24 June 2010

Osborne’s emergency budget accepts Labour’s larger state

The Conservative-Lib Dem emergency budget, presented yesterday by Chancellor of the Exchequer George Osborne, was meant to fix the fiscal nightmare created by Gordon Brown’s decade or so of profligacy. The man who borrowed and spent up large in the boom years, increasing public debt year on year, and then suddenly switched to a half-baked version of Keynesianism (whereby he does the same in the bad years, ignoring that Keynes did say that in boom years such debts should be paid down).

The fiscal position Britain is in is stark. It is NOT because of the government bailing out banks. By 2016 the UK public debt will be £1.3 trillion, that is even WITH the cuts in spending and increases in taxes from the emergency budget, being over 70% of GDP (and that does not include PFI and pension obligations which are not counted as debt). What Osborne has done is effectively halve the deficit – deficit being overspending – by 2015. He is making the problem grow at half the speed of Gordon Brown before the UK reaches a theoretical balanced budget by 2016.

How is he doing it? Well if you listen to some it sounds like he’s been tough on spending. He hasn’t. 23% of the reduction is by pilfering even more from British taxpayers than before. In other words, the Con-Dem administration is ACCEPTING that Gordon Brown was right to spend more. The argument is a matter of degree. As much as George Osborne is cutting spending, he isn’t cutting it back to remain within the relatively high tax envelope Britain has, he is raising taxes as well.

Most stark is that VAT is being increased from 17.5% to 20%. A significant hike which will choke off retail spending and hurt almost everyone. Perhaps it is the price for the inane British worship of the NHS, but it isn’t presented as that. A Bank Levy is being introduced, punishing all banks for the foolishness of some. Capital Gains Tax is increased as well. He is even investigating a “Financial Activities Tax” (or a tax to chase finance out of the UK to Switzerland). Hopefully that will go nowhere.

There is some modest good news on tax.

Some tax thresholds change, which lowers taxes on some smaller businesses and those on the lowest incomes. Company tax is being dropped by 1% a year every year for four years to reduce it to 24%. That in itself will be positive for business growth in the UK. Small companies will only pay 20%. A stark contrast to some! A proposed tax on phone lines is to go. Fuel, tobacco and alcohol taxes have not been increased. The minimum income threshold for income tax is being increased slightly. However, of course none of this offsets the hit on VAT.

On spending the picture is very mixed as well.

He announced an average of 20% spending cuts across departments (excluding health and overseas aid), which will be detailed later in the year. How that might affect core spending such as defence, justice and police will be curious, but the devil will be in the detail. Sadly he hasn’t simply decided to abolish departments to make that easier.

Public sector pay is frozen for two years, when it should be frozen until there is a surplus. Quite what business would increase pay when it is bleeding red ink (especially for people often unemployable elsewhere) is beyond me. Those earning less than £18,000 wont be subject to the pay freeze, but are all getting flat pay increases – regardless of performance (and Labour say the Tories hate the poor?).

The retirement age is to be raised to 66, but pensions have become another huge bribe. Future state pension increases will be linked to earnings, not inflation, producing a huge demographic based fiscal nightmare for the medium term. Nobody is telling pensioners they don’t get back what they put in, but what their children and grandchildren will be paying in taxes.

As welfare spending increased 45% in ten years, that had to be tackled too. Benefits are only to be increased according to consumer prices, not retail prices (a lower level). A host of tax credits will be wound back. The ridiculous £190 grant to pregnant women (which the last government said was to encourage them to eat healthy, when it typically was used to buy a TV, clothes or any other luxury item) is being abolished. Child benefit is frozen for three years, but absurdly is NOT being taken away from those on middle to higher incomes.

Housing benefit, which costs more than the police and tertiary education combined, is being scaled back by capping the total amount paid. Apparently some families with earnings of over £100,000 have been getting housing benefit legitimately!!

Privatisation is part of the picture too. The sale of the high speed rail line to the Channel Tunnel, the NATS (air traffic control system), the student loan debts and the Tote were announced. None of this is controversial.

Yet so much more could have been done to avoid any tax increases. Simply ensuring all benefits/tax credits were only available to those in the bottom quartile of earnings could have saved billions. There could have been a clear and decisive end to corporate welfare of all kinds. Finally, whilst it would have been politically unpalatable, the greatest gains could have come from raising student fees and charging for basic NHS services (say half the cost of doctor visits).

Yes, the Con-Dem government has avoided the UK facing the kind of run on its currency and public debt that the socialist countries of the Mediterranean are now facing. However, it has retained the dependency mentality of entitlement to benefits because you breed, health care on demand rationed by queuing and enormous bureaucracy and government always “being there” to help individuals, businesses and the like.

Gordon Brown’s big state is still there, most of the cuts are not cuts, but just stalling of the growth of the state. The fact that 23% of the deficit reduction plan comes from increasing taxes should tell you that this is a conservative government with a small “c”, it is not a government of smaller government and free markets.

22 June 2010

Cuts are not painful

Britain's Chancellor of the Exchequer, George Osborne, is preparing the country for austerity, mk III.

Mk 1 was the easy part, the 1% trimming of public spending to save £6.2 billion in the current year, essentially the spending the Conservatives had promised to cut. Was not much, but a taste of what was to come.

Mk 2 was last week. £2 billion worth of projects were cancelled, and another £8.5 billion deferred. Almost all of it spending approved in the dying years of the Brown regime. This included the absurd "investment" of £80 million that the government didn't have to "create" 200 jobs, although I doubt the average wage was close to £400,000 each!!

Mk 3 promises to be much much "worse" say the papers. Actually, it mostly wont be painful, if it weren't that 20% of the austerity will comprise of tax INCREASES in one form or another. Capital Gains Tax and VAT are likely targets, and it is they that will threaten the recovery, not the spending cuts.

There will be major cuts hopefully. Public sector pay is expected to at least be frozen if not cut, and public sector pensions are expected to face severe cuts because they are becoming unaffordable. Welfare benefits are likely to be frozen as well, with a scythe taken to the "middle class welfare" Labour built up to buy votes. One of the absurdities of the UK welfare state is how many recipients are on above average incomes. Hopefully it will be the end to that and more.

You see the Tories have stupidly ringfenced health and overseas aid spending for no cuts, which means it will be welfare and public sector pay that get hammered. Painful?

No. It isn't painful unless you think living within your means so you are lumbered with debt (or your children aren't) is painful. It is called being prudent. It isn't painful to stop stealing money from future generations. The UK public sector is already better paid that the private sector - yes you read right, the average income in the public sector is 2% higher than the private sector for similar jobs.

It isn't painful to wean people who are on average and above incomes from the state tit, so they actually bear the cost of raising their own children. It isn't painful for the private sector to no longer be shouldering the burden of competing against a bloated public sector staff.

Already the government is announcing new privatisations, the latest being the high speed railway between London and the Channel Tunnel.

It would be too much to hope for no tax cuts, or for the NHS to start charging for GP visits and face its own cuts, or for student fees to be at least 50% cost recovery, or for welfare to be time restricted (and only restricted to UK citizens!). However, it will be the start of rolling back the creeping (and bankrupting) state of New Labour.

Labour's lies about it are too easy to refute. It "threatens the recovery" if the state doesn't keep borrowing at record levels. Furthermore is the deceit that the deficit is about bailing out banks, when the truth is that the proportion of spending related to the banks is close to 2%. Labour is claiming it is ideologically led, as if overspending and growing the state by Labour wasn't.

