How can Cameron avoid being blamed for his inheritance?

ConservativeHome reported earlier today that Tory strategists are considering producing a 21st Century Domesday Book compilation analysis of Labour's legacy if the Conservatives win power at the next general election.

Tim Montgomerie wrote: "It would be one of the first acts of an incoming Conservative government. New Cabinet ministers would be ordered to prepare an audit of their portfolios. Four to six weeks later a Domesday statement of the extent of public borrowing, the weakness of the nation's energy infrastructure, the weakness of family structure and so on would be published. As well as serving as a statement of challenges it would then be hung around the neck of the Labour Party."

This is essential work.

I have long held the view that the next Conservative government would have a fight on its hands to convince the electorate several years into its first term that it was not to blame for the countries ills and that they still need time to put them right. I've also felt it would be a good way to recalbrate the 'official government statistics' and other measurements of government performance that have long been skewed in favour of the government to falsely show success. These must be put on an independent footing.

This so-called 'Doomsday book' would be an effective way of showing the state of the nation the Tories inherited and hence a useful way to be judged. This of course has risks of its own if the Tories were to fail to deliver but such ambition would help focus minds. It is very important that a benchmark for judgement is set.

I had previously envisaged Cameron doing a presidential-esque state of the nation television address to the people setting out the shithole we were in after 13 years of Labour rule and the steps people could expect from the Conservatives to put it right. (Not sure if this would be within the rules - if not, Cameron could change the rules).

It will take at least two terms to put Labour's mess right and the electorate needs to give Cameron the time and remember who really deserves the blame.

Tories can now reform Barnett Formula

The papers today have been full of stories about how Scotland needs the Union more than ever; how it owes the Union (and particularly English taxpayers) a debt of loyalty after RBS and HBOS have been bailed-out; and how the SNP's dreams of independence have gone.

It is difficult to disagree with any of this.

Ironically, Alex Salmond had been holding Iceland up as a model for an independent Scotland, saying Scotland could be part of a north Atlantic "arc of prosperity."

However, what this all means is that the Barnett Formula which allocates UK funding to Scotland - in other words an unfair net transfer from the English to the Scots - is ripe for reform.

Lord Barnett, the former Labour minister who devised the formula in the 1970s, has said that it was only supposed to be a temporary measure. Fast-forward several decades and we still have it.

Why? Because Labour does not have the will nor inclination to change it. If they changed the formula the SNP would cry foul and Labour MPs would no doubt lose their seats. Throw into the mix that Brown and Darling are Scottish, the chances of Labour ever changing a formula that is manifestly unfair to the English I would say are non-existent.

BUT... the Tories could do it when they return to power! They only have one MP in Scotland and are unlikely to return there in great numbers. Before the financial crisis the Conservatives would have been wary of changing the Barnett Formula in case it pushed the Scots towards Salmond and his independence agenda. Being the pro-Union party this would have been a disaster.

But now the Scots have to take it. They can't risk going it alone. RBS and HBOS have been given guarantees of £100 billion which is equal to Scotland's annual economic output. Scotalnd would not have been able to rescue its financial services industry and would have gone the way of Iceland - bankrupt!

They do say every cloud has a silver lining...

Dispatches - Hedge Funds are evil

I watched Channel 4's Dispatches programme last night entitled: 'Cameron's Money Men'.

It wasn't the most balanced of documentaries to say the least and portrayed Cameron as a hypocrite, saying that despite the Tory leaders lofty rhetoric about transparency in party funding, the Tory leader had not matched it with action.

So we had reporter Antony Barnett (never heard of him) dig up the standard stories about Lord Laidlaw and Lord Ashcroft.

But Barnett also sought to make a huge issue out of the Tories being funded by 'secretive' hedge fund managers who use that most 'evil' of financial practices to make money, namely short selling - the favourite scapegoat of every government of today.

The documentary was essentially saying: Tories are being backed by wealthy people which raises 'cash for access' issues and Tories should not be benefiting from short selling.

This made me think several things:

• How on earth is the Tory party supposed to raise the necessary funds to fight an election if it cannot take donations from wealthy backers?
• The Tories do not get given millions of pounds from unions like the Labour Party.
• Parties cannot rely on lots of very, very small donations to function - who do you personally know has either the inclination to donate to a political party and/or the money to do so in prosperous times, nevermind during an economic downturn?
• £50,000 a year per wealthy individual signed up to the 'Leaders dining club' is hardly a lot of money in the whole scheme of things. It's hardly buying influence. I know are ploiticians can be cheap, but surely not that cheap?
• Those who give the money are obviously going to be more inclined to do so if they get to meet Cameron, Osborne, Hague etc.
• Just because Cameron meets these people does it mean he rejects the views of voters who do not donate? This just does not follow.
• Why should Cameron not meet these types of people - they are voters and taxpayers.
• Modern communication costs lots of money; do we really want hard-pressed taxpayers paying for party funding because that's the alternative? I certainly do not - public spending and my taxes are high enough!
• In the US, donating money is equated with freedom of speech. Curtailing donations is seen by many as violating the 1st Amendment. Why, in this country, is exercising one's freedom of speech via a donation always seen as dodgy and morally corrupt? Cynics always choose to believe a donation is given to get something in return. It is not naive to suggest that sometimes people give money because they support the aims and aspiration of the party and its leader. You would be surprised how even businessmen are dazzled by politicians, and a meeting with them is enough for them. Those in public affairs are always amazed by this.

• Politicians have made short-selling the scapegoat in the current economic crisis, particularly the fall of HBOS, whereas data has shown short-selling activity had been steady and was not the cause. Governments like to show to their citizens that they are not helpless and can do things which is why we have a lot of unnecessary legislation because politicians feel they always have to act. Therefore, a ban on short-selling was a cheap, populist way of showing voters that government was keeping a check on the practices of those nasty bankers.
• Short-selling has been in practice for over a century and is a legitimate financial practice which even Alistair Darling has conceded. The Church of England has got on its high-horse saying it was morally wrong but was then found to have egg on its face after it was revealed it has benefited from the practice. Oh dear, God won't be happy...
• And as Guido has pointed out, the Lib Dem's Lord Oakeshott was up in arms on the Dispatches documentary about the Tories and short-selling but one of the Lib Dems biggest donors, is Paul Marshall who is worth over £300 million and has donated seven-figures sums to the Lib Dems despite being half of Marshall-Wace, hedge fund managers, who engage in short-selling! Oh dear, Lord Oakeshott is In the Brown!!!
• Furthermore, as Guido has also pointed out, Labour too has benefited from donations from hedge fund managers engaging in short-selling - inc. Paul Myners, Ronald Cohen, Derek Tullet and Gilad Hayeem to name a few - which perhaps explains Labour's silence on this issue.

Osborne's new quango to tackle Brown's profligate spending

A few thoughts about George Osborne’s plan to create a new quango called the ‘Office for Budget Regulation' (OBR) if the Conservatives win power. It was the first of the Conservative financial reforms to be announced at the weekend. The role of the new office would be to ensure government does not break certain spending or borrowing limits, as part of a new “Debt Responsibility Mechanism.” It would have a remit of forecasting the public finances and saying whether current trends are in line with the desired path. The idea is new in the UK although other European countries have similar ‘Offices’ in place and in the US there is the Congressional Budget Office (CBO).


George Osborne has said: “We will call time on Gordon Brown's age of financial irresponsibility and put in place an independent system that will allow a referee, if you like, to show a yellow card to a Chancellor and Prime Minister if they are stepping out of line.”

So, why has Osborne done it, how will it work and are there any problems?

• It aids the Conservative narrative that Brown has been an irresponsible, profligate spender and borrower who encouraged an irresponsible decade of unsustainable growth on the back of unprecedented levels of public and household debt. The Shadow Chancellor used his Conference speech yesterday to talk about the OBR and give an ‘honest’ assessment of the economic situation saying all the money had been spent and the “cupboard was bare.” This of course he blamed on the profligacy of Gordon Brown. Osborne said there was only one Golden Rule in politics: “Never trust a Labour government with the public finances.”


• It shows the Conservatives as the party of Prudence and Stability. Brown once had these two to himself but has jilted them both. His fiscal rules are now worthless and prudence was left behind in 1999 when Brown chose to no longer stick to Tory spending plans and began turning on the spending taps (he turned them on full in 2001).


• As Fraser Nelson from the Spectator has pointed out, it should act as handcuffs for a future Labour government who, in theory, would be reprimanded by the OBR if they ever tried to spend so much money and build up so much debt again. But as Nelson points out, this is slightly defeatist as it anticipates a future Labour government. That said, it is also pragmatic and if successful would be a thorn in any future Labour ‘tax and spend’ government. I see this (and the two points above) as the main reasons for the creation of the OBR. However, there are two possible flaws. One is that the Prime Minister will no doubt appoint the Chairman of the OBR. A future Labour PM could appoint as Chairman someone who is comfortable with a loose fiscal policy (i.e. tax and spend), though if the Tories appoint a Chairman on a long term it would make it harder for Labour to replace the incumbent Chairman. Second, a future Labour PM could just abolish the OBR claiming it was a waste of money. Whether it would be politically possible to do either would depend on how successful, trusted and established the OBR and its Chairman had become and therefore the criticism the media would level Labour’s way if they proposed abolishing it. It would also depend on whether ‘tax and spend’ was a toxic issue in the future. If it was, it is unlikely Labour would propose abolishing the OBR for fear of becoming unelectable.


