Europe and the UK

The Chancellor, yesterday told the country that weaker growth and higher borrowing would force the country to endure a record breaking six years of austerity. Then as soon as he had made his statement he was off. To where you might ask? To Brussels for an emergency meeting with European finance ministers. 

And oh, how he needed to go there. For he knows that however miserable the prospect outlined in the House, it will be a hell of a lot worse if the crisis in the euro zone is not resolved soon. 

If the European financial system goes belly up it would tip an already fragile UK economy into a double-dip recession.

As it is, the Office for Budget Responsibility painted a grim picture of what the country can expect until way past the next election.  The government is on course to borrow an additional £111bn over the next five years, while unemployment will hit 2.8 million and living standards will continue falling until 2013. 

But it is those in the public services that are going to take the biggest hit.They  will face job losses totalling 710,000, compared with the 400,000 it had previously expected as a result of the government's spending cuts.

But Osborne  let the cat out of the bag that things could be a lot worse when he said the Treasury was now undertaking "extensive contingency planning" to cope with a possible break-up of the euro, and admitted: "If the rest of Europe heads into recession, it may prove hard to avoid one here in the UK."

And what of Europe? The signs there are ominous. There are fears that Europe has entered the make-or-break phase of its crisis, as a sign of this Italian 10-year bond yields were closing in on the 8% level yesterday.

The EU Monetary Affairs Commissioner Olli Rehn said: "We are now entering the critical period of 10 days to complete and conclude the crisis response."

So whether our misery becomes a whole lot worse is no longer in the hands of George Osborne but in rather in the hands of Angela Merkel and how she responds in the next fortnight to the Euro zone crisis.

What is certain is that the next General Election will be a strange affair indeed. The government will have to fight it having already committed to £15bn of additional spending cuts for the first two years of the new parliament.

So parties will approach the election with little scope to make improvements to the wealth of the country. So the arguments will be about how the limited wealth is distributed. So the language of the next election will be about fairness. What is the fair thing to do when the coffers are low. The party(s) that is most convincing on this will get the spoils.

Wales and the Autumn statement.

George Orborne in his Autumn Statement has seemingly declared war on public sector workers in general and on the Welsh public sector workers in particular. 

His freezing of pay packets to one per cent will hit all workers in the sector but his proposal to introduce regional wage rates  will particularly hit those in Wales. Public sector workers in the country will see their future wage packets considerably smaller  than those doing the same job on the other side of Offa's Dyke. 

The Chancellor's appeal to the unions to call off tomorrow’s strike can hardly be taken seriously after such announcements.  Proposing to cut wages is hardly likely to get public service unions in a reasonable frame of mind to negotiate a deal  over pensions. 

Why he should set about to alienate the unions without any real gain for the economy is difficult to comprehend? One can only deduce it is ideological rather than a practical economic step.

To dampens UK household expenditure and consequently growth, particularly in the retail sector at such a time makes no practical sense at all. Especially when the Chancellor was forced to concede that the UK risks falling into recession in the coming months and the economy will barely grow next year.

This freeze and the prospect of regional wages will have a disproportionate impact on Wales. A large number of workers employed in the public sector in Wales.

Wales has not done well from George Osborne’s statement. Out of the £30bn UK ‘National’ Infrastructure Plan Wales will only get £216m.   

Worryingly the changes to the growth figures in the short term show the the Government’s economic policy is just not delivering. The OBR is now predicting that Britain will expand by just 0.7% in 2012 (down from 2.5% in the March forecasts). 

With such low growth figures in Britain, it is almost inevitable that Wales will either be  or, maybe is, already in recession.  The economy in Wales has always lagged behind the rest of the UK. Last month's unemployment figures showed us as the country that topped  this miserable league in the UK

What’s to be done? Well, if the Chancellor has not seen Wales has a high priority, the Welsh Government needs too.  

The Welsh government needs to up it’s game. It needs to be far more proactive than hitherto. 

Ways have to be found to get more infrastructure development in Wales. If Merseyside can get the Chinese to invest in an Atlantic gateway and other parts of England getting Middle Eastern countries and Asia countries investing in infrastructure projects, why not Wales? Why does Wales seem to miss out on large infrastructure developments? 

