Crisis, what crisis!

Crisis, what crisis!

Some aspects of this are hard to understand, here’s my attempt. The UK has been in a balance of trade deficit for decades. For most countries it is the main factor in determining foreign exchange rate between sterling (GBP) and other currencies. In the case of the UK, there is significant additional incoming flows buying sterling quoted stocks, bonds and gilts. Sterling has been falling ever since Brexit, in my mind as a result of a drop in confidence due to Brexit and the growing relevance of the balance of payments deficit; the fear of inflation has added to that recently.

Last month I looked at the cost of living crisis, which I argued was mainly caused by increasing energy and food prices. The Bank of England has raised the minimum lending rate (Bank Rate) as both a counter inflationary measure and last week, a currency market defence i.e. if the US or ECB raise their interest rates then sterling is less attractive as savings location and money moves out.

On 23rd Sept., the Chancellor announced a £65bn tax cut, which was aimed primarily at the better off. In doing so he seemingly rejected the advice of the Office of Budget Responsibility. The Treasury select committee have asked to see the advice. The controversial purpose of the tax cuts is to increase domestic income and thus demand for both consumer and investment goods, but in the words of Blackadder, “there is one problem with this theory”. Actually, there are several, but in terms of understanding the current crisis, it is generally believed to be inflationary and its benefits are contested. not least by those who say any tax cuts or subsidy should be given to the poorer who will spend it rather than save. The markets’ response was swift and brutal, sterling and UK long term government debt both fell dramatically in price. This also has the effect of making the funding of the tax cuts more expensive.

UK Bond Yields from Trading Economics 1 Oct 2022 Prices and Yields are inversely related.

There are two technical features of the current UK financial services market that have exacerbated the problem. The first is index linked gilts, these pay a variable rate of interest and redemption payment,  depending on the RPI. This has the side effect of ensuring that the markets expectation of inflation becomes a factor in the spot price of long-term bonds. The primary market for bonds is as a savings instrument, but additional bonds are held and traded by hedge and speculative traders. The announcement of a non-credible macro-economic policy caused the markets to fear inflation and dump UK Gilts, and swap or trade GBP for other currencies.

It gets worse, on 28th Sept, the Bank announced a massive gilt buying operation to sustain the price of UK gilts. They did this because of fears of pension fund collapse. It seems that many pension funds have been borrowing and buying derivatives in order to invest and doing so against their gilt assets. Inter-institutional loans require the borrower to post collateral and as the value of the gilts decline, so does the collateral and the lender asks for more. The funds then have to sell a reduced value asset in order to post collateral and the volume of these sales impacts the price in downward direction. Let’s hope the bank action is enough. Even those in a defined contribution scheme, may have problems, as the collapse of the Equitable shows, where it went under because its guarantees to a subset of it investors were seen as more important than its contractual obligations to the rest. A lot of people lost a lot of money.

 The Govt is finally talking to the Office of Budget Responsibility and are planning an announcement. The Bank of England is holding fire on announcing interest rate increases, which maybe substantial.

Bank Rate History, the last 20 years history

Increasing interest rates will impact mortgage payments, and we move to the world of “the Big Short” with people losing their homes. It will get worse as the period of fixed payments expires. The mortgage providers took fixed rate mortgages off the market. Increasing interest rates will also increase rents as landlords seek to defend their income against inflation and increasing interest rates and of course many rental properties have mortgages to pay.

A triple whammy of inflation, pension losses, and mortgage payment increases, suddenly the UK seems a lot poorer than it was.  …

Now that’s a landslide!

It is not usual for a political party to have a post conference bounce, but not like this; there might be something else going on. 🙂

Electoral Calculus which is struggling under load predicts as follows,

 …

Why Labour must welcome The Forde Report

Why Labour must welcome The Forde Report

I have been struggling to read the Forde Report, but there are plenty of people who are willing to help me understand what it says. I made a brief comment on Article 7 on this blog but at Labour Conference I found this article in the CLPD Campaign Briefing Conference edition and have reproduced it with the author’s, George McManus, permission. DFL

A damning indictment on Labour HQ

The Forde Report should be read by everyone with any interest in the future of the Labour Party and our democracy. Its contents are truly shocking and illustrate what we’ve known for many years. This didn’t start with the election of Jeremy Corbyn; it’s been going on for years.

