++Labour Economic Policy Meltdown Latest++

The latest phase of this exciting day's news, playing out before our very eyes on TV and online, sees things taking a turn for the even worse for Darling, Byrne and Mandelson. Far from their emergency smear operation, covered live and in its entirety on the Beeb, having the desired effect of lowering the graphite control rods into the overheating core of their economic policy, it has merely triggered a super-critical reaction - from the business leaders they have accidentally patronised as being too stupid to understand that the Tory Party is tricking them. Business leaders don't like that. No one does.


The Spectator has more...

Mandelson was in political warlord mode, flanked by Liam Byrne and Alistair Darling, his unlikely musclemen.

But they blew it. First, Byrne and Mandelson asserted, with absolute certainty, that the Tories will raise VAT. Opaque pledges cannot be successfully criticised by baseless soothsayings. Alistair Darling then compounded the error by suggesting that the Tories were too incompetent to cost tax pledges but sufficiently artful to con leading businessmen. That is absurd. Already, two of the letter writers have rejected the suggestion they’ve been duped, and maintain the incontestable point that a NI cut would encourage growth and employment - yesterday, Darling admitted that the NI rise would hit jobs - and the recovery by extension. Ian Cheshire, of Kingfishers, said:

"It's a little patronising to say we've been deceived, this is not a political point, it is a business issue."

After a momentary wobble, the advantage is with Cameron and the National Insurance cut.

This is turning out to be a marvellous April Fool's Day - but not if you're a Labourist fool, of course. But this is a major victory for Cameroons. And all because they started being Tories again. Who'd have thunk it?

Blair's Millions

Excellent piece from the Renegade Economist today which traces some of Tony Blair's labyrinthine collection of funds, holding companies and legal entities that he's started since handing over his mandate to Gordon Brown. According to the Renegade, he's created a "complex web of structures involving 12 different legal entities handling the unprecedented millions he is receiving since he stepped down from office in 2007."

The article goes on:

So mystifying are the former prime minister’s financial structures – which involve highly specialised limited partnerships and parallel companies – that the Guardian today launches an open invitation to tax specialists and accountants to attempt to explain the motivation behind such structures. We have published the Companies House documents and other legal papers regarding the structure of the partnerships at guardian.co.uk and invite expert comment via our site at guardian.co.uk/politics/series/blair-mystery.

Thereis no suggestion Blair is doing anything illegal. But he refuses to explain the
purpose of the secretive partnerships.

Tax specialists say Blair could use these unusual arrangements at some point in the future to seek to transfer millions tax-free to his four children.
Blair denies, however, that the structures are such an inheritance tax avoidance scheme, known as a “family limited partnership”.

“Family limited partnerships” were being publicized to lawyers and accountants in November 2007 at the time Blair’s lawyers started to set up his structures.

Known in the trade as “Flips”, family limited partnerships are a way of getting round stricter inheritance tax rules in the 2006 budget, imposed by Gordon Brown while Blair was still prime minister.

'Flips', eh? Oh, the irony. Now, as yesterday evening's post on this blog shows, I'm not a little nervous about the Grauniad's journalistic standards, so I'm very pleased that an independent economics journal and blog has taken up the story. Indeed, the article then goes into far more detail than the Graun would ever dare about Blair's on-the-face-of-it legal but pretty irregular financial affairs, all designed (so the theory goes) to dodge inheritence tax, so little Leo will inherit all daddy's estimated, post-PM fortune of 14 million quid (and rising). "There, there. We won't let the beastly tax man have any of it." Perhaps Blair will be voting Tory in the next election (if he's actually registered to vote in the UK, that is).

Whichever way you choose to look at this, and the financial arrangements alone certainly seem worthy of the taxman's attention, it is worth remembering that Blair's pocket-lining at the expense of the British taxpayer, his early retirement (a breach of both a manifesto promise and of trust with 'the nation' - or 9 million suckers, rather- that gave New Labour under Blair, not Old Labour under Brown, a mandate to govern) and his subsequent ruthless exploitation of his ongoing popularity in the United States (if only they knew him as we do) are just the tip of the iceberg. They were (are?) all at it!

