Scottish Independence, referendums and um…

Been a little while since I ventured onto the good ole’ blogosphere.

The current fuss around the Scottish Independence issue has obliged me to light up the keyboard again.  Short and sweet mind!

I’m a Scotsman… Well so what sez you? My heart says I’d love to see Scotland as a proud and independent nation I think our history, our heritage and our national psyche all cry out for independence.


My sensible heid has always said: what about the economy stupid?

That’s always been my position and even more now. It grieves me to be in the same rowboat as Michael Moore  (as much charisma as an anaesthetized hatstand)

I pinched that one from somewhere, the New York Times I think. Thought it was hilarious at the time.

Getting back to the rowboat. Margaret Curran, the pseudo-socialist Labour party wummin makes the trio… How did I get teamed up with these two for God’s sake!

Regrettably, I have to agree with this gruesome duo. An independent Scotland would face a bleak future of auld claes and purridge on the stormy economic seas we would face on our own.

We’re condemned to go to hell in the same handbasket as the Auld Enemy. I wish it wasn’t so but it’s the truth ain’t it.

We can’t live on shopping in Tesco and Asda into the future. So, dear heart be still. If we Scots want independence (and we do) we’ll need to find an economic miracle to fund it I’m afraid.

And that dear reader is, in a very small nutshell the essence of my thoughts on the current debate.

There are some impressive Scots pushing the argument. Wee Alex is chust the sublime politician. Unprepossessing but without question the star politician of the UK this century. His sidekick Nicola is excellent, a real firebrand, bright, confident and above all calm under fire. A star and undoubtedly FFM material. (Future First Minister), I know you worked it out.

Sadly, it’s not enough, nothing like enough…

I’d love to vote with my heart but…

State pension con, personal allowance over 65 con, Lib *con* coalition

I’m not 65 yet, I’m 62 but with retirement looming the events of the last few weeks have some significance in my household.

Like everyone else I will be due a state pension at age 65, my personal allowance for income tax will increase to just over £9000, which is very welcome as I am sure you would agree.

The Lib Con coalition has been up and running for a few weeks now and it’s our new Chancellor, George Osborne who is catching my attention.

His budget was heavily trailed in a demonstration of spin of which Alastair Campbell would have been proud. ‘Accrued benefits will be protected’ he boasted, we will look out for the elderly…

A week or so has passed since the Budget statement, the real detail will not come till October when the mass of benefits claimants will start to feel the pain. However a fairly clear picture is starting to arise on what is proposed for State pensioners.

The Lib Dems made hay with their promise to increase personal allowances to £10k and take millions of taxpayers out of income tax altogether. In reality that has translated into a meagre £1000 per annum rise in allowances for taxpayers under 65 taking personal allowances to £7475.

Under 65’s??

What about the over 65’s? Is there a corresponding increase in allowances for State pensioners?

Don’t be silly! Your increase in allowances awarded by our new lib con coalition is…. Zero, zilch, a duck egg my friends. No increase, clearly pensioners have too much money already in the view of our dear Mr Osborne. At a stroke he has disadvantaged pensioners against the rest of the country’s taxpayers by £200 per year. Thanks George…

The tories of course, like the lib dems have said they will be nice to the pensioners, that they would link pensions to earnings unlike the nasty old Labour Party which linked pensions to the retail price index. In fact nice Mr Osborne said that there would be a ‘triple lock’ on pension payments which would ‘guarantee’ a better deal for state pensioners.

So what’s the reality? 2012 is the first year of the new link to earnings and… Surprise, surprise, the State pension is forecast to be £70 a year lower than would have been paid using the previous system. This will save Mr Osborne around £1 billion pounds which I guess you could say was the state pensioners contribution to the Nation’s rather large deficit!

There is a fuller account of all this in the Daily Mail which you can read here. The Mail being such a rabidly pro-tory paper, I think you can take this to be reasonably accurate.

So, my dear pensioner and soon-to-be pensioner readers. If you thought our new government had your best interests at heart and a new dawn of equity and decent pension provision was on its way I’m afraid you were wrong. The men who said these nice things were politicians. Now I’m not saying that all politicians are snake-oil salesmen, that would be giving snake-oil salesmen a bad name. Harrumph!

George Osborne, his Budget, the deficit and welfare reform.

The morning after the night before..

