Tag Archives: economics

Hollande’s Importance for Labour

Francois Hollande’s rise to become French president and remove the centre-right administration of Nicolas Sarkozy was a big moment for Europe. Hollande’s accession marked the rejection of technocratic and conservative led recession in favour of a more equal, painless route out of Europe’s woes. Furthermore, Hollande’s triumph appeared to personify the anti-austerity tide sweeping across Europe from the streets of Athens, Dublin, London and Paris. The French elections symbolised the democratic wishes of the peoples of Europe to escape the bonds of austerity in favour of a growth-led recovery in the interests of the many not the few.

The initial triumph for Ed Miliband’s party therefore was simply the impending signs of a turning tide. The people of Europe had realised that it was leftist, growth supportive policies that would drive Europe out of recession not more and more cuts to vital services which starved the economy of oxygen. Hollande gave British Labour supporters a huge boost with his election, even if we have found his early days in office underwhelming. That is we have until four days ago, when Hollande unveiled his first budget, including his centrepiece policy: a super tax on the super-rich. From now on, the richest in French society will pay a tax rate of 75%. Whilst Ed Miliband has done some marvellous work in raising Labour’s ratings in the polls (even if his own are rather less satisfactory), it will be the results of Hollande’s super tax that could define whether Labour can be trusted with the British economy in 2015.

Ed Miliband has long been making moves against what he sees as predatory capitalists and the super-rich. Recently he announced plans to forcibly break up banks if they refused to do so themselves, whilst attacking the Tories watering-down of the Vicker’s report into banking practice. Furthermore, he has dedicated Labour to repealing the tax cut for the rich, which the Tories implemented in George Osborne’s budget, in the interests of fairness and to squeeze those who contributed to the financial crisis that has led to Britain’s terribly recessive economic period. These policies are controversial to say the least.

Whilst the public generally agree with Ed about the need to make Britain a more egalitarian and fair society, they fear that Labour, still blamed for the financial collapse of 2008, cannot be trusted with the economy. These fears are compounded by the Tories, although their economic credibility is dissolving gradually due to the double-dip recession. Another Tory argument, central to the idea of taxing the rich and squeezing the banks, is that if we squeeze the rich too hard they will simply pack up and leave, simply go on strike, in a scene reminiscent of one of Ayn Rand’s sauciest wet dreams. This is why Hollande will be key to Labour’s election chances.

Although the French economy is not based around a rich financial centre such as that in the City of London, the French nation has its fair share of the super-rich, people who will presumably become disgruntled by the notion of having their taxes raised to 75%. The key tests for the Labour party will be the tax receipts of the French treasury over the next couple of years and the number of rich who decide to leave French shores in search of a more generous tax deal.

The Tory argument that a Labour government will push away the banks, the rich, and their enterprises by squeezing them too hard is about to be tested across the Channel and if their arguments are proved wrong not only will the Tories look even less economically credible but they will suffer further humiliation. Furthermore, if Labour are right, Ed Miliband will once again be proved right on one of his main themes (remember Murdoch and the Leveson Inquiry). This would be a major boost to Miliband personally and Labour economic policy and credibility as a whole. The success of French policy could cement Labour’s chances of re-election and consign the Tories to a swift return to opposition. The advantage for Miliband is that, even if he is wrong, the consequences for him are much less severe.

Firstly, Miliband can still take the moral high ground. He would remain the politician who was backing the little people over the rich and powerful. He would still be the one standing up to the banks and their gambling practices. Plus he would still be right to demand the morally and ethically correct route even in the face of a wealth rebellion. After all, even if the wealthy threaten to leave, that would not make it right to simply cave in to their demands. Miliband cannot let himself to be seen selling his ethics away for the concern of money. The public will understand and appreciate this.