There can be no forgiveness for Blair for so many reasons, and he should be investigated for his dodgy businesses and questionable tax arrangements - just after he's been arrested over Iraq - but we must never forget that an awful lot more parliamentarians have been doing this under this Labour government for more than a decade and the worst, criminal offenders have been of the Labourist stripe. Now we know why. A management culture begins at the top. If the person at the top is a money-grubbing, ruthless exploiter of tax and expenses loopholes, the entire organisation's likely to follow suit. They're just copying the boss. Indeed, for the boss to feel OK about being so venal, he will positively (though quietly) encourage it. And that, folks, is called corruption.

And we've had 13 years of it. No wonder we're bankrupt: the country financially and parliament morally. Thank Brown for the former; Blair for the latter.

EU Declares War on the City

As if any more evidence were needed of the seriousness of the ongoing power drain from Westminster to Brussels, we now hear that the latter has now brought forward legislation to regulate Britain's all-important financial sector, its main target being the City. Dan Hannan reveals all:

When I warned against the EU’s Alternative Investment Fund Managers Directive five months ago, some of you felt I was laying it on a bit thick. And it’s true that my language was strong: “The City is staring into the abyss,” I wrote. “If the proposed EU directive on hedge funds goes through, London will go the way of Bruges, Venice and Amsterdam: a once dominant financial entrepôt sidelined by more virile cities.”

If you still think I was exaggerating, read this. So much for the idea that the most objectionable parts of the proposal were likely to be modified. Responsibility for the oversight of financial services will be shifted, with malign and irrevocable consequences, to the EU. London will be regulated by Brussels. Three new EU institutions will be responsible for invigilating an industry which, while marginal in most EU states, is critical to the United Kingdom. Like all bureaucracies, these institutions will enlarge their remit year by year until they bear no resemblance to the agencies originally envisaged. Those who mislike and mistrust Anglo-Saxon capitalism will at last be in a position to control it. All to solve a non-existent problem.

What are you waiting for, you hedgies, you derivatives traders, you bankers who see no reason why the state should dictate the terms of your contracts, you pension fund managers, you City solicitors, you who work in the ancillary industries, from conference organisers to chauffeurs? Are you all planning to join the emigration queue? Isn’t it at least worth putting up a fight?

It might be for them, but clearly the British government, which has caved in on this and so many other issues involving the giant steamroller that is the EU, has already made its mind up about the future of the United Kingdom of GB and NI. The fight was fought and lost when we were denied the referendum on Lisbon/the Constitution. Whatever follows - and this is just the start of it - I for one fear that the blind Europhiles (and they inhabit every mainstream British political party), who've somehow been hoodwinked by the socialist-federalists into believing that if you allow unelected, faceless Brussels officials to pass laws your country must obey, you are somehow not selling out the electorate of that country, have already done the permanent damage. Against the wishes of 65%+ of the UK population, and a majority of the people of the rest of Europe, too, it really looks like they might have won. They are about to take down the City, an institution that has long been in their crosshairs. The only question left to ask, powerless spectators as we now are, is "what will be next?"

Incidentally, the article to which Hannan refers in the first paragraph reads as follows:

A pan-European watchdog should be given powers to stop short-selling, according to a European Union report that also calls for tough sanctions against hedge funds that fail to curb pay, borrowing and risk-taking.

The European Union is examining new rules for the funds and others. This week, Jean-Paul Gauzes, a French member of the European parliament appointed to broker a deal on the law, will issue a report outlining the direction the EU should take.

In the document, obtained by Reuters, Gauzes writes: "In exceptional circumstances and in order to ensure the stability ... of the financial system ... the European Securities and Markets Authority (a proposed new body) may take the decision to restrict short-selling activities".

He wants the authorities to be able to "impose a temporary prohibition of professional activity" or "request the freezing ... of assets."

Britain, which itself imposed a ban on short-selling at the height of the crisis, could view the bid to cede power to a European watchdog as an attempt to dilute its influence over London, home to most European hedge funds.

Gauzes' recommendation goes further than most had expected and is twinned with other proposals to clamp down on hedge funds and other specialist financial investment groups.