George Osborne the UK Chancellor of the Exchequer presented his first budget yesterday. Bit like a chinese takeaway, quite filling at the time but quickly fades away and hunger sets in again. Mr Osborne’s proposals to address the deficit are curiously unsatisfying.

He says that there will be a large element of welfare reform… I’ll come back to this in a minute.

25 percent cuts in ‘unprotected departments’ are proposed. Cuts at this level would be, to say the least eye-watering but I suspect that George’s budget may be more about aspiration than delivery.

Michael Portillo is on record as saying that in his experience while it is easy to talk about introducing cuts, it is much more difficult to make real savings.

I just have a horrible feeling that this budget is no more than an analysis which in a perfect world would come together neatly and churn out a balanced budget in four or five years time. I predict that the reality will be messy, painful, unfair and ultimately unsuccessful in making the savings our new Chancellor hungers for.

Coming back to Welfare Reform. There is precious little detail on how these proposals will affect individuals currently unemployed or enjoying a lifetime on ‘out-of-work’ benefits as Mr Osborne puts it. We will hear more detail in October I guess but one thing is for sure. There is going to be a big shake out of public sector workers. Hundreds of thousands of those currently working for the state are going to join the dole queue fairly soon.

The new coalition intends to discontinue the current incapacity benefit payments over the next few years. They are also committed to a massive shakeup of disability living allowance over the same period.

A couple of things strike me about these proposed measures. We are talking about re-jigging the lives of millions of UK citizens in a very short period. To make the proposed savings, folk will move from health related benefits to work focussed benefits.

These are huge changes. An army of administrators and doctors will be required to undertake these tasks. This will be expensive.

The claimants once judged and found wanting will still need to be supported by the state, albeit at a lower level. Their numbers will swell as the government’s own policies turf out civil servants and local government workers and they join the dole queues. We could well end up with a zero sum game where the state after a huge amount of activity and turmoil end up spending the same or more than they would if things had been left alone.

Don’t get the wrong idea, I want the government to be successful. The standard of living of everyone in the country depends on it. I am not convinced by the current situation whereby generations of the one family live their lives out on state benefits with work never entering the equation.

George Osborne needs to succeed but I fear it will be a bumpy ride. The Treasury team is very new, raw and inexperienced and while the analysis might be accurate I fear that the delivery will not come up to par, and we will all be the worse for that…

George Osborne on Marr talking about the emergency budget – transcript

I think I can say with confidence that there has never been a budget that is anticipated with so much concern from the public at large. Everyone in the country waits to see what the negative outcomes will be for them. So, anything coming from George Osborne has to be of interest. He appeared on the Andrew Marr show this morning to talk about the background to his budget statement, so I thought it worth taking the time to produce a transcript.

Marr: Tuesday is of course also the day of the emergency budget and with that in mind, I’m joined by the Chancellor of the Exchequer George Osborne. Welcome Chancellor.

First of all, is it all done? Is it settled, is it signed off?

Well actually the budget measures and what’s in the budget is largely signed off and we had a meeting on Friday with David Cameron and Nick Clegg and Danny Alexander, the Chief Secretary to the Treasury and the measures are all agreed and in fact the creation of this independent office for budget responsibility forces chancellors now to take these decisions some days before the budget rather than doing it the night before which has been the case in the past.

Sounds like there are bits of it which are not completely nailed down.

Well the only thing I haven’t got is the speech yet but after this interview is finished I’m going to go and write the speech.

Ok, how bad’s it going to be because we’ve had all sorts of lurid-sounding language. We’ve had all sorts of predictions of a £30 billion pound squeeze or a £40 billion pound squeeze, so just give us a sense of the badness.

Well, I don’t see it as badness, I see it as decisive action to deal with Britain’s record budget deficit and we sit here as the country in Europe with the largest budget deficit of any major economy at a time when markets and investors and businesses are looking around the world at countries that can’t control their debts. And so we’ve got to deal with that and in that sense it is an unavoidable budget but what I’m determined to do is to make sure that the measures are tough but they’re also fair and we’re all in this together and that as a country we take the steps necessary to actually provide the prosperity for the future.

So, when you say that we’re all in it together, the people right at the top of the tree, the people who’ve been getting huge bonuses, the banks and the bank  people and so on, the private sector. Are they going to be stung alongside all the public sector workers who are going to lose their jobs?

Well look, that’s a very pejorative question. “Stung, losing  jobs, etc”.