However, I really don’t see it going that far. The rich will not leave France on their yachts and private jets. Instead, the French people will be seen to be enjoying a fairer deal, where the rich pay their way and the poor are not used as sponges to be wrung dry so as to pay for a tax cut for the rich. Hollande may just have provided a huge boost to the British Labour Party’s chances of victory

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Lords Reform and the Coalition

Today, Nick Clegg declared an end to the Liberal Democrats’ fight for House of Lords reforms during this Parliament. Following the brazen refusal of Tory backbenchers to toe the party line and honour the coalition agreement, and Labour’s justifiable, yet still suspiciously partisan, no vote to setting a clear timetable for Lords reform, the Lib Dems now consider any continued push for reform at the present time to simply be fighting a losing battle. The problem that the prime minister will now face, in response to Clegg’s speech, is that, having now conceded defeat to his own backbenchers, how can he first, restore his reputation as in control, and secondly, prove to Clegg and the Lib Dems as a whole that the coalition can continue to work effectively in the interests of both the country and the Lib Dems.

Firstly, the Tory rebellion was the explosion outwards of Tory backbench frustration at the Lib Dem ‘wagging’ of the coalition tail. It has been a constant complaint from Tory backbenches that the Lib Dems have far too much influence upon government policy considering the disproportionately few number of seats that they contribute to the government’s majority in the Commons. Therefore, when a bastion of conservatism, the House of Lords, one of the final two seats of British government’s unelected officials, came under threat, Tory backbenchers reverted to type and refused to, in Clegg’s strong words ‘honour the coalition agreement’. All this suggests that David Cameron lacks real control over the Tory party, particularly with his arch-nemesis Boris Johnson waiting in the wings, basking in the glory of the London Olympics as well as the failings of Cameron and Osborne.

Furthermore, on the back of Tory rebellion, Cameron is now being confronted with a rebellion from his coalition partners, not just from the backbenches but even amongst the Lib Dem’s most senior members and government ministers. Indeed, Clegg himself today said that his party would be instructed to oppose the Tory plans to gerrymander constituency boundaries (as if they’d need any instructing at the moment). All this bodes unwell for the coalition.

Therefore, Cameron, despite finding himself stuck between rebelling Tory backbenchers and rebellious Lib Dems has to take drastic action to repair his personal image as well as that of the coalition. Initially, Cameron must make it clear to the Lib Dems that, despite being forced to accept their rebellion regarding constituency changes (a damaging blow to the Tories who would have gained exttra seats in the next general election had the changes passed through Parliament), he cannot accept frequent rebellion. He has the power to do so, as both parties know that a collapse in the coalition would be disastrous for both, leaving behind a frail, powerless government and the possibility of a destructive early election for all involved. Two parties that so “heroically” came together in the ‘interests of the public’ cannot now jump overboard petulantly at the first sign of choppy waters.

However, Cameron will be well aware that he has to placate the angered Lib Dems, whose centrepiece policy will now be lost amongst the turbulent seas of coalition. With Cameron’s personal standing plummeting alongside the British economy, perhaps now is the time for Cameron to take the boldest move of his political career and consign his long-term personal friend, but hangman of British economic recovery, George Osborne, the chancellor, to the dustbin. Currently, Osborne is probably the one man more hated at the top end of British politics than Cameron himself. Furthermore, his obstinancy in the face of mounting economic problems, means that Osborne has tied himself to the mask of a shinking ship, one that Cameron can only save by changing economic course, an impossibility under Osborne’s leadership. Cameron’s only hope of maintaining a Tory role in government in 2015 and beyond is to save the British economy, and therefore, for the sake of his leadership Plan A must be rethought, even if this does mean stabbing Osborne in the back (after all Osborne isn’t even popular within the Tory party anymore).

If Cameron did grow the balls to finally ditch the troubled Osborne the question would remain of who to replace him with, an answer that I think lies in the placation of the Lib Dems. The one member of the British government, who in the eyes of the public, still retains a shred of respect is Vince Cable, the man who foresaw the global economic collapse, bashes the bankers and Murdoch and is the darling of the Lib Dems. This move would not only give the coalition a boost with the voters, Cable being a man much more in favour with voters than Osborne, but also cheer the Lib Dems and allow for a change in economic course.

Surely now it is time for Cameron to wake up to the dangers of retaining Osborne as chancellor and save the coalition at the same time.

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Is Cameron delusional, a liar, or just plain stupid?