 I believe, we owe a debt of gratitude to those who compiled and leaked the 800+ page report into what went on at Labour HQ, without which the truth would have never exposed.

Forde, an eminent QC, forensically examined the leaked report and its background. He has exposed that the senior staff we employ and pay to work on our behalf, who were meant to act in a politically neutral way, were actually working to undermine the Party’s elected leader and his team. And that the fundamental rule of the Labour Party, that ‘we exist to maximise representation in Parliament’ was being sabotaged by our own side.

Sadly, after more than 2 years’ investigation, and with only three specific terms of reference, Forde admits he’s unable to shed any light on who was responsible for the report or its leaking. But his conclusions are a damning indictment on practices at Labour HQ.

Forde investigated a number of issues including the discriminatory culture, poor staff management, and failings in the disciplinary processes, all of which predated Jeremy’s leadership.

Factional and discriminatory WhatsApp messages

 Forde describes a Labour Party where a toxic culture exists and where racist tropes are cited by senior members of staff, and his comments on the Senior Management Team’s WhatsApp messages are damning.

When the leaked document first emerged, it was alleged that members on the left were ‘cherry picking’ quotes for partisan reasons. Forde disagreed: “We find that the WhatsApp messages are deplorably factional… and at times discriminatory attitudes are expressed by many of the Party’s most senior staff.” He goes on: “Criticisms of Diane Abbott… are expressions of visceral disgust, drawing on racist tropes.” And: “We were told that many of the comments were made in jest. For Party staff to consider such ‘jokes’ acceptable suggests they have become detached from professional and personal norms.”

A different view on Anti-Semitism

His comments on Anti Semitism are scathing.

When Panorama broadcast its ‘Is Labour Anti-Semitic’ programme, Ofcom received a flood of complaints. All were dismissed. The programme was nominated for a BAFTA.

The programme alleged interference by Jeremy Corbyn’s office, suggesting that his office had aggressively imposed themselves on the disciplinary process to get his allies of the hook.  Forde has a different view. An eminent and learned, cautious, legal expert QC, Forde refers to such media reports as “wholly misleading” and concludes that the issue of Anti-Semitism was treated “by both factions as a factional weapon”. This is a stake through the heart of an issue which caused so much damage to Labour’s election chances.

 But there can be no equivalence in how both factions responded to AS. The right had clearly identified this as an issue to beat the left with and when Panorama got on board it was raised to a new level. This was at a time when senior figures on the right were demanding that Jeremy Corbyn should intervene to kick people out of the Party and then alleging misconduct because he was intervening in the process. Activists will recall how for over a year, on a daily basis, we were hearing media reports of how AS was a scourge in the Labour Party and not being taken seriously because Jeremy Corbyn was an Anti-Semite. It came up time and time again on the doorstep.

Anti-left SM investigations

Forde writes in detail about the validation exercises employed in 2015 and 2016 ahead of ballots being issued in the leadership elections. Hundreds of abusive search phrases were used in social media searches to root out infiltrators. But Forde found there had been no legitimate reason why such phrases focussed only on abuse from the left, whilst attacks on left MPs including Jeremy were ignored. He concluded that the intention of the exercise was to remove ballot papers from Corbyn supporters.

Sabotaging the 2017 GE

For many activists the most damaging part of the Forde report relates to activities surrounding the General Election of 2017.

Forde found that senior staff siphoned off £135,000 of Labour Party funds to be used as national spend in seats held by anti-Corbyn MPs rather than in winnable Tory seats. This fund was set up covertly, without the agreement of the Campaign Committee: they broke the rules if not the law.

 Instead of a single election strategy there was the Party strategy and the covert Ergon House strategy. The former targeted Tory winnable seats, the latter on shoring up anti-Corbyn MPs. Forde says he could neither prove nor disprove whether this approach cost us a Labour victory, although he thought it unlikely. Either way, Labour lost a number of Tory seats by small margins whilst majorities in some Labour seats were piled high.

 Forde concludes that “the Ergon House operation was wrong” and that “it was unequivocally wrong for HQ staff to pursue an alternative strategy covertly… and that the anger amongst the membership on the issue is justified”.

