Monthly Archives: September 2012

Jim Pickard

There are some questions that would be fatal for a serving British prime minister not to know the answer to. The composer of Rule Britannia is not one of them.

So while David Cameron may have joked to David Letterman last night that his career was now “ended” for getting that wrong, he should count himself lucky to have got through the US talk-show programme without any serious glitches.

The Letterman Show is not exactly Newsnight with Paxman – politicians are teased and prodded rather than skewered and grilled. But with 3m viewers, including most of the UK media, it was fairly risky for Cameron to become the first serving PM to go on the show.

Yes, he failed to identify Thomas Arne as composer of one of the big Last Night of the Proms anthems. (He incorrectly guessed Edward Elgar, who was around 150 years 

Kiran Stacey

Michael Moore began his speech in storm-battered Brighton this morning with a joke:

In an ever-changing world, it’s reassuring to know that Brighton conference remains the same. Fabulous weather, delegates compliant with the leadership line…

Except it didn’t work, because this year the delegates actually have been compliant with the leadership line, even voting en masse in favour of the coalition’s economic policy. As one observer remarked to me: “It’s like they are in a trance-like state.” 

Kiran Stacey

I’ve written on this blog before about the dispute between Westminster and Holyrood on whether there should be a third option – dubbed devo-max – on the eventual referendum on Scottish independence. The coalition doesn’t want it to be, worried the SNP will use it to muddy the waters and keep the independence debate rumbling on. But the Scottish government says the option should remain open if Scottish people show they want it.

The dispute is so tense that Westminster officials recently started questioning whether it could scupper the referendum altogether. But it seems Alex Salmond could be about to back down.

In an interview with the LA Times, the first minister said:

Independence regularly is the most popular option of three options that are usually offered to people. One is no change from the current situation; second is what’s often called devo [devolution] max, or fiscal autonomy; and the other is independence.

 

Kiran Stacey

Vince Cable’s speech to Lib Dem conference was just about on-message as regard to the coalition’s economic strategy. We need the state, he said; we need a demand stimulus, he said; we are taking advantage of low interest rates and borrowing more, he said. But he didn’t quite call for more borrowing for an immediate fiscal boost.

In fact, any Lib Dem wanting to call for a departure from George Osborne’s Plan A will now find it very difficult to do so after the party conference voted overwhelmingly in favour of the current fiscal plan.

This morning, delegates were asked to vote for a motion backing the “difficult decisions taken by the coalition government” and calling for the government to “do everything possible to stimulate growth within its fiscal mandate” (emphasis mine). 

Kiran Stacey

This morning’s research from the IPPR lays out in thorough detail just how difficult George Osborne will find it to meet his fiscal rules when announcing his spending review for the period 2015-2017 next year.

The think tank has analysed the forecasts from the OBR and the Treasury and calculated the cuts needed to make sure the current structural deficit is cleared by the end of the five-year period and debt is falling as a ratio of GDP by 2015.

Firstly, let’s assume no cuts are made to welfare. If that is the case, the chancellor needs to make average savings of 3.8 per cent from departmental budgets. If spread equally among the departments, that would mean hugely controversial measures such as cutting the NHS budget by nearly £8bn a year and education by nearly £4bn.

 

Kiran Stacey

The Lib Dem conference, which starts on Saturday, could be an awkward affair for the party leadership. It is the first conference when Nick Clegg has been faced with members of his own parliamentary party calling for his resignation, and the second successive one where the party has been languishing in the polls.

The agenda for the conference shows the party leadership willing to give the faithful some red meat in the form of Tory-bashing motions. There is a motion insisting on national pay bargaining, one recommitting the party to Lords reform and one resisting any attempts to expand Heathrow.

But the biggest problem could come during the debate on the economy, when an amendment will be discussed calling for the government to rip up its fiscal mandate and take immediate measures to stimulate the economy. 

Jim Pickard

The debate over shale fracking is warming up ahead of the government giving an expected go-ahead to the industry later this year.

Into the fray this morning came Lord Browne, former chief executive of BP, who – according to the Lords register of interests – is also a director of Cuadrilla, the only company currently fracking in Britain.

