Category Archives: Economics

The Tories and Blairites were ideologically hidebound fools to underestimate Corbyn

Robert Henderson

The attitude of Tories towards Jeremy  Corbyn ranges from amused condescension to  an unseemly childlike  and profoundly undemocratic glee as they  dream of a country with no serious political opposition to hinder them .   Blairites respond with poorly disguised incredulity  to the probability  that  a man who does not buy into the NuLabour credo will become the next Labour leader and gnash  their teeth and wail that  a Corbyn led  Labour Party will be at best  cast into the wilderness of opposition for a decade or more and at worst rent asunder never to be a serious political force again. In the mainstream media, most of whom  have sold their souls to the idea of free markets, free trade and the general paraphernalia of globalism, articles and editorials  forecast the end of days if Corbyn becomes  Prime Minister.

Interestingly, this hysteria  has not diminished   Corbyn’s popularity one whit and will  probably help fuel   his rise to what promises to be victory in the leadership race without the second preferences being counted.   Why has Corbyn  garnered so much support? The quick answer is he  offers  an alternative to the free market, free trade religion which has been fed incessantly to the public for decades as the only possible economic system for a modern state.

This immediately gives  the man  pull with those who have old Labour values, but he has attracted a much  wider range of support.  The young have flocked to his meetings.  Surprising at first glance in view of Corbyn’s age, but readily understandable  when it is remembered that   British politicians generally have either failed to comprehend or refused to admit that the world they have created over the past 30-40 years is much tougher and more uncertain for today’s young than it was for them when they were young,  with housing now hideously expensive, well paid jobs difficult to come by and university education leaving graduates with a debt of £40,000 or more and no suitable jobs to go to.   Corbyn is offering concrete policies to help them, not least a huge social housing programme.

But it is not just the young who are suffering.  There are millions of older people of working age through to those in retirement who no longer live a life with any real security, as they struggle with ever increasing private rents and zero-hours contracts.   Corbyn speaks to them as he speaks to the young.

Finally,  there are the huge numbers of people from  across the political spectrum who detested the  wars which Blair dragged Britain into and have a strong animus towards Blair himself.   Corbyn shares their views,  going so far as to state  that Blair should be tried for war crimes.

Why did the  British political class so misread Corbyn’s potential?  The Tories as a breed are simply insensitive in their approach to the poorer sections of society.  This is epitomised by their inability to understand that to those  living lives of great economic  uncertainty  there is nothing more enraging than to be constantly told  the colossal lie “We are all in this together” by rich politicians, as happened  in so often Britain after the Lehmann crash in 2008. They simply assumed that those who were not comfortably off and secure in their jobs and housing  could be ignored.

The most striking thing about  the Corbyn phenomenon is not that he looks as though he will win the leadership election with policies which bear some resemblance to Labour’s old core values. No, the real eye-opener is  how out of touch the Labour elite have become with the lives of ordinary people.  They  either believed  they could manipulate the vote to get the result they wanted  no matter what the electoral process was or so believed the Blairite gospel  of free markets and globalisation that they simply could not conceive of people voting for someone who had the audacity to suggest that Old Labour ideas of state ownership and a disengagement from military adventures  were the way forward.    Whichever reason it was, the Labour leadership was willing to agree to a new electoral process which chooses  the party leader  on the basis of  a  one man one vote  with the vote   granted   to  not only existing party members , but also to affiliated union members and every Tom, Dick and Harry who coughed up £3 to register as a supporter..

The potential dangers for the  Blairites in such a system (entryism from the left, enemies of the Labour Party voting and so on)  should have been obvious,  but they would have remained unimportant  had  Corbyn  been unable to get sufficient support from Labour MPs to go on the ballot form. If there was no Corbyn in the race all that would have been left were varieties of  Blairite to choose between.  The Labour elite’s blind belief in the unshakable dominance of Blairism is shown in the readiness of Labour MPs to give Corbyn enough votes to put him on the ballot.    Many who gave him their  vote  admitted it was simply to ensure there was a left wing candidate in the leadership, race much as Diane Abbott  was placed on the ballot for the previous leadership election.   When Corbyn entered the race his candidature was treated as a joke by the Tories and as of no more than a sentimental wave to Labour’s past.

In summary Corbyn is running rings around the other candidates because:

1) He offers something different. With him there is an alternative. The Blairites have been so  feeble because like all dominant politicians they have not had to argue their case within Labour  for a very long time. They ended up believing their own propaganda. Moreover, their case was never strong because Blairism is essentially Tory-lite plus political correctness writ large.

Blair hollowed out the Labour Party of all its core values: Thatcher did the same for the Tory Party. All we are left with are two neo-liberal internationalist parties wedded to globalism and political correctness.   Corbyn is offering the  chance of restoring some of those lost values to Labour.

2) Blairites and Tories are portraying Corbyn as  a member of the extreme left. This is objectively wrong.   Had Corbyn been putting forward his present ideas  thirty years ago as Labour MP he would have faced accusations of being a centrist sell-out. Worse for the Blairites they do not understand that many people who are  not rabidly left wing would welcome the energy companies, water companies, the Royal Mail and British Rail being returned to  public ownership because they understand instinctively that absolutely essential aspects of the economy should be in public hands. For such people this does not seem like leftwingery but a government just looking after the national interest. Ditto protectionist measures to protect British industry.

3) The people who attack him including the other candidates and many Labour MPs  offer no real argument against him. All they do is point at him  and say either that he is absurd or is living in the past.  They offer no  real argument against what he proposes. On economics his opponents simply assume that anyone who does not unreservedly  buy into the laissez faire religion is either mad or bad. The Tories and the Blairites are both making the mistake of imagining that pointing at Corbyn and shouting “socialist”, “looney left”, “nationalisations”,  “unions” will make him   profoundly politically toxic to the British electorate.

4) When he is attacked over potentially seriously damaging  issues such as  being rather too eager to sup with  terrorists or  the anti-semitic,  his accusers go way over the top.  For example, on his supposed  equivalence between Isis and the USA in Iraq, Corbyn has condemned Isis pretty emphatically and simply said that where the USA has behaved badly it is reasonable to say that should be condemned as well. Or take his wish to see the railways renationalised by letting the licenses run out. All the laissez faire gentry are saying it cannot be done because of the cost and legal quibbles over ownership of assets such as rolling stock.   This is obvious nonsense because the East Coast line was taken back into public ownership without any cost or difficulty and run efficiently.   The effect of such exaggeration negates the criticism which could reasonably be put on Corbyn.

5) In the present circumstances Corbyn has the priceless asset of not having an aggressive personality. That makes the increasingly angry  attacks on him seem absurd.

6) Corbyn actually answers questions rather than trotting out soundbites. Moreover, his answers mostly show he has been well prepared on anything which is likely to crop up. You may  not agree with his policies – I disagree with many of them – but at least Corbyn presents a coherent plan of action for this policies.

7) He doesn’t panic when asked awkward questions.

8) Unlike the three other candidates Corbyn is a recognisable human being, someone untrammelled by focus groups and advisers or years in office being controlled by the party elite

  1. The other candidates haven’t got an ounce of personal authority between them. You watch them robotically trot out the NuLabour mantras and think, God, is this the best the Labour Party can do for a leader?

All that Corbyn promises may well turn out to be pie-in-the-sky. But that is to miss the valuable public service the man is doing.  If Corbyn becomes leader, and perhaps even if he does not but makes  a strong showing, the timeworn  consensus between the Tory and Labour Parties will be broken. That alone  would be a healthy development because it would force not merely the Labour Party to develop and justify its ideological position but also shift the Tory Party from a blind belief in laissez faire economics.

Corbyn, although a strange bedfellow, also has great utility for those who wish to leave the EU. He has given strong indications that he might well move to the OUT camp. To have the leader of one of our two major parties  campaigning to come out would be a massive boost to the OUT campaign.

Abolishing National Insurance would be a tremendous gamble  


Robert Henderson

George Osborne is thinking about abolishing National Insurance (NI)  as a separate tax and incorporating it into income tax.  The implications of such a move would be very  far reaching    because  the basic  NI  rules are complex  and effect far more than just NI deductions and the practical IT  difficulties it would create for both the government and employers, both public and private, are immense.

The most obvious and pressing reason why the idea should not go ahead is the fact that NI is one of the big earners for government. In the 2014/15 financial year it brought in £108 billion – see page 15.  Only  VAT  (£113.9 billion) and income tax (£163 billion) provided more tax revenue to the Treasury. To make up for the loss of the NI contributions income tax would have to be increased  massively if  income tax has to raise the £108 billion currently raised by NI  in addition to the £163 billion it currently collects.  That could only be achieved  by getting most of the extra money by  raising the basic rate (currently 20%)  massively, probably doubling  it,  because those paying the  40% and 45% income tax rate are not sufficient in number  to be able to bear the brunt of the increase. Moreover, once tax rates go beyond 50%  they become psychologically  difficult and increase the likelihood of evasion. In addition, the present government is deeply unsympathetic  to raising the higher income tax rates. The situation is further complicated by the government’s stated intention to keep on raising the personal allowance which at least in the short term is likely to reduce the income tax take.

The options  for raising some of the £108 billion by raising other taxes are limited.  VAT could be raised,  but that would be regressive because it  falls on everyone and would almost certainly suppress demand.  The next  two most productive sources of tax revenue in 2014/15 were  corporation tax  (£41.4 billion) and excise duties (£47.2 billion).  The fact that both  bring in so  small an amount in relation to what needs  to be raised means neither could  supply more than a small part of the lost  £108 billion even if their rates were raised substantially.  Moreover, raising corporation tax would go directly against Tory policy of having a low tax burden on business and increased excise duties would again be regressive.

The next  obstacle is the incompatibility of  the income tax and NI systems.    NI operates on a radically  different basis to income tax. Income tax is simple in principle, the complications which arise come not from  calculating the tax due but in deciding what is liable to income tax. There is the personal tax  allowance which exempts a certain amount of earnings  from tax and   three rates of tax (20%,40%,45%)  for three bands of earnings. The operation of NI is much more complex, involving  both employees and employers,  with a  link to benefit entitlements  and  NI rates which do the exact opposite to income tax rates, namely, the NI rate decreases as income  rises.

The NI system is too complex to give exhaustive detail here  but I shall outline  a few of the basic  NI facts to give a flavour of its complexity.  Currently NI  is not paid by anyone earning less than  £155 per week, although someone earning £112 per week  (the Lower Earnings Limit)  gets credit for benefits such as the state pension as if they were paying NI.  Those earning  £155 per week (the Primary Threshold) begin paying NI. When they reach £156 per week (the Secondary Threshold) the employer also begins paying NI.   This employer’s contribution is in addition to the employees and is a payroll tax.  When  the employee earns £815 per week (the upper earnings limit) or above they pay a reduced rate of NI.

People who are employees  pay 12% of their pay between £155 and £814 per week and 2% on their pay above £814 per week.  The employer will pay 13.8% on all earnings above £156 per week.   Benefits in kind, for example use of company car, attract  employers  but not employees’ NI at the rate of 13.8%.  This is a big saving  to an employee  enjoying substantial benefits in kind. There are separate rules for the self-employed which the government has pledged to alter during the course of this Parliament.   As can be seen the NI situation is very administratively messy.

If income tax  and NI are amalgamated a problem arises with pensioners over the state retirement age.    NI is not paid by those over retirement age, but income tax is. Hence, if NI is abolished and income tax is raised to compensate for  the ta x revenue  loss, many pensioners would be left paying far more tax unless the government exempted all or part of their income. But to do that would be incredibly messy, not least because large numbers of pensioners pay income tax.  It is also worth noting that more and more pensioners are working past retirement age.  If the income tax rise to compensate for the loss of NI revenue means a rate of income tax which makes those over the retirement age more expensive to employ, this will probably mean fewer OAPs working or having less income, either of which would create greater eligibility of benefits.

The payment of benefits generally would also create difficulty. At present NI contributions count towards  entitlement for:

Basic State Pension

Additional State Pension

New State Pension

Contribution-based Jobseeker’s Allowance

Contribution-based Employment and Support Allowance

Maternity Allowance

Bereavement benefits

The position with the new  state pension is complicated because , contrary to government suggestions that it would provide everyone with an enhanced pension,  this appears not to be true  with perhaps two thirds of pensioners not receiving the full pension.

Any consolidated system for tax and NI would have to either take into account the entitlement to benefits or the benefits would have to cease to have any connection with what the individual pays in  tax.  There would also be the complication of how to treat the entitlements built up prior to the abolition of NI.   The present  system of National Insurance numbers would have to be retained because they are tied in so firmly to the access to the British welfare state.

