Brown's Recession

The ONS has said today that Britain has experienced its first quarter of negative economic growth since 1992. The economy has contracted by 0.5%. This contraction follows 63 quarters of consecutive economic growth and one quarter of zero growth. The size of the contraction was worse than most economists expected and they now believe will be entering a period of prolonged recession rather than just a technical recession - i.e. two quarters of economic growth. Another piece of bad news is that the value of the Pound has been plunging. It is now trading at 1.55 to the US Dollar. Back in May it was 2 Dollars to the Pound. It is further evidence of our weakening economy which comes off the back of last week's news that unemployment has seen its steepest rise for 17 years.

So, who is to blame?

If you listen to our Dear Leader, Gordon Brown, it is all the result of global economic forces, particularly America. (Can one imagine Tony Blair, John Major or Margaret Thatcher pinning all of Britain's problems on its closest ally?)

Of course it is true the world’s economies have battled a set of roughly simultaneous shocks, but it is also true that these differ in their scope and reach. There has been a commodities shock (now rescinding) that hit all economies more or less equally through sharp rises in food and energy prices; a credit shock global in reach but uneven in its impact, with the effects greatest in the US and UK and least marked in Japan and the emerging world (the Eurozone lying somewhere in between); and a housing shock, with residential prices crashing in a number of economies including the US, UK, Spain and Ireland.

However, Brown is vulnerable, particularly on the issue of the housing shock because the government did nothing to dampen down the housing boom and if anything enjoyed reaping the benefits of the feel good factor as people saw the value of their homes grow ever greater. This is despite claiming in his first Budget as Chancellor in 1997 that: "I will not allow house prices to get out of control and put at risk the sustainability of the recovery.” Furthermore, Brown has justifiably come in for criticism for encouraging a ‘boom’ on the back of the highest household debt in the G7 (UK family debt is an astonishing 178 percent of household income). Brown also failed to warn against excessive borrowing like Vince Cable did; failed to do enough to encourage savings which can help families and individuals during an economic downturn; and created the tripartite system of financial regulation which failed to prevent the disaster of Northern Rock and subsequent banking collapse.

Brown looks ridiculous when he continues to contend that Britain is best placed to come through the economic downturn. You will not find a single economist who agrees with this widely over-optimistic appraisal of Britain's situation. The OECD has noted that Britain is particularly vulnerable because of its dependency on the housing and construction markets. The credit squeeze appears to be most potent when it is combined with falling house prices and strained household balance sheets – as in the US and (with some differences) the UK. However, whereas the UK shares America’s sectoral weaknesses – a housing and financial sector bust – it does not have the strengths of a larger economy or US-style productivity growth to rescue its economic performance. The fear for the UK is that, looking forward, tight credit conditions combined with Britain’s high levels of debt and rapidly falling house prices are likely to prove more troubling than in many other countries.

Brown's reputation for sound economic management is vulnerable on multiple fronts, and rightly so. His management of the public finances has steadily got worse since 2001; he has failed to put money aside during the good years to spend in the bad; he has over-inflated his achievements while taking credit for the achievements of others; he has been guilty of enormous hubris claiming to have abolished "boom and bust;" and he has sought to take credit for the good times while trying to distance himself from the bad.

This last point is important. We heard Brown say for a decade that Britain's strong economic growth was down to him. It had nothing to do with global economic factors. It had nothing to do, for example, with the industrial growth of China and India which led to a dramatic fall in the cost of imports and thus benefited national economies throughout the world in terms of low inflation and providing favourable conditions for low interest rates. In turn, this has led to inexpensive borrowing which helped fuel economic growth in Britain and around the world.

But now, the British economy has gone from boom to bust. Does Brown hold his hands up and say: "As i boasted that the good years were entirely down to me; i must also hold my hands up and take the blame." Of course not! Instead, he's completely flipped his argument. Now, Britain's poor economic performance has nothing to do with Brown's handling of the economy but is entirely down to global economic factors, particularly the poor economic management of the United States' government. Get real Gordon! You can't have it both ways!!!

In one respect the boom years were down to the actions, or should i say, voluntary inaction of Gordon Brown, though this is credit he will not want, but does deserve. The failure to control the housing boom, to keep a check on unsustainable government and household borrowing, and to regulate the banks correctly should all be on the political gravestone of one James Gordon Brown! They all contributed to what we now know as the 'Age of Irresponsibility' and an unsustainable boom that was destined for bust.

Sell your vote on ebay!

Well, that's what one guy tried to do. Max Sanders, a college student from Minnesota, thought it would be a laugh to sell his vote in the upcoming Presidential election on the auction site with a minimum bet of $10.

Unfortunately this prank or example of entrepreneurship (depending how you look at it) is illegal under 1893 Minnesota law. Apparently the law was used to prosecute quite a few people during the Prohibition era when people were selling their votes for booze! Not a bad exchange...

Anyway, ebay has taken the listing down (spoil sports) and Minnesota government officials (who obviously have too much time on their hands) are looking into prosecuting the poor chap who could face a maximum penalty of up to five years in prison and a $10,000 fine.