The deficit is a legacy of Labour bribing voters with their kids' stolen future earnings, it was immoral then and is now. It is only moral for this government to end this as swiftly as it can, and start to confront the debt.

Note the difference with a certain government on the opposite side of the world.

15 June 2010

Bloody Sunday reprise

30 January 1972 in (London)derry is a day that sadly will always be in infamy. A day that Catholics in Ulster will see, with much justification, as the day the British Army turned on those it was meant to protect, but also a day that many Protestants will see as a provocation by terrorists.

The report of the Saville Inquiry will be released today, and so i wont predict what it will say. However, I do have three points to make in advance.

1. For those who seek justice, seek convictions and imprisonment of British army officers who killed, it is worth bearing in mind how many IRA terrorists who also have killed before and since that day, who have been pardoned and released. Was that right? No. Does it mean the British soldiers who gunned down civilians deserve to not face justice? No. However what should happen?

2. Reflect on how utterly disgusting and repulsive it is that the Blair Administration seems to have given a blank cheque on time and money for this Inquiry. £191 million is so far beyond what even compensation for the victims and their families would be, that it shows once more what happens when governments treat those they are meant to serve with contempt. It should not take twelve years and £15 million a year to gather evidence, and come to conclusions. I don’t expect much self reflection from those who have profited indirectly from Bloody Sunday.

3. More important than all of this, consider how tribalism, this time flavoured with religious sectarianism, can completely disregard the rights of the individual. How mind numbingly stupid it is to label anyone Catholic or Protestant, when it is simply about "us and them", with the same mentality that has seen the blood of millions spilt. The same mentality as in Rwanda, Chechnya, Sri Lanka, Kashmir, Nazi Germany, former Yugoslavia and the list goes on, and on. The surrender of the individual to the group, the demonising of the "other" (outsiders), and glorification of the "group". It is only tragically funny when you consider how unlikely in most cases to find such people in Northern Ireland capable of holding cogent arguments about theology. The Northern Ireland peace process has NOT been about rigorously pushing individual rights,and reason to reject the knuckle-dragging mentality of religious sectarianism. Instead it has been about ending the fighting, keeping quiet and moving on, whilst British taxpayers have poured a fortune to prop up an economy on life support.

The malignant, evil philosophy that blends religious hatred (fired up by churches on both sides, seen most recently in the insane rants by Reverend Ian Paisley shouting "antichrist" at the previous Pope), tribalism and scape-goating has left Northern Ireland still full of many who think the poverty, desolation and decay of the region is due to what the "other side" did. Meanwhile, with a British government facing fiscal ruin, perhaps the chance exists for the 70% of the Northern Ireland economy "produced" from the state sector, to be paired back, and for the people of Ulster to start focusing on themselves, generating wealth and prosperity and treating each other as individuals, rather than members of communities that exist in their heads.

11 June 2010

Dutch elections, victory for freedom

The elections in the Netherlands have produced two substantial winners and two losers. However, I will let you count the number of times in the media YOU see how one of the winners is portrayed.

The first winner is the new leading party, the VVD (People's Party for Freedom and Democracy) which is a party of economic and social liberalism. It is similar in mould to how ACT (NZ) presents itself. It believes in free markets, welfare only for Dutch citizens, and reductions in taxes. It appears to have gained nine seats, increasing vote from 14.7% to 20.4%.

The second winner, is the new third party, the one that will get the most publicity, the PVV (Party for Freedom). It is led by Geert Wilders, a man who the British government sought to ban because he opposes Islam. The PVV believes in substantial tax cuts and reductions in the welfare state, the abolition of the minimum wage, is sceptical about the European Union, and believes only immigrants who embrace Dutch humanist and Judeo-Christian values should be admitted. Wilders is radically opposed to Islam, which means he is portrayed in much media as being "far right nationalist". However, like the late Pim Fortuyn, Wilders is no fascist. He simply vehemently defends the social liberalism and tolerance for individual diversity that the Netherlands hold dear AGAINST those who wish to destroy it. On top of that, he would implement a radical programme to cut the role of the state. It has gained 15 seats, rising from 5.9% to 15.5% of the vote.

So between those two, 36% of Dutch voters supported scaling back the size of government.

The losers were:

The CDA (Christian Democrat Appeal), a centrist conservative party. It believes in reducing state spending, but also tougher controls on drugs, prostitution, abortion and euthanasia. It supports decentralised control of schools and hospitals, and wider European integration. It is the party of the outgoing Prime Minister, Jan Balkenende. It lost 20 seats, to drop from 26.5% to 13.7% of the vote.

The SP (Socialist Party), which believes in the welfare state, state health and education, and opposes privatisation and globalisation. It was originally a Maoist Party during the height of the Cultural Revolution. It lost 10 seats, dropping from 16.6% to 9.9% of the vote.

It would seem Dutch voters rejected conservatism in favour of small government, and the financial crisis has also seen them turning from Marxism.

Other results were modest losses for the centre-left Labour Party (from 21.2% to 19.6% of the vote), and the centrist (conservative socially, economically leftwing) Christian Union (from 4% to 3.3%).

There were also gains for the Democratic 66 Party (an unusual blend of liberalising labour markets, supporting tax cuts and market reforms to healthcare and education, combined with environmentalism, radical social liberalism and a federal Europe) which soared from 2% to 6.9% (arguably another party that believes in less government) and the Greenleft party (which is an unsurprising mix of environmentalism, former communists and believers in big government socialism) which went from 4.6% to 6.6%.

So capitalism is hardly under attack in the Netherlands when the main parties that gained support believe in more free market policies, with the only leftwing party making any gains hardly making up for the losses from other leftwing parties.

Blogging disrupted

Just to note my blogging regularity has been disrupted because of:

1. Being overseas twice in the last few weeks (with glacial speeds available);
2. Moving home;
3. Two and a half weeks to get a phone line installed to carry broadband (and no, there is no cable TV option, as Virgin Media hasn't cabled my street).

So whilst I wait another 7 working days to get POTS (Plain Old Telephone Service), after which I can get broadband, service is not going to be regular. No, I'm not getting it from BT, not only because it is an expensive and poor quality deal, but also because since BT has lobbied hard to destroy BSkyB's property rights in programming (which were built up commercially against two government owned competitors, and three government licensed ones) I figured I no longer needed to give a damn about BT's property rights on local phone lines.

Meanwhile, the British media has been focused on:
- Gunman who went on a shooting spree (but few have asked whether others having guns might have stopped him earlier);

- The Gulf of Mexico oil leak, Obama's xenophobic attack on BP to make up for his own impotence on the issue, and BP's own incompetence;

- The World Cup (which sadly is unlikely to see a New Zealand-North Korea final, as much as it would upset millions) is hyping up England and South Africa;

- The next stage of austerity, as the Con-Dem government "warms" up the British public for spending cuts perhaps ten times that already agreed (whilst the public continues to remain ignorant about what cuts actually MUST mean, such as cutting the welfare state and increasing university fees). Much good is being said about focusing on the role of the state. Few yet understand how drastic and urgent the cuts have to be, and sadly it will also include tax rises;

- The ultra-tedious contest for leadership of the British Envy, Spendthrift and Spin Labour Party, now no longer including a relative unknown who said Margaret Thatcher should have been assassinated in the 1980s. Most recently it now include Diane Abbott, who is notable for being a black woman. One of the contenders, Ed Miliband, said it showed the diversity of the Labour Party. It was pointed out to him that two of the contenders share the same mother (his brother David Miliband is also standing), and of course another man called Ed is standing as well.

