The great Diane Abbott tweetgate scandal of 2012

Here’s the exchange, as reproduced by the BBC:

Bim Adewunmi: I do wish everyone would stop saying 'the black community' though. WHICH ONE?
Bim Adewunmi: Clarifying my 'black community' tweet: I hate the generally lazy thinking behind the use of the term. Same for 'black community leaders'.
Diane Abbott: I understand the cultural point you are making. But you are playing into a "divide and rule" agenda.
Bim Adewunmi: Maybe. I find it frustrating that half the time, these leaders are out of touch with black people they purport to represent.
Diane Abbott: White people love playing "divide & rule" We should not play their game #tacticasoldascolonialism
Bim Adewunmi: I don't advocate 'divide and rule'. But I wish we could deal more effectively with issues without resorting to monolithic view.
Diane Abbott: Ethnic communities that show more public solidarity & unity than black people do much better #dontwashdirtylineninpublic

I should start by declaring that my general opinion of Diane Abbott is pretty low, although my estimation of her importance is also pretty low. I find it hard to get worked up by this.

Still, on the offending phrase: I don’t quite grasp the mental process that starts with wanting a quick and clear way to describe people who seek to weaken black people by turning them against each other, and ends with choosing “white people” rather than “colonialists” or “imperialists” or “racists”.

Nonetheless, I’m sure she knows full well that there are loads of white people who don’t fit that description. My best guess is that she was aiming to be a little cheeky in the vague service of solidarity-building, in the way that Harriet Harman might make some semi-serious unflattering overgeneralisation about men to make the sisters nod along.

If so, it’s still unpleasant and it’s still untrue – I go along with Russell on “the superior virtue of the oppressed”. But the idea that any white person has in any way been harmed by this tweet is just ridiculous. At the very outside you could argue that impressionable young black people might read it and as a result take more of an ‘us vs them’ outlook towards all white people, but I think that’s stretching it well past breaking point.

My real beef with what Abbott said is precisely because of the “context” that she protests her tweet was taken out of. I don’t like the way she rejects Bim Adewunmi’s point.

Questioning the merits of a set of “community leaders” (black or otherwise) is not on any meaningful continuum with the tactics and values of 19th-century colonialism. And the suggestion that black people shouldn’t criticise their so-called “community leaders” for fear of being seen to “wash [their] dirty linen in public” is depressing.

But then, there are far more depressing things to do with race. And yet this is the issue we’re all yelling about this week. Well, it’s easy, isn’t it? We know how to do ‘somebody said something and people say they’re angry at her and other people say they’re angry at them and now I’m going to say something’. We don’t know how to make society more just and people less prejudiced. Well, I don’t, anyway.

He moves in implausible ways

There’s an oddly lovely exhibition at Wellcome Collection at the moment of ‘Mexican Miracle Paintings’ – votive offerings from people in small towns in Mexico, dating back over a century, expressing thanks for the assistance of God and his saints in times of trouble.

The art isn’t world-class and nor is the prose of the messages that go with each picture, but the whole point is that these are heartfelt expressions of ordinary people’s hopes and fears – and the whole effect is quite touching.

That said – and far be it from me to judge other people’s faith, especially at Christmastime – a few of the stories didn’t leave me completely convinced that divine intervention really was at work:

I thank Our Lady of Zapopan for giving me back my health. I was suffering cancer of the face and on 17 September 1936 it was considered to be incurable. I pleaded to the Holy Virgin of Zapopan and on 17 March 1941 I was completely cured through the intervention of the Holy Virgin and the doctor Edmundo Aviña.

Miracle granted by Our Holy Mother of San Juan to Antonia Lopez on that memorable 18 January 1888…while, during the flooding in Leon, seeing herself and her family in great danger along with 15 other people, implored with all her heart to the Holy Mother of San Juan. On hearing her prayer, our Divine Lady intervened and they were miraculously saved by climbing a tree and for such a great miracle she dedicates this retablo.