I bet Mr Sanders thought he was on to a winner - pocket the money and vote for who he wanted to vote for anyway!

PMQs - Debt and boom 'n' bust

The Commons was loud and boisterous today at PMQs. The Osborne donation-that-never-was story seemed to hang over the House with Labour MPs particularly rowdy as one would expect.

David Cameron decided to make public debt and Brown's hubristic claims to have abolished boom and bust centre stage. Cameron said Britain had the biggest budget deficit in the developed world and wanted to know if Brown regretted not building up a surplus like other countries had done during the good times. In a couple of good lines, Cameron said Brown couldn't lecture the banks on borrowing because he had borrowed so much himself and couldn't lecture the banks on transparency because he had hidden so much of Britain's debt off balance sheet.

The PM seems more comfortable and confident of late and that was apparent in his performance at the dispatch box. Yet he has lost none of his infuriating ability to quote Cameron out of context, avoid answering direct questions and blatantly lie with statistics. Brown lied once again about the state of the public finances saying Britain's national debt was only 37 percent (sorry Prime Minister, it's at least 43.6 percent) and low compared with other countries. This meant he could borrow more and spend more which was right for the economy during difficult times.

Brown made Cameron's fleeting bipartisan support a theme of PMQs returning to it several times. He wants the country to see Cameron as someone who is putting partisan political interests over what is best for the country. I wonder if Cameron and the Tory hierarchy regret ever making such a big deal about bipartisanship. It does not really work in the British Parliamentary system. Cameron's offer of support at his party conference may have got the tone right but substantively his words were empty because Brown does not need the support of the opposition parties to pass legislation. What is more, they should have known that Brown is the greatest factional politician there is who does not have a bipartisan bone in his body (anyone remember ERM and Black Wednesday?) Furthermore, it is ironic that at the same time he calls for cross party support, Brown seems to be becoming ever more political.

Cameron said that the PM did have cross-party support for the recapitalisation of the banks but that did not mean he had to support the rest of the government's economic policy - past, present or future. Cameron then moved on to Brown's hubristic claim to have abolished boom and bust.

The Prime Minister tried to squirm his way out of this one. He told Cameron that he had already said that he agreed with the Governor of the Bank of England (i.e. that Britain was in recession). That was not answering the question. Brown then asked was Cameron suggesting that the government should not have saved the banks? Clearly Cameron was suggesting no such thing. He then reprimanded Cameron for talking down the economy, saying Cameron himself had said that opposition leaders should not do such a thing. I think Brown is more worried that Cameron is talking down his economic legacy - what remains of it anyway!

Cameron hit back asking why Brown couldn't answer a direct question for once in his life. Again he asked whether Brown would admit he did not abolish boom and bust. And again Brown refused to answer the question. Instead he sought to explain once again that Britain's economic problems are all from those horrible foreigners. Cameron thought he'd have another futile stab at the question. He said Brown had taken the credit during the boom but was avoiding the responsibility in the bust. Again, PM have you abolished boom and bust? Again, no answer, just we will not return to 15% interest rates. Brown said what was important was judgement and Cameron and George Osborne (I wonder why Brown mentioned him?) had not shown any. He said the government would continue doing what was best for the country, with or without the opposition's support. Cameron then came to his last question. He declared that we were now in a bust and tried for the last time to get the PM to admit he hadn't abolished boom and bust. For shear perseverance you've got to give it to Cameron. Alas, still no answer from Brown who was making a mockery of PMQs by this stage. Instead he said the Tories had no policy proposals and no constructive solutions to offer.

Cameron needs to keep throwing these type of punches at Brown. He needs to show the PM is a man who is directly culpable and yet cannot admit his mistakes, resorting to outright lies to defend himself. Brown cannot be allowed to get away with his shameful management of the economy.

As for the minor battle between Nick Clegg and the PM, the Lib Dem leader asked about government help for pensioners in fuel poverty. The PM did not answer the question - that would have come as no surprise to Cameron. But he did get a good jibe in at Clegg's expense saying the state pension was more than £30 a week which won him a few laughs. Clegg then, in a prepared remark, accused the PM of being "all at sea" thus enabling him to also have a dig at Osborne by saying "if not on a luxury yacht." Clegg then said low and middle income families were being hit very hard indeed. Would the PM reverse the unfair system so those who use less energy pay lower prices? Will he do that yes or no? The PM said he welcomed positive suggestions but that Clegg would be in a better position to be heard had the Lib Dems not committed to £20 billion of tax cuts funded by cuts in public spending.

Finally, right at the end of PMQs, the Beast of Bolsover, the veteran Labour MP Dennis Skinner stood up and brought the Osborne story to PMQs. He asked the PM to give rock solid assurance that he would never ever meet a Russian billionaire. Skinner added "we'll leave that to sleazy party opposite." The highly partisan Brown replied that it was a very serious matter indeed and he hoped it would be investigated by authorities. Not very Prime Ministerial, but as Nick Robinson pointed out, it will ensure the story runs again as the PM has now commented on it. Andrew Neil on the Daily Politics made an interesting point. He said the Speaker was complicit in calling Skinner as it was not necessary to call him at all, especially at the end. The move has hurt Michael Martin's wafer thin credibility. He should avoid being so partisan too!