Recruitment bias

Forde is also scathing on recruitment. Long term nepotism and cronyism is cited by members of the GMB; many attitudes were “deep rooted”; and a “Mono Culture” had developed in which staff were not recruited on merit but because they were a mirror image of those doing the recruiting.

This was reflected in a lack of diversity and the under-representation of BAME and women, which Forde goes into in some detail. Forde goes into depth into the allegation that a racist, sexist, and otherwise discriminatory culture exists in Party workplaces. This is an area of greatest concern for a Party which exists to oppose all forms of discrimination and to be champions of diversity.

Problems were cited not only in LOTO and Labour HQ but also in regional recruitment. Staff were appointed and promoted not so much on merit but on a factional basis. Evidence is listed of staff feeling unsupported and overlooked in a culture which was deeply embedded pre-Corbyn.

Forde concludes that there are serious problems

Forde feels that the principle of staff being the politically neutral ‘Civil Service’ of the Party has been seriously undermined and paints the picture of a “working environment totally at odds with the values the Party stand for” and of “senior levels of management actively engaged in this sort of abuse”, and points out that if recommendations from this report are ignored, then the “hostile, exclusionary monoculture in Labour HQ will leave the deep-rooted problems untouched”.

Forde talks of the “undoubted overt and underlying racism and sexism in WhatsApp messages from senior staff”, of the Party’s failure to deal with staff complaints, and of many examples of staff reporting abuse. He accepts the leaked report’s allegation of a toxic culture in the Party, and provides the evidence to back it up, including sexism and bullying.

 Forde insists that the culture must change, and his recommendations are extensive, covering areas including the disciplinary process, complaints process, rights of appeal, transparency and time limits, sanctions, reforming party culture, social media policy, recruitment and management of staff, and relations between LOTO and HQ/Regions. Political education and training will be key, and he’s “disappointed that there has been a refusal (by the Party) to engage with Jewish Voice for Labour’s proposals for training and that CLPs are not even allowed to enlist their help”. He recommends clear and transparent Codes of Conduct, especially for staff, which some have been demanding for years.

We must act on Forde’s recommendations

 Forde’s recommendations must all be taken on board – and seriously. The Labour Party must now agree to fully implement these recommendations, because if change doesn’t happen then factionalism will remain at the heart of the Party’s problems, and will only be solved by a large section of the Party walking away and setting up a new party.

It’s not good enough for the Leader’s office to say that factionalism has been rooted out, or for the General Secretary’s office to act in a manner which appears to be diametrically opposed to the recommendations. Measures taken the last 2 years clearly work against Forde’s principles.

Nor has anybody been held accountable. That wasn’t in Forde’s remit, but someone led on the Ergon Strategy, someone decided the priorities for the 2015/16 validation exercise to root out Corbyn supporters, and someone failed to address the discrimination which was reported.

The Forde Report is not a whitewash. It must now be implemented and not swept under the carpet. …

On the Economy

On the Economy

The bulk of motions on the economy were tabled by Unions, and focused on wages, infrastructure and working rights. Several of the Union motions call for renationalisation of the basic utilities, mail and rail, but not gas or water. I wrote a speech but wasn’t called. This is sort of what I planned to say.

“We are in an economic crisis, a crisis of living standards and possibly the first one caused by a government since the discovery of … Keynesianism.

Reinforced by Brexit, we have declining inward investment, the highest inflation in a decade, imports are up, exports catastrophically down, we have a possibly unsustainable balance of payments deficit again, it’s been in deficit for decades and a labour shortage impacting agriculture, social care, and the NHS and also stagnating wages.

The currency is taking a fall due to confidence, this increases the price of energy and food.

My dad, once said to me, that, “governments take thousands of decisions every day and under the Tories everyone is wrong”. it is not enough to seek to get only some of these decisions right, to compete with this ERG government on the basis of competence allied to debt fetishism. We need to offer hope.

One thing that Kier Starmer has right is the growing anger that hard work is not enough to allow an even reasonable standard of living. it is a struggle to pay for rent or a mortgage and heat one’s home and even, although I hate the phrase put food on the table. We must offer people hope of a better economy and society.

