The solution to gender pay equality?

The problem with the many explanations being put forward today for the lack of pay equality between women and men is the attempts ignore the contribution of the past. This is particularly important for executive pay.

The Chartered Management Institute (CMI) found that it will take until 2109 for female executives to catch up to their male counterparts in pay parity. On average male managers are paid £42,441 compared to females in the same role who earn just £31,895, despite woman's salaries having grown by 2.4% and men's by 2.1% in the last year.

Attempts to explain this range from straightforward discrimination, to the effect of maternity leave, to women's lack of ability to negotiate better pay terms. But I would like to suggest that the pay gap at executive levels reflects the situation in higher education 20 years ago being reflected now. And a second piece of (less trumpeted) information released by the Chartered Management Institute seems to back this up.

To explain, allow me to take you back to January 2010, and the visit of Glenda Jackson MP to my politics classroom at my old school. A student had pointed out to her statistics showing that Labour's record on social mobility was poor. She argued that it was impossible to blame Labour for any current social mobility statistics. She then explained that social mobility is measured by whether someone is better off than their parents. Given that the main driver of that will be their education, and it takes 20 years to find out whether someone really has become better off, statistics on social mobility now would reflect the achievements of those educated (like me) in the 1980s, under (she was quick to remind us), Tory mismanagement of public services. She pointed to one of the students, who had had their entire education (from beginning of Primary school to that point, halfway into A-levels) under the Labour Party. "Now, YOU", she said "we will take responsibility for. Let's see where YOU are in 20 years time. THAT will tell you whether Labour achieved social mobility."

When you think about it, she was right. By the time the girl in question is 37, she would be settled in a career and probably at executive level. Or not. She would have come through a system which was truly equal. Where boys and girls had equal chances, equal opportunities to take GCSEs and A-levels, and degrees.

Only 20 years ago, that wasn't so much the case as it is now. Less girls did degrees than boys. Less girls did A-levels than boys. Less girls went on to futher qualifications than boys. Women were still having children at an earlier age, therefore not settling properly into a career and leaving climbing up the ladder until later.

Women do, however, earn more than men when in junior management roles. The CMI found on average junior women managers now earn £21,969, which is £602 more than men at the same level, but the gender pay gap as a whole is greater in 2011 than in 2010. But what that shows is that junior women managers, who are likely to have gone through school and our education system in the same numbers and at the same speed as males and are thus achieving equality. It is quite possible that those junior women managers might grow into the equally paid and promoted executives of the next 20 years.

Except for one problem. I'm going to predict that those junior women managers are in the mid to late-twenties, thus the majority have not gone through bringing up children, which is the time when pay equality really starts to bite. People have been trying for a long time to find a way to solve that problem, which has mainly consisted of maternity legislation. Much of that has been protective over women's pay and conditions, but you hear again and again of employers being wary of hiring women of child-bearing age because of the consequences of that legislation.

But we now have new legislation which could change this.  "Additional Paternity Leave and Pay" gives fathers of babies born on or after April 3rd 2011 the right to take 26 weeks paternity leave from 20 weeks after their child's birth. This could make an interesting difference because suddenly there is little legal excuse for mothers to be staying at home for the full year to take care of their children. If parents want to be at home with their children for the full year allowed, the mother and the father will be able to share it, legally. Yes, if the father is the main breadwinner this could be difficult to do, but in any other situation there is no reason why mothers can't return to work without feeling they are abandoning their children to the childcare system.

As Glenda Jackson might point out, this is going to take about 20 years to work through our system. But I'm willing to bet that if it works like I think it might, and if the changes in equality of education and aspiration that I feel New Labour achieved during their time in power work as I think they will, we might get to equal pay between the genders at executive level a great deal sooner than 2109.

Punish them? Yes. But if we don't listen to them we punish ourselves.

 There has got to be a process over the next few weeks of getting those who have looted, burned and destroyed our cities to talk. They need to explain to us not only why they thought they could act in the way that they did but, more importantly, why they thought they should act in the way that they did. The long-term solution to what I would call the greatest sociological crisis this country has seen in many years lies in making everyone feel like society and community has something to offer them. Because they don't at the moment.

My personal feeling is that these riots have been gestating for years, and I would like to run through how. Regular readers of my writings will attest that I am no bleeding heart liberal and I am also no foaming-mouthed conservative either. The reality is though that we need to look at ideas from all parts of the ideological spectrum. At the moment, too many people I am seeing in the media, on social networks and just talking to are closing their ears and singing "la-la-la" as loud as they can when certain arguments are aired. I think this is dangerous.

Parenting

It was one of the most haunting conversations of my life. I was in the internal suspension room at my old school and a by was telling me about his brother's release from Feltham Young Offenders' institute. I asked him what it had been like and he said "seriously Sir, my brother loved it." "Loved it?" I asked. "Get this right, it was the first time in his life that he didn't have to worry about where the next meal was coming from and there was always stuff to do. It was so much better than home." This made me really rather sad. What is our society coming to when life is better in prison than at home for some of it's members? If you think about the conspicuous consumption of those who have come into large amounts of money (by whatever means) you can see why people are insisting that we have two options to solve this problem - punish those who riot or try to find a way to share the proceeds of society more equally.

That said, there is little doubt that some of the behaviour we have seen has been caused by some outrageously lax parenting. I've seen it myself - the parents who treated my old school as a state babysitter, the parents who told me when I called to talk about their child's behaviour that "it's not my fault you can't control my kid." Police and politicians asked on monday for parents to contact their children if they were on the streets and ask or order them to come home. At what point was that going to work? The rioters may have been kids but if we are going to solve this problem we need to look at the conditions in which they are brought up, and the skills of their parents.

For instance, many students in Years 10 and 11 (15 and 16 year olds) at my old school had baby brothers and sisters. We need to look at the effect this has on them - their mother's time and attention is neccessarily taken up with a tiny baby and so the young people look outside the home for attention and a "family life" (read 'gangs').

Education system

Of the many things said to me on the day I told my old school (a state school) I was leaving to join my current school (a private school), the one that stuck most in my memory was this from an assistant head. "I can't believe you are taking your skills away from young people who need them and giving them to people who don't need them." In one sense, this was hyperbole, because all young people need a teacher's skills, albiet in different ways. But in another sense she had a point about the students at my old school. They need teachers, not just to teach them academic subjects, but to help them engage with life.

An amusing article I read once described a conversation a new teacher had with an old mate. "He asked me what this PSHCE was and I went through it in detail, how it teaches about sexual health, drugs, alcohol, relationships, citizenship skills and all that. There was a pause.....and then he said 'Oh, right, so it's basically doing what parents should do'."

The education system needs to be looked into, because every single person involved in the riots has been through it at some point in their lives. Yes, some of them may have truanted. Some will have left at 16. But even if schools haven't caused the problems, they can be involved in the solution.

We need to look at making sure the education system inculcates the right values and behaviours to ensure young people can get on in society. It also needs to be offering them opportunities to learn subjects that help them get a career and feel there is some hope in the future. We need to look at other education systems around the world. Let's start with Germany, for many reasons, but not least this one:

Britain's Gini coefficient (a measure of equality that puts an entirely unequal society at 1 and an entirely equal one at 0) is 0.36, France’s 0.32 and Germany’s 0.28. Germany's economy has recovered very strongly from the recession, but they also have an education system based upon matching their young people to appropriate educational pathways, and the result is higher equality.

Rights without responsibility

This is where something has, in my opinion, gone rather wrong in society. Somehow or other our young people are very cognisant of their 'rights' but far less accepting of their 'responsibility'. I still recall with a shake of the head what Ramzi Mohammed (one of the failed 21/7/2005 London bombers) shouted as he cowered behind a door as the police tried to break in..."I have rights! I have rights!"...this from a man who had attempted to murder hundreds of people.

It is the ultimate expression of a perfectly honourable attempt in the late 1990s to ensure that everyone was aware of their rights to make sure that they didn't accept ill-treatment and got what they were entitled to. New Labour made it very clear at the time that these rights - enshrined in the 1998 Human Rights Act - were to be given in return for citizens being responsible too. But it led to a distortion of the 'rights-culture' into what we have now.