Well, they are going to lose their jobs!

What we’re clear about is that all parts of society are going to have to make a contribution and, yes, we have to deal with the costs in the public sector but we also have to deal with the fairness of the banks making a contribution, now the previous government didn’t want a bank levy because they wanted every country in the world to sign up to one before they would agree to one in Britain. I don’t think that’s fair and I’m going to ask the banks to pay a bank levy so there will be a contribution from them. Controversial in my own party is our decision to raise capital gains tax and we’ll have more to say about that in the budget.

The bank levy? A. It’s definitely going to happen and B. I think the lib dems talked about it being ten percent of profit. Is that the area you’re looking at.

Well you have to wait for the budget, for specific tax measures but I stood up at the Mansion House in front of all the bankers and the City of London last week and I said very clearly there was going to be a bank levy, that we were going to have better regulated banks, that it was going to be tougher regulation and that we were also going to look at the structure of banking, so I’m perfectly prepared to say tough things to the financial services community, understanding that we want a very competitive and successful financial services community but not one that ends up being bailed out by the taxpayer, so if there are a range of decisions we need to take but let’s be clear, as a new government we  have inherited a truly awful financial situation. No incoming chancellor has ever faced a set of public finances like this and unless we take the determined and concerted action to deal with that, then I am afraid we will find our country on the road to ruin. We will find higher interest rates, businesses going bust, unemployment rising and our living standards declining and I’m not prepared to put up with that.

There are two, sort of ideas about the way people have spoken ahead of this budget, one is that there is a lot of very grim talk including from the prime minister and then actually it won’t be so bad on Tuesday and everybody will draw a sigh of relief, or, conversely that you’re really going to go for it in this budget, you’ve decided that, right at the beginning of a new parliament with the mandate and all the rest of it is the time to deliver the toughest things that you have to do.

Well it will be a budget for the parliament, it’s not just a budget for one year. This is going to set out measures that will take effect over a four year period, but as well as paying for past mistakes it also plans for the future and it sets out policies that I believe will create a more balanced economy, that we don’t just rely on one industry, financial services for our growth. We don’t have all the prosperity concentrated in the south-eastern corner of our country. Where all sections of society share in that prosperity. We don’t leave 5 million people on out-of-work benefits. So, as well as paying for these past mistakes, which we’ve got to do as a country and I think most people understand that. It also, I hope lays the foundations for a much stronger and more balanced economy in the future.

So, after Tuesday’s announcements we will know, will we what your plans are for the deficit reduction over those 5 years. It will be further and faster. It will be, I don’t know, question mark? Most of the deficit. There’s been a suggestion that all of the structural deficit, the hard core that’s left after the ups and downs of the cycle. All of that you’d like to get rid of in this 5 years?

Well, people will have to see my fiscal mandate when I deliver it on Tuesday. In broad terms what we will do is to set out our 5 year plan to deal with the deficit. To put it beyond doubt the question that Britain can live within her means. I think people should judge this budget, not just on the day after it’s delivered, of course they will pass judgement then, but also in the years to come and whether it laid the foundations for prosperity, for a country that can live within its means, for a more balanced and more equitable economy.

Before the election you said that you were going to go further and faster than Labour would have done in their plan. Is that still the case?

Yes, we will go further and faster. There will be an accelerated reduction in the structural deficit. By the way, that is what the G20 now recommends for countries with high budget deficits, and there are few with a higher budget deficit than Britain. So, we will be taking that action. It’s very important by the way that countries with surpluses like China also play their part in stimulating demand in the economy. We need a more balanced global economy but unfortunately Britain is in a position where it borrowed more than anyone else. Its banks were more leveraged than anyone else, our consumers borrowed more than anyone else and we have got to deal with those debts today.

Before the election again you said that you wanted to deal with this on a sort of 80 percent spending reductions versus 20 percent tax rises proportion. Is that still broadly the proportion that you want to see?

Yeah, I think that is a good rule of thumb. It’s not going to be exactly 80/20, that, I think is a good rule of thumb, that is what other countries have done when they have successfully tackled large deficits. In the end Britain’s problem came from over-spending, we didn’t have the money to spend in the way that we did and we went into the recession, into the banking crisis with the largest structural deficit. We didn’t fix the roof while the sun was shining. So that’s why we’ve got to deal with a spending problem and I think that mix is a broadly correct one.