PMQs Ratings

Brown - 6 (Confident, but lied - again - and avoided answering questions - again)

Cameron - 7 (Good attacks but still failing to land the knock out blow)

Clegg - 6 (Steady, though not dazzling)

The Osborne-Mandelson-Russian-Rothschild-Superyacht story

The Osborne donation-that-never-was story has been whipping political journalists into a frenzy.

My view is that it is pretty much a non-story and one big yawn.

The media are clearly bored – obviously the last day or two have been slow news days. They are making a mountain out of a molehill.

Mandelson seems to be getting revenge on Osborne.

Rothschild seems very upset that Osborne had released details of a private dinner - breaking the old boys code - and has made his displeasure public, no doubt egged on by Lord Mandy - time to grow up, it's called politics.

The BBC, particularly Robert Peston, seem to be waging a vendetta on Osborne.

There has been a ping pong of versions of events between a politician and a hedge fund manager - who to believe? At least the politician has published a full version of events.

At most, Osborne has shown an error of judgement getting on bored the superyacht.

But nobody has done anything wrong. No law has been broken. Osborne neither solicited funds nor accepted them. The story seems to now revolve around whether the Russian billionaire was being encouraged to donate via one of his own British based companies and for the paltry sum of £50 grand. £50,000!!! Absolute peanuts. Why would such a small amount have been asked for? Moreover, the practice is not even illegal. What a non-story!!!

For those who want to read more, check out Iain's Dale's post on the subject.

Other than that this is definitely a case of 'Nothing to see here, move along…' Zzzzzzzzzzzzzzzzzz

Obama to win but Republicans back in 2012

I've been sent news and a helpful report about a CentreForum event that took place at the Bloomberg's London office entitled: “America Votes: Implications for the US and the World.” The two speakers were Dr Stefan Halper, University of Cambridge, and Sir Robert Worcester, founder of MORI.

Both men said, unsurprisingly, they expected Senator Obama to become the next President of the United States.

They said it is too late for Senator McCain to change strategy and shift tact. There are no more debates left. However, they said if McCain is to have any hope of winning he will need to convince the one in five floating voters who are either white, young educated women or older white people to vote for him. He has no chance of winning round Black or Hispanic voters. However, his current attacks on Obama’s character are turning off the women voters he needs to attract.

They said if he fails to win round the floating voters the only hope for McCain would be a terrorist attack (unlikely, though not impossible) or a major Obama gaffe (again unlikely, given Obama’s cool, cautious character).

Some have suggested the so-called ‘Bradley Effect’ could come into play. They said they thought the Bradley effect would be unlikely to determine the outcome of this election. They said if it were to be prevalent it would be in the ‘red’ states (i.e. Republican states) and only affect the polling results by 2 percent nationwide at most. However, if the election was very close then it could of course have an impact if it did indeed materialise this election.

The choice of Sarah Palin by McCain as his running mate was strongly criticised as a strategic and tactical mistake. He had only met her once before and due to the lack of time left for him to choose his running mate, scrutiny of her suitability was minimal. She fitted the profile the Republicans were looking for: woman with kids, pro-life, pro-guns, and folksy charm to appeal to the Western states. However, she was all this for the first two weeks but then her credibility began to unravel in the television studios. In addition, she comes from Alaska which does not have many Electoral College votes and the state always votes Republican anyway. McCain would have been better choosing someone from a swing state. Furthermore, McCain was badly advised if he thought that pro-life Palin would be able to win over the disaffected but pro-choice Hilary Clinton female Democrats. McCain’s choice of Palin has damaged his credibility in terms of judgement.

Even though they thought Obama would become President, the panel said Obama is likely to disappoint the rest of the world, particularly Europeans. He will not be the radical departure from the Bush years they think he will be and the enormous expectations people have for Obama can only lead to disappointment. If he does have a single radical idea in his head, and the panel was hugely sceptical that he does, he ought to try and implement it immediately before Congress and the rest of the world ends his honeymoon period. For Obama’s part, he is likely to become very frustrated with the rest of the world, especially the Europeans. He has made Afghanistan (and Pakistan) key to his foreign policy but he is unlikely to find any joy in persuading European governments to put more troops on the ground and in conflict situations.

Predictions

Sir Robert Worcester – Obama will win; Gordon Brown will be the best friend of the new President, whoever he is; 2012 – expect a Republican recovery, expectations are far too high for Obama; and the Republican candidate for 2012 will be General Petraeus.

Dr Stefan Halper – Obama to win; and with a Democratic Congress very likely, Obama will find it really difficult to win a second term in office. Americans do not like one party in control of both Houses of Congress and the Presidency.