Look at our record. No Severn Barrage. Not a mile of electric railway track in the country. Abysmal transport links between  north and south of the country. No decent airport. The list is endless.

C’mon Carwyn lets get a list of major projects that Wales can take to investors. Let’s not be limited by our lack of ambition. After all your manifesto was “to stand up for Wales.” Now is the time to deliver. 

Racing fun on TV

The government may have got their deal by offering a crumb or two the Liberal Democrats way. But the tips below will give you a great deal more that you’ll get out of the budget settlement!

Although all our budgets took a hit last week with only one winner and no placed horses. It was our worse results since starting this Saturday racing blog. This week we’ll have to raise our game. 

Again it’s the terrestrial television racing that is followed and these are at two meetings, Newbury and Newcastle. Both offer some really good races and there will be plenty of excitement and my guess some upset of favourites.

Newbury

2:05 Sportingbet Intermediate Hurdle (Limited Handicap) (Registered as the Gerry Feilden Hurdle) (Listed) Cl1 2m110yds

The in-form horse is Empire Levant but odds are low so the question is which horse could give you a better return esach way and Azari could just do it for you

Newcastle

2:20 Stanjames.com fighting fifth hurdle Grade 1 Cl1 (4yo+)

Overturn is fit an raring to go Binocular is a top horse but just seems to let you down when you think it’s in the bag

Newbury

2:35 Sportingbet Long distance hurdle Grade 2 Cl1 (4yo+) 3m110y

Big Buck’s unlikely to be beaton but obviously it is reflected in odds so Pettifour each way. Back the two with Big Buck’s for a win only

3:10 Hennessy Gold Cup Chase (Handicap) Grade 3 Cl1 (4yo+) 3m2f110y 

Sarando as an each way bet Great Endeavour for win

Newcastle

3:30  At The Races rehearsal chase (Handicap) (Listed)  Cl 1 (4yo+) 3m 

Ashfield’s dream is another each way bet although Hey Big Spender will be fancied

Newbury

3:45 Sportingbet Handicap chase Cl2 (4yo+) 2m4f

Osric each way Coup Royale has the pace but his jumping is all over the place.

Budget agreement

So the courtship is over, a new relationship starts now. With Labour and who, you might ask, - the Liberal Democrats. Yes, with the Liberal Democrats in Wales. Why? Because a deal has been done with Labour on the budget.

What is the deal? An extra £20 million for a new Pupil Deprivation Grant, which will stand at £32.04 million in total for 2012/13, to reduce the impact of poverty on educational attainment. 

The additional £20 million will be reflected in the Final Budget to be tabled on Tuesday 29 November, and represents a 16.5% increase to the total additional allocation made in the Draft Budget.

The Liberal Democrats have been pushing hard for a deal so that they could creditably go into the local elections with a fig leaf that separates them from the coalition with the Conservatives in Westminster. Their campaign message will be slightly easier to sell now. 

Whether the local Labour parties in Swansea, Cardiff and Wrexham welcome this deal is another matter. In these areas they are challenging the Liberal Democrats for control of the councils.

So why not a deal with Plaid Cymru? Well, Plaid Cymru were pushing for £45 million. A price  to high for Labour.  It also helps Carwyn Jones with his backbenchers who hated the One-Wales agreement with Plaid Cymru. Having a smaller less challenging party on board is much more to their liking.

It can safely be said that an  early coalition deal with Plaid Cymru is now very remote. Indeed there is little appetite within Plaid Cymru for a repeat coalition with Labour.They have to decide on their new leader and then the future direction they  as a party will take.

As to the budget itself, there will be a vote on the draft budget next week, before finally putting it to bed on 6 December. It all now becomes a bit of a  formality with the government having ensured majority support for next years finances.

From riches to riches

It’s a closed shop and a very effective it is.  No, not a trade union but the closed doors of the UK’s Board rooms. 

How effective a closed shop it is, was highlighted this week in the High Pay Commission’s final report titled Cheques with Balances: Why tackling high pay is in the national interest. 

