Who is Keyser Soze? Saif Gaddafi.

Sorry to spoil the movie "The Usual Suspects" for you but I know who Keyser Soze was - Saif Al-Islam Al-Gaddafi. "The greatest trick the Devil ever pulled was convincing the world he didn't exist" said Kevin Spacey's character, Verbal Kint, during the film. Well, I think the world has just woken up to the magic that has been played upon them by the son of Colonel Muammar Gaddafi, and I must applaud both father and son, it was magnificent. 

Last May Gaddafi junior gave a speech at the London School of Economics (LSE) outlining his vision of Libya moving towards a "participatory democracy" and a "free society". Last week, the same man gave a speech in Libya promising  that his father's regime would fight to the "last man, the last woman, the last bullet." Among those taken by surprise by this ideological U-turn were Peter Mandelson, Prince Andrew and Tony Blair. But it wasn't just these three - whom we know to be more interested than normal in money and/or power. It was, for instance, the entire management team of the LSE. How did he do it?


The story is laid out in this week's Sunday Times - In 2003, Saif Gaddafi enrolled at the LSE to study for an MSc, following his father's decision (negotiated by Tony Blair through Saif) to renounce terrorism and dismantle nuclear weapons after the West had shown in their invasion of Iraq what might happen to the so called "rogue states". Senior academics at the LSE have commented that he seemed committed to liberal principles, asking questions about democratic theory and human rights then forming a foundation to lobby for reforms inside Libya and pushing for human rights abuses to be addressed. 


He then wrote a PhD thesis which was submitted in 2008 entitled ""The Role Of Civil Society In The Democratisation Of Global Governance Institutions: From ‘Soft Power’ to Collective Decision-Making?" and included, on page 41 - the following passage, which is rather relevant to his present attitude:

"Locke saw people as being able to live together in the state of nature under natural law, irrespective of the policies of the state. This self-sufficiency of society, outside the control of the state, was given weight by the growing power of the economic sphere which was considered part of civil society, not the state. The state is therefore constructed out of, and given legitimacy by, society, which also retains the authority to dissolve the government if it acted unjustly. Other writers continued with this distinction of civil society and government. The state kept its function of maintaining law and order that Hobbes had stressed, but was considered to be separate from society, and the relationship between the two of them was seen to be subject to laws that gained their legitimacy from society, not from the state. For example, Montesquieu saw the state as the governor and society as the governed, with civil law acting as the regulator of the relationship. The importance of law in regulating the way the state and society interacted was obvious to many writers who considered that a government that did not recognise the limitations of law would extend to become an over-reaching tyranny similar to that described by Hobbes in Leviathan."

(OR, you might say, similar to Libya under his father)

The financier, Nat Rothschild, threw a party for Gaddafi to celebrate his PhD and through him he met Peter Mandelson and Russian billionaire Oleg Deripaska - who was investing in Libya. Saif was also a front man for the Libyan Investment authority which set up a London Hedge fund which invested in a London Hotel, Deripaska's Russian Aluminum company, Juventus football club, Pearson (who own the Financial Times) and an Italian defence company. Through all this he met Blair again and also Prince Andrew - who hosted a Libyan trade function in 2007.

Politically he seemed committed to reform in Libya even up to last year where he claimed he wanted a "level of freedom like in Holland" in Libya and wouldn't take a role in his father's government unless he was democractically elected.

So what has gone wrong? Was the last 7 years just a conversion of convenience so that the West's eyes (and missiles) were turned away from what was really happening in Libya? Or was it internal pressure in Libya for him to change his focus. Or was it - as the LSE academic David Held suggested, that he has ditched his principles out of misplaced family loyalty?

I hope, to retain my faith in human nature, that it is the latter. I fear, because the motives and gains from it were so clear, that it was the former.

(Cue final shot of Saif Gaddafi walking off into the distance shaking off his fake limp and straightening out his deformed hand).

Does the 'Arab Spring' justify the Iraq invasion or provide further damnation for it?

The main question for me raised by the The 'Arab Spring' that has broken out across the Middle East is whether it proves the invasion of Iraq wrong or right.

Over the past few weeks I have heard from some that the revolutions in Tunisia and Egypt that resulted in the removal of the leaders of those countries and the ongoing attempts to do the same in Bahrain and Libya prove that eventually, the people of Iraq would have risen up against Saddam Hussein, so there was no need for an invasion on the pretext of humanitarian intervention.

On the other hand, I have heard from others that these revolutions prove that the people of the Arab World hanker after democracy, which means the liberal interventionists who joined together with the neo-cons in the early part of the last decade to suggest that the process of democratisation should be hurried along in those countries that were or could be a danger to the West were also right. This was based upon the 'democratic peace theory' that no two democracies have ever gone to war, which has been around since the days of Immanuel Kant in 1795 and quoted by Presidents Clinton and Bush during their terms.

I find holes in both arguments. On the one hand, Tunisia and Egypt are very different from Iraq. Although the respective dictators in the former two countries were surrounded by the usual infrastructure of fear (secret police, records of torture etc) they had no where near the amount of control that Saddam Hussein did, as proven by the short length of time it took to get rid of them. Such was the fear of Saddam in Iraq, and such was the fear under which his people lived, that an attempt at a revolution would have resulted in far more bloodshed and taken far longer. In fact, you can see a bit of this from what is happening in Libya, where Colonel Gaddafi seems far happier to spill the blood of the rebels, and where it also seems some of his popular support is holding, although how much of that is due to money and fear we can't tell.

