Eurozone crisis – it just got personal

Until now, the Eurozone crisis for me has been a vague, distant phenomenon. I would turn on my TV to see mass protests in Athens, numerous summits between EU leaders and hear abstract talk of financial markets and rising yields on Greek government bonds.

Yes, there was a crisis going on, but it was all comfortably remote and happening in slow motion. Whilst I could feel sympathy for the austerity-stricken Greeks, I struggled to appreciate why this crisis really mattered. What was all the fuss about? How did any of this affect the average person in the street? Ultimately, who cares?

Well now I know. At a personal level, this crisis now has a human face.

Meet Enrique. He lives in Algeciras in southern Spain, the largest city in the Bay of Gibraltar. He’s my Grandpa. This week he discovered that the municipal tax on his house has increased by 50%. He fears that taxes on rubbish collection will also rise. ‘The crisis is reaching people with low incomes’, he tells me. Enrique also saw the value of his savings dive as the share price of Santander Bank fell, a consequence of growing uncertainty over the safety of Spanish banks.

In other words, he’s getting poorer. And at root, this is the tragedy of the crisis in the eurozone. Citizens of European countries, and it’s beginning to happen in Britain too, are having to pay higher taxes and endure lower living standards so that their governments can begin to pay off their debts. It’s pretty simple: governments are choosing to spend less and tax more to try to appease bond markets that take fright at the first signs of economic mismanagement.

Things look particularly bad for Spain because their fourth-biggest bank, Bankia, is asking for a €19 billion bailout from the Spanish government. Bankia’s balance sheet is weighed down with toxic debts following Spain’s burst property bubble in 2008. Spain’s bailout fund isn’t yet big enough to save Bankia, so it will have to go to the financial markets to borrow the rest. But with investors demanding interest rates of almost 7% for holding Spanish government bonds, the cost of this bailout is looking eye-wateringly high.

Indeed, it was borrowing costs of 7% that forced both Ireland and Portgual to go cap in hand to the International Monetary Fund to seek bailouts in the past. There’s now a real chance that Spain could be next.

And whilst these question marks hang over Spain’s financial credibility, investors will continue to withdraw capital from the country. A record 66.4 billion euros was moved out of Spain in March alone. This lack of confidence means further falling share prices for banks like Santander and further troubles for people like my Grandpa.

So what is to be done? How to end this seemingly never-ending crisis? In general terms, the answers to saving the euro would seem to lie in the following: greater fiscal integration, a degree of debt mutualisation and the political will to stomach long periods of depressed living standards.

On the point of fiscal integration, the euro zone area needs to start acting like a single country with a centralized approach to taxation and spending. Different countries with different economies pursuing different tax and spend policies but united by a single currency was an idea doomed to failure. Europe needs to become more federal. Getting voters across the continent to agree to this is another matter, but it has to be done.

Meanwhile, richer euro zone countries like Germany need to be prepared to stand behind the debts of the likes of Spain and Greece. The German people may not like it but it’s the price they’ll have to pay for saving the single currency. And they should see that it’s a price worth paying given that the success of the German manufacturing industry is in large built upon the favourable price of the euro relative to other currencies. If they were forced to revert to a strong deutschmark, their exports would most likely slump. So Angela Merkel needs to concede ground and accept some form of debt mutualisation.

Will any of this actually happen? Based on past form, you’d say not. But Spain’s problems have given the crisis a new momentum. If the euro is going to be fixed, it’s going to have to happen sooner rather than later.

But whatever happens next, this is now personal. It was previously easy to overlook the fact that this crisis touches real people with real plans and real interests. Spain’s troubles, however, and my Grandpa’s in particular, have changed that. This crisis really does hurt the person in the street.

And in this globalized 21st century, a butterfly flapping its wings in Madrid stands to create an economic hurricane the world over. Britain is very much in the firing line. Unless Europe’s leaders act quickly to implement a lasting solution to the continent’s problems, the human cost is only going to get worse.

Published in The Bubble, Durham’s online student magazine – 5th June 2012

http://www.thebubble.org.uk/politics/eurozone-crisis-it-just-got-personal#!page=2

Some prisoners should be given the vote – let’s get nuanced!

Matt Williams’ article on votes for prisoners is worth reading: he gives a concise yet thorough discussion of the complexities of the issue and offers a strong case for denying prisoners the vote. I would, however, like to offer a response to his article.

As a starting point, we should note there are two key questions at the heart of his discussion and it’s important to keep them separate. The first question is ‘Should prisoners be able to vote?’ The second question is ‘Should the European Court of Human Rights be able to answer that question on Britain’s behalf?’