In commenting on the report the chair of the High Pay Commission Deborah Hargreaves said,

“There’s a crisis at the top of British business and it is deeply corrosive to our economy. When pay for senior executives is set behind closed doors, does not reflect company success and is fuelling massive inequality it represents a deep malaise at the very top of our society.

The British people believe in fairness and, at a time of unparalleled austerity, one tiny section of society – the top 0.1% -continues to enjoy huge annual increases in pay awards. Everyone, including each of the main political parties, recognises there is a need to tackle top pay. That’s why we are saying there must be an end to the “closed shop” that sets top pay and that pay packages should be clear, open and published to shareholders and the public.”

It couldn’t be put better. The country is facing a strike in the public sector over cuts to pensions, working families in Wales are finding themselves in homeless hostels because what they earn isn’t enough to pay the rent and put food on the table and the long term sick are seeing their benefits cut. 


And what of our captain’s of industry? Are they sharing the pain, bearing their share of the burden? Not on your life, they’re all rushing to get their snouts in the trough.The  report points the finger at the bosses. Showing them to be a grabbing self serving lot, voting themselves stratospheric pay increases. 

Redistribution has certainly taken place, but not from the rich to the poor, quite the opposite, wealth flowed upwards to the top 0.1%.  


Coincidently the Office of National Statisitics, yesterday, reported that the gap between the highest and lowest paid had widened considerably. The bottom tenth of earners saw their pay creep up just 0.1% between 2010 and 2011 while the top tenth saw their pay grow 18 times faster. 


With inflation running between 4 and 5 per cent many at the lowest end of the scale saw their pay cut in real terms.


The pay of waiters and waitresses – who are mostly part-time workers – fell 11.2% year-on-year to £5,660. Hairdressers' salaries fell 4.5% to £9,599, while cleaners' remuneration fell 3.4%. This explains why many are not making ends meet and that there is an increase in the number of homeless. 


The industrial unrest we're about to see in the public sector is surely a reflection and consequence of their pay only going up by an average 0.3% last year. It is less than half the increase of that of the private sector.


At the other end of the scale, chief executives and directors of leading organisations saw an average salary of £112,157, a rise of 15%. The salaries of senior corporate managers also saw a hike up with a substantially  increase – up 7.1% year-on-year to £77,679.


Inequality of income is not new, it happened under Labour too. The gap  widening in their term of office as they sucked up to tthe City. But, at least, they could claim that when they were in charge, real wages increased in every income group. 

Now the choice facing many, is no pay or low pay.


The gap between the four nations is also wide. The median salary in London of £27,560  and in Wales is nearly 30 per cent lower at £19,472 and Northern Ireland's £18,494, the lowest-earning region of the UK. Average earnings in Scotland were £20,862.

It is a fact that with less cash in the pockets of ordinary people consumer growth takes a hit. And economic recovery? Well it don't happen.  The rich may get the pleasure of a large wad of cash. But it’s only the poor that can spend in such numbers to get a country's economy moving again. Why is it that politicians never seem to understand this basic fact.

Easier for bosses to dismiss staff

It’s going to be made a great deal easier for bosses to get rid of their staff if the government get their way.  Of course, it’s not a vindictive move against the workers, but done with the best of motives. And the motives? To boost economic growth and cut back on red tape.

What are the changes?  The ninty day consultation period that is required by law when twenty or more redundacies are anounced is to be reduced by two thirds to a thirty day period. 

After lobbying by business leaders, the number of cases going to employment tribunals will be cut and the qualifying period for workers to be able to claim unfair dismissal will rise from one to two years' service.  

But, there is deadlock between the Conservatives  and the Liberal Democrats on the proposal to allow bosses to sack “poorly performing” staff without explanation. 

Whilst this particular proposal is on hold because it's a step to far for the Liberal Democrat, they are going along with the other proposals. 

The ideas are contained in a Downing Street review, headed by venture capitalist Adrian Beecroft and a Conservative Party member and donor.

Understandably these changes are opposed by the trade union who say that it’s return to "Victorian employment practices".

Such proposals will add to the insecurity  of workers that are already worried about their jobs because of the general economic downturn. The result will be a general reluctance amongst the work force to go out to spend thus making a dire economic situation a whole lot worse.  The last thing required at the moment, is to dent further, consumer confidence.

It is doubtful that the proposals will add a great deal to streamlining business but it will add to the general feeling that this government just doesn't care about ordinary people. There is a feeling abroad that the Conservative majority in government are working to the agenda of their business chums and the Liberal Democrats are being dragged reluctantly along with this anti-worker agenda. 

Not what was intended

An invisible hand, the ratio of girls to boys in India and China, a plague of rabbits in Australia and a wildlife sanctuary in Korea. What do they have in common? It sounds like a quiz question, doesn’t it, but no, it’s an example of the law of unintended consequences.

Most students of economics will have been introduced to the concept through the work of Adam Smith.   He maintained that an individual is led by an “invisible hand to promote an end which was no part of his intention. It is not from the benevolence of the butcher, or the baker, that we expect our dinner, but from regard to their own self interest.” The unintended consequence of a an act of self interest - the public good.

The higher ratio of boys to girls in countries like India and China is put down to the unintended consequence of the ultrasound. In both societies, boys are valued, girls are not. So the ultrasound enables women to decide on an early abortion of the unwanted girl foetus. 

Rabbits were introduced to Australia for food. In no time at all Australia was over run with the rodents leading to the destruction of valuable arable crops. Less food, not more. The unintended opposite of what was intended. 

More positively the setting up of a buffer zone between North and South Korea has lead to an unintended wildlife sanctuary developing in this zone.

That actions have unintended consequences, is a lesson now understood by economists and other social scientists but for some strange reason doesn’t seem to have penetrated the minds of politicians.

Two examples of this. The first is that of the economy. 

By cutting down hard and quickly on public expenditure to eliminate the country’s debts it has unintentionally made it more difficult for the government to meet their own debt reduction targets. 

Cutting down on public expenditure has increased unemployment and consequently increasing the benefit bill. Causing the debt reduction target to slip further into the future. 

Another example, modernising the monarchy. 

In an attempt by David Cameron to prove his radical credentials he came up with a cunning little plan that would give him brownie points without the expenditure of much political capital. 

Off he went to the  Commonwealth conference with a plan to change the  rules for deciding who gets the Crown. 

No, its not going to be raffled all that’s being proposed is a change to the rules of succession. From now on, the first born of the Monarch, irrespective of whether a girl or boy will succeed to the throne.  Oh, how different history would have been if the male child of the Monarch had not been allowed to elbow aside his older sister. 

Not only did Mr Cameron get a deal on equality between the sexes but also got agreement that future monarchs will be allowed to marry Catholics. Removing at a stroke the anti-Catholic bias at the heart of the monarchy.  

All good stuff. But has Mr Cameron thought of the Law of Unintended Consequences. Trying to modernise the British Monarchy a laudable objective, but the rub is that it involves reversing 300 years of law making.

Changing and amending three hundred years  of law is the task Mr Cameron now has to get through Parliament. Changes will need to be made to the Coronation Oath 1688, the Bill of Rights 1689, Royal Marriages Act 1772, amongst many others. 

But perhaps the one that will raise the most interest, will be the need to change the Act of Union 1707 with Scotland. The religious changes, being proposed, go the heart of this act. 

To revisit this Act must be music to the ears of Alex Salmond, the First Minister of Scotland. Why? Well, it will become very clear that the Act of Union is no ordinary Act of Parliament. It is a treaty between two separate sovereign polities. So why should an ardent unionist like Mr Cameron choose to reopen discussions on this treaty now?

It is unclear that at the very time that independence is so high the political agenda in Scotland what is to be gained by opening up this particular hornets nest.It seems a strange piece of timing. Baffling indeed. 

Surely, it raises the stakes and plays into the hands of those that want independence. One can only conclude that in rushing into change three hundred years of British history, the Prime Minister just did not think things through. 

The unintended consequence of modernising the Monarchy may take us back to the time when there was but one Monarch of two very separate Kingdoms inhabiting these island.  