He also calls for powers for the European Commission, the EU executive, to allow it impose caps on borrowing by a hedge fund.

"It is considered necessary to allow the Commission to impose limits in exceptional circumstances on the level of leverage that Alternative Investment Fund Manager could use," he writes.

Both the European Parliament and the bloc's member states share responsibility for writing the final version of the law and Gauzes, who has been appointed to broker a deal in parliament, is central to the process.

FRANCE VS BRITAIN

Gauzes' views are likely to have the backing of France and will be a setback to Britain's attempts to water down the proposed rules to protect London, Europe's financial capital and a major driver of Britain's economy.

Short-selling typically involves an investor borrowing shares and selling them on in the hope that the price will fall and he can repay the lender with stock bought for less. The British government temporarily outlawed the practice when its big banks, already teetering on the brink of collapse, were further undermined by short-sellers.

Gauzes now wants the funds to give extensive information about how they are investing as well as agreeing to cap the amount they will borrow, which many will see as restricting the much-prized freedom to switch investment strategies quickly.

During the crisis, hedge funds have come under increasing suspicion, prompting the European Commission, or EU executive, to draft rules to keep close tabs on a group that one politician has dubbed locusts.

Even if we wanted to fight back, I'm really not certain we can any more. Nature - or rather history - will simply have to run its course. That history (or rather future) does not look good for Britain on the strength of this piece of evidence. It doesn't look good for Europe either, frankly. The will of the people always triumphs in the end, one way or another.

Sugar Axe

Iain Martin, on his increasingly brilliant new blog for the Wall Street Journal Europe (which, incidentally, is run by another British stalwart of journalism, former Sunday Telegraph editor Patience Wheatcroft), has noted that Lord (nee Suralan) Sugar's showcase for managerial bullying, The Apprentice, has been axed by the Beeb until after the General Election. We will therefore see even less of this executive dinosaur on our screens than first thought, following his inauspicious and bizarre (and typically insulting) outburst against the constituency he was charged with supporting (or, as he prefers, "championing") - small businesses. Oh joy unconfined.

A big businessman with small business mentality himself - he sees all others as rivals, or all rivals as 'other' (it's hard to say) - he was, perhaps, the worst possible appointment for this role Labour could have conceived. Then again, for a while back there Alan Sugar was bafflingly popular. And that's all it took to get him hired by Mr Universally Loathed, Gordon Brown.

Martin writes:

When he joined the U.K. government, and entered the House of Lords thanks to Gordon Brown’s patronage, Lord Sugar seemed completely baffled as to why anyone might think this move had political connotations.

“I don’t see this as a political thing - I know everybody else does,” he said nonchalantly on the Andrew Marr show, shortly after his appointment.

But that’s the thing about taking a seat in the upper house of the legislature. It…tends…to…be…a…political…thing. Especially when you take a job from the government.

“It’s very simple - all I am is an adviser, I’m not a policymaker,” he went on. “I have been loyal to Gordon Brown and the Labour party for quite a while, but I also have my loyalties to the BBC.”

Others were less sanguine, the Conservatives in particular. Shadow culture secretary Jeremy Hunt demanded an inquiry. There was no way, the Tories said, that the Apprentice could be aired in the run-up to or during a general election when Sugar worked for the government.

Well, the BBC has caved in. The next series of the Apprentice is to be delayed until the summer and after the last possible date of next year’s election. The BBC Trust has ruled that there is an “increased risk to impartiality”.

Quite.

I think it's safe to say from this that the BBC has now decided who's going to win that General Election now and is scared shiftless of upsetting them. They should be.

