Democrats worst set of election results since, well, he was in charge.

In the Guardian today Ashdown fulminates against the “regiment of lies” put about by the No to AV campaign and warns, none too ominously it must be said, that

“So far the coalition has been lubricated by a large element of goodwill and trust. It is not any longer. The consequence is that when it comes to the bonhomie of the Downing Street rose garden, that has gone. It will never again be glad confident morning”

You wonder if Ashdown knows where the quote “Glad confident morning” comes from? If he did it’s hard to see why he would use it.

It comes from ‘The Lost Leader’, a poem by Robert Browning excoriating his former idol William Wordsworth for his betrayal of the Liberal cause

Just for a handful of silver he left us,
Just for a ribbon to stick in his coat—
Found the one gift of which fortune bereft us,
Lost all the others she lets us devote;
They, with the gold to give, doled him out silver,
So much was theirs who so little allowed:
How all our copper had gone for his service!
Rags—were they purple, his heart had been proud!
We that had loved him so, followed him, honoured him,
Lived in his mild and magnificent eye,
Learned his great language, caught his clear accents,
Made him our pattern to live and to die!
Shakespeare was of us, Milton was for us,
Burns, Shelley, were with us,—they watch from their graves!
He alone breaks from the van and the freemen,
He alone sinks to the rear and the slaves!

We shall march prospering,—not thro’ his presence;
Songs may inspirit us,—not from his lyre;
Deeds will be done,—while he boasts his quiescence,
Still bidding crouch whom the rest bade aspire:
Blot out his name, then, record one lost soul more,
One task more declined, one more footpath untrod,
One more devils’-triumph and sorrow for angels,
One wrong more to man, one more insult to God!
Life’s night begins: let him never come back to us!
There would be doubt, hesitation, and pain,
Forced praise on our part—the glimmer of twilight,
Never glad confident morning again!
Best fight on well, for we taught him—strike gallantly,
Menace our heart ere we master his own;
Then let him receive the new knowledge and wait us,
Pardoned in heaven, the first by the throne!

Given that the Lib Dems never “loved (Cameron) so”, “followed him”, “honoured him” or, as far as I am aware, “Lived in his mild and magnificent eye” you have to wonder if Ashdown isn’t actually talking about Nick Clegg. Indeed, if this is the starting pistol for a leadership challenge then it may be the first time one has been fired in catalectic tetrameter. If being a party of government doesn’t suit them the role of party of poetry is all theirs.

Did The Leopard really change his spots?

Would they have?

You may be one of those people, like me, who always tries to sneak a look at someone’s library, record or DVD collection when you visit their home. Perhaps the shelves are a window on the soul?

In October last year Nick Clegg told Desert Island Discs that his book choice would be The Leopard by Giuseppe Tomasi di Lampedusa. By then Clegg’s popularity had plunged from the heady heights of the pre election TV debates in April to somewhere lower than a snakes waistcoat. What does Clegg’s choice of The Leopard tell us about the man who is one of the most controversial figures in Britain? And how useful is this sort of analysis?

The Leopard is a book both written and set in changing times. Tomasi di Lampedusa, the last in a long line of minor Sicilian princes, wrote the book in the wake of World War II during which his estate had been badly bombed. The novel’s setting is the culmination of the ‘Risorgimento’, or resurgence, the name given to the period of Italian nationalism which brought about the unification of Italy, led by Giuseppe Garibaldi, in 1861.

The book tells the story of how the Salina’s, a minor aristocratic family like Tomasi’s own, navigate the turbulent social and economic waters of the Risorgimento. The challenge for the head of the family, Prince Fabrizio, is to adapt the family to the new Italy being created by Garibaldi’s nationalists.

The book is full of portents of the apparent impossibility of the task. It opens with Fabrizio’s daily routine being interrupted by a grisly flashback of a dying soldier. Later on a cake in the shape of the family castle is devoured before Fabrizio’s son gets to have any. Fabrizio himself seems unsure whether the aristocracy can survive. In conversation with his staff he believes that the old order can be maintained but when he encounters Father Pirrone, who warns that the new order will bring the destruction of the nobility and church, Fabrizio says that change and adaptation to it are the natural order of things.