As a teacher, I have heard many times that the school has "no right to have my kid in detention" from parents, perhaps in response to a detention for not doing homework or something nasty said to someone else. The problem is that those same parents never quite understood that not only did the school have a right to discipline their child, but it was our responsibility to do so, for their own good.

An interesting extension of this has been seen in the term "respect". Young people these days are constantly on the look out for respect. Interestingly, they feel they have a right to respect and they have no responsibility to earn that respect. I was listening to an interview with  a girl the other day saying something I have heard quite a few times along the lines of "they are disrespecting me so I'm gonna disrespect them. When they respect me I'll respect them." Trouble is, it is never clear what this 'respect' entails, and it may appear to some that 'disrespect' actually means 'trying to stop me committing crime'.

I prefer to look at it another way. As a society we should find out what would make young people feel they are being "respected" and try to offer it. Maybe it's feeling listened to. Maybe it's feeling cared about. It might actually be something we can do. But when we do it, we must insist on reciprocal responsibility.

Relations with the police

The middle class tend to look at relations with the police like they do immigration. Because they don't feel the negative side of it they think it isn't a problem for others. Immigration has been only good for me - I get cheap food from around the world and cheap cleaners and builders etc and a wonderful diversity of pupils to teach in school. But many people have seen themselves marginalised in society in favour of immigrants in terms of both jobs and housing, and we middle class intelligensia seem to brush those feelings aside as racism instead of empathising with the genuine frustration some people feel. It's the same with relations with the police. We in the middle class - not experiencing the constant hassle from the police that many in society do, never subject to constant stop and search and constant suspicion in the course of what the police will regard as just doing their job - just brush aside these claims with an "if you're doing nothing wrong you've got nothing to worry about." Well, as I talked about in point 4 of a previous article (click here), some people in society do nothing wrong and still have to worry. We need constant dialogue and understanding between the police (who are supposed, after all, to have a 'monopoly on power') and the policed. Some, of course, see the police as an impediment to them committing crimes, and hide that behind complaints of brutality and bias, but that is a very small minority.The police have made so many positive strides since the horrors of the 80s and the institutional racism laid bare by the McPherson report in the 90s in terms of their engagement with communities. But they are not there yet, and the alleged refusal to communicate with the family of Mark Duggan after he was shot dead shows that.

Restrictions on the police

The Met Police have admitted today that they gave strict orders to those on the street to "stand and observe" rather than go on the offensive against the rioters. This was because of the risk of legal challenge to their actions in the light of the ongoing court cases related to the policing of the G20 protests and the student fees protests. I have written about this (read here) and pointed out that the rioters will have guessed that this might happen and will have taken full advantage of it. By yesterday, there seemed to be a public consensus that the police should be allowed to do their job properly. Through the media the plans to use plastic bullets was aired and water cannons discussed and given that there wasn't the usual backlash to these ideas they would have probably gone through with it should there have been serious disturbances in London. BUT we need to have a debate about how it came to this. The police effectively admitted that the constant legal challenges to their actions have made them fear doing their job and the result was looting, arson and violence. Have we, in our attempt to be a liberal society, gone too far? Have we now got the police force we deserve? The vigilante groups set up yesterday and out in force all over London certainly think so.

What they see as acceptable in society

Many of the youths involved in the rioting see a society that has excluded them from 'having'. They see footballers exhibiting vast wealth and even minor celebrities flaunting their possessions. They will also have been told by some of the ringleaders that looting is OK because the rich are looters too. Tax avoidance is seen by many as stealing from society. Causing a financial crisis then rewarding yourself with 'a bonus in order to retain talent in a global employment marketplace' is also seen as looting as well. Too many people, in the eyes of the marginalised in society, have taken from us without giving. Now it's their turn. There was an interesting stand-off in Clapham where a group of residents blocked off their road to be confronted by a group of youths shouting   "you are rich, we are poor" and "we rule London tonight, not you." Others, talking to the press said that "we're going to show the rich that we can do what we want, just like they can". This, to most people, seems like a shallow excuse, but in their minds, they may believe that our current society rewards those who take what they can - but only legalises some of the methods.

"The cuts"

Ken Livingstone was called an "opportunist" for saying on Newsnight that "if you are making massive cuts, there's always the potential for this sort of revolt against that".  He talked about the social divisions created by the government's austerity drive and also the effect of the cuts in police that are taking place - pointing out that he raised the number of police by 7,000 in his time as mayor. No doubt this is electioneering by Livingstone, and, as is always required by those on the left wing, it ignores the £1 trillion of debt this government inherited from Labour but to call it 'opportunistic' is, welll, 'opportunistic' too. Because Ken is right, we do have to look at the effect of the cuts as part of looking at the causes and solutions to the current crisis in our society. From Sure Start to other children's services through to youth clubs and the like, we need to be careful what is being done away with, because the effects will be in the long run. It seems to me that the government is happy to attack the entitlements of those who don't or can't vote (the young) whilst leaving along the entitlements of those who do (the old) even though many of the older recipients of bus passes and fuel benefit are very wealthy and don't need it. I would like to see, as part of whatever inquiry arises from these riots, a closer scrutiny as to who is being affected negatively by the austerity drive. I believe in the reasons for the austerity drive, but that doesn't mean I neccessarily agree with how it is being done.


Lack of opportunities

And here lies the nub of this crisis. Many of the rioters just didn't care. So what if they got arrested? So what if they got sent to prison? Arrest and prison are a badge of courage where they come from. It doesn't make a difference to them anyway. We might say - "if you go to prison you'll find problems getting a job". To which they might legimately answer "well I didn't have any chance of getting a job before this so what difference will going to prison make?"

No, we need to get together as a society and work out how to make all young people feel they have opportunities to be successful in life. But we need to make sure their targets are actually attainable and realistic. Through help with parenting, education, sensitive policing, ensuring they learn the importance of the responsibilities of a citizen as well as the rights we can see that there are benefits from being part of a community, from being part of society.

Or we can just hang-em and flog-em.

I think I know what is more likely to work.

We must learn from these riots

We could call the riots that have swept London this weekend either common criminality or the anguished roar of the politically dispossessed and economically disenfranchised. The truth is probably in the middle, but we should take every chance we can to learn from what happened and why in order to make sure they don't continue.

But first some pertinent stories and statistics:

1) Being a policeman is a hard job. One told me about being screamed at outside a tube station on July 21st 2005 (the day there was a failed suicide bomb attempt - a fortnight after a "successful" one). "Why aren't you stopping them?" he was asked "you should do everything in your power to stop them." Yet when they do make attempts to stop 'them' they are often accused of racism or brutality. "I feel like I can't win" said this particular police officer, "because I'm damned if I don't stop crime and damned if I try and stop it."

2) Being a 15 year old boy in London is also a hard job. A lovely young man at my old school who is now at university told me of the time he was stopped and searched by police three times in one day. It was cold, so he had his hoodie up and he was walking fast. He wondered if he was guilty of looking like he was about to commit a crime or of being a 15 year old black boy in London.

3) On average every year the armed police units get called out about 10,000 times. They only actually reach their destinations about 2,000 times as normally on their journey it is found they are not needed. They draw their guns on average about 100 times a year and on average around 10 bullets are fired. If you are an armed police officer and you shoot your gun you are immediately placed on what might be termed an "honourable suspension" and you will never be allowed to be an armed police officer again. You are trained NOT to fire your gun, and you know that to shoot it will be the end of that particular career.

4) During recessions it is like the tide going out and revealing us as a society. Some of us saddled with unpayable debt, some of us with no form of income, some of us homeless, and some of us so rich that we actually can't find ways to spend our money.