British Politics

The panel also briefly touched on UK politics. Sir Robert said Cameron had grown enormously in stature these past three years. However, he said Cameron’s biggest mistake has been ignoring the fact that all leaders should have a kitchen cabinet within their organisation which fully utilises all a party’s experience. He said people like John Gummer and Ken Clarke should be brought into Cameron’s inner circle and expected they would be closer to an election.

ICM gives Brown no bounce

The latest ICM poll has been released and shows Brown has got no benefit from his so-called 'Superman heroics'.

Tories are unchanged on 42 percent and Labour are also unchanged on 30 percent. The only movers are the Lib Dems, up 4 points to 21 percent.

This will be hugely disappointing for Brown. He has had the best media coverage for months and months and yet still he is 12 points behind and no more advanced than after the Conservative Party Conference.

It is possible that Cameron's speech on Friday in which he took the gloves off and put the blame on Brown for the country's economic woes and got him some much needed media attention may have cancelled out Brown's 'Flash Gordon - Saviour of the Universe' routine.

All-in-all I would expect Cameron to be pretty pleased with how his lead is holding up.

Voters have clearly decided Prime Minister Brown is not for them!

Brown lies again

Brown has just told the Commons that Britain's national debt stands at 37.6 percent of GDP - thus 'allowing' him to borrow, borrow, borrow and spend, spend, spend!

Brown is playing with figures. He used IMF figures, however, Britain's own Office for National Statistics (ONS) says our debt actually stands at 43.6 percent. Brown only quotes IMF figures because they don't include Northern Rock which the NAO ruled against Brown by saying it must be included. Britain's national debt is even higher if PFI is brought on balance sheet.

Labour and Keynesianism

Labour is to return to Keynesian economics apparently according to weekend briefings - it is to spend the country out of a recession.

However, as the Adam Smith Institute notes, Labour only seems to have understood one half of what John Maynard Keynes advocated.

It is true that he said governments should increase spending in a downturn to help stimulate demand in the economy. However, he also used to advocate saving money in the good years so that money could be spent in the bad.

Gordon Brown's economics involves high public borrowing and spending in the good and bad years.

The result? The highest debt in the world and obscene burdens to be borne by future generations.

UPDATE: Andrew Neil has an excellent post about the marginal effects Keynesian economics has had historically with helping revive an economy during a downturn and cut unemployment. It failed when FDR tried it and most recently when the Japanese have tried it in the 1990s. It will fail again when Labour tries to increase spending and bring forward its big capital investment projects. What this country needs is tax cuts!

Time for tax cuts

Nick Robinson has a good post today arguing that David Cameron has a problem with the economy; that is, he does not have much to say. Robinson argues:

• He can’t say that he predicted the banking crisis because he didn’t;
• He can’t say he has a better answer because he has backed the government’s recapitalisation;
• He seems to have ruled out tax cuts saying that the “cupboard is bare” and as a “fiscal conservative” he won’t borrow money to fund a tax cut; and
• He won’t spend his way out of trouble arguing that it is not a cost free answer.

What Cameron has been able to offer has been measures to give small businesses help such as a 6-month VAT holiday and a short-term 1% National Insurance cut. These may be worthy and all will help, but they are hardly sufficient in themselves to pull us out of a recession.

Cameron has said that Government has made two key errors – 1) profligate borrowing and spending during the good years and 2) removing the regulatory powers of the Bank of England. However, Cameron’s previous pledge to match Labour’s spending levels (it seemed clever at the time as it negated Brown’s ‘Tory tax cuts’ attacks) undermines his argument that Labour spent and borrowed too much as does the lack of serious and sustained warnings from him about government debt levels.

Before the financial crisis and economic downturn, Cameron’s economic policy was “Spending the proceeds of growth” – a mixture of tax cuts and government spending/investment – which is clearly no good anymore given there is no growth. Cameron has yet to offer an alternative economic policy.

Cameron’s argument that the Conservatives wouldn’t have got us into this problem is not enough on its own. The media do not seem interested in his “we wouldn’t start from here” argument as they seem far more interested in what remedies he has for the future – as do voters.

Labour have made it clear that they will head off to the Left with their Keynesian stimulus package – i.e. they are going to try and borrow and spend their way out of trouble like all Labour governments do. The Lib Dems have shifted to the Right unexpectedly with pledges to cut taxes. And what are the Tories doing? They are tinkering at the edges with small initiatives while essentially saying the economic realities they face precludes them from offering a strong lead in any direction. This is what Cameron is doing by trying to link his lack of options to Labour’s decade of economic mismanagement. But this is not what the other parties are saying and doing.

Cameron seems determined to cling to the centre, matching Labour’s current spending plans while avoiding any specific pledges to cut taxes. This just won’t do anymore. The situation has changed and that means new ideas are needed. He cannot continue playing safe indefinitely. Fiscal levers need to be pulled and Cameron needs to make up his mind and pull one of them properly. His choices are more and more spending or tax cuts.