On the tax side, I know you can’t go into details but is VAT a regressive tax?

Well, I’m not getting into a discussion on individual tax measures because I don’t think… The price of coming onto a programme like this just a couple of days before you deliver a budget is that you can’t answer certain questions, but I thought it was important to set out the broad approach we are going to take, our priorities and making it clear to people that, yes there will be tough decisions but that they will be done in a fair way and the object here is a much more prosperous and secure economy.

Ok, I understand that but, in terms of more extreme ideas about VAT, up to 25 percent, or indeed some of the fears of your own backbenchers about capital gains tax. Can you reassure anybody at all on any of that?

I’m not going to get drawn into individual  taxes, with capital gains tax, what we have said is that we want to protect business assets, that’s important and here is a tax where at the moment we see massive income tax evasion. We see people shifting their income. These are very rich people who often shift their income from income tax where they will be paying 40 or 50 percent to Labour’s CGT rate of 18 percent and that’s not fair given the current situation so we’ll deal with that. As I say the whole object…

The prime minister said that he didn’t come into politics to clobber people who are doing the right thing.

What I came into politics for and David Cameron came into politics for is to have a society which is based on a secure and strong economy, where the gains of that economy are equitably distributed across society. Where wealth is not concentrated in one part of society or one part of the country and with our partners now in the coalition that is what we will deliver.

A lot of your own backbenchers however want some kind of help for people whose life savings may be affected by this, who have spent all their lives saving. Some kind of taper, some kind of help for people who really have done the right thing?

Well of course I have listened to a lot of representations on this issue and lots of others and one of the things I’ve tried to do in the 7 short weeks I’ve been chancellor is to have a completely open door, people have been able to come and see me as members of parliament. I’ve been speaking to business organisations, trades unions, all sorts of other people. So I’ve been listening, of course I’ve then got to make a judgement with my colleagues in the cabinet and people will hear that judgement on Tuesday.

Can I ask you about the 80 percent cut as it were on the spending side, the prime minister said that three huge areas. Public sector pay, public sector pensions and welfare. You couldn’t ignore those areas simply because of the size of the spending involved in those. Can I just take them one by one. Public sector pay. You announced before the election that you were going to go for a public sector pay freeze of a year. You just said that you were talking about a whole parliament. Could we see a public sector pay freeze that would go on beyond a year?

Again you are going to have to wait for my budget, but we did make it clear there would need to be pay restraint in the General Election and let’s be clear, the reason for doing this is A. To put the economy on a sounder footing but also to protect jobs in the public sector. But I mean, this is the trade-off that many people in the private sector have made over the last couple of years is to accept things like pay freezes in return for trying to protect jobs, you see that in car plants across the country and in other private sector businesses. And I think people in the public sector understand, I think that the public sector understand that pay restraint is a way of protecting jobs and of course we want to protect jobs above all else.

What about the Pensions Bill, because as things stand. I know it’s a slight controversial figure but some people say that the bill for public sector pensions is going to triple to about £9.5 billion within 5 years and that would clearly be unsustainable. Have you got any plans to deal with it?

Well, the public sector pensions bill is unsustainable and the office for budget responsibility, this independent body we’ve created has shown that. We do have to tackle it but again I want to do this in a way that everyone feels that they’ve had a chance to contribute, to have their say. So we’re going to be establishing an independent pensions commission and that independent pensions commission is going to be chaired by John Hutton.

The Labour Minister?

The former Labour Work and Pensions Secretary, former Labour Defence Secretary. He is a man with real intelligence and knowledge in this area. I think he is going to bring a cross- party perspective to what is a national problem, and means that this is not going to be done on a partisan basis. Having John Hutton on board chairing this independent pensions commission will mean that we can approach this issue of public sector pensions in a fair and equitable way.

Some people watching will say. Ahh, another commission, he’s kicking it into the long grass.

No, I’m not kicking it into the long grass. John Hutton will report in September on early steps we can take save costs in public sector pension provision and then by the next budget, next Spring he will set out recommendations for longer term reforms of public sector pensions. We want to balance the entirely legitimate desire of people in the public sector to have a decent retirement which I want to protect and we’re certainly going to protect accrued rights, but also something that’s fair for taxpayers across the economy. Dealing with that division, that disparity between private and public sector provision is a very important part of keeping our country together in the years ahead.

