POLITICS CORNER

[Stanley]

Just been listening to IDS saying that capping benefits at £500 a week will not harm poor families getting more at present as the government will help them to move and find a job. I was wondering how I would regard that assurance if I was one of those affected. Are we really meant to believe him and take that at face value?

[Stanley]

The EU Train Wreck is still developing. The talks with the banks to try to get them to agree to a voluntary 50% reduction in the value of Greek bonds are still stalled and due to the delay a haircut of up to 75% may be needed. The Eurobond solution is being blocked by Germany. A Greek default seems inevitable and this will hit the EU banks. There was an indication yesterday of how serious this is. The IMF issued its latest forecasts and is in agreement with Standard and Poors, They have downgraded growth forecasts for the whole of Europe including the UK and flagged up the fact that austerity measures are stopping growth. Basically they forecast that the UK is flat ling and France is shrinking. Add to this the news yesterday that UK debt has hit £1trillion and the GDP figures due out today are expected to show another fall in growth and it's a bit of a headache. The IMF warn that unless the EU gets its act together the most likely outlook is global recession. Not good news lads, get into the bunker!
A historian pointed out that it took 20 years for the UK to repay war debts after WW2, a similar situation. I fear that we may have cocked up and loaded our kids with debts that even in best case, will be on their backs for ten years plus. I reflect that the same people who got us into this mess are the ones we are relying on to find a solution. Work it out for yourselves. Happy New Year!

[Stanley]

Merkel is getting flak this morning for insisting that the ECB shouldn't have to take the haircut on Greek bond holdings. There are suggestions that the IMF should take the same penalty on Greek loans. The route out of the Greek problem gets more and more complicated and is slowing any decision down so the likelihood of default increases.
Yesterday's UK GDP figures gave nobody cause for optimism. Significantly one of the biggest falls was in manufacturing, the key sector for growth and employment. The IMF suggests there is wriggle-room because UK interest on borrowing is still low, the market trusts us. Speculation that Ossie may go down the Lib-Dem route and give tax cuts on lower incomes but raising some of the higher rates. If he does it will be a major concession. We shall see.

[Whyperion]

Well the con-dem policy remains increasing tax free earnings limit , increasing it by 5.7% this budget would achieve that and more fiddling to erode tax free limit to nil for those on higher rate income tax rate might occur, this would probably raise more for the treasury , particulary if higher rate starting limit is not uplifted in line with inflation.

[Tardis]

Interesting graph:

[Tardis]

Local Politics:

I have the agreed budget from the Town Council too, but I probably need to sign up for a picture account somewhere to put it up here. Do you think it needs it's own topic?

One of the subjects last night was moving the cenotaph from outside the co-op up to the memorial gardens. I wonder if that is so that LCC can widen the top of Wellhouse Road to ease the capacity of traffic likely to come out of the new Tesco.

[Stanley]

Any proposal to move the War Memorial again will get the thumbs down from me if only on the grounds of visibility and access. That was the reason it was moved from Letcliffe to the present site.

[Stanley]

Hartnet, head of HMRC goes public slating the cash economy and the loss to the revenue. Quite right but I wonder whether this concentration on the small traders is meant to divert attention from the ongoing dispute about the large companies who are avoiding massive tax bills, in the Vodafone and other cases, proven to be breaking HMRC rules and approved by him. See this weeks PE for yet another Vodafone scheme to avoid UK tax. Isn't it strange that the firms named and shamed don't sue Private Eye.....

[Stanley]

I listened to George Soros giving his take on the atmosphere at Davos. Always worth listening to I think. He said that the apparent lifting of mood was slightly misleading. He reckons that 'crisis fatigue' has set in, people are getting tired of panicking. His forecast for the Euro is that it will survive 2012 but after that may have to change. He says the fundamental problems are still there and a lot depends on what happens to the Mediterranean countries in the next few months. He pointed out the high interest rate at present being imposed on Portugal. Bottom line seems to be that the train wreck is slowed down but still proceeding.

[Stanley]

There is an air of almost optimism in the news that is coming out of Europe but I don't trust it. One of the main things the politicians have to do is raise confidence and present a united front for the markets. The word is that agreement is imminent in the negotiations with the private banks on the reduction in bond debt but the move by Germany towards central control of budgets has hit Greece first and the proposal was that an official from the German government should be installed in Greece and have control of financial policy. As I forecast, this is a red rag to a bull. One minister commented that it would be just like the German occupation during WW2. The bigger problem is that like Greece, when other countries recognise the scale of loss of sovereignty involved in the German proposals, their reaction will be the same. It all goes back to the original flaw in the common currency, it can only work in the long term is the different economies perform on the same level. There seems to be very little chance of this ever being the case. I don't see how it can work in the long term. The train wreck is not yet averted!

[Stanley]

While the EU politicians led by Merkel try to persuade the rest of the union to be reasonable and do it their way the markets have decided that the rate for Portuguese bonds is 17%. Totally insupportable of course but at the moment not a problem because Portugal has been temporarily bailed out but this problem is waiting for them down the line. The basic problem hasn't gone away, the present EU economic model is not fit for purpose and it remains to be seen whether other countries will accept the loss of sovereignty involved in adopting the German model. There is also the subsidiary problem of Germany having to finance the changes and it is yet to be seen whether the German electorate will agree to this.
Meanwhile the hiatus means that UK actions are on hold until they see the scale of the changes and at the moment this in itself is damaging our prospects. I understand the ConDem coalition's problems and whoever was in power they would be the same. There is too much uncertainty in our systems. A good example is the doubts arising about the pension changes. Opinion is growing that eventually they will not result in any saving. The government's problem is to find ways of addressing matters like this without damaging market confidence. What is often forgotten is that regardless of comparisons with other countries, our debt as a percentage of GDP is over 80%, imagine how you would feel about future prospects if your credit card was in debt on this scale and you were facing a reduction in annual income. Simplistic I know but it's a reasonable analogy.

[Tardis]

I may be missing something, but Wierd Ed today seems to have managed not to lay a glove on the Cameroon

Nice to see that Bercow wasn't completely asleep, but if it was a prize fight I think that he would have stopped it.

How do you miss an empty net from that close?

[Stanley]

The ya boo atmosphere of PMQ's is one of the most depressing facets of governance these days. We are in a position which compares with 1939, tremendous forces at work which are certainly going to affect us and the opposing factions try to score cheap debating points when what we need is cooperation and a united front, not electioneering. The history teaches us that in the end this is the most efficient way to marshall what resources we have. I'm afraid it is a sad refection of the quality of the protagonists. I want to hear a senior member stand up and make a statesman's speech, not another ploy to massage the polls or the next election.
We are told that there is no money and that we are 'all in it together' when all the evidence shows that there is plenty of money swilling round in the system. The ConDem government is on track for a £3billion pound underspend on the current account, I heard an estimate yesterday that to date, less than 10% of the cuts to services have bitten, many large firms and the banks are sitting on pots of cash due to lack of confidence in the system, they can't see a clear route to investment because of the uncertainty caused by the possible consequences of developments in the EU. We are in limbo and all we hear is the old arguments being re-hashed. Even die-hard Tories recognised this in WW2, when Churchill formed the war coalition he brought in the most effective men he could find and after the war, even when defeated in the 1945 election, gave unstinting praise to Ernie Bevin and Aneurin Bevan who brought their immense grass roots knowledge and union experience to the party and were very effective. This is a clue to the direction we should be going in now, not playground antics. We face twenty years of austerity and a resulting fall in standards of living. The task we have is managing this without affecting the quality of life. Perhaps the basic problem is that a cabinet of millionaires is not best placed to appreciate the scale of the problem.
Meanwhile, in another part of the forest the EU train wreck continues.

[Tardis]

Speeches of that magnitude have never been made in the house as a rule

Usually they are done on the 'stump' where there is an active public audience.

Interesting that the euro train wreck has managed to come back and bit Frau merkel today with the disclosure of the heavy debts carried by the Bundesbank.

[Bradders Bluesinger]

I have a feeling that Chris Huhne will be prosecuted.....
If he isn't , I wonder what action his ex-wife will face...They can't both be telling the truth.

[Stanley]

Brad. They seem to be closing in on him. Watching with interest.
Michael, "Speeches of that magnitude have never been made in the house as a rule" Not too sure whether you mean never or sometimes. Either way you must have missed some of the oratory in the House. My point is that good, thoughtful speeches with content are what we need. Not playground behaviour.
The crucial factor in any comparison of the German economy with the rest of Europe is that after WW2 Germany used the aid from the US via the Marshall Plan to construct an economy that avoided the worst mistakes of the past with very high personal savings, an efficient and equitable tax system and high levels of local control of investment via the Lands Banks. This encouraged conservative policies driven mainly by the need to manufacture and export and produced the 'German Miracle'. This success and the differential between them and other economies, especially the Mediterranean countries, is the reason why the Euro could never work as a common currency without aligning the other economies with the German model. This is what the Merkel Model is trying to do and it can't be a short term project. The level of ECB holdings of Greek bonds is a sideshow and part of the political infighting over the extension of fiscal control from the centre. What is triggering this is the almost certain Greek default which will hit all the European banks. The haircut alone will cut holdings by half. Remember that whilst lower, UK banks hold the toxic bonds as well.
The number crunchers have been busy and the latest forecast is for UK to slide back into negative growth for at least the first six months of 2012 with consequent affects on employment. This doesn't surprise me as reporting on the economy always tends to be too optimistic. What still worries me is that I fear that the bald GDP figures hide a drop in overall trading profitability, both in manufacturing and retail, which could prove to be a greater problem in the long run.

[Tardis]

Huhne to be charged, and his ex-wife

Wonder if that kind of charge will throw him out of the house too if it sticks?

[Bradders Bluesinger]

YES !...after eight months, though ......
You can bet your bottom dollar ,that if he were not a cabinet minister, the process would have been MUCH shorter. Now he only has to wait until 16th Feb.(with fancy lawyers and adjournments , somewhat longer no doubt)...but I wonder if he will come clean.....
Maybe we'll also see some movement in "Coulsongate " yet ..eh

[Tizer]

Resigned as Energy Secretary...about time too.

[Bradders Bluesinger]

Interestingly Vicky Price has NOT protested her innocence , but instead made a statement that she hoped the matter would be dealt with quickly (words to the effect).....Sounds like she might plead guilty ...OoooErrr !

[catgate]

. My point is that good, thoughtful speeches with content are what we need. Not playground behaviour.

I think you must have a good imagination. To my ear they all fall into your latter category.

[Tardis]

Understand that the 16th is for the magistrates court, where it will be referred upwards.

Minimum sentence is custodial, so he'll be out of the house too if found guilty.

[Stanley]

I agree Brad, there has been a significant rearguard action and this signals to me that the DPP must feel they are on very firm ground because there will have been very significant covert political pressure on him. Good that the trial date is imminent because this needs clearing up. It all contributes to the current distrust of politicians and that's the last thing we need at the moment.
The discussions on Greece continue, it appears that there is no agreement as yet on either of the main subjects, the 'haircut' the banks holding Greek debt are facing and the corollary to this, the IMF bail out which is contingent on the haircut. There is another problem, the longer this takes, the less certainty there is of the effectiveness of the IMF and EU bail out. Further, the repercussions on the EU itself can't be quantified until the Greek debt is fully understood. All this is complicated by the fact that the Greek government aren't making any significant progress with the internal cuts which are a condition of any bail out.
As if this wasn't enough, whatever happens with Greece sets a benchmark for the treatment of the other Mediterranean countries and Ireland. Talk about the Gordian Knot!

[Tardis]

This is an interesting take on the euro.

Fairly obviously a sceptic, but some of the logic is plausible

http://johnredwoodsdiary.com/2012/02/04 ... /?tw_p=twt

Hasn't solved the zombie banks, or the economies laden with debts, or increased the confidence necessary to actually restructure working programmes

I'd be surprised if the Americans know why it is working too, but it might have something to do with their businesses relocating out of China and India and putting up their facitilites in the US.

Note the biggest business story in the UK this week is about the merger of two companies on the FTSE 100 who are legally domiciled in Switzerland.

[Tardis]

The spin doctors are all fired up by Aardman Animations comments about their great heroes Wallace and Gromit bearing a great likeness to wierd Ed.

The NHS bill should go through this week, and then it appears to be onto Lords reform.