30 october 2010, the amazing mrs merkel

I am one of angela's biggest fans (13 feb), not least from seeing her at close quarters resurrect the european constitution virtually single-handedly. Less than a year after lisbon came into force, it is worth recalling the firm consensus then that this would be the last treaty for a very, very long time. Now though, it looks like everyone was wrong. In a modern day retelling of twelve angry men, it seems that angela went into last week's summit alone against 26 "nos", but came out with unanimous agreement for a new treaty to tighten eurosystem rules. Contrary to the common telling though, this is not a new treaty. There have been dozens of "treaty" amendments over the years, not least with every new accession. Most had painless ratifications. I myself helped amend the treaty when the new member states joined in 2004 to change the way of calculating countries' voting rights on the (interest rate setting) ecb governing council. Interesting one that: tiny luxembourg came out more powerful than poland, which has 80x the population. The point though is that the uk adopted it with the "ponsonby rule", meaning it was laid before parliament for 21 days. I monitored opinion closely: there was not one comment or colomn inch. This time around, we are going to road test lisbon's new mechanism of what I called "silent ratification" (p17). This would, for example, enable the permanent crisis mechanism to be established within the treaty's "no bail out" parameters, but would not allow member states' voting rights in the council to be truncated. The former will be designed to stop germany's highly sensitive constitutional court feeling the need to weigh in. There is the risk that an activist parliament could block it, not least as a negotiating chip for something else. Step forward the uk, whose parliamentarians have a host of such wants. However, the uk government should relatively easily be able to head that one off at the pass, and one would suspect the price of that is already negotiated. The precise amendment is going to be hard fought, germany's stance being to really accelerate euro area economic governance in the way that lisbon was designed to enable to happen if the backbone was ever found. We may be in that territory. Marvellous merkel may again have pulled an astounding rabbit from what everyone else saw as an empty hat - and if it does lead to tighter euro area economic governance, it may well be a rabbit that lays golden eggs.

23 october 2010, salami slice or restructure ?

Although this is about the local "here", the need to learn from the local "there" hopefully provides interest to my (mainly) non little england readers. Though more complex, local government here is essentially losing around a quarter of its income, making the need to cut costs drastic. Of course this has been long-known, and 3 london authorities, have already gone quite far down the road to keeping all their separate political structures and identities, but having a single set of people supporting them and providing services. Is this the way to go ? Those authorities have a combined population of some 600k: larger than the uk's largest single authority (manchester's range from 182 to 483k), but much less than broader city areas (manchesters' totalling 2,600k). There are 2 factors: what is the most efficient size for such a unit (from the perspective of both cost and, let's call it, social capital); and what do people want. There is much literature on the first question, and the answer to the second is it depends who you ask and how you ask them (this is absolutely brilliant). The real answer to the question is the balance between bulking up - which improves outcomes and reduces costs, through economies of scale, transparency, lesser ability to protect inefficient local connections and better practice transfer, and keeping it small enough to avoid the tragedy of the commons, when people become so removed from the community that they act solely as rational and selfish individuals even when such action is clearly contrary to the broader community's interests. A starting point for greater manchester is that political change is a nightmare. However, there are many ways to change other things that would vastly reduce costs for everyone. With hugely far sighted intention, the political leadership has already asked whether it's "better to do things 10 times over or do it once, and save on administrative costs but still deliver the same service to the public ?", and how soon we rise to that challenge will determine whether we create tomorrow's landscape, or become its victims.

21 october 2010, dread the launching of the bad ship qe2

Blanket news in the uk is fiscal, with a fearful "spending review" (see the attached) slashing more spending than any time since 1273 bc. The real date with destiny though though is november 3rd, and its monetary, as the good ship quantative easing prepares to set sail again. It's back - and this time its going to be mind-bogglingly bigger than ever. First off the blocks dropping bucketfuls of money from helicopters will be america, followed a day later by the bank of england. This is very bad news. Qe2 might help steady the bigger ship of state in the short term, holding down interest rates and devaluing the currency (the dollar is already falling in anticipation), so boosting exports, but this is bugger-thy-neighbour stuff and stores up many, many troubles, not least inflation - which is already running well above target despite desperately bad economic times. With dollar purchases potentially massive, central banks are increasingly taking over the markets themselves, the fed to create more dollars, the others to keep their own currencies steady against a sinking global reserve, with anyone that dares hold out (that's you, euro) likely to be clobbered by rapid strengthening, as japan just found out. Surely, even the dollar though has limits somewhere to its elasticity and ability to export inflation. Managing the world's main global reserve currency is the goose that lays the golden egg, but it is being slowly strangled - and who knows what happens then ? The biggest problem is where the bucketloads of money actually land, and as consumers in the west are going to remain cautious however cheap money is (it's already virtually free), a huge part of it finds its way to where interest rates are higher and profits are being made: the emerging economies, who are then staring at sustained inflation down the barrels of whatever weapons come to hand in the currency war that is surely really soon to be upon us. This is uncharted territory all around. Bon voyage - not.

Attached File: csr.doc

17 october 2010, ...and what happened next

Just to complete the sequence of my last blogs: friday, manchester and luton, as after a day's work I picked up the kids and drove them down to a travelodge just outside luton airport. Saturday was budapest as we flew over to meet up with my other half and then stayed in hungary for my mother in law's funeral on the monday. All in all, it went as would be expected, with moments of deep regret, memories, smiles, togetherness, bitterness, tears and children running around all swirling over the day, which ended for us on a plane back to luton and a long drive back before a horrendously busy four day week, leading to a rather neglected blog. This was a week that will be with us for a long time.

