Monthly Archives: March 2010

From the FT’s comment section:
John Kay: The British housing market did not wreck any banks
Aidan Foster-Carter: Hermit economics hobbles Pyongyang
Christopher Caldwell: Fighting to repeal the healthcare law is no lost cause
Martin Wolf: Why Germany cannot be a model for the eurozone
Editorial: Time to pay the deficit attention
Editorial: A half-good scheme
Editorial: One careful owner
Global insight: David Gardner, Wounded Celtic Tiger shows signs of clawing back growth
Market insight: Tadashi Nakamae, How Japan could lead the way back to durable growth
Notebook: Sue Cameron, A rulebook for God and the Queen
Lex: The agenda-setting column on business and finance

From the FT’s comment section:
Philip Stephens: Now ‘Honest Vince’ plays fast and loose
Stephen Roach: Blaming China will not solve America’s problem
Gideon Rachman: The euro’s big fat failed wedding
Michael Skapinker: The art of repairing a cracked reputation
Editorial: Russia’s bloody backyard battles
Editorial: Iraqi coalitions
Editorial: Market justice
Market Insight: Gillian Tett, Will negative swap spreads be our coal mine canaries?
Lex: The agenda-setting column on business and finance

James Mackintosh

The Conservatives have a secret plan to save Britain’s economy. Hidden in their financial documents (that’s journalist-speak for “in the briefing notes”) is an explanation of how the opposition’s tax cut plan can be squared with gilt investors baying for deep cuts: The Tories would push through immediate spending cuts of 0.5% of GDP, or £6bn.

Sounds great. You can buy a lot with £6bn nowadays: two aircraft carriers and change, or the whole of the British bank bail-out.

But there are two caveats. And they show the Tories have got zero clue about the level of spending cuts needed to satisfy the markets and maintain the country’s AAA rating.

First, this is a one-off cut. After saving an extra £6bn in 2010-11, the Tories would splurge all future savings on the cost of reversing (“most of”) Labour’s planned National Insurance rise and a freeze on council tax. Popular with the Tory base, tax cuts.

Second, the £6bn is a one-off cut equal to 0.7% of the country’s net debt. Not the deficit, but the outstanding balance. Consider this: if you had a £250,000 mortgage and were struggling with the monthly payments, this is equivalent to making a one-off payment of £1,749, then thinking you had fixed your debt problem so you could go out and buy new iPads for the whole family every year.

Here’s what the Tories say:

This is just under 0.5% of GDP and less than 1% of total Government spending. It is the result of a twin assessment of what is necessary in order to retain Britain’s credit rating and restore confidence in our economy, and what is achievable in-year without affecting the quality of front line services…

Our judgement is that this is the right amount of additional in-year savings needed to establish credibility and restore confidence in our economy.

Are they right? Is this going to solve the the market’s perception that Britain is a worse risk than, for example, Italy? Is it going to end the risk of credit rating downgrades? Simply put, no.

Here’s the reality: the voters would not accept David Cameron and George Osborne’s efforts to sell an “age of austerity”. So the Tories have switched from fiscal responsiblity to fiscal denial, spending money the country doesn’t have in the hope that markets will forgive them. Dan Roberts summed up the optics of the Tory shift nicely in the Guardian:

Either Osborne was right that Britain’s colossal deficit threatens to wreck the economy, in which case this is a reckless piece of political grandstanding. Or perhaps he is right now that there is enough wiggle-room to give voters some money, in which case what was all that stuff about economic armageddon?

A one-off £6bn saving is neither here nor there. Luckily for the markets, Osborne almost certainly knows this and will push through a true austerity budget after the election. Unluckily for democracy, the voters won’t be told what is coming, at least by the Tories.

James Mackintosh

Given the difficulty telling the British political parties apart on serious issues, the creation of VoteForPolicies.org.uk is an eye-opener.

The site takes you through a blind tasting menu of policies, then tells you at the end which party you prefer, based on their policies rather than on where their leaders went to school or whether they are balding.

Surprisingly, the Green party is currently ahead with almost a third of voters. Even I – brought up in Green-infested Gloucestershire, and therefore deeply sceptical of the economic and political nonsense the party plasters everywhere – managed to pick one of their policies. Second are the Liberal Democrats, followed by Labour and the Conservatives.

The test is well worth taking. Unfortunately, it does not improve the level of debate that much: were voters actually to pay attention to it, party policies would become even more tactical and short-termist (although after the Tory tax and spend promises over the weekend, one has to wonder if political promises can get any more cynical).

