Stormy Weather

I have a confession to make: I can't bring myself to read the Open Public Services White Paper. Whenever I try and steel myself to pick it up, all I can think of is David Cameron tearing the social contract into tiny pieces whilst laughing maniacally. That is not a pleasant mental image.

Instead, I've read Vince Cable's 2009 book about the credit crunch, titled 'The Storm'. He wrote it in haste to try and explain the causes of the financial downturn, back when the idea of Liberal Democrats in the cabinet would have provoked disbelieving laughter. Reading it with the benefit of hindsight is very interesting.

When I borrowed this book from the library, I thought it would display the vast extent of Cable's hypocrisy once he become a government minister. I was surprised to find that some of his 2009 viewpoints accord quite closely with the coalition's stated programme. The book articulates Liberal Democrat ideology much more clearly than any of their election campaigning ever did. Cable's view is liberal in the old-fashioned sense of the word; pro-markets and anti-state in principle, but agreeing that there is need for a strong legal, regulatory, and fiscal policy basis for markets to operate within. Superficially, this agenda seems to differ from the Conservative Party (who dispute the need for a strong legal, regulatory, and fiscal policy basis, painting it all as red tape) and the Labour Party (who are more pro-state, insofar as they actually invested in public services). That's a vast oversimplification, which credits UK political parties with an ideological coherence that they don't have, but it does point to a certain sympathy between Conservative and Liberal policies. Labour at least pretended to put people before markets.

Cable clearly articulates the need for reduced UK public spending to get rid of the so-called structural deficit (a disputed term, I should add). This is now the coalition's favourite soundbite. He also emphasises the need for stronger regulation of banking. The current government have talked about this at some length; their actions have conspicuously failed to live up to their words. Remember Project Merlin and how banks continue to ignore it? Remember when banks were allowed to pay unlimited bonuses? I don't think that this was what Cable had in mind in 2009. That said, his concern was the need for multilateral reform, given the international nature of the crisis. He has been making the right noises, just without supporting action.

There is a seemingly minor but critical distinction to be made between Conservative and Liberal Democrat economic policy: in his book Cable proposes public sector cuts once stimulus has got the private sector growing; Osbourne's approach is predicated on cuts to the public sector acting as the stimulus. The former nuance has clearly been subsumed under the great coalition carnival of cuts. As I've said many times before, I doubt such sudden and deep cuts will turn out well for anyone, least of all the most vulnerable in society, the economy, and the Liberal Democrats as a political party.

'The Storm' makes it clear that unbalanced housing policy contributed significantly to the economic crisis. Cable notes that the hysterical pursuit of home ownership (influenced by political, financial, and media hype) brought about a destructive house price bubble. To avoid it happening again, a more-balanced housing market with greater proportions of social and private rented property is needed. That is definitely not what the present Housing Minister and his ministry are working towards. Interestingly, Cable suggests that a period of deflation could help to prevent a second property bubble. In 2009, this was a real possibility and deflation did actually occur (if you go by RPI). These days, inflation is above 4% and being driven by food and fuel prices rises over which the government has very little control. Both markets are dominated by cartel behaviour and global in nature, as other chapters helpfully explain.

This book is definitely at its best when looking at the global picture; the rise of China and India as economic powers, the perversity of richer countries borrowing heavily from poorer, and trends in energy and food markets are all summarised neatly. I strongly take issue with the relegation of climate change to an afterthought, though. Nonetheless, 'The Storm' is well worth reading and covers a lot of ground within 157 pages. Ultimately, though, it is fatalistic. The UK is waning as economic power, many contributory factors to the downturn remain beyond UK policy control, and even if we get our domestic policy in order recovery will remain difficult.

Cable sensibly doesn't try and predict the future; he didn't foresee the alarming prospect of Greece, Ireland, Italy, and the US threatening to default on their debts, for instance. Rather, he presents a frankly depressing vision of where things were in 2009 and the main problems that needed to be addressed. It's now 2011 and those problems remain unfixed; rebalancing the housing market, investing in education and research to strengthen the economy, economic rebalancing away from financial services, and promoting fairness by using the tax system to reduce inequality. I haven't seen evidence of the coalition government making progress with any of that, despite frequent name-checking of the latter two aims.