In Matehuala on 7 January 1937, Juan Hernández became so drunk that he completely lost his senses, to the point of walking into the mountains where he passed out all night. The following morning he returned and headed for the train station, but before getting there he felt so ill that he kept thinking he was going to die. Nevertheless, he managed to get back home. His wife Lazara Alonso, noticing what a serious state he was in, pleaded with all her heart to Saint Francis of Assisi of Catorce to restore his health as he had to support her and her child. If he would intervene then she would commission a retablo for such a great favour and, because it was granted exactly as asked, she presents this retablo giving a truthful testimony of the work of his divine majesty in this evident miracle.

Thanks to God All Mighty Saint Francis of Assisi, the Seraphim I thank you with all my heart for this miraculous accomplishment: a warehouse with multiple uses. “Potrero del Moro” Ranch, C del Oro, Zac. For the resistant structure (foundations, columns, walls, internal structure, window frames, beams and paving slabs). He thanks you with all his heart.

Hmm.

Merry Christmas!

Cameron’s bad faith

This is (some of) what David Cameron had to say about religion and secularism yesterday:

The Bible has helped to shape the values which define our country. … Responsibility, hard work, charity, compassion, humility, self-sacrifice, love, pride in working for the common good and honouring the social obligations we have to one another, to our families and our communities - these are the values we treasure.
Yes, they are Christian values. And we should not be afraid to acknowledge that. But they are also values that speak to us all – to people of every faith and none. And I believe we should all stand up and defend them.
Those who oppose this usually make the case for secular neutrality. They argue that by saying we are a Christian country and standing up for Christian values we are somehow doing down other faiths. And that the only way not to offend people is not to pass judgement on their behaviour.
I think these arguments are profoundly wrong.
…those who advocate secular neutrality in order to avoid passing judgement on the behaviour of others fail to grasp the consequences of that neutrality or the role that faith can play in helping people to have a moral code. …for people who do have a faith, their faith can be a helpful prod in the right direction.
And whether inspired by faith or not – that direction, that moral code, matters.

And this adapted version illustrates how utterly wrong he is:

The Conservative Party has helped to shape the values which define our country. … Responsibility, hard work, charity, compassion, humility, self-sacrifice, love, pride in working for the common good and honouring the social obligations we have to one another, to our families and our communities - these are the values we treasure.
Yes, they are Conservative values. And we should not be afraid to acknowledge that. But they are also values that speak to us all – to people of every party and none. And I believe we should all stand up and defend them.
Those who oppose this usually make the case for secular neutrality. They argue that by saying we are a Conservative country and standing up for Conservative values we are somehow doing down other parties. And that the only way not to offend people is not to pass judgement on their behaviour.
I think these arguments are profoundly wrong.
…those who advocate secular neutrality in order to avoid passing judgement on the behaviour of others fail to grasp the consequences of that neutrality or the role that party politics can play in helping people to have a moral code. …for people who do have a party, their party can be a helpful prod in the right direction.
And whether inspired by party politics or not – that direction, that moral code, matters.

Cameron’s abuse of the term “secular neutrality” is striking: it means religious neutrality, not – as he seems to think – moral neutrality. This isn’t a petty point about semantics, much as I enjoy those. I’m actually trying to take him at his word and offer some helpful advice (he’s a regular reader here, and he knows I’m a big fan).

The final sentence of the quote (in either version) is, I agree, the most important. But it’s crippled by the rest.

If what you’re trying to promote is a moral code, a set of values that most of us agree are pretty sound even if we often don’t live up to them, you do not do it by branding those values with a sectarian label that lots of people don’t accept.

Yes, he litters the speech with polite caveats that of course people who aren’t religious can be moral. But his central argument rests on the opposite (and false) assumption that you can’t steer clear of religion without also abandoning morality.

Christianity has been a huge factor in British history. It’s still a big presence, but it’s fallen a long way. In terms of what British people today believe and practise (or don’t), it’s hardly accurate or helpful to say we’re “a Christian country”. If he can’t think of a way to promote morality without talking about “Christian values”, he’s doomed to fail.

Calling for delayed cuts means delayed calling for cuts

Something interesting is happening to the Labour leadership. They’re starting to realise that their current ‘cuts later’ position means that later – at the next election, say – they’ll have to be for ‘cuts now’.