It is a very difficult thing to do though, first of all can we be clear that quite a lot of public sector workers or employees who think at the moment that they have got a pension of a certain size waiting for them down the line will find that it is a smaller pension.

Well, first of all we are going to protect accrued rights and it’s very important that we establish that right from the off.

Because you could be legally challenged if you didn’t.

It’s very important for reasons of equity that we protect accrued rights but we are going to look at the sustainability and affordability of public sector pensions going forward. This is not an issue that can be ignored, I know that if you had one of the Labour leadership contenders here they’d say ‘This is outrageous, we don’t need to do this’, they are not telling you the truth. This is a real problem for our public finances, for taxpayers across all generations going forward and we’ve got to deal with it and having John Hutton, a former Labour cabinet minister with real experience in this area ensures that it is going to be approached on a cross-party basis and everyone is going to have their chance to have their say.

You’ve talked a lot about fairness and bringing people with you and everybody being in it together but in the end you will have to be announcing some pretty brutal decisions won’t you, on Tuesday if you are going to convince the markets that you mean business?

Well, I think they are necessary decisions, I think the country understands that we can’t go on piling up the debt, we can’t have this mañana attitude which that we’re gonna deal with this problem next year. We see what happens to countries that don’t face up to their problems. You can see in Greece an example of a country that didn’t face up to its problems and that is the fate that I want to avoid and I’m absolutely clear, I don’t want the question even asked ‘Can Britain pay its way in the world? I’m going to prove on Tuesday that we can and then we can go on to create that more balanced economy which I think will bring prosperity for all.

And to put it personally you will be a very unpopular man among a lot of people, there will be huge protest of some kind no doubt over the years ahead. Do you have the steel to go through with this. Are you going to be as tough as Margaret Thatcher’s chancellors were? Geoffrey Howe when he came in in 1979 and the party and the leadership went through a very, very hard time indeed.

I’m committed to doing what is the right thing. What’s the point of doing a job like this. Not to chase tomorrow’s headlines, not to chase the 24 hour news cycle. It’s to do what you believe is absolutely right for the long term future of this country and that is what I’m determined to do on Tuesday. I’m not courting popularity or unpopularity…

And you have the sort of steel to face down massive demonstrations and all the rest of it?

I think people can make an early judgement on the last 6 or 7 weeks. They’ve seen that I’ve delivered on what I promised. An independent scrutiny of the budget figures, in-year reductions in spending. Dealing with all the I.O.U’s and the morass of unfunded spending commitments we inherited. Now we’ve got a budget that will deal decisively with our deficit and put this issue beyond doubt.

Your critics, and there are many economists as well as politicians say that you are taking an enormous risk with all of this and although the deficit has to come down you may very well push the economy back into recession and once you push it back into recession the unemployment bill rises and you go into the downward spiral. If there are signs that that is happening will you change course?

Well look, the greatest risk to the British economy at the moment is the sovereign debt risk, that’s what’s stalking European economies at the moment, that’s what you read about when you pick up your newspapers every morning and it’s a real threat and we’ve got to deal with that risk. We can’t put off this decision about how we deal with our debt. Now the package that I announce on Tuesday will be staggered over the parliament, it doesn’t take effect in one day or one month it’s staggered over the parliament, it’s a budget for the parliament but it deals with our problems and in the end….

This is an ability to change course if necessary if the economy starts to contract sharply, there’s a problem of demand in Europe, unemployment is shooting up. Can you look at this again?

This is a plan to deal with our deficit. We set a clear fiscal mandate across the parliament and I’m absolutely clear Tuesday’s got to be a moment when Britain looks itself in the face and says ‘we are going to deal with the problems of the past. We are going to pay for the bills of the past and we are going to plan for a brighter future’. And that’s what this budget is about.

And inevitably given your figures and plans then those on benefits are going to find that, either find their benefits frozen or in many cases going?

Well, I’m not going to pre-empt any announcements on welfare, but we have to tackle this welfare bill it has got completely out of control in recent years and what I want to do is to reward work. I want to support the person who leaves their house at 6 or 7 in the morning, goes out and does perhaps, a low-paid job in order to provide for their family and is incredibly frustrated when they see on the other side of the street the blinds pulled down and someone sitting there on a life of out-of-work benefits

So this is not simply because of the situation you’ve inherited. This is something you think is right to do anyway?