1: Directorships

Partner & Managing Director, Riverstone LLC (private equity; energy & power)

Director, CODA Automotive Inc (automotive; battery)

Director, Cuadrilla Resources Holdings Ltd (oil and gas)

Director, Fairfield Energy Ltd (oil and gas)

(Cuadrilla is not without controversy: it was reported recently that the company breached the conditions of its licence at its sites in Lancashire.)

Lord Browne writes this morning that the UK has “promising onshore shale resources” which can provide a “critical role” in future energy supply.

In an FT editorial, he writes:

“The hydraulic fracturing process – or fracking – used to extract natural gas from shale is on the political agenda across Europe and has raised important environmental questions. But good practice and the UK’s tough safety regulations mean it can be performed safely and without endangering water supplies. If that can be achieved, the prize is substantial…”

Ed Davey, the energy secretary, has responded to the Lord Browne editorial in a letter to this newspaper in which he accuses the oil executive of “regrettably partial” analysis. The peer was wrong to accuse the coalition of the “unthinking abandonment” of fossil fuels, he said.

“Our Carbon Plan implies a very significant role for unabated gas throughout the 2020s, and as back-up or with carbon capture and storage through the 2030s and 2040s. We expect new gas capacity of up to 20GW to be built between now and 2030. Shale gas may well play a part in our energy mix too, but until we have more certainty about the potential scale and costs of shale gas production in the UK it is unwise to assume it will be some kind of silver bullet,” he responded.

It does seem as if Browne has skirted over the point that fracking is hugely controversial, as my colleague Pilita Clark explained back in the spring. The new technique has opened up the potential for vast untapped reserves of oil and gas and has already transformed the US energy market; but not without any cost.

“As fracking spread in the US, however, so did complaints. Some people with private water wells near fracked gas wells claimed their water had turned brown or contained methane, the main component of shale gas. A house near one fracked well exploded in Ohio in 2007, catapulting an elderly couple from their bed, according to a subsequent lawsuit…… Or as Nick Grealy, a UK shale gas lobbyist, says: “Ninety per cent of people hadn’t heard of fracking – and the 9 per cent who had, heard something wrong or bad or both.”

Here is another analysis, this time by our former energy editor Sylvia Pfeifer:

Just as nuclear power has its drawbacks, however, there are also uncertainties around shale. Chief of these is the potential environmental toll. The industry is dogged by

 

Jim Pickard

You could be forgiven a sense of déjà vu on reading that the coalition may freeze benefits and/or change the way they are uprated: we have been here before.

Most recently, in June, David Cameron said in a speech about benefits (at the Bluewater shopping centre in Kent) that something had to give on inflation-linked benefit increases.

Next, we need a debate about the limits of state provision. There are national questions we have to ask. This year we increased benefits by 5.2 per cent. That was in line with the inflation rate last September. But it was almost twice as much as the average wage increase.

Given that so many working people are struggling to make ends meet we have to ask whether this is the right approach. It might be better to link benefits to prices unless wages have slowed – in which case they could be linked to wages.

Long before that speech, the FT revealed a year ago that:

“George Osborne is looking at options to cut billions of pounds from next year’s benefits bill by scrapping inflation-linked rises, in a move that could trigger a fierce cabinet clash.

The chancellor is alarmed at the political and economic difficulties presented by the fact that benefits and pensions next year would rise by 5.2 per cent, in line with the bumper inflation figure for September, the base month for the calculation.

The FT has learnt that Mr Osborne has asked officials to provide models for a range of alternatives models, including raising benefits in line with average earnings growth of about 2.5 per cent or even freezing some payments altogether.

Iain Duncan Smith, work and pensions secretary, is said to be highly concerned….”

In the end Cameron was thwarted by Nick Clegg, who insisted that benefits should go up by the full amount.

The final compromise was revealed in the FT by Kiran Stacey: the Lib Dems judged that it was better for tax credits (ie hard-working low income families) to be hit rather than benefits – 

Jim Pickard

David Davis has added his weight to mounting Conservative criticism of the BAE-EADS merger as the two companies held a private briefing in Westminster to persuade MPs of the deal’s merits.

The influential rightwinger said the merger would cause the loss of a “massively important strategic British asset” and threaten heavy job losses.

