Blair Memoirs, Hague Denies — The UK Media

The British media is just getting sillier. I wasn’t sure it was possible but after watching and reading the coverage this week of Tony Blair’s memoirs and of the gay rumors swirling around the Foreign Secretary William Hague that is the only conclusion I can reach.

On Blair, the U.K. media has been focused mainly on the former Prime Minister’s disclosures about how poor his relationship was with the dour and obsessed Gordon Brown, his grim-faced Chancellor of the Exchequer. Poor old Tony had to put up with constant conpsiring by Brown and his gang – allegedly Brown even triggered the party investigation into the money-for-honors scandal that dogged 18 months of Blair’s premiership. Some commentators rightly castigated Blair for his playing the victim in his memoirs – ye Gods, he was the Prime Minister and should have sacked Brown.

But the news pages have been taken the Blair claims far too seriously instead of questioning far more strongly whether the former Prime Minister should be writing in the vein he does. Virtually all politeness and conventional form have been thrown out in the book by Blair – he dishes on former colleagues, reveals private conversations with members of the Royal family, etc. One expects this kind of thing from Labour’s gosipy “prince of darkness” Peter Mandelson but should a former Prime Minister be writing in this way?

Blair has produced a “soap book” — not a serious, substantial tome. His chapter on Iraq – and his refusal to accept that he and Bush made any mistakes – should have been the media focus and not the “Brown was mean to me” stuff.

And Hague? After putting up with weeks of a semi-public media whispering campaign, Hague decided earlier this week to rebut blog-launched allegations that he had slept with a male aide. To add credence to his rebutal he went into detail about the difficulties he and his wife have been facing in trying to conceive a child. Now the poor man has to put up with claims that his denial is a public relations blunder – too much information, according to The Times.

The BBC has been running the Hague story as its second lead most of the day with news anchors questioning public relations “experts” and spin-doctors. Sheila Gunn, a former colleague on The Times and now a political consultant, argued that Hague has just prolonged the story by “giving it oxygen.”

Well, it didn’t need any external oxygen before – the blogger Guido just carried on making the allegations with nothing to go on except a photograph showing the aide and Hague walking along the street dressed GQ casual and smiling and the fact – not connected with the picture — that during the election campaign they shared a room with twin beds in it. And with nothing to go on now, the media is keeping the gay allegations going by questioning the public relations efficacy of his denial. And this is journalism?

Hague was utterly right to issue a denial and I don’t see how disclosing the problems he and his wife are facing in trying to create a family will do him any harm with the public. As the newspapers watch their circulations decline — and as the BBC watches its standing fall — maybe they should all rethink how they cover the news.

Closing the Gap

Why should the British middle-class instantly reach for their wallets whenever they hear a British politician talk about closing the gap between the rich and the poor? Nick Clegg, the U.K.’s deputy Prime Minister, demonstrated exactly why in London today with his speech on creating a more socially mobile society. The rich quickly morph into the middle class, and so what he really means is closing the gap between the middle-class and the working-class. The real rich, as we all know, will just move overseas, if there is too much redistribution out of their pockets.

Of course, Clegg can’t say that, especially as he is in coalition with the Conservatives, but that is what he means.

I am all for greater social mobility – that is one of the driving reasons I, British-born, embraced the United States – but “wealth” redistribution is not the way to do it, or shouldn’t be the main driving force. Britain has been trying that since the Welfare State was established in the wake of the Second World War and as studies have shown it hasn’t been so successful. The increased redistribution primarily from the middle-class to the working-class and tremendous subsidies to geographically poorer areas of the UK under the Brown government failed dramatically to close the gaps dividing north from south or the one separating the middle-class from the working-class.

The review the Coalition government is undertaking now of the universal benefits system is a good thing – the well off surely should not be receiving subsidies in the form of child credits and heating allowances they don’t need. But how much is going to get taken from the middle-class at the same time as they are facing higher taxes before they decide either that they have had enough of the Coalition government or decide to trigger a 1970s-style brain drain?