Social unrest is created by many things. Take Tottenham for instance. In Tottenham here are more than 50 people for each unfilled job, and 10% more people claiming Jobseeker's Allowance this year than last. Last week Mark Duggan, about which we know very little, was shot by a police officer. The family wanted answers as to how it happened, but, partly due to it being the subject of an Independent Police Complaints Commission inquiry, they were not getting any. So they marched to the police station in Tottenham peacefully on Saturday afternoon demanding "justice" for the killing of Mr Duggan. What this "justice" actually involved, I'm not sure.

But what we do know is since then we have had rioting, looting and the attacking of police officers in Tottenham, Enfield, Walthamstow, Edmonton and Brixton. It seems to have been organised over the internet, and people have been coming in from quite a distance to get involved. Shops up and down highstreets, from chain stores to independent newsagents, have been ransacked and looted by mobs of youths, and there has even been the almost ridiculous sounding scene of about 100 people in a retail park in North London emerging holding boxes of trainers and loading them into cars.Today (Monday 8th August) we have looting and quite a lot of setting fire to things in Lewisham, Peckham and Hackney.

So, again I ask - common criminality or the anguished roar of the politically dispossessed and economically disenfranchised? I believe it is both, and we must do something about both in order for it to stop.

Should public sector workers be going on strike against demographics?

There's going to be some strange scenes over the next few months if the leaders of the public sector unions have their way. You're going to see a lot of people take to the streets to complain about medical advancements and the skills of doctors.

Make no bones about it, the Coalition government want this battle to go ahead. Should there be a strike, David Cameron will get a different human shield than Nick Clegg - the unions. Because whilst there are plenty of issues for which strikes are appropriate, pensions reform isn't one of them.

Because it's not the government's fault that life expectancy has increased by 20 years since the pensionable age was set at 65 (60 for women). It's not the government's fault that at the time the default retirement age was set at 65 one person's pension was paid by 5 taxpayers and now it's less than 2 taxpayers. It's not the government's fault that the unfunded cost of servicing our public sector pension liabilities of £1.2 trillion is now running at about £45 billion a year — in effect a second, hidden deficit.

This was the problem facing Lord Hutton (a former Labour Pensions Minister) when he was asked by the Coalition government to lead a Pensions Review. Last week the chief secretary to the Treasury, Danny Alexander, took up most of Hutton’s proposals by announcing that the retirement age of public sector workers — other than those in the army and the emergency services — will rise from 60 to 66, and that state employees will on average have to pay 3.2% more in pension contributions.

However, this change will not be applied to workers on less than £15,000 a year, and those earning less than £18,000 will have their additional pension contributions capped at 1.5%, so the usual appeals to compassion cannot be easily made. 

What's more while no existing public sector employees will lose any accrued rights — that would be both illegal and immoral — final salary pensions will gradually be replaced by those based on career-average earnings; but the most valuable aspect of the traditional public sector pension — that it will be index-linked and guaranteed by the exchequer, no matter how high future inflation rates — will remain.

Historically, these gold-plated pension plans, along with shorter hours, longer holidays and greater job security,  have been compensation for the lower salary one could expect in public service compared to those of equivalent rank or skills in the private sector.

However, 13 years of Labour rule saw public sector pay increased to the extent that recent research by the Policy Exchange think tank, based on figures from the Office for National Statistics, shows there is now a significant premium in pay for taxpayer-funded workers, whether measured by both mean and median annual salaries, or by typical hourly wage rates.

When you add the value of an index-linked final salary pension, the employment market is further distorted. Last year the Public Sector Pensions Commission, after a nine-month investigation, concluded that “the true value of the [unfunded] ... public sector scheme ... is over 40% of salary”. In other words, in order to acquire the same benefits in retirement, a private sector employee would have to pay 40% of his salary in contributions (his employer certainly won’t).

It's important we look at this further. Britain has a workforce of around 30 million workers. Around 25 million of those work in the private sector with 5 million the public sector. The average private sector employee has a pension pot of around £30,000 which is enough to buy an annuity on retirement at 60 of £900 a year.

So when Mark Serwotka, the leader of the Public and Commercial Services Union (PCSU) tries to attract our sympathy by pointing at the average pension of £6,000 a year that his members earn, bear that £900 a year figure in mind. Also remember that to get £6,000 a year means a pension pot of around £200,000 a year on the open market. The taxpayer has to provide that pension pot.

The question is, if the PCSU members (and, I have to say sadly, the teachers union members), won't pay the full market cost of their pensions, why should the nation's workforce, most of whom will not be benefitting from it, do so instead?

As I said earlier, there are many issues that  public sector workers could strike about. Job losses is one thing. Working conditions may be another. Teachers could walk out in protest at proposed cuts in educational provision. But instead the first strike may be about pensions reform. This is a massive mistake, and Ed Balls, the shadow chancellor, is spot on by saying that the Coalition government would rub their hands with glee if the public sector workers went on strike for this reason, as they would be able to claim the unions are harming the economic recovery, not the Coalition's policies.

Serwotka has tried out the familiar routine of declaring it it immoral that their members should pay for the consequences of a crisis caused by the idiocies of overpaid bankers. But they could throw all the bankers into the sea and not solve the pensions crisis.

Private companies have long ago stopped final salary pensions for their employees, as they would make them bunkrupt. With pensions, the government can't get trapped into promising its employees more than it could possibly recoup from the taxpayers.

There are two ways to solve the pensions crisis. Stop people living longer by turning back medical advancements and possibly well targetted euthanasia. Or we can get real and cut down the gap between the contributions public sector workers make to their pensions and how much they receive in income from their pensions.

Which one makes sense? Even though it reduces my own income in retirement, I know the answer.

March for WHAT alternative?

It's on days like yesterday that I love my country. You look at the news around the world and see protestors against their governments' policies being shot, imprisoned, tortured and eventually silenced. Here, we had so many people filling Hyde Park today that the organisers stopped counting and no one is doubting there is a decently sized movement "for the alternative" to the Coalition's deficit reduction plan. It's not a national movement and it's not a majority - 250,000 to 500,000 people are about 1% and 2% of the voting population. It's a collection of interest groups who are affected or will be affected by the policies. But that doesn't make what they are saying any less important to hear. It's absolutely vital that people of this country have the right to protest and hold the government to account, scrutinizing their policies.

However, good though they are at articulating the problems with "the cuts", I'm still waiting to hear a coherent, economically sound alternative. It is extremely important that this arises soon.

For instance, until Ed Miliband actually explains HOW he would halve the deficit in 4 years (as would have been the plan had Labour been in Government) then his contribution to this debate remains the same knee-jerk children oppositionism that seems to see him blindly flailing around shouting "Thatcher! 80s! Ideological!", in a sure-fire short-term poll raising strategy that won't get him elected in a million years.

While we're at it, can someone explain why it is OK for the UK to be paying more in debt interest at the moment than we do on national defence, and why it would be OK to end up paying more interest than we spend on our education system - which would be the case in 2015 EVEN IF we clear the deficit (remember - we need to have enough surplus to pay off over a trillion pounds of debt which could take around 50 years). That debt interest has what is known in Economics as an opportunity cost. Every penny could be spent on something useful, instead - it is spent on paying off debt. And for those today who advocate that we simply refuse to pay the debts we have - are you seriously trying to bring down the entire world's financial system?

I would also be grateful if someone can explain how the 'Robin Hood Tax' would actually help reduce the deficit. I get the idea - it sounds wonderful - tax the rich and give to the poor. Lovely. Politically and socially wonderful. Trouble is - it will raise LESS tax revenue. People will leave the country (taking the jobs they create with them) or will do what they can to avoid the tax (I'll come to THAT in a minute) or work less (because it's pointless working hard as your pay gets taken from you) and there will be LESS tax revenue. This is the difficulty of setting up a tax system. FACT - when the higher rate of tax went from 60% down to 40% in 1988 the tax take ROSE and the amount rich people paid ROSE.  So, someone tell me how it would reduce the deficit please.

Now, tax avoidance. Again I think it is a very important point and, using the figures from UK Uncut and the TUC today it would raise £25bn if it was sorted out. But, as I address in a previous article on this site (click here) that is not likely to raise as much as it might seem. The Coalition government IS attempting to close more loopholes - particularly for non-doms, but it is right that a light is shined on this area as more should be done.