Creating an entirely new computer system  to accommodate both the new amalgamated regime  and the present stand-alone system  for income tax and NI  would be daunting at best and probably impossible. ( In this context it is  worth bearing in mind the lamentable record of British governments of all colours with massive computer systems.) It is likely  that both the old and new  Government computer programs would need to keep running.

Then there is the IT problems  and additional costs which would be faced by employers, the vast majority of which, together with  many of the self-employed,  use computerised accounting and payroll systems. All of those would have to be  updated or new systems bought, installed and staff instructed how to use them.  Many current systems would not be updated because they are either too old or the software company which created them has gone out of business. Public service employers are particularly vulnerable as they often  use bespoke systems, that is systems developed for them alone,  which are often very old in origin with many updates patched into them over the years.

Finally, there is the problem of ensuring that the additional income tax revenue is actually collected. There is also  a very real general  danger that a switch to a consolidated income tax/NI tax would not  produce the same revenue even if the Treasury calculates that  it would on paper.  The Treasury might simply get their sums horribly wrong because of the complexity of the integration they are managing.  Alternatively, smart   accountants may simply find ways of minimising any additional  income tax.  The beauty of NI from a tax collection point of view is that it allows much less  tax evading wriggle room compared with income tax.

National insurance is a far from perfect system, but it is difficult to see how it is radically unfair or its operation radically administratively inefficient. Its purpose is a sham in as much as there is no managed  fund created to pay for specific services and benefits,  and the link between NI and earned benefits is increasingly tenuous. But so what?  It is a major revenue source which regardless of the fact that it goes into the general Treasury pot is major part of the funding source of the Welfare State. Moreover, any government could decide to make  NI an hypothecated tax allocated to particular circumstances.

As for being administratively simpler, this  seems wildly improbable  when our past experience of large scale  government  IT systems is of consistent failure and  there will be undeniable extra costs for employers.

At best the abolition of NI  would be a tremendous gamble and at worst unreservedly reckless. Government  policy should never be about gambling.

Bruges Groups meeting 24 September 2014  – The EU’s attack on Britain’s most successful industry [the City]

Prof Tim Congdon  (Founder of Lombard Street Research)

Dr Gerrard Lyons  (Chief Economic Adviser to Mayor of London )

Lars Seiet Chistensen  (CEO Saxo Bank)

Robert Henderson

The three speakers were all agreed on this

  1. The desirability of Britain’s financial services sector continuing to grow.
  2. The dominance of London as a purveyor of financial products.
  3. The damaging effect of the EU on the City in particular and British financial services in general, both at present and the great potential for much more destructive EU policies in the future.
  4. The resentment of other EU members, particularly the large ones, of Britain’s dominance as a financial centre. Congdon and Christensen suggested that this resentment led to active attempts by the EU to take away this British dominance through EU legislation.

Other points to note were (a)  Congdon and Christensen being  certain that the only way forward for Britain was to leave the EU   because Cameron’s promised renegotiation would produce nothing of consequence and (b)  Lyons coming out with the “London benefits from immigration”  fantasy (exactly who  benefits?) and claiming, curiously , that what was needed was the “financial equivalent to the Luxembourg  compromise” to protect the City, curiously because the  Compromise, if it has any practical force at all (which is dubious), already covers such  financial matters because it embraces all aspects of the EU open to majority vote, viz “Where, in the case of decisions which may be taken by majority vote on a proposal of the Commission, very important interests of one or more partners are at stake, the Members of the Council will endeavour, within a reasonable time, to reach solutions which can be adopted by all the Members of the Council while respecting their mutual interests and those of the Community”.

However, the Compromise, which is only a political declaration by Foreign Ministers and cannot amend the Treaty, did not prevent the Council from taking decisions in accordance with the Treaty establishing the European Community, which provided for a series of situations in which qualified-majority voting applied. Moreover, qualified-majority voting has been gradually extended to many areas and has now become normal procedure, unanimity being the exception. The Luxembourg Compromise remains in force even though, in practice, it may simply be evoked without actually having the power to block the decision-making process.”

It is a little bit disturbing that someone advising  a powerful politician such as Boris Johnson  is so ill informed about the reality of the EU.

The great omission from the event  was any consideration of what the British public wants.   All three speakers  completely ignored the democratic will of the British people.  The British may not like the EU,  but neither do they like globalism. It will be impossible to win a referendum on Britain’s membership of  the EU if the electorate know that all they are being asked to do is to swap the overlordship of Brussels for the  ideological despotism of free trade and mass immigration. (The laissez faire approach involved in globalisation is those with power enforcing an ideology by refusing to act to protect what the vast majority of human beings regard and have always regarded as the interests of their country and themselves.  It is a tyranny caused by the neglect of the rightful use of state power for the common good.)

Come questions from the audience  I was unable to get myself called. Had I been able to do so I should  have raised the question of  the democratic deficit and the impossibility of persuading the British electorate to vote to leave the EU if the alternative was more state sponsored globalism.  Sadly, those who were called to ask questions complete ignored these  vital questions

After the meeting I  managed to speak to Congdon  and put the question I had been unable to ask to him.  Congdon’s response was a simple refusal to discuss the question of protectionist measures. Indeed, he  became extremely animated in his refusal  saying he would have no truck with such ideas.  This is par for the course when I attempt to debate with laissez faire religionists.  They either do what Congdon does, refuse to debate or become abusive.  These are the classic behaviours of religious believers when their ideas are challenged.  These people know in their heart of hearts that their religion, whether it be sacred or profane, cannot stand up to close examination so in the vast majority of cases they a either refuse to debate or resort to abuse  which has the same effect.

Congdon also made the fantastic  statement that come an IN/OUT  referendum,  the British would vote to come out because they “have always valued freedom”.  Apart from this being historically a highly questionable claim, the vast  demographic changes over the past 60 years wrought by mass immigration have both diluted the Britishness of the population and the British population as a whole has been cowed by more than half a century of political correctness being enforced with ever increasing ruthlessness by  those with power in the country.

The other  issue  I raised with Congdon were the implications  that ever deeper  devolution had for the UK’s relations with the EU .  I put forward a plausible scenario: an in/out referendum is held. England votes 70% to leave while Scotland, Wales and Northern Ireland vote 70% to stay in. I asked Congdon what  he thought would happen if such a vote occurred.  Amazingly,  he said he had no idea.

I need not have weighted the votes so heavily towards a vote to leave in England. The discrepancy in size between England and the other home countries is so huge that  England  would not have to vote YES to leaving the EU by anything like 70 for and 30% against to ensure the referendum was won by the leave the EU side.

The official number of registered electors  qualified to vote in Parliamentary elections at  the end of 2012 and their geographical distribution was as follows::

The total number of UK parliamentary electors in December 2012 was 46,353,900, a rise of 0.5 per

cent from December 2011.

The total number of parliamentary electors in each of the UK constituent countries and the

percentage changes during the year to December 2012 are:

  • England – 38,837,300, a rise of 0.5 per cent
  • Wales – 2,301,100, a rise of 0.1 per cent
  • Scotland – 3,985,300, a rise of 1.1 per cent
  • Northern Ireland – 1,230,200, a rise of 1.4 per cent

Assuming for the sake of simplifying the example that there is a 100% turnout,  23,176,951 votes would be  needed for a vote to leave the EU.  If England voted by 60% to leave that would  produce  23,302,380 votes to leave , more than would be required  for a simple majority.

But that is obviously not the full picture, There would be a substantial vote to leave  in Scotland, Wales and Northern Ireland. The combined electorate of Scotland Wales and Northern Ireland in 2012  was 7,516,600.  If  70% of those voted to remain in the EU that would only be 5,261,620 votes.   There would be 2,254,980 votes to leave.  If England voted 54% to leave (20, 972,142 votes) the votes to leave in the whole of the UK would be  23,227, 122 (20, 972,142 +2,254,980) , enough to  win the referendum.

Of course that is not how the vote would be in the real world. The turnout would be nowhere near 100%,  although  it might well be  over eighty per cent if the Scottish referendum is a guide.   How   Scotland, Wales and Northern Ireland would vote is of course uncertain,  but  I have allotted  such a generous proportion of the vote to the stay in side in those  countries that it is unlikely I  have seriously over-estimated  the vote to  leave.  What the example does show  is that under any likely voting circumstances there would not need to be a very strong YES to leaving vote in England to override a very strong vote to remain part of the EU  in  Scotland, Wales and Northern Ireland.

If there was such an unbalanced result, that is with England voting to leave and the other three countries voting to stay or even if just one of Scotland, Wales and Northern Ireland voting to remain in the EU, this would ostensibly produce a potentially incendiary constitutional crisis, especially if  Westminster politicians keep on grovelling to the Celtic Fringe as they did during the Scottish independence referendum ( a practice which  grossly inflated the idea of  Scotland’s ability to be independent without any pain in many Scots’ minds).

I said an ostensibly incendiary situation because in reality there would be little appetite to leave the UK  if the hard truths of  what leaving the UK and joining  the EU would mean were placed in front of voters in Scotland, Wales and Northern Ireland. England or England plus one or two of Scotland, Wales and Northern Ireland would be a completely different kettle of fish compared with Scotland leaving the UK with the rest of the UK still in the EU. If any of Scotland, Wales or Northern Ireland wished to leave the UK they would  and join the EU with the rest of the UK or just England outside of the EU,  they would be faced with an England or a remnant UK state which had regained its freedom of action and would not be bound by EU law.

The strategy of those in who want  the UK to leave the EU should be to reduce the idea amongst voters in Scotland, Wales and Northern  Ireland  that leaving the UK and joining the EU after a UK vote to  leave has taken place would be an easy choice.  To diminish  the  vote to stay in those countries  a pre-emptive strike is required before the referendum  laying before voters in Scotland, Wales and Northern Ireland the realities of their relationship with the EU and the  UK if they  seek to leave .

This is something which should have been done during the Scottish referendum.  Indeed, the refusal of the Better Together side of the argument to point out these realties was one of the prime reasons for the NO vote not being much larger than it was, handsome as that result was.  The unionist side generally was deeply patronising  to the Scots with their  line that only Scots could have a say in the debate and that the rest of the union had to keep quiet for fear of upsetting the Scots and driving them to a YES vote.  It implied that Scots are essentially less than adults who could not either bear contrary views or have the wit to listen to hard facts.

The primary things the Scots, Welsh and Northern Irish should be reminded of are:

  1. Wales and Northern Ireland are economic  basket cases which rely heavily on English taxpayers to fund their public expenditure. To lose that subsidy would cripple them both. Nor would they get anything like as much extra  funding from the EU – assuming it would have them as members –  as they would lose from the end of the English subsidy.

Scotland is in a better position because it is larger and has for the present at least significant oil revenues. But it is a very narrow economy relying very heavily on public service employment – a significant part of which deals with the administration of English public service matters –  while the private business side of is largely comprised of oil and gas, whiskey, food, tourism and financial services.

The figures below are the latest official estimates of the tax raised in each of the four home countries to the end of the 2012/13 financial year. These figures should not be treated as exact to the last million because there are difficulties in allocating revenue to particular parts of the UK, for example, with corporation tax, but they  are broadly indicative of what each country collects in tax I give two sets of figures to show the differences when oil and gas is allocated on a geographical and a population basis.

Table 1 Total HMRC Receipts (Geographical Split of North Sea Revenues), £m

UK         England    %       Wales      %     Scotland   %        N. Ireland %

2012‐13 469,777   400,659 85.3%    16,337 3.5%   42,415 9.0%       10,331   2.6%

Table 2 Total HMRC Receipts (Population Split of North Sea Revenues), £m

2012‐13 469,777   404,760 86.2%   16,652 3.5%   37,811 8.0%        10,518    2.6%

Compare this with public spending for each of the   home countries in the calendar year 2013 (I was unable to find expenditure figures for the financial year but they would be little different) :

England        £456.2 billion – difference of  £56 billion approx. between tax raised and money spent

Scotland        £53.9 billion  – difference  of £12 billion approx. between tax raised and money spent

Wales            £29.8 billion   – difference  of £13 billion approx. between tax raised and money spent

  1. Ireland £19.8 billion   – difference  of £9  billion approx. between tax raised and money spent

NB differences between I tax raised and money spent are based on Table 1 figures which give the most favourable interpretation of Scotland’s tax position.