Social mobility comes with providing fine schools, access to excellent higher education and the economic, commercial and regulatory circumstances that encourage entrepreneurialism, wealth creation and prosperity. And as history has shown, countries that declare war on their middle-class tend not to do so well when it comes to economic growth.

Arguably, Margaret Thatcher did more than Brown or Blair for social mobility and encouraging working-class aspirations. She did it by allowing council houses to be bought by their occupants at below market value – a policy fought tooth-and-nail by the left and center-left in British politics. She did it by welcoming success, encouraging entrepreneurism, keeping taxes low, reducing public expenditure and ceasing the British industrial habit of propping up lamb-ducks. She was also more heavy-handed with high-blown, snooty and traditional institutions than many Labour ministers were before her and have been since. And aspiring working-class voters loved her for it – that’s why she was re-elected.

Obviously, it was good to hear Clegg saying that the Coalition government aims to assist social mobility by improving people’s lives rather than by providing hand-outs, but sadly missing from the Clegg speech was anything about lower taxes — just more stuff about “fairer taxes”, in short more taxes on the middle class.

And this on the day when an excellent economist, Danny Blanchflower, a former member of the Bank of England’s monetary policy committee, urged the Coalition government to cut taxes or face another recession.

The New Normal — What’s To Be Done?

I had an interesting discussion today with the excellent libertarian blogger David Friedman prompted by a USA Today interview with Mohamed El-Erian, the CEO of Pimco. El-Erian was stressing his idea of the New Normal, “which predicts a post-financial-crisis world of lower investment returns, slower economic growth and higher odds of another out-of-the-blue financial shock. In short, a world in which the range of financial outcomes — and risk — is much wider than normal.”

David on Facebook commented: “Pimco’s CEO echoes what I have been saying for a while now: (1) cash is king; (2) asset returns will be negligible for the foreseeable future. You’ve been listening to me, right? You’ve liquidated your real estate holdings and are now renting, right? Right?”

And the edited exchange between us went thus:

Jamie Dettmer: “Actually, David, my old Cambridge contemporary doesn’t say anything of the sort. He does say there is too much home bias but it makes no sense to sell your property now in the troughs of the markets. Sure if you had investment property you should have sold long ago. Otherwise you sit tight — you have to live somewhere. Or rent your property out, if you are in a high-rent area and can go to a low-rent area for your needs. One thing that ordinary people make a mistake on is taking the advice of gurus like Mohamed. His clients are big corporations and high net-worth individuals. But I think he is right about the New Normal and that ordinary investors in particular should be careful of equities and look to emerging markets and foreign currency holdings. But should they sit on a lot of cash — more than, say, a year’s need? I am not so sure. In savings accounts and fixed bonds they are losing money when inflation and tax is taken into account — it maybe better, depending on personal circumstances, to pay the mortgage off or down. They would secure a better return.”

David Friedman: “Admittedly, his phrase “a lot of home bias” is ambiguous. I can see it being interpreted either as meaning too much money in one’s home or too much money invested in one’s home country. Which, in essence, is a distinction without a difference. So, I don’t see why you say he doesn’t say anything about home ownership.

But, generally, yes, the more equity one has in one’s home the more able one is to ride out rough economic storms. But, many people don’t have sufficient equity in their homes and so are teetering on the edge of bankruptcy. Better to liquidate one’s expensive, illiquid, and leveraged “investment” than to suffer the caprices of economic growth.

Finally, it’s not true that housing is a hedge against inflation.”

Jamie Dettmer: “No, my point about paying off or down on the mortgage wasn’t as a hedge against inflation as such. It was more that they are paying interest on their mortgage and by keeping lots of cash they are not getting a return on their savings to match or compensate what they are paying for their mortgage — at least over the long or even medium term. I agree that if someone is struggling and is over-leveraged on their home and they can get a sale, them they are better advised to escape. His comment about home bias is highly ambiguous — does he mean investing at home or being invested in a home? Even if it is the latter, then personal circumstances kick in. Last, it also comes down to where your property is. The US has a national housing market but with significant variations. I am reasonably content with having property in the DC-Baltimore metro area — but I would not be sitting comfortably if my property was in Enid,OK, say. But as I get older there are two things I am fairly sure about — taxes and death! Wow, that’s a bit depressing — think I need another espresso.”