You’ve got to have welfare reform. It is completely unacceptable that we condemn 5 million of our people in this country to a life on out-of-work benefits and we’ve got to tackle welfare reform and we’ve got to tackle welfare bills because that is such a big component of government spending.

George Osborne, Chancellor, big week ahead of you. Thank you very much for coming in this morning

And with that the interview came to an end. Guess we’ll all find out on Tuesday…

Lib dems Danny Alexander and Nick Clegg announce ‘savage cuts’, where are the tories?

Strange, I was under the impression that there was a budget next week but dominating the media at the moment is news of cuts, cuts and more cuts, the next more draconian than the one before.

Danny Alexander has announced £2 billion in cuts.

He is cutting an £80 million loan to Sheffield Forgemasters. Stopping support for a visitor centre at Stonehenge, scrapping the rollout of the Future Jobs Fund. Cancelling a new hospital north of Stockton. The pain goes on and on. The biggest sums come from the suspension of a scheme to replace search and rescue helicopters operated by the Ministry of Defence and the Coastguard. This scheme was to have been funded on a PFI basis.

Mr Alexander seems to take great delight in wielding the axe. “The former Labour government was spending money it didn’t have, cynically playing politics with the hopes of many communities” lectured the former press officer of the Cairngorms National Park…

Danny is not alone in playing the harbinger of doom. His boss, our revered deputy prime minister Nick Clegg was getting in on the act as well, his target was tax credits for families.

It is not unreasonable he said to reduce these handouts to better-off families.

I declare an interest here. It is a long time since I finished raising my own small family, but in those far-off days the concept of state support for parents in work was entirely alien. I have watched in puzzlement as taxpayers money has been handed out to apparently prosperous families who did not appear to need the money. Well, Mr Clegg thinks so too; he has rushed to identify himself with proposals to cut tax credits to families with incomes in excess of £30,000 a year. The details will emerge in George Osborne’s emergency budget next week but Mr Clegg seems to feel the need to prepare the ground for the Chancellor.

Now is it just me or is there something lemming-like in the lib-dem high command which attracts them to bad news announcements like moths to a candle? Please note that in all of this talk of cuts and austerity there are no tories to be seen or heard.

Is it the numbing effects of so many long years in minority opposition politics that is causing this strange predilection for doom-laden statements?

Make no mistake Mr Clegg, Real Politik has not gone away, the tories can hardly believe their luck that the lib dems are doing so much heavy lifting on the bad news front. Cutting tax credits for middle earners and putting large numbers of people out of work will be electorally unpopular to say the least. These are tory cuts but the tories while they may not escape the fallout scot free have very successfully managed to focus the blame on the hapless lib dems with them being so keen to help out and all…

Nick, Danny and all the rest of the innocents are going to have to learn a hard lesson and learn it soon if they are to avoid oblivion at the next election in 2015 or whenever it happens to be.

In politics it doesn’t always do to selflessly leap into the breach. There is a time for saying nothing and letting the real culprits take their share of the opprobrium.

Ah well, they’re young, I guess they’ll learn. Eventually….

David Davies on Marr. The Future of Banking Commission reports

Bit of a maverick Mr Davies. Stood against David Cameron for the conservative party leadership in 2005, wasn’t helped by a stilted speech at the party conference and as history will record David Cameron became party leader and ultimately prime minister.

David Davies was appointed Shadow Home Secretary after the leadership contest and all things being equal could have expected a top job in the new coalition. However on 12th June 2008 he resigned from the shadow cabinet and as an mp to force a by-election to highlight the cause of civil liberties, this against the background of a vote on the counter terrorism bill extending the detention period for terrorist suspects from 28 to 42 days. He won the by-election but no friends at the top of the party, so there is no government post for Mr Davies in the new coalition.

He’s not been idle mind, he’s been chairing the ‘Future of Banking Commission’ which has been looking at the future of banking regulation in the UK, this is a pretty high level body and has some very respected people as members, John McFall, Vince Cable, Roger Bootle, Clare Spottiswoode to name but four. The commission was set up by the ‘Which’ consumer group. Chief executive Peter Vicary-Smith also served as a commissioner.

David Davies appeared on the Andrew Marr show this morning to consider the Commission’s report.