I finish by saying this is a crisis caused by this Brexit government and planning to fix it neither offers hope nor is truthful.

Flirting with monetarism and offering little hope on even trade friction with the European Union jeopardises the loyalty of many of those who voted for us in 2017 & 2019.

Dave Levy, from my notes

Apart from the attempt to fix Brexit, I think we’ll offer more than I had feared. …

The Rules Debate

The Rules Debate

Each year at Labour Conference, there is a rules debate and despite the bleats from supporters of the NEC, that we should be talking to voters and not about ourself, they always bring up rule changes, published the day before conference, thus only available in the first Conference Arrangement Committee report, it comes with a series of recommendations and this year the NEC recommended we passed theirs and rejected everyone else’s.

The debate became one of CLP rights. Last year Conference mandated that where time permitted, selection longlisting committees should be 50% from the CLP; this was ignored by the NEC who came back with a rewrite to allow them to continue to pursue their two donkeys and a lion strategy while in a number of cases, denying popular local left-wing councillors a position on either the long or short lists. The NEC came to conference with a rewrite of this rule, as did the CLP moving the original change. The CLP amendment fell, the result is presented in Table 1 below.

ForAgainst
CLP21.09%28.09%
Affiliate21.13%28.87%
Total43.05%56.95%
Table 1: Result of Card Vote 7, Parliamentary Selection Procedures from CAC2

There was a well supported rule change to permit members of the Party who were currently suspended from the whip to stand in trigger ballots and also a motion banning lobbyists from standing as MPs. The former was designed to allow Jeremy Corbyn to participate in a trigger ballot; as the rules stand, the Chief Whip can ensure that this does not happen. There was an interesting but I think ill-informed contribution from the delegate to Sheffield Hallam who raised the question as to what would have happened to Jared O’Mara if this rule had been in place, she implied that he might have been considered for the 2019 election. He wouldn’t, he resigned and his initial appointment by the NEC shows the danger of not consulting the local party.

My pet amendment, of inserting the ECHR into Labour’s rules was opposed and the NEC asked for remission, which the moving CLP agreed to; unfortunately, the Chair permitted this to be voted upon despite telling conference it had been withdrawn. I sought to move a point of order but they have invented a procedure where one has to justify the point of order to the speakers desk who told me that it was under-control. It wasn’t the point, delegates were being wrongly advised. While I consider a point of order that the speaker is talking rubbish is not a valid point of order, the point that the Chair is talking rubbish and has misguided conference is a valid point of order. It should have been allowed.

The NEC amendments which were carried included placing a 1 year waiting period on affiliate and CLP rule changes, whereas it seems the NEC can make them with under 24 hours notice. This is a disgusting piece of factionalism and control. One consequence of this is that the so-called three year rule is effectively a five year ban on reconsidering rule changes.

Another change is to cap CLP delegation sizes. I wouldn’t mind this if the floor could call a card vote but it can’t. (I need to redo my delegate power chart). Giving the floor the power to call a card vote was one of the changes proposed by CLPD.  I don’t know of any large CLP that sends its full entitlement as they get very large very quickly. CLPs are entitled to one delegate/250 members.

In my notes for a speech, I was not called, I included the slogan, adopted from the open source movement, “clever people with good ideas and work elsewhere”.  Making rule changes harder for CLPs and affiliates fails to recognise this.

This was post dated to the time of occurrence, it was finished on 4th Oct.  …

The Finance Report

I attended Labour Conference as a delegate and I got to ask some finance questions, I only had a minute, so couldn’t ask them all and they took a while to answer, so the video is longer than necessary and the answers from the platform were not particularly comprehensive, but I was able to speak to Dianna, the outgoing Treasurer who gave me better answers in a personal (corridor) meeting.

The deficit, if not the size, was known when they set a budget. They report regularly to the business board which meets at least six times each year and as when necessary, they report to the NEC on current plans twice/year.

I was told in the Hall that the £6m political publishing was print bills for local elections incurred on behalf of local parties or campaign forums; later it was suggested that there is a corresponding income item, which I need to find. My initial scepticism is based on the fact that I&E statement has an election expense line and that is where I would expect election expenses to be reported.

The increase in the Senior Management Team cost is based on the fact that there are now 10 members of the SMT, up from 6. I wonder what this does to gender parity in the staffing budget.

I managed to ask my three questions within the allotted minute, but there are no supplementary questions permitted and one of the essential points made by Diana was the theory that membership is synchronised with the electoral cycle. I don’t believe this to be true! It would seem to be true of donations but not membership income. This seems to be aligned with leadership, and if so, will be exacerbated by the OMOV elections for the Leadership.

Labour’s membership by leader

The NEC still have to either fix the decline in membership or find new but legal sources of income and as I have argued, the rich donors weren’t there for Blair, why would they be there for Starmer, although I can think of several very good reasons that became clear as the conference proceeded. …

Labour and Foreign Policy

Labour and Foreign Policy

I have just done the Labour List survey on Labour’s foreign policy advertised and written by the Labour Foreign Policy Group (Who they? Ed). I note that on their question on Brexit, they repeat the political trick used in the corrupted referendum,  Do support the Leadership’s attempts to move on and make Brexit work or should we rejoin the Customs Union and Single Market or the EU, or just satisfy ourselves with a ‘closer relationship’.

I believe we need to re-join the Customs Union and Single Market, to alleviate the economic damage caused by the increased trade friction and this is a closer relationship with the EU. I also believe we should re-acquire our political rights i.e. rejoin. The Labour Leadership have a fantasy that the Tories hard Brexit can be fixed, and we can now see the beginnings  of the Tories  phase III, the repeal of the Working Time Directive, revoking the Banker’s bonus cap and the restarting of fracking. Wake up, we have an equally unprincipled Prime Minister who is an effective servant of the ERG and the UKIP entryists.

With respect to the survey, I wanted to vote for all three ‘No’s but couldn’t as it was a radio button widget answer. This is how they win, it’s called divide and rule and this is why the PR campaign won’t talk about systems until the principle is agreed.

I also said with respect to supporting the Ukraine that Labour should ensure that Russian money is expelled from UK politics and while the Tories and Leave campaigns are the obvious first port of call, Labour needs to make sure its own hands and the hands of its parliamentarians are clean!

I think my first principles would be that a Labour Government must promote democracy and the rule of law at home and abroad, democracies don’t war with each other, …

Will CoFoE’s democracy come to be?

Will CoFoE’s democracy come to be?

At the CTOE plenary meeting we discussed Von der Leyen’s state of the Union address, we are/were most focussed on what she said as a result of the Conference on the Future of Europe.

We noted that she concluded the speech with a call for a convention on the treaties, prioritising an inter-generational contract, to leave the world better than we find it for our children but also to make the accession of new countries easier and to ease decision making.  She also welcomed the Conference out come and promised that citizen’s panels, “will now become a regular feature of our democratic life.”.

It was reported that there was little coverage of the commitment to reform in the speech in Germany. It was also reported that at the moment there are 17 member states opposed to a convention including the current presidency, the Czech republic, and its successor, Sweden. However circumstances change, and there is significant interest in the larger member states in specific reforms most obviously reform of the veto and possibly the extension of competencies, with defence, migration and energy markers being the obvious candidates, as a result of the war in Ukraine.

I am of the view that the Conference report opened a number of gates to a massive progressive improvement of the social and economic well being of the citizens of the European Union and Von der Leyen has in particular picked up on Migration policy as an area where it can do better, building a system based on dignity and respect. She also promises to incorporate citizens’ panels into the democratic fabric of the EU.

The CTOE agreed to continue to campaign for a convention, with the whole report of the Conference being on the table, and to continue to push for reform of the veto, and the implementation of transnational lists, which requires Council acquiescence. …

Labour and the EU

Labour and the EU

I have written an emergency motion for Labour Party Conference, I have ’till noon on Thursday to get it submitted, so better get a move on, unfortunately doing this from a CLP is a bit tricky . I need to check if it’s on the Agenda but that’s a bit tricky, I am not sure they have published all the motions to hoi-polloi like me yet.