Then there is this notion that we should not be spending money on the wars Iraq, Afghanistan and now Libya. It's hard to get away from the fact that when the cuts are costing jobs it is a shame we are spending such a huge amount of money in Iraq and Afghanistan. But unfortunately we are there are we can't just walk away as we really do have to clear up the mess we made.

As for Libya, I find it interesting the amount of those protesting yesterday with signs saying things like "Hands off Libya". First of all - let's not forget that all but 8 (eight) of our elected representatives voted for the Libyan operation. Let's also not forget either that there was about to be a massacre committed there. I have discussed Libya elsewhere (click here and here), but I must ask the question...if there is a moral case against cuts do those morals take a backseat when money that might be spent on you is instead spent on saving peoples' lives?

Also there is the whole question of putting "protect the public sector" in the same paragraph as "concentrating on economic growth". Which one do you want? Let's put them together - can you get economic growth by protecting all public sector jobs? If so, how? There are three ways of getting income in this economy:

1) You receive money direct from the public purse in the form of benefits
2) You receive money direct from the public purse in the form of wages for working in the public sector, which you give back in the form of taxes and national insurance
3) You receive money from private companies which you give back in the firm of taxes and national insurance

It doesn't take much to see that the only way out of those three in which the UK purse gains more than it loses is 3) wages paid by the private sector. If we want sustainable economic growth we need to empower the private sector to pick up the slack on employment and therefore growth. The amount of resources devoted to the public sector causes something called "crowding out" where resources (financial, human, land, capital, everything) are diverted from the private to the public sector. Examples could include the fact that the increased borrowing by the government to fund added government spending could cause interest rates to rise, making it more expensive for private businesses to borrow money. Another example could be where an employee, instead of working for a private company, getting paid wages and paying tax to the UK is instead employed as, say, the "walking co-ordinator" for a local authority (and don't go on about "nurses and teachers" - it's not them being cut, but it may be the person who interviewed my mother-in-law for her own NHS job that she had been in for 20 years twice  in one year when she moved from 5 days a week to 3 to 4). Or it could be that a private company can't afford rent to move to a bigger office because a public sector organisation is offering a larger rent. The point is, protecting public sector jobs is not the alternative, the case for that is completely different.

Finally, there is scrapping Trident nuclear system. I can absolutely see the case for doing this, given the sheer amount we would be spending on something that, should we ever have to use it then we are basically at the end of the world anyway. But, my understanding of the international power system is that should we not have any nuclear capability, we will literally "lose our place" at the top table of international politics. Whether that is right or not, and whether we should care, is another thing. I do care, but I'm just one opinion.

Before I conclude, I must add that too much of the argument against the deficit strategy in built on an outright lie. The lie is that the financial position this country is in is all because of the banks and nothing to do with the Labour Government's economic policy. This is a convenient lie, as it allows people to say the banks should pay to clear up the mess. To be clear, at the end of one of the longest periods of continuous economic growth in our history, the UK had a budget deficit, rather than the surplus that could and should have been built up by a prudent government during the boom part of the economic cycle. I should also point out that to fund the structural deficit (that part of the deficit not caused by the economic cycle) that existed BEFORE the recession the Labour Party were happy to borrow from the banks, and that borrowing was, in theory, put to good use. As I have said elsewhere (click here), there is no reason why a coherent case can't be made to justify this risky management of UK funds, because a lot of spending was needed to clear up the mess left by chronic underinvestment in public services from 1979-1997 BUT that doesn't mean the lie should continue to be propagated that the trillion pound debt and £145 bn deficit was caused by the banks. It was caused by the feeling on the part of the Labour Government that the boom would never end then exacerbated by the depth of the bust when it did end, and that depth WAS caused by the banks. Again, Labour may be getting short term polling gains by not admitting their responsibility for the deficit but they simply won't get elected again unless they show they won't put the country in that position again.

In conclusion. It is extremely important in this austerity age to have this level of political debate and protest, and I am proud that we are having it. But please, somebody with some form of economic literacy, explain to me an alternative strategy that actually makes economic sense, and explain how it would be done. Because I didn't hear it yesterday and I haven't heard it yet.

Inflation isn't the problem. Stagflation could be.

We are about to see an example of how psychologically influential inflation is in the UK. There can be no other reason why the Bank of England could even be considering raising interest rates right now.

Recently (10th March 2011), the Bank of England Monetary Policy Committee (MPC) voted to leave its Base Rate at 0.5%. This means the rate has been at an all-time low for 2 years now. But, like a swan, the serenity on the surface belies a lot of action underneath, and it is almost certain that this vote was very close and we're about to see some real action in the form of a rise in interest rates. But the fact that this might happen when we are possibly in the midst of a double-dip recession (should April's growth figure be negative then we are officially back in recession) shows the problem with the Bank of England's sole objective, to target inflation.

When teaching macro-economics, I am at pains to point out to students that when faced with an essay on policies to deal with a problem they must consider openly the cause of that problem. So, should they be asked to discuss policy options available in the event of rising inflation, they would struggle to get near top marks should they not point out the dependence of the corrective policy on what caused the inflation in the first place.

My view on this is that the causes of this inflationary spike cannot be remedied by raising interest rates. Therefore doing so could cause worsening unemployment and confirm the journey back into recession. I also suggest that the only reasons why interest rates would rise is because the Bank of England is too focussed on its primary aim (inflation stability) at the expense of its secondary aim - to support the government in meeting their targets for growth and employment. This may be because of the hold that inflation has on economic fears. Maybe the MPC thinks Britain needs inflation credibility more than anything. Well, I would like to control inflation too, but not at the expense of growth and employment at a time when we don't have enough of either. It's frustrating enough waiting for the Coalition government to come up with a strategy for growth without the MPC making it even more unlikely.

Anyway, back to causes. In this case, inflation is now consistently running at and over double the Bank of England's target - which is 2% (plus or minus 1% let's not forget) - for three main reasons:

1) The rising oil price
2) The rise in VAT from 17.5% to 20%
3) The rise in food prices

The rising oil price

The rising oil price is a particular problem for the UK. It pushes up inflation because we import so much oil so business costs rise, pushing up prices and consumers spend more on the petrol made with it. It also can cause unemployment because as it pushes up business costs rational employers may look for other ways to cut costs, through firing or not hiring people. It can also cause a slowdown in economic growth and possibly cause a recession. Inflation is often caused by rampant economic growth, with a concurrent growth in employment. This time, we have inflation accompanied by negative economic growth and high unemployment. That is called 'stagflation' and the problem is that it's more or less here. Raising interest rates will do nothing to stop the rising oil price. The Government can reduce fuel duty on it - BUT they have to reduce the deficit, so they are stuck in a bind too.

The rise in VAT from 17.5% to 20%

This automatically put prices up. Remember, inflation is measured using a basket of goods, weighted for the importance of the items within it. Many of those items have just seen their prices go up by the amount of the rise in VAT.  This was done by the Coalition government, again because of the need to raise tax revenue to deal with the deficit. An economist from afar who didn't know this happened might think that consumption had gone up, raising aggregate demand and so raising interest rates would help, but the VAT rise makes that connection different. Raising interest rates will do nothing to deal with the impact of this rise.

The rise in food prices

This has mainly been caused by extreme weather events in the major food producing countries. It has been exacerbated by speculators but they are not really to blame. The problem again here is that the rising cost of food imports  pushed up the costs of many businesses who then pass those onto customers in the form of higher prices, causing inflation. Again, rising interest rates will not stop this happening.

It would be nice to think that there was a simple answer to the economic ills of the UK. We have a massive deficit, massive debts, huge unemployment, a government without a recognisable growth strategy and now inflation. We need to deal with all of those problems and a rise in interest rates will probably make them worse.

For instance, the upcoming job losses in the public sector are supposed to be offset by job gains in the private sector. But the investment needed in the private sector for that to happen would need to be funded from somewhere, and a rise in interest rates will make that more expensive, and therefore less likely.