25 May 2010

Much ado about 1%

The big news in the UK yesterday was the announcement of £6.2 billion in spending cuts by the government in the current year. It's a cut that both sides of the House of Commons are not being fully honest about. How many lies or evasions of the truth are there? Let's count:

Lie number 1. The Labour Party is claiming that these spending cuts are about "taking money out of the economy" and will precipitate a "return to recession". There is no evidence that running a deficit that is as high as 12% of GDP (higher than Greece) bolsters the economy. In fact quite the opposite. After all, if running huge deficits saves the economy surely it should be steaming along, when in fact in the last quarter it grew by 0.2%.

Allister Heath in City AM proclaims the arguments in favour of continued the high levels of deficit spending are "intellectually bankrupt, pseudo-Keynesian" as the bloated state crowds out the private sector. Why? Because when the state borrows on such a scale, it does so by issuing sovereign debt. It has to do so at market interest rates to attract investors, so it attracts investment from the private sector, in everything from manufacturing to services to banks seeking deposits to boost their own leverage. One of the leading lights of leftwing journalism in the UK - Polly Toynbee of the Guardian - shows up her own economic illiteracy in saying "If Europe causes a second dip, cutting is a bad decision; if Treasury receipts strengthen, then such deep cuts so fast may not be needed." So it is NEVER a good idea to cut government spending according to socialist Polly.

You see the British government is dependent on private investors lending it money to pay for current spending. If confidence lapses in the government's ability to do so then witness Greece. One need not be a libertarian to see how unsustainable fiscal profligacy is. In a world where the term "sustainable" is a buzzword thrown about promiscuously like the favourite harlot of the age, it is curious that most don't understand it outside the platitudes of environmentalism.

So Labour is dead wrong, and largely to blame for the current set of affairs (most of the deficit is not about bailing out the banks, but about the collapse of tax receipts to prop up the bloated state built up by Blair and Brown, and overextended by Brown in recent years). Yet before the election it didn't completely shy away from cutting spending.

Lie Number 2. Labour wouldn't have cut spending. You see Labour did pledge to halve the deficit in five years, which would have meant a sustainable reduction in spending of at least £20 billion per annum. While Labour wouldn't cut spending in 2010, it would have been under enormous pressure to impose significant cuts in 2011. However, its new Great Leader will no doubt simply oppose cuts regardless of the 2010 Manifesto.

Lie Number 3. The savings are all going to cut the deficit. No. £0.5 billion of the savings are actually going to be spent elsewhere and used to start some tax cuts. The latter will be a miniscule boost to the economy, but in essence it sends the message that cutting spending means having money to spend elsewhere. It doesn't while you still have a budget deficit, especially on this scale.

Lie Number 4. The cut in spending is substantial. No. The saving of the total UK budget is less than 1%. Yes that is all that is being saved. It tells you something that total UK government sector spending is 100x this. That comes to the real issue. The budget deficit this year is £163 billion. Less than £6 billion off of that is 3%.

Shifty evasion number 5. There will be further cuts, but this was the hard part. No. Even an optimistic view about the economy, which given the crisis in the Eurozone (which is easily the UK's biggest trading partner) is unlikely, would likely generate sufficient tax revenue to cut the deficit by between a third and a half over time (time during which debt will have increased and the debt servicing costs as well). So there needs to be, at the very least, cuts 12x those implemented yesterday.

Shifty evasion number 6. Future cuts can be made through "efficiency savings" and "trimming budgets". No. Let's assume there needs to be cuts of around £105 billion in spending. You could not do that without hitting some combination of welfare, education, health, defence, or cutting public sector salaries. In other words, significantly limiting the welfare state. The "pain" has just begun, and the dirty little secret is that the UK welfare state as it stands is unaffordable and unsustainable. At some point hard decisions are going to have to be made such as:
- Will health and foreign aid both remaining untouchable areas, both with real increases in spending?
- Should public sector salaries be cut by up to 20% on average?
- Will tertiary sector funding increases have to come entirely from fees?
- Will pensions and welfare benefits be frozen or cut?
- Will middle class welfare, such as winter fuel allowances for the elderly be severely curtailed?
- Will government housing expenditure be halted?

The Conservatives probably know that, and also know that having the Liberal Democrats part of the government that does some of these will help spread the political blame.

However, the public still remains ignorant of the scale of the problem. Which brings me to:

Incompetent explanation of the need for spending cuts. George Osborne as Chancellor of the Exchequer has done a shocking job of selling the need for cuts. He hasn't explained that interest rates could rise if cuts aren't made, he hasn't explained that a bloated state does not allow the private sector to grow, he doesn't convincingly make my first point above, that continued deficit spending is NOT about keeping the economy going - it takes money from the private sector to make the state take it from taxpayers in the future.

What the 1% cut in public spending means is simply a sign of willingness to take steps to deal with Britain's fiscal catastrophe. It is seen as a first step, but sadly is being portrayed as "taking the tough decisions early".

The cuts announced are easy and obvious, although a minor point is that it is odd for government to cut spending on roads when it doesn't allow the private sector to enter the market (and already recover revenue 4x that which it spends on roads from road users).

On top of that it is nice to see the UK doesn't have privatisation -phobia like New Zealand does.

The Royal Mail is to be part-privatised (49%) to raise money and to get private investment into the firm. Far more interesting is that the government is considering a serious proposal to lease the entire motorway network to the private sector.

20 May 2010

Hone Harawira is right

Yep I don't say that too often.

According to Stuff "He was having difficulty supporting a tax increase that made things easier for the wealthy "at the expense of those in need".

"GST hits poor people the hardest because nearly all of their money is spent on things that you pay GST on – food, petrol, electricity – so any increase is going to really hurt them.""

Yes, and you don't need to be a socialist like Hone to realise that consumption taxes do this because those on low incomes spend more than they save.

There can, of course, be income tax cuts. In fact simply winding back government spending in real terms to what it was in 1999 would enable the deficit to be abolished and for the top rate to be scrapped and the 33% rate to be cut without raising GST.

Imagine the change in economic activity and international perceptions of NZ if government did scrap the spending outlined by Roger Douglas, wound back spending to 1999 levels, scrap middle class welfare such as "working for families", put serious caps on welfare and see the top rate drop to 21% for income and company tax, and make the first $14000 tax free.

Hone Harawira would be arguing about spending cuts (yes you wont get subsidised broadband, your university fees would go up with inflation and welfare would be far tougher), but he'd not be arguing about tax because those he is interested in would be paying less. Everyone would be.

However, I forgot, many of you elected a Labour Lite government led by Helen John Clark Key with Michael Bill Cullen English as Finance Minister.

After all Labour only increased income tax once (the 39% rate) and then reduced income tax once, and did not ever increase GST.

UPDATE: Oh NOW I know why you voted for Labour National, David Farrar makes it clear it is about staying in power for three terms. Quite why you'd choose the blue team over the red team to keep implementing the red team's policies is beyond me

18 May 2010

Fifth bailout in twenty years

The announcement by the New Labour National government that it is spending NZ$750 million of your money, to strengthen a company that the Old Labour government bought for NZ$690 million ought to provoke outrage on behalf of those supporting the current government, and should condemn Labour and its cheerleaders the Greens to history for being the most egregious destroyers of taxpayer wealth since Sir Robert Muldoon.

It should be so obvious to a child that buying something that is worth NZ$690 million and having to spend $750 million to save it is lunacy. Labour receives the blame for the former, and now New Labour National does for the latter.

