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Why Scotland wouldn’t do an Ireland or Iceland

Nov 17

Posted by Jeff in Economy | 13 Comments

The Icelandic and Irish economic problems have been regularly used against the arguments in favour of independence, largely thanks to Salmond’s ill-timed boast that Scotland should join them in an arc of prosperity. So often are these two countries mentioned as independence bogeymen, by seemingly otherwise wavering voters, that it is clearly vital that Yes Scotland obliterates this fear as an obstacle to victory in 2014.

Iceland
Iceland is a country of ~300,000 people that has built its economy on fishing and smelting aluminium. The economy was in a comfortable position around 2005, enjoying average annual growth of 3% since 1995 and the public debt was a comfortable 25% of GDP. This success had led the small island to be festooned with academics, containing more researchers per capita than any other country in the world. Iceland could be summed up in two words around this time – educated and restless. Reckless was waiting in the wings.

Caught up in the heady tailwinds of aggressive Capitalism, stories abound of successful fisherman turning their hand to currency exchange hedging and advanced derivative trading. City boys steamed in, took over and a crazy Wall St mentality quickly materialised. The ensuing madness could be summed up with a simple metaphor*: if one Icelander owned a dog and the other a cat, and they valued each animal at $1bn, they could lend each other their animals and use that $1bn asset to trade and grow around the world. Fantasy economics, in keeping with the US’ commercial debt papers but far outstripping it for sheer lunacy. Academics around the world provided growing warnings that the Icelandic economy was out of control but the male ego could not be pierced and foolish financing continued.

The UK bought what the former fishermen were selling hook, line and sinker, ending up with $30bn of exposure locked up in this tiny country. If you think clever people should have seen what was coming, keep in mind that Oxford University alone invested $50m. It seems that Brits were the greediest investors, chasing the highest yields and not stopping to question how sustainable Iceland’s promise of a 14% return actually was. Not very was the answer.

Would Scotland make the same mistake? We have plenty of fisherman but I don’t see them being so cavalier as to plough into investment banking any time soon. In a way our naturally curtailed ambition would work to our advantage there. Could Scottish banking assets replicate Iceland’s at the height of the storm and rise to being worth 1,400% of GDP? Unlikely given our balanced economy and 5m population to Iceland’s 0.3m. RBS has had its wings clipped and HBOS has been lost to Lloyds, all with the Scottish economy still in reasonably good shape. There is little scope for any repeat of the recent past from now avowedly risk-averse financial institutions and, furthermore, there would be little appetite for the public to bail out any wayward private companies down the line.

Ireland
Ah Ireland, you charming fools. A population size not dissimilar to Scotland’s, a political outlook not dissimilar to Scotland’s and an economy not dissimilar to Scotland’s. Even their football results are gravitating towards ours. Why wouldn’t we make the same mistakes as the Celtic Tiger, especially given we (perhaps) wouldn’t have the safety net of the European Union beneath us as we stagger into a new future alone?

Well, let’s back up a bit.

Irish banks lent cheap money backed by low interest rates and low corporation tax rates to companies that built homes and properties in order to keep the manic chain of credit -> profit -> credit going as quickly as possible. When credit was choked and properties were suddenly unable to be sold, companies and individuals found they didn’t have the cashflow to service their debts and banks found they had €bns of loans that were unlikely to be repaid. The 13 year Irish bubble had been burst, with devastating effect.

Foreign debts of €110bn could not be met and a tangled web of global exposures unwound over the next few years. In Ireland, recession hit, unemployment rocketed (14.6% at Feb 2012), immigrant workers left, shares plummeted, governing parties were ejected from Parliament and austerity budgets were drawn up. Not great craic.

Could the same mistake be made in Scotland? It’s more likely than repeating Iceland’s many errors to be sure, and given Salmond has heavily hinted that he would like Scotland to drop Corporation Tax rates (Ireland’s is 12.5%), then a second Celtic Tiger getting into trouble through cheap money isn’t out of the question. However, lending is anaemic right now and financial institutions in Scotland will have learned most of the lessons of the past. The only way that Scotland could replicate Ireland is to have a golden decade ahead of us, time enough to join the European Union and time enough for academics and risk modellers to warn us if we’re getting ahead of ourselves.

Furthermore, the three banks that were most responsible for the Irish banking crisis, Anglo Irish, Bank of Ireland and AIB, were all truly Irish banks with no parent company providing oversight in a global context. Scotland may have RBS, but the rest of the banking competition, Barclays, HSBC, Lloyds and even Virgin, all have wider controls in place that would avoid their being colectively too big and too reckless for one country the size of Scotland. Even RBS’ potential for disaster is shackled by Government ownership for the near future, not to mention its already clipped wings, and I don’t see Airdrie Savings Bank rising up and taking the Scottish economy with it any time soon. It’s quite simply a different ball game in Scotland to the hurling of money that was sloshing around in Ireland in the past couple of decades.