This is back to the future territory. The Conservatives need to re-fight and win the arguments of the 1980s all over again. How has it come to this that the Tories have let Labour turn ever higher public spending and ever higher public debt (the highest in the world) into a positive? How have the Tories let Gordon Brown spin public spending as ‘investment’? How have the Tories let Labour smear tax cuts? The answer unfortunately has to be successive weak and misguided leadership.

The Conservatives need to have the intellectual confidence to win this ideological battle.

Cameron should be bold and courageous and offer tax cuts. The political climate has changed. Nick Robinson says this is a trap Brown is laying so that he can once again use his favourite ‘Labour investment versus Tory cuts’ attack. So be it. Cameron should take him on and make the case for tax cuts.

For too long Tory leaders have been silent. It is not as if he would be sticking his neck out anyway as the Lib Dems have led the way and this should make it easier for him. Also the Tory supporting newspapers of the 1980s and early 1990s will return to the fold. The Murdoch papers and Daily Mail in particular would relish the battles of the 80s again.

To fund his tax cut Cameron should either cut public spending (unlikely in a recession and will play into Brown’s hands) or borrow money. He should do the latter. Labour and Gordon Brown no longer have a foot to stand on. They cannot claim Cameron is offering unfunded tax cuts Cameron when its own spending commitments are unfunded paid for by more and more borrowing. Cameron should also inject some economic realism into the debate. He should tell the voters some hard truths and link them relentlessly to Brown’s handling of the economy. He should also attack Brown’s spending, destroying the spin of ‘investment’, and hammer home the message of a wasteful, bloated state. Brown should not be allowed to just create unproductive public sector jobs. In a time of a recession, Britain does not need more bureaucrats! Finally, Cameron needs to stop Brown’s argument that a big state is the solution from taking hold. We have had Brown’s big state for 11 years and all his spending, regulation, tax increases and red tape have not stopped us from entering recession but have helped lead us here!

And if Cameron does not offer tax cuts and continues with his cautious strategy? He could still win at the next general election. He still holds a 8-9 point lead in the opinion polls and the “time for a change” sentiment among the electorate remains strong. Furthermore, the Item Club says we’re now in recession and won’t come out until 2010. Consequently, the economic recovery is unlikely to be in time to save Gordon from the wrath of voters upset with becoming unemployed, having their houses repossessed and their living standards fall. But there is still a small chance Brown could win, especially if Cameron lets him frame the terms of the debate around more public spending and a bigger state. Finally, remember 1992 – John Major won despite being in a recession.

Cameron should be bold, not cautious. He should take the fight to Brown!!!

Tories 'only' 9 points clear

The latest ComRes poll, and first of many this weekend, shows that the Tories' lead has been cut to just 9 points.

Depending on which angle one looks at it, it can be construed differently:

• Tories did have a 20 point lead in the summer. Now it is in single digits.
• This puts us in hung parliament territory.
• However, Tories are still on 40 percent.
• Even after Brown doing his 'Superman' herorics (or should that be Robin?) Labour are still 9 points behind.

The narrative to come will depend on the rest of this weekend's polls and the polls from the next couple of weeks.

Superman? More like Robin...

It appears that Gordon Brown AKA Superman, Saviour of the Universe, the "man with the plan" (according to Harriet Harman), etc was nothing of the sort.

There we were, led to believe that it was our Dear Leader who had 'saved' us from financial ruin when in fact the "man with the plan" was Alistair Darling, the Chancellor all along.

An article in today's Times reveals:

"The Times can reveal today that the Chancellor believed that recapitalisation was the “only show in town” some time before Gordon Brown and that the Prime Minister signed up only after the intervention of his ministerial fixer and enforcer, Baroness Vadera.

Today Mr Brown is happy to take the plaudits but eight days ago it looked just as likely that he would be content for history to remember the bailout as “Darling’s plan”. In a conference call with Mr Brown, Mr Darling agreed that it was time to get tough. Briefing reporters in the International Monetary Fund’s headquarters, he said: “It is terribly important that governments don’t just talk about what needs to be done but they actually get on and do it.”

So, McCavity Brown was happy to have the plan associated with Darling in case it failed. What a surprise. Brown is nothing if not courageous.

But most importantly what this Times article shows is that analogies made between Brown and Superman are all wrong.

If anything, Brown is no more than a boy in tights - Robin to Alistair Darling's Batman!

Cartoon: He's not the Messiah...

Brown gets two new spin doctors!

How many does Brown need?

The Prime Minister that claimed to want to move past the constant spinning of his predecessor is no longer content to just spend more taxpayers money on spin than Blair, but now has two political spin doctors where Blair managed with just one.

This is perhaps understandable given that Brown is hopeless with presentation, especially giving interviews. The poor bloke needs all the help he can get.

Damian McBride - McPoison to his enemies such as Lord Mandy the Dandy - has been replaced with John Woodcock (ex SpAd for John Hutton at the Department for Business) and Michael Dugher (currently a special adviser for Geoff Hoon at Transport).

The news was broken by Rosa Prince earlier.

Justin Forsyth, who had temporarily filled the void left by McBride who assumed a backroom strategic role, has now also returned to his backroom role in international development.

