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Oakeshott: Lib Dems 'still fighting' in Cabinet for bonus tax

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Paul Mason | 23:20 UK time, Tuesday, 11 January 2011

Lord Oakeshott, the Lib Dem Treasury spokesman claimed tonight that in contrast to David Cameron and George Osborne, Vince Cable had personally demanded Barclays boss Bob Diamond take a reduced bonus.

Asked if the business secretary Vince Cable was still fighting to impose limits on bank bonuses, Lord Oakeshott (who does not hold a ministerial position) told Newsnight:

"It's not just Vince it's the Liberal Democrats as a whole: it's an important issue for us. We're not going to go back on it."

Asked whether this was an argument still going on within cabinet Lord Oakeshott said:

"This is going on. This is very topical. We are still very much fighting."

Lord Oakeshott, who arrived on the Newsnight set bearing a copy of the Coalition Agreement later told me that it is still on the table that the government will impose a one-off bonus tax.

Which makes the front pages of every paper this morning - as briefed by Downing Street spin doctors - a little confusing. Because the message coming out of Downing Street could not have been clearer: no bonus tax but an attempt at a voluntary restraint on bonuses.

Labour are already on the blower depicting Oakeshott's move as a tactic to mask capitulation - but if the battle is as intense as it is being portrayed, these could be make or break days for the influence of the Business Secretary, Vince Cable.


  • Comment number 1.


    Westminster politicians, under the coalition ethos, are EVEN MORE transparently dishonest than in the bad old days of dossiers and duck houses. But we can do nothing.

    Exercising free speech, in a time of universal 'deafness', is an act of supreme pointlessness.

  • Comment number 2.

    Time to threaten the use of Vince's 'nuclear option' (with clear intent to use it).

    Or is it all really just a pantomime?

  • Comment number 3.

    Perhaps at some point we might be treated by the politicians to their views on how banks can pay such remuneration and bonuses when the financial health of the industry is far from being assured and when shareholders, who have taken big hits since 2007, feel they should get more reward for the risks they have taken. Banks are the extreme manifestation of the rapidly worsening of the distribution of income/pay and what is needed is a debate (and policies) on how society becomes fairer in this respect. I feel a song coming on - "nineteen for us, one for them" (at the margin of course).

  • Comment number 4.


    Just one small difference: We get to shout "IN FRONT OF YOU!" And Westminster doesn't even bother to reply: "CAN'T HEAR YOU!"

    What's more, no sweets will be thrown into the audience under H&S, and for ethnic dietry considerations.

  • Comment number 5.

    Let it roll...let even the dimmest dreamer see our plight for what it is....let Diamond Geezer Capitalism break wind in the face our pathetic country and its risible democracy.

    Maybe it takes this sort of humiliation and contempt to wake us up?

    Stop voting...stop treating politicians and the media and "the City" and our daft religions as anything more than different types of organised crime!

    Why not ask the UN to put in some peace keepers while we hold a bloodless revolution and put the whole Establishment on trial....NOT a kangaroo affair with executions....but something like the peace and reconciliation process they had in South Africa.

  • Comment number 6.

    This does all have the feel of some kind of pantomime about it. I think the whole bonus issue is being used as a smokescreen. The banks want a lot more taxpayer backed insurance against losses if they are going to lend money to SMEs and I also think they want more guarantees from the government concerning 'stability' the housing market. After all how many first time buyers who bought after 2008 are really paying a full mortgage based on today's house prices? In other words more privatised profits and socialised losses.
    I think there will be a deal on lending tied to some kind of one off gesture on bonuses by the banks that will grab all the headlines, while the ongoing price wrung from the taxpayer in return will be hidden away in the small print and go unnoticed for the 24 hours the story is in the news.

  • Comment number 7.

    Forget the bonus tax, it is unworkable and those 'brightest and best' will always find ways around it.
    Diamond Bob is responsible for making shed loads of money for Barclays, that is his job and I assume he is good at it.

    Lord Oakeshott would better spend his time concentrating on something the Government can do which is regulation.

    Firstly, fines by the regulator should come from profits after tax.

    'Barclays has agreed to pay $298m (£190m) to US authorities to settle investigations relating to payments that the bank facilitated to countries facing government sanctions.'
    (quote from an article on dated Aug 16 2010, see link below*)

    Lloyds agreed to pay $350m over similar issues
    Credit Suisse paid $536m
    Royal Bank of Scotland £5.6m fine by the FSA for failure to have systems in place to ensure funds were not transferred to terrorists or others.

    If those fines were increased by a factor of 10

    Barclays = $2.98bn
    LLoyds = $3.5bn
    Credit Suisse = $5.36bn
    RBS = £56mn

    Then we might find Bob Diamond spends a bit more of his time making sure his people are behaving themselves and are making money legitimately rather than just looking at the cash rolling in.

    Financial enterprises get fined all the time, it is considered a cost of doing business, if those costs were raised so that an infringement of the rules could threaten the very business itself then we would soon find that only compliant and well behaved businesses were successful.

    *This is the link to the full FT article

  • Comment number 8.

    6. At 11:00am on 12 Jan 2011, muggwhump wrote:

    I would put my money (or more accurately everyone's money)on an extension of the SLS repayment period being slipped behind that smokescreen. When noticed there will be the political spin of "it is not new money".

    If they are really cheeky SLS may even enlarge itself without us noticing at first.

  • Comment number 9.

    Why don't we charge the banks for the credit they create out of thin air (collect the seignorage) and a hefty insurance premium for guaranteeing deposits? Banks are able to make super profits for a reason.

  • Comment number 10.

    Lord Oakeshott, the Libdem Treasury Spokesman: personally demanded Barclays boss Bob Diamond take a reduced bonus.
    When is a "reduced bonus" not a "reduced bonus"?
    When you call the bulk of the bonus by some other name and make the Government feel that it has one a reduction.

    "It's not just Vince it's the Liberal Democrats as a whole: its an
    important issue for us. We're not going to go back on it."

    Dear Lord Oakeshott, not backing down is a waste of energy that could be applied to more viable ways to reign in investment banks' profiteering.
    When is a "reduced bonus" not a "reduced bonus"?
    When you call the bulk of it something else and make the Government feel that it has one a reduction.