This dilemma is resolved in the character of Tancredi, Fabrizio’s nephew. He throws his lot in with the nationalists, explaining to Fabrizio, in the books most famous epigrammatic moment, “They will foist a republic on us. If we want things to stay as they are, things will have to change”

But if Tomasi sees the end of the old aristocracy as inevitable he seems to see as equally inevitable its replacement with something remarkably similar. One of Garibaldi’s men, Don Calogero, has risen from poverty to become wealthier than the Salina’s. He is nouveau riche and, early on, arrives at one of Fabrizio’s parties tastelessly dressed, to Fabrizio’s quiet satisfaction. But despite having the money he still craves the respect which the old nobility brings. A marriage is arranged between Dan Calogero’s daughter, Angelica, and Tancredi. Don Calogero gets the Salina’s nobility and the Salina’s get Don Calogero’s cash. Fabrizio and Don Calogero soon begin to assume more and more of each others characteristics. The prediction of Don Ciccio that the union of Tancredi and Angelica will simply cause the negative characteristics of the two families to thrive at the expense of the positive characteristics comes true.

In this sense The Leopard is a fundamentally conservative book. The very nature of conservatism is the conservation of an existing order. It is based on a conception of human nature as a constant from which it follows that methods and norms of behaviour in the past are equally worthy of respect as those originating today and that a good case must be made for change. If the duty of the conservative is not quite, as William Buckley put it, to stand astride history shouting “Stop!”, it is certainly to say “Hang on a minute” in a rather stern voice.

And in The Leopard Tomasi questions whether the changes wrought by the Risorgimento were beneficial. At one point Father Pirrone, the novels conscience, returns to his home village and sees the changes since the arrival of Garibaldi’s troops. The land, which used to belong to the church, has been seized and handed over to a moneylender much like a young Don Calogero. Whereas the monks, embedded in the community for several centuries, allowed the peasants to collect herbs on the land for free the new owner charges them. That this echoes the Marxist critique of capitalism for ditching “feudal, patriarchal, idyllic relations” in favour of the alienating ‘cash nexus’ only goes to highlight that we are discussing conservatism with a small rather than capital ‘C’.

What does this tell us about Nick Clegg? After all that it’s hard to say. Someone looking at my bookshelves might see The Downing Street Years by Margaret Thatcher and Capital by Karl Marx and conclude that I’m a total schizophrenic. If you saw American Psycho on a bookshelf would you panic and reach for the mace?

Does Clegg empathise with any of these characters? It is difficult to see the son of a wealthy banker and descendant of Russian nobility seeing much of himself in the counter jumping Don Calogero. It is difficult, if you believe Clegg is at all sincere, to see him picturing himself as either Fabrizio or Tancredi, one doubtful of the possibility or worth of change the other resigned to it but determined to use it for his own ends. If you doubt his sincerity then Tancredi would seem to fit the bill perfectly. More likely, given his recent tear stained interview with the New Statesman, he may identify with Concetta, Fabrizio’s put upon daughter who retains the family’s noble traits only to be appreciated too late.

Perhaps he may identify with Tomasi himself? The Leopard was turned down by publishers fearing a scandal in Tomasi’s lifetime. When the book was published in 1958, the year after Tomasi’s death, it lived up to the publishers fears. From the left the book was accused of smearing the progressive achievements of the Risorgimento. From the right it was attacked for its depiction of desiccated nobility. Clegg would certainly recognise that situation.

Or perhaps he may value the novels deeper points about change. The many people who voted for Nick Clegg based on his promises of change may, perhaps, have thought twice if they had known that the one book he would read if he could read no other, questioned both the possibility and desirability of radical change.

This article originally appeared at Middlebrow Magazine

Gillian Duffy strikes again

“We must stop meeting like this”

A year after being called a ‘bigoted woman’ by Gordon Brown and dealing a massive blow to Labour’s reelection chances Gillian Duffy faced off with Nick Clegg yesterday.

Rochdale is a long way from Westminster yet it seems Mrs Duffy cant walk to the shops without bumping into the leader of a political party. Of course, it helps that she was driven there by a local Labour party activist in a scheme dreamed up by local Labour MP Simon Danczuk who, one suspects, can expect a telling off from Ed Miliband, admittedly not a terrifying prospect.