Andrew Sparrow says exact details of their "job share" have yet to be finalised, but there's going to be an increased emphasis on spinning the regional media.

It will be interesting to see how this works out for the PM. The working relationship between the three will need to work well without egos intruding. How will responsibilities be divided? Who will the media turn to for briefings - both equally? One can easily see how an unhealthy rivalry could develop between Woodcock and Dugher with both wanting to be seen as top dog internally (i.e. with PM) and externally (with the Lobby).

Problems could lie ahead...

Hallelujah! Cameron takes the gloves off!

Slavish support for the government is over! Praise the Lord!

Cameron told the City of London today that Brown's handling of the British economy had been a "complete and utter failure." He said he would "never pull my punches in explaining how this government has brought Britain down."

Cameron has finally taken the gloves off. He said the economy was broken and that Labour couldn't fix it "not least because they cannot own up to any mistakes." He said Brown had made "irresponsible" decisions that had led to a period of "irresponsible capitalism." Brown had "spent and borrowed without restraint," which Cameron called "intentional" negligence, and boasted that he "could abolish boom and bust and that the good times would last forever." Returning to a theme of his conference speech, Cameron said: "Over the past decade, we have seen a total breakdown of economic responsibility."

It was an excellent speech! Just what was required. The Conservatives have been worried that political point scoring would not be looked upon kindly by the electorate during the current economic difficulties. But as Nick Robinson has pointed out, the Conservatives have had enough of allowing Brown his time in the limelight, seizing the initiative playing 'superman'.

The loathsome Yvette Cooper, Chief Secretary to the Treasury, has accused Cameron of adopting bipartisanship as a "short term gimmick" and criticised him for playing "juvenille political games."

Of course it's in Labour's interest that it has a benign opposition that slavishly supports the government. But it is not in Britain's interest!

Oppositions have a duty to support the government during a crisis. This they have done - possibly for too long. It must also be remembered that Cameron, as Leader of the Opposition, also has a duty to tell the public about the abject failure of this tax 'n' spend Labour government!

Cameron has to change the PM's narrative that the economic downturn is purely down to global factors. Luckily for him, Brown's tenure in office has given him ample ammunition to use against our Dear Leader!

As a final point, let us not forget how Labour and Gordon Brown behaved at the time of Black Wednesday - the previous financial crisis. Labour had supported joining the ERM yet that did not stop Brown making opportunistic political capital out of an economic policy he in fact supported!!!

If Cooper wants to talk about political games, fine - Labour doesn't have a leg to stand on!!!

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...

PMQs - Harman out of her depth

William Hague, standing in for David Cameron, gave an accomplished performance as ever though it was one which was more restrained than normal. The Conservative front bench, which has showed signs of removing its bipartisan shackles the last day or two, obviously still feels the time is not right to go for the government's jugular on the economy. However, there was much more critique of the government than last week's woeful efforts - thank god!

Hague challenged Harman on the rising unemployment figures and called on the government to reform the insolvency laws.

In reply, Harman said the government had made changes to the insolvency laws in the 2003 Enterprise Act. She said unemployment was lower than in 1997 and announced a £100 million package to help people back into work.

Hague retorted that she should not be so complacent about unemployment by referring to 1997 as unemployment is forecast to reach 3 million (if it does it will stop Labour harking back to the 1980s!!!), and he clinically took apart the £100 million programme which is not all it seems having been a combination of a re-announcement and money taken from an existing budget (what are the chances with this government?)

Harman said she wasn't being complacent and said Hague should not write-off the economy (Is this going to be Labour's line of defence - any criticism of the government's handling of the economy will be turned around as unpatriotic; running-down the economy built off the back of hard working Britons? What a load of crap!)

Hague then came up with another practical suggestion about stopping pensioners being forced to buy an annuity now that would provide a poor pension given the depressed stock market. He called on the government to act on the Tory proposal without delay.

Harman said she was concerned about pensioners but Hague said it was all very well being concerned, what was needed was swift action.

Harman then said the last thing the Treasury needed was advice from her or from Hague. (Bipartisanship was beginning to look decidedly tenuous).

Hague then asked what the government meant when it said institutions bailed out will lend on 2007 levels - the height of boom and bust?

Harman replied that banks should indeed lend and not sit on capital. She said the government did not regret its investment in public services and claimed that the government had reduced public debt from 43% of GDP in 1997 to 37% thus allowing themselves now the space to increase government debt to back the economy if necessary. (A whopper of lie from Harman here. It was a 'Brownie' of which the PM would have been proud. Government debt currently stands at 43.4%, not 37%, so there is no 'room' to increase borrowing and keep the economy stable as she claims if one is still supposed to be sticking to the government's own 40% threshold. The government simply borrowed too much money during the good years).

In his best intervention, and most partisan, Hague said the government was "no longer in a position to boast about the economic record" of the last 11 years. He said Gordon Brown's claim to have abolished boom and bust was “one of the most foolish, hubristic and irresponsible claims ever made by a UK prime minister.”