What to know why you're not getting a real tax cut? Ask both of those gangs of reckless spendthrifts. Why their parents didn't spend a couple of hundred bucks to buy them train sets when they were kids so they could indulge in this pastime is beyond me? (mine did by the way).

Will Kiwirail make a profit that will even approach to recovering this (and the other money poured into it in the past year or so)? No. Indeed, the goal is to be "self-sustaining", which presumably means make an operating profit, not recover the long run cost of capital in this very capital intensive business.

The problem is we've been there before. Government is regularly using your money to rescue railways in New Zealand. The first time was understandable, the second time could even be partly excused as due to the legacy of Think Big, but ever since then it has worn a little thin.

The simple truth railway enthusiasts (and I count myself as one of those) have to accept is that the economically viable future for railways in New Zealand is to operate a severely curtailed network carrying moderately high volumes of containers and bulk commodities.

Two years ago I wrote this post, still valid today, where I outlined what looked to be viable and what did not. Railways north of Auckland have little future, as does the line north of Masterton and between Stratford and the main trunk. The Napier-Gisborne line has had a fortune poured into it, so may be best to keep mothballed in the event of traffic.

David Heatley from the NZ Institute for the Study of Competition and Regulation has an excellent presentation called "The Future of Rail in New Zealand". I wrote about it as well.

You see the railways were bailed out in 1982 when transformed from a government department to a commercially oriented corporation (the first "SOE" before the term SOE was coined).

The railways were bailed out again in 1990, in part to pay the full cost of the main trunk electrification approved before corporatisation (and which was found to be a loss making capital investment even if the electricity was supplied for free), and in part to pay for the restructuring following the removal of the monopoly on long haul freight.

Then it was privatised in 1993.

It was bailed out once more when Dr Cullen bought the track from Toll Rail (having earlier paid over the nose for the Auckland rail network), and then refused to enforce the cost recovery track access charges needed to pay to maintain the network.

The fourth time was the renationalisation, by paying well over the market price for the "business" it kept it open, except that it is unprofitable.

Now you're paying more, this time to make it "viable".

Darren Hughes has said the $750 million isn't enough, because $11 billion is being spent on roads. Yes well done Darren, noticed a railway to every business and home? Noticed how many people use roads compared to railways (most lines you can wait hours for a train of any kind to appear)? Might you be better asking why YOU voted for taxpayers to pay over the odds for this dog of an asset? What is he trying to achieve besides looking like he's addicted to spending bad money after bad? Does he want to spend $11 billion on railways??? He says "I think we need to be looking at how we move freight from, say Gisborne on the east coast, to Napier port". Who is this "we"? Because almost all of it goes by road, as it is substantially cheaper. This was looked at when you were in government Mr. Hughes the simple answer is that there is damn all freight from Gisborne to Napier, because Gisborne has a port. The distance is far too short for a viable rail freight operation.

This example shows all too obviously how inane the Greens are on railways (believe in them, believe in them), how blatantly wasteful the Labour was in renationalising it and how the Nats are too damned scared to do what actually needs to be done - get Kiwirail to borrow the money for its renewal itself.

If there are people willing to buy trains and run them on the network paying to use it, then let them. If there aren't then mothball parts of the network and offer to sell it to whoever wants it.

The arguments that the railways save money are clearly ludicrous.

If there is a desire to ensure rail and road are on an equal footing then set up the highways as a profit oriented corporation that borrows and invests in its network paid for by user fees.

Then both networks can be self sustaining, and be privatised. Hopefully then the ongoing political fetish of saving a network that, by and large, has had its day and is now only viable for a few core freight tasks, will be over.

14 May 2010

Gareth Hughes a clown once more

What the Greens say about an unprofitable Hamilton-Auckland passenger rail service.

Ohhh a new rail link? Yes, we want it, you should pay for it, it must be good, it's a railway. People like trains, see the petition of those people who want it? No we didn't ask how often they'd use it, stop being mean, we want it, you pay for it. Go on, it's good for you. How much? We don't know, who cares, you'll be made to pay anyway. It will reduce congestion? How much? We don't know, we ignored any evidence that says it will do nothing.

Gareth Hughes is proving he is as much of a clown as Keeping Stock showed he himself demonstrates.

He says "the commuter rail connection had real merit and offered a long-term option for linking Auckland and Hamilton. Yes, so hard to get between those cities with that state highway, the buses that use it and even the Overlander rail service.

He goes on as the Waikato Times reports "Hughes pointed to the 2011 World Cup as a "great incentive to get a commuter service happening"". Yes, nothing so good for the environment as encouraging Aucklanders to live in Hamilton and commute, and commuting has everything to do with the Rugby World Cup, right?

Follow the thinking so far? Well Gareth doesn't even know there is a railway already between Auckland and Hamilton (most of it double-tracked) "The Greens wanted to see a "corridor of national significance", with construction of a rail-line – or space for it to be built – alongside the Waikato Expressway". Presumably he's never actually travelled between the two cities by land.

This staggering level of ignorance should render the Greens as being a laughing stock. Let alone the wilful blindness of the Greens and local authorities in Waikato ignoring that the last time such a service was trialled, it was for 16 months from 2000 to 2001, undertaken by the then privately owned and unsubsidised Tranz Rail (you know that awful foreign company that leftwing legend has it destroyed the railways). The trial was not a success, even though it used the relatively comfortable Silverfern railcars, it carried on average 12 passengers a day south of Pukekohe.

That's not even a profitable busload. A profitable rail service would need to carry at least 12 times what the trial did, every day, in each direction.

However, the Greens aren't about economics, or reason, for them railways are a religion, and any idea of a new service must inherently be good because trains are good, always.

You should be forced to pay for them because of this, because it is about faith "Mr Hughes said the Greens did not have costings for a Hamilton-Auckland commuter rail link, but they believed the cost-benefit ratios would still be greater than those for new roads.

No costing, no idea about how many people would use it, but they BELIEVE it would be more beneficial than new roads.

If the Greens are so blindly ignorant about something which is rather easy to dismiss, can you imagine how often the Greens engage in such a faith based view of the world (especially given how they dismiss those who have one they disagree with?).

Nuclear fusion achieved?

Well so says the Korean Central News Agency

So I can't wait for that country's willing idiots in NZ to cheer this on, since it already cheered on the DPRK nuclear weapons programme.

The same agency of course says US troops commit 60% of the crimes in South Korea.

It also claims the US is the worst offender of human rights in the world in that:

"In this society one can live only by way of racketeering and through fraud and swindle. Without these practices one cannot but be pushed to the fringes of society where one can not keep body and soul together, denied even the elementary rights to eat, get clad and have a shelter....Drug abuses getting more rife in the U.S. with each passing day are producing an increasing number of mental and physical cripples."

So methinks that scientists need not be planning a trip to Pyongyang soon to discover fusion.

13 May 2010

Con-Dem anti-reason anti-business coalition

Well it's out, the Conservative-Liberal Democrat coalition has shown its true colours, and they are colours of a red and green coloured wolf in the sheep's clothing of Cameron and Clegg. The new government is no more friendly to capitalism and to reason than the last one.

The coalition agreement now published gives the impression of being pro-business, and the impression of dealing with the budget deficit, but it commits to a vast range of new spending measures, and to interfere with private businesses on a grand scale in multiple sectors.

The envy-touting, dependency supporting left should be relieved, and the Greens thrilled.

Take the following:

- "The parties agree that funding for the NHS should increase in real terms in each year of the Parliament, while recognising the impact this decision would have on other departments. The target of spending 0.7% of GNI on overseas aid will also remain in place." Yes, the NHS, subject already to record spending increases in the past, can continue to extract ever greater inefficiencies, and not be accountable for it. Meanwhile, the British taxpayer will have to mortgage to continue increasing state aid to developing kleptocracies.