Andrew Marr set the scene thus:

We must reform the banks. how many times have you heard that? And when might it actually happen?
The new government is setting up a commission, it probably won’t report for a year or so but do they really need to wait? Because there is another distinguished commission on the future of banking, all party, took evidence from across the industry and partly set up with the consumer group Which, its report is out today. Its chairman is the Conservative mp David Davies who is with me now.


This substantive new report, it’s quite a thick report. Really at the centre of it is the idea that, yes, we should break up the banks into the sort of safe, normal bits of the banking industry that most of us deal with day and daily and the bits that take risks. The investment banking.

That’s right, that’s exactly right. The first thing to say that if we don’t do something along these lines, the next time this happens it’ll break the country, we’ll go bankrupt.

As we depend so much on the banking industry?

More than 5 times the GDP is tied up in bank assets. Five times. So, if we have to guarantee that through another crash like the one we’ve just had then it’ll all be over, we’ll make Iceland look like a successful economy. So from that point of view it’s got to be done, the separation is not easy of course and the reason that the government’s commission is taking it as read that separation is necessary is it’s got to be done in negotiation with foreign countries, America in particular, the Europeans. But also it’s got to be done intelligently, because it’s quite an expensive thing to do, if you take all these big companies and take them apart, it’s going to be quite tough to do…

It’s interesting because Vince Cable was a member of the commission before he joined the government and stands entirely by its proposals as far as one understands and there had been a bit of suspicion that somehow the banking industry would lobby the coalition government  and that in the end there wouldn’t be a big structural change, the banks wouldn’t be broken up.

Ye-s, that was in part a fear that led to the commission being set up I guess, that somehow the power of big finance would influence it. One of the arguments has been that Glass-Steagall, the last break up of the banks was over-ruled about 10 years ago as a result of Wall Street lobbying.

And there hadn’t been a bank crisis all the way through the years of Glass-Steagall separation and within a few years of it going. Bingo…

Sixty years without a crisis under Glass-Steagall and in ten years. Bang! We have the biggest crisis since Glass-Steagall.

So, let’s be clear what you’d like to see is all the big banks broken into the investment bits, so you’d have a High Street bit of Barclays, a high Street bit of RBS…

The details. There are about five things you achieve through breaking up the banks. You protect the taxpayer. You protect the depositor, you stop the conflict of interest, you stop the conflict of interest that we’ve heard about, The Goldman Sachs allegations where they bet both sides of the street as it were, as they say in America. You’ve got four or five things you need to achieve so the detail of how you do it; I expect this government commission to come up with but broadly speaking, yes you got to have that separation.

But if it’s this important to the economy and if it’s this urgent shouldn’t they really be getting on with it now?

Well you can do some things straightaway. We’ve talked about living wills which is, essentially you draw a dotted line down the middle of the bank and say: if you have a crisis; this bit’s protected, that bit goes to the wall. That helps, that starts people to behave as though they’ve got a separate bank, you’ve got to do that in public. So things like that. And there are a lot of other things that have to be done as well.

You’ve also been involved in the campaign to get the government to moderate its threat to raise capital gains tax to forty or fifty percent. How are you going on that?

Oh, pretty well, what you’ve got to understand straightaway is these things like the capital gains tax provision came back as a part of a coalition deal struck over a weekend under high stress, and what I think will happen is that the tory half of the coalition if you like will be able to meet the liberal half’s requirement for a high headline rate but mitigate it in such a way it doesn’t harm pensioners, people who’ve saved, through second homes, holiday cottages or whatever, or equity, people who, let down once by Gordon Brown’s reforms of the pensions which did real harm and have looked for somewhere else to put their money, those people have got to be protected.

And what finally about the 55 percent rule, this idea that parliament won’t be able to vote for a dissolution, won’t be able to go to the country or ask the prime minister to go to the country unless 55 percent of the mp’s have voted, which seems unparliamentary.

It did and that’s another of these concerns, but you know you’re going to see this a lot in the coming couple of years where we’re going to have debate in public.

So you don’t think that the spirit or integrity or identity of the Conservative party as an organisation is going to be blurred or diluted or threatened by this coalition?

Well I don’t think that the Conservative party will let that happen, it will have its say, what’s going to be different however is how your profession deal with it. Are they going to say every time we have a sensible, intelligent debate “Oh, there’s a split”? or are they going to say “well actually, that’s quite a good argument and maybe they should modify it and maybe that compromise is quite a good idea.”

The tone of politics has changed hasn’t it, the public  mood is different.