On that second question, Matt says ‘the ultimate decision [on votes for prisoners] must be left to the national government otherwise sovereignty is threatened.’ I wholly agree. Parliament ought to remain as the supreme law-making authority of the land. Parliament’s accountability to the British people at the ballot box ensures that the laws it creates reflect the public will.

We also already have our own British judicial system to ensure that Parliament doesn’t act outside of its powers or infringe civil liberties. We shouldn’t have to face interference from European judges and we ought to remove our commitment to the European Convention on Human Rights and adopt our own British Bill of Rights.

But it is on the first question – votes for prisoners – where I disagree with Matt. Some prisoners should indeed be able to vote, namely those on short sentences or who are soon to leave prison.

Let me begin by saying that I will not use the traditional arguments often used to support votes for prisoners, such as the denial of the vote allegedly harming rehabilitation or undermining human dignity. Frankly, I find these unconvincing. Most prisoners don’t care about voting and in addition, rehabilitation comes from things like education and skills training, not voting.

Instead, denying all prisoners the vote violates a more fundamental democratic principle. This principle is that all citizens who must abide by the laws of the land reserve the right to vote for the members of the legislature who create those laws. This principle is fundamental because it preserves our own freedom. We may have to obey laws that restrict free action but since we’ve been able to vote for the people that create these laws then they are in a sense self-imposed and hence compatible with our freedom.

The problem with banning all prisoners from voting is that you violate this principle. Let me demonstrate with an example. Imagine Person X. He is given a 6-month custodial sentence in January 2010 for repeat minor offending. He is unable to vote in the May 2010 general election and is then released from prison in July 2010. For the next four or five years he must obey laws made by people he wasn’t able to vote for, just because he happened to be in prison at the time of the general election. In my view, this means that the deprivation of his freedom extends beyond his prison sentence.

In his article, Matt justifies this deprivation by saying that it ‘makes no sense for those who break, ignore and abuse the law to have any influence over those who make the law’. However, the problem with this view is that you deny the prisoner the ability to influence the law for a long time after they’ve left prison, namely, until the next election.

This is the wrong approach; a prisoner should be able to vote in an election if they’re going to have to live for a significant period of time in a society governed by laws created by politicians elected in the prisoner’s missed election.

Let’s take another example to further demonstrate my position. Imagine Person Y. She is given a 20-year custodial sentence in January 2010 for murder. I believe that Person Y should not be allowed to vote for the next fifteen years because they’re not going to be living in society for the next fifteen years. But they should be allowed to vote towards the end of their imprisonment because they will soon be coming out of prison and having to abide by the laws of society.

Hence I take issue with Matt’s statement that ‘you cannot have a system which gives the vote to some prisoners and not others. [It] has to be either all or none’. To this I say, ‘Why not?’ Why not have a system where prisoners on short sentences or who are soon to leave prison can vote? And where prisoners on longer sentences can’t vote, at least not until near the end of their imprisonment?

Similar to other European countries, judges should be able to follow appropriate guidelines and use their discretion in deciding which prisoners can vote and which can’t. It doesn’t have to be all or none.

Prisoners ultimately have to rejoin society, a society governed by laws voted upon by elected representatives in the legislature. If we are to respect one of our fundamental democratic principles then prisoners should be able to vote on these elected representatives since they will live under their laws.

If this is denied to a prisoner then the democratic principle is violated and the deprivation of the prisoner’s freedom is extended beyond their time in prison. For me, that’s unacceptable. Hence you’ve got to give some prisoners the vote.

Published in Palatinate, Official Durham Student Newspaper – 16th June 2012

http://www.palatinate.org.uk/?p=24244

Is a Lib-Lab coalition on the cards?

I’m not a gambling man but, like our Prime Minister, I enjoy following political odds. Like public polls, I think they give a good snapshot of the state of the nation and indicate where we could be heading.

I particularly like following the odds for Britain’s next government. Paddy Power currently offers Labour as favourites to secure a majority at the next general election, closely followed by the Conservatives. No surprises there. But of most interest, in my view, is what the bookies see to be the equal third most likely outcome: a Lib-Lab coalition.

Could this really happen? In the event of a hung parliament, could Labour and the Liberal Democrats forget the acrimony of the last few years and form a progressive coalition to lead Britain? Like I said, I’m not one to place bets. But if I did, this one might just tempt me.

The odds have been shortening and here’s why. The Daily Telegraph revealed over the weekend that senior Liberal Democrats such as Vince Cable and Sir Menzies Campbell have allegedly been in regular contact with Labour leader Ed Miliband and his inner circle to discuss issues on which they have ‘common ground’. In the event of another hung parliament, it would seem, the two parties want to be ready to seize power.

