A narrow political vision on Britain’s global role?

by | Oct 8, 2010 | Conflict and security, Global system, UK

Three weeks, three party conferences, but what did they tell us about where the parties see Britain’s place in the world?

First up were the Liberal Democrats in Liverpool.Their first conference as a party of government and junior Foreign Office Minister, Jeremy Browne, who described himself as the longest serving Liberal in the Foreign Office since 1919, gave the foreign affairs speech.

He made the now obligatory reference to the rise of China, India, Brazil and other powers and said Britain and Europe can’t stop this, but instead should seek to make it a force for good.He also argued that Britain still has a lot to offer and should be a catalyst for this new world order. It was short on specifics or examples of how this could be done, and how different is this from David Miliband’s talk when he was Foreign Secretary, that Britain should be a ‘global hub’?

The Lib Dems’ junior Defence Minister, Nick Harvey, focussed on one of the party’s keynote policies – a review of the need for a like-for-like replacement of Trident. In his speech, Nick Harvey argued for delaying the decision until after the next election, but his reasons appeared less about giving more time to consideration of the options and more about wrong footing the Labour Party. An argument that could give the impression that debate on a fundamental issue like the future of Britain’s nuclear weapons capability is being used as a tool to embarrass political opponents.

Next to Manchester and Labour’s conference. Being the first since losing power, it, perhaps understandably, witnessed quite a bit of raking over the recent past – both from internal critics of the last government and from former ministers defending their records.

A fringe meeting on the future of defence policy I went to heard concerns from trade unions and defence contractors about the potential impact on jobs and the industrial base of the defence cuts expected from the ongoing Strategic Defence and Security Review. The former Defence Secretary, Bob Ainsworth, was on the panel and on the defensive, responding to questions about his record with jibes back at some of his questioners.

The thing lacking was much discussion of what kind of role Britain should play in the world and what kind of military forces will be required for that. The defeat of David Miliband for the leadership and his decision to return to the backbenches inevitably meant there was less focus on his foreign policy speech to the conference than on discussion of his legacy, including as Foreign Secretary. On The World Tonight, journalist Ann McElvoy argued his main legacy was that in the wake of the Iraq war, which many believe was a big mistake, he made the case for Britain to retain its global reach and the need for intervention when the time is right, especially in Afghanistan.

On to the Conservatives in Birmingham.In the wake of the leak to the Daily Telegraph of Defence Secretary Liam Fox’s letter to David Cameron arguing against deep cuts to his budget, the mood among the Tories’ defence team seemed more upbeat, suggesting their rearguard action ahead of the Comprehensive Spending Review may be having some success. And, almost inevitably, discussion over Britain’s role in the world at the conference was dominated by the defence review as it nears completion.

The defence fringe I went to was a bit more wide-ranging than its Labour equivalent. The Defence Minister, Peter Luff, said the government is looking to France to be a strategic partner along with the US. He also suggested Britain would seek to work with France to develop new weapons systems bi-laterally, rather than enter new multilateral projects like the Eurofighter ‘Typhoon’. But the argument over what role Britain should play in the world came mainly from Nick Witney of the European Council on Foreign Relations rather than the politicians on the panel.

All this left me thinking that if the party conferences reflect the way the main parties are looking at Britain’s future global role, it does seem their focus is still very much on the defence review and cuts, rather than the more fundamental question of what role the UK should play in the changing world order. If there is a wider debate going on about what the UK’s military forces should be for, rather than simply what can be afforded, it seems to be going on largely behind the scenes. Whether that is wise is another matter.

UK election debate – the housing crisis

by | Apr 29, 2010 | Economics and development, UK

If the BBC leaders’ debate tonight devotes more time to bigotgate than to housing, I am going to dedicate the rest of my days to working for the Corporation’s demise.

Britain’s unsustainable housing market is at the root of many of the country’s problems and could wreak appalling damage on voters during the next parliament. It must feature in the debate.

Someone should start by reminding Gordon Brown of a promise he made in his first budget speech in 1997:

Stability will be central to our policy to help homeowners. And we must be prepared to take the action necessary to secure it. I will not allow house prices to get out of control and put at risk the sustainability of the recovery.

As I argued recently:

When Brown spoke, the average house cost £75k  – about £10k above the early 1990s nadir. A long long boom was just beginning. Prices would peak in February 2008 at an average of… £232k!!!

In other words, Brown promised not to let house prices spiral out of control and then allowed them to treble, during a period when household disposable income increased by only 30% or so.

2007 saw what is often called a housing price crash, but as this graph shows, it was really only a blip.

As the government pumped money into the economy and pushed interest rates to unprecedented low levels, the bubble started to inflate again. House prices are now back to the levels of June 2007.

Second guessing the housing market is a mug’s game, surely this is unsustainable. British houses are overvalued by nearly a third, according to one measure. Worse is the amount of mortgage debt outstanding – $1.238 trillion. By comparison, government debt is ‘only’ £950 billion.

Low interest rates and buoyant employment (relative to the economy’s woeful performance) have kept householder’s head above water – but the highly-indebted remain highly vulnerable to any increase in interest rates or to further job losses.

My best case for the housing market is a long period of stagnation (we desperately need lower prices). Worst case would be a sudden, vicious and self-fulfilling collapse. I believe this is currently the most serious economic risk facing the British people (one which is, of course, interrelated to Europe’s sovereign debt problems).

So what do the major parties have to say about this in their manifestos?

  • Labour wants to expand home ownership and exempt all houses under £250k from stamp duty (likely to push house prices up). It says it will build 110k houses over two years (likely to push prices down).
  • The Conservatives promise to exempt first time buyers from stamp duty if their house costs less than £250k. It wants to put communities in charge of planning, which is highly likely to reduce the number of houses built.
  • The Lib Dems plan to use loans and grants to bring 250k empty houses back into use.

Pretty weak beer, all told. No party questions the shibboleth that Britain needs more homeowners. None is prepared to explain how they will manage risks that have been increased by the response to the financial crisis.

Far less do they have policies to fulfil Brown’s promise from 1997 – to end boom and bust in the housing market radical proposals (see my Long Finance paper) to prevent the mortgage market from screwing borrowers every twenty years or so.

So here’s my question for tonight’s debate:

In 1997, Gordon Brown promised he’d never let house prices get out of control again, but then presided over a housing bubble that has left British householders owing £1.2 trillion on their mortgages. In government, what will you do to stop the housing dream from becoming a housing nightmare?