7 october 2010, thursday, london

Virgin rail has done well out of me these last weeks. Took the 6.43am to london this morning, and aside from a couple of hours putting the kids to bed as soon as I got home, I send my last email just shy of midnight, so work is pretty all-consuming at the moment. Every day though, I see evidence that it's worth it. Today I spent a great deal of time on child poverty. Can change make a difference ? Even yesterday a new york times journalist reinforced my faith that it does. Drawing on a raft of different studies, his striking conclusion is that life in the womb "allows poverty to replicate itself generation after generation. Pregnant women in low income areas tend to be more exposed to anxiety, depression, chemicals and toxins... [and] more likely to drink or smoke... kids facing stresses before birth appear to have lower educational attainment, lower incomes and worse health throughout their lives." Traditionally the Chinese count life as starting at conception, so you are born aged one. I think they're on to something...

6 october 2010, wednesday, manchester

Home sweet home, and without a boarding card, as it was texted to me on my phone, and I just flashed that as I went through. Amazing ! Holed up at home for the day (19 november) but piling through lots of stuff, and mixed feeling about seeing us held up in the ft. As a family, we are digesting the news about child benefit (richer folk will lose it), worth a hundred and fifty pounds a month to us. I have to say that with the monumental nature of the savings that will have to come, if we are indeed as a society to do what needs to be done by the poor, all these higher-income supplements are surely going to have to fall by the wayside. As one bbc wag said though, that's £1bn done, so just another £82bn to go now. It's going to be a long and tortuous couple of years, and just about everyone is going to be getting less of just about everything at the end of it, and so the sooner we get used to living in a new paradigm the better.

5 october 2010, tuesday, brussels

There´s an old film, if it´s tuesday, this must be belgium. It is, and it is. I am here officially to chair a session on competitiveness and inclusion, and unofficially to lobby and learn more about how manchester can draw down more funding from the eu (19 may). Many ways it turns out, although the question is whether we are brave and radical enough in the teeth of cuts to invest in a team that can work at it night and day to craft opportunity and ruthlessly pursue it in the dogged and sophisticated manner it takes. The session itself was execllent, or as excellent as these things can be with 5 cities starting by setting out their wares. Swift chairmanship though carved out a half hour at the end for some robust discussion. Competitiveness, it seems, does not automatically help inclusion, although we all wish it did. Anyway, everyone went home happy, or went on to the next session of the 4-day open days for regions & cities. I did possibly my last ever "regional" dinner tonight, and am off home tomorrow morning. Exhausted.

4 october 2010, monday, birmingham

Amazing who you see at the conservative party conference these days, and I was amongst them. Alone in a lift after breakfast with ian duncan smith (27 may), who prodded his floor (3) and then turned his back, guarding the buttons, so I had to politely lean in front of him to prod my own (1). Andrew lansley (16 june), by contrast, who was walking in the hotel as I walked out, seemed a more affable chap. Saw the back of boris, who seemed to be jumping up and down even as he ate breakfast standing up. John hayes is a story for another day, and I stoppped counting odd ministers when I hit double figures. Greg « magna carta for localism » clarke had a few interesting things to say, but star of the day on the fringe, by a country mile, was the decidedly non-party lord digby jones, whose passion, experience and worldly can-do pragmatism would steal any show.

30 september 2010, can’t spend, won’t spend

Even as the dollar continues to enable the us to spend, spend, spend, still the fed may yet go back to printing more money ("quantative easing" as it seems to be soothingly termed now), as may the bank of england, as public spending tails off and recovery looks unlikely to be able to pick up the slack. Even the anti-christ of asset purchase, the ecb, is slowly becoming a serial offender, again this week intervening to support the irish, with every sign of more to come on that front soon. The evidence is ever stronger that the western consumer has finally decided to stop spending ever more and start paying off debt, and even putting away a bit for a rainy day, which long-term macroeconomics would recognise as an unalloyed "good thing", but which is going to act as a long-term drag now that the well of the two interlinked drivers of western economies for the last years (consumer spending and credit flood) has now run dry. So the million renminbi question, is where will growth come from ? Regular readers will know my considered view that there is an inevitably long way to go in the dip and stagnation cycle before we find the answer to that question.

26 september 2010, on my bike

I spoke at a cycling summit earlier this week. Not my best ever gig, but saved by the passion of the message I found coming through as I skipped over the plethora of statistics about how cycling can save the world to my own very real enthusiasm. Yesterday, I was practicing what I preach, picking up my youngest's bike from the repair shop (I'm not very black-fingered) and the three of us going on a 10km-round trip. My other half was in budapest, as her mum rather suddenly passed away earlier in the week, though the kids didn't know yet. We made a good day of it, pausing for lunch and just generally having fun in an urban environment that I have to say was very green and cycle-friendly. We also discovered, literally a few hundred metres down the road, a great farm shop, from which I bought a few fresh things. Today, we delivered the news to the kids, and so are so are just spending a quiet day pottering around. I watched ed miliband on the andrew marr show and am bracing myself for the consequences of the israeli moratium on settlement building being lifted...

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