    Lord Oakeshott: "This is going on. This is very topical. We are still very much fighting."
    Sir, give it up.

    Lord Oakeshott - The government will impose a one-off bonus tax.
    When is a "bonus" not a "bonus"?
    When you call the bulk of the bonus something else and make the Government feel that it has won.

    Downing Street could not have been clearer: no bonus tax but an attempt at a voluntary restraint on bonuses.
    "Voluntary restraint"!
    You'll have to wait till I stop laughing...
    When have the investment banks too big to fail ever shown a drop of "voluntary restraint".

    Labour is right: Oakeshott's move is a tactic to mask capitulation. And the only one who doesn't seem to know that it's a tactic to mask capitulation is Lord Oakeshott.

  • Comment number 11.

    The usury industry has indicated it has no ears: what else does one expect from the money-changers in their temple?

    At least we have now come to the end of the road in which the banking industry was saying it was listening to public concerns. Who was the Listening Bank: can anyone recall that old advert?

    They are not listening and they don't care about the taxpayer. Fine. Time to clear the decks for action.

    Banking reform now has to be centre stage to economic recovery. The Tories are now faced with the issue as to who runs the country: again. Remember Ted Heath taking on the miners? Now David Cameron has to take on the bankers or his party is deader than Nick's. Heath may have lost but if Cameron puts the boot into the userers and reforms the banks by splitting retail from the casinos and letting the casinos go bust then he can be assured of winning the next three elections with or without the Lib-Dems.

    The big question now has to be have the Tories got the bottle? The Lib-Dems need a good victory so they will be up for it, so come on Dave get your boots on. Time has just been called on any moderation! The banks clearly don't know the meaning of the word.

  • Comment number 12.

    #11 "Banking reform"

    The ICB has been seeking counsel from Paul Volker, I see:

    Maybe the ICB will drop a bombshell later in the year?

  • Comment number 13.

    12. At 1:54pm on 12 Jan 2011, Hawkeye_Pierce wrote:
    Maybe the ICB will drop a bombshell later in the year?

    I expect the bombshell to be full of whitewash.

  • Comment number 14.


    To get/retain power, a party must MANIPULATE THE ELECTORATE. To achieve this, at current rates, costs up to £20 million. This sort of money comes - directly or indirectly - from the infinitely relaxed super-rich. Top bankers will still need wheelbarrows.

  • Comment number 15.

    the nuclear option will be a ...damp squib....very Vince!

  • Comment number 16.

    11...Stan..Good points but Heath and Thatcher and Blair and Mandelson "took on" the working classes with the full support of global capitalism in a re-run of what happened in the that our industry and real jobs could be exported to capitalism`s new workshop of the world in China. This was the end of working class politics and now the only people with "leverage" are financiers.

    Notice the USA`s big mistake(?) of letting German industry get re-established and powerful. The Germans now run the EU in which we are powerless hostages.....and we are just about to learn that our "credit rating" relies on us turning into a feudal financial outpost of global capitalism where our sons and daughters are pimps and pole dancers not political protestors!

  • Comment number 17.

    Lord Oakeshott, surely he's out on a limb? I bet he can hear the saw now.
    The other issue dominating Newsnight was that of the Pc environmentalist. He has just added a new definition for the term 'embedded'.
    Regards, etc.

  • Comment number 18.

    16. At 2:54pm on 12 Jan 2011, worcesterjim wrote:

    "Notice the USA`s big mistake(?) of letting German industry get re-established and powerful. The Germans now run the EU in which we are powerless hostages.....and we are just about to learn that our "credit rating" relies on us turning into a feudal financial outpost of global capitalism where our sons and daughters are pimps and pole dancers not political protestors!"


    I trust the Germans more than the free-market anarchists that run this country!

    Have you noticed which types of countries are the only ones that seem able to establish significant manufacturing industries and thus maintan national trade surpluses. Hint, they tend to be ones that are more social in their outlook.

    Germany prurged their country of most of their (Trotskyite) free-market anarchists during the last century. Good habits tend to provide benefits over the long term. China just never let them them in in the first place.

    Free-market anarchists also seem to be very un-popular in the the middle-east, other muslim countries, Iran and North Korea.

    Do you know why that is? (it's a very serious question btw)

  • Comment number 19.

    Both Christianity and Mohammedanism were originally against usury....and one suspects this is a very ancient fault line between them and Judaism.The free market anarchists are probably what we used to call International Jewry....but can`t mention any longer!

    At one time in Europe the Jews were the only people allowed to lend money at interest...but the aristocracy got round this by "borrowing" from them and then "forgetting" to repay them or turning the Christians on them in pogroms and Holocausts and other unedifying expressions of scapegoating.

    Islam still has a strong downer on the Jews and Israel`s presence as a Jewish state could be the most suicidal act of bravado ever! But the Moderator will aren`t allowed to say anything "critical" about Judaism.

  • Comment number 20.

    There is a byelection tomorrow - I am not interested in LibDem talk. Words by polticians are cheap, and at the moment theirs are the cheapest of all.

    It's a pity that there isn't a market where we can destroy politicians by shorting their promises!

  • Comment number 21.

    The LibDems are becoming symptomatic - Stockholm Syndrome is a possibility - but what is it?

    On August 23rd, 1973 two machine-gun carrying criminals entered a bank in Stockholm, Sweden. Blasting their guns, one prison escapee named Jan-Erik Olsson announced to the terrified bank employees "The party has just begun!" The two bank robbers held four hostages, three women and one man, for the next 131 hours. The hostages were strapped with dynamite and held in a bank vault until finally rescued on August 28th.

    After their rescue, the hostages exhibited a shocking attitude considering they were threatened, abused, and feared for their lives for over five days. In their media interviews, it was clear that they supported their captors and actually feared law enforcement personnel who came to their rescue. The hostages had begun to feel the captors were actually protecting them from the police. One woman later became engaged to one of the criminals and another developed a legal defense fund to aid in their criminal defense fees. Clearly, the hostages had "bonded" emotionally with their captors.