Many commentators feel that in the medium term there is more of a danger from deflation, in which case nothing should be done now to hurt growth.  I'm going to add my name to them.

You want fair access to universities? - Train the teachers.

So the Office for Fair Access (OFFA), which is supposed to be 'promoting and safeguarding fair access to higher education' according to their website, have come up with yet more ideas that do nothing of the sort. Their new idea is to try and make the top universities offer places to students from poor-performing state schools on much lower grades than others. We're not just talking about AAB instead of AAA, they are talking about Cs. This craziness has to stop. If you want to have fair access to universities you need to train teachers in state schools to do the job they need to do.

1) Train teachers in how to teach  A-levels - there's a reason that 'A' stands for 'Advanced'. There is an emphasis on analysis and evaluation skills that students need to be specifically taught. They are not techniques that can simply be taught through the same spoon-feeding many teachers end up doing for GCSEs. They need to be explained, then practiced again and again by the students to make them repeatable, particularly on the vaguer A2 questions, where students have to work out what parts of their subject 'tool-box' to use. In my experience those who are excellent GCSE teachers may think they don't need to learn more about teaching to teach A-level.

2) Measure A-level results and act on them -  what gets measured gets managed, and given the emphasis on GCSE results to compare schools it is no surprise that management effort and concentration, and therefore teacher effort and concentration, is on GCSEs. This is sometimes at the expense of A-level teaching and sometimes at the expense of close scrutiny of A-level performance. I've seen great GCSE teachers take 3 weeks to mark A-level work if at all because it comes last on their priority list. I have no doubts about the importance of concentrating on GCSE results for the lower ability students to help them get the 5 good GCSEs that can get them a foothold in the workplace. But if you want to be engines of real social mobility, regardless of your political and educational ideology, you cannot get a poor student into the best university without good A-levels. By saying that students from poor performing schools can get in with lower grades you are saying that inadequate A-level teaching and focus is OK because you will socially engineer equality of outcome. Is that really the best long term solution?

3) Train teachers in helping students select A-levels - one of the great things about many comprehensive schools is that they offer, under the same roof, courses that suit all types of student. So, for those students who have a more vocational bent there are BTEC courses, and for those with a very academic focus there are the 'traditional' A-levels such as French, History and Maths. The BTEC courses have been a major factor in widening participation, allowing students to study courses in school that they are interested in and follow them through into higher education. But in the middle of vocational and 'traditional A-level courses' are those which the major red-brick universities, on whose back OFFA is climbing, see as falling too much in the middle. Universities such as Cambridge and LSE publish a list of these courses (which include A-levels in business studies, ICT and media studies for instance) which they do not regard as adequate preparation for universities. Other universities do not publish these lists but may be about to be forced to publish them. Whether or not you agree with this categorisation of A-levels, it exists, and every teacher (or at least every Year 11 tutor and Year Head and those in charge of sixth form) should know them. Never again should student not find out until their UCAS applications are rejected that their choice of A-levels automatically disqualified them from the universities they aspired to.

4) Train teachers in helping with UCAS applications - there is no reason why every teacher involved with sixth formers shouldn't be better trained in what makes a good UCAS application great. Teachers are involved all the time with writing subject references for the pupils, writing the actual UCAS references for the pupils and helping with personal statements. I would imagine that in most state schools they do this without any training. Given UCAS is a competitive process, isn't this letting their students down?

At the end of the day, there are loads of ideas for government intervention to try and solve the problem of inequality of access to universities. But why not try and offer equality of opportunity for students before you settle for equality of outcome. You can only, after all, get equality of outcome by offering inequality of opportunity (Oh, sorry, you go to a good school so your application doesn't get decided on merit).

There are many ways that do not cost a lot of money to solve this problem and I would hope this government don't get drawn into offering a politically expedient but shameful solution purely to assuage their tuition fee guilt.The answer is right in front of them.

Surely the teaching unions wouldn't argue against training their members to help students achieve their aspirations. Wouldn't they?

Where were the Union leaders when their members really needed them?

Mark Serwotka - head of the PCS

If you want to go on a fruitless search, find a single union leader who uttered any words of warning about the dangers of the government building up so much debt. While you're at it, find a single union leader who expressed any concerns about so many jobs being created that had to be funded by borrowing due to the massive shortfall from tax revenue. Can't do it? Now find a story about union leaders warning about the cuts. Easy isn't it? Welcome to the world of vested interests.

If you have a vested interest in something, you have a very strong reason for acting in a particular way, for example to protect your money, power, or reputation.This is why the unions, and in particular the public sector unions, never complained about the enormous amount of money being showered upon their members. You might ask why they should, after all, that money brought them more power. Yet their role is to represent the interests of their members, and pointing out the dangers of the government getting into such debt would have been in their members' interests.

Why? Think about it this way, the Labour government created something between 750,000 and 1 million public sector jobs. When you get a new job, you may move home, including your family. You may take on a new mortgage or other debts. You may make major changes in your lives linked to the new job you have. All of these assumes your new job is secure. If, however, your new job was being paid for with borrowed money that will have to be paid back at some point then you should know about it as your new job may well not last long. 


But where were the union leaders then? "Be careful - these jobs are being paid for with borrowed money, there will have to be cuts at some point". Or "We would warn our members against making onerous commitments that depend on their income from these jobs that the government can't afford to give out". Nope, none of it. 

I'm not talking about jobs such as teachers or nurses or essential workers. I'm talking about the 'sustainability facilitator' or 'walking co-ordinator' or 'performance change champion' types of jobs that sprang up in every local authority over the past 10 years of so. Each time someone got one of these jobs, the public sector unions got another member. This increased the membership subscriptions and the power of the unions, which is why they were quite happy to cheer the creation of hundreds of thousands of jobs that made some contribution to putting the UK into a trillion pounds of debt.

Only now, the axe is falling. Government spending is being cut and the unions are shouting loudly, threatening to 'co-ordinate' their strikes around Easter (this skirts around the illegality of a General Strike). Mark Serwotka - Head of the Public and Commercial Services Union said strikes were 'inevitable' and that "The more of us that stand together against the cuts, the more problems we can create." 

The problem is that the country is a trillion pounds in debt and Mark Serwotka said nothing whilst that was happening. So claiming to stand on the moral highground is a bit rich now. 

I have nothing against unions. Without them, the exploitation of the workforce, in terms of pay and working conditions, would be far worse. 

But I am against self-serving 'have your cake and eat it' leaders who want your money from your pocket to pay their members wages regardless of the financial position it puts the UK into. Had they raised concerns about borrowed money being used to hire workers then I would be very happy for them to be bleating the way they are now about those workers being jettisoned. But they didn't, so I'm not.

It's Labour's Debts AND the Coalition's Cuts - not OR

The new Labour leader Ed Miliband has been getting plenty of advice recently on how to take his party forward. "Abandon New Labour", some say. "Attack the Coalition's cuts as ideological, too fast and too deep" say others. These are simple strategies that could work in the short term.  "Deny all responsibility for the trillion pounds of debt the country is in and the £150 billion budget deficit", say many more. This is far more dangerous, and gives the Tories in particular a massive hole to drive a truck through like a knife through hot butter every time the Coalition strategy is questioned. A far more effective long-term strategy, and one more likely to result in Labour being returned to government in 2015 would be to 'admit and explain'. Here's why.

Without meaning to be morose, imagine your parents died, leaving a massive amount of debt that you hadn't known about. You and your family had always planned to move into the house they had owned when they died, but now the bank wants the house sold to pay off those debts. Are you simply going to say that the bank is being unreasonable? What about your parents leaving that amount of debt? What if they even left a note with their will saying "I'm afraid to tell you there's no money left"? At what point would it come into your head that there are two issues - one is how you feel about your parents leaving so much debt, and the other being whether the bank is being reasonable in expecting their house to be sold to pay it off?