The approximate  percentage of overspend  (spending less tax collected) by each of the home countries is

England      12%

Scotland     22%

Wales          43%

  1. Ireland 45%

The three smaller countries are accumulating debt at a much greater rate than England. In addition, small countries which go independent would find raising the money to meet their overspends would be much more expensive  than the cost of financing the debt as part of the UK

It is also worth noting in passing  the per head differences which are substantial between England and the other home countries.

In 2012/13, public spending per head in the UK as a whole was £8,788.

–              England £8,529 (3% below the UK average).

–              Scotland: £10,152 (16% above the UK average)

–              Wales: £9,709 (10% above the UK average)

–              Northern Ireland £10,876 (24% above the UK average).

If public spending per head was reduced to the present  English level in the other three home countries  approximately £16 billion would be removed from the UK  budget.

  1. The vast majority of their trade is with England. Barriers created by England’s departure from the EU could have very serious economic consequences any of other home countries remained  within the EU.
  2. Much of what they export to countries outside the EU has to pass through England.
  3. All three countries would be net takers from the EU budget not contributors. The EU are unlikely to welcome with open arms three more small pensioner nations. There would be no guarantee that the EU would accept any or all of them as members, but even if they did they terms they would have to accept would be far more onerous and intrusive than they experience now.  In particular, they would almost certainly have to join the Euro as this is a condition for all new members.
  4. An England or a reduced UK outside of the EU would have to impose physical border controls because any part of the UK which seceded and joined the EU would be committed to the free movement of labour within the EU (more exactly the European Economic Area – EEA). That would mean any number of immigrants from the EEA would be able to enter either England or a reduced UK via whichever part (s) of the UK had seceded and joined the EU.
  5. Being part of the UK gives the smaller home countries great security because the UK still has considerable military clout – ultimately Britain is protected by nuclear weapons – and the size of the population (around 62 million and rising) is sufficient in itself to give any aggressor pause for thought. The proposal for armed forces made in the SNP sponsored White Paper on independence recommended armed forces of 10,000  regulars to start with rising to 15,000 if circumstances permitted.   That would be laughable as a defence force for a country the size of Scotland which has huge swathes of land with very few people on the land.  An independent Wales and N Ireland would be even worse off.
  6. They could not expect to walk away from the Union without taking on a share of the UK national debt and of taxpayer funded pension liabilities proportional to their population, have a currency union to share the Pound, have UK government contracts for anything or retain  the jobs exported from England to do administrative public sector work  for England, for example, much of the English welfare administration is dealt with in Scotland.

If  this is done,  with any luck the enthusiasm for leaving the UK to join the EU if  England or England plus one or more of the other home countries has voted to leave the EU will diminish sufficiently to make a vote to  remain in the EU unlike or at least  reduce  the vote to stay in to level where there is not an overwhelming vote to either stay in or leave.

What the British people want from their politicians… and what they get

Robert Henderson

What do our politicians think of the electorate: precious little. All the major mainstream parties either ignore or cynically  misrepresent  the issues  which are most important to the British – immigration, our relationship with the EU, the English democratic deficit,  foreign adventures , the suppression of free speech and the precarious state of the economy. . These issues are  not addressed honestly because they either clash with the prevailing internationalist agenda or because to address them honestly would mean admitting how much sovereignty had been given away to the EU and through other treaties.

This antidemocratic failure to engage in honest politics is an established trait. The wilful removal from mainstream politics of vitally important issues has been developing for more than half a century. The upshot is that the British want their politics to be about something which is not currently on offer from any party with a chance of forming a government. The British public broadly seek what these days counts as rightist action when it comes to matters such as preserving nationhood, immigration, race and political correctness, but traditional leftist policies on items such as social welfare, the NHS and the economy (has anyone ever met someone in favour of free markets and free trade who has actually lost his job because of them?).

The electorate’s difficulty is not simply their inability to find a single party to fulfil all or even most of their political desires. Even on a single issue basis, the electorate frequently cannot find a party offering what they want because all the mainstream parties now carol from the same internationalist, globalist, supranational, pro-EU, pc songsheet. The electorate finds they may have any economic programme provided it is laissez faire globalism, any relationship with the EU provided it is membership, any foreign policy provided it is internationalist and continuing public services only if they increasingly include private capital and provision. The only difference between the major parties is one of nuance.

Nowhere is this political uniformity seen more obviously than in the Labour and Tory approaches to immigration. Labour has adopted a literally mad policy of “no obvious limit to immigration”. The Tories claim to be “tough” on immigration, but then agree to accept as legal immigrants more than 100,000 incomers a year from outside the EU plus any number of migrants from within the EU (350 million have the right to settle here). There is a difference, but it is simply less or more of the same. Worse, in practice there would probably be no meaningful difference to the numbers coming whoever is in power. The truth is that while we remain part of the EU and tied by international treaties on asylum and human rights, nothing meaningful can be done for purely practical reasons. But even if something could be done, for which serious party could the person who wants no further mass immigration vote? None.

A manifesto to satisfy the public

All of this set me thinking: what manifesto would appeal to most electors? I suggest this political agenda for the What the People Want Party:

We promise:

1. To always put Britain’s interests first. This will entail the adoption of an unaggressive nationalist ethic in place of the currently dominant internationalist ideology.

2. The reinstatement of British sovereignty by withdrawal from the EU and the repudiation of all treaties which circumscribe the primacy of Parliament.

3. That future treaties will only come into force when voted for by a majority in both Houses of Parliament and   accepted in a referendum . Any  treaty should be subject to repudiation following  Parliament passing a motion that repudiation should take place and that motion being ratified by a referendum.  Treaties could also be repudiated by a citizen initiated referendum (see 29).

4. A reduction in the power of the government in general and the Prime Minister in particular and an increase in the power of Parliament. This will be achieved by abolishing the Royal Prerogative, outlawing the party whip and removing the vast powers of patronage available to a government.

5. That the country will only go to war on a vote in both Houses of Parliament.

6. An end to mass immigration by any means, including asylum, work permits and family reunion.

7. An end to all officially-sponsored political correctness.

8. The promotion of British history and culture in our schools and by all publicly-funded bodies.

9. The repeal of all laws which give by intent or practice a privileged position to any group which is less than the entire population of the country, for example the Race Relations Act..

10. The repeal of all laws which attempt to interfere with the personal life and responsibility of the individual. Citizens will not be instructed what to eat, how to exercise, not to smoke or drink or be banned from pursuits such as fox-hunting which harm no one else.

11. A formal recognition that a British citizen has rights and obligations not available to the foreigner, for example, the benefits of the welfare state will be made available only to born and bred Britons.

12. Policing which is directed towards three ends: maintaining order, catching criminals and providing support and aid to the public in moments of threat or distress. The police will leave their cars and helicopters and return to the beat and there will be an assumption that the interests and safety of the public come before the interests and safety of police officers.

13. A justice system which guards the interests of the accused by protecting essential rights of the defendant such as jury trial and the right to silence, whilst preventing cases collapsing through technical procedural errors.

14. Prison sentences that are served in full, that is,  the end of remission and other forms of early release. Misbehaviour in prison will be punished by extending the sentence.

15. An absolute right to self-defence when attacked. The public will be encouraged to defend themselves and their property.

16. A general economic policy which steers a middle way between protectionism and free trade, with protection given to vital and strategically important industries such as agriculture, energy, and steel and free trade only in those things which are not necessities.

17. A repudiation of further privatisation for its own sake and a commitment to the direct public provision of all essential services such as medical treatment. We recognise that the electorate overwhelmingly want the NHS, decent state pensions, good state funded education for their children and state intervention where necessary to ensure the necessities of life. This promise is made to both reassure the public of continued future provision and to ensure that the extent of any public spending is unambiguous, something which is not the case where indirect funding channels such as PFI are used.

18. The re-nationalisation of  the railways, the energy companies, the water companies and any  exercise  of the state’s authority such as privately run prisons which have been placed in  private hands.

19. An  education system which ensures that every child leaves school with at least a firm grasp of the three Rs and a school exam system which is based solely on a final exam. This will remove the opportunity to cheat by pupils and teachers. The standards of the exams will be based on those of the 1960s which is the last time British school exams were uncontaminated by continuous assessment, multiple choice questions and science exams included practicals as a matter of course. .

20. To restore credibility to our university system. The taxpayer will fund scholarships for 20 per cent of school-leavers. These will pay for all fees and provide a grant sufficient to live on during term time. Any one not in receipt of a scholarship will have to pay the full fees and support themselves or take a degree in their spare time. The scholarships will be concentrated on the best universities. The other universities will be closed. This will ensure that the cost is no more than the current funding and the remaining universities can be adequately funded.

21. A clear distinction in our policies between the functions of the state and the functions of private business, charities and other non-governmental bodies. The state will provide necessary public services, business will be allowed to concentrate on their trade and not be asked to be an arm of government and charities will be entirely independent bodies which will no longer receive public money.

22. A commitment to putting the family first. This will include policies which recognise that the best childcare is that given by the parents and that parents must be allowed to exercise discipline over their children. These will be given force by a law making clear that parents have an absolute right to the custody of and authority over their children, unless the parents can be shown to be engaging in serious criminal acts against their children.

23. Marriage to be encouraged by generous tax breaks and enhanced  child allowances for children born in wedlock.

24. Defence forces designed solely to defend Britain and not the New World Order.

25. A Parliament for England to square the Devolution circle. The English comprise around 80 per cent of the population of the UK, yet they alone of all the historic peoples are Britain are denied the right to govern themselves. This is both unreasonable and politically unsustainable in the long-run.

26. A reduction to the English level of Treasury funding to Scotland, Wales and Northern Ireland. This will save approximately £17 billion pa because the Celts receive overall approximately £1,600 per head per annum more than the English.

27. An end to Foreign Aid. This will save approximately £11  billion.

28. A written constitution to ensure that future governments cannot abuse their power. This will be predicated on (1) the fact that we are a free people, (2) the belief that in a free and democratic society the individual can be trusted to take responsibility for his or her actions and to behave responsibly and (3) that politicians are the servants not the masters of those who elect them. It will guarantee those things necessary to a free society, including an absolute right to free expression, jury trial for any offence carrying a sentence of more than one year, place citizens in a privileged position over foreigners and set the interests and safety of the country and its citizens above the interests and safety of any other country or people.

29. Citizen initiated referenda shall be held when ten per cent of the population have signed a petition asking for a referendum.

Those are the things which I think most of the electorate could embrace, at least in large part. There are also other issues which the public might well be brought to  support if there was proper public debate and a serious political party supporting them such as the ownership and bearing of weapons and the legalisation of drugs.

The positive thing about such an agenda is that either Labour or the Tories could comfortably support it within the context of their history.

Until Blair perverted its purpose, the Labour Party had been in practice (and often in theory – think Ernie Bevin), staunchly nationalist, not least because the unions were staunchly protective of their members’ interests and resistant to both mass immigration (because it reduced wages) and free trade (because it exported jobs and reduced wages).

For the Tories, the Thatcherite philosophy is as much an aberration as the Blairite de-socialisation of Labour. The true Tory creed in a representative democracy is that of the one nation nationalist. It cannot be repeated too often that the free market internationalist creed is the antithesis of conservatism.

The manifesto described above would not appeal in every respect to ever member of the “disenfranchised majority”. But its general political slant would be palatable to that majority and there would be sufficient within the detail to allow any individual who is currently disenchanted with politics to feel that there were a decent number of important policies for which he or she could happily vote. That is the best any voter can expect in a representative democracy. People could again believe that voting might actually change things.

What a true assessment of the economic costs of mass immigration would include

Robert Henderson

The politically correct never cease to tell us that mass immigration is a net benefit to Britain. By this they mean that immigrants pay more in taxes than they cost in publicly funded services. To make such an assessment the following statistics would be needed:

1. The amount of income tax and National Insurance paid by immigrants.  Because of the type of work involved – seasonal, work offered by foreign gangmasters and so on –  it is reasonable to assume a  disproportionately  large proportion of those working in the black market are immigrants. There is also a practice of immigrants working and paying tax until they exceed the single person’s tax allowance in a tax year, ceasing to work in the UK for that tax year and then reclaiming all the income tax paid at the end of the tax year. That rebated tax  needs to be deducted from the tax paid figure held by Her Majesty’s Revenue and Customs (HMRC).

2. The costs arising  from the native population who are denied jobs which immigrants have taken. This will involve the benefits native workers have to collect because they cannot find a job, the costs of having to move to a new area to either seek work or because  the new benefits cap will not meet their rent and the costs of having to take children out of one school plus the costs of registering with a new GP because a family is forced to move .