I still think that Vince Cable has acted hypocritically and consider his callous attitude to Southern Cross unforgivable. However all politicians (indeed all humans) are hypocrites sometimes and working in a coalition inevitably requires compromise. The astute analysis in 'The Storm' demonstrates that Cable must realise how ineffective and downright dangerous most of the policies he has to support are likely to be. As the economy stalls, the euro totters, and America seems doomed to be downgraded, I wonder if he thinks such compromise was worth it?

I did find one prediction in the concluding chapter of Cable's book: 'There is a long period of austerity ahead'. It's hard to argue with that.

Keeping Calm and Carrying On

I haven't been posting lately as reiterations of previously expressed outrage would have been tedious to read and depressing to write. Government policies are still counterproductive, the coalition continues to dismantle public services, and the economic case for austerity continues to weaken. The Localism Bill is dragging itself through parliamentary processes, changed little by amendments. A storm of warning and protest about proposed NHS reforms from nearly every observer is largely being ignored by the PM. The only good news, that the Committee on Climate Change's carbon budget recommendation was accepted, shouldn't even be news. It only was because BIS and the Treasury were being reactionary about recommendations that should have been accepted as a matter of course. Moreover, the agreement to cut emissions by 50% will only be meaningful if actually achieved. That will require significant policy intervention, which is not yet forthcoming.

Rather than concentrate on national policy, I've been thinking about personal lessons from the past year.

Five ways to survive in a dying public sector organisation

1. Set aside a time (just after lunch on Friday is good) when everyone in the office can have a thorough bitch-in about the week's developments in government policy and their negative consequences. Sarcastically reading aloud recent CLG press releases will form part of this cathartic exercise. A current example: Pickles to cut red tape that stops the public from flying flags.
   
   (As an aside, I think it striking to compare the number of press releases from CLG about social care and flags. The former concerns the protection of abused children and vulnerable elderly people, arguably most critical task of local councils; the latter are pieces of fabric waving in the breeze. During April and May thus far, six seperate CLG press releases have been about flags. None have been about social care. See for yourself. What does this tell you about the department's priorities?)
   
   
2. Ensure that you have an exit strategy. Easy for me to say now, as I have a Masters place, but this is a huge source of anxiety for my colleagues. We now have less than five months left, and some are I think beginning to panic that come September they might be left adrift. Options being considered within the office, other than simply getting a similar job are: full-time study, setting up a as a self-employed consultant, charity work, and retraining as a teacher. However risky or speculative it might be, some plan for post-redundancy is essential, and ideally it should be something you feel good about. Rather than gloomily watching the organisation wither away around you, try and look on it as an opportunity for change and to move on with your career. Again, it's all very well for me to say that as I don't have kids or a mortgage. Still, the strange period of knowing your job will vanish is an ideal opportunity to consider what you need and want out of life in general, as well as your career.
   
   
3. Avoid regrets. There are a number of projects that I've put a great deal of time and effort into which will very likely be lost once my organisation has gone. I've had to make peace with this, in order to concentrate on the most important projects that really must continue elsewhere. These things need to be put in perspective. None of the reports that I've prepared or the emails I've sent will be of great interest to historians in a hundred years. They did what was needed at the time and provided me with useful experience, but if the paper copies are recycled and the word documents fossilise on a server somewhere, civilisation isn't going to fall. That does not mean that I wasted my time, just that the situation has changed. Regrets are a waste of energy that is better spent planning for the future.
   