- "We will restore the earnings link for the basic state pension from April 2011 with a “triple guarantee” that pensions are raised by the higher of earnings, prices or 2.5%, as proposed by the Liberal Democrats" So the retired wont have to face any austerity, just their children and grandchildren. Why? Well given they voted for profligate governments in the past you might well ask.

- "We further agree to seek a detailed agreement on taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities" No income tax wont be coming down, it is about increasing capital gains tax. Yes, if you get capital gains for your OWN profit, not for "business" then screw you, Clammyegg wants your money.

- "We agree that a banking levy will be introduced. We will seek a detailed agreement on implementation.. We agree to bring forward detailed proposals for robust action to tackle unacceptable bonuses in the financial services sector" Why? Well let's tax one of the country's most successful service sectors, never mind which banks never needed a bailout and those that did. Oh and let's deter the most successful people in the sector being tax resident in the UK, to please the envy ridden proletariat. So it's off to Switzerland for that lot then?

- "We have agreed that there should be an annual limit on the number of non-EU economic migrants admitted into the UK to live and work" Don't worry, you'll not be attracting the best and brightest anyway, they'll be leaving. Nice sop to the BNP though.

- Finally, taxpayers will prop up a massive programme of Green fetishes and an effective end to growth in the British aviation sector including "The creation of a green investment bank" (quite where the money comes from is irrelevant), "Measures to encourage marine energy" (again, whose money?), "The establishment of a high-speed rail network" (ah the grand show off project that has next to no positive environmental impact), " The cancellation of the third runway at Heathrow. The refusal of additional runways at Gatwick and Stansted" (privately owned airports and the airline industry can go to hell, less competition for European airports and airlines), "Mandating a national recharging network for electric and plug-in hybrid vehicles" (with whose money?).

So that's it. More spending, more taxes, more regulation of the current crop of hated businesses (banking and aviation), and worshipping at the totem of environmental fetishes regardless of cost and benefit.

No reason behind most of it, and a distinctly anti-business agenda particularly if you are in finance or aviation.

Anything for freedom? Well, besides scrapping ID cards, ending the storage of internet and email records without "good reason", and something called a "Freedom Bill", there isn't much. Free schools, paid for by taxpayers maybe, and talk of some tax cuts (which don't offset tax increases of course).

Anyone who voted Conservative expecting less government, less interference in business and a more reason based view of policy should be sorely disappointed. When the Treasury briefs the new government on the fiscal debacle, it will become clear how little of this can be afforded, and so it will be a lie, taxes will go up dramatically, other spending will be slashed substantially or a conbination of it all. Furthermore, with a new agenda of faith based Green initiatives, reason appears to be distinctly absent from this administration. The government wont be shrinking.

Fortunately I didn't vote Conservative.

12 May 2010

Who owes a huge debt?

One of the likely contenders to lead the Labour Party, as it moans and groans about how the incoming government is paying for the debt it incurred, is Ed Miliband.

Apparently he tweeted "We owe Gordon a huge debt: Britain is a fairer country and our world is more just because of what he did."

No Ed, the country owes a huge debt because of Gordon. You lying lowlives pretended this wasn't real, scared the people who you've made dependent on the state that they would be out in the cold if it was addressed.

Gordon Brown has left the UK with record public debt, a record budget deficit (at levels akin to Greece) and a legacy that will burden taxpayers for many many years, including the children of taxpayers.

Good riddance. It was the most optimistic outcome of the election that you spendthrift liars were ejected from continuing to borrow your way in office by propping up those who you depended on for power.

UK 2010 - NZ 1996

Despite the noisy baying of far-left violence touters outside Number 10 last night, already demanding their own bloody vision of the future, the new Conservative-Liberal Democrat (a leftwing wit called it Con-Dem) coalition is not a return of free market Thatcherism.

More's the pity.

Had the Conservative Party been a party touting a shameless belief in capitalism, wealth creation, property rights and a sound scepticism of government on both practical and moral grounds, then this coalition might actually be positive for freedom in the UK. The sole thing the Liberal Democrats can bring is a belief in social liberalism - and by that I am not meaning the vile socialist conformity that means that a priest can be arrested for expressing his point of view, but a belief that individual rights comes first, at least in respect to law and order matters. The element of the Liberal Democrats sceptical about laws on drugs, censorship and creating new offences every time a particularly hienous crime is committed, would be helpful.

Sadly, the salad bowl of these two does not fill me with optimism, yet I am going to give this government a chance. Why? Life's too short to be constantly negative, so I'll rate this lot on what they do, not what they said they would do. For the latter would simply be depressing.

Y

So I am hoping taxes don't go up, although both parties campaigned on it to greater or lesser degrees.

I am, in fact, hoping that the Lib Dem promise to make the first £10,000 of per annum income tax free goes ahead. That WILL help put money in the economy, just not the way that socialists embrace.

I am hoping that the promises to abolish ID cards, and get rid of the criminal offences created under Labour since 1997 are kept, and the Orwellian Independent Safeguarding Authority is abolished.

I am hoping that LibDem Finance spokesman Vince Cable's recent conversion to cutting the deficit means that some serious spending cuts can be implemented this year.

I hope privatisation increases in pace, noting that unlike NZ, it isn't a dirty word in the UK, and continued throughout the Blair and Brown administrations. The Royal Mail, Channel 4 and Met Office were all considered for sale under Labour, and should be back on the agenda.

Finally, I am hoping that the Conservative policy of allowing anyone to set up a school, with minimal regulation and funding following the pupil (ala Swedish school vouchers) proceeds. It is perhaps the only policy that had anything worthwhile in it.

Yet the seeds of discord have already been sown in this coalition. The LibDems have been promised over 20 middle and junior Ministerial roles, for a party with 57 MPs this is grossly disproportionate compared to the 307 Conservative MPs. It is especially disconcerting given that absolutely none of them have ever been in government before.

So this is where the parallel to NZ lies. In 1996, the National Party and the NZ First Party formed a coalition. It immediately caused discord among many NZ First supporters who opposed National, so the LibDems will already be under substantial grassroots pressure to ensure the Conservatives have their policies severely moderated (not that there is much to moderate).

However, with over 20 LibDems in executive roles it is easy to see where announcements of sheer banality and stupidity will come from. Bear in mind the LibDems include those who have been aligned with the Marxist Stop the War Coalition (Chaired by the supporter of North Korea's regime, Andrew Murray), the LibDems embrace the European Union in ways that the Conservatives rightly find an anathema, and the LibDems are fanatical supporters of cutting CO2 emissions according to the Green Bible of "fossil fuels always bad", and have a Cabinet Minister leading that policy. The announcement of broad agreement on many policies would seem to indicate that the Conservatives had little to surrender, and showed how little the Conservatives really offered that means chance.

Yet it still remains that there are many in the Conservatives eager to cut back the role of the state, and many in the LibDems keen for the opposite. How long those tensions can be papered over is unclear. It helps that, unlike NZ in 1996, the minor party is not led by a prima donna who seeks attention, but does little work. Although it also helps that Clegg and Cameron genuinely get on, not something that could have been said for the Bolger-Peters relationship at first.

Whatever happens, there will be disenchantment. If it proves to be a government shrinking the state then the LibDems will split, as it has been the repositary of protest votes for leftwing opponents of New Labour for so long. If it proves to be a government of pablum and little serious change, then many Conservatives will be fed up and bored with government that simply "conserves" what Labour did, and makes selective cutbacks (and tax increases) to address the deficit.