The point is - The Tunisian and Eygptian armies both refused to protect the regimes by cracking down on their own countrymen (also happening in Libya to some extent - although Ghaddafi's tactic of keeping the army weak to reduce the chance of military coup means this is less relevant). As Bobby Ghosh points out in a recent article in Time magazine "Saddam, on the other hand, could always count on two armed groups whose ONLY reason for being was their loyalty to him: the Republican Guard, and the paramilitary Fedayeen Saddam", which had proved themselves in putting down previous revolutions (e.g. the Shi'ites after the Kuwait War). Add that to the Ba'ath party infrastructure, the strength of the secret police and the way he allowed his people no cell phones, satellitte phones and internet access and there just wouldn't have been the apparatus for revolution. Ghosh quotes an Iraqi in 2003, who said ""If there were a million Gandhi's in Iraq, Saddam would send the Republican Guard to kill every one of them, and they would do it without any hesitation."

On the other hand, attempting to democratise Iraq in the name of 'democratic peace theory' was actually a misuse of the term. The problem with Iraq was two fold:

1) They were trying ot democratise a country surrounded by non-democracies - which many theorists argue actually INCREASES the risk of war. In 2004, Erich Weede said,  "Imagine the democratization of a nation located in the middle of a deeply autocratic area. Its democratization would generate a number of autocratic-democratic dyads and thereby increase the risk of war. By contrast, the democratization of a nation surrounded by democracies would certainly be desirable." This explains why democratising Poland (think about it's location) was so much easier than  Uzbekistan once the Cold War ended, and why Iraq has been much harder. There were no motivations for the surrounding autocratic countries to help Iraq's democratisation whereas Poland's neighbours saw a useful new friend and invited it in, politcally, economically and socially.

2) Like Eygpt, Iraq didn't have the infrastructure to become a democracy. No independent judiciary, no experience of a Parliament scrutinising a government's actions and no disinterested agents of social order - so, as Nils Petter Gleditsch, Lene Siljeholm Christiansen & Håvard Hegre pointed out in 2004, trying a forced democratisation of Iraq was only ever going to result in an unstable semi-democracy.

So, whether or not the Arab people want democracy is not the point - and certainly not a pretext for an invasion of a sovereign country, no matter how heinous its' leader is. Some argue now that the Arab people don't necessarily want democracy, but in fact just want a change in leader. We can all celebrate the changes and revolutions taking place if we want to, but I repeat again, we should be careful what we wish for.

In conclusion - Iraq, as I have found on many occasions whilst trying to teach politics - was a special case. There are major doubts the people could have achieved what has been and will be achieved in other Arab countries, but that doesn't make the invasion justified.

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?

Egypt - "May God help everyone"

The words of Omar Suleiman, at the end of his terse speech announcing Hosni Mubarak's resignation as Egyptian President, could not be more poignant. I for one am praying for the people of Egypt - that they get what they want and that they are safe. Trouble is - they will probably need divine intervention to come out of this situation with either.

International Relations theory is dominated by the two main schools of thought, realism and liberalism. Both appear to accept that the international political system is anarchical. Realists believe that this anarchy neccessitates a self-help system in which states maximise their security and relative power position. Liberalists, however, believe that the best way to respond to anarchy is for states to co-operate, using international organisations and trade to create a situation where states have too much to lose if they enter conflict with each other.

As part of this, Liberalists believe in cosmopolitanism -  the ideology that all human ethnic groups belong to a single community based on a shared morality - and a major part of that is democracy. This is why so many in the West have been so excited about what is going on in Egypt. From a military backed dictatorship we see the possibility of democracy emerging and it seems important to everyone that democracy is allowed to flourish.

Here is the problem though, and the best way to introduce how much of a problem it is would be by pointing out that George W Bush was a neo-liberal who also believed democracy and cosmopolitanism was best. Iraq after the 2003 invasion contained none of the institutions you need to grow a democracy from. There was no independent judiciary, no experience nor Parliamentary set-up where government could be held-to-account and scrutinized, and no distinterested forces for social order either (e.g. army and police). Hence the difficulties you see today.

The above three characteristics hold in Egypt too, and therein could lie a problem. We in the West could help them, but will they accept our help? Remember, we have (because of a realist belief that General Mubarak could serve our purposes in the region) supported the dictatorship they have shown to so detest for the last 30 years. So who would they trust?

Realists have spotted a further problem here. It's the "careful what you wish for" problem. If the Egyptian people get a free vote they could well vote in a government hostile to the West. This doesn't necessarily need to be an Islamist party such as the Muslim Brotherhood either, because there are new powers in the region that you don't have to be Islamist to get into bed with. Saudi Arabia threatened to replace every penny of aid that the US were threatening to withdraw last week, because they could. The US know that and the competing parties in what will hopefully be a peaceful upcoming election know that too.

Which is why need to turn to the Muslim Brotherhood. Hitherto banned in Egypt they have gone down the well-trodden line of working very hard on social projects to build up support all over the country - leading to them having something like 25% of the vote in their pockets already. This could grow should they offer a viable governing programme.

Is the Muslim Brotherhood what the Liberalists wanted? We don't know a huge amount about them. Knee-jerk realists argue that Islam is not compatible with democracy so the Muslim Brotherhood would go the same way as Hamas have done in Gaza (throwing opposition politicians off the top of buildings just doesn't count as allowing yourself to be held to account in my book).

BUT Indonesia has a thriving democracy and is a Muslim country, so we can't make generalisations. The Muslim Brotherhood have been making the right noises. Added to that, they will know the world is watching, and may want to show that Islam IS compatible with a fully functioning democracy. We will see. We certainly need to be careful about any interference in the election and need to work with whoever wins.

