New figures out today show the UK's public sector net debt at just over £1 trillion for the first time ever. In the first 19 months since it took over, the coalition added £225 billion to the £779 billion debt it inherited. And it's projected to rack up another £390 billion by the next election.
Chris Huhne attacked David Cameron for the EU veto in Cabinet back in December. At the time, one Cabinet minister told me that part of Huhne’s critique was that Cameron had scuppered the chances of a Liberal Democrat MEP, Sharon Bowles, being reelected as chair of the European Parliament’s Economic and Monetary Affairs Committee, which deals with financial services. But Bowles has been reelected. In a Lib Dem press release welcoming this, Nick Clegg declares that: ‘As party leader, I am proud that we have a leading Liberal Democrat in such a prominent and powerful position on the international scene. As UK Deputy Prime Minister, I am delighted and relieved to know that the EU financial services brief is in such expert hands.
Tristram Hunt, the historian and Labour MP, has written a brilliant rebuttal to my piece in the Telegraph last week, in which I said that capitalism is hardwired in Britain’s DNA. Socialism, he says, is also hardwired into our country’s mindset. Writing for Comment Is Free, he says: ‘There is another story of Britishness a long way from the template of Cameron and the Spectator.
During the leaders debates before the last general election, David Cameron declared that he wanted to make immigration a non-issue and he would go about it by reducing immigration numbers from hundreds of thousands a year to tens of thousands a year. He hasn’t succeeded in the second objective — more than half a million people arrived here in 2010, only 30 per cent of whom were from the EU — and he most certainly hasn’t succeeded in the first. At least if the reaction to today’s revelations about immigrants on benefits is anything to go by.
Ever since Ed Miliband’s ‘predatory capitalism’ speech at the Labour Party conference, the future of capitalism has been a subject that has much occupied our MPs. Clegg made his speech on Monday, and Cameron delivered his yesterday. I have had plenty to say about the coalition government’s inadequate economic policy, and its inability to stoke growth. But Cameron’s speech was impressive, and it’s worth going into in some detail. I look at it in my Telegraph column today. Much rot is spoken about capitalism. It is not an ideology, there is no rule book you can tweak: it is simply the name given to the system where people trade with each other the world over.
Today’s speech by David Cameron is one of those ones that give you a real insight into how he sees the world. Cameron said that he wanted to see an ‘insurgent economy, where we support the new, the innovative and the bold’. He talked about the need to ‘encourage the adventurous spirits who challenge the status quo and declared that he admires ‘more than almost anything the bravery of those who turn their back on the security of a regular wage to follow their dreams and start a company’. This reveals something important both about Cameron personally and how he sees the economy. The people that Cameron respects are not the CEOs of established companies but the entrepreneurs who are creating dynamic, new companies.
Ed Miliband is on unusually assertive form this morning. His observation in the FT that ‘my speech to Labour’s annual conference was not — I think it is fair to say — universally well-received’ is not, I think, intended self-deprecatingly, but rather self-congratulatory, as though he were the only politician calling for a ‘responsible capitalism’ at the time. And he's repeated that suggestion elsewhere: in a short statement for Which?, and in a Labour briefing document — entitled Who is he trying to kid? — that has been filtered around the crowd at David Cameron's speech. Ed is trying to crash Dave's party, and bring it crashing down. Like I say, he's being unusually assertive.
What’s the point of Ed Miliband? Does the Opposition leader have any purpose in life other than to provide ritual entertainment for the Tory wrecking crew at PMQs? Having spent the New Year listening to lethal attacks from his dearest supporters, Mr Miliband has now seen his leadership shrivel to a pair of policy statements which rival each other in desperation and barminess. The first, outlined by Liam Byrne this morning, is a fantasy tax on banking, ‘to create 100,000 jobs’. The second is Labour’s new position on the government’s austerity programme. This would baffle the dippiest and trippiest resident of Alice in Wonderland. We hate the cuts. We back the cuts. We oppose the cuts. We endorse the cuts. We accept the cuts.
He already has his bikes and his buses, but might Boris get his island too? Today's Telegraph reports that David Cameron is going to announce a consultation into building a new airport in the Thames estuary, as was first proposed by the London Mayor. The PM will wait until that consultation is over before making a final decision, but he's said to be 'provisionally supportive' of the plan at the moment. Nick Clegg, by the sounds of it, is more provisionally negative. Even the very prospect of Boris Island is a triumph for the Mayor, and not least because Cameron and George Osborne were previously opposed to it. It also says much about the more general shift in attitude of those Tories in government.
Are today’s inflation figures cause for celebration? The Consumer Price Index rose a mere 4.2 per cent in the year to December, down from 4.8 per cent in November. So, yes, a sharp drop — but only a statistical boffin could describe this as good news. Sure, a similar drop can be expected when the VAT rise drops out of the comparison figures next month. But the prices confronting British shoppers are still rising at twice the supposed inflation target, and will keep rising above this target for months to come. The following graph shows the trajectory we can expect for CPI and RPI over the next few years: The misery that inflation inflicts on the public is, of course, mitigated by pay rises.