For myself, I don't expect much difference. If that proves to be the case, then the big question will be whether David Cameron will have changed politics in the UK in form (not substance) by moving the Conservatives and the Liberal Democrats together (leaving a sniping increasingly leftwing Labour in Opposition), or if this is the start of a polarisation process as the two parties find their inevitably diverse wings sniping and building support for a revolt.

In any case, the losers will always be the taxpayers, as no major party was standing up for them this election.

Conservative-Liberal Democrat government of austerity

or so it seems. Given imminent reports of the end of talks between Labour and the Liberal Democrats.

The incoming government will have one priority, addressing the budget deficit. It should do so with alacrity, and with a clear vision to strip out as much unnecessary spending as possible. It should not treat any budget area as sacrosanct. It may wish to delay tax cuts, but it should not increase taxes. However, I fully expect an increase in VAT and fuel duty at the very least, thieving bastards.

What it will mean is significant layoffs in the public sector, freezes for public sector pay, significant culling of public sector pensions, and the end to the wishlists of the many seeking money that does not exist.

It will also mean that the budgets of Scotland, Wales and Northern Ireland will all be hit, despite the moans and groans of the socialist parties that largely represent those communities.

The LibDems will automatically lose popularity as leftwing supporters are upset about the inevitable, which was that the party would choose one of the major parties to support. However, both parties will cause an upset, since both barely touched the issue of the £100 billion deficit, with at best plans to deal to a tenth of that. The British voting public have both been deceived and wanted to be deceived.

They are about to face reality almost Greek style, they wont like it, and the Labour Party is waiting there to show sympathy, even though the Labour Party is mostly responsible for the problem in the first place.

I expect within weeks an "opening of the books" exercise of reality on the deficit, highlighting how bad things are, what happens if it is not addressed and pointing the finger of blame squarely at Gordon Brown and Labour. The Lib Dems will join in on this as well. Labour will seek to sidestep this, but it will be difficult to deny the truth of deficits year on year, and how the bailing out of the banks is only part of the reason for it.

The only question remaining for now is whether it is a coalition or a minority government. Either way, it wont be very popular very long. The answer will depend on what the Liberal Democrats decide.

11 May 2010

Britain wont get proportional representation

With the Liberal Democrats proving that their negotiations in good faith with the Conservatives, include backroom dealings with Labour, it has become clear what the sticking point is. The problem for the Liberal Democrats is that there is no incentive on either major party to give in.

The sticking points with Labour were really only twofold, Gordon Brown and the need for more than Lab-LibDem to get a majority. The first part of this has been addressed, Gordon will be gone. The second part is an issue, especially since the SNP and Labour are far from friends. Yet it need not be quite that way. 323 seats are needed, if you consider Sinn Fein never turns up. So Lab-Lib Dem = 315. Plaid Cymru, Greens, the Alliance and SDLP add another 8. So it is done. The SNP is hardly likely to bring down such a government to give the Conservatives an advantage. Messy perhaps? However, the leftwing LibDem rank and file would embrace it.

So now the LibDems get to choose. Conservatives or a coalition of the losers? What will matter is electoral reform, since the LibDems want this to unlock the prospect of being near permanent kingmakers.

However, neither Labour nor the Conservatives are that stupid. Labour knows that it would enable its own vote to be cannibalised by the LibDems, Greens and even the BNP. The Conservatives fear the same from the likes of UKIP, but also fear there is likely to be a permanent leftwing majority.

So the electoral reform issue has been the card the two main parties have played, except it has come to a natural conclusion.

First, the Conservatives offered an all-party committee to look at wider political reform with proposals ready for the next election. The LibDems say that as a fudge, but the Conservatives said it would consider a far wider range of issues than just the electoral system (and that it wasn't the top priority).

Secondly, Labour offered legislation to enact electoral reform. Admittedly its own kind (called alternative vote, also known as preferential voting), but it would be in place for the next election. The LibDems were more impressed, but such a change would only benefit the party modestly.

Thirdly, the Conservatives proposed a referendum on the system Labour was offering. A big step for the Conservatives, but still less than Labour's offer.

Yet both main parties are not offering any form of proportional representation or even a referendum on it. Why? Because both know the other wont do it either. The Conservatives wouldn't offer it, because it would cause civil war within the party itself. Labour knows this, so has little incentive to do better than the Conservatives, yet has done so.

For the Liberal Democrats they are stuck. The Conservatives are offering a solid coalition or confidence and supply agreement, which could last and offers a chance at a referendum on voting reform the LibDems have little interest in, but which looks like a big compromise, as it is Labour's policy on offer. Labour is offering a less stable coalition, but guaranteed electoral reform, and a more acceptable policy mix. It has even rolled its own leader to achieve an agreement.

The corner the Liberal Democrats are in is one of their own making. If Labour is supported, the change in the electoral system will put proportional representation off of the agenda for many years, because change will have occurred. The public wont have much appetite for another change until that is bedded down. If the Conservatives are supported, the referendum will do the same. If it is a "no" result, then the implication is no public appetite for change. If it is a "yes" result, the change will still put proportional representation off of the agenda.

The only way the Liberal Democrats can back themselves out of this is to seek a little less than the Conservatives are offering - a referendum to back, in principle, a change in the electoral system (with a second one on the options after an election), or to focus electoral reform on the relatively toothless House of Lords. Labour wants a fully elected House of Lords, pushing for a form of proportional representation there, might be acceptable to both major parties, given the Lords only has limited powers to amend or reject legislation.

So whatever happens in the next few days, it will be clear that PR is not going to happen. There will be many upset at this, but then again the majority of votes cast at the general election were not for parties pushing PR.

As for me, I'm agnostic about how heads are counted, when what's in them is what matters. I was never enthused about proportional representation in NZ, but then I'm not enthused that my vote didn't count under FPP unless I wanted to pick between four choices I found distasteful. So whatever happens, happens. What matters far more to me is resolving the West Lothian question, which surely will come to the fore if a Labour-Lib Dem government is formed, consisting of a great deal of Scottish, Welsh and Northern Irish MPs, with the vast majority of English MPs in the Opposition.


What next for the UK government?

There are now four possible permutations of a new British government. Don't be deluded that the substance of any of them remotely reflects the difference in form. So what are they? What do they mean for less government?

Conservative minority government: A confidence and supply agreement between the Conservatives and the Liberal Democrats. It will have to include at least some commitment by the Conservatives to support steps towards electoral reform, and principles around a budget. The Conservatives would form the government and Cabinet, and the Liberal Democrats would agree to support a budget and keep the government in power. Beyond that every bill would be negotiated on a case by case basis. Likely to be more acceptable to the wider Liberal Democratic Party as it would mean many of its policies would not be sacrificed to a coalition, but subject to parliamentary scrutiny. Liberal Democrats can claim some independence. Conservatives would implement manifesto only subject to obtaining a Parliamentary majority, which would become increasingly difficult. Difficult to see how extensive spending cuts can be implemented. Conservatives may need Labour support for some legislation. Unlikely to last for full-term.

Verdict: More likely to ensure Conservative instincts to restrain taxes will be implemented, but less likely to ensure the few positive Liberal Democrat influences on civil liberties will be addressed. Think watered-down Cameroonian Conservatives, a bit like watered down low-alcohol beer - what's the point?

