A republic at any price?

Seen the Republic website? It's a strange campaign, working to "support a republican constitution in place of the monarchy". But what kind of republic?

It seems that for the folk at Republic anything will do. They say that after a successful campaign to replace the monarch with an elected head of state they will "facilitate a debate on the best model for a future republic" - but only AFTER?

The problem with Republic - and the reason that even as quintessential Roundhead I can't support their campaign - is that they seem to want to end the monarchy at any cost. Even at the cost of a unchecked Presidency that allows dictatorship to grow in its midst? Even if the reserved Presidential emergency powers allow immediate and unconditional suspension of the constitution? Even at the cost of forced coalitions to avoid Presidential intervention?

We need a grown up political dialogue in this country which isn't about not liking the Civil List, Prince Andrew's views on helicopter usage or Prince Charles' views on architecture as a reason for preferring a republic, but a solid case for a TYPE of republic that suits us. Not a borrowed form (whether American or European) but one that is made for the UK. Surely that is not beyond us?

The hard life of an MP....

It must be a very onerous job being an MP. The House of Commons sits at odd hours still, rises for recess and reassembles with the tides and seasons, and the processes and procedures for daily business are still bafflingly arcane.

Hang on, though. If MPs wanted to do so, they could change all of that. For example, the House will sit for a mere 128 days in the 2008/09 session and, on most days of the four day attending week, begins its work at 2pm. How about (radical idea this) the House sitting for 220 days, from 0900 to 1600, abandoning the fripperies (prayers, Westminster Hall debates, even adjournment debates), allowing MPs to return to their constituency homes if within 2 hours commute of London? Huge numbers of MPs wouldn't need the much vaunted 'second home', they'd get the chance for a closer and more detailed scrutiny of the executive and legislation, and moreover Parliament would actually be sitting for more hours than it does currently.

In all of the recent discussion of expenses and parliamentary reform I had hoped to see some recognition of this simple fact: that our MPs could make their life easier, and raise our respect for them, simply by changing the arcane hours of sitting of the House. The rest of it (expenses reform, House of Lords reform to a fully elected chamber, deselections and primaries...) can wait. Let's insist on a more rational pattern of work for those we elect, and pay for, in Parliament first so we SEE them working when we are working too.

The liberal prescription

How do you get out of a recession? Well, first - as Keynes taught us all if we had the wit to notice - you can't expect to do more than stimulate recovery, possibly at the cost of inflation. The liberal prescription for a recession ought to be, modestly, along the same lines. Whilst Gordon 'Batman' Brown claims he is saving the planet, liberals should be saving our sanity and hope by making it clear that old fashioned deep recessions like this (not the stagflation of the 1980s) are not easily remedied by fiscal or monetary policy alone - that governments can stimulate but can't cure, even if confidence in the financial system were miraculously restored. Liberals know that recessions require a mix of policies, to protect the most vulnerable on the one hand from the effects and to stimulate a macroeconomic response on the other. In this recession, a truly liberal response is to claim less, hope more. We don't only have to fear fear itself, we have to fear the mad machine politics of the Tories and Labour for whom the prescription is driven more by polls than by reason.

VAT and, er, reflation...?

Mr Darling and his Treasury madarins ought to win a Nobel prize in economics, for (unbeknown to the rest of the economists practising and writing today) they seem to have come to the remarkable conclusion that one can reflate an economy by means of reducing VAT by a modest 2%. Yes, the VAT the we all discount as a part of the purchase price of goods and many services. The VAT that we pay at a fixed rate on most purchases, whether they be capital or non-capital goods. The VAT we expect to have no chance of escaping unless we are villainous. The VAT many of us, if we are businesses, reclaim just as we pay in on purchases. So what will the great plan achieve?

Well, think about Christmas shopping for a moment. Last year a report here suggested that the average spend on Christmas presents was £570. If VAT at 17.5% was incorporated in the price of all of the goods bought as presents - unlikely, since at least that selection of jams for Aunt Mabel and little Timmy's new sweater will be zero-rated, as will much else in the £570 - a reduction to 15% would 'save' you £14.25. That's a Kung Fu Panda DVD and a box of chocolates at Tesco. For all of the effort to reflate the economy by the extraordinary measure of VAT reductions, even at the peak of our annual spending the best we can expect is the equivalent of a couple of hours of animated comedy and a handful of caramels and orange cremes.

Now don't get me wrong. It may be worth it - after all, at least Tesco will benefit. But there is no evidence here of targeted thinking in relation to VAT reduction of the type the economy needs and the government seems to believe it is providing. What about a bigger reduction for capital purchases? What about even extending zero-rating for charitable purchases to a more extensive range of capital items? What about extending the idea of reducedVAT on some services that are provided in the main by small firms?

Come on, Darling, think....

Keynes is back!

It seems to be an age ago that we could mention the name of John Maynard Keynes without howls of derision. Now, though, Keynes - a liberal intelligence of the highest order - appears to be back in fashion. If you don't believe me, have a look at the New Stateman for this week in which, with extraordinary zeal, the likes of Noreena Hertz claim him for their own.

Now, I don't know about you but as one of those for whom the bankruptcy of monetarism, then supply-side economics, then neo-liberal market economics and (that famous phase) 'post-neoclassical endogenous growth theory' came and went as so much froth and fluff, I am glad that the old boy is due for a serious examination again. But it should be a serious and sensitive rehabilitation - not a 'hero-fest' for socialists.

Let's be clear. Keynesianism (or the moderated neo-Keynesianism of the late eighties) isn't for softies. It is for real, thoughtful and purposeful liberals. Socialists beware. There are no easy rules for state management of recessions, and intervention is not - genuinely not - the simple prescription anywhere in Keynes. Keynes was, and remains, a difficult - sometimes even an unpalatable - thinker and that great trinity of works (The Treatise, the General Theory and How to Pay for the War) evolves an approach to economic analysis that is subtle and powerful.

What he did not offer was the sort of simple panaceas that Labour politicians seem to want and socialist commentators insistently believe are at least palliative in effect (never enough for them of course, but a means of mollifying the voters that usually eject Labour when recessions strike).


What he did offer was a thoroughgoing analysis of how, by concerted action allied to confident and assertive government leadership in the face of business apathy and loss of confidence, an economy like our own could be coaxed back to health.

Keynes knew that his prescription would allow capitalist economies to retain their liberal freedoms, but that other (similar but by no means identical) prescriptions - from the authoritarian left and right - were available. In the General Theory he wrote:

"The authoritarian state systems of to-day seem to solve the problem of unemployment at the expense of efficiency and of freedom. It is certain that the world will not much longer tolerate the unemployment which, apart from brief intervals of excitement, is associated - and, in my opinion, inevitably associated - with present-day capitalistic individualism. But it may be possible by a right analysis of the problem to cure the disease whilst preserving efficiency and freedom."

Keynes saved liberals the fate of sinking with the classical system that demanded constraints on the demand side of the economy in a recession, but more than that he outlined an economic liberalism that is still relevant today.

Oh, and if Mervyn King happens to read this, he also said - as Mervyn will know - "a decline in the rate of interest will be a great aid to recovery and, probably, a necessary condition of it". Go to it, Mervyn!

News coverage and recessions

The BBC is at it again. Cataclysmic economic disaster is just around the corner, the soup kitchens will be open this weekend and sales of Down and Out in London and Paris are set to skyrocket...

News broadcasters are insensitive - or, more worryingly, hypersensitive and very, very aware -to the power they exercise over the fate of the economy during recessionary episodes. Research seems to suggest that news plays an important effect in actually shaping our economic behaviour - and it is an effect more pronounced in periods of recession than in periods of prosperity or boom. Two studies worth reading are this one by Goidel and Langley from 1995 and this one by Wu et al. Both analyse the impact of news during the recessions of the 1990s. Both conclude that the reporting of 'bad' economic news has an effect, and that it can exacerbate behaviour, which must include 'dis-saving' (as Keynesians used to call it) and putting off purchases.

What does this mean for the BBC? Well, it must mean that this great public service institution is currently doing all of us a tremendous disservice. It is actually stoking the recession gleefully. Interviews during news bulletins today have included 'vox pops' insisting that a largely bemused public shares stories of 'how the downturn has affected them this lunchtime'. Not only is this editorially silly, it is potentially damaging.

Yes, the economy is faltering. Jobs will be lost. Businesses will go to the wall. But this is a cyclical phenomenon we have lived with for centuries. That, of course, is the BBC's argument - they proclaim that they are holding a mirror up to nature, not shaping it.

My point is that, with evidence showing so strongly the very real effect of news coverage in exacerbating the recession, should they take the risk?

Or are ratings worth that much to the BBC?

Lembit for Party President?!?

Like thousands of others, I have received an email from Lembit Opik soliciting my vote for the position of President of the Liberal Democrats. I have to say almost the first line put me off voting for him: "I have always believed the Party President is the ideal job for me", he writes, as if that is a recommendation. Hmmmm. Modesty? Evidence of fitness? Strategy? No, just vote for me to make me happy. Encouraging, isn't it?

No, spelled with a 'B'...

Bankers. Don't you just love 'em? Not content with creating a crisis in their own industry by mispricing risk on doubtful derivative instruments and accumulating them to the point of near destruction, they have the temerity to wonder whether the taxpayer is 'doing enough' to bail them out of the mess. Moreover, after a helpful and well coordinated move by the central banks to cut interest rates as an assistance to them - not taxpayers and savers, by the way - they have the further effrontery to say that they 'might not pass the benefit on' to mortgage borrowers. Yet more indifference to the rest of us comes from the 'shock' that the governments of the western world are apparently not saving all of their banking bretheren, and are not quite prepared to back the hunch that interbank lending might get going again with borrowed cash and taxpayers' money to the tune of 1.5 times GDP.

Can we get this right for once? Banks are the servants of our economy, not the masters of it. The government has to assert the basic principle - which voters have now clearly realised and politicians should quickly understand - that our finance system is too important, should be made less important, and should be placed in the hands of people with common sense. Spivs, self-regarding quants and 'masters of the universe' need not apply this time.

As winter comes on, and pensioners on low incomes face hypothermia again, bankers railing at the rest of us for our 'indifference' will be an affront.

Groan...it's Lembit again

The ability of the leadership of my party to shoot itself in - or, probably, near - the foot is extraordinary, and that arch-transgressor Lembit Opik is at it again today. In an interview reported on the BBC website he makes some rather innocuous points about the Segway personal transporter, a motorised scooter for grown-ups, in a rather silly 'protest' outside the House of Commons. Lembit, who holds a responsible position in the party usually reserved for grown-ups, believes the Segway is " flexible, convenient in rural areas as well as large cities - and environmentally friendly". As it may well be.

But how, even if this were the solution to the transport problems of the UK, does Lembit make the point? By describing it as "...biggest step forward in transportation since the Wright brothers", by stencilling (yes, stencilling) the word 'Police' on the front of one and driving it up and down in front of the House of Commons, and by claiming that adoption of the Segway would constitute, in the words of a BBC report "...a transport "revolution" in the capital as commuters turned to them instead of cars and bicycles".

Now this may be a happy, jolly little jape to Lemit, but it is making my party look silly, trivial and childish. There is nothing wrong with humour in politics, nothing wrong with eccentricity. We don't need only the high-minded Gladstones, the stoical Balfours or the reserved and patrician Douglas-Homes of this world, we do need a few clowns for colour.

Why, though, do they have to congregate in the leadership of a party making a credible claim to be considered the real opposition to the government in so many areas?

Lembit? Please think about the party before personal publicity ahead of your next stunt.

What is left of economic policy?

One of the reasons why Downing Street is now hotly denying that Mr Brown was ever going to unveil an economic strategy to counter recession is that, put simply, 'economic policy' is pretty much emasculated now. It doesn't really exist.

Margaret Thatcher (in her various guises as arch-monetarist, supply-sider and non-interventionist) had one outstanding effect on economic policy making. She shifted the goal posts by moving them off the pitch. Instead of accepting that economic policy management is difficult, frustrating and risky and involves utilising a range of economic policy instruments, she embraced the myth of the single instrument (monetary base control from 1979-1983; supply-side fiscal policy from 1983-1989...). After all if you really don't understand this stuff, why not just pick a single lever and use it - and blame 'international circumstances' when things go wrong?

Mr Brown, of course, hasn't just moved the goal posts from the pitch; he's given them to another team. The one instrument of macroeconomic policy left to us is interest rate polcy, and he shifted responsibility for that to the Bank of England in 1997. Now you could argue that with the reforms in exchange controls in the 1980s, the restructuring of our economy through privatisation and outsourcing of public assets and services, and indeed economic growth, there are strong reasons for believing that government can do less now to avert a recession than ever before.

This is nonsense. There are still levers of influence and action that Alistair Darling could use - from effecting changes in bank balance sheets through BoE action, through to encouragement for business investment via tax credits, to changes in the purposes of planned public spending (reducing discretionary recurrent spending and increasing capital infrastructure spend, for instance) - that would, when taken together, amount to an economic strategy for coping with the effects of recession.

The belief seems to be that all of this is too hard, too risky. It makes the brain hurt. Better, then, to cushion the blow for (some of) those on low incomes and hope the rest of us can weather the storm - and be prepared to take the credit if we do.

This is politics without principle and without guts. It is artless, deficient in leadership, stumbling and incompetent, and unimaginative.