Why so? Well, as wheezes go this one backfired badly. Whereas Brown was unpleasant and anti social and didn’t like people very much, Nick Clegg is quite a nice chap and was perfectly polite to Ms Duffy, even if calling her ‘Gillian’ was a bit over familiar. When faced with a woman of clearly limited intelligence who insisted on asking him the same question he’d just answered, Clegg showed admirable coolness in the face of a pretty obvious set up. Still, with the practice he’s had you’d expect him to be cool under fire.

But something of interest emerged from the meeting and that was Labour’s attitude towards Mrs Duffy and people like her. The lesson of ‘Bigotgate’ was that the Labour party is run by people who don’t like Labour voters very much. The open door immigration policy operated by the last Labour government was, no doubt, a boon for the likes of husband and wife Ed Balls and Yvette Cooper who could get a nanny on the cheap. And besides, how many immigrants could afford to live in Highgate? Surely, as they looked out of their bedroom at their neighbours million pound houses, they wondered what all the ‘immigration’ fuss was about.

It was rather different for the low paid people who traditionally make up Labour’s support. They faced competition for low skilled jobs and saw stagnant wages as a result. They saw their public services stretched to breaking point. They saw their communities change beyond recognition. And when Mrs Duffy dared to question the leader of the workingman’s party about all this she was called ‘bigoted’.

And Labour haven’t changed. When David Cameron made a perfectly sensible speech on the failure of ‘state multiculturalism’ Sadiq Khan popped up to accuse him of “writing propaganda for the EDL”. When the coalition put forward the well intentioned but probably ineffectual immigration cap, Labour suggested sticking to their failed old policy.

For all the schmoozing of Mrs Duffy Labour have been doing it is all totally false. They don’t care about her issues and they probably think she is a nutcase. Using her for the failed ambush of Clegg is a low and cynical political stunt.

Reflections on the ‘revolution’ in Barnsley Central

A message yes, but a “strong” one?

There’s an old saying back up north; you could pin a red rosette on a pig and people would vote for it. At last years general election the voters of Barnsley Central proved this to be almost literally true when they re-elected Eric Illsley, already mired in controversy over his expenses, now jailed over them.

If the judgment of the voters of Barnsley Central is suspect so is that of their new MP Dan Jarvis, elected last night. His acceptance speech, uncertainly delivered, was a carbon copy of that given by Debbie Abrahams when she was elected to another safe Labour seat, Oldham East and Saddleworth, in January. He declared that “The people of Barnsley Central are sending the strongest possible message to David Cameron and Nick Clegg. Your reckless policies, your broken promises and your unfair cuts are letting our country down”

But it’s difficult to see how Jarivs can come out with this rubbish. This ‘strong message’ took the form of nearly 3,000 fewer people voting for the photogenic ex Para than voted for the decidedly non-photogenic ex NUM employee and fraudster back in May last year.

What appears to have happened is that the Labour vote held up as you’d expect it to in any other year while Lib Dem voters stayed home and Conservatives voted for UKIP. Obviously this is not ideal for the coalition but no one ever thanks the doctor for perfoming neccessary surgery while he is fiddling about in their intestines. Given how doubtful it is that these voters will carry this apathy and protest into a general election where the stakes are higher, the coalition can be fairly happy to have generated nothing more than a bit of grumpiness among its own supporters.

Labour, on the other hand, for all their rhetoric of strong messages from angry voters about unfair cuts have seen their vote flatline in two seats they already held. But then how can a party who’s leader describes its beliefs as “a blank sheet of paper” expect to inspire anything but indifference?

The end of the affair, but it was a fool’s love from the start

Breaking up is hard to do

On January 5th the Independent reported that the Liberal Democrats had hit an all time low in the polls of just 11%. Part of this is down to students falling out of love with the Lib Dems, just 15% continue to support them according to YouGov in November. As recently as last May this figure was 45% and ‘I agree with Nick’ was a slogan popular on campuses nationwide. Where did the love go?

Students fell in love with the Liberal Democrats over Iraq and stayed in love over the unaffordable promise that taxpayers continue to pay 60% of the cost of 50% of all British kids studying for three years. It was never a relationship with stable foundations.

For all the sound and fury at the time Iraq receded as an issue. This left the unaffordable promise.