3. The cost to the native population of a reduction in wages caused by immigrants increasing the pool of labour. This will mean  less tax paid and more in-work benefits

4. The cost of  benefits drawn by immigrants when they are not working.

5. The cost of benefits drawn by immigrants when they are working, for example, working tax credits, housing benefit.

6. The cost of NHS care given to immigrants.

7. The cost of education given to immigrants, this to include the additional costs arising from those with poor or non-existent English.

8. The cost of benefits, education and NHS care for the children of immigrants born in the UK.

9. The costs of benefits paid to immigrants to support children born abroad and living abroad.

10. The inflation of  housing costs caused by immigrants and their children born in the UK increasing the demand for housing.

11.  The costs involved in a decline in the quality of NHS care and educational standards because of the pressure placed on the NHS, schools and higher education by immigrants.  The inadequate English of many immigrants employed in the NHS in particular must reduce the efficiency of the service and increase the likelihood of error. The difficulty of teaching in schools with huge numbers of pupils lacking English as a first language speaks for itself.

12. The costs involved  in the British economy generally from a loss of efficiency through the inadequate English of immigrants and their lack of understanding of British customs. It may be cheaper for an employer to employ an immigrant in terms of wages,  but,  especially where the immigrant is dealing with the public, there must be a substantial the loss of efficiency in terms of  extra time taken to conduct conversations with customers, misunderstandings of what is wanted and an inability to explain  to customers what is on offer.

13. The loss of expertise to Britain of skilled Britons who seek work abroad because of opportunities the UK being blocked by immigrants, for example,  newly qualified British doctors and nurses have encountered difficulty in obtaining British posts despite the frequent claims of NHS staff shortages (,  while positions at British medical schools are cut and large numbers of foreigners recruited (–limits-places-deny-British-students-chance-study-medicine.html)

14. The costs – which can be lifelong –  of the loss of work experience for Britons  unable to get work at all, whether skilled or unskilled.  This is particularly important for the young.

15. The costs in terms of wear and tear on the roads because of increased traffic arising from immigrants.

16. The cost of criminal activity amongst immigrants.

17. The cost of criminal activity amongst the descendants of immigrants.

18. The costs of guarding against Islamic terrorism.

19. The costs of the remittances made by immigrants and their descendants to their ancestral countries.

20. The costs of meeting the requirements of the “anti-racist” legislation which puts considerable burdens employers. These are  particularly severe for any employer who is funded in whole or part by the taxpayer.  Such employers have to not merely be non-discriminatory,  but they have to prove that is what they are as a result of the Race Relations (Amendment) Act 2000 ( The police are particularly keen to show how PC they are (

21. The cost of dealing with visa requests, asylum claims,  claims regarding family reunions  and claims based on compassionate grounds. The costs include employing civil servants to process claims to stay in the UK, the cost of staffing of immigration tribunals, the costs arising from the court time taken by the cases  which go to the courts, the  legal costs of those trying to stay in the UK (which are normally paid by the taxpayer), the cost of running immigration detention centres and the cost of removing people from the UK .

22. The ongoing cost of the descendants of immigrants – potentially through many generations – of racial and ethnic groups who continue to display high levels of unemployment, high benefit dependency,  low-skills,  poor educational attainment, low payments of tax and  abnormally high levels of criminality.

I defy anyone to find a piece of research which comes close to including all those costs or even a majority of them.

Of course the economic arguments are not  the most important thing about mass immigration which is that it changes the nature of a society because immigrants arriving in large numbers from the same country will invariably colonise parts of the country and resist assimilation.  Nonetheless, it is important to thoroughly examine the weaknesses in the economic claims made by the politically correct because it is their favoured ploy to try to pull the wool over the public’s eyes.

The costs fall most heavily on the poor, the rich being, as yet, largely untouched because they arrange their lives so that they do not encounter the supposed joy of diversity and have no need to seek work in a competitive situation.

Civitas meeting: Transforming the market: Towards a new political economy

Civitas meeting: Transforming the market: Towards a new political economy 13 November 2013

Speaker: Dr Patrick Diamond

Diamond’s talk was based on his recently published Civitas tract

Diamond is firmly in the NuLabour camp, having been involved in various positions servicing the last Labour government,  including that of  head of Policy Planning in 10 Downing Street. He now holds several academic positions at London and Oxford universities. He is also a Labour councillor for the London Borough of Southwark.

What is his recipe for “transforming the market”?  This extract from his Civitas tract give the bare bones of it:

“The government is an enabler, directing strategic investment to growing sectors and firms, providing fertile conditions for entrepreneurship.

The government is a  regulator, managing the inherent volatility and instability of markets, while promoting competition in product and capital markets.

The government is an equaliser, ensuring the supply of public goods and human capital helps the least advantaged, while ensuring the basic distribution of household income accords with basic principles of fairness and social justice.

And the government is an innovator , promoting experimentation, technological adaptation, alongside the discovery of new markets, services and the advancement of knowledge.” pp49/50

This has the ring of someone reciting a catechism whose end is in its saying not in its doing.

Diamond’s  buzzwords for curing the ills of the British economy are decentralisation and localism. This dovetails with the Labour version of the Tories’ risible “Big Society” which I heard  John Cruddas  outline not so long ago ( Read this in conjunction with this report and you will have Labour’s economic and social programme  for the next general election.

There is a good deal of “back to the future” in his  programme. He wants to create a ‘super ministry” combining the Department of Business,  Innovation and skills (BIS),  the Department of Communities and Homes and some Treasury functions to “ decentralise and devolve economic power away from London.”  Older readers will be irresistibly reminded of the first Wilson government in the 1960s when work, and especially public sector work, was to be sent to the less prosperous parts of Britain. Thankfully Diamond  at least spared us any ancient embarrassing rhetoric such as “the white heat of technology” or “picking winners”, but that is what he thinking.

Diamond’s wish to see Britain’s economy “rebalanced” away from services and towards manufacturing also resonates with Wilson’s desire to shift more people into manufacturing. This he attempted  to do with arguably the most absurd tax ever introduced in Britain, the  Selective Employment Tax (SET).  This  was placed on service companies only, the idea being that this would make more people seek manufacturing jobs  because service employers would find it more expensive to employ people and the number of service jobs would fall. In turn the hope was that manufacturing wages would be lowered because of increased competition for such jobs. This last was an heroically optimistic scenario because of the power of the unions at the time.

SET failed for the wondrously obvious reason that it increased the costs of service employers without improving the circumstances of manufacturers, whose wages remained  much the same,  while demand for  their goods was at best not increased and at worst might have even fallen if unemployment in the service sector rose due to the increased cost imposed by  SET and reduced overall demand.   This meant manufacturers could not employ more people.  All  SET could do in the circumstances of the 1960s,  if it had any effect at all,  was reduce employment and/or raise retail prices.

So many things are to Diamond’s mind “too centralised” or  overly  concentrated in particular areas .  Apart from  general economic power and government,  he pointed to banks, infrastructure such as airports and even the Arts. Leaving aside whether localising affairs is desirable, there is an inherent problem with making things more local and decentralised. There needs to be not merely the bricks and mortar of regional banks and companies, councils with much more responsibility and so on, there needs to be a class of people who can handle such responsibilities at the local and regional level. None exists at present. Nor can such a class be created by conscious policy.  It is something that happens, if it happens at all, naturally.

At one time Britain did have a healthy political and managerial class who were willing and able to assume the burden of exercising local power. But that class grew naturally from the fact that the whole of society was of necessity  conducted at the local level because of poor communications. But from the advent of the railways onwards localism became less and less the natural state of affairs.  We have now reached a  point where the exercise of  political power and initiative  at the local level  is feeble because those with real political ambition do not see serving at the local level as important. It is all very well to lament this and say power and influence should be shifted back to the local level but how able and ambitious people can be persuaded to confine themselves to local government is another matter. Frankly, I doubt whether the clock can be turned back.

As part of his worship of the local Diamond is much taken with Germany with its regional banks, workers directives  and technical schools.  He wants Britain to copy them. In this he is making the profound but common error of believing that what works in one society will work in any other society. This was doubly  odd because he recognised in one part of his talk (and does so in his written tract) that the transfer of methods from one society to another was problematical, but still went on as though the problem did not exist when he got to the detail, such as it was, as to what should be done in Britain.

Germany is decentralised because that is the way it has always been. A latecomer to the nation state (1870), the German state has always been in practice a federation with some of the larger components such as Saxony and Bavaria having histories as substantial kingdoms in their own right.  The consequence is that regionalism comes naturally to Germany in a way that it never would do in Britain and especially England,  because England has been centralised in the sense that it has been a kingdom encompassing those with a broad common ethnicity for many centuries. In modern Germany the sixteen Lander form political entities which each  have both size and a separate history   to create and maintain  regional loyalty. In England there are no such hard core regional loyalties. Regional sub-divisions of England are no more than geographical expressions, the South West, the North West, the South East, Midlands and so on.  Even the North East – the  region of England often put forward as having the strongest regional identity – is far from being an area  with a separate identity around which all the inhabitants can coalesce.

Diamond’s scheme for remedying the ills of the British economy has many other weaknesses. He is sold on predistribution.  This is, almost inevitably these days, an ideological import from the USA.  It is the political equivalent of selling snake oil to the ill.  The idea is that silly old traditional methods of redressing inequality such as progressive tax regimes and benefit support (which actually work) are forsaken for ethereal aspirations that  encourage long-term investment,  providing good quality public services, particularly healthcare and investing in the skills of the young , workers on company boards, a minimum wage pegged to inflation and so on.  The problem is these will not work while mass immigration and relatively free trade exists both in terms of imports and the export of jobs through outsourcing.

The broad sweep of Diamond’s ends I would have sympathy with, the re-industrialisation of Britain, greater material equality, an end to the worship of markets, long term planning by companies and so on.  The problem is his means. They will not work because he is always trying to work within the context of both a market economy and globalisation. Take his strategy for manufacturing. To increase this, especially in terms of making it much broader as well as larger in GDP terms, some form of protection would have to be used, be that traditional controls such as quotas and tariffs or state control of vital industries together with fiscal measures to ensure the price of essential goods and services are within the reach of the poor.   We can be sure of that both because economic history has no example of a country industrialising except by protecting its domestic market and because simple logic tells you that it is impossible to compete across the economic board  with countries whose labour forces are earning a fraction of British wages, who have scant regard for health and safety and whose governments ensure that it is very difficult to enter their markets by economic regimes which are anything but laissez faire.

Diamond’s attempt to get round this problem is for Britain to concentrate on high-tech industries. There are two problems with this. The first is strategic whereby it is dangerous for any country to leave itself at the mercy of world events by being unable to produce a wide range of products either at all or in sufficient quantity to tide the country over in an emergency.

The second difficulty is the sheer impossibility of creating  sufficient jobs to employ enough of a  large population like that of the UK to compensate for the export of lower tech, lower skilled work. Even if it was in theory possible, it would be impossible to find enough people capable of  high tech work because the way IQ is distributed means that even in a country with a strong average IQ such as Britain will have huge numbers of people who have mediocre to poor IQs –for example, there are around 6 million people with IQS of 80 or less in the UK.  Thus two reasons for a broad-based economy come together: the impossibility of providing enough high tech, high skill jobs and the need to cater for the less able in society.

The audience questions and remarks

What was heartening was the anger which quite a few of the audience (it was a deliberately small gathering of around 25) expressed about the way British governments had failed to protect British companies and British economic interests generally. “Britain is becoming a servant economy” was probably the best of the comments summing up where Britain is headed if the current laissez faire policies continue to be followed.

These points were made by other members of the audience:

–          The takeover of  British companies by foreigners was made much easier with the abolition of the Mergers and Monopolies Commission  (which had a public interest test)  and its replacement with the Competition Commission (which has no public interest test but simply a test for the proportion of the market a takeover would involve).

–          Manufacturers comprise only 11% of GDP but 50% of British exports.

–          Manufacturing jobs are generally better paid than service sector jobs so their loss is more keenly felt both by the individual and in terms of GDP.

–          Foreign direct investment is often concerned with the acquiring of British assets rather than new investment.

–          Energy costs are killing manufacturing in the UK.

The owner of JLS Ltd, John Mills (who is currently the largest Labour Party donor and a one-time Camden Councillor),  advocated a deliberate 20%  devaluation of the pound . I have discussed this with him on another occasion and the problem with it is this: starting the devaluation is easy enough, but stopping it   at the level you want it is not. The danger is that the currency  will deflate way beyond the desired point because the brakes fail to halt the decline in its value.  It is also worth remembering that the value of the Pound against major currencies has dropped 20% or so since Lehman Bros failed in 2008.