David Friedman: “But, if we assume that he means US investors are over-invested in their home country, and we further make the assumption that most people’s largest investment is in their house, then it follows that most people would be better off liquidating their real estate investment and investing that cash abroad….”

Jamie Dettmer: “That might be. But he also notes that you should avoid big risks with equities and that things are going to be topsy-turvy and that people should invest in what they know. Further, I do have most of my cash in foreign currencies but I can find no really worthwhile fixed bond or savings account that would not have me losing when tax is taken into account. Standard Chartered offers an offshore fixed bond of 4.5 percent over a year. Others at the 4 percent mark require the bond to run for three to five years.”

David Friedman: ‘Well, it seems to me that what he’s really talking about here is that one should diversify across asset classes, and make that diversification international. Which is fine, as far as it goes, but as you say, that’s not practical for the average investor. So, the average investor, who more likely than not, has most of his net worth concentrated in his house, is sort of screwed.

On the other hand, when financial crises hit, all correlations go to 1, as we saw in 2009.

I think the lesson here is that volatility is inherent to financial markets, and that no government can mitigate that volatility. Better, then, to make peace with volatility, than to try to defeat it. Admittedly, that’s a fatalistic view of finance, but there you have it.”

Jamie Dettmer: “Yea, I think that’s right. We are mere corks floating on the water.”

David Friedman: “The first person who figures out how to properly hedge portfolios 100% of the time is going to make trillions.”

Jamie Dettmer: “Well, several big investment banks thought they were doing just that — great while it lasted, for them. And they were encouraged by Brown (the end of boom and bust) and Greenspan.”

I ought to point out that the David Friedman in this exchange is not David D. Friedman.

The Cuts That Dare Not Speak Their Name

British Prime Minister Gordon Brown is likely to announce tomorrow the long-awaited general election. But in the run-up none of the major parties are prepared to tell the truth about the scale of the cuts in public expenditure that will be needed to stave off national bankruptcy. All the parties are careful to avoid announcing any numbers – how much will have to be cut from public spending, how many jobs will have to be lost from Britain’s bloated public sector, how high taxes may have to be raised and what the balance should be between spending cuts and tax hikes, if Britain is going to secure the economic growth it needs to get out from under mounting debts.

Cutting public expenditure substantially is the only way forward. But where and by how much? Labour politicians on the whole avoid the word “cuts” and prefer to talk about public investment. Conservative leader David Cameron and Osborne have followed their Labour counterparts and promised to ring-fence health care, defense and Britain’s overseas aid budget. In fact, Labour goes even further and the Prime Minister has insisted that all “front-line” services – education, the National Health Service and the police – will be unaffected, if he is re-elected.

Read my full take on the British election and the economy at the Daily Caller.

Talk about Spinning

Heroic spin by Labour’s Alastair Campbell in his blog this morning, arguing that there’s “fantastic stuff” in the Observer. He chose to focus only on a YouGov poll at the bottom of the splash story on Gordon Brown (see earlier blog post today) showing the gap narrowing between the Tories and Labour and to combine that with highlighting the only extract from Andrew Rawnsley’s torrid book that puts the Prime Minister in a good light.

He left unanswered the allegations of the Prime Minister’s temper tantrums and anger problems, the dysfunctionality of 10 Downing Street under Brown and Brown’s underestimation of the looming financial crisis. Oh, and no response to allegations about Chancellor Darling trying to stop Brown being “reckless” with the public finances.

