Open Thread: Deflation, Am I Bovvered?

And so it has come to pass: nearly eight years after the financial crisis started, and despite years of QE, the UK is suffering deflation.

Or are we really suffering at all?  With the election safely behind them, will Osborne + Carney let rip?  Is this the strategy for 2020?  Or will the oil price take care of any slack in the economy?

Go for it, C@W people!

ND

Election 2015: Sore Losers, Sore Winners

What does it take, in terms of practical effort on the ground, to win a Parliamentry election?  From the tone of complaints by some of the Disappointed one is inclined to think they imagine you've simply to have your heart in the right place, pick your candidate, and wait for the tooth-fairy to deliver victory to your chosen camp.

Actually it takes a lot of careful plotting and planning, followed by many many grinding hours of footwork.

History corner: in the heady days of the SDP some good friends of mine whose idealism had inhibited them from joining any of the tarnished old political parties decided Woy Jenkins et al were Different.  They joined up, found the whole thing jolly congenial - and volunteered to deliver 2,000 leaflets.  This was Islington, so no long front-drives involved: but after a couple of evenings they discovered that 2,000 was quite a lot.  Two months later, 1,500 of the expensively produced pamphlets remained in their cardboard boxes.

Back to 2015, and as discussed in CU's recent post, of course many people live in 'safe' seats that are most unlikely to change hands.  But an insurgent party (such as UKIP) or a party wishing to regain power must set about actually winning in places where they don't have incumbency.  And in marginal seats, absolutely everyone must knuckle down to covering the hard yards.

Personally, I have made a habit of living in marginals (see comments on that thread), with 2015 no exception.  I won't bore you with the demographic details but suffice to say, Croydon Central was and is a very marginal seat, with the sitting Tory targetted strongly by Labour and a chunky UKIP vote in the 2014 council elections that could easily have dished him.  So how was it defended?  

By 400+ people pounding the pavements for 6 months, that's how.  Operating under committed and intelligent leadership with a very good, carefully thought-out, bespoke and detailed plan.

You can read about it here.  The headline is misleading because it suggests that incumbency is everything.  It's important for sure, but there's a lot more besides, as the body of the text makes clear.

And that's what it takes to achieve a majority of just 165 votes in a difficult seat.   Labour worked just as hard in Croydon Central, with much optimism in their hearts, and it must be a bitter result for them.

But how many front doors did disgruntled UKIP supporters knock on?  Around our way, the only thing we noticed was some sour-faced leafleting outside a shopping parade on two occasions, and the  one postal delivery that is available free to all candidates.  As my tired feet slowly regain their normal state, you'll understand when I greet "s'not fair" with a chuckle.

ND

Changes. Boundary Changes!

Around these parts we have strongly criticised Tory strategists for failing to nail the much-needed Parliamentary boundary changes in the coalition agreement - which was the Only Thing That Mattered (given that whoever got into power in 2010, in whatever combination, was going to sign up to a bit of austerity etc).

So now, fellas: eye on the ball and fix the bloody boundaries !  Do it now!  A quiet word to the DUP - lads, think of something realistic we can do for you, and join us in this little Bill we have up our sleeves, anything you want really - and Get It Done !  Now !

Yes, there are other consitutional matters that need serious attention in the coming Parliament, and I trust that wise heads have thought them through carefully.  There is some intelligent magnanimity to be shown to the Scots, and a glorious opportunity for some intelligent, win-win devo-localism across the land.  But that can wait.

Fix The Boundaries Now !  There may never be a better opportunity.

Back to celebrating:  Croydon Central ...  165 votes, haha.  Ed Davey, heheheh.

ND

_______
Update(1):  pleased to see Andrew Neil raise boundary changes as his first question to Grant Shapps just now (13:40)

Update(2):  they don't even need the DUP now 

Nicola Sturgeon Coalition Blues

It’s here for you, Madame Nicola 
Mili loves you more than you will know, whoa ho ho 
We're here to please, Madame Nicola, 
Coalition beckons any day, hey hey hey 

We'd like to know a little bit about your tough red lines 
We know you’re keen to help yourself 
Look around you, all you see are panic-stricken eyes 
Stroll in Downing Street until you feel at home 
Coo-coo-ca-choo, Madame Nicola … 

On a TV sofa on a Sunday afternoon 
Being in the candidates' debate 
Lie about it, tease them with it 
When you get to choose 
Every way you look the English lose 

Where have you gone, Margaret Thatchio 
Our nation turns its lonely eyes to you, whoo hoo hoo
What's that you say, Madame Nicola 
Maggie T has left and gone away, hey hey hey 



_______________  
© Nick Drew 2015

Mr Putin's Strategy Prevails

Watching as much as I can bear of the election coverage it is striking how ineffective almost every gambit seems to be.  Fairly dramatic policy commitments are launched; incidents planned and unplanned strike the news editor's desk with enough force to command headline coverage; mighty gaffes are perpetrated; claim, counterclaim, downright lie and outright abuse are hurled; and all disappear from the scene in a welter of newly-minted nonsense, with a half-life of about an hour.