There are further ways to mitigate the risk of ‘doing an Ireland’, if the Yes Scotland alliance is brave enough to adopt truly radical policies. House prices overheated in Ireland, and to a lesser extent in the UK, because too many people saw themselves as a property magnate. Bricks and mortar are the building blocks of a decent pension but taking on crippling debt to hoard a wide property portfolio is the kind of selfish, quick buck philosophy that only causes problems in the long term. With house prices currently still too high, and accommodation shortages well publicised, a clean, golden bullet solution for an independent Scotland would be to simply ban second homes. Put simply, safeguard supply by tempering demand.

If home ownership is the best route towards a comfortable pension, then surely we should clear a path towards as many Scots as possible getting to that stage. Individuals and couples with surplus money typically put it into an investment property or two, reducing the number of available properties to buy and also contributing to the rich getting richer and the poor getting poorer. Furthermore, this will drastically reduce the risk of Scotland having an overheated domestic debt problem as it will reduce household gearing. Sure, this policy would reduce current house prices and could exacerbate current problems by leaving homeowners in negative equity, but this downside would be factored in and negative equity isn’t a problem if you don’t intend to move home. Even for those that would move, a slight downsizing would be the solution given house prices would decrease across the board.

Exceptions could be made for bridging loans, moving between properties and holiday homes but at a fundamental level the message would be thus – Owning more than one property is greedy and not in Scotland’s collective best interests. It is a prime example of a policy that could work in Scotland, would have helped Ireland but wouldn’t even get a foot in the door south of the border, the type of policy Yes Scotland should be adopting to highlight where the change in independence could lie and how it is learning the lessons of the past. Indeed, as far as I’m aware, there’s no stopping the SNP adopting this policy at a devolved level from Holyrood before the referendum takes place. A few radical policies might not go amiss as the rather timid approach to selling independence hasn’t worked so well so far.

I’ll say something else about Ireland and Iceland that Scotland could learn from. They really are in it together, and that’s worth something. Is Scotland really bought into the direction of travel that the UK is taking? One would have to conclude that it isn’t, and that comes at a cost, financial as well as emotional.

Ireland and Iceland, even if in a financial hole, can look at health and education and justice and take a holistic approach to finding solutions. Scotland is unable to do this as we are shackled alongside the rest of the UK that wants to move in a different direction. That doesn’t make either side right or wrong but it’s like a 3-legged race with 2 different finishing lines. You can’t win.

One other benefit from the financial woes of our near neighbours is that other countries will learn from their mistakes. Scotland suffered deeply from the Darien scheme of 1690 but didn’t make the same mistake again until Fred Goodwin went on a swashbuckling adventure and helped to buy ABN Amro for a stupefying £46bn. One could say therefore that the still somewhat cautious, Calvinist Scotland is now safe from serious financial error until the 24th century.

At the very least, don’t let anyone smugly say ‘What about Iceland and Ireland?’ while shrugging their shoulders in a self-satisfied manner as if they’ve won the argument.

* several parts of this post loosely, and occasionally directly, derived from Michael Lewis’ wonderful Boomerang book

Steve Bell just loves puppet imagery

Nov 16

Posted by James in International, Media | 5 Comments

Today there’s been a veritable faeces-storm over Steve Bell’s latest cartoon, which depicts Bibi Netanyahu using laughable “peace envoy” Tony Blair and Foreign Secretary William Hague as puppets, with missiles unleashed behind him. One Times hack went so far as to call Bell a Nazi, although that appears to have been a misunderstanding. Bell defends himself thus.

But anyone who is even vaguely familiar with Bell’s work (and I am a fan) knows he loves this kind of imagery. All sorts of people are depicted, largely legitimately, as puppets in his work. All these works are copyright Bell or the Guardian or both – I couldn’t always find them on the Guardian’s site, but if anyone from the Guardian wants me to take them down, just let me know..

Racist about Egyptians?

Racist about Russians?

Racist about Americans and Iraqis?

Racist about Afghans?

It’s a thing Bell likes. It fits with a certain left understanding of the world, especially international relations. So-and-so is really controlling what’s-his-name. Sure, some people who are antisemitic use it too, so should that make it off-limits as a metaphor? How would you illustrate that idea?