That leaves Israel. Binyamin Netanyahu started off making noises about putting his country on alert but was told in no uncertain terms by the UK and USA to tone down his rhetoric. The Muslim Brotherhood have promised to have a look at the treaty that Egypt has with Israel. They say they want to put it to a vote of the Egyptian people. They have never been able to vote for it before and for all we know Mubarak was essentially paid to support it instead of believing in it.

My advice to Israel is not to make the same mistake as I feel they have done with Hamas. Not negotiating with a group that don't recognise Israel is the wrong way round, you need to negotiate to persuade them TO recognise Israel. They should offer to work with whatever government is voted in across the Sinai border. The Liberalists in Israel should hold sway over the realists.

Whatever happens - Omar Suleiman is right - may God help everyone.

Forestry Commission sell-off - a Tactical Defeat?

I may be wrong about this, but I have a feeling we may be watching an interesting tactical move by the Coalition government in which they purposely float a policy for consultation that they know will be rejected in order to show they are prepared to listen and change course.

The aim according to the consulation is to transfer ownership of the 18% of land owned by the Forestry Commission to the private sector in order that they are "run more efficiently".

Many opponents fear that some of the most beautiful pieces of British heritage are to be lost to commercial developers who will make money from the change of those forests into, say, residential property. The Government argue that if the consultation is read properly people would realise that ownership would be transferred not to commercial developers but to 'community groups' and the Woodland Trust or the National Trust.

Where almost everyone is baffled (including a clearly unconvinced Damian Green (immigration minister) on Question Time this weeek) is why it is necessary. Announcing the policy, DEFRA argued it was about a 'new approach to ownership and management'. Green repeated this (from his notes) but, despite his responsibility as a Government Minister to support Government policies, he struggled to do so.

It has nothing to do with cutting the deficit.In fact, it could quite possibly cost money to do it. So there seems to be little reason to risk popularity over it.

Which has led me to think that this is an attempt at a minor tactical self-immolation on the part of the Government. Show the population you ARE prepared to listen. Show them a consultation is exactly that. Say that you have listened to the people and you are now prepared not to go ahead with this policy and you can look quite reasonable and decent for a little bit. Doing away with this plan to transfer ownership of 18% of our forests to into private hands won't harm deficit reduction so nobody loses.

Once that's done, full steam ahead with the next controversial policy. If the public or the opposition then say that the Government isn't listening to the will of the British people, the Coalition can point to this meaningless climb-down and say that's not true.

Simples!

Tony Blair and shades of Grey

Unlike most people who have an opinion on Tony Blair's autobiography, I have actually read it.

This is an important distinction that can now be made when discussing Blair, his actions, his decisions, his mistakes and his successes - we do actually have his view on it, his thoughts at the time and his opinions now. The distinction can be made between those who think that judgement can be passed after hearing only the case for the prosecution, and those who are at least prepared to hear the defence before deciding on guilt.

There is nothing I find more frustrating when teaching, thinking or talking about politics and economics than those who see only black or white. There are umpteen shades of grey, and I like to explore them all before coming to a decision on what I think. I meet far too many people who think, say, 'black' on an issue, read only 'black', consider only 'black', and talk only 'black'. They then consider themselves to have formed an opinion. I don't regard them as being capable of doing so properly.

This has two consequences for me. First of all it means that it may take longer for me than for most to form an opinion, because I insist on reading as much as possible of the different views on it before doing so. Second it means I can and will change my mind on an issue, and I don't see this as a weakness.If I read a view or see evidence which causes me to doubt my previous position, I feel it's not a problem to reconsider.

Yet far too many people I have come accross during my life, and especially my career in education, be they students, teachers, parents, friends - have their view of the world and that's it. It may be the same view that their parents have, or that their favourite teacher has, or that their friends expect them to have, or it may be one that they have developed through reading books and newspapers that lean hard to one particular point of view. What I have found in too many people is an unwillingness to consider that there may be another legitimate point of view. They won't read another point of view, they won't even consider any evidence, to the point of wilfully ignoring its existence, just in case they find themselves doubting the position they think they have to have.

I find this intellectually cowardly and immensely annoying, and I must emphasise that I find it happens on both sides of the political spectrum, whether people are talking about the UK economy, UK politics, or the Global economy and international relations (particularly the Arab-Israeli conflict).

I've been trying to work out for a while why this happens. Is it because people are lazy? Yes, some of them. Is it because they are scared, maybe of what their friends or parents or colleagues would think if they were showing signs of developing independent thought? Definitely happens. Is it because they are worried about what they would think of themselves if their convictions wavered? I think so. Is it because they 'know they are right' and everyone who disagrees with them is not just wrong but a wicked person? I have come across too many for my liking who are like this.

The problem this causes is that it weakens the standard of debate around the country, and around the world. It means that we don't develop the understanding of each others' points of view that allows conflict to be resolved through sensible discussion. It means in this country too many people sleepwalk into voting for a party because "we're a Tory family, or I'm Labour and I always will be" instead of thinking about which policies may be better for the country at the time, mainly because they have no idea what other party policies actually are. I've voted in 5 elections in my life, for 3 different parties, depending on what, after much thought, reading and debate, I think would be best for the UK. When I decide what I think would be best, I'm not "right", that's just my opinion at that time.

Even if you think you will never change your view of an issue, there is nothing wrong with becoming as au fait as possible with contrary views, if only to strengthen your ability to argue against them using other tactics than just repeating your point louder and louder every time, or resorting to personal insults because you've run out of sensible points to make. You might, just might, change the view you have. Don't be scared, it's OK to do so.

I started with Tony Blair's autobiography so I'll end with it. I'm fed up to the back teeth of people saying "I'm not going to read it - it's all lies" or "I'm not interested in what that war criminal has to say". He was there, he was responsible for our country's safety, he made a decision, whether you think he is a hero or a war criminal it is important you read his views and the evidence he saw and used to make his decisions.