‘Another week, another speech about the evils of capitalism.’ So joked Nick Clegg at the start of his speech to Mansion House earlier, and there was some truth in this particular jest. All three parties are jostling to be seen as the harbingers of a new economy at the moment — one that doesn't reward failure; that benefits everyone ‘fairly’; that won't seize up as the old one did; that etc, etc. Ed Miliband sketched out his rather insipid vision for this economy last week; David Cameron will hope to do a better job later this week. Today, though, was the Deputy Prime Minister's turn. So what did Clegg say?
Yet another day here in Westminster that's all about the economy. Nick Clegg has just delivered a speech on the subject to Mansion House, focusing on ‘responsible capitalism’, which we'll blog shortly. And two prominent forecasting groups, the Ernst & Young ITEM Club and the Centre for Economic and Business Research, have suggested that we're effectively back in recession. They both reckon that the economy shrank in the final quarter of last year, and is wilting even further in this current quarter. But, like the OECD, they also predict that this ‘double dip’ will be relatively short-lived and relatively mild. Against that backdrop, enter George Osborne.
In the news bulletin after Ed Miliband’s interview on the Andrew Marr show, the headline was about Miliband saying he does listen to criticism of his leadership. It rather summed up Miliband’s problem at the moment: he can’t get beyond all the chatter about his leadership. In terms of the substance, Miliband’s explanation of Labour’s new economic position showed just how difficult it is going to be to explain it to the public. Miliband argued, as Balls did on Saturday, that the cuts are currently going ‘too far, too fast’ but that he can’t promise to reverse them. As one Tory said to me yesterday, Labour is saying that the cuts are the problem but we might have to adopt them.
Even as Ed Balls embraces the need for austerity today, he takes a very different position to the coalition on why it’s necessary. The government has always blamed the need for cuts on the ‘awful economic inheritance’ bequeathed it by Labour. Balls, on the other hand, puts the blame squarely at George Osborne’s door. In his Fabian Society speech, he said: ‘George Osborne’s economic mistakes mean more difficult decisions on tax, spending and pay.’ His argument is that, by cutting ‘too far and too fast’, the coalition has caused the economy to stagnate and thereby created the need for more austerity. Labour has, of course, long been trying to shift the blame for the cuts away from themselves and onto the coalition.
‘I must be responsible and credible in what I say.’ No, it's not Bart Simpson writing on the blackboard at the start of The Simpsons, although it may have been said with just as little enthusiasm. It's Ed Balls on the Today programme this morning, explaining his decision to endorse George Osborne's public sector pay freeze. Balls' interview in today's Guardian is his biggest effort so far to sound 'responsible and credible' on the economy.
France is set to lose its AAA-rating with Standard & Poor's later tonight, according to Reuters. We'll have more on this soon.
How would an independent Scotland have fared during the crash? Given that the liabilities for RBS alone represent 2,500 per cent of Scotland's economic output, it's a difficult question for Alex Salmond. He replies that the banks in Scotland would have been better-regulated by wise, old him, so the problems would not have arisen. But Faisal Islam at Channel Four has unearthed a letter that rather explodes this theory, written from the First Minister to Fred the Shred egging him on with the calamitous acquisition of ABN Amro. This, as CoffeeHousers will know, is the acquisition which was so hubristic that it went on to sink the whole banking group.
Earlier today, the Government announced that it is still planning to go ahead with a new high-speed rail line that will reach Birmingham by 2026, and then be connected to Manchester and Leeds. And it's doing so in the face of widespread scepticism among the public and business leaders. When we at the TPA commissioned YouGov to test public support for different cuts in public spending, 48 per cent of the public supported cutting the project against just 34 per cent opposed. While organisations like the CBI back high-speed rail, the Institute of Directors (IoD) actually asked their members and found that 38 per cent thought HS2 would represent poor value for money, against 30 per cent who thought it would represent good value.
What would an independent Scotland's public finances look like? ‘Good, actually,’ says the SNP as they present their ongoing case for independence. They like to claim that, discounting the rest of the UK, Scotland was in surplus for ‘four out of the last five years’ — it's Westminster, not Holyrood, that can't manage the public's money. Which would be a powerful argument were it actually true. You see, the SNP are talking about the ‘current budget balance’, which excludes the £6.4 billion a year that Scotland spends on capital. When you include that spending — according to the Scottish government's own figures — there has been a deficit for every one of the last five years.
Was Ed's Big Speech worth the extended wait? Not really. It wasn't a stone-cold terrible speech, but neither was it the rambunctious, attention-grabbing number that his leadership could do with. In fact, we could have saved ourselves the effort by simply reading his New Year's message again. That was considerably shorter, and covered almost all of the same ground. Squeezed middle? Check. Tackling vested interests? Check. An admission that Labour will need to cut? Ch… oh, you get the point. The best that could be said about today's speech is that it presented some of these arguments more clearly than in the past. Indeed, the attack on George Osborne's fiscal agenda was, by Miliband's usual standards, particularly punchy.