I managed to make a few points. These were:

1. That it is impossible to rebuild manufacturing except behind protectionist barriers, official or unofficial, the proof of this statement being the fact that it has never been done.

2. Most immigrants are not engaged in highly  skilled work but low-skilled or unskilled jobs, which in itself gives the lie to the idea that immigrants are doing jobs which Britons could not or would not do. I further pointed out that many of these jobs involve dealing with the British public  – in shops, cafes, call centres and so on – and that many of those  so employed have completely inadequate English. To claim that a foreign worker who cannot speak fluent English is a better employee in such posts than a native English speaker is a self-evident nonsense.

3. That British unemployment, especially youth unemployment, cannot be cured while our borders are effectively open both because of the EU and the unwillingness of all the major parties to halt immigration from outside the European Economic Area.  (Diamond flatly refused to discuss the question of immigration, contenting himself with “We shall have to differ on immigration”).

4. Diamond stated in his talk that healthy economies relied on “efficient, effective and non-corrupt public sectors”. I broke the dreadful truth to him that Britain no longer has such a public sector. Privatisation (especially PFI) has greatly increased the opportunities for corruption in public service. Increase the opportunities and corruption increases. It is a very simple equation.

Diamond accepted that corruption had  worsened in central government public service but bizarrely claimed it had reduced in local government circles. The reality is that corruption has increased not decreased in local government because so much of local government work has been contracted out. Diamond attempted no justification for his claim merely asserted it. (It is a very strange thing but I have never been to a meeting dealing with the same general subject area as this one where anyone other than me  has raised the issue of corruption, this  despite the fact that there are regular examples of it in the mainstream media).

Privatisation has also reduced the efficiency of public services, because  where used it destroys the chain of command within the public service.  This occurs because where there is a private contractor involved the public service provider cannot instruct those employed by the private contractor but must work through the contractor’s management. This can lead to very complex arrangements.  I gave the example of major London hospitals where there are  routinely PFI contracts for the food, the laundry, the ward cleaning and the maintenance and cleaning of the multi-media installations (TV, phone, internet).

5. That giving more power,  including greatly increased borrowing powers,  to local councils is  a recipe for disaster because of the lamentable quality of the large majority of councillors. I urged anyone around the table who doubted this to go and view their local council in action, especially in the committees and subcommittees.

6. The laws which allow directors who do not meet their statutory responsibilities to be punished are rarely enforced. I gave as examples the provisions within the Company’s Act to remove the personal; limited liability of directors and to ban people from being directors.   I pointed out that these provisions  had not been used against any of the directors of RBS, HBOS, Lloyds or  Northern Rock, despite their extremely reckless behaviour.  Had the limited liability of directors such as Fred Goodwin been removed the directors could have been sued for every penny they had.  As for banning directors, I told the meeting that from my own experience with the Inland Revenue of  trying to get even the directors of tinpot concerns banned  was well nigh impossible and that to get a mainboard director of a Footsie 100 company banned was in practice impossible unless the director was convicted of a criminal offence against the company such as embezzlement.

What needs to be done

If Britain’s economy can be reshaped it can only be done with a judicious use of protectionist measures, the renationalisation of vital services such as the utilities  and an end to mass immigration.  Diamond will not even consider doing any of this.

There was one issue which I did not get a chance to raise  because of the constraints of the meeting.  Nor was the issue touched on by Diamond or any of the audience. It concerned technological changed.  Robotics and 3-D printing bid fair to turn our economic world upside down. I include below links to a couple of articles which deal with problems they will create. Just in case you are tempted to say Oh that’s just sci-fi, especially in the case of robotics, go online look at the latest robotic developments, for example, a humanoid robot which can walk over rough ground (

and a humanoid robot that has human eye movements very well imitated. (

The implications of Robotics are explored in these essays:

Making plans on the basis that our economy and society will remain in broad terms similar to what it is now is a mug’s game.

Robert Henderson 29 11 2013

One nation Labour: work, family and place – a taste of Labour’s next election propaganda

Civitas meeting at 55 Tuftn Street Westminster SW1P3QL

14 October 2013

One nation Labour: work, family and place

Speaker: John Cruddas MP

The speech was  howlingly vacuous, full of trite phrasemaking and statements of the blindingly obvious added to a rich menu of vague aspirations. Here are a few examples:

“Families come in all different shapes and sizes”.

“Some of our families trace their English roots back  generations, and for some their children are the first  born in England.“

“We will improve our schools so they can help children develop good character, and learn the values of respect, honesty, compassion, trust and integrity.”

The only surprise is that Cruddas did not tell  the audience that  he believed in motherhood and apple pie.

But empty as it was of hard policy, this speech is important because Cruddas was laying out the general propaganda strategy of the Labour Party for the coming General Election.  The strategy was noteworthy for  its unmitigated cynicism, it being a shameless attempt to cloak the true intent of Labour with words which until very recently the Party would have treated as beyond the politically correct Pale.

Cruddas’  engaged in dog-whistle politics. For Labour’s  historically  core vote, the unalloyed white working class,  he used words and phrases such as patriotism  and national renewal, but  in a way that would have met with the firm approval of  Lewis Carol’s Humpty Dumpty. They meant whatever Cruddas meant them to mean rather than what any normal person or a dictionary would take them to mean. Nation did not mean a natural nation but a bogus one centred around civic ideals. Patriotism did not mean wanting to express a sense of nation but pride in the civic ideals.  Being English did not mean being English in the cultural or historic sense,  but English as simply a coverall term for those living in England. (In passing, I could not help wryly wondering  if Cruddas was unaware of the fascist echoes in his language: One Nation; National Renewal,  the new England…. )

Cruddas had other electoral wares to peddle. To entice Tories alienated by Cameron’s NuTory social liberalism and the aspirational working-class vote,   Cruddas put forward what might politely be called the NuLabour version of that risible Tory phrase The Big Society.  This consisted of a condemnation of centralisation and a devolution of power and responsibility to the local level in general and the individual in particular. Here is a flavour of Cruddas’  general thrust:

“One Nation begins in local places. It is in our neighbourhoods that we express our cultures and identities and the new England taking shape is happening where people meet and greet one another, neighbours help one another and watch and learn from each others different lives and so build up trust and in the process make a home together. “

“They are the people who tend to think of themselves as both English and British. They care about their families and work hard for a  better life.  The ethic of work is deeply held because it is about  self-respect and self reliance.  They are responsible and look after their  neighbourhoods. But they don’t feel they get back what they deserve. “

“They are powerfully aspirational but they are struggling to make ends meet.  The better life they have worked for, and their hopes for their children are under threat due to the cost of living crisis.  Labour should be their natural home.” 

Despite the Thatcherite tone, this was The  Big Society NuLabour style. Consequently,  it also contained a good deal of political correctness, including a seeming acceptance of male employment  providing less than enough money to support a family as a permanent fixture in the British economy. Indeed, there was even an undertone of this being a good thing because  it furthers the cause of gender equality, viz:

“Millions of men no longer earn enough to follow their fathers in the role of family breadwinner. More and more women are taking on the role of breadwinner. Families thrive when there is a partnership and teamwork amongst adult relations We need a new conversation about families and their  relationships that is jointly owned by women and  men. “

“We need to value father’s family role as highly as his working role, and women’s working role as highly as her domestic one. And we need to have high expectations of fathers because otherwise we collude with those men who don’t step up to the mark.”

“We will look at where we can make greater use of a ‘whole family’ approach to public services which assumes, where it is safe and appropriate, that a child  needs a relationship with both parents.

 “That means:

– exploring changes to maternity services to engage the whole family and include fathers.

– looking at paid leave for prospective fathers to attend antenatal sessions and hospital appointments during pregnancy.

– developing services that facilitate mutual support between families.

– helping family self help initiatives in the community and letting finance follow.

Helping children take responsibility for their own actions, also means improving sex and relationship education for boys and girls with zero tolerance of violence at its core.  “

The third prong of Cruddas’ propaganda method was to speak of England not Britain:  

“It is a sentiment that is shared by a large part of the electorate today, particularly in England. Patriotic, love of family; live and let live. Committed to the virtues of responsibility and duty; fiercely democratic and individual. “

“We are a country of many roots looking for an identity. Some of our families trace their English roots back  generations, and for some their children are the first  born in England.“

“One Nation begins in local places. It is in our neighbourhoods that we express our cultures and identities and the new England taking shape is happening where people meet and greet one another, neighbours help one another and watch and learn from each others different lives and so build up trust and in the process make a home together.”

This is not Englishness at all but a substitute for the increasingly meaningless use of British, a term  which has become a semantic umbrella to obviate the need to call immigrants and their descendants English. There  is to be a new Englishness, not one born of the organic formation and shaping of a nation across a millennium and a half, as has been the genesis of England and the English,  but  a cosmopolitan multicultural politically correct mess which no English man or woman would recognise as English.

In true Labour fashion his speech was also packed with uncosted spending commitments  such as paid antenatal paternity leave, guaranteed work for the long-term unemployed, increased childcare payments, cutting and then freezing business rates for small and medium sized firms and  putting more money into vocational training. Incredibly, Cruddas claimed that  these new costly policies will be made whilst government spending reduces overall, viz:: “We will govern with less money.”

There was a strong hint to what the devolution of power  would really be about in Cruddas’  housing proposals, viz:

“Local people need local homes and we will devolve power to local authorities to negotiate with private landlords reductions in rent and use the savings to build new homes.”

The device is transparent: the responsibility is moved from national politicians and any failure rests with local politicians.  And so it will be with anything else devolved under a Labour government if one is elected in 2015.  As for the housing proposal, If there were no legal power to force private landlords to reduce rents, and there was no suggestion from Cruddas that there would be, it is  the purest pie-in-the-sky.

On the subject which most exercises the native English, immigration, all Cruddas had to offer was first this:

 “Change brings both a sense of loss as well as hope; across the country there is a powerful sense of grievance and dispossession. A loss of culture and a way of life.  We have to engage with the visceral politics it creates. “

With this as the risibly inadequate solution:

“On immigration, Ed Miliband has set out a new approach which combines tougher controls on people coming in from new EU countries with measures to help stop low skilled migration undercutting the wages of workers already here.” 

Cruddas also had the effrontery to claim The Conservatives are dividing Britain  when of course the greatest cause of division is mass immigration which increased hugely under Blair and Brow with a net inflow of more than three  million to the UK.

It would also be interesting to know how Cruddas could square his wish for Britain to be “fiercely democratic” with the  mass immigration which has been the prime policy exercising the British electorate for a long time when they have been denied any say on  it because neither of the major parties has any real intention of preventing it, not least because both major parties are committed to Britain’s membership of the EU.

There was also a feeble apology for the mess created by the Blair and Brown governments. Reflecting on the 2010 election defeat Cruddas mused “did we spend too much attention treating problems in society rather than preventing them? We moved thousands more people into work, but did we pay sufficient attention to the type of work performed and the rewards received? Were we attuned to the scale of low skilled immigration and across its impact in communities?  “ before concluding baldly “We got things wrong.”

Needless to say,  Cruddas’  conclusion that serious mistakes were made did not lead him to suggest that he , and all the other Labour MPs who served in the Blair and Brown governments who are still in the Commons should resign in  disgrace because of the mess Labour left on leaving office. An admission of fault without proportionate or indeed any penalty suffered by the wrongdoers is meaningless, a taunting of the public.

The full text of Cruddas’ speech is at

Come question time I managed to get the first question. I launched it with a decent preamble during  which I pointed out the three to four million net immigration under the last Labour government; the reckless spending with government spending deficits totalling more than £200 billion before the crash of 2008 and  the millions in full-time work who could not earn enough to support themselves and were heavily dependent  on benefits. I ended by asking the question “In view of the mess the last Labour Government left behind them in 2010 why should anyone trust the Labour Party enough to re-elect them at the next election?  Had there been time, I would have added in the perpetual warmongering of Blair, the handing to the EU of ever more power without the British public being consulted in a referendum, the disastrous neglect of the UK’s energy supplies, the vast expansion of the  racket that is PFI and the institutionalisation of political correctness within the British public sector.