    While the psychological condition in hostage situations became known as "Stockholm Syndrome" due to the publicity – the emotional "bonding" with captors was a familiar story in psychology. It had been recognized many years before and was found in studies of other hostage, prisoner, or abusive situations such as:

    •Abused Children
    •Battered/Abused Women
    •Prisoners of War
    •Cult Members
    •Incest Victims
    •Criminal Hostage Situations
    •Concentration Camp Prisoners
    •Controlling/Intimidating Relationships
    In the final analysis, emotionally bonding with an abuser is actually a strategy for survival for victims of abuse and intimidation. The "Stockholm Syndrome" reaction in hostage and/or abuse situations is so well recognized at this time that police hostage negotiators no longer view it as unusual. In fact, it is often encouraged in crime situations as it improves the chances for survival of the hostages. On the down side, it also assures that the hostages experiencing "Stockholm Syndrome" will not be very cooperative during rescue or criminal prosecution. Local law enforcement personnel have long recognized this syndrome with battered women who fail to press charges, bail their battering husband/boyfriend out of jail, and even physically attack police officers when they arrive to rescue them from a violent assault.

    Nick Clegg's attitude to David Cameron is at issue here - having gone into coalition with the Tories, the LibDems are paying a huge political price in the country and Clegg's response is reflecting the strain and pain this is causing him -but is it Stockholm Syndrome or not?

    Diagnosis is made by indentifying:

    •Positive feelings by the victim toward the abuser/controller
    •Negative feelings by the victim toward family, friends, or authorities trying to rescue/support them or win their release
    •Support of the abuser's reasons and behaviors
    •Positive feelings by the abuser toward the victim
    •Supportive behaviors by the victim, at times helping the abuser
    •Inability to engage in behaviors that may assist in their release or detachment

    Lord Oakeshott is trying to rescue the LibDem front bench from their captors - if he is smacked down by Clegg or Cable I'd say we can draw the appropriate conclusion...

    .... and if Cameron allows the bonuses to go ahead he will be breaking a clear election promise - as will the LibDems - and as the first line in their Coalition Agreement as well, Lord Oakeshott is desperate to maintain some shred of credibility for the LibDems.

    As the "Nice Party" the LibDems have been very taumatised by the reaction to being in the coalition and Clegg is on the receiving end of some pretty aggressive criticism - and it suspect it hurts.

  • Comment number 22.

    @21 Nice one Richard! :-)

  • Comment number 23.

    21 Richard...Cameron,Clegg,Milliband and Flywheel are just puppets like poor old President Obama over at Capitalist HQ....they have no power because after years of piracy,theft,usury and exploitation the West`s game is up and it owes "communist" China more money than it can ever repay.

    A detached observer might think this was poetic justice....but if our politicians have no power we do need to consider what influence we have over our future security and prosperity ...and even our tenure here.

    As a fully paid up Celt with ancestors who lived in the hebrides for centuries I am here to tell you that a lot of my kith and kin got starved and booted out of the caring sharing hospitable multicultural British Isles!

  • Comment number 24.

    #23 worcesterjim

    I know that at times it can feel like you are impotent against the rising tide of forces that you don't seem to have any control over but do not despair, you have more power than you think.

    1. stop consuming where possible (reduce, reuse, recycle)
    2. move your money to a more ethical bank
    3. set up your regular outgoings as standing orders (not DDs
    4. remove all of the rest of your money at the beginning of the month in cash
    5. pay for everything you do consume by cash

    You as enduser/consumer have all the power and everything the system wants, without you the whole system will grind to a halt.

    There are some expenditures that you have no control over and are forced to pay (income tax, council tax etc.) where this occurs then start to use the services that you pay for to the maximum eg. claim housing benefit (even though you know you aren't entitled), query the decision and then appeal the decision, when your circumstances change (once or more per year) repeat the process.
    Get your friends/aquaintances to do the same, help them fill in the forms (make a game of it)

    This is what David Cameron means by Big Society.

  • Comment number 25.


    What you advocate, if carried out on a large scale, would be hugely deflationary and would tip the UK into the mother of all recessions.

    If consumers reduce their spending in this way mass unemployment wil follow and our GDP will collapse.

    This is beginning to happen in Eire, Greece etc right now - what you posted is an economic suicide note for the UK.

  • Comment number 26.


    "where this occurs then start to use the services that you pay for to the maximum eg. claim housing benefit (even though you know you aren't entitled)"

    totally disagree with this point, but with you on the overall direction of "civil disobedience".

    On your point about not using banks, here is the rub:

    you have more power than you think. *

    * if you are prepared to put yourself out

    Witness this in the plastic bag fudge. Plastic bag use is not a core issue, it won't fix anything, it's symbolic and best of all it is easy to comply with this straw-man issue. Hence it has gained credence. Policies that hurt, like driving less and walking more, have been ignored. Yes driving has fallen a bit but in response to petrol prices.

    Abolishing bonuses won't in itself fix the issue of the deficit. Systemic reform might but that is all a bit too complex so let's just rail against a single target rather than have a holistic view.

    People have to take responsibility and try harder. I just don't see that happening.

  • Comment number 27.

    Richard, it is merely a shot across the bows.
    I didn't start this, those in power did, I just want to give them a gentle reminder of who actually holds the power.

    (we have mass unemployment and collapsing GDP already, our banks, retailers and multinationals continue to avoid taxes whilst off-shoring profits and bonuses)

  • Comment number 28.

    Government looking for voluntary restraint from Banks needn't look beyond their own Enterprise Investment Scheme. Allow bonuses and suggest Investment Bankers INVEST in an EIS thereby gaining tax relief @ 20%.

    If that EIS business employs Graduates @ approx £25,000 p/a, the Treasury gets back more in tax & NI than it gives in relief.

    A Graduate job creation scheme, funded by recycled tax paying bankers a bonus! What better accolade could a Minister want?

  • Comment number 29.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 30.


    'People have to take responsibility and try harder. I just don't see that happening.'

    The system is currently in freefall, there has been an unconscious buyers strike that started in Aug 2008 when derv hit £1.36/lt, more people are paying down debt than borrowing (including companies).
    This can't last forever but the banks will be broke (more than they already are) well before people start to spend again.

    Hiding the bailouts is becoming increasingly difficult (the loan to Ireland is not perceived by the man in the street as a gesture of friendship but as a way of keeping UK banks afloat, the icing is that the banks then wave (justified or not) bonuses in everybodies face.)

    More people have less to spend.

    Less people have more to spend.

    I think the flashpoint is likely to be around £1.45/lt derv at todays money.

    #29 Debtjuggler

    (who are the auditors and accountants ? are they also advisors ?)

    this has been known for a long time (although it is only now becoming mainstream), there was a poster on Peston in 2008/09 who pointed it out (in his own inimitable style) Herosrest I think it was.

    FAS157 kicked it off, this has been renamed topic820, Basel III (which is supposed to fix it) might really open the cans up.

    ie. demand is dropping and therefore there is oversupply

  • Comment number 31.

    It's time Cable's limitations were recognised. He is a slave to free trade ideology and submerged in his own ego issues. He looked good talking economy before the election - but look at the competition at that time!

    Now he is power mad and vulnerable to ego flattery - and not just with young women in his constituency surgery. Considering what is now in the 'trade agenda' (but which he is not admitting to), his single track and undifferentiated pursuance of 'free trade' mean he is a danger to the UK.

    Included now in the free trade agenda to which Cable is so unflinchingly committed is the concession allowing transnational companies to bring in their own cheap labour, most aggressively pursued by India. And trade commitments are permanent.

    Now isn't there a point at which to question 'free trade' and to reconsider that some things need protection, like UK people's right to be employed, before others, in the UK? To assert that UK people have a different relationship to place than workers brought in as commodified labour, for corporate profit?

    Yet Vincey himself has assured me, in true free trade proponent tradition, that allowing corporations to bring in cheap labour and put UK people out of jobs is just 'non -discrimination'.

    But he can't think it's that benign because, like Mandelson before him, he has declined to tell the UK public what they are being signed up to in this regard. Too sensitive??? People have a right to know! So he is keeping a very big secret, for his corporate masters. And he is certainly in close with Indian transnationals. Why didnt he mention the big EU/India Free Trade Agreement that is going through, when he was on a high profile 'trade' mission to India last July?

    That's why having a man like that in such a powerful position is so dangerous to UK people.

    Note that for all the non-events described in Paul's blog, we are still only at the 'voluntary' agreement on bankers bonuses and that is as far as we will get. Because free trade rules, despite the messing around.

    Another aspect of the international trade agenda is ensuring that financial services are progressively more liberalised globally, even while we are having this pretend fiddling at the edges re bankers bonuses.

    Cable is well aware of this, too. Stop pretending

  • Comment number 32.

    #29 DJ

    "I'm shocked, there's gambling in Casablanca!"

    What, you means banks have found clever ways to hide / disguise risks, and are using this to siphon off tax payer wealth!!!

    There have been some brave articles in the Telegraph lately, but still mainstream media has a lot of catching up to do. For anyone who wants some proper finance news, then this will make an interesting combination:

  • Comment number 33.

    31...Yes the BBC/New Dictatorship loyalty is to economic and political liberalism and not to the so-called Left as most of us used to imagine it.

    It`s open border free market old fashioned Victorian capitalism of the kind we were wise to replace with something more humane in the last century.

    I still feel we should be engaging in a serious discussion about "open society" liberalism as promoted by George Soros and his Open Society Foundation.

    Whatever you might think of his ideas they clearly drive a lot of American policy and have an incredibly strong influence over EU policy and the EU`s expansion into an enormous undemocratic secret society that we are told next to nothing about!

  • Comment number 34.

    31. At 2:25pm on 13 Jan 2011, stayingcool


    I thought I was going mad!

  • Comment number 35.

    To look at the bigger economic picture, here is a long and comprehensive article by Paul Krugman about the Euro Crisis and the possible outcomes. I think it's one of the most important articles he has written for some time - and may well end up in text books. To me it is reminiscent of Keynes' 1920s speculations published in "Essays in Persuasion".

    This comment on a Krugman blog on Portuguese bond auctions might (or might not) be relevant.

  • Comment number 36.

    @25 Richard, I take your point about economic suicide, but as I say again and again, why should I have to buy c**p in order that other people can afford the necessities of life? It is wasteful of scarce resources and bad for the environment. MY purpose in life is not to be a consuming machine as in "Brave New World"

    How to start a transition to a more rational economy? Here are many good ideas, generally carefully thought out:

  • Comment number 37.


    "More people have less to spend.

    Less people have more to spend."

    Indeed income disparity is high:

    This article has it peaking at the end of Labour's "reign". What we need now is for the coalition to reign this in. I see traders earning £1m+ as not being part of this equation. So few people fall into this category - it's not effecting society except via media magnification.

    The government need to tackle the thousands of people who earn £100K+ if they are to effect the statistics, but how effective would this be? Many would move abroad. Many would not start businesses - why take the risk for being taxed to the hilt beyond a certain point? How many people do you know who are incredibly wealthy (ponzi property aside!)

    I think people feel that there are a vast number of wealthy people out there. Many of them enjoy far more wealth than they could ever dream of. The proxy for this perception is television. Turn it on - property programmes that have people buying massive houses with huge gardens in expensive counties. One buyer after another. Same with American tv. Everyone lives in a massive apartment in the coolest part of town, hardly works, loads of cool clothes and a great car. Some of the wealth is even synthesized. People who have nothing are dressed up and paraded as a success, then when the cameras go off they are put back in their place.

    Now turn off your tv. Do you know +anyone+ like this? I don't! TV and celebrity culture are normalizing the appearance of untold extravagance. I believe this is causing a lot of unhappiness (and forcing them into debt as they try to buy segments of this lifestyle in the belief that everyone else does).

  • Comment number 38.

    Just watched QT tonight...and realised that the whole charade can only be viewed with absolute clarity with thoughts of tabblenabble/statist in mind.

  • Comment number 39.


    it doesn't surprise me that income equality peaked at the end of the Labour term, since then the middle middle class and the lower middle class have been propelled downwards as their lines of credit have been cut off.

    This is not the fault of the current Government however the cuts from April onwards will hurt that group more than most.

    I don't think fiddling round with tax rates is going to do much good, it might help in the short term but it will only raise problems in other areas that will require fixes that raise yet more problems.

    I have come to the conclusion that the system of the way we are governed and the way the country is run is beyond repair, the whole thing is looking like it will crash at any time and even if we make it through the current (and ongoing) crisis any fixes implemented will only be bandaid solutions and the real underlying problems in our society will remain.

    Under the current methodology I don't think society as a whole could identify and agree what those underlying problems are let alone come to any consensus as to what changes could/should be implemented.

  • Comment number 40.


    You are absolutely right!

    We should stop importing rubbish from the other side of the world and become self-sufficient ourselves in food, energy and manufacturing.

    This would solve our balance of payments deficit, our high level of unemployment, our low level of investment in industry and reduce our welfare bill.

    The change needed is to stop the ludicrous, quasi-religious belief in gloalised free trade and recognise the need for a UK TRADE policy that doesn't mean being supine: i.e. tax imports of manufactured goods, plus bilateral trade deals that are balanced.

    It means having an industrial policy to invest in import substitution and renewable, sustainable manufacturing that maximises recycling and minimises the use of fossil fuel.

    In agriculture it means ending our dependency om imported grain as a feedstock for animals and much more use of traditional breeds than don't need it.

    In energy it means investing in renewables and insulating homes, but I think nuclear is a bad idea - it takes nearly 20 years to recoup all the CO2 released in building them - thousands of tons of steel & concrete - plus there isn't more than about 30 years of fuel out there.

    We may have to go for carbo sequestration too -inject CO2 into depleted oil/gas fields in N. Sea. Perhaps "clean coal" + sequenstration might be a stopgap measure?

    Failing to plan is planning to fail - and I think that the global trade imbalances will inevitably lead to the economic system failing anyway if it's left to continue to get more and more imbalanced - so we need a plan to produce a future for the UK that is sustainable AT ALL LEVELS - economically, socially, environmentally and financially.

  • Comment number 41.

    QT is impossibly poor. It's all you need to know about the dumbing down of the BBC. The last episode I watched, many months ago, had Davina McCall on. If I'd had Mark Thompson in my living room I'd have made him eat my TV license. I now avoid it and just watch comedies that are supposed to be comedies.

    Bob R:

    oh dear - you do seem blue. I don't think it's beyond hope. I do think it has to get much worse before people make a genuine attempt to sort it out. Agreed that the status-quo is downhill. On the plus side my local primary school teaches Mandarin :-)

  • Comment number 42.


    I know you have posted this before

    ''Why should I have to buy c**p in order that other people can afford the necessities of life? It is wasteful of scarce resources and bad for the environment''

    But it remains the best 2 sentence summary of the underlying dynamic to the whole global economic situation I have yet come accross.

    For those on here interested in the rather quaint old fashioned idea of existing and interacting in the physical world, there is a 'Radical Statistics' conference in Leeds on 26th Feb which looks like it covers many of the issues lamented about time and time again on here if anyone fancies it.

    ''This year's Radical Statistics conference addresses the cuts agenda, the detrimental corporate influence on science, alternative measures of progress and the problems with UK libel laws.''

    Sounds right up our street!!

    It is in my backyard so I will be there anyway, I can arrange a (e.g.) breakfast meeting within the conference for ''Paul Mason's ????????'' ( not sure what we could call ourselves..suggestions welcome!!!). If anyone is interested.

  • Comment number 43.


    maybe '' Paul Masons Cafe Economique''.

  • Comment number 44.

    The time is here to roll back Hayekism.

    Do not accept that the market determines everything, can attain efficiency, that information is symmetric.

    The recent posts 36 et seq. seem to cry...

    Refute the doctrine of 'trickle down' - the evidence shows it's just not working.

    Plan what we as a country import - if it's an import and it's not on the list you don't need it. If it's Davina McCall you definitely don't need it.

  • Comment number 45.

    #42 Jericoa

    Re: NEF conference

    Sadly I am stuck in the ether and can't get out from behind the firewall and DMZ.

    Do you know if the talks will be videoed and put on youtube and the conference notes published as it looks like an interesting conference.

    At least in you we will have a man on the inside who can report back :)

  • Comment number 46.


    "The time is here to roll back Hayekism."

    If 50% of GDP as government spending is rolling back Hayekism, where do you suggest we should go from there? More state spending ie towards communism?

    I'd say state spending at 50% of GDP is quite a planned economy and this is why we have seen things get so bad over the past 10 years, as we crawl out from under the ponzi housing scheme that masked the state's utter inefficiency (if you were dumb and couldn't see the whole thing was a total sham).

    "Plan what we as a country import - if it's an import and it's not on the list you don't need it."

    The government have had 50% of GDP worth of choice. They did a rubbish job and we have no infrastructure to show for it.

  • Comment number 47.

    @42 Jericoa

    Let us know what goes on in Leeds - it's a good agenda. As a regular Private Eye reader (since 1971). I follow news about the libel laws with great interest, though not all is bleak as Simon Singh's victory shows.

    If the conference were in Bristol you'd see me, but Leeds rather a long haul from Pembrokeshire - I used to travel to Middlesbrough regularly when my late mother lived there, and whenever possible I took two days.

  • Comment number 48.


    will you be going to the NEF conference referenced by Jericoa ? You could pool resources with the More or Less team from R4 and get two items for the price of one.

  • Comment number 49.

    Vince? He's gone from a political lion to Bagpuss in just a few months.
    Apt surname though, he's certainly laid a few of those.
    18 has nailed it, how do apologists for the US/UK economic consensus of the past 30 years account for Germany's rapid, high quality manufacturing led exit from the recession caused by - whatever Cameron and Osbourne say - the failure of the banking system at the heart of that failed consensus?

    Germany - it has all the elements that these apologists say is toxic for business, good wages, social welfare, long term investment in areas like manufacturing, strong trade unions who also have a say in many companies, plenty of sustained investment in infrastructure, a healthcare system that covers all.
    Not only Germany either, most successful Northern European nations manage this - except one.

    None are utopia's, all have their own problems too, but they were not the cause of this recession so perhaps it's just that they are coming out it quicker and in a sustainable way.

    All the rantings across multiple blogs, of a swivel eyed nature, coupled with a Basil Fawlty style view of modern Germany, does not account for these facts on the economic ground.

  • Comment number 50.

    I am such an economic dunce that it`s painful trying to follow all this stuff ....but inn self defence I have taken to moving a bit beyond Will Hutton`s stuff..... and today found myself reading Margareta Pagano`s column in the Independent on Sunday.
    She did a leader on a cove called Professor Larry Kotlikoff who has come up with "Limited Purpose Banking" as a way to save the capitalist world from a revolution which might topple the rich and powerful.

    You will understand it better than I.....but to me it sounds like a restatement of the bl... obvious.`s saving grace is that it`s being proposed by an American...and not a horrid British chap like Keynes.

    What think you economists to his ideas?

  • Comment number 51.

    Did anyone hear the Stephen Nolan show on Fivelive the other night with people calling in and talking about how they are going without food in order to pay their taxes and bills?

    Just wondering if anyone else at the BBC is going to highlight the real pain that is now being felt by large numbers of people across the country - a policy which is the direct result of the Fed-led, and which the BOE is following, QE printing.

    Black swansea turns up in all shapes. It was cake once. Perhaps it will be baked beans or cornflakes tomorrow.

  • Comment number 52.

    Ben #46 Let's be clear, I don't necessarily advocate 50% Government share of GDP on a permanent basis.
    Hayek would leave the British economy to be run by the market which presumably you would advocate, No? However, as we have seen if left to the market, the British economy would be denuded of jobs, manufacturing large employers etc. because these can be done more cheaply elsewhere. The costs of production are held artifically lower elsewhere, because of larger labour markets, repression, currency manipulation. In shipping jobs offshore the market fails to take into account the social impact & social costs of change. Economy and society can't adapt fast enough to the great unseen hand of the market - global capital travels faster than ever a society can deal with. If we expect to live in a civilised democracy, then there is a price to pay (for a safety net, for education, for health and for security). Given the market led changes and globalisation in the last 10 years and the costs that that has imposed on British society, it is not surprising the government share of GDP is temporarily high at 50% of GDP. Government is (as a generalisation) dealing with the adaptation of Britain to the globalised economy. These costs have been socialised as the market doesn't take these into account and taxation is the price we/the market pays. Except that some feel they don't need to pay any price for their actions. The market says steel/iron will no longer be made on Teesside after 150 years - the community will adapt, it doesn't have 150 years to change so there is a price. That price should be paid by the beneficiaries from the global capital markets, the bankers.

  • Comment number 53.

    #50 Jim,

    I'm no economist but Kotlikoff's idea seems a little complicated, he starts with a basic idea and then tags on other features as questions arise, which is how we got into this mess in the first place, each new rule to counter one problem leads to complexity and other problems (which require fixes).

    My preferred solution to the banking question is as follows

    One National Bank (that can't be privatised) which offers a current account where wages can be paid in and offers

    1. Debit Card (in the original meaning of a transaction is only authorised if there sufficient funds and not the current system whereby a Debit Card can act as a Credit Card)
    2. Standing Orders and Direct Debits
    3. Direct Fund Transfer (in/out)

    No interest paid on any balance and no transaction charges (even if a transaction is bounced)

    Balance to be fully guaranteed

    It should also offer a deposit account (also funds guaranteed) whereby the account attracts interest at the rate of inflation so that the purchasing power of your money remains the same, access should be instant but the interest should be payable from the end of the month you pay it in and stop at the beginning of the month you take it out (that little bit of interest at each end pays for the running of the account)

    Other Bank accounts, Credit cards, mortgages, secured and unsecured bank loans should be left to the free market, no Government guarantees, caveat emptor.

    #Ben, I don't know if bank/financial system bonuses are justified or not as I don't work in that field but the fines handed out for rule breaking are pitiful, Barclays (across the whole group) made profits before tax of £11,600 million, fines for wrongdoing totalled ~£193 million which is no deterrent to future infringement.
    At that level banks are likely to become incorrigible, my point being that fines at the punitive level are more likely to correct that behaviour.
    (fines should come from post tax income just like any fines I accrued would)

    It is not 'civil disobedience' for a consumer to exercise their power not to consume the products on offer, it is simply putting demand and supply back in the correct order.

    As for utilising public sector services, if you don't use it you will lose it (like local post offices or rural bus routes), when the service is privatised the bids will be based on the current level of demand, if the economy should continue to rumble along the bottom (slow/no growth) then more people will find themselves in need of the safety net but by then the net will not be of sufficient size to catch them.

  • Comment number 54.

    Thanks BR ... will attempt to digest that as I search for a fig tree at the garden centre....if my pre-zimbabwean pounds still stretch to purchasing anything at all ! any of our current political entertainers agree with your ideas.....and far more the Wall Street Mafia have any incentive to listen to you?

    Surely while thhey float away on a tide of quantitative easing towards even pore riches they are hardly likely to have a pauline conversion and mutate into the Cooperative Mutual Bank?

  • Comment number 55.

    All this user's posts have been removed.Why?

  • Comment number 56.


    "The time is here to roll back Hayekism."

    "Hayek would leave the British economy to be run by the market which presumably you would advocate, No?"

    Hi Tonyparksrun,

    No, I wouldn't advocate total free-market Hayekism. I didn't say I would anywhere in my post. You just suppose that my opinion must be polar to yours, as per BBC blog convention.

    What I am questioning is why it's time to "role back Hayekism". If as your second statement above supposes, Hayekism leaves the British economy to be run by the market, the two statements are surely incompatible. We have 50% GDP spent by the government therefore we do not have Hayekism to role back, so I question your polemical statement.

    The political debate is always relative, never the bigger picture. If we had 40% government GDP spending and the government suggested increasing it by 10% people would say we were becoming communist, yet if we are at 50% and the government suggests decreasing it to 40% we are in Hayek's territory. In fact both are pretty socialist by any definition.

  • Comment number 57.

    @53 Bob "...also offer a deposit account (also funds guaranteed) whereby the account attracts interest at the rate of inflation so that the purchasing power of your money remains the same ..."

    I'm not sure that it is possible or desirable to guarantee money against inflation.

    Firstly, inflation in a particular price may be the manifestation of a shortage in or an increase in demand for a finite resource. If this is experienced over a wide section of prices, due to famine, war or natural disater, increasing the money supply to compensate will not increase the supply of scarce goods, it will just cause hyperinflation, as in Germany in the 1920s. In these circumstances the only alternative to inflation is rationing - it may come to that with fuel in the forseeable future.

    Secondly, it is generally accepted that the "Paradox of Thrift" is true at least to an extent, which means that the "savers should always be rewarded" mantra may not make sense. In the current state of the UK and US economies, which face a liquidity trap, negative real interest rates encourage more spending now, which keeps the economy moving.

    Thirdly, the quantity and variety of goods available next year will be strongly influenced by what is spent this year. To be very simplistic, if everyone saved money by not buying cabbages this year, there would be none to buy at any price next year, as the farmers wouldn't plant them. It might even mean less food in general available, and a rise in prices, if farmers went bust and didn't produce anything else either!

    Saving is regarded as morally good, because savers are being resposible, making efforts to live within their means and provide for their own future, etc. All of which would be laudible if it worked. However we live in a complex and interdependent society. It is impossible to provide for one's own future in the sense of personally producing the goods one needs. Therefore by saving, we hope to have purchasing power to buy goods in the future, produced by others, or by organised collective effort. Merely not spending money now does not help these goods to be available in the future, and may actually mean they won't be. The only saving which is beneficial to future production is capital investment.

    I think we need a very radical reform of money. Money should be tied to the productive capacity of the economy, like the Japanese koku system was linked to the expected rice harvest. Any money should be TIME LIMITED. It should be either spent or invested in a given period or it becomes out of date. Obviously, investments might increase ones income, and society's useful production, in the future. How this could be implemented to favour a green economy is another, related issue.

  • Comment number 58.


    'do any of our current political entertainers agree with your ideas..'

    G.O. does at the moment, he went off on the piste some time ago and we haven't heard anything since (he might still have a hangover), in the mean time nobody is changing policy, coming up with new initiatives or doing anything really which lets everybody else just get on and do productive stuff, of course it will all go horribly wrong when he gets back and starts messing with the buttons again.

    '...and far more the Wall Street Mafia have any incentive to listen to you?'

    Yes, if we just ignore them and refuse to do business with them then they will wither away, we've got a full house and they are only holding aces and eights.

  • Comment number 59.

    57. At 2:01pm on 17 Jan 2011, Sasha Clarkson wrote:
    Any money should be TIME LIMITED. It should be either spent or invested in a given period or it becomes out of date. Obviously, investments might increase ones income, and society's useful production, in the future.
    This only makes superficial sense.
    If I spent it on gold, copper, salt, oil it may help production for a short while, but it would also lead to commodity bubbles. Production would falter when all this hoarded stuff is later sold.
    What is the difference?

  • Comment number 60.

    @59 Fair point, but there is a difference between investment in maintainence/improvement of productive capacity and commodity speculation. This can be addressed by regulation and tax systems.

    My points were motivated by concerns over regarding money as a commodity rather than an entitlement to consume. You cannot defer you right to consume indefinitely, and then expect the goods and services you desire to be available upon demand. The quote at the end of the article on Frederick Soddy's book is as valid now as when it was made:,_Virtual_Wealth_and_Debt

    Also Keynes on not spending:

    "...mere abstinence is not enough by itself to build cities or drain fens. ... If Enterprise is afoot, wealth accumulates whatever may be happening to Thrift; and if Enterprise is asleep, wealth decays whatever Thrift may be doing. Thus, Thrift may be the handmaiden of Enterprise.

    But equally she may not. And, perhaps, even usually she is not.

    From here:

  • Comment number 61.

    OK Brain`s Trust...what about the effect of all those millions of devoted Chinese "savers" when their money reached the USA ....and we were all got in debt with it being leant to us at ridiculously low rates of interest?

    Naturally the USA walks on water (as global capitalism`s driving force)...but what is the long term prognosis for UK plc......and don`t anyone tell me that "in the long term we are all dead"!

    Should we/can we "save"? I ask because it would never have benefitted me to save money in my longish what`s different now?

  • Comment number 62.

    This is somewhat off topic, but somehow relevant to the bigger picture I feel. A "Witness" report from Aljazeera on the Ahmedabad kite flying festival in India. It's interesting, beautiful and at times sad. There are 4 related videos; this is the first one.

    I've watched a bit of Aljazeera recently - I'm quite impressed actually!

  • Comment number 63.

    #57 Sasha,

    a very good post, I agree with some parts and not with others but when I try to explain explain the bits I don't necessarily agree with I tie myself in knots (which probably means you are right).

    I see inflation as the increase in the amount of money without the corresponding increase in stuff (for want of a better word)

    I agree that increasing the money just because of a shortage of a particular item causes rampant inflation of all stuff, I can see it also deterring increased production as the increase in the money devalues all things.

    'Savers should always be rewarded', I would have this as more along the lines of 'Savers should always be safeguarded' and 'Investors should always be rewarded' (with either a gain or a loss)

    The rise in the price (either due to increased demand or constrained supply) should encourage Investors to invest, the opposite should also be true.

    Savings I equate to storing, if I save enough 'money' to purchase 10 average items from a representative sample of stuff that is available at that time then I should be able to purchase at some time in the future 10 items of stuff that is available at the time of spend, just because my savings (at the time of saving) would buy me 10 onions, doesn't mean that I can buy 10 onions at any time in the future as demand/supply constraint of any particular item will be different (and so will its price).

    Investment I see as a gamble on future demand with all the associated risks/rewards that that entails.

    'I think we need a very radical reform of money. Money should be tied to the productive capacity of the economy'

    I agree with that but I'm not sure of the 'time limit' requirement, it just seems to me to either enforce consumption or gambling.

    I don't know about a green economy, one that doesn't crash a lot and is hard to game would suit me :)

  • Comment number 64.

    @63 Bob - I'm not sure I'm right either: I was just offering food for thought really! :-)

  • Comment number 65.

    Perhaps none of us really know what is going on in the world economy....and the worrying additional thought is that it`s possibly not a participation sport for folks like us anyway.

    Things happen because the powerful will it thus...and not in response to scientific financial or economic processes susceptible to our influence.

    America rules because it CAN....and no one is going to seriously challenge the fact that it`s completely bankrupt by the rules that govern UK plc!

  • Comment number 66.

    #65 Jim, sorry but I'm not a "doff your cap", "it's not for the likes of us" kind of guy. I'm alive so therefore I'm economically active, if I'm economically active then I have a responsibility for my actions.

    We can grant those in power the authority to act in our name but we still have the responsibility to make sure it works how we want it to, if it isn't working then we must remove that authority and either do it ourselves or grant the authority to someone else who we think can/will.

    (responsibility cannot be reassigned only authority can)

    #64 Sasha, it occurred to me that if the inflation rate was fixed at 0 then there is no need for interest, loans would be at a fixed price (presumably the lost opportunity cost + risk premium), interest seems to be a hedge against inflation.

  • Comment number 67.

    BR...I entirely agree and share your sparky determination to make an impression....what I was trying to express was that we may be putting ourselves at a disadvantage if we lend credence to the rubbish "science" of high finance by treating it as a functioning rational system that econmists can adjust like a clock because it follows the rules of physics.
    I reckon that the economics we try to bring to bear is Marx Brothers "science" and that it only "works" in the Wall Street Kingdom of Freedonia and in textbooks written by the gnomes of Wall Street....
    But in REALITY the emperors are just powerful chancers and gamblers and shysters....who make the "rules" up as they go their advantage every time!

  • Comment number 68.

    #56 Ben

    Fair comment on the relatively high level of government spend - With the health care reorganization, for example, I detect that the Conservative government are being more radical and doctrinal than they need to to pull back the higher level of government expenditure.
    Once (if ever)the financial crisis plays out, the economy rebalances and government expenditure returns to levels below 40% of GDP, we will be left with a health service and higher education system that is entirely market based. That is my point.
    I would put to you that the consensus level of Government expenditure based on recent political evidence (elections, polls etc over say 15 years) is in the range 35-40% - this is what it takes to run, secure and maintain a civilised society in C21. With greater efficiency this may reduce a little. We are spending relatively more in exceptional circumstances to manage the crisis - it will fall back eventually - it just seems to me that reforms are being made "on the bounce" for doctrinaire reasons where arguments against rebalancing government expenditure are difficult to rebut.

  • Comment number 69.

    @ #11 - is there any precedent for the Tories putting the boot into bankers. This seems a rather unlikely scenario to me.

  • Comment number 70.

    69...How appropriate is the number 69!...Yes of course...and it get`s worse because older folk like me know that the moment Labour creep back into power "Red Ed" ...(you can`t make it up!) will be elbowed aside or discover his inner Tony Blair ...and the seamless process that began in 1979 (if not earlier) will see "our" parliamentarians carry on lying and cheating and taking us to the cleaners!

  • Comment number 71.

    @70 Jim: "Red Ed" discovers his inner Tony Blair? Ugh! What a thought! To me the litmus test for Ed Milliband is whether he toadys to Rupert Murdoch, or takes the fight to him. In my opinion, News Corp is as much the enemy of this country as Al Quaeda.

  • Comment number 72.

    ...and Al Quaeda are not tapping the telephones.

  • Comment number 73.


    There's a rumour that Mandy is eyeing up some sort of role with Lazards investment bank and according to the FT the bank has not denied the speculation. Still one good turn deserves another. Lazards advised Kraft during their controversial buying of Cadbury - something the previous government didn’t block.

    Guess who was the Business Secretary at the time?

  • Comment number 74.

    'To me the litmus test for Ed Milliband is whether he toadys to Rupert Murdoch, or takes the fight to him.'


    Birds of a feather...

    #70 and 71

    'Red Ed' indeed. If he was actually 'Red' then surely he would have re-instated Clause IV as his first priority?

    Try not to repeat (and thereby implicitly imbue) the anarchistic and deliberate rhetorical mis-labelling of Ed Miliband. It only serves Murdoch's agenda.

    The union's members were sold a pup. But their highly paid union leaders were fully aware of this!

  • Comment number 75.

    @75 DJ - I think we were being a bit ironic about "Ed"'s label. :-)

    Re Mandy, I've never worked out what the "immensely talented Mr Mandelson" was supposed to be good at, apart from self-promotion, undermining his own side, and lobbying on behalf of rich "friends".

  • Comment number 76.

    75 Even nice boys "have to pick a pocket or two" in a world run by global capitalists our grandchildren are about to discover......unless we oldies get our fingers out!

  • Comment number 77.

    hi tonyparksrun,

    I too am not sure about a market based NHS. I just don't see a place for free-market economics and state-wide healthcare. I'm really not sure what to do about this. Bottom line for my local GP is that all the receptionists and the woman running it are utterly dumb. You might think that's harsh, but I believe they are. To get better people they need to pay more, which increases the budget, which we cannot do. How to square this circle? I think the only solution is a better educated population. This takes decades to effect as we don't even have enough smart people to teach a new generation. I've no idea how we halt this education death-spiral.

    With our current population even a small amount of intelligent behaviour (plus self-motivation and ownership of problems) commands a very good wage because such people are above average. Doing an ok job and sorting out admin procedures ought to pay ok at best. Many practice managers do better than ok. If we increased average intelligence/ability it would mean a lowering of wages for competent people as supply increases. This wouldn't necessarily mean lower a lower standard of living as services would improve and taxes may fall due to increased efficiency.

    I think the government has to devolve responsibility to the people, who I think given the opportunity might step up to the challenge, and put less money into non-productive stuff (benefits, legal related rubbish, wars) and more into education. The British public have to meet their side of the bargain by pulling their finger out.

    Oh - and scrap this paternity rubbish from Clegg and make it easy for small businesses to sack people at the drop of a hat. I would consider starting a small business but if I hire I'll have more responsibility for a new hire than I do for my own son.

  • Comment number 78.

    Other European health services work`s not rocket science (sorry Bob!)....but there`s one issue that drives our entire country....if a multinational can`t turn it into way of ripping us off it won`t happen" capitalism rules ... OK!(NOT!)

  • Comment number 79.

    Not a bad effort from Pesto last night on banking, but why was it on BBC2?

    Even better effort from Leeds United tonight in defeat.

    Inflation high.

    Unemployment up (christmas not included yet neither austerity measures).

    Pressure on interest rates.

    Households on knife edge budgets, being steadily eroded by inflation, any tweek in interest rates will tip a lot of people over the edge.

    If only people were as passionate about economics as they are about football the world would be a completely different place.


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