Postcard from Hell

It has been suggested that Mr Putin's over-arching strategy for managing politics in the era of the interweb (over which he exercises a lot less control than his Chinese counterparts) is to bombard all media with such a cacophony of high volume noise, the less coherent the better, so that confusion reigns and nobody believes anything.

(Nearer to home, I'd say that recent UK exponents of media management such as Campbell, Mandelson and Clifford, all essayed a similar strategy - but episodically; smokescreens deployed reactively at times of particularly awkward embarrassment for their clients and masters, rather than as an ongoing 24/7 way of life.  Modus operandi, rather than vivendi.)

Under the Putin doctrine the incumbent power is presumed to be the beneficiary as no opposition ever gains traction.

I wonder if Cameron, by design or otherwise, is in line to benefit from the same?  He doesn't even need to generate the hubub himself (though the Tories play their part) - his opponents do it for him, which might even add to its charm.

A good weekend to all.

ND

Right To Buy 2: not quite a work of genius ...

...  but it is passably interesting.  

Everyone knows (or thinks they know) how popular RTB1 was.  Lots of people who won't remotely benefit from it, see it as an (accepted) token of True Blu-ism, an appropriately deferential and umistakable piety towards Mrs T and the hallowed Property-Owning Democracy.  It fits with all known marketing wisdom, as practised by Hollywood, West End Theatreland, chocolate manufacturers, automobile brands etc etc: stick with what you know they like ("pre-sold", in the jargon) and serve it up again.   "Brand extension" - there you go, that's another one.

Oh, and it could represent an actual, realistically-available, once-in-a-lifetime, 'life-changing' windfall for several hundreds of thousands, who may remember (or others in the family certainly will) how Uncle Bert really did make out like a gangster with RTB1 twenty years ago.   And no-one but the Tories will offer it, so ...

Did I mention it's actually, and everyone knows it, real?

So it looks like Good Politics.  "It's not funded" is a pretty lame response in the circumstances.

I'm guessing Miliballs and Clegg (a) kinda saw this one coming, and (b) rather hoped it wouldn't.    Forewarned isn't always quite forearmed: knowing that when someone kicks you in the shins it hurts, doesn't stop it hurting when they do actually kick you.

ND 

Greenist Fantasy - only in Wales and the minds of Lib Dems

The news that the Tidal Lagoon Power have got Ed Davey, Environment Secretary for two more months, excited about plans that have been around since the 1960's should not really be news, but the BBC have decreed so there we are.

The interesting part is in their plans are, by Greenwash standards, actually costed. The key aspect is that they think a 2 mile long lagoon built in Swansea Bay will only need a £168p/MWh subsidy.

Let's compare that to the totally unaffordable and expensive proposed new nuclear plant. The one we hate the Government for because they caved in and agreed to a £90/MWh subsidy. Oh dear, oh dear indeed.

Of course for Green power fantasists that fact that these things are not economic does not matter. The subisdy comes from you, the bill payer after all and they don't expect to ask you just ratchet up your bills by say, er, 50% and have it all stamped and agreed by the Government. Of course, Tidal power is probably worse than wind power as it is only available 4 times a day for an hour - not of much use to a 24hr power requirement is it?

At a time when the fall in Oil Prices has made even Fracking (er, no subsidy here) look like it will be too expensive, then this floating of this 'idea' to try and shore up the Lib Dem vote in Wales is pure nonsense-on-stilts.

Moreover, it is not even a new idea, tidal power and the Severn barrage have been talked about by the ill-informed since the 1960's. perhaps earlier. At every stage the costs are looked at it becomes so astronomical as to be completely prohibitive - and that is before another bunch of decry the impact on the sea and the creatures who live there.

I so hope for Ed Davey to lose his seat in the General Election and the Country to be rid of such ludicrous people in its crucial Energy Department.

Devo-Manc: Another Serious Power-Play

One of my perennial themes here has been: 

• governments have their hands on the biggest levers 
• a government strategist with a bit of creativity can always drive the agenda

Regrettably it is usually people like Mandelson who actually understand this.  Brown sort-of understood it, except he deployed it negatively in his 2009-2010 scorched-earth campaign, analysed by C@W at the time.  Anyhow, Osborne understands it too (and of course Crosby).