Cruddas gave me a non-answer,  being reduced to saying that I had not given a nuanced  view of the last Labour government, followed by a claim that all had seemed going well until the crash of 2008, with an implied shrug of the shoulders that the crash could not have  been foreseen.  Contemptibly, he tried to hide behind the Tories by saying they had supported the economic policies of the Blair government.  The latter was of course true, but being wrong with along with your political opponents is no excuse. The reality is that the crash was about as obvious as Christmas coming at the end of December if one looked at the economic indicators.  (I publicly predicted the crash  in July 2007. By then house prices had risen so high that in the large majority of English council areas it was impossible for someone earning the average wage to buy their first house, despite the ease with which mortgages could be obtained with loans of up to 125% of the property’s value being offered.  It was clear that the housing market, which underpinned the gerrymandered NuLabour boom, would collapse and cause a severe recession).

The rest of the questions were curiously bloodless. Depressingly, no one else at the meeting seemed to be angry about what had happened to Britain under Blair and Brown.

The one thing of interest which came from these  questions was Cruddas’ definition of what constituted a sense of nation and patriotism. It was the “civic patriotism” so beloved of the left at the moment, the ludicrous idea that a nation can be formed around nothing more than a set of self-consciously arrived at values such as a belief in representative government and the rule of law.  Any sense of belonging arises organically from the natural human traits which create “tribal feeling”  not from governments telling people what to believe.

The “values” which Cruddas was speaking about were in reality  those of political correctness. This  meant  he  was purveying not one nonsense but another one on top of  it –  nonsense on stilts – because political correctness is in itself an exercise in denying reality.

After the meeting I email Cruddas this without receiving a reply:

Dear Mr Cruddas,

I was the person who asked the first question at the Civitas meeting tonight. Apart from the points I made in the preamble to my question, I would say that your  emphasis on localism and community  self-help sounded remarkably like a NuLabour version of the Tories’ Big Society. Both ideas are non-starters because you cannot create  social networks and community spirit self-consciously. It can only develop organically. For the same reason a civic citizenship cannot be created to stand in the stead of Man’s innate tribal feeling.

What the Labour Party needs is a return to a firm and clear understanding of what things should be private and what public and to defend public ownership and intervention where it is appropriate.  The long essay below ( examines that proposition in detail

At present all your party is trying to do is patch a few social and economic grazes when what is needed is major surgery.

In your answer to my question you said the picture I painted was not nuanced. To that I would reply how exactly does one nuance over 3 million net immigrants under Blair and Brown or massive debt they ran up from 2002 onwards? The detailed debt figures are

Labour ran a surplus for each of their  first four years of government:

1998       £    703 millions

1999      £11,976 millions

2000       £16,697 millions

2001       £ 8,426 millions

Total  1998 – 2001  surplus of £37,802 millions


Labour ran a deficit for  the rest of their time in government:

2002    £19,046  millions

2003    £34,004  millions

2004     £36,797  millions

2005     £41,355  millions

2006     £30,755  millions

2007     £33,718  millions

2008     £68,003  millions

Total 2002 – 2008   Deficit of £263,678  millions


2009   £152,289 millions

2010   £148,774  millions

Total  2009 -2010   Deficit of £301,063 millions


Net total debt accumulated  in the period 1998 – 2008 £225,876

Net total debt  accumulated in the period 1998-2010 £526,339 millions

Figures taken from

These figures understate the true increase in public debt because of the Enron-style accounting which kept most the PPI and PFI debt incurred under Blair and Brown off the books.

As can be seen, the present Labour claims that the financial mess is all due to the post-Lehman global crash is embarrassingly  untrue.

Yours sincerely,



Robert Henderson

Sorting out the mess after the Euro collapses

Robert Henderson

17 of the 28 EU states make up the Eurozone. If the Euro collapses 17 new national currencies will have to be established. A conversion rate for Euros to each re-established national currency will have to be agreed.   The weaker a country’s economy,  the less favourable the conversion rate.

That  will be painful for the weaker Eurozone economies, but it will be administratively relatively simple because the transaction can be made  bilateral,  just as the assimilation of the East German Ostmark into the Deutschmark was accomplished at the time of German re-unification, although this would be more complicated.

The bilateralism would  have to come through a system something like this:   the Euro coins and notes issued in each country’s name  and the Euro bank deposits of each country held at a certain date would be convertible only into the re-established national currency.  For example, this would mean that those holding Euros issued by France and Euros in French bank accounts  at a designated date,  would have their Euros converted to Francs at whatever the agreed rate was.

Unless such a system was adopted almost everyone holding  Euros would  demand that their Euros were converted to attractive currencies  such as a re-established Deutschmark rather than a new drachma or escudo, regardless of how attractive the conversion rates were for the weaker re-established Eurozone currencies.  This would happen because the weaker re-established currencies would be viewed by most as potentially worthless at worst and likely to devalue severely and quickly at best.  There would also be no guarantee that all the newly established currencies would be freely convertible.

The domestic administrative complications will be daunting enough,  but  they will be nothing compared to those that arise for  those holding the Euro as a reserve currency.  As the Euro is a supranational creation,  there can be no neat conversion of Euros held as a reserve currency to another currency as there was at German re-unification. Instead, each holder of Euros as a reserve currency would probably  have to receive a basket of currencies made up of all the 17 Eurozone’s new national currencies with the amounts  of each currency determined by some criterion such as the size of population of each Eurozone country. This would mean substantial losses for Euro reserve currency holders,  because most of the basket of 17 currencies they received to replace the Euros they held would be currencies which were weak and hence undesirable internationally.  Only the new Deutschmark would probably be considered genuine  reserve currency material.

In 2011  currencies held in reserve throughout the world amounted to about $10 trillion ( The Euro makes up just under a quarter of that, say $2.4 trillion.  The effect of a Euro collapse would be massive, not just on the EU or even the developed world generally,  but on the entire world because the developing countries hold around two-thirds of the $10 trillion, much of which will be Euros.

The potential damage the collapse of  the Euro would wreak may be the primary explanation for the ruthless treatment of Eurozone countries such as Greece, Spain and Portugal in the struggle to maintain the Euro, although the contemptible desire of the EU elites  to save face at any cost  is  doubtless also in play.

A subsidiary problem is how  non-reserve currency holders of Euros (individuals, business, other corporate bodies) outside the Eurozone would be treated. It would scarcely be a practical proposition to hand them a basket of currencies like the reserve currency holders because the vast majority would be holding only a small or relatively small number of Euros. For those holding just coins and notes there would not be a problem because those notes and coins would be identifiable as having been issued by a particular state and could be converted at the agreed Euro/re-established currency of the particular country rate just as the notes and coins held by those living in Eurozone countries could be converted. Ditto any Euros held in banks in Eurozone countries regardless of the nationality of the holder or their place of residence, the state in which bank account is held being the determining factor.

But a  severe problem would arise with those holding Euros in bank accounts outside of the Eurozone. How those Euros could be allocated to any Eurozone member by any rational or objectively fair scheme  I frankly cannot see. I suspect that they might have to settle for either  a basket of  Eurozone re-established national currencies as the holders would do (impractical for small amounts) or whatever (almost certainly decidedly penal) conversion rate each ex-Eurozone member might be willing to offer.  For example, France might offer a better rate than Germany. The foreign holders of Euros in bank accounts   could of course  simply be cut adrift and lose the entire value of their Euros.

Then there is the problem of what to do with contracts drawn up in Euros. What value would be put on the Euro cost of the contract?  I suppose it might be dealt with by using the conversion  rate  of the Euro to each Eurozone ex-member’s  re-established currency  with the place where the contract was to be carried out  determining to which newly  re–established currency  the contract would be converted. Or perhaps the contract could be converted to another currency such as the US dollar or pound sterling with payment either being made in that currency (which the contracting party doing the paying  would have to purchase using their own currency or any other foreign currency reserves) or in a newly re-established national currency at whatever  the exchange rate  between  that currency and  what might be termed the third party currency was at a moment in time. For example, suppose the third party currency was the US dollar and the ex-Eurozone state was France.  Francs would have to be given to the value  of whatever the exchange value of the Franc against the dollar was,  either at ts value at a given date or at an agreed conversion value.

The potential mess is colossal. What if a newly established currency is simply too weak to be able to either buy sufficient of a currency such as the US dollar or to make payment  in a new re-established national currency because the exchange rate was so penal it made the completing of the contract impossible?  What if  the contractor who  is  to be paid refused to complete the contract because they had no faith in  the newly re-established national currency? What if a newly  re-established currency was not strong enough to be fully convertible?   The outcome could be very severe because of the potential for a large shrinkage of economic activity across a  healthy slice of the world’s economy. What will happen generally if the Euro collapses?  The stark  truth is that no one knows because there is no historical example of a currency union on the scale or type of the Eurozone  failing .  The nearest example is the Latin Currency Union which lasted from 1865-1927, but that was small beer compared to the  Eurozone ,based on precious metals and not involving a reserve currency. Nor of course was international trade and finance developed to anything like the extent  it is today.

The architects of the Euro, whether intentionally or not, have behaved with a criminal recklessness in venturing where no one had gone before.

Royal Mail privatisation – an act of ideology not of necessity or prudence

Robert Henderson

The announcement of the privatisation of the Royal Mail  by  the Business Secretary Vince Cable (  is the marriage of the Thatcherite  privatising Zombie which has infected the whole of the mainstream British politics linked to the mania for “competition” exhibited by the EU (  The two ideologies – that of market economics and the goal, pursued with pathological determination,  of an ever expanding equalisation of trading conditions throughout the EU dovetailed perfectly.

The public sees Royal Mail as a public service. This is unsurprising because it has been in public hands since the 17th century and the provision of a universal delivery service to every part of the country for a standard charge existed from the time  Rowland Hill invented the postage stamp and the penny postage in the mid 19th century until the EU  interfered and ended the monopoly on letter post and small parcels in 2010.

There are clearly much broader questions of social  utility  than the cost or otherwise to  the taxpayer.  But even on the narrow and vulgar question of cost to the taxpayer there is no solid case for privatisation. Provided the letter post and packages up to a size which encompasses  the large majority of packets sent is  kept as a state monopoly,  the service could be relied upon to remain in the black whilst keeping postal charges low.  Even with the considerable weakening of Royal Mail’s monopoly over recent years it is still delivering healthy profits, viz: “ The state-owned delivery company said pre-tax profits jumped to £324m from £201m last year and a loss of £165m in 2011. Underlying operating profits soared 165pc to £403m from £152m in 2012” (

It is true that letter numbers have  declined  considerably in recent  years, by 25% between 2006 and the end of 2012. Nonetheless, the volume is still considerable  with 16 billion letters being sent to 28 million addresses  in 2012 ( Even with the ever growing use of digital communications, it is difficult to see letters dwindling to an insignificant number in the near future. Moreover, a good deal of the recent letter decline can be attributed to the ever growing cost of postage,  with second class mail for small letters now being 55p (large letters 69p) and first class  mail  60p (large 90p) ( In 1840 when the penny post was introduced a letter of any size could be sent for one old  penny. At 2012 prices that would be 87 old pence today (7/3) , or 36 new pence.  (  In real terms the  modern cost of a first class large letter is nearly three times as much as its 1840 predecessor. Bearing in mind the benefit of modern sorting technology  and transport and a great reduction in the number of deliveries per day,  it is rather surprising that the cost of post has risen hugely in real terms in modern times rather than dropping.

Parcel post costs have also risen sharply for those sizes of parcel  most likely  to be used: “2kg [parcel] was previously £5.30, but this will now rise to £8 if it is bigger than 45cm by 35cm by 8cm.” (2013  – and )

These price rises have been permitted by the regulator Ofcom simply to prepare the Royal Mail for privatisation. If Royal Mail remained in public hands, with the old letter post and small parcel monopolies restored, the cost of postage could be reduced considerably because profit would not be a prime driver of the cost . In fact, with the current profits being made, even if the present situation was maintained substantial postage price reductions could be made.  The current large profits are only needed to make Royal Mail  attractive to prospective buyers of the business.

But even If the worst came to the worst and Royal Mail regularly made a loss, and the taxpayer had to  directly subsidize the cost, this would still be a benefit to the general public because it would ensure that an important public service was maintained at a price the public could afford.

The really good news for those who want  Royal Mail to stay as a public service is the immense growth in parcel post because of the already hugely expanded and ever expanding increase in Internet buying. In May 2013 this accounted for 9.7% of all retail spending excluding automotive fuel ( There is every reason to believe it will continue to grow substantially as people get more and more comfortable with buying online and the opportunities to buy in shops diminishes as more and more close The Centre for Retail Research estimates that stores will decline  from 281,930 today to 220,000 in 2018, a decline of 22% (  This growth in parcel post will more than cancel out the reduction in revenue from  letters.