   
4. Don't become isolated, either from your immediate colleagues or other organisations. Mutual support in my team is proving a really powerful thing. My colleagues and I are trying to support each other through hard times, and I consider that extremely important. As well as practical help (reading each other's CVs, sharing information about jobs, etc), we keep up with each other's progress, setbacks, and morale, wishing luck with interviews and providing tea for whoever is having a bad day. At times, three people in my team have all gone for the same job, but amazingly this hasn't caused distrust and excessive competitiveness. The atmosphere in the office is genuinely that of all being in this together. Moreover, the whole public sector is going through seismic changes, with redundancies at every organisation I work with. This certainly provides a heartfelt topic of conversation with any public servant I happen to meet.
   
   
5. Create some lunchtime escapism. Yes, it's all very depressing. The government is waging an ideological war on the public sector, there are far more people on the dole than there are job vacancies (the current ratio is five to one), and the future can seem bleak. It's important to avoid reading the news until it makes you cry with rage during your lunchbreak, and instead use the time for distraction. I tend to go for a walk, or read a bit of a book (novels and popular science, no current affairs or economics), or send a long email to a friend, or just talk to colleagues about something totally unrelated to work. Usually involving anecdotes about the wanton destructiveness of their children.

Even if you're not in the lovely situation of impending redundancy from the public sector, you will likely have some financial anxieties. Inflation is up to 4.5% and 42% of households expect to have less money to spend over the next year. You might notice some common themes in my pieces of advice to handle this: firstly, each would also reduce your carbon footprint, and secondly, each would be much easier to follow if you happen to be young, have no children, and live in an urban area. That would be my inherent bias as a twentisomething childless urban dweller, sorry.

Five ways to cope with the Age of Austerity

1. Get rid of your car, as they are a huge financial drag. Petrol prices are volatile and rising, road maintenance budgets are falling. Cycle or walk whenever possible, try not to rely on public transport. Bus and train fares are rising steeply whilst subsidies fall; frequency and reliability are thus deteriorating and will continue to. Given the quantity of sunk costs to car ownership; purchase, insurance, tax, maintenance; ditching the private vehicle rather than trying to use it less will make a much more significant saving. When bus, bike, train, or feet won't do, there are always taxis and car clubs. Moreover, the additional exercise will help with point two...
   
   
2. Stay as healthy as you can. Of course this is always a priority, but even more so when controversial and risky reforms to the NHS loom. During this kind of chaotic period of cuts and reorganisation, patient care is going to suffer, even with the best will in the world. This is not a good time to need a hospital or GP, at the very least you're likely to have to wait longer.
   
   
3. Shop around for food, buy only what you need, and don't waste it. Travelling on foot or by bike also helps with this, as you can't buy more than you can carry. Vegetarianism is cheaper than being a carnivore. Ready meals are an expensive source of calories. Special offers are only worth it if you would have bought the product anyway. Brands and special luxury ranges are generally a ripoff. It feels like I'm stating the massively obvious here, but these things add up and food is something that you can't buy second hand!
   
   
4. Think about your role in the Big Society. The government is radically changing the social contract and you must expect less from public services and more DIY. How would you cope if your local library, leisure centre, job centre, or Sure Start centre halved its opening times or closed altogether? Could you volunteer to help keep such a centre open? Which public services would you particularly notice reductions to? Which approach would make more sense if your preferred service is threatened: campaign against the cut, or volunteer to mitigate the effect? Do you know who your local councillor is, in case you need to put pressure on them?
   
   
5. Always look on the bright side of life. Happiness is threatened by redundancy and economic slump, but not precluded. Living within your means in the UK is likely to provide you with a good standard of living, even if your means are small. A little more frugality with regard to material goods wouldn't be a bad thing in the western world. There is great truth in the old saw that the best things in life are free. To wit, whenever I need cheering up, there are always pictures of baby animals.

More than five reasons why Cambridge is one of the best places to be in these harsh times

1. As it is 5 miles in diameter and flat, travel within Cambridge can effectively be cost-free. The vast majority of drivers expect and respect cyclists. Some roads do involve a measure of modal warfare, but there is usually an alternative and better route to be found. There are some glorious paths alongside the river Cam, as well as various quiet roads which form the cycling superhighways around the city.
   