So now we see another serious power play, and it's well up in the creativity stakes (relative to the usual nonsense) - Devo-Manc and, in particular, the NHS-devo aspect dropped onto the unsuspecting Labour Party yesterday by Osborne.  Yes, he couldn't resist dropping this bombshell himself.

And yes, Labour has been comprehensively wrong-footed.  Oh how they hate devolution!  So now they must spend a week (out of the ten weeks remaining) cobbling together a response, which won't be easy because the Mancs (almost entirely Labour) are in favour.  (Hell, Andy Burnham - panicky and instinctively against it - is a north-west MP.)  And Tessa Jowell likes the sound of it for London.  And every regional newspaper will be majoring on it for weeks to come - even if the Gruaniad relegated what the New Statesman called the biggest story of the day to a sub-page on its labyrinthine website (oh how the lefties hate devolution).

We may confidently assume this initiative is part of a rolling barrage.  It wouldn't be difficult to bundle Mili off the field with the devo-bombardment alone, for which there is plenty more ammunition still to be fired: but I'm guessing that another flank will be opened up soon, to reinforce his lethal disequilibrium.

This is gearing up to be one of the great election campaigns.  It's not before time and I'm loving every minute.  There's no such thing as an election to lose.

ND

Wars, Rumours of Wars, and the FTSE 100

What colourful times we live in, eh?  A single day's headlines include:

• Russians limbering up for the expected assault on Mariupol  
• Cameron commits military 'advisers' to Ukraine*
• Ms Green the greenie publicly melts down into a puddle of green goo
• the FTSE 100 reaches a record high!

Wow.  The next several months are going to be astonishing.

Seriously for a moment, I take all these items as grist to Crosby's mill.  We know that there will be all manner of happenstance making the minnow-parties look stupid - only the SNP are moderately proof against this.  Of course, Mili will take succour from any further green meltdown, but Cameron will take still more from the combination of war abroad and UKIP looking flaky at home.   I think he's mad to engage in Ukraine: power-mad, that is.  Proof of serious intent at a no-holds-barred elelction strategy.  This is William Pitt stuff: you gotta admire a pure power-play.

ND

* truth be told, UK military 'advisers' have been in Ukraine, on and off, for a number of years, much good it has done

Doom, Gloom - and Reasons to be Cheerful

The news from overseas is pretty awful:  but round my way the sun shining this morning, I'm feeling bouyant for a number of reasons - and the Tories are ahead in the polls!  Cue the inevitable CiF thread, further adding to the jollity.

What's more, the same poll has 'NHS' as the most important single issue by a mile, having previously contested the #1 slot with other issues.  If Mili, howling 'dodgy Tories' at the top of his nasal voice, can't hang on to his earlier poll lead against that backdrop, ...

I shan't rub it in for all you 'kippers out there.

Having always been in the camp of everything to play for / Crosby knows the score / no such thing as 'this is an election to lose' - well, I still am.  Couldn't claim to have anticipated the SNP thing, in fact quite the reverse, I kinda thought the referendum result would put them back in their box.  No matter.

There must now be the strong possibility of a huge negative feedback loop for Labour.  Balls was already lining up Mili for both barrels.  Tax avoidance isn't a great platform for the Mili-family to campaign on, so that line won't serve for much longer.  The meeja have unanimously decided the Pink BatBus is hilarious.  Oh yes, the sun is shining.

Greece, Ukraine, Libya, Italy, Denmark ... that's for tomorrow.

ND       

Could the House Price bubble burst before the election?

A week is a long time in politics. A week can also be a long time in the financial markets - as can a day. Just looked at the smashed share prices of the insurance companies now being investigated by the FCA - a load down 20% or more in the blink of an eye.

When sentiment turns, it can go very bad. My own investment in GKP is down to 90p today from heady heights of 450p just a couple of years ago. it's a big change and the facts have changed so along with that so have the prices.

Currently in London we have a massive house price bubble. Huge population growth, limited housing development and competition from the World's wealthy for a piece of 'London Gold' is driving prices up at an incredible rate. Great times to be a property developer or agent, less good for those wanting to buy a house or even rent at a decent price.

As well as the human factors, the Government has weighed in by restricting permitting for new developments and pushing Help to Buy. In addition there is the Funding for Lending Scheme and record low interest rates for a 6th year running. Liquidity is everywhere. Anyone can borrow and borrow a fortune - encouraged by the Government and the Banks that they own.

It is a witches' brew, the higher prices go, the bigger the crash will be. Last time many eminent commentators were warning about a crash in 2003/4 that did not happen until 2007. Then the global nature of the crash saved London as it became a safe haven for capital flight.