Absolutely, ironically my banking commission was coalition politics before the coalition, the three parties coming together to fix something and I think there’s a great deal of scope for using the common interest of the parts of the coalition to actually solve the country’s problems. No bad thing in that.

Very interesting. David Davies thank you very much indeed for joining us.

And there the interview finished.

Back in the world of coalition politics…

The coalition are in the process of setting up the ‘real’ commission which will consider banking regulation in this country. They’re having some difficulty finding a chairman at the moment, George Osborne has his Mansion house speech coming up in the next few days…

Perhaps George could consider David Davies’s Commission report instead and save us all a few bob?…

Iain Duncan Smith, work or lose your benefits. Reform the welfare system.

Interesting chap our Iain Duncan Smith, he had a short and spectacularly unsuccessful stint as Conservative party leader ending in 2003.

Can’t keep a good man down though and in 2004 he formed the Centre for Social Justice and in the years since he has been touring sink estates across the UK observing the lower orders as they lived their lives. The nominal reason for setting up the CSJ was to seek solutions to the poverty and deprivation that blights large areas of urban Britain.

I watched Iain, particularly during his visits to Scotland, notably to the Easterhouse council estate on the outer fringes of Glasgow. He seemed a concerned individual, genuinely sympathetic to the plight of the unemployed in deprived areas.

I suppose at a personal level he was going through a catharsis, a recovery from his disastrous stint as leader of the party. He appeared at the least to be a ‘one nation tory’, in fact there was almost a socialist aura around him in the statements he was making over these years.

Well, time has moved on, the lib con coalition are now in power and, would you believe it, Iain has come back to the centre stage. Now in government as Work and Pensions Secretary he has the chance to practice what he has been preaching these last six years or so.

His current role will be key to the lives of millions of people. Reading between the lines he has been asked to do nothing less than to reform the welfare system in the UK.

He’s an affable guy but it’s interesting to see the change of language the last few weeks have brought on; the dove has changed somewhat, it remains to be seen whether he has turned into a hawk but the phrase “work or lose your benefits” is being bandied about already. Today’s Daily Mail article gives a few pointers as to how his mind is working.

So Mr Duncan Smith has had plenty of time to carry out his analysis of the welfare system. I’ve already mentioned his generally empathetic reaction to the workless, however the new administration is under a heavy-duty imperative to save money and cut the deficit; 14 percent of our national income goes on welfare payments. It is an obvious area where savings can be made. I fear that Iain’s generous instincts are going to be lost in the rush to make cuts.

Middle class benefits are being looked at, but since these are paid to largely tory voters I predict that family tax credits and suchlike are likely to largely escape the axe.

I guess it’s the unemployed and workless who will be feeling the draught. Over the last 30 years or so with the continued erosion of  blue-collar wage rates; a situation has grown up where it is economically more advantageous to live on benefits than to take up any of the minimum wage jobs which are on offer these days.

A lifetime on welfare. In fact generation after generation supported by payments from the state is now a reality for very large numbers of people around the country. The possibility of working does not feature in the consciousness of folks caught in this trap. We are all rational beings and I don’t blame anybody for taking the path in life which serves their own self-interest. Years of de-industrialisation and outsourcing of work to distant lands have taken away most of the jobs to which the workless could aspire.

It’s a conundrum, and one which successive governments have successfully ignored but it was always going to have to be addressed at some time. The dire state of our financial affairs means that there can be no more stalling on this issue. Iain Duncan Smith is going to have to come up with solutions to this most vexing of problems.

I’ve always worked, I had a 3 year interregnum between ‘decent’ jobs but even then I continued to look and kept myself going with a few months here and there of temporary and short term work until something better turned up.

I confess I don’t know what the answer to all of this is. Yes, if the workless were to start thinking and acting in the way that I did then many more of them would get into employment but I had plenty of transferable skills and many years of experience in a modern work environment. Most unemployed folk have none of this and if they all changed their attitudes and became ace job seekers overnight then there would still be disappointment and failure for millions of them.

So Mr Duncan Smith, I agree with you that there is a problem. Wouldn’t it be nice if we could repatriate 5 or 6 million of our ‘lost jobs’, that would answer the problem overnight, but let’s face it that is not going to happen. In the  absence of re-opening the workhouses and throwing folk onto charity, I just can’t see an answer.

Good Luck to you Iain. You are going to need it!