Conservative-Liberal Democrat coalition: A comprehensive agreement, which means a government led by the Conservatives, but with the Liberal Democrats having Cabinet positions. Clegg as Deputy PM (perhaps Home Secretary), and possibly Cable as Chancellor of the Exchequer. Would include a commitment on agreed policies, Liberal Democrat acceptance of certain Conservative policies, and moves towards electoral reform. Gives Liberal Democrats a long sought after direct sharing of Executive power. However, Liberal Democrats will be seen as being part of a Conservative led administration, and so will share responsibility for all policies. Likely to upset many Liberal Democrat supporters, especially if it is a government of austerity as it is likely to send many voters to supporting Labour. Essentially a trade-off of power vs. risk of unpopularity. Verdict - Expect perhaps a more solid commitment to not being authoritarian on law and order, but likely to have a far weaker commitment to cutting spending. An empty glass at best.

Labour-Liberal Democrat coalition, with confidence and supply agreements with multiple minor parties (coalition of the losers). A new Labour leader would be Prime Minister, with Clegg as Deputy and a few other Liberal Democrats in Cabinet. There would be some form of electoral reform given Labour's statements, and policies would be some blend of the two leftwing parties. May need concessions to protect spending in Wales, Scotland and Northern Ireland whilst spending cuts are harsher elsewhere. However, it binds the two leftwing parties closely, and means another Prime Minister who wasn't standing as such in the election campaign. Verdict - Perhaps some easing of the draconian state of Labour, but watch taxes rise and spending rise (though not so much). Weak hemlock. Watch it try to be a grand coalition for the children and co-parents who are the current majority, and disappoint progressively.

Labour minority government, with confidence and supply agreements only with other parties. As with a coalition with the Liberal Democrats, except Labour carries the Executive and the responsibility for the government, and has to gain approval for all legislation. Likely to be far more unstable, and short lived as the minor parties seek more and more Verdict - Business as usual, except with the need to offer more to the minor parties.

On my part, I simply want two things:

- A government willing to make serious spending cuts;
- A government willing to wind back at least some of the authoritarian measures implemented under Labour.

I don't believe any government involving the Liberal Democrats will do the former, and frankly it is preferable that the next government comprises the thieving parties on the left, and is unstable, than being a short-lived limp-wristed Conservative government. A Labour led government will be a government dominated by parties that did NOT win in England, but won in the other three constituent countries, and if it pillages England to reduce the deficit, leaving the others intact, it will exacerbate the whole West Lothian question.

So go on Nick, Gordon and Mandy (Peter Mandelson), do a sordid little deal, watch you sacrifice English taxpayers to keep the Welsh, Scottish and Northern Irish in their Soviet bloc style public sector based economies, and pay the price. You'll delay the inevitable, make it obvious what needs to be done, and you'll force another election, and by no means will a majority support proportional representation at that point. You see at that point, a significant number in England will happily let Scotland and Wales go, or demand an English assembly.

Gordon to go, as the price for Labour's grab at power

While the UK ticks along quite happily without government making any critical decisions, Gordon Brown has finally announced he will resign as Labour leader, in October. This was designed purely to woo the Liberal Democrats to form a coalition with Labour (which will need support from a gaggle of leftwing minor parties who wouldn't vote to bring it down anyway).

The British public are observing the delight of politicians negotiating how to take their money, how to spend it, how to run up debt in their name that they'll be forced to pay, how to regulate their lives and tell them what to do.

Whilst it has looked like the Conservatives would manage this with the Liberal Democrats either as a tight coalition, or with a minority government, the game has changed. The Labour Party has convinced Gordon Brown to fall on his sword, and sacrifice himself for the addiction to power.

Is this the change so many called for, for politicians to decide who is in government? For politicians to horse-trade their manifestos?

In any case, I don't care. I think it would be excellent to have a coalition of the losers, of those who genuinely believe in taxing and spending, who believe in telling people what to do. Let them cobble together a filthy coalition, where the Welsh and the Scottish nationalists demand to be shielded from budget cuts.

Whatever government is in power will either have to delay budget cuts, and so push Britain's reputation further into the dark, or will have to make brutally tough decisions on cutting spending that none of the parties were honest about needing to do.

It would be apt for those who have collaborated to keep the public ignorant about the scale of the public spending debacle to become increasingly to blame for it, or to take the can for having to deal with something they pretended didn't exist.

10 May 2010

I like coalitions, except with parties I don't like

The Liberal Democrats believe in proportional representation, so as a party it believes that government in the UK should generally comprise coalitions.

However, more than a few Liberal Democrat members and supporters have been interviewed on various TV channels saying "I didn't support the Liberal Democrats to get the Tories put in power".

No, maybe not, but you did support the Liberal Democrats surely understanding that supporting coalitions means that the Liberal Democrats might back Labour or the Conservatives?

After all, if you supported Labour why didn't you vote or join the Labour party?

No doubt if the Conservative-Liberal Democrat agreement comes off, many Liberal Democrat supporters will be upset. No doubt many Tories will too (I for one would rather there be a coalition of the losers, because it would be largely dismissed by much of the public, prove unstable and incompetent).

However, be grown up. You wont always get what you want, besides YOUR party has been advocating just this sort of scenario being the norm.

Frankly, you need a Conservative-Liberal Democrat deal to work. Because if it doesn't, it will demonstrate to the public that coalitions are unstable and don't work well. Another election will cost the Liberal Democrats.

Which is, in fact, why I don't really care that much. All of the parties want to hike taxes, all want to at least maintain the existing size of the state, it really is a matter of not much change.

09 May 2010

UK election: Strategic machinations

For political pundits, the negotiations between the Conservatives and Liberal Democrats, and then no doubt Liberal Democrats and Labour are fascinating. However, what it is really about are two things:

- What team implements roughly a similar set of policies overall;
- Whether the economy or electoral reform becomes the priority.

So what are the pressures on the main parties? The tensions are between getting power, and alienating future voters or alienating their own grassroots of voters and members. All of the parties face very different pressures that limit their range of options, as follows...

Conservative

As the party with the plurality of seats and votes, it has rightfully claimed the greater right to lead a government. Cameron has also appropriately set down some bottom lines, such as defence, Europe and immigration. It is highly unlikely that the Liberal Democrats would push any of these. There are areas of potential agreement, like lowering taxes on the low paid, abolishing ID cards and (unfortunately) the embrace of environmentalism. However, there is a difference of priorities. Cameron has made it very clear the priority must be the economy, in particular addressing the fiscal crisis of the budget deficit. In doing so he comes across as being statesmanlike, focusing on the issue that does have a significant number of his own supporters worried, and the public in general.

The contrast is with political reform, a wider term than "electoral reform" as discussed by the Liberal Democrats. Cameron has proposed a cross party inquiry. He knows this wont be enough for the Liberal Democrats, but he also knows it will appeal to Labour and to many in the general public. To his own party it looks like a good opportunity to dodge proportional representation, but it does give room to talk about a wider range of ideas than electoral reform.

For example, balancing the size of constituencies, reducing the number of MPs, reforming the local electoral system, electing the House of Lords. On electoral reform, several options can be considered, including Labour's preferential voting proposal. Cameron can present any of these for discussion, and can even consider a referendum for some of them. However, he also knows he can't offer a referendum on proportional representation without a major internal rebellion.