Now look at the politics of the deficit and the policies to deal with it. The Labour government left a £168 billion deficit and a debt of £1 trillion. Liam Byrne, former Labour Chief Secretary to the Treasury, left a note for his successor saying the exact words in the above paragraph. The Conservative-led Coalition have decided to get rid of the deficit by 2015, at which point they will need to start paying down the actual debt.

Labour politicians are attacking this strategy, saying that it is too fast and too deep. The Coalition is responding with "there is no other alternative" given the deficit left by Labour. Labour, and many on the left of the political spectrum then tend to splutter something about the banks causing the deficit, which is, quite frankly, economically illiterate at best, lying at worst. It is as if accepting their part in creating the current problem would mean that they can't then attack the policies the Coalition are choosing. But I don't think this is true.

Let's go back to basic economics. When there is economic growth, you would expect to build up a budget surplus, as tax revenue should be more than government spending. When there is a recession, you would expect to drop to a budget deficit, as you will spend more than tax revenue to keep the economy out of depression. This is a cycle, which is why it is assumed that a budget deficit of 3% of GDP is a "cyclical deficit" - in that it is something that happens when a country goes into recession. The EU stability and growth pact suggests that budget deficits shouldn't go over 3% and net debt over 40% of GDP.

The Labour government, however, spent a lot more than tax revenue from around 2001. This meant that we entered the recession in 2008 with a deficit of around 3% of GDP and with debt of around 40% of GDP. So, in order to spend our way out of a recession the UK had to borrow more money, which is why we find ourselves with almost a trillion pounds of debt (72% of GDP) and a deficit of around 11% of GDP - second highest in Europe. This, then, is a 'strucural' deficit, which is where government spending is above tax revenue for other than cyclical reasons. The structural deficit can't be blamed on the recession. 

So, there is a charge, which can stick, that Labour didn't "mend the roof while the sun is shining". There is also a charge that the Conservative-led coalition is making 'ideological' cuts, which means they are shrinking the size of the state purely because that's what they believe in doing rather than as a response to UK finances. The charge that could come back would be that the building up of debt even during a period of sustained economic growth was also 'ideological' on Labour's part, in that they believe the state should be as large as possible. The jibes at Gordon Brown's comment in the 2006 budget - "No return to boom and bust" - are important here because going into a recession in so much debt can only happen if you weren't expecting a recession.

Labour answer that they had to spend a lot of money to improve public services after many years of chronic underinvestment during 18 years of Tory government from 1979 - 1997. This is true, particularly with schools and hospitals, both of which were in a terrible state in the mid-1990s. They then point to the fact that the recession was caused by a 'global financial crisis' - which was not their doing and nobody expected, a charge which is less easy to justify, given that Gordon Brown had created a tri-partite financial regulation system which basically failed to regulate our banking system. But essentially it is possible to blame the banks for the recession, which increased the size of the deficit.

Chris Mullin

BUT attempting, as Chris Mullin, ex-Labour MP, author of some brilliant diaries ("A View from the Foothills" and "Decline and Fall") does in an open letter to Ed Miliband in the Times recently, to say that the financial meltdown was not Gordon Brown's doing but  "a crisis of capitalism", and “It was the bankers, stupid”, is showing, again, either economic naivety or politically-motivated mendacity. I hope it was the former.

There is a reason why it's called a "public debt". It's because the public sector was spending more than it was getting in from taxes. Had, when the financial meltdown hit, the UK had a budget surplus then perhaps Mullin would have a case. He doesn't, and as long as Labour and others on the left use this line of attack they can never regain economic credibility.

So Ed, why not instead admit that the country's finances are in such a bad state for a good reason. The financial crisis was caused by the banks, but the deficit and the public debt were caused by the need to invest in the country's future. Talk of all the successes, talk of all the differences made when Labour were in government.

Give concrete examples. It is quite possible, and Ed Miliband has the time to do so, to argue that the country's financial position is partly the result of Labour policies which were necessary.

If you want to say how necessary, ask anyone whether this country was a better, or nice place in 1997 than it was in May 2010, I'm not sure you'll find many even die-hard Tory supporters who would prefer to go back to 1997.

If you can separate the two arguments, that the deficit and debt was necessary for the long-term good of thr country, and that the Coalition's fast and deep cuts are the wrong way to go about dealing with them, you may be able to win both of them.

If you don't know how to do this, ask Ed Balls to do it for you. He's good at it, which is why it's a shame that you chickened out of making him Chancellor.

BAA - should it ever have been privatised?

Heathrow: stranded planes

One of the more frustrating aspects of evaluating whether certain industries should be privatised or operated under public ownership is that at first glance the basic economic analysis of the advantages of both is very similar. Proponents of both argue that both a nationalised and a privatised industry will be run more efficiently and  provide lower prices, more choice and better quality services for consumers. Those anti-to either both argue that they lead to organisations having no incentive to be any of the above. So, privatisation or nationalisation? As with many economic concepts, it depends.

Since the main argument for privatisation is to introduce competition into a market in order to force organisations to operate more efficiently, the areas in which it makes the least sense to release an industry from public ownership are those in which a natural monopoly operates. This is where there is really only room for one firm in a market. The privatisation of the railways - where only one company can operate on a particular line, is an example of this. The privatisation of water supply is another as it's not possible for a competitor to come in and lay more pipes. This is probably why rail maintenance had to be re-nationalised earlier this decade and why the regulation of water companies has been so controversial.

But in the news recently has been another great example of an industry which should perhaps have never been privatised, and in particular, the effects that privatisation with no chance of competition has on the behaviour of firms. This is BAA limited - privatised in 1986 and responsible for operating many British Airports - including Heathrow, Gatwick and Stansted.

You'll notice immediately that BAA had a virtual monopoly of London Airports. The massive start up costs of airports and the economies of scale to be gained as they grow are enormous barriers to entry into that market, so much so that Gatwick had to be forcibly sold in 2009 - which was a first admission that privatisation hadn't worked in this industry.

You'll also notice that BAA is a private limited company. It was the British Airport Authority until 1986, then BAA plc until 2006 when it was taken over by a consortium led by a Spanish company called Ferrovial and delisted from the stock exchange. This means that those who run an industry as vital to the UK's economic health as its main airports answer to no-one. Not the government, and not the shareholders, no-one.

Hence, when last year BAA were charged with making sure there wasn't a repeat of the chaos that ensued during a tough winter in which many planes were grounded, they spent a very small amount (about £600k) on equipment that, as we have just seen, was insufficient for clearing the snow and ice that again formed on the runways at Heathrow. This grounded thousands of passengers, wrecking holidays and their travel plans.

You'd have thought it would hurt BAA too. But they ALSO operate the retail locations within the airports, in which so many passengers were stranded for so long. These locations charge a premium price, for they are also a local monopoly. They would have made a killing over the past two weeks. I am not saying BAA deliberately did this. I am talking about the difficulty they must have with incentives.

BAA lack the incentive to make long-term investments to ensure that conditions at their airports are conducive to planes arriving and leaving, because they make serious money from passengers having long stays at their airport. Furthermore, even though BAA provide a vital service to the UK, there is absolutely nothing the government can do when they don't provide that service, as they are a privately run company. Hence we have had Phillip Hammond, the Secretary of State for Transport, standing around looking sadly impotent. He offered resources to BAA to clear the runways, but BAA allegedly refused (because, he said, there is equipment (e.g. lights) embedded in the runway which needs to be protected so there is a level of expertise needed for clearing the snow and ice from a runway).

One of the main advantages of having a vital industry with long-term capital investment needs in public ownership is that those long-term capital investments can be made without worrying about short-term profits to shareholders. Even though BAA is not a public company, the consortium that bought it may have incurred debts to do so which need servicing so those profits are important. In this country, the water companies have negotiated to be allowed to raise their prices to take account of the long-term capital investment needed to maintain the country's antiquated piping system. Public ownership would mean that would not be an issue.

The point is not that Heathrow airport in particular would have been able to operate all planes under public ownership. I don't need to go into the problems that lack of competition causes in public ownership. BUT since in public ownership an industry is judged by its ability to run a service for consumers, not for its profits, there would have been more incentive over the past year to have made the long-term investment (short-term rise in costs) that would have meant this year's winter problems would not have been so serious.