From the FT’s comment section:
Clive Crook: Obama throws out the political rules
Wolfgang Münchau: Europe has resolved nothing over Greece
Eugene Rogan: Refugees for settlers is the way forward for Israel
Ian Bremmer: China knows the time for lying low has ended
Editorial: Obama makes the world a safer place
Editorial: Japan’s false dawn
Editorial: Account ability
Global Insight: John Thornhill, EU struggles to establish new world order
Lex: The agenda-setting column on business and finance

From the FT’s comment section:
Philip Stephens: Merkel’s myopia reopens Europe’s German question
Martin Wolf: ‘Back to the future’ imperils Britain
Justin Fox: Cultural change is key to bank reform
Wilhelm Hankel, Wilhelm Nölling, Karl Albrecht Schachtschneider and Joachim Starbatty: A euro exit is the only way out for Greece

Editorial: Not before time for financial
Editorial: Dubai does better
Editorial: Lost in translation

Global Insight: James Lamont, Pakistan’s game of high stakes
Markets Insight: Gillian Tett, London faces battle to stop trading shift to eurozone
Notebook: Jonathan Guthrie, A Will to Conquer the budget deficit   
Lex: The agenda-setting column on business and finance

James Mackintosh

Here’s the problem: the public does not realise that truly enormous cuts to public service and/or massive tax rises are required. The politicians are too scared to tell them, for fear of losing the election. So after the election, whoever wins won’t have a mandate to push through the big cuts needed. Cue strikes, disappointment, attempts by new government to delay action, a sterling crisis, and possibly even an IMF rescue.

Politicians are being advised by some to keep schtum. But the solution should be for politicians of all the parties to set out NOW how bad things really are. The deficit is 11.8% of GDP, and has to be cut. Even on Labour’s planned cuts, if it sticks to its promise of protecting frontline services and overseas aid, other services need cuts of 18%-24% over four years. This is a profound change to the way the country operates; the public needs to be prepared, and needs to debate the issues before the election.

But no party is willing to set out the precise cuts, because the other side will attack them – as we’ve seen from the “Labour investment vs Tory cuts” lie, and from David Cameron’s backing away from the Conservative promise of an “age of austerity”. As a result, half of voters don’t believe action is needed, with almost half arguing that public spending should rise. They are going to get a shock when the cuts start to bite, and they are not going to be happy.

It is time to call on the Queen. Heads need to be banged together. Gordon Brown, Cameron and Nick Clegg should be forced to set out their policies in detail: all agree, after all, that big cuts are needed, they just don’t publicise it (much). There is very little difference between Cameron and Brown on the speed of the cuts, for all that both sides are trying to make that the issue. The political decision voters should face is whether they want Labour cuts or Tory cuts: and the only way to get that is if the politicians are honest.

The primary role of the head of state is surely to guarantee that democracy functions. At the moment the democratic debate is not working properly, which could have profound effects on the future of the country. A summons to the palace for the three leaders would probably do it, but if not, a simple public comment: the Queen continues to have the most powerful platform in the country. But if she’s too bound by constitutional convention to intervene, it just goes to show that it is time to move to a new constitutional set up, with a proper head of state able to defend democracy.

From the FT’s comment section:
John Plender: It is time to stop punishing prudence
David Pilling: Google’s tough call on China
Mats Berdal and Nader Mousavizadeh: Resource wealth need no longer be a curse
David Marsh: Reasons to be cheerful about Europe
Robert Pozen: How to design a fair bank tax

Editorial: Greece triggers an EU identity crisis
Editorial: Net diplomacy
Editorial: Malaysia’s shame

Global Insight: Ben Hall, Sarkozy cannot fall out with Merkel
Market Insight: Erik Nielsen, ECB must re-examine its dependence on rating agencies
Notebook: Chris Cook, In defence of Stephen Byers
Lex: The agenda-setting column on business and finance

UK Budget commentary:
Editorial: Fine, if you forget the public finances
Martin Wolf: Mistakes that drained the fiscal reservoir
John Plender: Love affair with the rich is truly dead
Philip Stephens: Darling’s faith-based politics
Jonathan Guthrie: The creditworthy pay for banker-bashing
John Authers: Sterling got lucky, but it is still set for a fall
Nicholas Timmins: Silence on spending is anything but golden

From the FT’s comment section:
Martin Wolf: Excessive virtue can be a vice for the world economy
Robert Reich: Recovery depends on Main Street
John Kay: How to make money without trying
Jurek Martin: Republicans rage at the tenacity of hope
Money Supply blog: Chris Giles, UK Budget 2010: deficit reduction … details, details
Global Insight: Alan Beattie, US shows appetite for action
Markets Insight: John Plender, Why CoCos are dangerous to our system of finance 
Notebook: Jim Pickard, Maldives should look elsewhere  
Lex: The agenda-setting column on business and finance

From the FT’s comment section:
Gideon Rachman: Obama’s bounce changes the world
Michael Skapinker: Right or wrong, the customer always matters
Philip Stephens: Britain has bigger problems than the unions
George Magnus: Renminbi reform is just the start for China
Editorial: Obama secures his place in history
Editorial: Darling must give a reality Budget
Global Insight: Edward Luce, Obama beats odds but game is far from over
Market Insight: Thomas Huertas, Too big to fail is too costly to continue
Notebook: Brian Groom, Call it the Strategic Re-election Fund
Lex: The agenda-setting column on business and finance

FT dot comment

FT dot comment is no longer updated but it remains open as an archive.

Politics, economics, high finance and morality – this blog addresses the issues being considered by the FT’s comment team, and their thoughts.

FT dot comment: a guide

Christopher Cook is an FT editorial writer. Before joining the FT in 2008 as a Peter Martin Fellow, he worked for three years for the Conservative party.

Lorien Kite is deputy comment editor, a post he took up in 2009 after four years as a commissioning editor on the analysis page. He joined the FT in 2000.

Ian Holdsworth became assistant features editor in 2009 and was previously chief production journalist for the features pages.


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