• It will go some way towards convincing the electorate that a Conservative government will keep its promises to keep spending and debt at sustainable levels. However, it is a sad indictment of politics today that the Conservative Party – traditionally seen as the low tax and spend party – would not be trusted to deliver just that if it featured as a manifesto commitment. This makes me think this is more about constraining Labour and making them look bad than keeping Conservative spending under control.


• It may help placate those Conservatives who are pushing for tax cuts to be offered upfront. If they see the OBR as a credible tool in bringing down public spending (a good in itself for those on the Right as it will signal smaller government) they may also feel, in time, that tax cuts would be able to follow as a result.


• It will help the Conservatives cut spending and provide some political cover for the Tories from Labour attacks that they were cutting essential public services – a favourite line of the Left whenever cuts in public spending are proposed (as if all public spending goes on front line services!)


• Although some have compared the proposed OBR with Labour’s decision to grant the Bank of England independence over setting interest rates, the two are not comparable. Short of rescinding the Bank’s independence, the Chancellor cannot alter the interest rate decision taken by the MPC (though he does set the inflation target). With the OBR, its Chairman will only have an advisory role and will not recommend tax or spending changes. Prime Ministers and Chancellors will be able to ignore the OBR’s advice, though crucially the PM and/or Chancellor will have to come before Parliament to explain why they disagree. This way the government still keeps control but has a ‘spending conscience’ on its shoulder. David Cameron claims it will be a “rod for our own backs” though Peter Riddell of the Times sees it more of a “system of traffic lights” similar to the Bank of England's published Inflation Report before independence in 1997. Nevertheless, so long as the OBR is made credible, any differences between it and the government of the day would be heavily reported on by the media which could help keep a check on government spending and debt, though this would be dependent on the government which first created the OBR not undermining it straight away, which should be possible as it would be a Conservative government.


• Rather than Brown’s current fiscal rules (Golden Rule and Sustainable Investment Rule) which were backwards looking, could be revised (and thus were undermined), and had more relevance as anchors in prosperous times, the proposed OBR is meant to form part of a forward-looking framework for public finances, overseeing a falling proportion of debt and a balanced current budget. As Peter Riddell points out, instead of an upper limit set on spending and borrowing (Brown’s fiscal rules), the focus under the Tories would be on direction: downwards. It is hoped that this could make a real difference although there currently is a lack of detail about timing, and how long it will take to achieve such fiscal prudence.

P.S. Sorry for the absence of posts the last couple of days - i've had a busy few days!

Ipsos MORI - 'The Verdict on Brown'

I’ve just come into contact with Ipsos MORI’s Party Conferences Briefing entitled ‘The verdict on Brown’.

It is an interesting slide-show document that provides an overview of where the parties and leaders stand PRIOR to the Labour and Tory party conferences.

The key messages from MORI are:

• David Cameron and the Conservative Party are still making real headway against Gordon Brown, with more than half the public agreeing that the Conservative Party is ready to govern.
• Cameron has struck a note with the populace, with two-thirds (63 percent) agreeing with his assertion that “British society is broken,” and half believing that “David Cameron represents modern Britain.”
• The Tories are now seen as better than Labour on having the best team of leaders, understanding the economic problems facing Britain and having the better policies on family issues.
• The Tories are also seen as having better policies than Labour on all key issues to voting except healthcare and education (but fewer voters now feel these matter in deciding who runs Britain).
• In contrast 44 percent say there is nothing they like about Gordon Brown and 69 percent are dissatisfied with the way he is doing his job as PM.
• However, half (51 percent) do agree Brown is going a reasonable job in difficult circumstances.
• Brown’s ratings are now where Major’s were after Black Wednesday – the Conservatives never recovered from this point and remained around 13 points behind in the polls for the best part of a decade.

What the MORI findings show is that far from Cameron's and the Conservative Party's poll ratings being simply a function of Brown's and Labour's unpopularity, the Tory leader has been able to make positive headway of his own - particularly with his messages about the 'broken society' and Cameron looks like he has successfully tapped into the zeitgeist of the 'modern', much as Blair once did, and this has contrasted badly with Brown, a man in his mid-fifties who has been in office for 11 long years.

It will be interesting to view the weekend opinion polls to see whether Brown's 'relaunch' conference speech (how many relaunches has this man had - was that his 102nd?) has helped his dire personal ratings, humanising him, and whether that in turn gives Labour a much needed fillip in the polls.

More to follow later on specific slides...