They’re also starting to think about the relationship between the image they project now and the image they’ll want to project come 2015.

If they carry on as they have, using most of their airtime to attack cuts that they genuinely see as too fast and too deep (but that they cannot possibly stop), they’ll establish themselves in the public mind as anti-cuts. They can certainly win some support like this, but the trouble is that when they get to ‘later’, they’re going to have to say ‘OK, we’re pro-cuts now’.

At that point, their anti-cuts supporters will lose enthusiasm, and much of the rest of the electorate – who will be more pro-cuts – will be deeply unconvinced by this late conversion from the party that’s been so vocally anti-cuts all this time.

But, as I say, they seem to be shifting their emphasis. Ed Miliband recently gave a speech in which the most-reported line was that “the next Labour government is likely to inherit borrowing levels that still need to be reduced. So even then resources will have to be focused significantly on paying down that deficit.”

And Ed Balls, writing this week, makes a similar point, but still gives the impression that he wants to slow down this repositioning: “it is so important that we set out before the next election tough fiscal rules that the next Labour government will have to stick to – to get our country’s current budget back into balance and national debt on a downward path”.

Before the election, yes, but how long before it?

Balls argues for “combining stimulus now to get the economy moving with a tough but balanced medium-term deficit plan”. But this leaves the question of what happens when we get to the medium term. He will have to say ‘You know that stimulus we wanted? Well, even though we didn’t get it, it’s too late now, so now we want cuts instead.’

Changing tone like that as an election nears is a very hard sell – as David Cameron found when, having spent a few years promoting a more caring, less anti-public-sector image, ended up campaigning on a much more conventionally right-wing platform in 2010. The difference is that Cameron’s about-turn arose from an unexpected crisis, while Balls is implicitly promising his in advance.

Labour will have to choose between arguing for what they would be doing/have done during this Parliament and arguing for what they want to do in the next.

Their struggle to make this choice is a symptom of a deeper tension: parties can respond to being kicked out of power by telling voters ‘we didn’t deserve to lose your trust’ or by telling them ‘we now deserve to regain your trust’. Miliband and Balls have preferred the former but are now fitfully edging towards the latter.

George Osborne has forgotten what Nigel Lawson learned

Last week I argued that the cost of UK government borrowing is determined mainly by wider economic conditions – on an international scale – and that increases in the amount the government is borrowing appears to have had no negative effect on the interest rate paid.

Now, via an FT article by Samuel Brittan, I find I’m in surprising company:

The chancellor’s main argument against fiscal stimulus was that it would raise interest rates and thus be self defeating. … Mr Osborne vastly exaggerates the effect of the UK Budget deficit on long-term rates. He need not take my word for it. Lord Lawson reports that a similar argument was used in the run-up to the tough Geoffrey Howe Budget of 1981. But he later thought better of it. He writes in The View from No.11, published 11 years later: “Long-term interest rates ... are determined by the balance of supply and demand in the capital market. As the capital market was becoming increasingly a single global market the public borrowing in any one country [with the exception of the US] had a correspondingly diminished effect.” He was right second time round.

The confidence trick

This is the heart of the narrative that holds the government’s economic policy together:

Towards the end of Labour’s time in office, government borrowing was threatening to spiral out of control. Questions were being raised about our national credit rating, and the bond markets were pushing up the cost of borrowing. The coalition’s determined programme of larger and faster spending cuts has rescued the UK, creating much-needed confidence in the prospects for deficit reduction and, as a result, economic growth.

So: what’s the evidence?