And yes, having a menorah on the podium might seem off. But you know, it’s just how the actual podium Netanyahu uses looks. That same pic has the same furled Israeli flags that Bell drew for today, too. Again, it’s just how a Netanyahu press conference looks. I’m as anti-antisemitic as anyone, but criticising Israeli politicians for bombing civilians, and criticising those who support them in doing so, that has to be allowed. This just looks like another attempt to shout down critics by disingenuously conflating their legitimate criticisms with racism.

Where next after the triumph of elected police commissioners?

Nov 16

Posted by James in Constitution, Elections | 5 Comments

Some people are mumping and moaning about the low turnout for these new roles down south. But think how much each vote will have counted for – a much higher proportion of the overall turnout than any vote in recent memory.

Quality votes, if you like, rather than mere quantity votes.

Anyway, what’s next up in the Coalition’s rolling feast of democracy? The people, a select few of them at least, are hungry to vote for roles previously regarded by stick-in-the-muds as “non-partisan”, i.e. to be stultifyingly occupied by boring civil servants.

Where’s the progress in that? Where’s the democratic oversight? Is this what our ancestors died for? Here are some suggestions for the next posts which could use a little “people power” to bring them into the 21st century:

  1. Chief Scientific Officer
  2. Doctor
  3. The Director General of the BBC
  4. The Queen
  5. Traffic warden
  6. Returning officer
  7. First Sea Lord
  8. Head of planning
  9. President of the Supreme Court
  10. Head of HMRC

Think about the quality of candidates we’d get, too. Mr Delingpole might fancy the first on the list, for example, but I would press David Attenborough to run against him. First Sea Lord would attract some excellent candidates, keen to muck about in boats and with a thing for leadership – also look at the excellent hat you get (see above), and what an epic job title. I’d probably make a much better doctor than my doctor too – he never takes my requests for high-end recreational pharmaceuticals seriously.

And head of HMRC! What fun! Which companies should pay their full tax? You decide. Same thing with planning – the back-scratching opportunities would be immense. Traffic warden might sound like less fun, but a committed environmentalist could just do all the 4x4s and leave all the Priuses (Priii?) alone. And it’s working in the outdoors, keeping fit. Probably less competitive than the election we’d see for Queen, as well: there’d also be quite a lot of traffic wardens to elect. Thank goodness they wouldn’t all get a Freepost leaflet or we’d need to elect more posties too. Returning officer may also sound quite dull, but you get to pick who’s elected next time, so that’d actually be quite powerful.

Anyway, the logic is impeccable, and today the Coalition has made a great start. Three cheers for democracy!

Heaton-Harris and Delingpole referred to Northants police for possible breach of electoral law

Nov 14

Posted by James in Crime, Elections, Environment | 13 Comments

The Guardian’s splash today is eye-catching. Greenpeace, masquerading as the gloriously named Windefensible (shades of Chris Morris’s Nonce Sense), covertly recorded Chris Heaton-Harris MP making extraordinary admissions.

He set out a covert plan to pretend to run the Telegraph’s science-denial correspondent James Delingpole as a candidate, only to have him withdraw before putting his nomination in and to endorse the Tories. This scheme was designed to mislead the electors of Corby and to skew Tory party policy, and Delingpole played his role perfectly.

On one level, it’s funny, and they got caught before election day. On another, though, it’s extremely serious and potentially illegal.

The fact that Delingpole didn’t file doesn’t exempt them both from electoral law, especially Heaton-Harris, who as the Tories’ agent is effectively acting with the party’s authority.

How can a candidate be involved in electoral fraud when they don’t stand? Before we come to the law, the principle isn’t hard to understand. Let’s do a totally hypothetical example. Let’s say a leftish party of government faced a by-election after becoming involved in a war. If their rightwing opponents faked up an anti-war candidate to attack the government candidate from the left (in a way they couldn’t themselves, assuming they supported the war) that could be assumed to depress left turnout for the government candidate. Conversely, the governing party in that example could fake up an anti-war candidate, then have them fold just before nominations closed and get them to endorse the leftish candidate.

It’s fraud, essentially.

I’m no expert in electoral law, but there are at least two other offences potentially involved here, both as part of the 1983 Representation of the People Act. Were any donations made to Delingpole’s campaign by Conservatives? Section 71A on the control of donations may apply here if so. More obviously, Section 107 covers the “corrupt withdrawal from candidature”. Beyond that, false statements may have been made under the terms of Section 106, the section Phil Woolas was convicted under.

Update: it’s been pointed out to me by legal blogger @loveandgarbage that §118A of the 1983 Act confirms that a person becomes a candidate for the purposes of the Act no later than “the day on which he is so declared by himself or by others“, which Delingpole has clearly done, and is not dependent on the filing of nomination papers, payment of a deposit etc. That exposes Delingpole to far more of the Act’s restrictions, and may broaden the offences that need to be considered.