The promise had been made in more carefree days when no one had to worry about how it would be paid for, the Liberal Democrats were never going to get elected so who cared? Not since Sonny serenaded Cher had lovers been so blasé about the bills.

Then the unthinkable happened. The Lib Dems actually did end up in government. Curiously, many of those who voted Lib Dem were upset at this outcome; it seemed they had voted Lib Dem to bring about a Labour government.

Faced with actual power the Lib Dems were forced to dump the unaffordable promise on fees and as the old folk song went the hottest love was the soonest cold. The sweet nothings of May had been replaced by angry chants of “Nick Clegg, shame on you, shame on you for turning blue”

But like any break up the blame isn’t all on one side. Students who voted for the Lib Dems on the strength of their pledge on tuition fees need to ask themselves a question; why was it that the only party willing to sign it was the party that had no expectation of actually being asked to deliver on it?

Both Labour and the Conservatives went into the last election with the possibility of forming a government. Both made some pretty wild pledges but even they ran a mile from the tuition fee pledge. The Lib Dems probably knew they couldn’t keep it but didn’t think they’d have to so persisted in the fantasy that the taxpayers pockets were bottomless. It’s often asked whether students would have voted Lib Dem if they hadn’t made their tuition fee promise. An equally pertinent question is would the Lib Dems had made the promise in the first place if they’d thought they’d have to honour it?

But surely that fact that no party with a realistic proposition of power was willing to make this promise should have set a few alarm bells ringing among the student leadership? Surely they should have asked why this was? They are clever people, that is why they believe the taxpayer should to continue fund their education. But they fell for a fantasy. If they chose Lib Dem fantasyland over the real world then shouldn’t they take a look at themselves and take some responsibility?

The death of the Liberal Democrats may well be the consequence of this most acrimonious break up since The Smiths. But so what? The Lib Dems have always offered an alternative, but not an alternative to the policies of Labour and the Conservative,s but an alternative to grim, real world politics where money doesn’t grow on trees. What’s left of the Lib Dems is moving on. The student leadership should too.

Printed in London Student, 17/01/11

Methods, madness, and housing benefit reform

Slum clearance?

The early months of the coalition government seem to have settled into a pattern. A ‘savage’ (sic) cut is in the offing, be it capping benefits at £26,000 per year, tuition fees or public sector pension reform, which the media puffs up into the spark which will ignite outrage.

Then something strange happens. Or rather, it doesn’t. Families on benefits receiving no more than the average income, the students who benefit paying more towards their university education or public sector workers paying more into their pension funds are all accepted by a public which sees them as the common sense they are. This dissonance was seen with housing benefit reform.

Part of this is down to the sheer madness of the hyperbole deployed by the opposition. Jon Cruddas MP took a deep breath and blew hard on his dog whistle when he spoke of housing benefit reform leading to “social and economic cleansing”. Even less tastefully Polly Toynbee spoke of the Conservatives “final solution for the poor”.

It’s hard to think what the coalition actually could do to justify conjuring up the ethnic massacres of Yugoslavia or the hell of Auschwitz. Certainly their plans to save £1.8 billion per year by cutting Housing Benefit don’t.

Currently you can claim up to £8,000 per month from Housing Benefit. In one recently reported case, Abdi and Sayruq Nur and their seven children get just that to rent a house in London’s eye-wateringly expensive Kensington. They previously lived in the less salubrious Kensal Rise area but, according to Mr Nur, “The old house was good but the area was not so good. It was a very poor area and there were no buses, no shops and the schools were too far”.

I, as an average salary earning full time worker living in London, cannot afford to live in Kensington. Yet I pay taxes that go towards paying for the unemployed Mr Sur and his family to live there. Rather than grotesque talk of ‘cleansing’ and final solutions, this is real social justice. As Nick Clegg said in the Commons on October 26th

“it is perfectly reasonable for the government to say that it won’t hand out more in housing benefit than people who go out to work, pay their taxes, play by the rules will do when they look for housing themselves.

We are simply suggesting there should be a cap for family homes of four bedrooms of £400 a week. That is £21,000 a year.

Does he really think it’s wrong for people who can’t afford to live privately in those areas that the state should subsidise people to the tune of more than £21,000? I don’t think so.”