I’ve looked at the yield on 10-year government bonds – a standard measure of the interest rate the government pays to borrow – and worked out how it changed when a select half-dozen events happened. I’ve taken the average bond yield over five trading days before each event and over five days after, to smooth out the effect of momentary blips, and compared each pair:

1. On 29 March 2009, credit-rating agency Standard & Poor’s warned that without a stronger deficit-reduction strategy, the government’s AAA credit rating might be at risk. Between the five days before this and the five days after, 10-year bond yields rose by 0.06%, making borrowing a bit more expensive.
2. On 21 May 2009, Standard & Poor’s formally moved the UK government from a “stable” outlook for its credit rating to “negative”. Bond yields rose by 0.38%.
3. On 26 January 2010, the fund management firm Pimco (a major player in the global bond markets) said that UK national debt was a “must to avoid” as it was “resting on a bed of nitroglycerine”. Bond yields rose 0.002%.
4. Coalition negotiations meant that the change of government took longer than usual. But between the five days before the election (6 May 2010) and the five days after David Cameron became PM (11 May), bond yields fell by 0.21%, making it cheaper for the government to borrow.
5. On 22 June 2010, George Osborne produced his first Budget. Bond yields fell by 0.18%.
6. On 22 November 2010, the government published its full spending review. Bond yields fell by 0.04%.

Well, this all seems to support the government’s case. There’s only one small problem: all these numbers are for US government bonds, not UK ones.

Here, by contrast, is what happened to UK government bond yields:


So in all six cases, when there was supposedly bad news for UK bonds, US bonds took a bigger hit, and when there was supposedly good news for UK bonds, US bonds got a bigger boost.

[Update: For a longer perspective than five days, I’ve averaged over the six months before the election (November 2009–April 2010) and the following six months (May–October 2010). From the first period to the second, UK government bond yields fell by 0.64%, but this was beaten by US bonds, which fell 0.75%. This simply does not support the claim that the coalition and its policies have been key to keeping UK borrowing costs down.]

In fact, US and UK government borrowing costs are very strongly correlated these days (since 2008, a massive +0.9):


So, unless the US markets are hypersensitive to what happens in Britain, something much bigger has been going on.

Before I get into what that is, let’s see how the actual amount of government borrowing relates to the cost of borrowing. The government’s story says that these are positively correlated – as does common sense. Surely, the more you borrow, the bigger a credit risk you become and people will charge higher rates to lend to you. So, if the amount of money the government is expected to borrow rises or falls, bond yields should move in the same direction.

Let’s see.

Every month, the Treasury collates the latest set of independent economic forecasts. Sometimes these look only two years ahead and sometimes they look farther, so the data I’ve put together is a bit irregular.

First of all, in Labour’s final year, there were five sets of independent forecasts of government borrowing that covered 2010/11 and 2011/12. This chart shows these alongside monthly averages for government bond yields (yes, UK ones):


As Labour’s time in office drew to a close, independent expectations of government borrowing were falling, not rising. The correlation between the level and cost of borrowing (albeit from a tiny sample size) was strongly negative. This means that fears of higher deficits could not have been responsible for the rise in bond yields that happened during this time. (And bear in mind that US bond yields also rose over this period.)

Secondly, over the lifetime of the coalition, here’s a chart showing monthly bond yields alongside independent forecasts of government borrowing across 2011/12 and 2012/13:


Again, the correlation is negative. As borrowing expectations have risen over the last six months, the cost of borrowing has fallen. This means that increased confidence about lower deficits could not have been responsible for the fall in bond yields. (And bear in mind that US bond yields also fell over this period.)

I’ve shown one chart for before the election and one chart for after. Wouldn’t that miss the change between the two governments, when both borrowing forecasts and the cost of borrowing both fell? Yes. But this fall in UK bond yields was matched – in fact, exceeded – by the simultaneous fall in US bond yields, which really can’t be explained by changes to UK fiscal policy. Something bigger is going on. But what?

The answer has two parts. For the first part, we can turn to Nick Clegg.

After the election, the Lib Dems abandoned their more gradual manifesto proposals for reducing the deficit and signed up to the Tories’ plans for faster, bigger cuts. Clegg said that the situation in Greece, which exploded shortly before the election, had changed things. In that, at least, he was right. However, he meant that there was a danger of the sovereign debt crisis spreading to us, so we had to be extra cautious with our finances. But the real lesson is different.

Investors have to put their money somewhere. Bonds issued by developed-country governments are normally seen as ultra-safe, and the yields paid on these bonds are normally quite low, as the safety is their main selling point. For higher returns, you can make a higher-risk investment elsewhere, if you dare. But the crisis in the eurozone meant that the risk-averse large institutional investors lost their appetite for Greek (and later Portguese, Spanish and Italian) government bonds.

So they needed to invest somewhere else.

On 23 April 2010, the Greek government requested an IMF/EU bailout. Between the five trading days before this desperate act and the five after, UK government bond yields fell by 0.07% and US bond yields by 0.04%. Rather than a fear of contagion hitting all sovereign debt, those countries that the markets saw as nowhere near the danger zone – including the UK – found that they could borrow more cheaply. Increased demand from fleeing investors brought down our bond yields.

And this persisted: 23 April 2010 was the day that US and UK bond yields both began a largely uninterrupted four-month fall.

The second part of the answer – what bigger thing is going on to make non-eurozone government borrowing so cheap even while so much of the stuff piles? – is the condition of the economy more broadly. But it relies on the same principle: investors have to put their money somewhere.

Jonathan Portes of the National Institute of Economic and Social Research reasons that lower bond yields would be a sign of confidence and economic strength if they were associated with a better stock-market performance; but they’d be a sign of weakness if they went hand in hand with stock-market falls. He finds that, since the coalition was formed, there’s a “strong, significant and positive” correlation: bond yields fall when the stock market does as well.

He’s right. I’ve checked, and from June 2010, government bond yields and the FTSE have shown a correlation of +0.56. The persistent weakness of the economy as a whole (in Britain and elsewhere) means that private-sector investment prospects look poor. The result of this pessimism – as with the flight from Greek bonds, although at a less frantic rate – is that investors who might have put their money in the stock market are instead going for government bonds, further pulling yields down.

This can also explain the counterintuitive positive correlation I noted earlier between the cost and the predicted amount of government borrowing. As the economy falters, investors move from stocks and shares to the safety of government bonds, driving down the yield on them. But a weaker economy also means lower tax receipts and higher welfare spending, so borrowing forecasts go up.

And that’s exactly what’s happening. The government can borrow so much so cheaply not because its plans (which keep getting rewritten for the worse) inspire such stunning confidence but because the rest of the economy inspires so little. It’s a sign of failure, not success. The story the government’s trying to spin us is entirely the wrong way round.

A few closing remarks, because I’m not in this post advocating any particular fiscal policy over another:

• While the government’s deficit-reduction plan has had little discernible effect on the cost of its borrowing, that doesn’t mean there isn’t a difference between safe and risky borrowing. There is. Both this government and the last have clearly been seen as being on the right side of the line – by the markets if not by the commentators. Despite the political rows, the difference between the Osborne plan and the Darling plan wasn’t massive.
• While nobody knows exactly where the line is, it’s clear that a few extra tens of billions of borrowing wouldn’t spark a crisis; indeed, feeble growth and high inflation mean this is exactly what’s happening. But, conversely, it’s far from clear whether a few tens of billions of stimulus would really make much difference to growth.
• Crisis avoidance isn’t the only reason to reduce borrowing as quickly as we reasonably can. A 12-digit deficit, even on a low interest rate, still costs a lot, and servicing debt interest isn’t the most socially or economically useful thing to do with taxpayers’ money.
• Economics isn’t the only reason to be sceptical about the virtues of rapid public spending cuts. It’s not just faceless bureaucrats and feckless scroungers that will suffer as a result.

Update: Chris Dillow also ponders what low bond yields mean and what the stock market can tell us. but he looks at the FTSE small caps index rather than the more globalised FTSE 100. I think the lesson is that the economic slowdown that's pushing bond yields down is not confined to the UK - just as my chart of US and UK bond yields would suggest.

Poor school results

One of the biggest things affecting a school’s exam results is not what happens inside the classrooms: it’s the backgrounds and circumstances of the children the school lets through its gates in the first place. The more children from poorer families a school has, the worse its exam results tend to be.

The graph below shows almost every state secondary school in England [1]. It plots how many of each school’s pupils qualify to receive free school meals against how many of each school’s pupils get at least five A*-C grades at GCSE including English and maths. Roughly speaking, it plots poverty against results [2].


There’s a pretty good correlation, of -0.57, between how many pupils are on free school meals and how many get five A*-Cs including English and maths. As poverty rises, exam results fall (although this fall levels out after around the point where a fifth of a school’s pupils qualify for free meals).

The grammar schools skew the picture – but only a little. Among comprehensives, the correlation is -0.55 – only slightly lower.

Most grammar schools are clumped up in the top left corner of the graph. They get very good results, which is hardly surprising given their intake. But selecting for ability also tends to select for wealth. The average selective school has just 2.6% of its pupils on free meals, while comprehensives average 16.7%. In fact, there’s not a single grammar school in all the land with even three-quarters as many kids on free school meals as the average comprehensive.

The next graph tells a similar story to the first, but it just covers comps, and it gets rid of a lot of the noise by grouping together schools by how many children on free meals they have (0-0.9%, 1-1.9%, 2-2.9%, 3-3.9% etc.) and shows the average results score for each such group:


But the correlation figures above understate the strength of the relationship. There are wide regional variations in prosperity across England, and of course parents don’t navigate the education system on a national scale: school choice works locally.

So by breaking the figures down into individual local education authorities (LEAs), we can see how strong the relationship is between poverty and results on a scale more relevant to parents’ choices about which neighbourhood to live in and which schools to apply to.

I’ve checked every LEA with 20 or more secondary schools (the smaller they are, the less reliable the correlation stats become [3]). There are 45 such LEAs, out of a total of 150.

The correlations range from -0.57 (Cornwall) to -0.90 (Leeds) – with an average of -0.76. So if you look into an individual LEA, the local link between poverty and results is usually much stronger than across England as a whole [4].

(LEAs with selective schools appear to have only slightly stronger poverty-results correlations than all-comprehensive LEAs.)

All this just shows how strong the link between poverty and GCSE results is. The exact nature of the causation is more complex to untangle, but it’s going to involve the fact that struggling to make ends meet makes it harder to devote time and resources to one’s children’s development. It’ll also, conversely, involve the fact that schools with good results become oversubscribed, driving local house prices up so that these schools become fuller and fuller of children with well-to-do parents.

One way to stop the education system from segregating children is to prevent popular, higher-scoring schools from cherry-picking the most promising ones. Banding and lotteries are efforts to achieve this, but I’m not aware of any compelling evidence either way on their effects.

The government’s big plan is the pupil premium, Nick Clegg’s favourite boast but something that appeared in all three main party manifestos in 2010. It’s an interesting way to motivate higher-scoring schools to admit more poorer pupils. Whether it succeeds or fails will depend on whether the extra cash can overcome the fear of being dragged down by the chavs.


[1] 2009/10 data, from the ‘Secondary’ tab of the ‘School spending – all data’ spreadsheet produced by the Department for Education. I’ve had to take 23 schools out of the calculations as there aren’t exam results figures for them.

[2] Qualifying for free school meals is an imperfect measure of poverty, related as it is to receipt of certain benefits. But it’s a decent indicator. Also, there are many other ways to measure how good a school’s results are than the number of kids getting five A*-Cs including maths and English: you could raise or lower that bar as you liked. This, however, is the data I have.

[3] Out of curiosity, I also looked at each of the 26 LEAs with under 10 schools in the data set. All have similarly strong negative correlations, for whatever that’s worth – except for the odd (but tiny) outlier of the Isle of Wight, whose five schools form a decent line sloping the other way, for a correlation of +0.51. I don’t know what, if anything beyond random variation, is going on there.

[4] How can pretty much every LEA have a stronger correlation between poverty and results than the national figure? Simple. This chart shows the schools in Bradford and Northamptonshire:


The red dots are pretty clearly grouped around a line (Northants has a correlation of -0.81), and so are the blue dots (Bradford’s is -0.76). But they’re different lines: Bradford is, on the whole, poorer and has more schools getting lower results, but with increasing poverty making less of a difference among its schools than in Northants.