Harman said it was a serious moment for the economy which was met with derisory laughter in the Commons (well, duh!) and she again repeated her line that Hague should not write off the British economy or compare it unfavourably with other countries. (Come off it! Brown has compared the UK's economy to other countries during the good years to make himself look good for a decade. Now the economy looks like going down the toilet, the government can't claim that international comparisons are suddenly not allowed). She concluded by saying the PM will take action to protect the UK economy and help stabilise the global situation and weakly described Brown as a "man with a plan" - using Cameron's line from the Tory conference.

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Vince Cable got to his feet a short time after asking how prepared was the government for the major rise in unemployment at a time when it had cut staff at benefit and unemployment offices? He also asked whether Harman could make sure those looking for loans were treated as favourably as the bankers were this week.

Harman said he was absolutely right. She said action had been taken to ensure credit is flowing back into small businesses and the housing market. She said the latest jobs figures were very concerning but claimed there were 600,000 vacancies in economy. (That will put people's minds to rest).

Cable then said he had got the sense that the minister didn't realise it's an emergency. He asked why hadn't the government and Tories changed their vow of silence on interest rates. He said cuts were necessary to prevent a deep slump.

Harman said she didn't accept his comments on the government being unprepared. And in her best moment of the entire PMQs she said she didn't know what Cable was talking about in relation to interest rates as there had been a cut last week.

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Other points worth making about PMQs was that Tory backbenchers seem determined not to let the government off the hook about the economy and don't seem committed to bipartisanship. A couple of Tory MPs brought up Equitable life and Philip Davies accused Brown's tripartite regulatory regime of failure. Harman struggled with these questions but said it was wrong to say Brown was responsible for the banking crisis when its origins were global.

The Tory front bench really needs to start hitting Brown hard on his profligate spending/borrowing, hubristic claims to have ended 'boom and bust' and the fact that his own regulatory system was not fit for purpose.

Returning to Harman though, i'd guess that if one was a Labour supporter, watching her would prove a nervous experience. Watching her deputise for the Prime Minister is like watching a car crash in slow motion.

Today, the politically correct Leader of the House looked badly out of depth, awkward, and uncomfortable - particularly having to deal with the numerous economic questions that came at her.

PMQs RATINGS:

Harman 5; Hague 7; Cable 6

PMQs: Will Harman repeat her jokes for a third time?

With the PM in Brussels today continuing his mission to save the world, the deputies will take over PMQs at 12pm.

We'll be returning to the Harriet Harman show for the third time.

I'm just praying that Harman won't use the same tired jokes against Hague she's used during her past two efforts. The first time she deployed them, including an attack saying she should be facing Theresa May, they were quite effective. However, the second time Harman faced Hague she produced an almost carbon copy performance - but by then we'd heard it all before.

So what are the chances Harman goes for a third undistinguishable sequal?

UPDATE: Thankfully she spared us (though her performance was still poor!)

Thatcher is not to blame

As a post script to my earlier post, it is worth rebutting all those in the media who are indulging in the worst kind of revisionism by blaming Margaret Thatcher for the country's current woes.

Mary Dejevsky has an excellent column in today’s Independent in which she argues correctly that Mrs Thatcher was always a strong supporter of ‘sound money’. Those saying the financial crisis has ended Thatcherism never understood what she stood for. She never supported the Wall Street ‘Greed is good’ mentality nor did she believe in the law of the jungle. The Conservatives have always supported effective regulation but have rightly decried excessive, burdensome regulation much favoured by the Left. Moreover, Mrs Thatcher, 83 yesterday incidentally, was not in love with the rich like New Labour has been – fawning over them and holidaying on the superyachts of foreign billionaires!

Finally, a question to all those on the Left in the media who continue to see Mrs Thatcher as the root of all evil – who the hell has been in power these last 11 years? I know Mrs Thatcher had a huge political impact during her 11 years in office but her time as PM ended in 1990 – 18 years ago!!!

If the finger of blame is to be pointed, let us point it at those who have held office during the ‘Age of Irresponsibility’ - Hang your heads in shame Brown and Blair!!

Even if the media is having trouble attributing blame, the British public certainly won’t do come May 2010!!!

Is Brown back in the game?

Temporarily it would seem, but ultimately he is still doomed to electoral defeat and here’s why:

Brown’s/Labour’s poll bounce, as Peter Riddell has pointed out in today’s Times, has largely come at the expense of the Lib Dems rather than the Tories whose poll ratings are largely holding steady.

The Glenrothes by-election could derail any Brown/Labour recovery if the seat is lost to the SNP. Expectations of a Labour victory, which were very low before the party conference season, will now be much higher, which means so are the political stakes for Brown.

Change is still triumphing over experience. For all the talk about Brown having successfully changed the political narrative with his “no time for a novice” conference speech, the public still want change and this is possibly the biggest obstacle facing Brown in his attempt to win Labour a fourth term. The latest Populus monthly poll for the Times (7 October) showed that despite the economic problems, 65 percent still agree it is “time for a change.”