   
2. Cambridge is highly aesthetically pleasing and has lots of green open spaces that it would be very difficult to start charging for access to. Admiring historic buildings and lazing on Parker's Piece will remain enjoyable, even if the parlous state of local government finances causes the latter to be mown less often.
   
   
3. Given the concentration of people in the city relative to the rest of the county, outlying villages will inevitably suffer the loss of libraries, leisure centres, and other services before the city itself, simply on the basis of usage. The student contingent (approximately 16,000 of the 130,000 total city population) help to keep the arts cinema and numerous lovely independent cafes viable.
   
   
4. Cambridge is a refuge for the left wing. There isn't a single Conservative on the City Council (whereas they run the County Council, a source of obvious political tension). Whereas the UK voted 68% No to AV, Cambridge voted 54% Yes. We also have a young and enthusiastic Lib Dem MP, Julian Huppert. Although I don't agree with everything he says and does, which is much more than anyone could expect from an MP anyway, he clearly has a lot of energy and interest in reflecting Cambridge's interests. I also admire his habit of communicating what he's doing and asking what he should be doing, for example canvassing twitter for questions he should ask in committees and parliament.
   
   
5. Although housing costs are painful and the rental market vicious, living costs in Cambridge are otherwise relatively low; I've already mentioned transport. There are lots of small independent food shops, which allow comparison shopping in a way that supermarkets simply do not. Obviously the city has supermarkets too, but if you hate them as much as I do you can avoid them. I find that fruit and veg are noticably cheaper from the local grocer than big box supermarkets. The charity shops are excellent for high quality second hand clothes and books.
   
   
6. It's a friendly, safe, pleasant environment that combines useful compactness and access to services with open space and a rural feel. My Suffolk-countyside dwelling family think it cosmopolitan, my London-dwelling friends consider me to be out in the sticks. Cambridge contains fields of cows and multiplex cinemas; truly the best of both worlds.

It has been almost exactly a year since the Coalition government came to power in a cloud of smug Eton bonhomie. I've survived the first year of austerity with my job intact, albeit doomed, and my home city relatively unscathed. This time next year, I expect to be an impoverished student and suspect that the cuts will feel a lot sharper. The important things are to keep calm, carry on, and take note of what may turn out to be a significant fact: since the student protests and March for the Alternative the government has completely lost the trust of the police.

Let It Grow, Let It Grow, Let It Grow

This week we learned that the UK economy shrank by 0.5% in the last quarter. George Osborne blamed the snow, conveniently forgetting that much of continental Europe experienced the same arctic conditions. Meanwhile Sir Richard Lambert, the outgoing head of the Confederation of British Industry, heavily criticised the government for having no economic growth strategy.

Sir Richard is right, when it comes to growth the government has some policy gimmicks but no actual strategy. Back in October last year a 'Local Growth' White Paper came out, awkwardly titled 'Realising Every Place's Potential'. Although the paper wanders erratically across planning, housing, sustainability, and region-bashing, the main message is summed up by this quote:

A further feature of earlier approaches was the belief that planning could both determine where growth should happen and stimulate that growth. This approach failed as it went against the grain of markets. Regional and other strategies stifled natural and healthy competition between places and inhibited growth as a consequence.

This makes it pretty evident that the new plan is to have no plan. The government doesn't think it needs a growth strategy. It considers the encouragement of economic growth not really any of its business; all it needs to do is destroy as much of the public sector as it can, and the economy will grow like Japanese knotweed. This is a very simplistic form of neoclassical economics, based on the lovely myth of perfect free markets. So as to ensure that the Department of Business Innovation and Skills doesn't look like a waste of space, though, a couple of policies have been announced.

Technology and Innovation centres are to be established, the first of which will allegedly open in less than two months. Next to nothing is known about what these are or what they'll do, other than the fact that they got £200 million funding in the Spending Review.