So putting all the dots together blurs the clarity of the lines a bit: the overall correlation across the two LEAs between poverty and results is -0.73 – still high, but lower then either alone. The same thing happens, on larger scale, when looking at all the schools across England together.

Grammaricks

Over on my other blog, I've got some limericks about language, grammar and editing.

Because silliness is better than politics.

(It'll help you with the first one if you know that 'stet' is a proofreading term meaning 'leave it the way it was'.)

Brown’s fiscal mistake

Labour’s time in power can be divided into three periods, as far as the public finances go. First, borrowing was reduced to zero and below, cutting the national debt from 42.5% of GDP in 1996/97 to 29.7% in 2001/02. Then, a period of borrowing 2.3-3.3% of GDP a year, raising the national debt to 36.5% of GDP in 2007/08. And finally, all hell broke loose.

It’s the middle six years that are now the most contentious, when the government ran deficits that weren’t huge but were still on the large side given that the economy was doing well.

That said, there was a world economic slowdown around 2001-03, and the fiscal stimulus that resulted from extra borrowing probably helped the UK come through in pretty good shape. Indeed, Chris Dillow goes further, arguing that the longer pre-crisis period was one where government spending was an important prop to the economy – tighter fiscal policy would have meant less growth and potentially a bigger housing boom if interest rates had been cut to compensate.

It’s also debatable how much less bad things would now be if we’d gone into the crisis with a balanced budget rather than a 2.4% deficit. We could have had a bigger stimulus (and, hopefully, a smaller recession), or had the same stimulus with less borrowing overall (so smaller interest payments and, hopefully, slower spending cuts now) – which would have been better. But the flipside of going into the crisis in better fiscal shape, as Chris argues, is that we might have been in worse shape in other ways.

But there is one sense in which Gordon Brown unarguably got it wrong.


This graph shows government revenues relative to GDP (thick black line) compared with a series of Brown’s Budget forecasts (dotted coloured lines):

Year after year, Brown predicted the Treasury’s income was about to rise to 40% of GDP and above; in reality, it never even reached 39%. Now, public borrowing is hard to predict, and so a couple of years of undershooting is acceptable margin-of-error stuff. But by, say, 2004, it must have been clear that something was wrong with the forecasting assumptions: the money consistently wasn’t appearing as expected.

Brown should have rethought his tax and spending plans or at the very least his predictions. After several good years, the Treasury had – like the financial sector – become optimistic to the point of complacency. And so, as they don’t like to mention, had the Conservatives, who in 2007 signed up to Labour’s spending plans for the following years.

Zeno’s paradox of fiscal policy and Osborne’s prophet motive

As Duncan reminds us, the central aim – the “fiscal mandate” – of the government’s fiscal policy is this, as set out by George Osborne in last June’s Budget:

the structural current deficit should be in balance in the final year of the five-year forecast period, which is 2015-16 in this Budget.

The thing about the fiscal mandate is that it’s a rolling target. In June 2010, the end of “the five-year forecast period” was 2015/16. Now it’s 2016/17. During the next election campaign, it’ll be 2020/21.

(Also note that it covers cyclically adjusted borrowing, excluding capital spending. These caveats take out a hefty chunk of the actual deficit. And yes, Brown was just as bad, with his ‘borrow only to invest over the course of the economic cycle’ Golden Rule.)

Which means that the notion of ‘hitting’ this particular target collapses – like the protagonists in Zeno’s paradoxes of motion, we’ll never reach the end of the rolling five-year period and see where it hits. But if Osborne can’t ever hit (or miss) the target, all we can do is judge whether he’s ‘on course’ to hit it.

This is why the Office for Budget Responsibility is so important to him: the official central objective of fiscal policy is for the announcement of that policy to induce the OBR to make a favourable forecast. That’s all.

It is, of course, ridiculous to think that government borrowing can be accurately predicted that far ahead. Osborne and the rest, whatever their faults, are (mostly) not mentally subnormal. And the OBR shows no signs of being any more accurate a coven of seers than the in-house Treasury forecasters used to be.