I've changed my position on the Iraq War many times - with different views on whether it should have happened (I think it's difficult to argue that the management of the aftermath has been anything other than a disaster). I've gone from the gung-ho - "let's kill them there terrorists" -  to the doubting - "why is regime change necessary there but not in places like Zimbabwe where people are dying but there's no oil" -  to "wouldn't the world be a worse place in 2011 if Saddam was still there?" to "really, given he was no danger to us, haven't we just contributed to a lot of muslim deaths? No surprise it's been such an effective recruitment tool".

Throughout my oscillations I relied on newspaper articles, books, films, interviews with those involved - all of these written with one bias or another. Tony Blair's autobiography is just another piece of evidence, which has obviously been carefully written with a view to the fact that he will be answering questions on this issue for the rest of his life. In it he quotes from UN inspector reports, from the UN security council resolutions and from conversations he says he had with different figures around the time.

He will have been just as selective in the information he provides as anyone, but the difference between him and others who have written about Iraq is that it was actually Tony Blair that was there. He made the decision, and we all sit in judgement of that decision, and to judge we need to hear from him.

The same people who talk about civil liberties and people being innocent until proven guilty tend also to be those most likely to decide that they have no need to read what he says. Well, until they do, they are not in a position to judge him or his decision.

As for me, having read extensively in preparing for an A-level Global Politics course and for my general interest in politics, I'm of the opinion that it was a war entered into for honest motives, but using seemingly dishonest means to persuade others of the case.

I'll read the Chilcot report too, and so will people who supported the Iraq War, no doubt, should the Chilcot report come out in favour of the decision to go to War. Should the Chilcot report come out against the decision, I'm sure those also against the War will read it. Sad that it won't be read by everyone whatever it says. But true.

Osborne needs balls, but the last thing he needs is Balls

"The harder I practice, the luckier I get", is golfer Gary Player's oft-quoted phrase (although he attributes it to fellow pro Jerry Barber). Yesterday's horrendous economic figures, showing that GDP has fallen by -0.5% must have made new Shadow Chancellor Ed Balls feel very lucky. But he will tell you that he has been practicing for this moment a long time, and it's not luck. He has been arguing for a long time that drastic cuts are not the way out of a recession, better to have a credible growth strategy. The news that the country has gone from growing by 1.1% in the last quarter of the Labour government to falling as it has in the second quarter of Coalition government surely proves Balls right. On the need for a growth strategy, definitely yes. On the lack of need for drastic cuts, the jury should still be out. What is certain is that the Labour Party now have the perfect person in place to argue that it is the Tory-led coalition's policies that have put us in this position. This was not the time to have Alan Johnson as your Economic spokesperson, and I imagine right now George Osborne knows that.

Watching Balls on the Daily Politics at lunchtime on the day the figures came out you saw the difference he makes. Andrew Neil pointed out (rightly) that the negative growth figures were not caused by the cuts, as the last quarter of 2010 saw public spending actually GROW by 5% to the largest amount ever. What Balls was able to do though was repeat his point about there not being a credible growth strategy and also bat away forcefully other economic points made (including showing his understanding of "Ricardian equivalence" - a flexing of his muscles to show the anti-Keynesians he's ready for them).

The fact is that we await April's figures with renewed interest, because if there is another fall in GDP then we have the double-dip recession that Labour have warned against for over a year now, and the effects for the Coalition's strategy could be far-reaching.

That doesn't mean these negative figures mean they should change course immediately - recovering from a recession as deep as the one we just had does usually involve some backward as well as forward steps. But it should cause pause for thought at least.

Most importantly, it renews the importance of communication. I'm convinced of the need to cut the deficit, but I am also convinced that economic growth can help to do that. I don't understand where this growth is going to come from. The fall of the pound has increased export demand for manufacturers (hence its growth) and loose monetary policy leading to low interest rates should help increase borrowing for investment (assuming banks actually are willing to lend money). But neither of these are in the control of the Coalition government.

So what are they doing? What is their growth strategy. Oh for a good Director of Communications........

Andy Coulson's lesson in Leadership responsibility

I once worked for a massive management consultancy firm. A leader in its field, the company was littered with broken marriages. The travelling was never-ending; you could find yourself being sent away for two weeks with an afternoon's notice. One day, they announced at a staff conference that were adding a 'slice' to their 'culture wheel' (looked like a cake, listed words like 'quality', 'knowledge' and 'sharing' on each slice). This new slice was to be called 'caring' and it meant that work-life balance was going to be properly taken account of. It all looked good.

About a month later, my uncle died, leaving behind two young sons whom I was very close to. Working in Paris at the time, I asked whether I could exchange projects with a London-based girl colleague with exactly the same skills and a boyfriend living in Paris. The answer was 'No'. I pushed a bit and found out something interesting...the 'caring' bit of the culture wheel was so that the partners of the firm could say that they were 'caring' nothing more. Off-the-record, they were happy to have a culture in which people felt like numbers and gave their life to the company. I was never allowed to speak to a partner about this issue, instead I talked to my team leader, his project manager, his manager and his senior manager, and the answer was the same.

When I left the company eventually, having been headhunted, I talked to the senior partner about this experience. He professed himself to be baffled by it. Even though he was 'my' senior partner, ultimately responsible for me, he was never consulted over this issue. The managers beneath him just made the decision they thought he would have wanted, given his previous decisions and the way he wanted people to be managed. "Had I known" he said, "of course you could have come back to London." I'll never know the truth.