The other policy trotted out as supporting the economy is the Regional Growth Fund. This consists of £1.4 billion over 3 years, scraped together from various government departments (BIS, CLG, DEFRA, DfT, and the Treasury) for projects to 'rebalance' the economy away from the public sector. Regional Growth Fund is caught in something of a Catch-22. Public sector bodies categorically cannot apply for it. Private sector organisations can, but must ensure that they aren't breaking the rules on state aid, which try to prohibit the government from propping up certain companies at the expense of others. State aid rules are complex, hard to understand, and greatly restrict the monetary support that businesses can get. As you can imagine, this presents problems. Nonetheless, the first round of the fund (a maximum of £300 million) attracted nearly 450 bids totalling well over £2 billion.

£1.4 billion may sound like an awful lot of money, but it is trying to replace multifarious infrastructure and transport funds, on top of the £6 billion spent in the last few years alone by Regional Development Agencies. For all their faults, RDAs provided business support and economic strategy. They are being wound up at the moment and their functions centralised or simply stopped. They will not be replaced, unless you count the completely unfunded Local Enterprise Partnerships, which I am not inclined to.

How successful is the No Plan economic plan likely to be? To date the signs aren't encouraging. The government is ignoring the fact that the public sector used to spend a lot of money in the private sector. And the fact that the private sector relies on public services and infrastructure to operate. And the fact that business confidence is heavily linked to government policy. And the overall state of the world economy in relation to the UK. The economy is shrinking, and the cuts have barely started yet. VAT hadn't risen yet in the last quarter, either.

The UK is vulnerable to economic forces far beyond its control. Rises in petrol prices, which the press have been up in arms about recently. Rises in food prices, as we import so much of what we eat. Rises in cotton prices, as we import almost everything that we wear. Inflation is therefore rising whilst the economy contracts. Stagflation, as it is charmingly known, was a feature of the 1980s. Inflation now is nowhere near what it was then (4.8% compared to over 20%), but give it time. Peak Oil is on its way.

The government wants private sector growth, which would require internal demand and/or exports to pick up. Demand for products and services within the UK is unlikely to grow given high and rising unemployment, limited credit availability, and higher VAT. Faced with reduced government support for the young and elderly, people will tend to save more. The disaster that is housing policy will increase costs in that sector, too. House prices will continue to rise as new supply gets scarcer.

Demand for UK exports has grown as the value of the pound falls, but is limited by the economic troubles of our main export partners (the US, Ireland, and the rest of Europe). Moreover, our major exports are cars, weapons, and financial services. Car demand is influenced by the likelihood of unemployment and wider economic climate (alarming), credit availability (poor), and petrol costs (rising). Weapons demand is influenced by government defense spending (being cut). Financial services got us into this mess in the first place.

Despite all this negativity, I am aware that I live in one of the few places to be prospering economically. The high-tech cluster around Cambridge is one of the few bits of the UK to be a net contributor to the Treasury. But at the moment the government isn't interested in what's holding this area back; overloaded transport infrastructure, unaffordable housing, and loss of public sector co-ordination and expertise. These are market failures which cannot be fixed by the private sector.

The government has lost sight of the basic fact that you have to invest money to make more money. That's practically the only policy lever it has left, in any case. National interest rates have little influence on levels of inflation or the cost of new borrowing nowadays. Regulation and tax incentives for business aren't popular with our neoliberal coalition. Their No Plan is to spend less to make more, probably based on a hunch.

This is not to say that no economic growth equals economic doom, far from it. Growth is pointless unless it improves wellbeing, and in any event cannot carry on indefinitely. At the moment government policy seems to be shrinking the economy and reducing wellbeing, although as ever I console myself with the fact that greenhouse gas emissions fall during downturns. Ultimately the UK and the rest of the world will have to reshape our economies to operate within environmental limits. Perhaps a coalition-assisted double-dip recession might set the scene for a lower carbon, less oil-dependent economy? It's a long shot, but hope for a green revolution springs eternal. Even when government economic policy seems entirely misconceived.