All of which means that the fiscal mandate in itself is a convenient fiction. Nobody cares about a few billion pounds here or there several years down the line. The real aim of this device is to persuade the king’s prophets to pull something out of the entrails that will give the troops confidence for the fight. And, given the sheer amount of ‘eliminate the deficit by the end of this parliament’ coverage that’s followed, it’s working. Politically, at least. Temporarily, at least.

Because Osborne has allowed an impression to take hold that the target is more rigorous than it really is. That suits him for the time being. But those simplified headlines, which he’s hardly rushed to correct, may end up as embarrassing for him as “Brits 45 mins from DOOM” became for Blair. In early 2015, when we’re still borrowing however much, it’ll look like a failure.

(And, as Duncan also points out, there’s also a ‘supplementary’ target that does have a fixed date: for government debt as a share of GDP to be falling by 2015/16.)

Updte: here's a chart showing what happens to the deficit when you adjust for the economic cycle and then take out capital spending (predictions as per Budget 2011):


Note that Osborne's taget measure (the green line) excludes roughly half of public borrowing at the moment. This cyclically adjusted current deficit was hardly out of control before the credit crunch hit; indeed, Labour had it lower going into their recession than the Tories had it going into theirs at the start of the 1990s. I raise this not to imply that everything was fine in 2007 but to point out that Osborne's choice of target doesn't necessarily do the political work he'd like it to.

Well, quite

I’ve just noticed that David Cameron began his speech about the riots and looting with this line:

It is time for our country to take stock.

The labour market

Just been listening to Peter Lilley on Radio 4 explaining why we need to force the workshy to get jobs.

Good luck with that.



Update: I should have included my data source. From the Office for National Statistics, select option 21.1 (Vacancies and unemployment). Then data series AP2Y is total UK vacancies, MGSC is seasonally adjusted LFS unemployment among those aged 16+, and JPC5 is the ratio (excluding agriculture, forestry and fishing for a reason that escapes me – perhaps there are a couple of million lumberjack vacancies that could save the day). Thanks to CH and friends for reminding me to add this.

How I tried to incite a riot using the mainstream media, and got away with it, by Tom Freeman (aged 18¼)

What with the recent rioting and looting – and the four-year sentences given to two morons who tried (and failed) to whip up a bit more trouble by posting on Facebook – I was reminded of my own murky past.

In 1995, when I should have been revising for my A levels but found everything else somehow more interesting, I noticed a letter in the Guardian from a man complaining about how unaccountable our rulers were. I don’t remember whether the idea came to me immediately or crept up on me over a few hours, but my reply was published on May 31:

In answer to Joe Phillips (Letters, May 30), I’m afraid there are very few ways in which we can vent our dissatisfaction at the monarchy, or the House of Lords, or even the Government between elections. We have opinion polls, where we can say what we like but get dismissed as unrepresentative, and we can write letter to politicians and newspapers but get dismissed as cranks.
However, there is a third way. At 2.30 tomorrow afternoon I will be conducting a violent and bloody revolution at the Palace of Westminster. All welcome. Refreshments will be served and crèche facilities will be available. Weather permitting.
Tom Freeman

Nobody could possibly take that seriously, just as nobody could possibly take seriously a jokey tweet pretending to threaten Robin Hood Airport with destruction if it didn’t clear the snow and reopen quickly.

Later that day, I received a phone call from a man from Stoke. (Back then, the Guardian printed its correspondents’ full addresses, so he’d clearly rung directory enquiries.) This polite and, from the sound it, ageing class warrior wanted to know about travel arrangements.

I let him down gently, and he had the decency to chuckle. But I realised that further explanation was needed, and so on June 2 the Guardian was good enough to print this:

My fellow anarchists and I apologise to readers for the failure of the planned “violent and bloody revolution” (Letters, May 31). The oppressed masses we had hired for the event were held up by traffic cones on the M4, and so the uprising was inquorate. The regulator Offcoup has recently revoked our Chartermark: with the loss of such government approval, we were unable to recruit enough passers-by to smash the state.
Tom Freeman

The police have yet to come a-knocking.