TV Racing

This Saturday Channel 4 races  are again followed. All six races are long and demand horses with a great deal of stamina.

The difficulty at this early part of the jump season one is dependent a bit on last season’s form and just as a week is a long time in politics a season is an awfully longtime in horse racing. A lot can happen to a horse in that time. So one relies on no the pedigree of the horses but that  of the trainer to decide where to put our lolly.

A regular reader was slightly confused with my methods. Let my explain, the horses highlighted in bold are the ones that I tip to win, but there is always another horse included that is worth a punt these are usually an each way bet. I say this because last week would have delivered a profit if the two horses mentioned had been backed. Some of them had very big odds and were placed.

2:10            Ascot

Amlin 1965 Chase Grade 2 (Class 1) (4yo+) 2m3f

Master Minded will be difficult to beat Somersby may stand a chance but will need to up game

2:30            Haydock

Betfair.com/Paulnicholls “Fixed Brush” Handicap Hurdle Grade 3 (Class 1) (4yo+) 3 mile

Robinson Collonges  has to prove stamina or Rival D’Estruval who carries a bit of weight but a good each way bet.

2:45            Ascot

Coral Hurdle (Registered as the Ascot Hurdle Race) Grade 2 (Class 1) (4yo+) 2m3f110yd

King of the Night might just put his nose in front of likely favourite  Oscar Whisky

3:05            Haydock

Betfair Chase (Registered as the Lancashire Chase) Grade 1(Class 1) (5yo+) 3m

Long run will be clear favourite but the odds will be so poor so go for an each way bet on Time for Rupert who is trained by Paul Webber who had the privelege of training horse that I once part owned.

3:20            Ascot

Carey Group Handicap Chase (Class 2) (4yo+) 2m1f

King Edmund a good each way bet or Anquetta for a safer option

3:40            Haydock

Betfair Multiples Handicap Chase (Class 2) (4yo+) 3m

Mostly Bob was a horse that never really came up to his potential last season but maybe this will be the year  Gansey is the one to beat.

Don't blame the Europeans

It is in the nature of politicians to find a scape goat to blame if things go wrong. The crisis in the Euro zone fulfills this role for the Westminister government. Mr Cameron and Mr Osborne are blaming the travails of the UK economy on European mismanagement. Oh if it was only so.

Yesterday’s unemployment figures and the downgrading of growth forecasts made by Mervyn King to 1% until the middle of 2012 will undoubtedly lead the Office for Budget Responsibility(OBR) to say that that this downturn will not allow Mr George Osbourne to meet his commitments of eliminating Britain’s debts by 2014-15. 

So there we have, it all the pain with none of the gain. The Chancellor got it wrong as this blog kept saying, a higher rate of growth was necessary to prevent damaging public finances wrought by deepening unemployment.  The promise made at the time of his first emergency budget that "we are on track to have a balanced current structural budget by the end of the parliament" looks pretty hollow now.

The whole scale surgery to the public sector with the private sector unable or unwilling to take up the slack, has got us into the situation where a million young people between 16 and 24 are out of work and the highest unemployment rate since 1996 of 8.3% with unemployment in Wales reaching 137,000 or 9.3% its highest level since 1992.

The problems with the economy in general and with Wales in  particular are deep rooted and can’t be blamed on the Euro zone crisis. Undoubtedly the Euro crisis will now make a bad situation a whole lot worse. After all, over forty percent of the UK’s trade is with Europe and if they fall into recession we’re also going to be in the mire.

So what’s to be done. Well, Osborne needs to use his Autumn statement to try to generate more growth in the economy. He particularly needs to think more creatively as to how to deal  with youth unemployment.

In Wales, the budget needs to be changed to push for more capital projects and more emphasis on economic support. More needs to be put into social housing, partly to deal with the large arrears and increased homelessness caused by the recession, but more particularly because house building is a good and quick way of getting the construction industry moving. 

But above all there needs to be a Commission established to look at how we deal with the endemic problems of the Welsh economy. Bottom of almost every economic league table is not a good place to be.