I think we'll also never know the truth about Andy Coulson's role in the News of the World 'phone-tapping' scandal. What we do know is that it happened, and more and more people are suing the paper. Coulson claims that he had no idea about it, and although an ex-NOTW journalist has claimed that Coulson personally asked him to use phone tapping, the fact is that there is no evidence that Coulson asked anyone, nor knew anything about it. Speaking in front of the Cross-party House of Commons Culture, Media and Sport committee in 2009, Mr Coulson said he had given his reporters the freedom to do their job, but "my instructions to the staff were clear - we did not use subterfuge of any kind unless there was a clear public interest in doing so."

But the fact is that he presided over a journalistic culture where his staff didn't care about public interest, they went on fishing expeditions in the hope of finding the story they wanted. This is different, and it involved hacking into the mobile phone messages of allegedly thousands of celebrities, sports stars and politicians. Coulson recognised this when he resigned in January 2007 from his position as editor of the News of the World.

Now, he has had to leave his position as Communications Chief to the Coalition government. By all accounts, including that of someone as partizan as Alastair Campbell, he was doing a very good job. But, like Campbell in the aftermath of the Iraq War, he was becoming the story instead of trying to control stories. Rightly, he recognised that "when the spokesperson needs a spokesperson" it is time to go.

Is this fair? Should he be punished twice for the same 'crime'? David Cameron thought no, and the truth is he and Coulson could well have toughed this out. It seemed that there was no smoking gun that would have directly linked Coulson to the phone tapping. Or was there?

Leaders get paid a lot of money. Part of that is to be responsible for whatever happens on your 'watch'. The actions of your team become your responsibility. Royal reporter Clive Goodman is in jail right now for authorising the phone tapping of members of the Royal Households' phones. Was that an idea he came up with, or did Coulson create the kind of pressurized culture and atmosphere where journalists thought that was the kind of thing they were expected to do.

Did the Senior managers at my old management consultancy firm just not care about the fact they could make my colleague's life so much happier and allow me to support my cousins? Or were they under pressure to make those kinds of decisions because of the even unspoken attitudes of the senior partners to the employees of the firm, who were purely there to make them money and should never be given the impression of having any influence? It is that question that helps me to understand why even if there is no evidence Coulson asked anyone to phone tap, it is still the case that he presided over a culture where it was done systematically.

Enemies of News International (owners of News of the World) and the Conservative party were never going to give up linking him to this. Communications Chiefs should be unseen and unheard. When they are neither, they should probably go. Sad, but true.

Game on - Miliband finally gets some Balls

When there is only one opposition party, it is extremely important for that party to be effective. The responsibility of the Labour Party for the next four and a half years then is to hold the Coalition government in check, scrutinizing every decision they make. This is not a mandate for the lazy oppositionism that we have seen too often so far ('it is a coalition policy so I shall oppose it') but it is incumbent upon Ed Miliband to help make sure the necessary medicine this country needs to take is targetted fairly and its side effects justified rigorously by the Government. Given this is a Coalition, meaning their policies are those that have been agreed with each other rather than those in their manifestos, robust opposition is vital.

This is why the initial appointment of Alan Johnson as Shadow Chancellor was not the right choice. Nice man though he is, popular though he is, 'normal' though he is, he does not understand economics, and seemed almost to revel in this fact. This always left me uncomfortable, and left George Osborne with a free-ride, given that Johnson was not capable of debating the economic merits of Coalition policies. I live four miles from Westminster and I could hear Osborne's sigh of relief when that announcement was made.

For the same reason, the new appointment of Ed Balls is exactly the right choice. Not the most popular man, in his own party and with the public at large, he is, however, a proper economist at a time when economics is possibly being re-written. His Bloomberg lecture in August, explaining his alternative to the current attempt to eradicate the deficit in 5 years, was a masterpiece of economic discourse. Whether it was right or not is not the point right now. It showcased Balls' one advantage over every other candidate for the Shadow Chancellor role, that he could talk and debate comfortably with every single figure in the financial world - be in journalist, businessperson or academic.

More importantly, for the state of politics in this country, will be the effect it will have on George Osborne. Now he will have to work much harder to justify his policies and ideas. Now he will have to have proper economic justifications for his actions. Now he will face the most effective political as well as economic operator in the Labour Party and he must expect to lose many battles, even if the war ends up being won.

Yes, the simple answer for the Coalition will be to point to Balls' record running the country. Gordon Brown may have been Chancellor, but Balls was the driving force behind him. When the Labour Cabinet wanted to cut spending, it was Balls who was in the way. He disagreed even with the election strategy of halving the deficit in four years, although he says he has changed his mind now because it seems that would be possible without causing the double dip recession he was so sure would be happening.

Certainly, the Government can try this strategy, but that doesn't mean it will work, because blowing rasberries at the track record of your opponents is one thing, justifying what you are doing about it is another, and if they think the public won't listen to Balls because of his past is naive. They will listen to him because he will be the most formidable bulwark against the widespread panic being spread over the cuts at the moment the Government could possibly face. He will probably become the focus for popular discontent, and might even be found joining in the protests.

I fear Ed Balls may go for the short-term solution of causing havoc instead of the long-term solution of actually coming up with an alternative solution to the trillion pounds of debt that his policies put this country into. If he does that, he will be successful in bloodying this government's nose, but he will not make Labour electable. If he plays the long-game, arguing as cogently as he is capable of for a proper alternative that actually makes economic sense, then 5 years from now he will be the country's Chancellor of the Exchequer.

So effective was he during the Labour leadership battle that I wouldn't bet against him being Prime Minister one day.

(Tax) Dodgy stats from the Sunday Times

There are lies, damn lies and statistics, but you would expect the Sunday Times to know the difference. Instead they have used some statistics to try and prove a point that are the very definition of ambiguous, and it is a shame as they could and should have done better.