Brown is benefiting from actually being able to take action whereas his opponents can only talk and offer bipartisan support in a crisis. Being able to act has made Brown look authoritative and strong – attributes that were once associated with him. But his return to form, if it can be called that, is largely because the financial crisis has allowed him back into his comfort zone - but this will not last forever. Brown cannot go on indefinitely playing Chancellor. This is his favourite role and the one he is most comfortable in. Eventually, when the financial crisis subsides, he will have to go back to playing Prime Minister and we all know after 18 months in the job he isn’t cut out for it. He is a prime example of a No. 2 not being cut out for being a No. 1.

The wall-to-wall, day-to-day financial crisis will not last forever and will instead be replaced by coverage of families experiencing the pain of recession. This will hurt Brown. For all he might be getting credit in the short term for his present handling of the credit crisis, he won’t get any credit but just blame when people’s experience of the ‘real economy’ involves falling living standards, rising unemployment and house repossessions. This is going to be the Conservative’s line of attack – Brown, well done on the banks but you haven’t done anything to rescue the ‘real economy’. Their strategy has been outlined by Tim Montgomery over at ConservativeHome.

Brown struggles to empathise with people. Unlike Blair and Cameron, he does not have high EQ (emotional intelligence) and struggles to find and use the required language. He is much more comfortable dealing with facts and statistics. When the ‘real economy’ takes a turn for the worse and people begin to feel real financial pain and hardship, Brown will not be able to comfort people with his technical jargon and barrage of ‘tractor statistics’. Cameron will have a clear advantage over Brown – in terms of empathy and not being culpable for the downturn.

Brown’s notorious propensity towards boasting and hubris will also come back to haunt him. For the past decade he has been telling us that he had ended boom and bust ("Under this Government, Britain will not return to the boom and bust of the past." Pre-Budget Report, 9th November 1999; "Britain does not want a return to boom and bust." Budget Statement, 21 March 2000; "So our approach is to reject the old vicious circle of the...the old boom and bust." Pre-Budget Report, 8 November 2000; "Mr Deputy Speaker we will not return to boom and bust." Budget Statement, 7 March 2001; "As I have said before Mr Deputy Speaker: No return to boom and bust." Budget Statement, 22 March 2006; and "And we will never return to the old boom and bust." Budget Statement, 21 March 2007). Well now the boom is over and has been replaced with bust. And even now Brown can’t help himself boasting that the rest of the world needs to follow his lead. Brown has framed himself as the ‘Pied Piper of Fife’ of the financial crisis. However, his triumphalism will come back to haunt him when the real economy takes a turn for the worse. The Tories are said to be cataloguing examples already.

On the subject of Brown’s quotes, one comment he made in his press conference on Monday (13 October) may come back to haunt him. The Daily Mail’s Benedict Brogan drew attention to this remark from Brown: "In future regulatory systems there will be both greater attention to issues of solvency and liquidity and probably a pro-cyclical attitude where in a period of growth you have got to lay aside more for the possibility that there will be contractions." Is this not an admission that the roof should have been fixed while the sun is shining? I’m sure George Osborne has been making this point…

Other comments Brown has made recently are also worth noting. He has called this the “Age of Irresponsibility.” Of course Brown was only referring to banking practices but it also lends itself to a description of Brown’s 11 years in office as the Tories pointed out during their conference. As does another Brown attack. He has condemned banks for hiding bad assets “off balance sheet” from regulators. However, Brown does just the same with the billions of pounds of Private Finance Initiative debt he has built up over the past decade. This debts/liabilities are not on the UK’s balance sheet!

When media coverage inevitably shifts from financial crisis to recession, the Tories and Lib Dems will be able to truly take the ‘bipartisan’ gloves off and attack Brown where he is particularly vulnerable; namely, that he was responsible for excessive, profligate public spending/debt; having presided over and encouraged an unsustainable housing boom despite saying in his 1997 Budget Statement that "I will not allow house prices to get out of control and put at risk the sustainability of the recovery;" having overseen the highest household debt in the G7 (178 percent of household income) and done nothing about it; and for having created the financial regulatory regime which has manifestly failed.

In short, Brown is still doomed!!!

Gordon plans to campaign in Glenrothes

Guido has a copy of a letter from Gordon Brown to his Labour MPs and Peers asking them to campaign in the Glenrothes constituency.

The Glenrothes by-election is hugely important and a Labour defeat despite a 10,000+ majority would bring Gordon's 'bounce' crashing back to earth.

Interestingly, the letter reveals that he plans to campaign in the constituency in what would be a break in precedence - PM's don't campaign personally in by-elections. It shows that Brown is obviously feeling much more confident after his 'Gordon saves the world' routine he has performed during the current financial crisis.

However, Brown has given himself and his proposed visit a get-out-clause in his letter saying it is "subject to the global financial situation." In other words, 'McCavity Brown' might still do a disappearing act if his bounce subsides and he no longer feels a visit to the constituency is in his political interest!!!