Practically allied to Royal Mail is the Post Office . Until  April 2012 Royal Mail and the Post Office were  effectively part of the same organisation, albeit as agencies of varying status. (  Now the Post Office is to be, legally, an entirely separate state-owned organisation.

A Commons committee in 2012  recognised  its public service function: “The Post Office remains an essential service which is extensively used. A third of the UK population—just under 20 million people—and half of all small businesses visit one of over 11,500 post offices every week.] The Post Office is one of the country’s largest cash handlers, processing around £70 billion of cash and £636 million of coinage every year. “

The official view of the Post Office networks future is rosy: “[In 2012] Paula Vennells, Chief Executive of Post Office Ltd, supported the proposals and set out her ambition for the Post Office:

If I have a vision, it is to have 30,000 post office outlets, not 11,500. It is to have standalone electronic drop boxes for mail packets. It is to have ATMs in railway stations. It is to have identity kits in town halls and libraries, all branded ‘Post Office’. But until we transform the current network and make it more sustainable, that becomes just an ambition.” (ibid)

This seems wildly improbable in the context of a privatised Royal MailAlthough  a ten year deal to maintain the existing Post Office network was agreed by the government in 2012,   it is probable that the network will be severely reduced in the not too distant future . It has already suffered a considerable contraction –  there are 11,500 Post Offices now compared with 20,000 in 1990. Many of the remaining offices,  and especially the  sub-post offices,  are struggling   because government services such as TV licence renewal have been removed from the Post Office remit and  there is a  general move towards online government services (in which the user increasingly has no choice but to use the online service) will worsen  the lot of Post Offices, especially the sub-post offices. (   Politically it will be much easier to reduce a stand alone state-run Post Office network  in size or even do away with all together than one attached in some way to the Royal Mail, especially if the privatised Royal Mail and its other private competitors decide not to use  Post Offices  as parcel pickup points and the government can keep pointing the Post Office network as “a burden on the taxpayer”.   The network It does require a public subsidy but this is minute in the context of national expenditure – it was  £150 million in 2010/11 ((

There is little experience of privatised postal services  because there are few anywhere  in the world and those that have been privatised – Sweden, Finland and New Zealand – have only done so within the last 20 years.   However, a 2007 European Commission report on the liberalisation of postal services within the EU  found a common theme, namely, a reduction in post offices and increased postal charges (  That is exactly what is to be expected when private operators are allowed  into a state service.

Does anyone  honestly doubt that privatisation will make matters worse? After all, every major British privatisation of public  services,  apart from telecommunications  where there can be real competition,  has resulted in higher charges for at best unimproved and at worst inferior services.  Why should this privatisation be any different?

Here is a media doubter Vikki Woods writing for the free market Daily Telegraph  : “ Vince Cable said in the Commons that the time had come for the Government to step back from Royal Mail and allow its management to focus on growing the business. The sell-off “is practical, it is logical, it is a commercial decision… It is consistent with developments elsewhere in Europe where privatised operators produce profit margins far higher than the Royal Mail but have continued to provide high-quality and expanding services.” Oh, yes? He says “expansion” but I hear “shrinkage”. The universal service obligation was only five days across Europe back in 2011, and now various national mail companies are sucking their teeth and suggesting three days a week would be good. “(

I suspect that many will have the same fears.

The Royal Mail is already much diminished from what it was. There is only one delivery a day; the cost of postage has risen massively  and much of the Post Office counter service which includes a good deal of postal work – recorded and registered letters, airmail, special delivery and so on –  has gone because of the massive reduction in Post Offices.   How long before the universal letter post obligation is reduced from six days to three days or two days? How long before a single universal charge for the whole country is abolished and hard to service areas such as the countryside are charged much more than the cities?  How long before door-to-door letter post  deliveries are replaced by deliveries to central collection points ?

Privatisation is a fraud on the public for its is selling that which belongs to everyone.  Where privatisation of state assets involves selling them  to the general public  it is a confidence trick on a par with the conman who “sells”  Nelson’s Column to  tourist.   Britons  who purchase shares in a privatised company are buying what they already own.  Think about that fact and don’t be a sucker.

The public is being doubly stung with this privatisation.  Not only will they almost certainly have, based on the experience of privatised postal services abroad, a more expensive and less comprehensive service within the foreseeable future, the funding of accrued Royal Mail pensions up to 31 March 2012 will remain as a charge on the taxpayer ( rather than the new privatised company.  In short, the taxpayer is left with the debts while the buyers of  Royal Mail walk away unencumbered with the historical pension obligations.

This is something which does not need to happen. It would be perfectly possible to retain a state-owned universal postal service which would not make a loss, would make sufficient money to keep modernising  and would be much cheaper to use. All that would  be required is the political will to say no to the EU and revert to the old letter and smaller parcel monopoly.  This  privatisation is simply an ideological decision and has nothing to do with the  viability of a state-run postal service in this country.

This could well be a highly unpopular privatisation because the public  overwhelmingly view  Royal Mail as a service and have become jaundiced by previous large privatisations such as the energy and water industries, all of which have  resulted in raised prices and no great improvement in the service they provide. It could  well cost the Tory and Lib Dem parties dear at the next election.   ( If it does, they will have only themselves to blame.

How much public money is being stolen and wasted because of the privatisation of public services?

Robert Henderson

In June this year I attended a talk given by Michael Heseltine. It was embarrassingly limp re-hashed Heseltinian fare from the 1980s,with Heseltine airily advocating localism in place of centralised government with precious little idea of how  to engineer his envisaged  utopia of local politicians free from the Westminster party embrace mixing with banks,  Chambers of Commerce and other trade bodies to bring about a Nirvana of self-help and self-determination. (  Thankfully,  the Coalition thought so little of Heseltine’s proposals in his Government commissioned report No Stone Unturned that only the derisory sum of £2 billion (Heseletine had asked for £49 billion) was allocated to his recommendations for devolved power and expenditure  to promote growth ( It would have been less insulting if the Coalition had allocated nothing.

When the opportunity came for questions I raised  the matter of  increasing corruption in the spending of public money.  This is a consequence of taxpayers’ money going to private contractors at an ever more alarming rate as the mania for putting out public services to private companies and not-for-profit organisations such as charities  continues  unabated,  despite the ample evidence that contracting-out is generally very poor value for the taxpayer.  My argument was simple: the greater the number of public contracts being put out to tender by commercial businesses and not-for-profit organisations, the greater the opportunities for corruption by either public employees and contractors colluding or contractors fixing things amongst themselves.  Human nature being what it is, greater opportunities for fraud inevitably means greater instances of  fraud.

Heseltine reacted with considerable vehemence to my suggestion that serious corruption might exist in public service saying that he “took great exception” to the idea.  His denial rang hollow because sadly there is a constant flow  of publicly reported frauds by those receiving public money.   Here are a few recent examples of  alleged frauds:

1. Pharmacists and drug companies colluding to overcharge the NHS for drugs    The amounts in this case are potentially very large: “The Daily Telegraph’s investigation has found that companies are privately offering discounts of up to 70 per cent on drug tariff items to high-street chemists, with the pharmacist keeping the difference. For example, the NHS would agree to pay £100 for a drug that would be supplied to a chemist for only £30.” (

2. Former government education adviser Tim Royle  arrested on suspicion of fraud when he was a headmaster (

Sometimes  misbehaviour  is judged to have fallen short of the criminal, but it still costs the taxpayer money.  A good example is that of  one-time award-winning  head teacher Jo Shuter  who  left herself open to suspicion and criticism by  inappropriate spending  and the employment of  relatives. She resigned but not before   being given a final warning  for “financial and human resource mismanagement”  (

I can give two examples of questionable public contracts involving a great deal of money  which I personally tried unsuccessfully to bring to public notice. Both involved Camden Council, the London borough in which I live. The first occurred in 2003 when the Council announced that they were to replace 14,000 kitchens and bathrooms in their council housing stock.  In response to a question I put to him at a public meeting  Neil Litherland, the then director  of Housing in Camden , quoted me £6,000 for each room (£12,000 for a kitchen and bathroom combined).  The bathroom and kitchen units Camden  proposed to fit were pretty basic. The total cost at that price was £168 million (at 2003 prices).  This struck me as outlandishly expensive, so   I went to a local high street fitted furniture retailer to get a  quote.

At the retailer  I  selected units of the same quality as those proposed by the Council and  was quoted £1,500 for each room, including the installation of the kitchen and bathroom units.   That was for a single retail sale. A contract for 14,000 properties should  result in a very substantial discount below a retail sale, but even at the retail price quoted the contract would have been a quarter of the Camden quoted figure.

When I made my complaint to Camden,  I doubled the £1,500 quoted by the retailer because Camden were doing other renovation work such as re-wiring and laying new vinyl on the floors in the kitchens and bathrooms as well as fitting the new kitchen units and bathroom suites.  The extra  £1,500 per room for this  renovation work was almost certainly far too much,  but even  at £3,000 per room  Camden  would have been halved their actual bill saving £84 million.

A  disinterested person reading that account might think the local politicians and the MP for area would have been biting my hand off to take up the case and stop the grossly overpriced contract going through. I could not find a single politician to take up the matter. Nor could I get even the local papers to investigate the matter.

The second case involved what is now known as the Francis Crick Institute. (  This is a gigantic medical  research laboratory currently being constructed on land behind the British Library. The site is  a road’s width from the Eurostar terminus.  There are excellent grounds for opposing the building of such a laboratory because it will be dealing with level 4 (the highest biohazard level) toxins.  This poses a risk of dangerous materials being released  (through a terrorist attack or carelessness)  into an area which is both heavily residential and arguably the busiest transport hub in London.  However, that is not the important thing in the context of corruption.

In an attempt to stop the building of the laboratory I used the Freedom of Information Act (FOIA) to gain details of the sale of the land on which the laboratory is being built. The land belonged to the taxpayer and was under the stewardship of the Department of Culture, Media and Sport (DCMS). The site   was put out to competitive tender and a good deal of interest was shown (27 bids, including the likes of Barratt Homes and   Oracle Group  –  The decision was solely in the hands of the Secretary of State for the DCMS who was exercising a quasi-judicial role in the matter.  Despite this, documents I obtained using the FOIA unambiguously show Gordon Brown when PM illegally interfering with the bidding process  from before the closing date for bids and carrying on interfering until the sale was complete (   Here is an example extract from a Treasury document  dated 1 August 2007:

The PM is also most recently stated that he is very keen to make sure that Government departments are properly coordinated on this project [the laboratory] and that if there is a consensus that this is indeed an exciting project then we do what we can to make it happen. This is extremely helpful from a DIUS and MRC perspective, but, formally a NIMR relocation project in London has yet to receive Lyons approval from Treasury (for either the first planned NTH site or the possible BL site).

This was before the initial bidding process was closed.  The process was a sham, the other bidders having bid with no prospect of success. Brown should not have interfered at all,  even to say whether he thought X or Y was or was not  a promising project, but here he is  issuing a direct instruction to favour the laboratory consortium by getting all the government departments with some future or immediate interest in the laboratory to put their weight behind it. (When a Prime Minister says he is “very keen” on something that is an order to move heaven and earth to achieve it).

As with the Camden contract for kitchens and bathrooms I was unable to get any politician, local or national, to take up the matter. Every Camden councillor and the local Labour MP Frank Dobson  had the information but refused to act. Camden granted planning permission in principle, but this had to be agreed by Boris Johnson in his role of Mayor of London because the Institute building  is over the height which can  be sanctioned by a London council. Johnson  granted permission despite having the details of the corrupted bidding process ( and refused to comment on Brown’s illegal involvement in the decision.  Equally telling in this case was the failure of the national media to take up the story despite Gordon  Brown’s involvement.  The nearest I came to getting the story up and running in the media was a single  short piece in the London Evening Standard (

The nature of public  fraud

Much, probably the large majority,  of the fraud consists of inflating contracts. This can be done with or without the collusion of public servants and politicians. Collusion between  contractors, public servants and politicians  speaks for itself.  Fraud without public servants or politicians being involved is more complicated. It requires a conspiracy by a number of contractors to fix a bidding process.  The larger the contract  or the more specialised the  work to be done, the more likely a bidding process can be fixed, because often there are only a handful of bidders  capable of taking the contract on. This leads to corrupt agreements between the companies to share out public contracts between themselves at inflated prices. This is done by the bidders  putting in bids to a supposedly competitive bidding process structured so that the company who is to take the contract puts in the lowest priced bid. However, this lowest bid is much higher than it  should be if it was pitched simply at a level to  guarantee a level of quality and provide a reasonable profit for the successful bidder.

