UK Debt Downgrade "80% Certain"

Tomorrow's DT will make further horrible reading for Brown and Darling (I dearly hope). According to one of their economics journos, Ed Conway, the head of one of Britain's leading fund managers, Neil Woodford, Darling's and Brown's inability to face up to the unsustainable scale of their spending and consequently gigantic debt levels - at least in peacetime - is now virtually certain to lead to a credit rating downgrade and, far worse, a subsequent debt spiral. Woodford is quoted as saying:

I would argue that there is a high probability... a decent chance that we will be downgraded, and it is a near certainty if we do not, in the wake of the next election, properly deal with the deficit. There are some major challenges here. If we do not take the medicine, there will inevitably be a downgrade. If we do, we have a chance of escaping a downgrade.

After the PIMCO shock, where their experts determined that there was an 80% probability of a downgrade from AAA and acted accordingly by dumping UK gilts, it seems this gathering economic storm is going to make the current arctic weather and subsequent national chaos look like a soft, Barbados beach on a warm day.

And the only party with a plan for getting us out of it with a coherent fiscal policy, designed to allow monetary policy to remain loose by avoiding the downgrade and subsequent, devastating interest rate rises and inflation, thus enabling a strengthening in any recovery, is the Conservative party. Philip Hammond proved that yesterday.

No wonder the Tories want an election right away. They're not bluffing - it's vital that we have a change of government because it really is the 11th hour for Britain's finances and economy.

Action must be taken - now!

By the way, well done Gordon. Well done Darling. Britain really is nearly bankrupt, thanks to you. Marvellous.

The UK's Future: Social Unrest - and Better Music

I thought this conversation was fairly interesting, especially the parts where American former trader, Max Keiser, talks about the free market capitalism/democracy relationship and the major disappointment that is Barack Obama ("he's not a politician, he's a celebrity"). He's pretty good on the impact on our purchasing power of the explosion in money supply, too.

Whatever happens, 2010 will be one of the toughest years the UK has ever faced. The only silver linings, at least to me, are that Labour and the evil Brown stain, who caused the catastrophe in the first place and then prolonged it with a fake recovery (which has yet to materialise), will be kicked out of power, preferably forever - and popular music is likely to improve in inverse proportion to the social dislocation caused by the ongoing deterioration in the British economy, (otherwise known as The Clash Coefficient).

Gordon Brown: Not Just An Idiot...

Just got back from a spell of Christmas shopping. I know, a bit early for a bloke, but I thought I would miss the rush and I knew what I wanted, so I thought it would only take an hour or so. Fat chance - it was hell out there! Then driving home I wondered to myself, is this a sign of economic recovery? Could be. Could be.

But...

...and it's a big "but" which is followed by the now all-too familiar name of the one-eyed Scottish incompetent, Gordon Brown. David Blackburn has proved that while he is many things, all bad, he's also something more, incredibly: he's politically naive. This king of bust, who presided over (as unelected Prime Minister) and largely was to blame for (as useless Chancellor who borrowed into a property bubble that his deregulation of the banks directly caused) the biggest peacetime crash since 1929 and the worst recession in post-war history, is now jeopardising the recovery as well with his stupidity and tribalism before it's even had a chance to start. Read it and weep:

The Times’ Ian King writes that Dubai’s predicament presents an opportunity for the City to attract new business. There is no reason why, with attractive incentives, London shouldn’t capitalise on Sheik Mohammed’s momentary lapse of reason. However, the appointment of Michel Barnier, an evangelical protectionist who makes Joseph Chamberlain look like the father of Free Trade, as EU regulating supremo is a disaster for Britain.

The appointment raises further questions about Gordon Brown’s acceptance of Baroness Ashton as the EU’s foreign minister. Michael Fallon is no doubt:

“Brown has been completely outwitted. We now have none of the three key economic jobs in Brussels. This has all happened at an incredibly dangerous moment when there are firm proposals which will govern regulations on banking, insurance, private equity and hedge funds.”

Despite its insistence to the contrary, Downing Street has failed to protect financial regulation from falling into foreign hands. The outmanoeuvred Prime Minister has left the City at the mercy of a politician who believes there is “too much free market liberalism”. No wonder the French are so keen on Gordon Brown. Recovery has been jeopardised by political naivety.

What we did to deserve this imbecile is anyone's guess. Oh, that's right, about nine and a half million idiots voted him in in 2005. Hang on...

Ah well, at least we'll get to vote the moron out some time next spring. I just hope that by then it's not too late.

King Backs Osborne

This is the implication of Mervyn King's long-overdue criticism of Crash Gordon's mishandling of the economy and creation of the largest peacetime deficit in British history, ostensibly somehow to buy his way out of recession, but in reality to try to generate some sort of fake recovery in the run-up to the general election, thereby, somehow, securing a victory. God help us all if that works.

Well, that's precisely the point, isn't it? Whatever the motive for Brown's profligacy, it's becoming abundantly clear that it won't work. Britain is not recovering, in spite of the gazillions of pounds, much of it printed, being poured down the drain to make up for Brown's truly horrific, banana republic-style borrowing and spending splurge. King, it seems, has finally come clean on the scale of the government-led secret, further bailout of those two giant Scottish banks, RBS and HBOS, (£61Bn) whose chiefs were so very close to Brown and other Scottish Labourists, and who brought such pain to the people of Britain as a whole with their casino business practices and high risk, rank profiteering. He seems to have had enough of carrying the can for all Brown's gargantuan errors of judgment, both as Chancellor and as unelected Prime Minister.

Today's Telegraph report therefore makes refreshing reading, at least for me, loathe Brown and support the Tory plan for saving the British economy as I do.

In comments which are likely to infuriate Mr Brown, Mervyn King said that the next Government would need to “eliminate a large part of the structural deficit” over one parliamentary term alone. This proposal goes significantly further than anything penned in by the Government in the Budget, or what is demanded by the Fiscal Responsibility Bill unveiled last week in the Queen’s Speech.

In a hearing of the Treasury Select Committee, Mr King said repeatedly that the Government’s plan needed to be “credible” and detailed, or it would lose the confidence of the international investors who buy British debt. He said: “I think [the plan] has to be something where a really significant reduction in the deficit, the elimination of a large part of the structural deficit, takes place over the lifetime of a parliament, which is the period for which a government is elected. Beyond that is a statement of intent and hope rather than a plan for which someone can be held accountable.”

This, to me, represents not only a "rebuke" of Brown for his incompetence and subsequent complacency about the state of the national finances, but also a clear message of support for George Osborne. And it goes further, according to the report.

In comments which will further rattle markets, Mr King said that the top-tier rating on Britain’s debt could be at risk if the Government does not go ahead with significant cuts.

He said: “I don’t think there’s any immediate risk [of a downgrade] but of course the longer there isn’t a credible plan that sets out what actions will be taken, the more that is a risk. I myself don’t think that there is any impediment to the UK putting in place a credible plan that will convince financial markets.”

This is arguably the sternest of the numerous warnings the Bank’s Governor has issued to Mr Brown over the size of the deficit. It is the first since Mr Brown announced last week that the Government would draw up legislation forcing it to cut the deficit each year for the next decade and insisting that it halves the budget deficit within four years. Since then, however, official statistics have shown that the Government is still borrowing cash at the rate of almost £3 billion a week.

I wonder how Brown will get his revenge. Remember, you see, for 'moral compass' man, it's all about politics and always has been. He will burn anyone down who shows dissent and over whom he exercises some form of control. That's Brown's way, the way of the bully, the coward and the demagogue.

It's also the Labour way. An expert has just spoken out of turn, in this case Mervyn King. We know how Labour deals with people like that, don't we Professor Nutt?

But hey, things can only get better. We can vote the bastards out in 2010. As one poll shows, published at the same time as that Guardian Ipsos-Mori rogue, (another puts Labour back down on 22%, on point ahead of the Liberals), it's looking increasingly like that's precisely what we will do. And there's nothing Brown, Mandelson or the rest of that shower of lying, ruinous losers can do about it.

Classic Starkey

David Starkey is the only person who's articulating what we all know - that Gordon Brown is responsible for both the crash and for creating the City culture, complete with the weak regime of regulation (Brown's personal creation), which encouraged bankers to ignore risk. As long as Brown was getting tax revenue from this giant, debt-fueled scam, he was happy - and happy to piss all that revenue away mercilessly on things (everything) that he had no idea how to manage. He's pissed away our future, in other words - and worse, he's pissed it away having already sold the collatoral.

But there's more. Combine this with the Brown-inspired bonus bonanza that reinforced the irresponsibility, thus keeping the whole madness spinning, and what you're left with is the perfect recipe for a total crash.

It's Gordon Brown's recipe - and it's come out perfectly: total collapse of the entire system; the destruction of Britain's financial and economic stability. Cheers, Gordon.

And now he's printing money to keep his high going! The lunatic needs to be stopped.

So I do hope the Tories will hammer these particular nails home. Brown thoroughly deserves it. (But so - in a slightly different way - do we.)

Whatever happens, if the Tories fail, then so do we. It's that dire.

But hey, thank God for Starkey!

The Emergent Osborne

Critical though I have been, almost constantly, of George Osborne since I began to write this stuff, I am happy to admit that all recent evidence points to the fact that I was, in truth, wrong about him. My lack of faith in his ability to engage with the zeitgeist, judge the political temperature and seize the moment was thoroughly weak-willed, it seems. Oh fickle me.

Yesterday was good (today will be better). Osborne railroaded Brown and trainwrecked Mandelson with the devastating timing of that leaked treasury document - and many excellent anti-Brown bloggers explained just how (I didn't). Today he's going for Labour's jugular, according to the DT's chief Conservative party news conduit, Benedict Brogan. Now that he's trumped Labour on the argument, he's going to stick it to them on policy. Public spending and debt levels are a national emergency, he will say, and that calls for an emergency budget. Excellent.

The last time the Conservatives returned to power with an emergency budget, there were no surprises. The Economist declared, "It's what you voted for", while the Daily Mirror said, "No one who voted Conservative can complain". It was 1979 and Margaret Thatcher had prepared the groundwork with a manifesto that addressed directly the twin challenges of the day: "Any future government which sets out honestly to reduce inflation and taxation will have to make substantial economies, and there should be no doubt about our intention to do so."

George Osborne is aiming to do the same again. By the time you and I vote, he hopes to have made it plain as a pikestaff that he intends to introduce sweeping measures to get the public finances back within reach of reason. It may not all be done in that first "emergency" Budget he plans to present within weeks if the Tories are returned, but he will go fast and furious, I'm told. The window of opportunity for doling out the bad medicine is narrow.

Quite what he tells us between now and polling day is another matter. He is weighing up calls for candour against the risk of showing a hand that can be trumped by a desperate Labour Party. He is aware of the need to prove there is more substance to his programme than making MPs pay more for their Commons salad, but is mulling the "how much is too much" dilemma. His conference speech in three weeks' time needs to impress the City with its maturity. He knows he should display the soberness of Geoffrey Howe rather than the showmanship of Derren Brown. It must be the address of a chancellor, and not of his shadow.

Yesterday, though, Mr Osborne was still demonstrating his knack for political coups. He released a leaked document that reveals the Government is assuming spending cuts worth 9.3 per cent between 2011 and 2014. This breach of confidence has had a devastating impact inside the Treasury. Labour exploited leaks in opposition, and is being undone by them now. This one has turned Gordon Brown's retreat from "Tory cuts v Labour investment" into a rout. To have shifted the ground of the political debate while in opposition is some feat. How far have we come if a shadow chancellor can accuse the Prime Minister of lying without provoking even a murmur of outrage?

What to cut is the new frontline in a war of attrition between the parties. But now comes the hard part. The Conservatives are committed to closing the deficit more quickly than Labour, which leaves the shadow chancellor having to explain how much greater than 9.3 per cent his spending cuts will be. As Ronald Reagan said in his first inaugural address: "All of us, together, in and out of government must bear the burden."

But do we even understand what reducing debt and reforming the public sector might mean? Glib talk of axed programmes, redundant civil servants and slashed benefits takes little account of the difficulties the politicians implementing such cuts will face. Vital? Yes. Do-able? Of course. But easy? No, and yet Mr Cameron and his shadow chancellor are being egged on as if restoring us to fiscal health is as easy as 1, 2, 3.

The Conservatives face four obstacles that cannot simply be wished away, the first of which is the public sector unions. Mr Cameron may be trying to seduce Brendan Barber, the TUC's general secretary, but the noises from its conference suggest no takers among the brothers for his olive branch. He is right to highlight the regiments of public sector employees who, like him, believe more can be done for less. But three in five workers in the public sector are unionised, and the BMA can be just as reactionary when it comes to protecting the largesse lavished on its members by Labour.

Then there is the Civil Service. Senior officials are desperate to be rid of this Government – yet, over time, Whitehall has developed its own addiction to unlimited money, coupled with an aversion to risk. A generation of mandarins has grown up fearful of delivering hard truths face to face, and of challenging poor performance. As a result, what a private company would find straightforward – the removal of failure – in Whitehall has become complicated and mired in treacle. Teaching civil servants to address poor performance with the same kind of brusque efficiency that obtains in the private sector must be part of the next government's programme of reform.

Mr Cameron, in his pronouncements so far, not least his promise to go to war with the educational establishment, shows all the signs of a politician who is not afraid to suffer the scars on his back that Tony Blair so famously complained of.

Which brings me to my next obstacle: the politicians themselves. Whitehall is gripped by short-termism, yet in a world dominated by the targets culture introduced by Labour, is this any surprise? When ministers themselves prioritise short-term results that can be ready for the Six O'Clock News or the autumn conference, how can the Civil Service hold out for the long view? Take the permanent secretary I know who was asked by Gordon Brown to deliver a 5 per cent real terms cut in his departmental budget (long before the Prime Minister was prepared to admit such a thing), only to have his ministers – all cronies of Mr Brown – veto every suggestion for shedding jobs, for fear of alienating the militants in the PCS union.

It's not just a Labour problem. Last week, Michael Fallon argued cogently in The Daily Telegraph that the shadow cabinet does not have the faintest idea of the commitment needed to cut public spending, and is still racking up spending pledges rather than offering savings.

And then there's us, and by that I mean the political and media classes of which I am a part. Are we truly ready for reform? What will we make of the grind of austerity, of the complaints from angry constituents and furious readers who have lost a hospital or a surgery, or seen their children refused a university place?

Mr Cameron proposes a long-term project of restraint and reform, but will face resistance, not just from the machine in the centre, or from the demoralised manager of a Leeds benefits office baulking at making a 10 per cent headcount reduction, but from top to bottom, an accretion of human resistance, born of short attention spans, lack of imagination, special pleading, and the siren calls of an economic recovery. How easy will it be for a Cameron government to argue austerity, when others are emerging into the sunlight and thinking: "It's over, why bother?"

Still, I remain an optimist. The public gets the need for "more for less". It's what they have always done, in the kitchen, with the home finances, and in running their small businesses. With the right leadership they can be persuaded to support a national endeavour to spend less and run things better. But it will require candour from government. In 1979, Mrs Thatcher was returned with a majority of 44, not a landslide. Her side wavered and came close to throwing her out when things got tough, until a gamble in the Falklands rescued her. We should not make the next government's job any more difficult by pretending that what lies ahead will be easy.

Great writing, especially the concerns - all of which I share. But once Labour get theirs and are kicked out of power - preferably forever - Osborne and Cameron will be given a free rein, and they'll bloody well need it to overcome those obstacles to which Brogan so eloquently refers. If they are honest with the people from the beginning, then they will. They must be honest.

It's all about faith, you see - the faith I didn't have in Osborne/Cameron initially but am rapidly discovering I now have. From faith comes a mandate; from a mandate comes leadership and strong government. None of these things has Brown ever enjoyed or deserved or, indeed, sought. And that's why he is doomed. The sooner he goes, the better for everyone.

So I say to the inheritor, Osborne: well done! But you must stick to your guns in order to rescue the country from the terrifying, deep, black hole that Brown, thanks to his catastrophic incompetence, mismanagement and world-beating, unbalanced arrogance, has dug for us.

Tories: over to you, then. You've won the argument.

Don't blow it.

The Radical Fix

'Renegade Economist' Fred Harrison has seldom been wrong about where our governments, particularly this one, utterly failed to 'go right'. Last month I wrote this little piece about his plan for a radical fix. This time, I'll just leave it to him to explain what we have to do as a nation to get ourselves out of the mire - and avoid the Thirties solution, which was World War II.



I don't entirely agree with him on the land tax issue (there are over-population and transition factors he doesn't seem to take into account with any rigour in his daring escape plan), but I totally agree with him on at least one thing: the first step is to cast off this government and force the next one to get it right. I also agree heart and soul that debt is our real enemy, and a powerful one at that. To defeat debt, the radical fix has to begin right away.

PS: And if you really care, read this (even though he's wrong about Thatcher).