The Labour Party’s centrists and the realist operators who just want power have written off the 2015 electoral prospects of the Labour party under the two Eds. So it is against this backdrop that we should look at two new publications that have just come out. Labour’s Business written by Luke Bozier and Alex Smith argues that the party should be pro-business, it even has one brilliantly simple business-friendly idea that the government should steal immediately – small businesses should have one person as their point of contact at the HMRC. One person who is responsible for dealing with issues arising from the complexity of the myriad of taxes – VAT, NI, capital gains, corporation taxes and the like – burdening small businesses.

“In the Black Labour: Why fiscal conservatism and social justice go hand-in-hand” is a new Policy Network discussion paper in which the authors; Graeme Cooke, Adam Lent, Anthony Painter and Hopi Sen, call for Labour to embrace fiscal conservatism. Policy Network is backed by Peter Mandelson, so is not exactly a fringe ginger group. The paper can be seen as a direct rebuttal of the kamikaze economics of Ed Balls endorsed by Ed Miliband, which poll after poll shows is not seen as credible by the public. Despite the state the economy is in George Osborne is believed and supported by the British public.

The policy details in the two papers won’t worry their Coalition opponents, they will however be seen as part of a slow move back towards the electorally potent reality-based politics of New Labour, rather than the one-more-heave-to-the-left politics of Ed Miliband. Ed Miliband and those around him believe the electorate is moving towards the positions of the Occupy and UK Uncut activist groups, a strategic error that will guarantee them electoral defeat in 2015. If Labour’s reality-based wonks want to be in government before they are old men, they have got to either get rid of the Eds or convince them to tack to the centre. These are the opening salvos…

“…tax cuts are faster to implement and more credibly temporary than expenditure shifts and should be targeted to investment, low-income households, or job creation to increase their multipliers… Simultaneous adoption of deeper long-run entitlement reform would be desirable to safeguard fiscal sustainability and market confidence…”

It also pointed out that

“The level of public spending as a percentage of GDP in our forecast has reduced by about half a per cent of GDP as compared to the previous fiscal year. However, it remains very far above the pre-crisis levels of spending and represents a long-term high in spending. It’s important to maintain that perspective”

Plan B, the Balls plan for bankruptcy and bond market collapse, is for higher taxes and more spending, this can be dismissed. Osborne is right when he says the international bond markets would crucify Britain if he switched to Plan B, for as Jeff Randall points out this morning

“At the moment, the Chancellor is pulling off a brilliant confidence trick: persuading the markets that Britain remains a triple-A credit, able to borrow on the same terms as Germany, while managing an economy with an inflation rate 66% higher than the eurozone’s average, and a national debt that is forecast to hit £1.32 trillion in 2015, nearly 40% greater than today.”

Tricky. Gordon Brown inherited an economy in a sweet spot and left an economy drowning in debt, Osborne believes he must bear down on the deficit to keep the confidence of the bond markets. Yet a paper produced by Dr Tim Morgan of bond brokers Tullett Prebon argues that if the government is going to miss its deficit reduction target anyway, what option would placate the bond markets more?

1. “Britain has missed its deficit target because growth hasn’t happened”
2. “Britain has missed its deficit target because the government failed to cut spending sufficiently”
3. “Britain has missed its deficit target because taxes have been cut in pursuit of growth”

We’re currently in the first situation, the second situation is unpalatable to the government, the LibDems don’t have the stomach for a shock doctrine style short term austerity programme. Balls advocates stimulus in the form of higher spending, no one in government is advocating the alternative, which is to stimulate the economy by cutting taxes instead. Of course if we also rolled back government spending there would be more room for tax cuts to boost consumer confidence and the economy, without matching spending cuts the deficit will rise. Osborne is going to miss his deficit target regardless of which option he takes, it wouldn’t scare the bond market so much if cut taxes in pursuit of growth…

Guido was an investment banker, has a lot of friends who are investment bankers, hell Guido even married an investment banker. Since the days of the Long Term Capital debacle at dinner parties Guido has argued that the problem with investment banking was that the geeks had brilliant reasons for losing big money, in that they had complex models that impressed management better than traditional trader’s gut instinct. The second problem was that investment banks were no longer partnerships, they were publicly listed companies, with shareholders who were not involved in day-to-day management. This has proved to be a disastrous form of capitalism, with owners who don’t know what the managers of their money are doing.