To remedy this unfair situation the measures proposed by George Osbourne, and which have provoked such fury from the likes of Cruddas and Toynbee, will cap housing benefit at £400 a week for a four-bedroom property and £250 a week for a two-bedroom home.

Far from forcing people out onto the streets a quick search on rightmove.co.uk revealed that, even in expensive London, there are 624 properties available with at least 4 bedrooms for £400 per week. A search on zoopla.co.uk found over 800 properties. Coming down to two bedroom properties rightmove produced over 1,000 while zoopla turned up 3,126, including many in trendy areas such as Islington and Camden.

True, many of these properties are to be found in London’s outer areas, zones 3 and 4, which would seem to lend weight to the argument made in the Independent that “the result of the cap, which takes force next spring, will be an exodus of the poor from the rich centre to the periphery and beyond”.

But that is exactly the choice that many people are faced with now; much as they might like to live in Kensington they cannot afford to so they live somewhere else. These reforms are about applying the same cost constraint on housing benefit recipients as are placed on the rest of us.

This shows why there is such a discontinuity between the “sound and fury” of shameless, tasteless and exploitative cynics like Cruddas and Toynbee and the public perception. The British people are a generally generous and fair minded bunch. Many of the key aspects of the welfare state still command widespread support. But when they see their taxes being used to subsidise people living in houses they couldn’t afford, we see just how far the welfare state has moved from Beveridge’s safety net to become a hammock. A poll for YouGov found that the housing benefit cap had 72% support. Even 52% of Labour voters backed the measures.

This is why all of the cynical, shameless and exploitative rantings from the likes of Toynbee and Cruddas are likely to have so little traction with the public. They are tales, as Macbeth said, “Told by an idiot, full of sound and fury, signifying nothing”

Are Nick Clegg’s Lib Dems more Liberal and less Democrat?

Nick the Kingmaker

For a long time ‘Liberal Democrats’ was usually a punch line to political jokes. Their leadership merry go round and policies which jumped to the right then the left of Labour and back again, apparently doomed them as just a protest vote. But this schizophrenia is a reflection of the odd history of Britain’s third party.

The Liberal Democrats are a hybrid. On the one hand, are the old Liberal party of Gladstone. They were heirs to the classical liberal tradition of John Stuart Mill, of social and economic liberalism. On the other hand is the Social Democratic Party. The SDP was founded by a group of disillusioned moderate Labour MPs in 1981, distressed by Labour’s lurch to the left. The two merged in 1988.

This duality at the heart of the Liberal Democrats has been brought to the fore in recent years. With ‘New’ Labour seemingly drifting toward the centre right on many issues, former Lib Dem leader Charles Kennedy sought to move the party to the left. In a clear echo of the SDP tradition, he pledged higher taxes to fund increased public spending and bitterly opposed the invasion of Iraq.

This prompted a response from the party’s Liberal wing and 2004 saw the publication of ‘The Orange Book – Reclaiming Liberalism’. With contributions from Nick Clegg and Vince Cable the book was a surprisingly frank statement of classical liberal beliefs.

The party’s 2007 leadership election between Nick Clegg and Chris Huhne was a straight shoot out between the two wings. The Liberal Clegg beat the more Social Democratic Huhne by just 1.2% of the votes cast. This victory, for the time being, of the Liberal faction over the SDP, was confirmed at the party conference in September when delegates voted to approve a platform of tax cuts.

This shift could see the one time joke party become something more important. For years it has been assumed that the most natural coalition in British politics was between Labour and the Lib Dems. Indeed, the late 1970s saw the Lib-Lab Pact whereby the Liberals propped up the ailing Labour government. In the 1990s, Paddy Ashdown and Tony Blair seemed on the verge of practically merging their parties.

But the ascendancy of the old Liberal tendency changes that. With his new rhetoric about the “smaller state”, Nick Clegg sounds closer to David Cameron than to Gordon Brown. Obstacles still exist, namely the differing stances over Europe and electoral reform and there is still the antipathy of the mostly SDP majority of rank and file members. But in the very possible situation of a hung Parliament after the next election, a new political cocktail could be on the menu.

(Printed in London Student, vol 29 issue 3, 20/10/08)