By prioritising the economy, Cameron is trying to portray any LibDem claim that electoral reform should be a priority as being the LibDems being self interested from a political perspective. As a result, if the reason the LibDems reject a coalition with Cameron, he can claim he was putting the national interest ahead of politics, but that the LibDems are less interested in governing, but more interested in politics. Cameron also knows that Nick Clegg is in a weaker position than he appears to be. The LibDems only increased their share of the vote by 1%, and lost seats. Clegg is not as popular as many thought, and personally must deliver to his party or he faces a serious challenge. However, Cameron also knows he offers some things to Clegg that Brown cannot:

1. Clegg campaigned on change, yet supporting Gordon Brown to remain PM will be contrary to this. He also doesn't have enough support to demand a new Labour leader;
2. Labour plus LibDems does not create a parliamentary majority. So the SNP and Plaid Cymru may be needed, adding to the complication, the compromise and the sense of it being a coalition of the losers.

However, if a coalition doesn't happen, because the LibDems wont get enough, a minority government could yet be formed. Yet, the LibDems would still want to extract a price for that, and that would have to include electoral reform.

As long as Cameron makes the economy a priority, he can state that he will lead a minority government only if a budget can be agreed that starts to cut the deficit. Other parties that interfere with that will only accelerate another election, an election none of them will want, given it is likely to only benefit the two major parties - as parties that can lead a government.

So Cameron knows he can either negotiate what he wants, or sit back, say that he wont compromise to fit minority special interests, and either sit in Opposition watching Labour have to confront the deficit, or wait for an election.

Cameron should not fear another election, as he can state that it would not be because of him. It would be because minor parties sought to gain more influence than he was prepared to submit to, and because Labour could not lead a stable government. Yet it would be a gamble he could play only once, for if the next election also fails to produce a majority, the pressure for electoral reform would multiply. Under the circumstances, the gamble is probably worth the risk.

Labour

Labour has lost, but nothing like as bad as had been anticipated. The strongest cards it can play are incumbency and the broader leftwing affiliation of most of the parties in the House of Commons. Incumbency has already been played though, and has been played too strong. It looks like a defeated Prime Minister believes he is entitled to stay in power. Labour will be aware of this, but also knows the other card is far more important.

The Liberal Democrats used to be a blend of those who believed in small government, with those who thought the Labour Party had gone too far to the left. The small government Liberal Democrats could work with the Conservatives, but they have been overwhelmed by those who came from the SDP, ex. Labour members who had fled a party with a Marxist manifesto. Now, they are to the left of Labour, and so would be less than impressed if Clegg went with the Conservatives, particularly if there is no solid guarantee to hold a referendum on proportional representation. A Conservative-Liberal Democrat coalition would see many LibDem voters swinging to Labour at the next election.

So Labour does have a strong card to play. It knows that maybe a majority of LibDem voters would prefer Labour over the Conservatives. The seats the LibDems lost went to the Conservatives, indicating that the bulk of the remaining LibDem vote are Labour supporters who either voted strategically or were choosing a "safe" alternative to punish Labour. That does not mean they would want a Conservative led government.

However, Labour also knows its weaknesses. The obvious one is that Labour + the Lib Dems does not make a majority. Yet that may not be a major problem. Both the Scottish Nationalists and Plaid Cymru are highly unlikely to support the Conservatives, and both are even more unlikely to want another election, so they have little alternative but to grant confidence and supply to a Labour-Lib Dem government, even if it means offering referenda on independence for their nations. Referenda that Labour knows would be lost by the nationalists.

On policies, there aren't any serious difficulties, given that the differences between the parties are not intractable. Labour can concede more than the Conservatives. Most importantly, Gordon Brown has already offered a better deal on electoral reform. Such a deal would include legislation to ensure the next election was under a different system. One compromise that the LibDems might accept is for an elected House of Lords with a form of proportional representation. In short, Labour can offer more on electoral reform than the Conservatives, and this is critical for the Lib Dems.

Yet there does remain a weakness. Gordon Brown. Nick Clegg will be aware that Brown is unpopular, and that one clear verdict of the electorate is that a vast majority of voters do not want a government led by Gordon Brown. However, the Labour Party is too battered by the loss of the election to engage in the coup needed to remove Brown and select a new leader.

Still, if Clegg picks Cameron Labour should not be too upset, for it offers Labour one and potentially two major political gifts.

Firstly, a Conservative-Lib Dem coalition will upset many Lib Dem members and voters, and potentially one or two MPs. This will be particularly if it is achieved without a solid commitment to electoral reform. Labour can sit back and watch that support look for a home. Given the reasonable chance such a coalition would not last a full term, it gives Labour a platform to build upon. Labour can simply say a vote for the Lib Dems is a vote for a Conservative led government.

Secondly, if such a coalition embarks on a serious austerity drive, Labour can oppose and seek the votes of the disgruntled.

So, Labour knows the Lib Dems wont want another election that soon, and also that there will be pressure to not support the Conservatives. If the Lib Dems support the Conservatives, then with the exception of Gordon Brown (who will almost certainly face a leadership coup), Labour wont be shedding too many tears, especially if that government faces the political price of reducing the budget deficit.

Liberal Democrats

It's fairly simple. The LibDems have lost seats, and gained only a tiny increase in the proportion of the vote. However, as a party it knows that while it can pick the government, it isn't in a strong position to bargain having lost seats. The only thing that unites the party is a commitment to electoral reform, and it must get the best deal for such reform, otherwise the chance the election has offered will have been wasted. As much as Clegg will want to talk of stable government and the national interest, he knows his party is split between those preferring Labour and those preferring the Conservatives, with the former in a clear majority. What matters the most is ensuring that this position of power delivers the party enough of a chance for electoral reform that it can at least get a referendum it can back to deliver a form of proportional representation. So that deal will be what matters.

Beyond that, Clegg personally would prefer Cameron over Brown. However, a deal with Cameron will upset many in the LibDems, so if it is to happen it better last, be stable, delay an election as long as possible. So he will want it to work, to be able to show policy gains, and then deliver electoral reform.

The same applies to Labour, although he knows that would be more comfortable with the party rank and file. So any such deal would need to be stable, and last.

Why? Because the last thing he wants is another election, an election when many LibDem voters would scurry back to the main parties.

So while he can choose between two suitors, he knows neither suitor will be too concerned if it does not last, because he will be the scapegoat, and another election will not scare them (although Gordon Brown almost certainly would not be permitted by his party to seek another term), but for Nick Clegg, he wont want another election.

08 May 2010

UK election, the aftermath

David Cameron has already laid down his offer to claim power with the support of the Liberal Democrats. They have been talking. Cameron has stated what he wont compromise:
- He wont surrender more control to the EU (bit late though);
- Maintenance of national defence (code for retaining and replacing the nuclear deterrent);
- The relatively closed door policy to immigration from outside the EU.

However, he is willing to surrender to the environmentalist agenda, which he shares, with the Liberal Democrats. He believes there is enough commonality to form a government. He risks leading a government that will bitterly disappoint his supporters,

Yet, if David Cameron does become Prime Minister it wont be the great success that was promised when he became leader. Simon Heffer in the Daily Telegraph has a rather damning verdict:

"Dave had to fight a widely despised Prime Minister leading a Government incompetent and destructive on a scale unseen in living memory. Seldom has there been a softer target; but seldom has one been missed so unnecessarily. With just 36 per cent of the vote, the Tories stood almost still since 2005. They are now on their knees to their other enemy, the Lib Dems. "

Gordon Brown may feel wounded, but in fact he did not do anywhere near as badly as forecast. He did better than Michael Foot in 1983, he did not come third, and he fended off perhaps a third of the Tory targets, and most of the LibDem ones.

The question is whether what David Cameron did to the Conservatives, saved it or cauterised it? I suspect it has done both.