And reports of such discussions don’t sound unreasonable. Cable has been a persistent grumbling presence in the current Coalition – criticising Clegg and Cameron whilst being viewed by one Tory donor as a ‘socialist’ – and the two parties share ideological sympathies on matters such as House of Lords reform and social justice.

Meanwhile, Miliband recently appointed Lord Adonis as his industrial strategy advisor, an influential peer who has strong links with the Liberal Democrats and who would be a good facilitator of talks between the two parties.

So the stars seem to be aligning. As in 1997, Labour and the Lib Dems appear to be making the strategic calculation that an alliance of sorts might be the only way of keeping out the Tories at the next election. But the difference back then was that Tony Blair went on to secure a landslide majority for Labour and so had no need for Lib Dem support when in government, a landslide that currently looks beyond Milliband’s reach. A coalition may be the only route to power.

And – whisper it – we might not even have to wait until 2015 for such an outcome. With the Liberal Democrats floundering at 9% according to the latest Yougov poll and Britain’s economy in double-dip recession, Cable and his key supporters might decide to take a risk and call for a radical change in the government’s economic policy. Plan A of fiscal consolidation has failed, they could argue, and it’s now time to switch to a bold Keynesian stimulus approach to lift Britain out of the doldrums.

Whether the Lib Dems would be brave enough to do this now is another question. Uncertainty is rife in the Eurozone and the Olympics are almost upon us, so the time doesn’t seem right to break up the Coalition. But the seeds have certainly been sown. Could we see a Lib-Lab coalition in the near future? These are early days, but I wouldn’t bet against it.

Published in Palatinate, Official Durham Student Newspaper – 6th June 2012

http://www.palatinate.org.uk/?p=24073

Clegg, the ‘F’ word and social mobility

Nick Clegg’s self-proclaimed raison d’etre in politics is the ‘F’ word: fairness.

And last week, speaking at a conference organised by the Sutton Trust, the Deputy Prime Minister renewed his calls for greater social mobility in Britain, an issue at the heart of his ‘fairness’ agenda.

As part of the government’s plan to monitor this issue, Clegg revealed 17 ‘trackers’ that the government will use annually to measure progress on improving life chances for the underprivileged. Clegg said that these would show ‘how well the government is doing in making society fairer’.

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Amongst the ‘trackers’ will be indicators such as how many teenagers from disadvantaged backgrounds achieve the AAB grades needed for the Russell Group of universities and how many children on free school meals are achieving a ‘good level of development’.

His fresh focus on this issue would appear to be a timely one. Recent reports by the OECD and the All Party Parliamentary Group  (APPG) provide various unflattering findings about social mobility in Britain.  The APPG found that UK mobility is low relative to other OECD countries, meaning that a child’s life prospects in the UK are often more closely linked to their parents’ circumstances than in other developed countries such as Germany or Australia.

Another telling finding is that 32% of MPs and 51% of top Medics come from privately-educated backgrounds, despite only 7% of the population being privately-educated.

But what can actually be done about the issue? How to make Britain more socially mobile? It’s a contentious question and, for Clegg in particular, one riddled with political difficulties. Three main obstacles stand out.

First, there’s the charge of hypocrisy. Critics will ask, ‘How can a Westminster School and Cambridge-educated son of a banker who benefited from unpaid internships paint himself as a champion of social mobility’?  Clegg’s response is that his own fortunate upbringing changes nothing but opponents of the Deputy Prime Minister will always be quick to shout ‘hypocrite’ whenever he speaks out on this issue.

Second, there’s the divisive question of whether or not to admit weaker applicants from less privileged social backgrounds to Britain’s top universities. Clegg and the Liberal Democrats have a strong position on this issue, declaring it a ‘disgrace’ that only ‘1 in 100 Oxbridge entrants have been on free school meals’. Giving these underprivileged students more preference, they argue, is a necessary ingredient of a fairer admissions process and is a way of improving social mobility in the short-term.

But politicians on the right call foul of such a process, arguing that students from more privileged backgrounds would then be disadvantaged and that improving the quality of state education is the more preferable way of increasing social mobility. Clegg is yet to convince these doubters of the merits of preference for the underprivileged.

And third, and perhaps most interestingly for Clegg, is the obstacle that springs from a philosophical tension within his own liberalism: how to balance fairness against that other great ‘F’ word of the liberal cause, freedom?

It seems that there will always be unequal opportunity and social immobility so long as parents are free to bring up their children as they wish. Some will want to make investments in extra tuition for their kids whereas others might prefer to book a family holiday. Likewise, a parent with good social connections will want to use these to find the best opportunities for their children.