It was the leader article this Sunday (Jan 16th) and used the example of the tax avoidance schemes footballers are using to make the point that high tax rates breed clever tax avoidance, thus lower tax revenue. So far so good, but then they attempted to claim that lowering the higher rate of tax from 83% to 40% (as the Tories did in  the 1980s "boosted, rather than reduced, the share of income tax paid by high earners."

This, in my view, was an attempt to say that a lower high rate of tax is progressive, which means that those on a higher income pay a higher percentage of that income in tax than do those on low income. They followed this up with some statistics.

 "In the last year before the new 50% tax rate came into force, the top 1% of earners contributed 25% of all income tax revenues. That compared with 21% a decade earlier and just 11% in 1978-9, the last year of Mr Healey’s tax regime. With a high tax rate of 40%, the top 5% of earners contributed an impressive 44% of all income tax revenues."

Now, on the face of it, the Sunday Times make their point. The top earners are paying more tax. Progressive right? Job done? Case closed? No, a great example of statistics used to prove a point which with very little effort can be seen to actually show something quite different.


Imagine there were 10 people living one an island with a GDP of £100,000. 9 of those people earn £5,000 a year, and one earns £55,000 a year. If everyone paid the same tax rate (say, 10%) then you could say that the "top 10% of earners paid 55% of all income tax revenues" and conclude that all is fair and progressive on that island. You could even make the person on £55,000 pay double the tax rate (20%) and then say "the top 10% of earners paid 71% of all income tax revenues" and all looks even more like a progressive paradise.

But that of course would ignore the issue that one person earns 11 times what everyone else earns. In this country we have bankers and footballers earning more in a DAY than the average YEARLY salary of the country. They are in that top 1% of all earners who are contributing 25% of income tax revenues, but that's more because of rampant income inequality than progressive tax rates.

In 1979, when the high tax rate was 83%, the Gini coefficient of the UK was 0.25, now it is in the mid-0.40s. The Gini Coefficient measures income inequality. The nearer it is to 0 the more equal income is, the nearer it is to 1 the more unequal our income distribution.

We have plenty of other examples of the creation of a financial elite in this country. How about the way that the average pay of CEOs has sped so quickly away from the average pay of a "shop-floor" worker. The UK ratio is second highest in the world after the UK and has multiplied again and again over the past few years.

Those CEOs pay more tax, much more tax compared to their cleaners. But that doesn't mean they are paying a higher rate of tax (even with the highest rate of tax at 50% there are so many tax avoidance schemes it is quite possible that CEOs pay less tax as a proportion of their income than a cleaner). It also hides the income inequality in this country.

I actually have no argument with the point the Sunday Times was making. There is an "ideal" higher tax rate for raising the highest tax revenue and it probably is lower than 50% (although David Cameron is rightly going to wait for the tax revenue figures to be released before judging that ).

But if you are going to argue that a 40% tax rate is "fairer" or more "progressive" than a 50% tax rate you need to find better statistics than the ones they found.

I'm not angry...just disappointed.

Bonus killers - careful what you wish for

It was the day a friend who works at a hedge fund told me his boss was looking into buying a Harrier Jet, about 3 hours after I'd had a fraught conversation with a mother of a pupil at my old school who couldn't afford to buy him replacement school uniform that I realised something was wrong with the way money is distributed in this country. This is the prism through which we need to look at the current debate over the bank bonuses which are about to be paid out. Yet, like every issue, it is complicated, because the government intervention that is being sought could be more damaging than most realise.

Somehow, apparently, the government is supposed to 'take action' over bonunes like they promised before the election. What this 'action' is, nobody can say, apart from the idea that those who work at the banks that are majority government owned (particularly RBS) should not be paid big bonuses at all.

The reasons for this are pretty unarguable. We are, apparently, "all in this together" (Osborne, G. 2010). We are all going to be hit by government spending cuts and tax rises, and there could be job losses. If everyone really is 'all in this together' then people who work in banks should not be getting massive bonuses. After all, it was the banks who caused this financial meltdown (although they did not, repeat not, cause the structural deficit) and government money was used to bail some of them out so paying out billions of that money in bonuses seems callous and crazy.

Suggested actions the government could take include: Taxing any cash bonuses at 50%, ordering RBS not to pay bonuses over a certain figure, a windfall tax on the profit pool from which bonuses were going to be paid, forcing the banks to lend more to small businesses and first time buyers and, well, it's not particularly clear. The hope was that the banks would be 'shamed' into not paying massive bonuses. Here's why none of the above will happen:

1) Bankers get bonuses. That's it. The job actually has very little other rewards. You don't meet your clients often and job satisfaction is minimal. It's all about a number. That number is the bonus you get paid at the end of the year. To use economic language, the pecuniary rewards are all, the non-pecuniary rewards are pretty much non-existent. Your entire sense of self-worth in the workplace is based upon your bonus and if it isn't big enough you leave. I'll come back to that sentence later.

2) Banking can be done from anywhere. So, at the moment the country gets a huge amount of tax from the financial services community but the banks could easily do their work in another country such as Switzerland. If the UK put a windfall tax on banks then it has to be done in other countries or the banks will go to those other countries, and the UK loses jobs and tax revenue that it cannot do without. It may be worth looking at the profits from which the bonus pool is paid. Some of those profits could be classed as "normal" profit - which is the acceptable return on the capital employed in setting up and running a business. Some, though, could be "supernormal" or "monopoly" profits, gained because the banking sector is dominated by massive companies charging much higher fees than they would in a competitive market.Trying to tax these monopoly profit though will only work if other countries do it.

3) If a bank pays £7 billion in bonuses over £3billion of that comes back in taxes. Any bonuses that take the annual remuneration over £150,000 is taxed at 50% anyway. If the bank doesn't pay it out as bonuses then they would need to declare it as profits, which is taxed through corporation tax, about to go down to 27%. This would mean a massive drop in tax revenue receipts if it were that simple. But many banks lost so much money a few years ago that they can effectively write those losses off against corporation tax for a long time, so the UK would less get revenue. This is, in economic terms, actually the strongest argument against most of what the opponents of paying bonuses are suggesting.

4) Yes, the government own RBS. We own RBS. It sticks in the craw that we pay out so much of what seems like "our" money out in bonuses. But what would happen if we decided that RBS staff don't get the bonuses? RBS is not like a normal nationalised firm. Taking ownership of it was always a short-term option, and the clear intention is to sell it back into private hands for a profit. This would help clear the billions of pounds of debt we have. Given it was nationalised when it was on its knees, if the government can wait until RBS builds its balance sheet up to full strength again it should be able to sell at a significant profit. To do that, RBS needs to be competitive. To be competitive it needs the best employees. To have the best employees you have to have competitive pay. If bonuses are cut, those employees will leave, RBS will be less competitive, and its value will plummet. Again, be careful what you wish for.

5) Making an apparent deal to make the banks lend more to small businesses and first time buyers in return for leaving them alone on bonuses sounds like a good idea. But on lending banks have been put in a difficult position. Having been castigated for irresponsible lending they reined in their lending and are now being asked to let it out again. What if what has actually happened was that the level of lending they are at now IS the responsible lending level? I just re-mortgaged, and it was extremely hard and took a great deal of time, with far more difficulty in getting the re-mortgage approved despite a perfect credit record and not borrowing a huge amount compared to income. I was quite sanguine about this, because this is perhaps what should have happened 4 years ago when I got a mortgage for over 5 times my income. What if lending to small businesses and first time buyers on a looser basis returns us to the same problems? Who will take the blame?

All government intervention in any market can lead to government failure. Intervening in the paying of bonuses could be a great example of that. This is not to say there isn't a moral case against the paying of excessive bonuses. They distort housing markets all over London and other areas where second homes are rife.  They are also particularly difficult to stomach for those in our population not sure where their next meal is coming from.

It might be better if instead of looking for a harrier jet, the hedge fund manager at the top of this article looked for an anti-poverty charity to give to. But some people have no shame. Just a massive amount of money.

VAT - economically right whatever the politics says

VAT is one of those issues on which many of the arguments involve a suspension of economic logic in favour of political expediency. On the day the Coalition government has put it up to 20%, it is worth reviewing and evaluating those arguments so that it is possible at least to see through the political mist that has descended over real assessment of whether raising it was the right thing to do.

First, a quick explanation of what VAT actually is. Value Added Tax is known in economic language as an ad-valorem indirect tax. Ad valorem means that it is a percentage that is added to the value of the good, so the amount of tax paid rises depending on the price of the good. It is an indirect tax because it is not paid directly by consumers to the government but it is collected by businesses (who operate as unpaid tax collectors). It is now charged at 20% on all products except those that are "zero-rated" which includes necessities like most food and children's clothing. Household energy bills are subject to a 5% VAT rate, which isn't being touched.

The reason why the coalition raised VAT is quite simple. There is a £160bn deficit and raising VAT by 2.5% raises something like £13bn. That said, here are the issues with it.

Figure 1: VAT is regressive.

1) It is a regressive tax - this is the classic argument, that since it is a flat-rate tax, those on a lower income pay proportionately more than those on a higher income. In simple terms, it hits the poorest hardest. This is shown by the graph on the right, produced by the Institute of Fiscal Studies.

BUT others argue that this is a misleading graph, as VAT is better measured on how much extra people will actually pay. The graph opposite makes a lot of assumptions, in particular on what the poorest actually buy, when  in fact it is those on higher incomes or those who are at a stage in life when they have to make certain purchases (e.g. moving house) who actually pay more in VAT.

2) It is easy to avoid - it is reckoned that VAT fraud costs the UK government about £2 billion a year, but the rise in VAT will motivate people to pay their plumber in cash this time whereas before they wouldn't have. There are predictions that VAT fraud will thus go up to £3-4 billion as a result of this change, so the government won't collect as much as they think

BUT - Legal income tax avoidance adds up to about £35 billion at the moment, making VAT pale into insignifiance. Also, this misses out the fact that the simplest way to avoid VAT is not to buy items that are not zero-rated. Ed Miliband helped out with this by saying that "they will be taxing you higher when you go out and get a cup of coffee. And when you pick up a DVD for the kids to watch at home." Both of those purchases are what you would definitely call 'discretionary'. If Miliband was saying that you were being taxed more for a pint of milk or a loaf of bread then he would have a point. But he isn't, so he doesn't.

3) There are other alternatives -  money can be raised using carbon taxes or a tax on financial transactions. Some argue that bank bonuses should be taxed more and the higher rate of income tax should be put up. There is also an argument for a "land tax" of 1% on the value of land owned (much of it by hereditary landowners), which could raise about £50bn. There is also the fact raised by those on the right that the same effect on the deficit could be achieved by cutting 2% more off government spending. There are those on the left who will suggest that the deficit is not so much of a problem that anything needs being done about it. The point is, there are alternatives.

BUT - if you want to raise money to cut the deficit in a way that can easily be implemented and be almost guaranteed for it to work, VAT is probably the most effective solution.

4) Both the Conservatives and the Lib Dems promised not to raise it during the election campaign -  yes, this did happen, although the Conservatives said they "had no plans to" rather than promising not to.

BUT - The problem is that you campaign in poetry and govern in prose and there were a lot of promises made in that election campaign that were irresponsible, and now they have the responsibility of government they have to just do what they feel is right. It would be irresponsible to not do something simply because they said they wouldn't in the election campaign. Also, as the Conservatives quickly pointed out, Ed Miliband was in the Cabinet only a year ago that tried to raise VAT - a plan nixed by Gordon Brown for purely political rather than economic reasons.

This is the first major tax rise by this government and it makes economic sense. The opportunity cost of not doing it was to cut more spending, so to raise any tax should be seen as a good thing by the "fight any cuts" lobby. Is it the right tax? Well, there are alternatives, and I would hope they are being considered. But this VAT rise seems the right policy for right now.

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.

Lib Dems not ready to be Ministers. The country not ready for Coalition.

Norman Baker - fighting against apartheid?!

One of the delights of starting Politics A-level at my old school was the political engagement of so many of the pupils. One of the most frustrating aspects of it though was their inability to think about politics as shades of grey, only black and white, good and bad. It's the same with the country, and in particular many parts of the media, as they try and deal with the fact that the UK is governed by a coalition. Either it is working seamlessly, or it is a "sham", with nothing in between.

This shows naivety in the least, ignorance at the worst. Or, in the case of the Telegraph reporters who targetted Liberal Democrat leaders at their constituency surgeries, a sneaky, corrosive agenda that led them onto a fishing expedition which did, in the end, come up with something important (Vince Cable's lack of partiality as Business Secretary when it came to assessing mergers), but mostly has come up with comments that show at worst that some Lib Dems don't understand their responsibilities as coalition government ministers but at best that, hey, guess what...coalition means two DIFFERENT parties with DIFFERENT beliefs working together.

As Conservative MP Peter Lilley said, "We're going to have rough waters and we've got to brace ourselves for it and not be driven off course by every ill-judged remark,". From the start, many who are against the coalition (both within the Conservative and Liberal Democrats as well as Labour) have seized upon every single disagreement as a sign it "isn't working". Yet the coalition has done far more in its first 7 months than anyone could have expected it to.

More importantly, it has done so without silencing dissent. For journalists who had to endure 13 years of media-trained New Labour automatons claiming violent agreement with every single policy announced, it must be a pleasure that Government Ministers have been allowed to talk of their misgivings about policy. Debate has been permitted, and in many cases this has resulted in the Liberal Democrats being able to significantly influence many of the policies announced, in the process possibly making them more palatable to the public than they might have been had they been pure Conservative formulations.

Yes, they were hung out to dry over tuition fees. But then again I think tuition fees was the area in which the Liberal Democrats as a party had the most learning to do if they ever want to be a party of government, which is a lot harder than being a party of protest: You can't come up with pledges and promises which would be undeliverable should you be in government....because you might end up in government. However much I might argue that those who go on about "broken promises" possibly don't understand that coalition is a compromise in which both, or all parties HAVE to break some promises, this was a particularly silly promise to make.

But to argue that, as Norman Baker (Lib Dem Transport Minister) did - that he is like Helen Suzman - the South African MP who ought the apartheid regime, is particularly far-fetched. "She got stuck in there in the South African parliament in the apartheid days as the only person there to oppose it... she stood up and championed that from inside," said Baker. Comparing the need to deal with a £160bn deficit and £1 trillion pound debt with the apartheid regime may seem ridiculous, BUT it shows the lengths that Lib Dems are having to go to justify their "collaboration" (a connotation-laden word used by John Prescott) with the Conservatives.

Then we have Deputy Leader of the House David Heath commenting that "George Osborne has a capacity to get up one's nose, doesn't he?", and Local Government Minister Andrew Stunell talking about David Cameron and saying,  "I don't know where I put him on the sincerity monitor... is he sincere? I do not know how to answer that question."

There again, James Holt, the Lib Dem head of media, did point out that "In workplaces the world over, there will be personality clashes and differences of opinion.In this case, the Liberal Democrats and the Conservatives are coming from very different points of view and they are coming together in the national interest."

And Lib Dem backbencher Adrian Sanders told BBC Radio 4's Today programme: "What is the point of being a separate political party if you don't consider that there are opponents to you? And the Conservative party is our opposition, in normal times."

The problem is that, faced by two young, female, pretty, giggling, fake Lib Dem party activists, these Lib Dem Ministers spoke completely candidly. They probably wouldn't have done so for two gnarled 60 year old bearded, sandalled Lib Dem activities, but then there wouldn't have been a story.

The Telegraph's readers don't like the Coalition, because it is watering down the Conservatism they want. That's their agenda. So they then set out to show it with this 'sting', but in the process relied upon the rest of the media and the country's lack of understanding of what coalition is and means to make it into a proper story.

Labour leader Ed Miliband has played this well, stepping into the Vince Cable affair by questioning whether his replacement on the BSkyB merger brief, Jeremy Hunt, who has been quoted on numerous occasions praising Sky, is fit to make the judgement to. He also used the word "sham" to describe the coalition, saying that "These are decisions of a Conservative-led government propped up by Liberal Democrat passengers. Passengers not in the front seat, not even in the back seat of the car, passengers who have got themselves locked in the boot," which is another open invitation to disgruntled Lib Dems to join Labour.

Miliband also opined that he would have sacked Cable for what he did. Many members of the Tory party wondered why Lord Young was relieved of his duties last month for saying something that was actually true (that some people had benefitted from the recession) yet Cable stayed within government. Miliband, of course, probably would have sacked a minister for doing what Cable did, had he been in charge of a majority Labour government. But he isn't, and neither is David Cameron, which is why it just wasn't as simple as that.

Also, Miliband is relying on everyone to believe that Coalitions are black or white. They are not. They are grey.

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.