The practice is probably very widespread. The Office of Fair Trading concluded an investigation in 2009 which showed widespread fixing of prices: “The OFT has imposed fines totalling £129.2 million on 103 construction firms in England which it has found had colluded with competitors on building contracts.” (see and

Where public servants and/or politicians agree to accept an overpriced contract they may be  bribed either directly or indirectly. A favourite indirect method  is not to pay the politician or public servant at  the time of the fraud but later with lucrative sinecures after they have left office .

The current rules regarding ministers and public servants taking posts in private industry are so lax as to be next to meaningless – they can take up posts after a year or two, regardless of how closely the private sector job is linked to their previous post.  A recent eye-catching example was that of Dave Hartnett who has just taken up a post with the accountants Deloittes. . The Telegraph Daily telegraph  recently reported “Until last year, Mr Hartnett headed operations at HM Revenue and Customs. His new role will involve him working one day a week at Deloitte, which acts as auditor for companies – including Starbucks – which have been accused of using legal loopholes to avoid paying tax.” ( I am not  suggesting there is corruption  in this case,  but is it really acceptable to have such a senior and important public servant turning from  gamekeeper  to poacher so rapidly?  Like Caesar’s wife, politicians and public servants should be above suspicion.

Waste through incompetence and lack of alternatives

Some of the fraud will be accomplished because the public servant or politicians involved in making contract decisions are simply not up to the job of judging what is a reasonable price for the work being put out to contract.  This is a common enough state of affairs because public servants often find themselves asked to negotiate contracts  even though they  have no experience of  doing so because work which has always been done by direct public labour is suddenly subcontracted to the private sector.   To cover their ignorance the public servant  will often judge bids not on their objective merits, but on who is the cheapest within the criteria set for a contract.  Whether the bid is a reasonable price  for the work done is ignored. This has a knock on effect, not least because  of the widespread lack of honest competition in bidding.  Those accepting bids will justify their acceptance by referring to other contracts for similar work.  Because of this inflated prices become the norm. The politicians who have to make the final decisions on the contracts are as ignorant as the  public servants who negotiate the contracts and simply take what is put before them in the vast majority of cases.

But even where politicians or public servants do realise a price is too high, they can be in a very difficult position which makes them  accept the price quoted.  The problem is that if they refuse all the bidders for a contract on the grounds of cost , then how is the work to be done?  They cannot go elsewhere often enough because there is no public organisation which could do the job rather than a private company or not-for-profit  institution. This is a particular danger with really large or specialised contracts which can only be undertaken by a few companies.  An inflated price may have to be paid by the taxpayer because there is no longer a  public sector alternative.

How much money is being lost?

Total UK Government expenditure for 2014 is £715.3 billion ( However, that does not include all of the Public Private Initiative (PFI)  liabilities because  Governments want to keep the full  PFI/PPP indebtedness off  the official national debt.  A report by the Office for Budget Responsibility in August 2011 notes that many PFI deals are not recognised in the National Accounts.:

“ As well as lacking transparency, this has fuelled a perception that PFI has been used as a way to hold down official estimates of public sector indebtedness for a given amount of overall capital spending, rather than to achieve value for money.[27]

The report details the scale of the problem noting that “at March 2010, PSND [Public Sector Net Debt] included about £5.1 billion (0.4 percent of GDP) in respect of PFI deals that were recorded as on balance sheet in the National Accounts.” However the OBR considered that “the total capital liability of on and off balance sheet PFI contracts was closer to £40 billion (2.9 per cent of GDP).”[28] They estimate therefore that if PFI contracts were all recognised as debt in the National Accounts this would increase the level of debt by around 2.5% of GDP.[29]” (

In 2012 The Guardian using ONS figures put total PFI liabilities at £301,343,154,097 (

It is clear that  a substantial figure should be added to  the headline £715.3 billion to account for the full PFI liability for 2014.

In the nature of things it is impossible to say exactly how much of taxpayers’ money will have been spent on overpriced contracts. However, the examples which are public knowledge suggest that it must be very considerable, because so much of what used to be done in-house by the British state, at both national and local level, is now put out to contract.

Take the NHS as an example.  If you spend time as an in-patient in the present day NHS you are likely to find that the cleaning, laundry, catering and provision of multimedia installations are  contracted out. The NHS will also spend immense amounts on equipment which will be supplied by a private contractor. Staff will often be recruited by a private agency for a hospital.  If they need temporary doctors and nurses they will pay a private agency.   The hospital may well have a Starbucks or a Costa Coffee instead of an in-house café for visitors. There is fair chance  that  hospital car park will  be run by a private company. Most expensively, if the hospital is recently built it will almost certainly be the  subject  of a PFI contract which stretches way into the future (twenty years or more). This,  and apart from costing the hospital a good deal of money  to pay for the building,   will almost certainly entail a costly management contract to run and maintain the building. This means in practice no one will be in definite overall charge,  because if something goes wrong with the building the contractor has to be left to undertake the maintenance as they see fit

The NHS is one of the most comprehensive examples of contracting out. But most government departments and much of local government displays the same tendency.  Schools and universities are within the contracting out net.  Defence procurement is  depends  very largely on  private contractors, foreign and British.  Police forces around the country  have either privatised much of their administration or are thinking of doing so.  Even the translation service used by the courts has been put out to a private contractor (with disastrous consequences).  Local government services such as waste  collection and disposal and street cleaning are frequently in the hands of contractors. The most disturbing and absurd example I have come across is the privatising of the quasi-judicial  District Auditor post which oversees local government and deals with complaints about their financial probity(“ Following the outsourcing of the Commission’s in-house Audit Practice, all auditor appointments are of private firms “

If only ten per cent  official Government expenditure is creamed off by fraud, that would mean £71 billion  of taxpayers’ money will be lost this financial year.  That is more than half the current government deficit.  But the figure  could well be much more because of the omitted PFI costs and the incentive of contractors to be as greedy as they can get away with.  Putting on twenty or thirty per cent to charges for supplying goods and services to central and local government might seem reasonable if you are the supplier and have good reason to believe  prices are likely to be accepted even if they are high. If the Telegraph reports of the grossly inflated prices charged  through collusion by pharmacists and drug companies are to be believed, the sky is the limit in the right circumstances for ramping up prices.

 Why do politicians do nothing?

It is little wonder that politicians in Britain are so willing to tolerate corruption because so many of them are happy to have their snouts in the public trough themselves in illegitimate ways. The information published by the Daily Telegraph on MPs expenses in 2009 was sufficient to show that the majority of MPs were engaging in expense claims which should never have been counted as legitimate expenses by Her Majesty’s Revenue and Customs (HMRC) in normal circumstances . This was because they did not meet the HMRC test of being  expenses “ wholly, exclusively and necessarily “ incurred in the performance of a job.   Very few MPs faced criminal charges even though quite a few repaid money they had claimed. Nor does the public know how many of the MPs faced fresh assessments  by HMRC or the penalties if any HMRC imposed.

Two criminal offences are committed by those who evade tax by illegitimately describing expenditure they have incurred as tax deductible expenses. That  counts as a false declaration. They are effectively claiming money by false pretences. A second criminal offence arises if the bogus expense claim is made without an employer knowing that it is bogus (effectively theft from the employer) or a business which  is paying a sub-contractor expenses as part of the contractual arrangement  and the business does not know the claim is bogus (effectively theft from the employing business).

Depressingly, MPs appear to have learned little if anything from the Telegraph’s 2009 exposure of their shameful behaviour  because they are still thrashing their expenses (15 May 2013

There is also the widespread  practice of politicians being employed on lucrative contracts by organisations whose interests they have either surreptitiously  promoted as a backbencher or , in the case of ministers,  had an area of responsibility which coincided with that of the organisation giving them the job  (

Finally there is  the scandal of still active politicians openly acting as paid lobbyists,   including providing ready access to Parliament  (

How things used to be

Until fairly recently the British Civil Service was remarkably free from corruption (local government is a different matter), a fact made all the more surprising because of the truly colossal amount of money Government  disposes of each year . There were two reasons for this. The first was the hard-won tradition of public service which in which the Civil Service is an apolitical institution and as such serves no political ideology or party but provides politicians of all stamps with disinterested advice and executes their policies. This tradition has been underpinned by the lifelong working careers which public servants, especially senior ones, have commonly had. Of course, that was merely the ideal and, as with any human institution, the reality fell some way short of the ideal. Nonetheless, such sentiments and conventions have in the past affected the behaviour of public servants for the better, especially in the area of honesty. Sadly, the public service ethos has been largely lost because of the constant upheaval in terms of employment, the loss of  career security  and thirty years of politicians and much of the mainstream media reciting the false mantra that private is good, public is bad.

The second reason for a lack of corruption was  the direct provision of most the services provided by central government. This meant that the number of large central government contracts offered to private business  was  small in relation to the money spent on the direct provision of public service in all its aspects. In such circumstances serious fraud becomes difficult going on impossible for most civil servants because they do not have access to large amounts of taxpayers’ money. (Where they do have access, for example in the Inland Revenue, in most instances there are strict accounting procedures which make the embezzlement of large amounts of cash extremely difficult). Moreover, where there are few government  contracts, most civil servants are not in a position where someone  would find it fruitful to bribe them because they have nothing to sell.  Unsurprisingly, where serious corruption amongst public servants employed by central government has occurred in the past, it has been overwhelmingly in those areas where large government contracts exist, most notably in Defence Procurement and building contracts. It is a reasonable assumption that the more public contracts offered to private companies, the greater the corruption will be simply because the opportunity for corruption increases.

It would be impossible to reinstate the public service ethos quickly, but taking work back into the  public  service fold  would have an effect on fraud and waste through incompetence.  It would  definitely reduce fraud and should allow costs to be controlled because it would be the public sector setting the prices for the work.

Here is a question for the supporters of privatisation in it various forms to puzzle over. Ever since Thatcher began the privatisation of public services governments have insisted that this was saving the public money.  Yet  government expenditure since 1980 has risen substantially  in real  terms.  In 1980 total public spending was £104 billion ( Using the Bank of England inflation calculator, £104 billion at 2012 values would be only £377 billion. (

The cruel truth is that the £715 billion of  government expenditure  in the present financial year is almost double what it would be if the UK had maintained public expenditure at 1980 levels in terms of the real value of the Pound.  If the true PFI/PPP figure for 2014 was included it might be double. The huge increase since 1980  is very interesting because in 1980 the UK  not only had a serious unemployment problem,  but owned vast swathes of British industry, everything from British Leyland and coal mining to the public utilities and , believe it or not younger readers, a national bus network which meant that to live in the country did not mean you had to run a car.  1980s  UK also had armed forces which were considerably larger  than they are now and the putting out to private contractors of public sector work in  national government and council services was rare except in areas such as road building and defence procurement.  For example, local councils only routinely  employed direct labour on items such as road maintenance and cleaning.    In addition much of  private business then was, we were constantly told,  supposedly hideously uncompetitive . Yet despite  these alleged  crippling disadvantages, the British government in 1980  was able to maintain a level of public services  better and more comprehensive than that we have today whilst spending, in real terms,  little more than half of what government spends today.

Why has British government spending rocketed?  It is reasonable to put forward as the primary culprit the mania for privatising everything  because of the near doubling of government expenditure since 1980, the high cost of privatised services  and the many individual examples of public contracts, especially the PFI contracts, which seem outlandishly expensive.


These things have not been understood by the privatisers:

1. The public service ethos did exist and was most valuable in maintaining standards, continuity and honesty within public provision.

2. Multiplying the opportunities for fraud results inevitably results in more fraud.

3.  That public services cannot be run on commercial lines  because public provision is normally universal provision.  Unlike a private company losing business, a public service provider such as the NHS cannot turn round and say we will not treat these patients because we need to cut costs.

4. For public services to run properly need to be focused not on the bottom line but the provision of the service.

5. Once a public service has been contracted out to a private provider,  the private provider has the government over a barrel because there is no alternative to a private provider once the public service option has been done away with.

6. That public employment gave those so employed secure lives and indirectly increased the sense of  security in those employed by outside of  public service  because  having a substantial proportion in secure jobs in itself made society more stable and certain.

7. That public money is a recycling of money and however it is recycled it has a value because its spending supports local economies.

8.   That public expenditure has increased steadily during the privatising of public service activities.

Robert Henderson 30 6 2013


Get every new post delivered to your Inbox.

Join 241 other followers

%d bloggers like this: