Yes or no to AV?

Truly my last blog on the arguments for and against AV for Thursday’s UK referendum on AV.  It’s been quite a campaign, but the arguments made by either side are weak or worse.  This may get a little better in this last week.  In its broadcast tonight the Yes campaign is at long last explaining what the system is and why it is a good idea, and even toning down some of its exaggerated claims.  The Yes campaign had left too much of the explaining to its opponents, while spending too much time twittering to to the converted.  By contrast the No broadcast seems much more about rallying the converted, especially Labour supporters; it rehashes the usual arguments in quick soundbites, using a variety of politicians and vox pops.  Up to this week the No campaign has been much more vigorous, albeit scurrilous.

First, for the benefit of those that haven’t decided, and want to get beyond the soundbites, let’s have a quick round up of the usual, weaker, arguments before identifying the stronger ones.  First the Yes:

  • It will make all MPs work harder.  The idea is because most MPs will need second preference votes to win, as well as a good haul of first preferences, then they will be more sensitive to people’s needs.  Well maybe.  But they are already trying quite hard for the first preference votes of minor parties.
  • Tackles “jobs for life”, duck houses, etc.  Well it should reduce the number of safe seats – but there will still be plenty left.  So some change, but not that much.
  • All MPs will need 50% of support.  A stronger argument, but of course this is 50% before abstentions.  Some voters will not offer second or third preferences so they will drop out, meaning that the winner gets a bit less than 50% of the voters who turned up.  The Economist newspaper seems to think this is a big problem, but if voters are indifferent between candidates then surely that’s fair enough.
  • It’s change.  True, but is it for the better?  Change would certainly rock the older politicos – but this is weak stuff.
  • It will keep the Tories out of power forever.  Not an argument to persuade Conservative supporters.  Frankly, I’m not at all convinced.  The Lib Dem vote could implode, the Tories scoop up second preferences from UKIP; if Labour fluffs it that could easily deliver the Tories an outright victory.  And if David Cameron succeeds in “de-toxifying” the Tory brand, it’s all to play for.

It says much about the Yes campaign that they haven’t said much more than this until this week.  The Nos, on the other hand have given us a massive battery of arguments:

  • It will cost £250m which is best spent on other things.  There has been a lot of heat generated by this claim, based on the costs of running the referendum (too late) and buying counting machinery (unnecessary).  Still, there will need to be an information campaign to explain the system, and it will take longer to count the votes, which will mean a bit more overtime.  Cheaper not to vote at all, of course.  What price democracy?
  • More countries use FPTP than AV.  My Tory leaflet says 2.4 billion to 29.5 million.  So?  I don’t know who they have counted into their 2.4 billion, but a large part of it is India, where there are literacy issues (and which doesn’t deliver stable government either).  The US has got round many of the weaknesses of FPTP through primary elections (which really are more expensive!) .  Many states also use run-off elections which work a bit like AV, and AV itself is not unknown.  And for President, if they used FPTP then Al Gore would have beaten George Bush in 2000 – but in fact they use an electoral college system.  New Zealand abolished FPTP for proportional representation.  That leaves Canada amongst developed countries; that country’ electoral experiences are not an advertisement for the system.  Today the Conservatives won a general election because the left-wing NDP took votes away from the centre parties.  What’s more many other nations, including France and Italy, have a single member run-off system that works a bit like AV.
  • The Australians don’t like AV.  My Conservative leaflet claims that 60% of Australians want to go back to FPTP.  That isn’t what the poll in question actually asked.  What many Aussies don’t like is that they are forced to preference ALL candidates, even if they are indifferent.  We aren’t proposing that in the UK.  In fact the principle of preferential voting (as they call it) is not controversial there.
  • AV gives weight to extreme parties, like the BNP.  Extremists will find more difficult to win under AV.  But they find it hard enough under FPTP (though George Galloway did sneak in in 2005).   But their second preferences will count.  Just as they would if there was no candidate of their party at all.  This is true, but it’s called democracy.
  • Soppy centrists will get elected.  This is the exact opposite of the extremist argument.  It isn’t made by the mainstream No campaign, but it is the argument of choice of the magazine Spiked, and Matthew D’Ancona.  The idea is that the trawl for second preference votes will put a premium on being unobjectionable.  But you still need first preference votes to be in contention, since you will almost always need to be in the top two on first preferences to stand a chance (and this is the Australian experience).  Soppy centrists are likely to get knocked out.  Besides appealing to the centre is how marginal seats are won under FPTP too.
  • There will be permanent hung parliaments and coalitions.  This is a valid argument against proportional representation, but not AV.  The argument runs that the Lib Dems will get more seats, denying a majority to Labour or Conservatives.  You have to believe in a Lib Dem recovery to think that; they will have a real problem to get enough first preference votes to be in contention in enough seats.  Even if you accept this, the balance between the top two parties is likely to favour the winner (because they get more second preference votes as well as first preference votes), and this will offset the effect.  One academic has suggested that the only election since the war that would have given a hung parliament under AV was last year’s, which, um…
  • We want PR.  AV is not remotely proportional; that’s why a lot of people like it.  But FPTP isn’t either.  PR isn’t on the menu.  The danger is that a No vote will put people off electoral reform of any kind for a long time.
  • We’ve been using FPTP for 300 years and we should stand by our traditions.  Well I’m exaggerating, but only slightly, based on Mr Cameron’s utterings.  One person one vote has only been around in the UK since 1950 when the university seats were abolished.  It’s not all that long ago when we abolished rotten boroughs.  We forget how much our constitution changes and adapts.

Enough.  What are the arguments that count?  For yes:

  1. It reduces the chances of rogue candidates splitting the vote and letting the enemy in.  This will make it easier for MPs to take an independent line against party managers.  Perverse results where people vote for the left and let a right wing candidate in (which seems to have happened in Canada today) are prevented.
  2. It’s more transparent.  Today a lot of voters vote for their second preference because they don’t think their first has a chance of winning.  The importance of first preference votes under AV will not stop this entirely, but it will be a big help.  And the winning candidate will know where his or her second preference votes came from.  Today they like to claim that all their votes are positive first preference ones – time to expose this.
  3. It’s a majoritarian system, like FPTP.  Coalitions only happen when the public really can’t make up its mind.  Of course many people prefer coalitions…but see above.  We aren’t turning the political world upside down, just making it a bit better.

And for the Nos:

  1. There is clearer bond with the voter, who needs to make a binary decision, which then gets counted in a highly dramatic process.  There is a little magic in the old ways.
  2. If No wins then the Conservatives will have to give the Lib Dems a consolation prize, perhaps in Lords reform.  If Yes wins then the opposite applies.

And that’s enough!

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Are the cuts necessary?

In the latest issue of Liberator magazine there is a letter from Peter Wrigley, a retired economics teacher who blogs as KeynesianLiberal.  It’s actually about a review of David Laws’s book, but it contains a wonderful statement that summarises why some people think the the government’s strategy of cuts is wrong-headed.  It is deeply flawed, but it strikes me how very little attempt is made to explain the UK’s economic plight beyond shallow sound bites.  I will try make a small contribution to correcting this.  But first, the quote from Mr Wrigley’s letter:

Distinguished economists and commentators, including David Blanchflower, Martin Wolf, Jospeh Stiglitz, Paul Krugman and William Keegan, have all pointed out that Britain’s debts are not historically high (in fact the debt-to-GDP ratio is quite modest by comparison with many similar economies); that Labour’s expenditure was reasonably prudent up to 2008, the year of the crisis; and that the current deficit is a result of falling revenues arising from the recession rather than profligate expenditure.  Above all, we are not Greece, are not and never have been in danger from “the markets”, which are, after all, largely institutions within our own economy, including many pension funds, lending to their own government.  Clearly, the “savage cuts” are far from a matter of necessity but are ideologically driven.

The interesting thing is that the facts cited in the statement are not widely out, if you separate them from the opinions.  But the last sentence is a glaring non-sequitur. Of the various people he cites in support, all are critics of the government’s policy, but I have only followed the writings of two: Martin Wolf (of the FT) and Paul Krugman (Nobel Laureate and New York Times columnist).  Mr Krugman has not made any commentary on the British economy to anything like the detail that Mr Wrigley implies, or not that I have seen – but he does seem to come to the same conclusion – that Britain’s austerity is madness and not an example for the US to follow.  But it is the US that is his interest.  Mr Wolf has given some excellent, clear analysis (such as this article, behind the paywall I am afraid).  I don’t think he would describe Labour’s expenditure up to 2008 as “reasonably prudent”.  He actually says of the deficit before the crisis struck:

The deficit was surely too large for that stage of the cycle, even on what was then thought about prospects. But it was not a disaster.

A quibble, perhaps, since coalition politicians certainly imply it was a disaster.

Britain’s debts are indeed not frighteningly large. Yet.  But the same cannot be said about the deficit – i.e. the rate at which we are adding to the debt.  Over 10% per annum will soon take the debt up to the 90% level where most commentators suggest it really starts to weigh the economy down.  The frightening element is the estimate that 8% of the deficit is structural; in other words such a deficit won’t disappear as the economy bounces back.  This is the point that Mr Wrigley appears not to have understood, or perhaps not to have accepted.

That 8% number is truly astonishing because it suggests that much of the economy pre-crisis was built on air, and has been lost never to return.  We can’t just bounce back.  Remarkable, but it isn’t seriously disputed.  Certainly not by Labour’s last Chancellor, Alistair Darling, and not Mr Wolf either.  I can’t speak for the other commentators.  In a later post I will return to how this situation arose.

It will be necessary to close this deficit – and nobody denies that either.  A lot of people are suggesting that the government is doing so too quickly and too aggressively (and I’m sure that goes for all the distinguished names cited).  It hardly follows that the cuts “are far from a matter of necessity”.  To understand the problem it is necessary to put aside the timing issue, and to ask how will the finances be put straight when they are eventually addressed.  There are three ways: growth, taxes and cuts.

Let’s think about growth first.  To claw back 8%, the economy has to grow by at least 16% (though 20% is probably more realistic).  If we can get the economy to grow by about 4-5%pa this looks reasonably feasible, perhaps.  But if you accept the view that there is not a lot of spare capacity, then a growth rate of 2.5% is more realistic, and this, or close to it, is already built into the government’s plans.  The government can’t stimulate such high growth rates by increasing the deficit – because ultimately this growth must come from the productive part of the economy.  The argument about austerity is about the government not making things worse, not about stimulating a boom.

So how about higher taxes?  Many on the left hope that the UK can move to a more Scandinavian style of economy with perhaps 50% of income taken in taxes, rather than the typical 40% odd typical of the British economy.  Many hope this can be done by just taxing the rich more.  Actually it is hard to see how this last can be done, beyond what the government already has.  Not much money can be made from corporate taxes, contrary to popular belief, because there just aren’t enough taxable profits around.  The various soft targets postulated don’t look so soft closer up, and wouldn’t make enough difference anyway.  It is a game of diminishing returns: the more you tax, the less incremental revenue you get – and there are costs to the wider economy.  It gets worse, since if you actually succeed you become over-dependent on rich people and big corporations to fund government.  There is clearly a problem that companies are making too much money, and that a lot of people are being paid too much; but taxing this inequality even further not a sustainable solution to the country’s fiscal problems – even if you think it is right to do anyway.  To raise taxes sustainably you have to aim lower.  At the “squeezed middle”.  There are two problems.  First that this may be economically inefficient, by reducing incentives to work; so you keep having to raise the bar.  Second, and more certain, it is politically toxic.  To say the least we do not have the necessary political consent across society.

Which leaves cuts as carrying the main burden.  This seems to be what the last Labour government concluded.  And if you are going to make big cuts, to public services, and to benefits, there is a lot to be said for getting on with it to let people get used to it and move on – rather than leave the Sword of Damocles dangling – and especially with public services.

But what if you think the government is cutting the deficit too quickly?  The best thing to have done would have been to delay the increase to VAT.  The second thing would be to delay cuts to benefits.  But benefit cuts have been pretty limited so far, and may yet take place slower than planned.  Perhaps other tax cuts might be considered.  The logic of the public service cuts is powerful, I am afraid.

Which leaves with two questions.  How did we get into this mess?  And is the government right to move so quickly?  More of that another day.

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The Economist shoots itself in the foot. Twice.

This week The Economist has come out for a No vote in a leader on the UK’s referendum to the voting system.  It argues that AV is no improvement on FPTP, so we should vote no.  It wants the system to be more proportional, with 20% of parliament’s seats reserved selected by proportional representation (PR), and the rest on FPTP.  It dismisses the argument that a Yes vote would make further change more difficult, without really saying why, beyond “It might exhaust the national appetite for reform.”  This is pretty weak stuff, but on two counts the paper has undermined its own argument.

Update.  Having read more of this week’s edition, the Economist’s hidden reasoning looks a bit clearer.  They are worried that a Yes vote would make the Conservatives so angry that they will derail other reforms, such as that for House of Lords.  Alternatively if there is a no vote then these reforms are more likely to go through as a consolation prize.  They appear to think that these other reforms are more important.

Also they are making a big deal out of the fact that because many voters will not preference all candidates, then some candidates will be elected with less than 50% of the vote.  They think this is a major problem with the Yes case; and yet I think this is simply equivalent to an abstention.  Nobody suggests that MPs should be elected with 50% of the whole electorate.  And enough people will cast preference votes, especially if there is a major left-right polarisation, to make the change in system worthwhile.  This article on NSW and Queensland state elections, which use the same preferential system envisaged here, makes that quite clear.

In the first instance, in the very same edition, the paper covers the Canadian general election, held under FPTP, with the sub-headline “A last-minute surge for the left might end up benefiting the right.”  This is exactly the sort of perverse outcome that AV can do much to prevent, because it reduces the problem of the split vote.  In Australia, which uses AV, the rise of the Green party has not benefited the right.  Under FPTP, using first preferences, the right would have benefited royally from the Green’s success in the last Australian general election.  So, “no improvement”?  The Economist makes the case against its own editorial with wonderful succinctness.

Next, the paper has changed its view.  It used to be a strong advocate for AV in the UK.  Admittedly that was a long while back (and certainly before 1997, when the paper’s online archive starts).  But the paper routinely refers to previously held positions, sometimes dating back to the 19th century.  And yet the paper’s leader makes no reference to this earlier view, and why it has changed its mind.

I have been reading the Economist since 1984 (and its position on AV swayed me in its favour back in the 1980s – one of the reasons that my support is not as lukewarm as some).  This is very disappointing.  The editorial team was probably deeply split.  Its Bagehot columnist, burnt by experiences elsewhere in Europe, hates PR and fears that AV might eventually lead to PR because more people will cast first preference votes for minor parties.  Others no doubt favour full PR.  I can imagine the poor leader writer trying to reconcile all this.  And failing.

 

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NHS: the net is tighteneing around hospitals

September 11, 2001 was a good day to bury bad news, a government spin doctor famously emailed on the day.  What about a royal wedding day?  Sure enough, via the Department of Health (DH) there was this announcement, saying that hospitals are expected to make an even higher rate of “efficiency” savings than before: from 4% per annum up to 6-7%.  This press release seems to have come out so late yesterday that neither the DH website nor that of Monitor (the regulatory body that made the announcement) have published it.  So I have been unable to access the details.  But make no mistake, this is a highly significant development.

What on earth is going on?  So far almost all the heat has been around the Coalition’s health reforms, and the dramatic changes to the commissioning side of the NHS, which are already in rapid progress, regardless of what is happening in Parliament.  This is the side beloved of politicians and policy wonks.  The idea is that the NHS will be shaped by more or less local organisations assessing their needs and then “commissioning” it from the supply side – mainly hospitals.  Hospitals, formerly in the driving seat of the NHS, would be put in their place.  It is a chaotic, market driven vision of change.  Under Labour commissioning was being led by the primary care trusts (PCTs); the coalition is moving this towards consortia of general practitioners (GPs).  This is all very well, but there is something else going on, and this is much more Stalinist, and which pre-dates the Coalition.

Or rather the model might be the Chinese leader Deng Xiaoping, who masterminded China’s recent astonishing growth.  Deng ensured the process was centrally directed, with no challenge to the Party’s authority; he worked by manipulating the incentives open to his underlings.  The centrepiece of this dynamic in the NHS is the £20bn of savings that I described in my last post.  This money isn’t being cut from the NHS budget; it is being “redeployed”, spent somewhere else, although it is very unclear where.  What today’s story suggests is that most of this pressure will be felt by hospitals.  The drive is to take 25% out of their budget over a mere four years.  Wow.

Regardless of where the chaotic process of commissioning takes us, the central leadership of the NHS (and it is not difficult to identify Sir David Nicholson as the driving force) has decided that hospitals are going to play a smaller role.  This is pretty conventional thinking in the medical field.  Hospitals are old-fashioned places where people are as likely to catch an illness as be cured.  The idea is to reduce them to a smaller number of centres of excellence, with the very best professionals supported by the very best technology.  Meanwhile more illnesses will be treated “in the community”.  I can’t express an opinion on how valid this view is, though I instinctively feel that it is missing something.

Never mind.  What it means is that many of the country’s hospitals will be closed.  Regardless of the chaos that has hit the commissioning side, the NHS bosses are turning up the heat.  I don’t know how ready our politicians are for it.  It has Labour’s fingerprints all over it, but it is the Coalition that will be in the firing line.  The only upside is that it should release money that can be spent on other things.  That and the knowledge that the government is doing the right thing.  Probably.

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NHS reform: we’ve started so we’ll finish

The NHS, probably rightly, is one of the main controversies in current British, or rather English, politics.  The Coalition government has put it there after Labour, by dint of a massive increase in spending, had managed to take most of the heat out of the debate, bar a few controversial hospital closures.  Personally I am a bit perplexed.  From one side I am being constantly lobbied by the Social Liberal Forum, a Lib Dem pressure group, to express disapproval of what looks like almost the entire reform process.  On the other side is 18 years experience as a business services manager, reinforced by my regular reading of the Health Service Journal (HSJ), the weekly magazine aimed at NHS managers.  This takes the need for reform pretty much as read, almost on a continuous basis – and gives me an inbuilt suspicion of people who resist change.  Partly because I have been trying to get a management job there, I am better informed than most on the NHS; but I have found it very difficult to make up my mind.  Will writing a blog post help me?

First, let’s understand that there is something of a crisis in the NHS.  The figure of £20 billion of savings required by 2015 is widely accepted as a fact.  This is quite interesting.  The figure first emerged a couple of years ago from a leaked McKinsey report, which the government tried to deny.  But it is a now central theme of NHS Chief Executive Sir David Nicholson’s management.  But the NHS’s budget isn’t being cut: the Coalition is protecting it in real terms.  In response we get some rather airy stuff about the increased demands on the NHS from an ageing population, medical inflation and suchlike.  But if we are cutting £20bn, we must be adding the same sum back somewhere – but we aren’t being told where.  I have a dark suspicion that a lot of it is about large PFI rents coming back to haunt us from all the capital investment of the last decade, though I’m not sure if that quite adds up either.  I find it strange that so little is being said about this.  It has the signs of a manufactured crisis to inject a sense of urgency across the organisation.

If so, then I don’t particularly disapprove.  There is a massive inertia about the organisation, with almost any change proposal meeting outraged resistance.  When I reflect on my career as a manager in the private sector, we were in an almost continuous state of crisis.  As a result we pushed through change after change, so that after 18 years the business had been transformed out of recognition both in efficiency and business model.  This was the result of simple competitive pressure.  Such competitive pressure is largely absent from the NHS, so Sir David’s success in stoking up a comparable level of crisis is to be commended.  It is clearly helping him deal with the resisters and rally supporters of change.

There seem to be two main challenges to the government’s reform strategy.  First is along the lines of “we don’t need this” – it will disrupt the process of making the £20bn worth of savings.  The second is that the reforms themselves are wrong, because they will “privatise” the NHS.  The answer to the first depends to a great extent on how convinced you are that the previous government’s infrastructure was up to the job.  This rested on three levels of organisation to commission services from a series of notionally independent providers, in turn answerable to various parts of the bureaucracy.  It is easy to think that this was over-complicated, but the three levels (national, regional and district) have a resilience about them; the NHS seems to revert back to such a structure every time people try to cut a layer out.  A more valid criticism is that the system is accountable only upwards, to the Secretary of State, meaning that managers spend too much time managing their chain of command, and not enough on the patients.  Another criticism, which may follow from this, is the sheer volume of management blather that the system generated.  Heaps of guidance, toolkits, methodologies, procedures, silly names, acronyms, and such.  The commissioning framework was called “World Class Commissioning” and involved developing eleven competences, progress on which had to be reported up the system.  This sort of thing is a charter for mediocre management.  People who manufacture millions of words that somehow don’t get to the point.  A particular worry is the lack of management with any clinical experience, and a failure to integrate clinicians into management generally.

To many this management structure was incapable of driving through the change needed, except in a few lucky pockets.  The blather merchants would succeed in populating scorecards with green spots and burying their peers and seniors in verbiage, but be unable to deal effectively with entrenched resistance from clinicians, and politicians nervous about reactions to reconfigurations.  To these critics it was essential to tear this structure up, while trying to salvage some of the best bits.  I wasn’t so sure.  I would have opted for keeping most of the infrastructure intact but bringing local political accountability into the picture, while trying to cut back on some of the thickets of blather.

But it’s too late now.  Many managers have lost their jobs; many more face the prospect of their job disappearing an uncertain future.  The damage has been done.  Far reaching reform may not have been the best idea, but we must capitalise on the current fluid situation to create something that works better than the previous version.  This may well slow down the march towards the £20bn savings in the short term – but maybe these savings aren’t quite as urgent as it suits many to claim.

But are the reforms going in the right direction?  I’m nearly up to 1,000 words already.  this is a topic for another day.

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Cardinal O’Brien: is this all that’s left of Christianity?

After a wonderful day out in the sun, I return home to a Twitter feed bulging with reaction to Cardinal Keith O’Brien’s Easter sermon in Edinburgh.  It was near top of the BBC news this morning, but it was surprising difficult to locate their coverage on the BBC website (here) this evening.  Archbishop Rowan Williams’s sermon (something about happiness) got much more coverage.  From this coverage I find it rather unclear what Cardinal O’Brien actually said, beyond an attack on “aggressive secularism”, and calling for all Christian denominations to unite against it in defence of traditional Christian values.  This was enough to get Evan Harris wound up and twittering.

I do support state secularism, but my deeper reaction to Cardinal O’Brien’s sentiments are about what it means to Christians.  There seems to be a large body of people for whom a (the?) fundamental purpose of Christianity is to defend its traditional values.  I have heard people on the radio suggesting that the Church got these values right at the start, and that to change them to suit modern fashion is a betrayal.  There is a massive reaction against accepting gays – quite disproportionate to the significance of the issue.  Likewise, many react badly to the idea of women priests and bishops, to the extent of switching from Anglican to Catholic denomination.

I find this very strange because it seems so at odds with the teachings of Jesus in the gospels, to say nothing of how the church has evolved since.  The central message to me of the Sermon on the Mount was that Christians should not be deceived by the letter of the law, but always go to the underlying purpose, and to do so with humility and love.  This is a dynamic message, allowing practices to be continuously re-interpreted.  One of the examples in the sermon was the observance of the Sabbath – where Jesus said that it was nonsense to be totally strict.  And so the church did adapt, notably by extending membership to Gentiles. And this adaptation has been dynamic.  Take its attitude to women.  It is quite clear that in the very early days, the time of Paul, women had a leadership role in the church.  But as Christianity became closer to the establishment this was less acceptable, and so doctrine changed (including some rather dubious epistles making it into the Bible, supposedly from Paul himself).  More recently, women have been returning to prominence, although the Catholic hierarchy are still determined to hold their line in the sand.

Defence of tradition actually undermines the core Christian message.  It is a doctrine to hide behind rather than face up to the challenges that real faith should lead you to.  It is a message of despair.  Is that really all that is left of this once great faith?  At least Archbishop Williams is trying to use his Easter pulpit to promote a message of hope.

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Is Vince Cable right about AV?

The AV referendum campaign is hotting up.  The No campaign are throwing a lot at it, and seem to have captured the initiative.  By and large they are deploying the same old arguments (e.g. “save one person, one vote”), which are nonsense to those that know about the system, but which still serve to muddy the waters.  What has changed is the weight of campaigning.  David Cameron is taking a very high profile; it looks like the full Tory machine is distributing literature.  The Tory friends in the press, like the Evening Standard here in London, are throwing their weight in.  Opinion polling seems to show this is paying off.

But the campaign looks more Tory by the day.  So perhaps it is natural for Vince Cable to hit back to suggest that first past the post (FPTP) is a Tory plot to win power against “the progressive majority” of Labour, Lib Dem and (not usually mentioned, but relevant) Green voters.  What helps this argument is that the Conservatives clearly seem to believe it.  They are so vehemently opposed because they think it kills their chances of ever winning a majority.  One of the Tory papers (the Mail, I think) suggested with horror that Mrs Thatcher could never have won under AV.  Mr Cable clearly thinks that Tory voters are beyond hope, but that the Yes campaign may be able to do a better job of mobilising Labour voters.  Given that the Conservatives seem to command about 40% of the vote, and that many Labour activists and older voters are sceptical, this looks like a bit of a gamble.  But how solid is his argument?  Just because the Conservatives believe it doesn’t make it true after all.

The “progressive majority” is an old idea, hatched in the 1990s (if not before) when the Conservatives were last in power.  It is founded on the observation that if you add Labour and Lib Dem votes together they pretty consistently get a 3:2 advantage over the Conservatives.  Certainly, it is difficult to see that small-state Conservative policies (much lower taxes, much lower benefits abd public spending), beloved of the Tory right, will ever command majority support.  There is an anti-right-wing-Tory majority.  But to call this majority “progressive” is a stretch.  Much of the opposition to such a right-wing agenda is conservative – something that characterises large parts of the Labour party (and dare I suggest some Lib Dems?).  Remember Tony Blair railing against “conservatism” in his own party?  It may be truer to suggest that there is an inbuilt conservative majority that opposes radical ideas, left or right.

Semantics, perhaps.  Would AV permanently stop the Tories?  It wouldn’t have stopped Mrs Thatcher.  The SDP-Liberal Alliance would have picked up some more seats from the Conservatives, no doubt.  But the Labour party of the time was so distrusted that they would not have picked up enough second preferences to take enough further seats off the Conservatives; they may even have lost one or two more seats to them.  AV is good for a political party with momentum (which sways second as well as first preferences) – and Mrs Thatcher had that.  She won because the Labour Party was strong enough to block the SDP-Liberal Alliance, but too weak to be a credible alternative to the Conservatives.  This dynamic would have been almost as deadly under AV as it would under FPTP.

But the Labour Party is a much superior political machine now, that knows it has to win votes at the centre.  For the Conservatives to beat them under FPTP and get a full majority they need other parties to undermine Labour, be they Lib Dems, Greens, or a future left-wing threat.  Meanwhile they need to hang on to at least 40% or so of the vote themselves.  This is a tall order if the Tory right was in the ascendant…but it would be more difficult for them to pull this off under AV, provided that the Labour Party made some attempt to attract middle ground voters.   Strategically Vince is mainly right.

Tactically – by which I mean up to the next election – the picture is much less clear.  As I have observed before, the Conservatives will be under attack from left and right simultaneously.  UKIP are showing real resilience and are gradually earning the right to be seen as a proper political party (like the Greens, but unlike the chaotic BNP).  The Lib Dems will want to make the best of their coalition nightmare with the voters by appealing to softer Tories.  The more Mr Cameron tries to appease one group, the more he will put off the other.  AV would make this situation much easier to manage.  So far he is keeping this nightmare at bay quite successfully – but there’s a long way to go.

AV will help stop a radical party on either side of politics take exclusive power without  genuine near-majority support.  Mr Cable is right about that.  But there is no progressive majority.  And the effect of AV (or FPTP) on the next General Election is much too hard to call.  The best reason for voting Yes is that AV is a fairer system that preserves the essence of the present one (single member constituencies; likely one party government).  Voting Yes or No because it will be good for the party you support is the road to disappointment.  For all three main parties.

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Why I won’t invest in gold

Want to see the world’s financial system at its most dysfunctional?  Visit a gold mine.  Huge expenditure of human and physical energy; destruction of landscape; poisoning of local people with its polluting by-products; lots of horrid, dangerous jobs.  All for what?  Digging up something that the world doesn’t need, and adds no value to anything.

Gold has real value as a decoration.  It is soft and easy to work; best of all it is inert and does not lose its shine in the air; it is virtually indestructible.  But most of the world’s gold is not used for decoration; it sits unseen in vaults.  It is used as money.  And the thing about money is that producing more of it (printing paper money or digging gold out of the ground) does not make the world any richer.  It is just an attempt by one person to pull a fast one on somebody else.

Money is a confidence trick, literally.  Things can only act as money by mutual agreement and confidence.  Money has no intrinsic value of itself.  Gold has been used as money since Croesus in 550BC, with widespread acceptance in both Europe and Asia.  But not everywhere.  In the American cultures found by European explorers gold was valued as a decorative resource, but not as money.  The explorers could not buy anything with gold coin.  In the modern age of paper and electronic money, there is no good reason why gold should fulfil this  role.  Its advocates point out that, unlike these modern forms, its supply is physically limited, with just those hateful mines and the melting down of works of art adding to supply.  Some suggest that it is real money compared to potentially valueless “fiat” money.  Well yes, but how to value it?  Just what law of nature says how much wheat, or wine, or how many haircuts an ounce of gold should buy?  At least proper money is hardwired into a mass of contracts; and the fact that we can regulate its supply more easily is a benefit, as well as a risk.  Gold as money is obsolete.  Or, as economist Willem Buiter put it (in his days as an FT blogger) Gold is a 6,000 year old bubble, with no more inherent value than cowrie shells (though according to Neil MacGregor of 100 objects fame it is only been going 2,500 years) .

Gold is an emotional investment.  Its advocates feel some sort of connection with the ancients who originally started to use it as money.  It is in the Bible.  My emotions are at least as strong.  Gold is the essence of evil when used for anything other than its beauty.  And that view has plenty of biblical support too.  I will not pay real money to invest in the stuff.

As gold shoots through $1,500 an ounce it is time to question what it is for.  Let’s stop using it as money. Let all central banks sell off their stocks for use as jewelry and gold leaf.  The world would be a much better place.

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Vickers Commission: so far, so good

I have deliberately paused before commenting on the interim report of the Vickers Commission on UK banking reform.  I wanted to read more about it; it didn’t help that the post office delivered my Economist several days late.  Unfortunately I still have not had time to read the report itself; let me come clean on that.  Most of the commentary seems to be that the banks have largely got away with it, and are heaving a sign of relief.  My answer is “not necessarily”.  It may be clever politics not to go for the more totemic ideas, like a full split between retail and investment banking, since that clears the path for the reforms that really matter.

The report primarily concerns itself with two things: preventing a future UK government being forced into bailing out or underwriting banks, and increasing competition between the banks.  The latter was behind one of the more controversial recommendations: the breakup of Lloyds Bank.  But I don’t think that’s the main battle.  I despair about the lack of competition in UK retail banking, but I don’t see that the costs to the economy are that large.  The main game is preventing the next bailout.

The suggested strategy makes plenty of sense.  Ring-fence retail banks, force them to hold more capital, and leave investment banks to their own devices.  The significance of the second part of that proposition needs to sink in (as this article from John Gapper in the FT (£) makes plain).  An investment bank may be “too big to fail” in global terms, but the UK government will say is that this is somebody else’s problem, so long as our retail banks are protected.  This is an entirely realistic admission that the UK government is now just a bit part part player in the world of global banking.  If one our big investment banks fails, then we don’t mind if it is bought up by foreigners.  This is a striking contrast to the approach taken by the Swiss government.