Anyway, I’ve asked the local police to sort it out. Letter below.

Hello all at Northants Police,
I note the Guardian’s cover story today about the covert arrangements between Chris Heaton-Harris MP, the Conservative Party’s agent in the Corby by-election, and James Delingpole, Telegraph columnist and putative candidate. I’m sure you’ll be familiar with the article and the film it’s based upon, but if not, it’s here: http://www.guardian.co.uk/politics/2012/nov/13/tory-mp-corby-anti-windfarm-film

It appears that both Mr Heaton-Harris and Mr Delingpole may have breached electoral law, including potentially sections 71A and 107 of the Representation of the People Act 1983. The former covers control of donations to candidates (depending on whether the donations mentioned were actually made to Mr Delingpole), and the second covers corrupt withdrawal from candidature.

Further offences of dishonesty may also have been committed specifically by Mr Heaton-Harris by his support for an apparently competitive candidacy, a candidacy we now know to have been devised by Conservative members and activists in order to skew both the election and party policy (the latter intention not being covered by electoral law).

Please can you let me know what action you might take with regard to these potential offences?

Yours
James Mackenzie

Two views on lobbying

Nov 14

Posted by Guest Blog in Holyrood | 2 Comments

Neil Findlay MSP has proposed a bill to regulate lobbying, and Better Nation is hosting the debate.

On one side, we have Willie Sullivan, director of the Electoral Reform Society, a former public affairs consultant (or lobbyist) who now campaigns for a fairer distribution of power. On the other, Alastair Ross, secretary of ASPA (the Association for Scottish Public Affairs – the trade body for the public affairs industry in Scotland). 

Let’s start with Willie’s case for.

For those of us who grew up in a house where the lobby was the bit you kept your wellies lobbying seems a strange verb. The provenance of the meaning is not straightforward. It may arise from loitering in the lobby of Parliament in order to convince members and government that a particular decision will be a good one, or it may have first been used to describe political wheelers and dealers who hung around in the lobby of the Willard Hotel in Washington in order to persuade then President Ulysses S Grant to make some decision or other, usually by buying him several drinks. Both of these origins probably assisted the arrival at the modern meaning, a meaning that is richer because of this.

The act of lobbying today still involves presenting arguments to those with power to try and ensure a policy, decision or legislation is made in a way that is beneficial to the agency (or its interests) making the argument.

So whether it’s bankers hoping to keep retail banking and investment banking closely linked, or if it’s Greenpeace asking for more taxes on carbon, they all want to have the opportunity to give the facts, figures, reasons and evidence to do something, or to point out the dangers and consequences of inaction, to those who have the power to make decisions and to those who advise them. This persuasion is not always a simple art. It involves all sorts of psychology and mythology, short term techniques, and long term strategies. Some companies spend millions of pounds paying experts to tell them how to go about it. There are global businesses that specialise in this work, some of whom have offices in Scotland. Many organisations have in-house ‘Public Affairs’ staff. Some focus on causes and campaigns, others stay strictly within the business sector. Often both personnel and companies will have had experience of working for good causes and for commercial interests. The divide is not as obvious as one might presume. The profession is the skills not the cause.

This is not to say that lobbying per se is wrong. It is in fact a fundamental part of our democracy. Interest groups and campaigns must have the opportunity to put forward their case and politicians need to know the arguments from as many perspectives as possible.  The problem is that some viewpoints can clearly dominate. Some of those voices can be many times louder than others. The resource that can be deployed, expertise purchased, the networks and relationships exploited, are very different for a multi-national than they are for a small community group or individual voter. Perhaps in the past we thought this was not something to worry about. If the legislative and regulatory conditions meant that banks could prosper, then surely we all benefitted? If Rupert Murdoch’s lobbyist could secretly text the Secretary of State’s advisor, might it be good for the freedom of the press?

Those times are long gone. People don’t trust politicians, they don’t trust big business, they don’t trust the media. We have a crisis of our democracy.

Neil Findlay MSP’s member’s bill on Lobbying Transparency won’t solve these big problems of inequality of power or the misbehaviour of feral elites. What it will do is quite simply allow us to know which organisation is lobbying who and why, and how much money they are spending on that particular campaign of persuasion, through a simple register and database. The big question is why would you not want the public to know that? The fact that some people don’t want us to know this is itself the best argument for why we should.

It’s certain we won’t hear anybody saying that providing this information is not in the public interest. As any good lobbyist will realise, this argument is just not going to ring true. Equally, as any good lobbyist knows, the arguments mustered against change will not be that this might make life more difficult for big business or corporate interests, but that it will place overly onerous burdens on community groups or worthwhile charities.

That is why the proposed bill should define thresholds for inclusion, will not require small voluntary groups or community organisations to register, and why the burden of time in completing the register is very small. Unlock Democracy, an organisation of 14 staff who spend a fair amount of their time lobbying Westminster have been trialling the proposed forms. It took them 20 mins to complete the registration form.

This register on its own won’t meet  the huge challenges that face politics described above. It is a very small step forward . However if we cant even take  this step then there seems little hope for progress.

The proposed Lobbying Transparency (Scotland) Bill will go through many changes before it can be enacted. If there are genuine problems, then let’s fix them, after all, why would you not do this?

And now for Alastair’s case against.

Do we honestly need lobbying regulation in Scotland?

I’m not being rhetorical – it’s a serious question to which I’ve yet to hear an answer that makes the argument for a new law.

“Lobbying needs to be regulated” – why? What has happened which shows there is a real problem here? One newspaper sting from 1999 simply isn’t enough justification for me.

“It’s undermining democracy” – how exactly? What’s the evidence that Ministers or MSPs have had their minds changed and passed bad laws as a result of “professional lobbying”?

“The potential for scandals will grow” – on what basis? Watch out for that terrible thing that could happen despite the lack of evidence that it actually will?

“Lobbying is done in secret” – actually I think in Scotland it’s done pretty publicly under a good level of scrutiny, although sometimes privately for good reasons.

Most importantly of all – what is passing a law to regulate lobbying going to achieve?

The lobbying that goes on in Scotland isn’t the £2bn per annum sharp-suited money-go-round as some people would have you believe. Go to Holyrood or St Andrew’s House and you’ll see “professional lobbyists” standing in line with everyone else, enjoying no special treatment, and engaging with politicians and public officials in exactly the same way everyone else does – by talking to them and telling them how things work. It’s that simple – there really is no mystique or secrecy about it.

Are we really saying Ministers, their officials and MSPs are so naïve and easily-persuaded that they cannot be trusted to talk to the real world beyond the insulated Holyrood building without swooning before every vested interest? Are they such delicate flowers in need of protection by law? Don’t think so.

Look at some of the landmark legislation passed since 1999 – the smoking ban, land reform, minimum alcohol pricing, the ban on hunting with dogs and the repeal of clause 2A – all delivered by a Scottish Parliament that did not bend in the face of “professional lobbying” from opponents of those Bills.

All were the results of campaigners, charities or good causes, and representative bodies making their case and working with Ministers and officials to change the law. Dare I say some of these democratic champions even invested in professional lobbying themselves and certainly influenced Government thinking, so where does that leave us?

The reason organisations – private, public or third sector – use lobbyists is because the people delivering services or managing them don’t have the time, resources or specialist knowledge to do it themselves on a day to day basis. What’s wrong with recognising you don’t have the right skillset for getting your message across to Government or Parliament and paying someone else to do it?

What would we gain from registration of lobbyists and disclosure of meetings? Like the publication of MSP expenses it could be good sport to go through it with the proverbial fine tooth comb to flush out nuggets of entertaining detail but to what end? The first few sets of MSPs published expenses showed us who was pound-foolish on taxis and who was penny-wise on staff essentials like milk and loo rolls. Now MSPs are astute enough not to claim public money for them or at least not to record them in detail, so who’s the winner in this particular transparency exercise?

What will a list of who met who and when they met usefully tell us? Neil Findlay’s Bill consultation doesn’t shed any light on that and while it might be fun to join the lobbying dots or add two and two to make five, that’s confusing the issue rather than clarifying it.

I don’t see how disclosing the amount of money spent will help measure lobbying activity either. Just because you spend a lot of money on something doesn’t make it bad, just as hardly spending a penny makes you a paragon of virtue.

I do agree Scottish Government business could be more open – ironically by looking to the Westminster system. UK Government departments publish (eventually) details of Ministerial meetings on a quarterly basis. No reason why Scottish Ministers and their senior officials shouldn’t follow suit, but that’s an administrative change that doesn’t need statute – just go ahead and do it.

No reason to stop at Ministers either – why not update the MSP code of conduct to publish MSPs diaries or work schedules? That will show who’s been meeting who and the level of lobbying by charities, good causes, and public bodies as well as those “professional lobbyists”. Again, you don’t need a law to do this, just a Standards, Procedures and Public Appointments committee.

I’ve tried to avoid the oft-used line that legislating on lobbying is a solution in search of a problem but I can’t any longer. Evidence of the real problems in Scottish life is all around, so let’s concentrate on tackling those instead of this.