Even the Daily Telegraph has raised this question...so it must be a pertinent one. After all, in the last year Manchester Airport made some large investments in airfield de-icer and other equipment, enabling it to allow UK-bound flights that couldn't land in less-snowy London to land there and some Heathrow flights to have passengers bussed up to be flown out from there.

The difference between Manchester airport and the others I've mentioned? Manchester Airport is publicly owned. Profits go to Manchester Council, not to shareholders. Can I rest my case?

"I have declared war on Mr Murdoch" - Vince Cable at his best and worst

Vince Cable

The most explosive thing that Coalition Government Business Secretary Vince Cable said to the two undercover Daily Telegraph reporters in the recent sting operation was actually not immediately printed by the paper for quite an obvious reason. When asked what battles he has been fighting with the Tories he said that he has been "picking his fights" and when pressed for an example he said "I don't know if you have been following what has been happening with the Murdoch press, where I have declared war on Mr Murdoch and I think we are going to win".

Rupert Murdoch is attempting to buy the remainder of BskyB at the moment. The EU Competition Commission has said today they see no problem with this on competition grounds, so the decision on whether it can happen falls to...the Business Secretary (Cable), who can refer the case to the Competition Commission but then acts on their advice. As a Government Minister, the Business Secretary should remain above having opinions on decisions like this. But Cable says he has "declared war on Mr Murdoch" and "we are going to win" - so he obviously feels he isn't above having opinions.

Why didn't the Daily Telegraph publish these comments at first (eventually, after Robert Peston of the BBC released the comments having been passed them by a Telegraph Whistleblower, they published them at 3pm)? Well, the Daily Telegraph doesn't want Murdoch to be able to acquire BSkyB, but knew that these comments by Cable would prejudice the inquiry, and lead to News International (Murdoch's company) having immediate grounds for appeal against any decision he makes. Why doesn't the Telegraph (a newspaper group) want News International to buy BSkyB (a satelitte television company)? Well, this is where the media world is about to become really very interesting, and to explain we need to go back to an announcement by James Murdoch, son of Rupert, who was BSkyB CEO back in 2004.

James Murdoch

Having taken over from Tony Ball and observed the crumbling infrastructure around the company, both in housing employees and serving customers, James Murdoch announced that there would need to be a massive amount of investment in upgrading the ability of Sky to serve their end of 2010 customer target of 10 million, a number which seemed like pie in the sky (no pun intended) at the time. In a portent of the short-term thinking that precipitated the recent financial crisis, banking analysts said that this was absolutely the best strategy for Sky to undertake long-term, but since short-term profits would be affected, investors should sell. Sure enough, Sky shares halved in value, but now, here we are, at the end of 2010, and BSkyB have 10 million subscribers.

This means they can change their business model from acquiring customers to retaining customers, which essentially means their costs could be cut by about 80% and the profits will start to really roll in.

The issue that the other major newspaper groups have is that News International, should they acquire 100% of BSkyB, will have access to 100% of those massive profits, and COULD use them to cross-subsidise a massive price cut at the newspapers that they own (The Sun, News of the World, The Times, The Sunday Times), which account for 26% of the British Newspaper industry. This could effectively put their competitors out of business.

Rupert Murdoch

It also creates a hugh media empire, with an annual turnover of £7.5 billion, compared with £4.8 billion for the BBC. This  creates a media dominance, granting Rupert Murdoch huge power, leading to a continuance of his already enormous influence on British politics, and is why the BBC, joined with the owners of the Daily Telegraph, Daily Mail, The Guardian and the Mirror write to Vince Cable in October urging him to block the deal.

The European Commission gave the green light to the deal yesterday - although they did solely focus on competition issues, and left the way open for the UK to decide whether or not to take appropriate measures to protect media plurality (power in the media is shared by many). Ofcom, the media regulator, will advise Jeremy Hunt (the Culture Secretary who yesterday had this lumped into his intray) on what to do about any public interest issues.

The European Commission's officials have already looked into many of the issues being investigated by Ofcom. In particular the possible "bundling" of cut-price combined subscriptions to its papers and Sky Channels. They argued that "price is only one, and not the main factor in determining readers' choice of and loyalty to a newspaper." If you want to see what this means, go up to a Guardian reader (cost: £1) and offer them the Daily Telegraph for 20p instead....it's just not going to happen!

Ultimately, the case against the full takeover of BSkyB rests upon what Rupert Murdoch and News International MIGHT do once they have it. News International's entire legal defence against this could be "but we won't do that" and the Government could extract legal commitments that they won't bundle newspapers and pay-TV subscriptions and won't use predatory pricing to force others out of business. Of course, then we get into the whole issue of whether THAT is in the public interest. What if you are a Sky subscriber and a Sun or Times reader? Are you not allowed access to lower prices then?

There is also the issue of Murdoch's political influence. There is no doubt that the courting of News International's support has been one of the main strategies of political parties, certainly this year and 1997, and when that support does change it does have a huge influence on voters.

Others cite what they say is the pernicious effect on US politics of Murdoch's Fox News Channel's one-sided coverage of it. Here is a great example of where two countries are divided by a common language. In this country BBC1, BBC2 and BBC News have a 73.5% share of broadcast news viewers and Sky News has 6.3%. In this country we have proper public television stations, with a commitment to neutrality. The US don't, which is why their politics is so partisan, and this is fuelled by the extremism of both Fox News on the right and MSNBC on the left. Fox News is the result of privatising news, meaning business people use it to chase profits, and right-wing views mean money over there. So there is little here to justify the regulator turning down this deal.

As for the Business Secretary himself there are some issues here.  Once again it suggests that Cable was very comfortable in a protest party but far less comfortable in a party which shares government responsibility. It also shows him to be very aware of his own value to the success of the coalition (given he commented that he could always resign and bring the government down if he really didn't like what was happening). In fairness, it also shows Vince Cable doing what he does that made him popular, speaking candidly and openly in answers to questions. It is an unfortunate fact for Cable that the collective responsibility ethos of being a Cabinet Minister means he probably needs to stop doing that so much...especially during what he thought was a normal constituency surgery meeting.

You can't avoid tax avoidance

UK Uncut occupying Top Shop on Oxford Street

There's more than one way to skin a cat, and more than one way to correct a budget deficit. Given it's when tax revenue is dwarfed by government spending you can therefore manage both. The coalition argue that cuts in spending should bear the bulk of the deficit-cutting burden, others argue that there should be more tax rises instead. Both of these methods will, in the short-term, reduce aggregate demand and thus economic growth. But
A new pressure group - UK Uncut, has been bringing attention to a third way to do it. Don't raise tax, just stop people avoiding paying it.

UK Uncut are a rather loose coalition of left-wing groups, and their main aim is to fight the cuts in government spending announced over the past 6 months by the current UK government. The difference between them and many others is that they are combining a call to stop the cuts whilst offering an actual way to cut the deficit (take note Labour Party) by finding a solution to what they say is £25 billion of tax being avoided each year by, say UK Uncut, rich and wealthy individuals and companies. If this got paid, they argue, there would be less need for the cuts, which are mainly affecting the poor. Makes sense doesn't it?

They give the example of Philip Green, who owns Arcadia, the shopping group. Actually he doesn't own it. He runs it. His wife, who has never worked for it and lives tax free in Monaco, actually owns Arcadia. This allowed Green to channel a £1.2 billion dividend to her in 2005, avoiding paying around £300million in income tax - enough to pay the salaries of 20,000 NHS nurses or the £9,000 tuition fees of almost 32,000 students.

They also give the example of Vodafone managing to avoid £6 billion in tax recently, that they needed to pay after their purchase of Mannesmann in 2000. They lost a court case to the HMRC, but were eventually let off with a bill of £1.2billion instead. That's £4.8billion not paid. A lot of nurses, and a lot of students.