Up until Salomon Brothers listed in 1981 the investment banks were partnerships. That meant the firm’s capital was provided and risked by the partners who ran the firm. The oldest and most experienced partners tended to have the most capital in the firm. This had a risk management effect greater than any Nobel Prize winning computer-calculated risk model, the old guy with the grey hair stood to lose everything when some testosterone charged 27 year-old trader bet the firm’s capital. This incentivised senior management to control risk, because they know there are old traders and there are bold traders but there are very few old, bold traders. The bosses’ desire to keep their retirement pots concentrated their minds.

Michael Lewis points out that public listings transferred all the risks from management partners to the firm’s shareholders who had no idea what risks were being taken. Now we have huge financial combines with managements incentivised to bet the shareholders capital big, win and get out with their annual bonus. If they lose, the shareholders lose, or if they lose really big the taxpayer eventually bails them out because they have retail banking High Street subsidiaries which democratic governments are terrified will be dragged under as well. Capitalism with the risk being taken with Other People’s Money has the same fundamental problem associated with socialist governments spending Other People’s Money. Why worry if it isn’t your money?

Downing Street is briefing that the PM will be promoting the idea of “moral markets”. It is of course human nature to act in your self-interest, what has gone wrong is that the incentives have been given to those who manage the capital to take risks which informed owners would never knowingly take. There is nothing moral in asymmetric markets where the risks are borne by others than those taking the risks. If taxpayers in Western democracies are to implicitly insure retail banks – in effect owning the risk – the cost of that insurance should be such that it is prohibitive for retail banks to take exotic trading risks. Proprietary trading is for proprietors. Moral markets require risk and reward to be fairly priced.

The now famous global warming graph (top), popularised by Al Gore, shows rising global temperatures. Now a well funded team called the Berkeley Earth Surface Temperatures project (BEST) led by Professor Richard Muller, of Berkeley University in California, has been accused of falsifying data by a respected member. A repeat of the Climate Research Unit debacle at the University of East Anglia.

Professor Judith Curry, who chairs the Department of Earth and Atmospheric Sciences at the prestigious Georgia Institute of Technology, said that Muller’s claims were a ‘huge mistake’, with no scientific basis – she has 30 years research experience and is the second named co-author of the BEST project’s four research papers. She has accused him of trying to mislead the public by hiding the fact that BEST’s research shows global warming has actually stopped – as seen in the more accurate chart (bottom).

One international controversy over research fakery at the Climate Research Unit of the UEA by politically motivated scientitsts is bad enough, now a second case of fakery has been uncovered suggests the global warming racket is unravelling. The age of the progressive consensus on climate change, which was bought into by Cameron’s Conservative Party, was based on deliberate falsifications.

“Ages are no more infallible than individuals; every age having held many opinions which subsequent ages have deemed not only false but absurd; and it is as certain that many opinions, now general, will be rejected by future ages, as it is that many, once general, are rejected by the present.”

John Stuart Mill, On Liberty

The claims by the likes of George Monbiot and others that the respectable scientific world was at one and those of us sceptical of the alarmist’s claims were in denial ring increasingly hollow. Public opinion is turning sceptical, suspecting rightly that this is just another racket to raise taxes. Temperatures have not been rising for a decade contrary to the global warming theories under-pinning the outlandish claims of the alarmists. Our supposed invisible carbon threat reminds Guido of the emperor’s new clothes – seen only by fools deceived by charlatans.

See also: CRU Boss Stands Aside, Queens University Blocking Data FOI, Time to Defund CRU’s Global Cooling Deniers, Climate Change Alarmism is Snow Joke

The “Occupy the London Stock Exchange” and “Occupy Wall Street” crowd have got the wrong target. Living standards are being deliberately and systematically undermined by central bankers not stockbrokers. The London protestors should head over to the Bank of England and their friends in NYC should head for DC. Inflation at 5% is robbing rich and poor alike of our earning power.

In consistently predicting this inflationary mess Guido would happily claim sagacity, but it is pretty basic economics that if the supply of something rises, unless demand increases, the value of it goes down. If you print more money, you get inflation. Simples.

Ben Bernanke and Mervyn King say inflation isn’t a problem, in fact the Bank of England’s official position is that deflation is the danger. The Chancellor says he agrees with the governor. George Osborne also claims he is a “monetary activist”, though since monetary policy is in the hands of the nominally independent Bank of England it is hard to understand how his activism can take effect. He also claims to be a “fiscal conservative” who, when not putting up taxes, spends and borrows more than Gordon Brown. Mervyn King is alright, his pension is inflation protected.

In the think-tanks and on the financial pages the likes of Allister Heath, Dan Hannan, the MPs Douglas Carswell and Steve Baker, as well as yours truly, are all sympathetic to a radical school of economics that is attracting growing interest. The father of this school was an Austrian economics professor, Ludwig von Mises, as the credit crisis deepens his books are selling better, in particular “Human Action” in which he warns

Police rules are clear:

“The release of information concerning current investigations may compromise any subsequent court proceedings. Police investigations are conducted with due regard to the confidentiality and privacy of victims, witnesses and suspects.” 

The Guardian has been making hay with the many violations of these rules by News of the World journalists. Once again the Guardian expects to be treated differently from the tabloids. The News of the World’s relationship to the Metropolitan Police was evidence of a corrupt media-police nexus, when the Guardian has an unlawful relationship with a Metropolitan Police officer it is, they froth, “a public interest investigation”. Just as when the Guardian avoids taxes offshore it is not, for some inexplicable reason, like when other firms do it. When Guardian journalists hack phones it is somehow different, journalists have to have the editor’s approval before hacking phones according to internal guidelines. The editor of the Guardian seems to think that his paper is above the law, and that he can be judge and jury when it comes to his paper hacking phones and compromising police investigations.

UPDATE: Metropolitan Police have issued a statement saying “This is an investigation into the alleged gratuitous release of information that is not in the public interest.” Quite.

“…you say we should be Gandhi-like saints and give everything away before we can advocate being taxed more. The point about tax is that’s it’s collective – it’s an “I will if you will” deal. I see no hypocrisy in any of this – but no doubt you will go on spreading ad hominem empty spite – instead of engaging fairly with the substance of the argument.”

Engaging with the substance of her argument, Guido asks, why is progress towards her social democratic utopia an “I will if you will” deal? If it is conditional on reciprocation from the likes of Guido it will never happen. Millions of us already feel over-taxed, like her employers we’re going to hold on to every tax break and tax haven we can come hell or Edward Balls. If she thinks she is under-taxed she can do something about it tomorrow, pay the Treasury more, they really do accept donations to bring down the deficit. Polly could give her own self-defined “unjust rewards” – for that is how she describes her own income – to charity and live more like the common people. Instead she chooses to keep the rewards that put her in the top 1% of income earners.

The home in London worth a million-and-a-half, the house in the country, the villa in Italy, the sheer inequality of it all must play on the conscience of a progressive social democrat. Her get out for keeping all is that she won’t make the sacrifice unless the likes of the greedy and privileged bankers in the neighbouring villas do so as well. Do you see the flaw in this aspiration?

Polly’s excuse for educating her children in private schools is that the state schools were crap at the time. The exact same reason the Fawkes girls go to schools whose existence Polly Toynbee now campaigns against. Another case of “do as I say, not as I do”.  

Meanwhile the next generation of progressives is lining up to be no less hypocritical than the last. Will Straw commends Tory MPs Matthew Hancock and Nadhim Zahawi who in their new book “Masters of Nothing“ argue that the banking crisis was partly due to a lack of women in trading rooms. Too much testosterone contributed to the debt crisis apparently, well that and a lack of pay transparency among other things.

Will is a wonk at the IPPR, the key policy and propaganda think-tank of the progressive soft left. So how does IPPR do on the gender equality and pay transparency front? Guido asked Will, IPPR’s associate director, how much he earns he refused to say or even give an average for associate directors at the IPPR. Pay transparency is only for bankers, not policy makers it seems. 

On gender equality the IPPR has 9 male serving directors out of 12 at the top. At the bottom 7 out of 8 operations staff are female. Another progressive case of “do as I say, not as I do”.  

It was Erin Pizzey, the founder of the first refuge for battered women, who in the late eighties identified Labour’s then radicals Harriet Harman and Patricia Hewitt as dangerous feminist  ideological enemies of the family. Harman and Hewitt were in those days leading lights of the loony left’s radical feminist wing, arguing in pamphlet after pamphlet that “It cannot be assumed that men are bound to be an asset to family life, or that the presence of fathers in families is necessarily a means to social harmony and cohesion.” After decades of agitation, which influenced social policy as well as social workers, their attack on men and their role in modern life has reached its nadir in Tottenham. Local MP David Lammy put it bluntly last week: “We are seeing huge consequences of the lack of male role models in young men’s lives..” Harriet Harman is the ideological single-mother of those gangsta rioters.

Peter Oborne correctly identifies that behind the scenes New Labour’s party policy was captured by the likes of Harman and Hewitt who viewed the traditional two-parent family as an instrument of male, patriarchal oppression. The riots are the toxic legacy of such poisonous “progressive” attitudes.

In government Iain Duncan Smith has perhaps only until the next election to reverse decades of progressive social policies, he has to make work pay for people who have known only inter-generational worklessness and rebuild the traditional family as the prevailing societal norm. That task first starts in the think-tanks, moves onto the broadsheet editorial pages, before becoming a stated policy objective eventually leading to changes in the infrastructure of social policy. There is also a necessity for a reversal of the secular kulturkampf which progressives have waged to make non-judgemental, moral relativism the only acceptable official view. We are currently only at the think-tank and broadsheet editorial stage.

Harman’s 1990 IPPR  pamphlet “The Family Way” was described by Feminist Review as “An attempt to combat stultifying, traditionalist concepts of ‘the family’”. We have reached the end of that decades long struggle by Fabians and feminists to undermine the family; with 40%  of children born outside marriage and a minority of childhoods completed in the household of both biological parents. It is now apparent to all that few if any of Harriet Harman’s gangsta progeny come from those supposedly stultifying traditional families.

It is self-evident that the welfare state has fundamentally undermined the family, enabling and actually encouraging fatherless families to become commonplace. This is a social disaster. Welfare incentives are powerful nudges in a negative direction. Downing Street wonks should understand that “nudge theory” works two ways, not always in a positive direction.

The scale of the problem is immense, in a generation since the sixties the percentage of births outside marriage has risen from 5% to 40%. Some of those are in co-habiting couples – which unfortunately are more fragile than traditional marriages – however the majority are brought up in fatherless households. A Civitas study found that children living without their biological fathers are more likely to get into trouble at school, to have adjustment problems and eventually go to jail. Iain Duncan Smith can’t solve deep social problems with welfare reform alone. Society needs to reverse decades of failed “progressive” thinking about the family and social norms. A culture which makes no value judgements about how we raise our children is creating tomorrow’s looters and rioters.

The IMF report recommends

“…tax cuts are faster to implement and more credibly temporary than expenditure shifts and should be targeted to investment, low-income households, or job creation to increase their multipliers… Simultaneous adoption of deeper long-run entitlement reform would be desirable to safeguard fiscal sustainability and market confidence…”

It also points out that

“The level of public spending as a percentage of GDP in our forecast has reduced by about half a per cent of GDP as compared to the previous fiscal year. However, it remains very far above the pre-crisis levels of spending and represents a long-term high in spending. It’s important to maintain that perspective”

Plan B, the Balls plan, is for higher taxes and more spending, the same plan Brown had which took us to the brink of bankruptcy with the biggest government deficit in the G20. That can be dismissed as a failed ideology, now tried for 13 years and tested to destruction. If faster growth is required the IMF actually recommends an accelerated Plan A, “Plan A+”, cutting taxes for those on low-incomes, cutting welfare payments to those who are healthy yet on long-term unemployment benefits and cutting overall government spending back to where it was before Gordon. The UK is cutting public spending slower than Obama and at a rate slower than even the EU average.

The IMF’s Plan A+ to boost growth should be considered along with supply-side reforms to boost business confidence, if we rolled back government spending there would be more room for income tax cuts to boost consumer confidence. If we want more private sector jobs and to grow the economy fast and sustainably, Plan A+ makes sense. Preferably sooner rather than later.