Today David Cameron called on Europe to copy the UK’s “pro-business, pro-growth” agenda. The prime minister claimed that whilst the deficit must be dealt with “growth in much of the eurozone has evaporated completely”. Of course Mr Cameron is right, growth must be high on the agenda of all European governments as the continent looks to bounce back from recession. But for Mr Cameron to be advocating the eurozone transferring the coalition’s economic policies to the continent so as to achieve growth is phenomenally idiotic. The UK, prime minister, is in yet another recession!

Since the crisis of 2008, the only real signs of economic recovery came when the Labour party was in government before the 2010 election. Since the election, the coalition has implemented swingeing cuts which have deepened the recession, the economy has stagnated, and now the UK finds itself in a double-dip recession. How anyone can advocate a policy that has delivered another recession from the jaws of recovery is beyond me and will astonish most voters.

The coalition government has increasingly had  to revise down its growth estimates over its term in government, upping the amount it is borrowing and consistently adding to the debt levels that they pledged to eradicate. The truth is that the coalition must now realise that it will be nigh on impossible to eradicate the deficit in the near future if they refuse to stimulate the economy and move it towards growth, yet they refuse to do so for the sake of saving face and stubbornness. Any change in policy would add credibility to Labour’s economic policy and the Tories still hope that by 2015, voters will not trust Labour with the economy. However, it is time for Cameron to realise that, if the economy continues to stall in a similar manner to the present, voters will trust the Tories no more than they trust Labour.

The prime minister claimed today that the coalition is implementing a “pro-growth” economic policy, but as GDP figures show this policy is achieving the exact opposite of growth, the economy is receding. The coalition’s ideological cuts to the public services have drained even more money out of the economy at a time when the government needs to maintain the public services so as to ensure that consumers continue to spend. The problem at the moment is that consumers are not spending because Mr Cameron’s policies have made them fear for their jobs!

The prime minister has shot himself in the foot by advocating the spread of his economic policies to the eurozone. The coalition has consistently failed to provide economic recovery for the UK and yet the prime minister fails to recognise this (at least publicly), and, rather than changing direction, he continues to espouse ideological economic policies rather than pragmatic ones.

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How Hollande can change Europe for the better

Francois Hollande was today sworn in as French president before heading to Berlin to meet German chancellor Angela Merkel in a bid to get to grips with Europe’s ailing economy. Up till this point, the Franco-German axis that has led the efforts to lead the eurozone out of the gloom of the recession has focussed on austerity and fiscal constraints and tightening. Before this point the leaders of the two countries were both centre-right politicians and Nicolas Sarkozy certainly did little to stand in the way of German efforts to bring the eurozone countries and economy to heel, imposing rigorous fiscal discipline on states that, in some cases, would be far better off out of the eurozone with the ability to control their own economy rather than be used as a toy of the Franco-German axis. Hopefully, with the advent of a new leader in France, Europe can begin to reverse the negativity of the centre-right governments that have dominated Europe and bring growth, fairness and equality to the continent.

The first step hollande needs to take in his new job is to let Merkel know that austerity will no longer be good enough for Europeans. An obvious failure to establish good, continuous growth following the recession has proven that the policies of the current European leaders regarding the European economy are not good enough, and hopefully Francois Hollande can bring to the table a more positive agenda for growth and lead the eurozone out of the economic quagmire it finds itself in. As part of this, Hollande must recognise that European governments need to invest in their countries and there is no way around this. Earlier this year, whilst the Dutch, Italian and German economies were contracting, the French economy experienced a 0.2% growth boosted mainly by exports. Hollande should pick up on this and rebalance Europe’s economies towards manufacturing and exporting products to the prosperous, large and rising economies in Asia and South America. The rejection of centre-right governments in votes across Europe should give Hollande the impetus and backing he needs to stand up to Merkel and replace austerity with a growth agenda.