“With strong French and German government interest in EADS, there is a risk that the British factories will come to be seen as peripheral to the core business of the merged company, with all the threats to employment that that involves,” said the MP, whose constituency is near BAE System’s Brough plant in Yorkshire.

Mr Davis questioned whether the new entity would gain entry to the American defence market.

“[The deal] raises serious concerns both in terms of competition and strategic national interest,” he warned. “Suggestions that this could be resolved before the end of the year strike me as wildly optimistic.”

On Monday afternoon two executives from EADS and BAE Systems took questions from MPs at a private meeting in the Commons. Journalists were banned from the briefing – I was politely ejected – and participants were asked not to talk to the press afterwards. (Although this was at the behest of the rather grand Ben Wallace MP, who chaired the gathering, rather than the companies.)

Bob Keen, head of government relations at BAE, told the MPs that the two companies had started talks on a merger after they lost the bid to provide Eurofighter jets to India in January, according to people in the room.

He told the MPs that French, German and Spanish influence over the combined business would be less than their current control over EADS – and that this was a condition of the deal. The French and Germans would end their current agreement to always vote in a bloc, he added.

The EADS executive, meanwhile – who had brought his own coloured charts – emphasised how many jobs the company had already created in the UK.

(I’m told that the new defence procurement minister, Philip Dunne, was also due to brief 

Jim Pickard

Bernard Jenkin, a former defence spokesman for the Conservative party, has become the most senior figure in Westminster to voice concerns about the impact of the BAE-EADS merger on relations between Britain and the US.

Mr Jenkin, a respected figure on the right of the party, said he did not want the Americans to “call the shots” over the British defence industry but they ought to be its “partner of choice”.

“My instincts are that this will create significant difficulties if we want to have bilateral defence programmes with the Americans in future,” he told the FT. “When we operate with them we get by far the best support.”

Mr Jenkin and other Tory MPs believe that a counter-offer is likely to emerge from a major US defence company such as Lockheed Martin or Northrop Grumman.

Amid a growing mood of unease about the deal on the Tory back benches, Philip Hammond, defence secretary, said the government would only approve the deal if it was in the UK’s national interest.

“We will want to be reassured not just about the security implications but about the implications for the future allocation of work to the UK,” he said. Mr Hammond said he was realistic,

 

Jim Pickard

Whether by design or by chance, (probably the latter), the one issue David Cameron would prefer not to talk about today will have slipped many people’s minds by the time of the evening headlines: Britain’s debt mountain.

But this does not mean that the issue will not revert to the top of the agenda in the coming months.

The issue was eclipsed mainly by the prime minister’s magisterial statement on the Hillsborough disaster, which is set to be the big political story of the day. The report’s revelations about doctored documents and attempts to smear the deceased were read out to a silent Commons straight after prime minister’s questions.

During PMQs itself Ed Miliband sought to nail down Cameron over the big debt issue but the prime minister successfully swerved away from the subject.

The government has two fiscal targets.

1] It intends to get rid of the structural deficit by the end of a five-year period. That has conveniently already slipped from 2015/15 to 2016/17.

2] Debt as a proportion of GDP should have fallen by 2015. Unfortunately for the coalition, this target is not flexible at all.

The PM’s spokesman insisted this morning that the fiscal mandate was still on track.

But Miliband repeatedly warned that the government was going to miss its 

Jim Pickard

Here is the full statement from David Cameron to the House of Commons over the Hillsborough tragedy:

Today the Bishop of Liverpool, the Rt Reverend James Jones, is publishing the report of the Hillsborough Independent Panel.

The disaster at the Hillsborough football stadium on 15th April 1989 was one of the greatest peacetime tragedies of the last century.

96 people died as a result of a crush in the Leppings Lane Terrace at the FA Cup Semi-Final between Liverpool and Nottingham Forest.

There was a public Inquiry at the time by Lord Justice Taylor which found – and I quote – that the main cause of the disaster was “a failure of police control.”

But the Inquiry didn’t have access to all the documents that have since become available…

…it didn’t properly examine the response of the emergency services …

…it was followed by a deeply controversial inquest…

…and by a media version of events that sought to blame the fans.

As a result, the families have not heard the truth and have not found justice.

That is why the previous government – and in particular – the Rt