Conference notes the announcement by Liz Truss on 19th September that there will be no post Brexit trade deal with the USA, and that the Govt is once again postponing (16th Sept) the imposition of the agreed customs checks between Great Britain and Northern Ireland.is a bit tricky, made worse by the direction not fo

Conference further notes that the Tory ‘Hard Brexit’ has led to reduced foreign inward investment, a worsening balance of trade deficit, reduced employment, a labour shortage in many industries, most obviously in agriculture, hospitality and in the NHS,  jobs are being offshored to western Europe and sterling is at its worse exchange rate ever with both the dollar and the euro. The labour shortages are compounded by the xenophobia released by the referendum and the Tory’s “hostile environment”.  

Conference believes that these negative economic consequences of Tory policy are significant contributors to the cost of living crisis.

Conference believes that to start reversing the damage inflicted by the Tory ‘Hard Brexit’ Britain needs to significantly reduce the trade frictions it has imposed on its imports of goods, services and labour from its biggest trading partner, the EU.

Conference resolves that Labour will call for a closer relationship with the EU in order to alleviate the trade frictions the Tories have introduced, that we will seek to rejoin Horizon Europe and Erasmus+, and that we will repeal the cruel and intrusive hostile environment. …

On the cost of living crisis

On the cost of living crisis

This started last year with the post pandemic wage recovery but what’s driving it today is the increasing imported energy prices, driven by the price of gas and to some extent the cost of food. There are two reasons why gas prices are critical, the first is that we burn it to make electricity and secondly, we use it to heat and cook in some of our homes and workplaces.

The UK privatised its energy distribution services in the late eighties and in doing so the planners had to solve two problems. The new market had to be both profitable and competitive.  They broke up the electricity generators and what today are called distributors but are in fact merely billing entities. They created a fake market and slapped a regulator, OFGEM, on top of it. The generator companies make electricity, from fossil fuels, nuclear, and renewables. OFGEM regulates the price onto and off the grid. Today it sets the price based on the highest cost source of supply i.e. Gas. The reason for this was to encourage investment in renewables, which are now capable of delivering to the grid at a considerably lower price.

The companies that are completely unaffected are the extraction companies, those who extract primary energy sources mainly fossil fuels from the ground. The UK quoted companies are BP & Shell, but several more of the UK’s primary energy suppliers are foreign owned. The current purchase price guarantees the extractors a profitable price which can be demonstrated by examining their profitability.

Both the Tories and Labour are planning to cap the consumer price for a limited period; the Tories plan to pay for this by a consumer tax (although they are calling it something else), Labour with a corporation “windfall” tax. The subsidy is needed but the critical reform would be to re-engineer the  fake energy market. I would also argue that there should be no public money without a public stake.

Another impact of the privatisation was that gas storage was sold off. Across Europe, the plan has been to buy gas in the summer, store it, and use it in the winter thus reducing the demand during periods of high prices. UK’s storage is now about 4 days; in Europe it is several magnitudes higher.

Privatisation has failed to deliver a resilient national energy plan, and the bulk of the current inflation is caused by the rising cost of imported primary energy.

The other cause is imported food prices, exacerbated by the falling domestic production. Reduced production, caused by a Brexit related labour shortage should lead to increased imports which the Brexit caused falling exchange rate makes it more expensive. This effect is reduced as we are importing less from Europe than we used to, as our European suppliers do not want to ship to the UK due to the increased trade friction costs and the opportunity cost of the transport. Importing substitutes from the US, India or even the antipodes is not cheaper due to the much higher transport costs. The reduced domestic food production also causes competition in the food supply chain which boosts costs.

On top of this, the Bank of England’s response to inflation will be to increase interest rates; this will make mortgages and rents higher which will squeeze family budgets more. Some people will have to walk away from their homes, and renters will face increased poverty as housing competes with food and warmth for a share of the family income.

The final driver for the cost of living crisis is falling real incomes making food and shelter consume a higher proportion of an ordinary family’s budget. The final obvious piece of the cost of living crisis is that there is an effective public sector pay cap. Public sector pay has been held to a 1.5% pay increase at a time of an effective increase in the Consumer Price Index of 10.1%.

James Meadway argues that wage increases are needed, prices should be fixed, and profits squeezed. It’s unlikely that the government will do this; it’s nit going to be pretty.  …