Furthermore, Hollande must allow the weaker eurozone countries such as Greece to make as pain-free an exit from the Euro as possible, allowing the Greeks to balance their own books in their own way. The mixed election results in Greece and the inability of Greek leaders to form a coalition is worrying and Greece needs strong governance soon, but that governance must come from Greeks, not technocrats in Brussels. The Greek people will accept nothing else, as made clear by the lengthy demonstrations and rebellion against conservative policies in the country. The same case must be made for other eurozone countries such as Spain where the plight of the indignados has aroused much interest and points to a similar public anxiety with austerity as that exuding from Greece.

It is important therefore for Hollande to oppose Merkel’s wish for continued austerity in Europe as well as loosening the regulation imposed in countries from Brussels, allowing the masses to choose for themselves how their economies are run and by whom.

Another aspect to Hollande’s job will be to help bring success to other left-leaning parties across Europe in their next general elections. Voters across Europe will be keeping an eye on the progress made by Hollande and the French left, particularly concerning the economy, as a guide to how well social democratic policies can work for them. It is important that Hollande not only performs well in the French economy, but also on the domestic front, if Europe’s socialists are to again find themselves in the position of power and ascendency within Europe.

Finally, Hollande must seek to combat the far-right in France, where Marine Le Pen achieved surprisingly good results with her Front Nationale party, a xenophobic, anti-immigration, fascist-esque movement not dissimilar to far-right parties in the UK and Europe as a whole. Hollande must ensure that he eruditely and efficiently opposes the policies of the far-right and particular condemns Nicolas Sarkozy for attaching himself to Front Nationale policies in the final run-off in an attempt to gain far-right voters, a particularly dirty and disgraceful part of Sarkozy’s re-election bid.

Hollande therefore has a big job to fulfil on entering office and I hope for the sake of the European left that he is able to perform his duties in a capable and successful manner. It would certainly be disastrous for the economic policies of centre-left opposition parties in Europe were Hollande to fail to turn the tide of economic gloom descending over the eurozone.

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Regional public sector pay

Nick Clegg has today surfaced to distance himself and his party from plans to introduce a regional pay policy within the public sector, a move which has created much furore within the trade unions and their members. The argument for regional pay goes that, because it is more expensive to live in some areas than others, and because in less well off areas private sector companies pay less to employees than they would in more prosperous areas, the government should ensure competitiveness by varying the pay of employees dependent upon the region in which they live.

However, as Clegg has rightly pointed out today this so-called ‘solution’ to the government’s problem of spending too much on wages in the public sector will only serve to create more problems by widening the north-south divide already far too apparent in the UK.

Currently the UK is dominated by the south-east and London in particular and this is a problem that commentators have observed for a number of years, but politicians have done very little about. Whilst very few moves have been made to rectify the anomalies between the north and the south, this proposal will only worsen the divide and therefore must be opposed not only by Labour in opposition, but also by the Liberal Democrats in government, and Nick Clegg’s intervention today appears to be the first sign of them doing so.

Outside of the south-east the UK economy is particularly flagging, with jobs being lost at a rapid rate, and poverty and reliance on benefits increasing. Therefore, the last thing that the rest of the UK needs right now is for the government to cut public sector pay, thus removing further capital from local economies and causing further poverty and further economic stagnation and contraction around the UK. In fact, the government at this point must surely look to step into the gap left by ailing private sector companies and provide local economies with a much needed boost by creating jobs in those areas of the country where growth under the current austerity programme seems unachievable.

Furthermore, if the government was to follow the trend of the private sector and attach high wages to London and the south-east, they would instigate a public sector brain drain away from the poorer areas of the country to the south, thereby giving these ailing regions an even smaller chance of creating future prosperity. This has the potential to leave these regions isolated and with very little prospect for economic prosperity in the future.

Therefore, these current proposals would be a very backward and unhelpful step for the government and the economy. Perhaps, instead of appealing to a regressive, London-centric nature, the government should look at more radical proposals to move higher-paid areas of the public sector out of London and the south-east and relocating them in, for example, the north of England, thus costing the government less in the long-term (when rent prices etc are claculated in) and allowing these areas to exploit the new capital this would pump into their economy. I fear however, that the government would see themselves as turkeys voting for Christmas were they to advocate proposals to move the high-wage earning public sector away from their cushy lives in the capital.

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