From a UK politics view at the moment this is benefiting the Government. The Government has engineered a nice boom which is helping, construction, banks and moving the liquidity created by QE into the real economy. After such a terrible financial crisis, this is in many ways a good thing.

Except that we are moving liquidity into a sector which is already far beyond its natural level. If it were a share, the London market is ASOS. ASOS is a frankly brilliant company which is hugely successful, but its share price went far beyond its value or that of its management to keep pace with. As such it has suffered big drops recently. At some point too another paradigm comes into play. There is an old market saying that when every market 'Bear' has become a 'Bull' then the market changes because there is no one left to sell - shares cannot go higher.

We are already seeing this with super top end London property, where prices and volumes are way down for over a year now. Most of the World's super rich who want a London pad already have one. I would not want to be one of these investors in Mayfair super-developments where they think average sale prices are going to be north of £20 million at £6,000 per square foot.

This effect will slowly trickle down the market in due course. The huge demand pressure is from the bottom of the market in the main so prices will always be cushioned and London property is unlikely to crash like a busted share. However, down it will come and the feel-good factor will wane and the effect on the economy will be real.

The top of the market is also here, maybe it will last for another 2 years, maybe 3. There is a chance though that sentiment turns more quickly and with it will go the Government's re-election strategy. So even though it is a terrible policy, don't expect to see the end of Help to Buy anytime soon.

So where is the Laffer curve or the alternative to 50% taxes?

Ed Balls has bought out that good old political trick of higher taxes on the wealthy. As we all know, taxes on someone else are always a vote winning idea.

As the saying goes, if you rob Peter to pay Paul, you can normally rely on Paul's vote come an election.

What is harder to dispute is that 50% is above the Laffer curve. the report from the Treasury thus far is pretty inconclusive. Due to people shifting their incomes, in collusion with their companies, in 201/12, there is little real data to work on. We don't really know if lowering the tax threshold raised more money or not. Equally, due to the timing int he middle of a dreadful recession where tax receipts collapsed, we don't really know if it raised any either. Truthfully too, no one knows where the Laffer curve is or if it even exists; if it did real events will always interfere to skew the results anyhow.

The best that can be said is that in the round of £600 billion odd of public spending, the difference is a rounding error. But of course, politically, this is a good old piece of divisive us-against-them vote-winning.

For Labour, it smacks of desperation as they are opposed to every cut so need some sort of veneer to say they would raise revenue. For the Tories, they are left on the side of big business and 'the rich' - a homely pace but not one packed with voters (although election funding is at least sorted!).

Worse news for those of us who want to vote UKIP. Their policy of a flat tax has also had real problems in the real world. Most of the EU Countries who have applied it also have an equivalent of National Insurance too. Except that the NI is often 30%+, so the nice flat tax of 10% ends up equating to 40% odd anyway.

You just can't escape the need to tax in Countries where social spending is so high and increasing all the time as the population grows and ages.

Personally, I think this is great politics from Labour - useless economic policy, but then they have that mark anyway, it hardens their anti-rich vote which outside of SE England is the key to power for them.

Labour's half turn to nowhere

It is amusing to see Ed Milliband and Ed Balls over the weekend try and say they will rein in their spending tendencies.

Labour are making exactly the same mistake that the Tories made in 2007 when they said they would look at ways of sharing the proceeds of growth the same as Gordon Brown. By matching spending plans to the opposition you remove any wiggle room.

Of course, I think they are wrong for the opposite reason to where most Lefties think they are wrong. Not that they are ruling out spending more, but that by giving the Tories a stamp of approval for the current austerity programme which is not delivering any real terms cut to either deficit or debt.

Perhaps they think the voters are going to be encouraged that Labour can supply Tory toughness on budgets with Labour's supposed extra caring for the working class? They may well be right today. But today it is 2013 and not 2015.

In 2015 we will be in a very different economic place. The world and UK will either be int he next recession or teetering on it. This recession will not be a low-interest rate recession unless things have gone so wrong in the economy that everything is being felt purely in terms of a rapidly collapsing Pound with no interest rate rises to offset the real terms loss of purchasing power. This would be suggestive of high inflation...its hard to see how this will work.

It is most amusing politically to see Labour fall into the same trap as the Tories. If the Tories had stuck with their traditional messages of lower state spending then in 2010 they would have been a lot more credible. Similarly if Labour said nothing now and kept their powder dry for another year they would be in a much better position to decide what the policy for 2015-2020 needed to be. I can tell you its going to be an emergency period of quite distressing economic choices and impacts. Labour could say they will need to raise taxes and cut pensions (including early raising of the pension age) to defend welfare for all; but now they will have to do it from a position of weakness.