Presumably Campbell had no time to respond properly — he was rushing off to watch his team Burnley play Aston Villa. They lost heavily……

The Brown Character Issue

The UK Observer has gone big today on Andrew Rawnsley’s book End of the Party with front-page and inside coverage. But the lead strikes me as a tad misplaced. Both the Observer and the author have focused on the British premier’s tantrums and anger management problems, but the more damaging material surely is buried: that Brown and Downing Street underestimated how bad the economic crisis would be, are overwhelmed and highly dysfunctional, delay decisions and can’t even keep up with correspondence.

Labour Party aides are pushing out the line that they have never seen the Prime Minister lose his temper. Home Secretary Alan Johnson on the BBC’s Politics Show made much of this, saying he found him to be soft-spoken. The other line of defence has been to argue snidely that they understand the author has a book to sell. Others argue that indeed Brown is an emotional and passionate man, committed to principle and country.

Brown wouldn’t be the first national leader to have temper issues. Bill Clinton could throw his weight around with subordinates and staff — one Washington DC news channel once famously caught the then U.S. President screaming at a cowering aide during a visit to a local school. Surely, British voters won’t be shocked to learn that the British Premier can’t keep hold of his temper — anyway that is old news.

Far more telling in the book is the detail Rawnsley throws up on Brown’s indecisiveness and on the overall inability of Downing Street to push through the work in efficient fashion.

Obviously it is disturbing that the head of the UK civil service, according to Rawnsley, had to reprimand Brown for his abusive behaviour towards staff at all levels, from typists and phone operators to senior aides. And the temper issue, as Rawnsley points out, raises relevant character questions about how Brown handles crisis.

But it is the examples of the dysfunctional nature of Brown’s Downing Street and the Prime Minister’s obliviousness to the depth and extent of the looming economic crisis that strikes me as more worrying — and far more damaging for the Labour Party as the election looms.

On the former point, Rawnsley has this to say in an extract buried inside the Observer’s coverage: “Even the basic housekeeping wasn’t being done. Letters…went unanswered.” Phones would also not be picked up. “There were cases of foreign embassies not being told whether a visiting leader was going to be granted a meeting with the Prime Minister and dates being muddled up…Routine decisions took months to process. Cabinet ministers and their senior officials began to speak with extraordinary vehemence about what one called ‘the sheer dysfunctionality ‘ of Number 10. On the account of one civil servant: ‘However chaotic it looked from the outside, it was a billion times worse inside.’”

Of course, one of Brown’s supposed strengths has been his understanding of economics. But according to End of the Party, it was Chancellor Alistair Darling who had a better grasp of the approaching financial catastrophe. According to Rawnsley, after Darling had issued a warning in a media interview in 2008 that the economic crisis would be the worst for 60 years, Brown flew into a rage and told the Chancellor that the financial turmoil “will be over in six months”.

The Katrina Effect

Snow hit the UK last night and continues today following a government call to councils to reduce by half what little gritting they have been doing. The snow emergency in the UK will have the political effect, I suspect, that Katrina did in the US but on a larger, national scale.

Certainly, the government needs to rethink what it is communicating. Take the latest from HM Revenue and Customs (HMRC), who have just announced farmers could face fines if they grit snow-blocked roads using tractors powered on red diesel, the reduced-tax fuel permitted farmers.

Under current rules farmers can only grit roads if using tractors powered by white diesel – the standard fully-taxed diesel for trucks, vans and cars.

Geoff O’Connell, a parish councillor in Belford, Northumberland, told the Daily Mail newspaper: “Doesn’t anyone at HMRC realise that we are experiencing a national emergency, one of the worst outbreaks of Arctic weather for decades? Our farmers are doing their level best to feed their stock and get their produce to our supermarkets. Are farmers supposed to plough, then be unable to grit, sand and gravel their driveways to prevent further drifts because their tractors run on red diesel?

“To suggest that they return to their farms to drain fuel tanks to re-fill with fully-taxed white diesel before carrying out any other, sometimes lifesaving, ploughing activities for their friends and neighbours is unforgivable, heartless and totally impractical.”