Budget fun

Income and Expenses	January	February	March	April	May	June	July	August	September	October	November	December
Previous month’s balance		£3,305	£6,610	£9,915	£13,220	£16,525	£21,830	£24,255	£27,560	£30,865	£34,170	£37,025
Available Cash	£7,000	£7,000	£7,000	£7,000	£7,000	£7,000	£7,000	£7,000	£7,000	£7,000	£7,000	£7,000
Additional income	£0	£0	£0	£0	£0	£2,000	£0	£0	£0	£0	£0	£3,000
Monthly expenses	£3,695	£3,695	£3,695	£3,695	£3,695	£3,695	£3,695	£3,695	£3,695	£3,695	£3,695	£3,695
Planned expenses	£0	£0	£0	£0	£0	£0	£880	£0	£0	£0	£450	£900
Savings	£3,305	£6,610	£9,915	£13,220	£16,525	£21,830	£24,255	£27,560	£30,865	£34,170	£37,025	£42,430

Preparing the household budget is never an easy task, there are some things that have to be met. Enough needs to be set aside for a roof over head, food and clothing and that’s only the basic needs taken care of. What about all the other expenditure? Not the easiest of tasks at the best of times, but to do it with less cash coming in is miserable. 

Imagine this when you have to manage a £14 billion budget, with little room for manoeuvre and members of the family screaming at you for more money for their favourite things. And oh yes, if they gang up on you they can stop you allocating cash for the things important to you. 

That’s the task the Welsh Government faces. To top it all, you’ve got to do it against the clock ticking towards a 6 December deadline. So what’s to do, as they say in the valleys?

Well, the Government has to reach an accommodation with at least one of the other parties and get them on side. It has to cut down on spending in an area it regards as important and shift the cash into an area earmarked by one of the opposition parties for attention. Not an easy task, but far from being impossible.

Despite the protests of the tightness of the budget, there is always slack. Indeed there is seldom a financial year that ends without an underspend. It is no coincidence that if you travel around Wales in February and March your progress will be impeded by temporary traffic lights. This because authorities desperately try to get cash spent before the year end for fear that will be taken back into the coffers of the Welsh Government. It doesn’t just happen in roads it happens in many other expenditure areas as well. 

So we can expect Jane Hutt, the Finance Minister, to have some scope for budget adjustments. There is also a little windfall of £38.9m that has come the Welsh Government’s courtesy of the Council tax freeze in England. The funding formula means Wales gets a percentage of that expenditure, to use anyway it wants to. Who knows there might be even more room for manoeuvre after Mr Osborne’s Autumn Statement on the 29 November. 

It all amounts to Jane Hutt’s cupboard not being completely bare. She may have some goodies to offer to one or more of the opposition parties. But which? 

The Conservatives want more money spent on the health budget. It is the biggest spending department but is taking the biggest hit of all with £102m being shaved off. It is unlikely that Labour politically could do a deal with the Conservatives and the money just ian’t there. Deal or no deal, in this case, no deal.

The Liberal Democrats are pitching for more money for schools and particularly more help for poorer pupils. Now it is quite possible to re-order priorities within the budget, but would Leighton Andrews allow any changes to his plans. It is difficult to see, despite Carwyn Jones cwching up to Kirsty Williams in the Chamber, yesterday.

No, my hunch is that the deal will be done with Plaid Cymru. Why should they have favour bestowed on them, you ask? Put simply, it’s the economy, stupid.  They want more help for it. Government just might accept that it's an area it could have done more about. Of late the government have scurried around trying to show that they’re upping their game to right the downward spiral that the Welsh economy finds itself in.

During the last few weeks they’ve re-announced their capital expenditure programme. Last week’s they had an economic summit, after which the Welsh government may have realized that they’ve got to raise their game in this area. 

The latest unemployment figures showing that there are now a 137000 people unemployed will add further to the pressure on them to do something for the economic portfolio.

The budget is the first challenge to Carwyn Jones’s government and yesterday’s defeat is a reminder that a government without a majority have to listen and learn. The next fortnight will test them and also the resolve of the opposition parties. But be in no doubt, a deal will be struck.