Some interesting points can be made here:

1) Everybody avoids tax, both consciously and unconsciously. The other day I was going to buy a new kettle and some food. On the way to the shop I realised I only had enough money to buy the kettle OR the food. I chose the food and avoided paying VAT. Will UK Uncut come and occupy my home in protest? Unlikely, because as you can imagine, this is a rather unavoidable avoidance!

2) There are a lot of people working hard to avoid inheritance tax. Inheritance tax is also called "death duties" and is an example of "triple taxation" in that someone is taxed on their income, taxed on interest on their savings or capital gains and then taxed again on any left over over a certain threshold when they die. There are, however, many ways to avoid inheritance tax, and it is so common that even famous Labour politicians have done it. Many argue that inheritance tax is fair as it one of the ultimate examples of a tax on unearned income. Others say it is a tax on success and everyone should have the right to pass on their wealth to their children, especially since much of that wealth has been taxed already.This is why none of the main political parties are comfortable properly attacking it.

3) Philip Green, on the many occasions he has been asked about his actions, argues that his success with Arcadia has rescued some major companies and created many thousands of jobs, which have taken many out of unemployment and generated tax revenue in themselves. However, is it really acceptable that the price of job creation is to let the creator off paying tax? What was certainly inadvisable was the government appointing Green to oversee the search for efficiency in public service as they did last August. There are plenty of other experienced corporate operators like Terry Leahy who could have done that without having everyone carp that it would help if he paid tax properly before advising us how to cut spending.

4) Vodafone's main obligations are to their shareholders. They say themselves,  in answer to questions on the HMRC case, that "the maximisation of shareholder value will generally involve the minimisation of taxation." The point is that it isn't the company who pays the tax, it is the shareholders. These include pension funds and small shareholders who hold a few shares or an ISA - and are likely therefore to have a tiny stake in Vodafone.

5) Ultimately, the main point which ties together the above points is that this is tax "avoidance" and is legal. It is not tax "evasion" which is illegal. Philip Green and Vodafone didn't make it legal, and they are unlikely to push for these methods to become illegal. The only organisation that can do that is the Government. So however many times UK Uncut occupy one of Philip Green's or Vodafone's shops they are actually aiming at the wrong target. Tax avoidance is allowed by the government.

So, why don't the government crack down on it? Why do so many loopholes exist? I imagine the main issue here is the need to balance the need to make sure that tax revenue is maximised without reducing the incentives to entrepreneurship and whilst also being that most normative of things..."fair".

If you raise tax on certain activities people may just stop those activities, or reduces the amount of those activities. Which means tax revenues fall. Which defeats the point.

This isn't an argument not to close some of more ridiculous loopholes. This goes to show that raising tax revenue isn't as simple as that. It's a little but like one of those games where you bash an object down and another one pops up. If the government do close one loophole, there are highly paid and trained tax accountants who will find their clients another one.

So what's the answer to the deficit then? It's hard to raise tax revenue by raising tax rates, and cutting government spending could actually increase the deficit in the future if it pushes the UK into depression.

The answer is found in an unlikely place. Tony Crosland - a former Labour Government Minister who literally wrote the book on the future of socialism - argued that economic growth is a necessary precursor to wealth redistribution. So that is where the UK Uncut should be targetting their campaign. We won't need cuts if we can grow because tax revenues should rise with that growth.

How do we get that growth? Here's an interesting thought...

Why, amongst all the protests against the cuts in Ireland, are they not complaining about the country's corporation tax rate being 12%?

Clegg to decide - third party of protest or coalition partner?

The vote on tuition fees on Thursday is a chance to find out whether the Lib Dems in the coalition government really understand the choice that they made to share power. The decision they need to make is not about the moral issue of charging for university education, but about whether they would prefer to be the third party of protest or a legitimate, responsible member of the executive.

The debate on whether tuition fees should be charged at all is something I have addressed already. There is an argument against tuition fees being charged full-stop on economic and moral grounds. There is an argument that tuition fees should be nominal, so that students who benefit from university education contribute towards it, but the burden is shared with the state. There is also an argument that students should pay for their entire education, as they benefit from it, and in our current financial situation we need to ask them to do so. There are therefore legitimate grounds to oppose, abstain or vote for the rise in tuition fees. Where there is a difference is in the responsibilities of the three main parties.

Labour MPs can vote for or against and not many would bat an eyelid. It has been conveniently forgotten by many that Labour introduced tuition fees in 2002 having expressly committed in their 2001 election manifesto not to do. This, perhaps, is why they have been relatively quiet on the implications of Nick Clegg committing to oppose tuition fees then vote for them in government. Also, the rise has been suggested by Lord Browne of Madingly's commission, which was set up by the previous Labour government. However, as we know now, Labour is the party of opposition, and oppose they probably will, whether they believe it to be right or wrong.

Conservative MPs will vote for, and I imagine will be whipped into doing so, as they are the majority party in government and there should be a certain amount of discipline installed into them. They didn't make any rash promises on this issue before the election and there are few grounds of principle involved on which they can vote against or abstain.

Then there are the Lib Dems. They made their pledge to oppose tuition fees before the election. That is true, but it was the type of pledge you make when you are a third party and may never need to actually have the responsibility of government. It was an economically-irresponsible pledge considering the deficit, but it has been hung around them like a noose.  Which Lib Dem MPs vote for or against or abstain, depends on what their role is in our new political landscape. To understand what they might do, and what they should do, relies upon the clearing up of two major fallacies that many protesters are either not getting, or ignoring.

1) The Lib Dems are in government. They are in the coalition. If they hadn't joined the Conservatives in a coalition then there would be no effective government, given that minority rule in a time of economic problems is not advisable. When you join a coalition, you have to negotiate and compromise. This means you get to keep some of your promises to the electorate, you have to drop some of your promises and some of your promises will be amended. The Lib Dems secured an agreement that they could abstain in the vote on tuition fees, and Nick Clegg has offered that to his MPs, on the basis that they ALL do so. However, some Lib Dem MPs have said they will honour their pre-election pledge and vote against, thereby breaking the coalition agreement. This means Clegg cannot abstain and has a responsibility to vote for the legislation. As does every other Lib Dem government minister, and there are quite a few of them. Those Lib Dems voting against are saying that they are not prepared to be in power, and that's fine, but they must live with that decision.

2) The actual legislation being voted upon has the hallmarks of Lib Dem intervention, particularly on some of the provisions made to make it more progressive. Because you don't pay until you earn £21,000 you pay nothing unless you are in the top 60% of earners in the country - so you at that point are NOT poor. Because the interest rate charge rises as income rises there is a progressive nature to the payments, with those on higher incomes paying a higher proportion of those incomes. The Lib Dems HAVE had their influence here, and it is therefore a coalition policy, and members of the coalition government need to vote for it or shouldn't be in government. Vince Cable, for instance, should he not want to vote for the policy, needs to resign from the government payroll.

The fact is that Nick Clegg and the Lib Dems are socially liberal but economically conservative. Many who suggested they were a natural coalition party for Labour understood little about their politics. Clegg has managed to pull the Conservative party towards the centre, and should be applauded for that.

I completely understand the anger of students. I have students at school who want to protest and if there is anything they should protest about it is this as they are being asked to pay for the debts dropped on them by older generations.

However, they are also being asked to pay for a university system aimed at 50% of the population. If you want services like that you need money to be spent. If you want money to be spent you have to collect it in taxes. Those taxes could be paid by everyone or by those who directly benefit from the service. It has been decided that those who benefit will pay and there may be no going back on it. They need to receive a service worth paying for and £3000 a year wasn't doing that.

So, many reasons to vote against, although I would hope some of those people voting against could be bothered to understand the actual legislation. Maybe doing so would go against their "narrative". They want to call this a Thatcherite policy (which is interesting as it was a Labour policy, and Thatcher was all for investments in the supply-side of the economy - which university education is).

Let's hope the education they want us to pay for is not wasted on this quoted protester.

"There are no jobs and yet I'm being asked to take on massive debts. At £9,000 a year that's £21,000 of debt"

1) If you don't get a job after university you don't have to pay back anything
2) Do the Maths!