But it leads to an obvious issue.  How do you prevent a meltdown in investment banking infecting the supposedly ring-fenced retail banks?  The collapse of Lehman’s in 2008 caused such chaos not because it was so big and important in its own right, but that it was too entangled with banks that had big retail deposit bases.  A retail bank will gather in lots of retail deposits; the question is where does all this money go?  If the bank is to make money it needs to get lent out.  If this lending gets into fancy investment banking products, then the ring-fencing has failed.  There must be some pretty heavy restrictions; the assets don’t need to be absolutely safe, but we want to insulate these banks from the complexities of the investment banking melee.  This will not be easy, as John Kay points out (in another FT paywall article, I’m afraid); all that is needed is an oversized treasury department, which is supposedly there just to oil the wheels of the machine.  Mr Kay knows this from bitter experience; he saw (as a non-exec director in the earlier days) how a runaway treasury department at the former building society The Halifax took that institution down a route that led first to demutualisation and eventually its own destruction; each step presented as innovative and sensible.  The detail must be subject to intense scrutiny.

But what of those excessive bankers’ bonuses and all the outrage that goes with them?  To the extent that this is a retail banking problem, the Vickers reform surely deals with it adequately.  The only way of tacking with it properly is to turn these banks into less profitable, lower risk utility organisations which can’t afford to pay big bonuses.  That is what ring-fencing and higher capital requirements should achieve.

But the bigger problem is investment banking.  This is an international issue, and Vickers is really about damage limitation.  As I have said before, the answer is not directly regulating remuneration, but cutting the profits.  This industry must be made much smaller and less profitable.  The two most important ways are through increased capital requirements and choking off its finance (or “leverage” as they like to call it).  The Basel committee is already making headway on the first.  Retail ring-fencing, if it is done properly, will help a lot with the latter.

Banking reform is a long hard road.  There is a danger that we have “wasted a good crisis”, and the passing of the crisis’s worst peak means that the pressure on politicians to deliver has eased.  But the crisis has not passed, though many financial types waving graphs seem to disagree.  A lot of banks are still in a shaky condition – and so are many governments’ finances, including those of the USA and UK.  There may well be a steady stream of aftershocks to remind our leaders that the journey is not over.  So far the Vickers Commission is playing its part.

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The power of Holy Week

As a churchgoer in my distant past Holy Week was the undoubted climax of the year.  Sometimes we would attend services daily the whole week, and almost always from Maundy Thursday.  The move from fast to feast was dramatic.  As with Christmas, the festival may have pagan undertones, linked to Spring and fertility, but unlike Christmas, the Christian content has been able to hold its own.  Even now as an agnostic, Holy Week retains a lot of power; power that other festivals have lost.  Why would that be?

This might be a puzzle.  My attraction to Christianity is based on Jesus’s teaching.  There’s not much of that during Holy Week.  Instead, as this Radio 4’s morning service demonstrated, we get some of the most difficult Christian doctrines to digest.  God sent his only Son to be a living sacrifice, etc.  This doctrine clearly had real power in Graeco-Roman times, and retained it in the Medieval period.  The Universe was a much simpler place then.  It was dominated by a single Earth, with its only sun, with the stars mere spots on the firmament.  It was easy to see that Man was the pinnacle of God’s creation, and that the two would have an important relationship .  God was be a kind of special superman.  Now we are lost in a near infinite Universe, this idea has gone beyond modern imagination.  If god exists, he must be similarly infinite and quite beyond us.  The whole idea of the incarnation and the idea of the sacrifice of God’s only son to save our sins has become a series of stale empty words.  Christians pronounce them as a ritual of identity; at best this formula is an icon – something to be worshipped and contemplated, perhaps, but a man-made creation of little intrinsic worth.  And I haven’t even touched the Eucharist.

So why does Holy Week retain its power?  It helps that it is linked to a clear narrative in the gospels, full of human drama and detail.  So much more gritty and real that the Christmas stories, which seem to have been worked out backwards from biblical prophesies.  But ultimately the drama of struggle, being wronged, hope destroyed and then reborn sums up so much of the Christian message.  An impossible burst of light onto a difficult world.  Most modern religions have a huge focus on the personal lives of their founder, and Christianity is no exception.  Few of these personal stories can be as unpromising as that of Jesus.  The Buddha devoted his whole life to attaining enlightenment; Mohammed attained huge temporal power in his lifetime.  It is impossible not to marvel at how the few days of the Holy week story led to such a dramatic and powerful movement.

So for me Good Friday will be a day of quiet reflection; Holy Saturday will be a normal Saturday; Easter Sunday will be a celebration.  Practising Christians do it better, but I will be shadowing them in my small way.

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