So unless Clegg wants to interfere with these parental freedoms it seems that he’ll just have to accept that a dose of social immobility will always be with us. He can continue to push ahead with policies such as the ‘pupil premium‘, where schools get extra money per disadvantaged pupil, and these should be encouraged and welcomed as they strike at the structural issues that restrict social mobility. But he will also know that perfect social mobility is unattainable in a free society. When the ‘F’ words clash, something’s got to give.

Published in Palatinate, Official Durham Student Newspaper – 29th May 2012

http://www.palatinate.org.uk/?p=23934

Regional pay is a fundamentally sound idea – but under-paying teachers isn’t

Amidst the pasties, the top-rate tax cut and reducing relief on charitable donations, last month’s Budget also saw Chancellor George Osborne announce plans to expand the use of regional pay in the public sector. Under the current system nurses and teachers have their pay adjusted to reflect higher living costs in and around London whilst some employees in the prison service also have their pay weighted to accommodate for local costs. Osborne’s plans, however, would significantly expand this use of differential pay to encompass other regions, such as Wales and the North East.

So what to make of this proposal for more regional pay? Would this not be unfair on those people living in the north of England who could end up getting paid less than someone doing a similar job in the south? Would it not also further widen the ‘North/South’ divide in the UK, with those struggling in the old industrial cities of the North looking on enviously at their richer southern counterparts, perhaps even abandoning the region altogether to pursue greater prosperity closer to London?

Despite what the trade unions will have you believe, the answer to both of these questions is ‘no’. On the issue of fairness, greater use of regional pay would in fact be more just than the current system. At the moment, as is clear from a recent report by the NHS Employers organisation, a nurse in Southampton doing the same job as a nurse in Durham earns the same salary despite the prices of things like food, drink and housing being higher in the South. This isn’t right. It’s eminently more sensible to take into account local prices when setting pay because this way you ensure similar standards of living for workers doing similar jobs.

On the issue of the ‘North/South’ divide, the answer is a little more nuanced. In the short term, yes, setting pay regionally may well impoverish the North and exacerbate the wealth gap with the South – new recruits in the public sector would have less money in their pockets and this could depress consumer spending and subsequently economic activity. All the old Keynesian arguments would apply and the North could see a temporary slump.

But in the long run this policy of regional pay stands to rejuvenate the North. Firstly, it could make it easier for private sector firms to hire the best talent in and around cities like Durham. Currently small and medium enterprises struggle to compete with the wages offered by the public sector and subsequently find it difficult to hire those talented employees needed to make a business flourish and grow. For example, an Institute of Fiscal Studies report from earlier this year showed that wages in the North East are 30% higher in the public sector than in the private sector for full-time working men. If regional pay were in place and wages in the public sector better matched those in the private then this issue of struggling to recruit talent could be less of a problem and we could see more entrepreneurial activity in the North. In the long term this means more jobs, more growth and higher standards of living. The short-term cost might be a few years of depressed activity, but it’s a price worth paying.

And secondly, the policy is coherent with the equally sensible idea of rebalancing the economy of the UK. In the good old pre-credit crunch days of a soaring financial services industry in London, the government could afford to shower the North with the proceeds of the economic boom and artificially keep unemployment down by creating lots of public-sector jobs. Unfortunately the music has now stopped and we’ve come to realise that this is an unsustainable way of running a regional economy. Any policy that can therefore encourage the North to wean itself off these public sector jobs should be welcomed and that’s why expanding regional pay is such a fundamentally sound idea.

However, as with most things, there’s a catch. Expanding regional pay will also affect teachers and here’s where I think the government’s getting it wrong. Although it’s not conventional to single out one aspect of the public sector as more important than any other, I think the education arm is of particular strategic significance. It’s the intellectual powerhouse of our economy, producing the workers, thinkers and the innovators upon which the future prosperity of Britain depends. The only way we’re going to become world leaders in areas such as bio-technology, alternative energy and manufacturing is by enthusing the next generation and giving every child in the country a top-class education. This begins with inspirational teachers.

That’s why I think we should be putting up pay for teachers everywhere, certainly not reducing it. We need to get the sharpest, most enthusiastic graduates into classrooms. Programmes like Teach First are a step in the right direction but the government needs to do more and back this up with cold hard cash. If a university-leaver sees that there’s a good living to be made out of going into teaching then we’ll see standards rise and we’ll take a step closer towards a world-class education system.

So that’s my message for Osborne: be bold. Expand regional pay, yes. But at the same time make teaching an elite, well-paid profession that attracts the brightest and best. Our children will thank us if we do.

Published in Palatinate, Official Durham Student Newspaper – 18th April 2012

http://www.palatinate.org.uk/?p=22925