By the way, I have a story about Sugar you might or might not like. In the mid Nineties, my brother worked for a software company with a colleague who had once had the misfortune of working for Sugar's consumer electronics outfit, Amstrad (or "Alan Michael Sugar Trading" for those that don't know). One of Sugar's methods of "personnel management", so my brother was told, involved walking across the shop floor at fairly regular intervals randomly firing people, especially middle managers and techies. No reason given, just the order of the boot. He would then see if the company could survive without them and, if it was found it couldn't, he would have them rehired soon after. One such victim was hired and fired no fewer than three times during his bumpy time with the firm. Sugar's tyrannical behaviour and the understandable fear of his cowed employees who had to put up with his primadonna-ish mood swings and merciless whim add up to one bad work environment - and one shocking boss. Maybe he paid well (I doubt it). Some might be tempted to approve of this stupidity (eccentric tycoon and all that), but he's Labour's small business "champion", for pity's sake. He's doesn't inspire people, he bullies them into submission.

Sure enough, what's now becoming crystal clear is that the way he ran his workplace has been transferred to the way he "champions" small businesses. "Stop moaning," he barks; "Most of these businesses deserve to go under," he moans, etc. His style of brutality might have made him some money in the 80s, but, a talent for making himself money apart, his neanderthal attitudes and fundamental ignorance won't help British private enterprise to be successful during Brown's bust in the noughties and beyond. For that reason, he should be out.

But, hey, you know, what goes around comes around. I think it's called 'karma'. It seems Sugar's saved up a hell of a lot of bad luck. And so has Brown.

Sweet.

Ken Clarke's Price

Decent speech from the seasoned campaigner and half-decent former chancellor. I still don't trust him, though, and with good reason. Do you?

I just wonder what his price is for loyalty. It must be high and European.

To me, you see, loyalty has no price, so (forgive the minor straw man) I just don't trust him. I don't think Cameron does either, so he will be a problem.

If only Clarke would grow the hell up - about everything. Or defect to the French.

The report in the Telegraph is good, you see:

Clarke said: “The burden of red tape and quangos is a millstone around Britain’s neck, stifling our economic recovery and playing havoc with our public services too.

“We need the right kind of regulation, based on giving people the responsibility to make judgements not forcing them to tick boxes and fill in endless forms.

“Under a Labour Government the regulatory burden has got out of control – costing more than £77 billion at the last count.

“It’s high time the Government got off people’s backs and started helping them instead. These new policies are the biggest and most serious attempt to lighten the load and I hope they're the spark that lights the bonfire of red tape."

The proposals include plans for a “star chamber” committee to ensure all new regulations are balanced by cuts to old laws on a "one in, one out" basis, a “sunset clause” for all regulatory quangos, forcing them to justify their existence after a period of time, and inviting the public to nominate unpopular rules for review and possible scrapping.

But most of that red tape comes from effing Brussels, Ken! Where's your head at, mate? Where's your head at.

New Business Tax Relief - A Great Idea

At last, a really great idea from George Osborne: the abolition of National Insurance for business startups. Read about it here.

The only way this country's economy is going to start to thrive again, after ten years of stagnation and contraction in the private sector, is if the Tories can encourage the entrepreneurial spirit in creative people. National Insurance relief for new businesses seeking to employ staff is certainly a start - and an excellent start at that - but it should only be the beginning of the process.

What should follow is a special, ultra-low rate of "corporation" (income) tax for startups and subsidies for business rates for, say, the first three years of trading. The benefits of these ideas far outweigh the costs in the medium to long term because the businesses are more likely to survive the crucial first years, become established, learn how to be profitable and begin to expand. Most will - or should - then be prepared for the changeover from "New Business" to, let's say, "Established New Business" status. A really imaginative solution to the shock of the sudden surge in operating costs could be to make it a step change - another two years, say, where there is a small NI contribution, full business rates and a slightly higher tax bill.

The point is that this sort of debate - and hope - is/was impossible under a Labour government that's been absolutely hell bent on bleeding the private sector white and then smothering it in red tape (in addition to the endless EU legislation currently strangling British businesses).

The Tories, in making these promises, have stated their intentions clearly, enabled the debate to begin and offered an incentive (albeit a small one) to the thousands of creative people in Britain with good business ideas and who don't want to sell out to Dragon's Den type parasites before they've even begun.

"We will send a message loud and clear that this country is open for business,"

Osborne said. And he is absolutely right. That's exactly what he has done. Amazing what one good speech and one good policy idea can achieve.

So - and I'm very happy to write this - bloody well done George Osborne. I mean that.