Irish strengths and Irish woes

There is a slight sense of deja vu watching the predicament of Ireland today. I was one of those graduates who left in the early 1980s along with tens of thousands of my contemporaries. Since then I have watched with amazement the transition not just through the economic improvements of the Celtic Tiger but towards a less hypocritical, more open society prepared to confront its demons and adopt more liberal social policies.

And while the Irish economy is in a bad away, thanks to a combination of rotten banks and a massive property bubble, not all that has been gained in the last twenty years has been lost. Ireland's infrastructure is much improved, not least with a decent motorway network and strong air connections. It still enjoys a highly educated population. And - thanks in part to the low corporation tax that finance minister Brian Lenihan is rightly keen to protect - it remains a destination of choice for modern internet, IT, agribusiness, tourism and Pharma companies. With unemployment high and emigration rising, that infrastructure is a solid base from which to recover - provided that foreign investors are not scared away by the current crisis.

But it is not blessed with great government - Lenihan, to be fair, aside - and it is doing a woeful job in selling itself, something that Irish bodies used to excel at. Viewing the country through the UK media, one could be forgiven for imagining that the country had reverted to the 1950s, with photographers presenting images that might have sold well to American tourists as early John Hinde postcards. Veteran editor and foreign correspondent, Conor O'Clery is pretty sharp on this point in an excellent piece in today's Irish Times. Ministers should take heed.

But it is about time that we started telling the positive story to the people that matter; the editors, the publishers and the senior policymakers in the powerful broadcast organisations. To the best of my knowledge, nobody in Government or in the administration with the appropriate competencies has been charged with doing so.

In the early 1970s when it seemed as if the conflagration of the North was going to spill over into the Republic, when cabinet ministers were being rounded up by the special branch and when rumours of coups and crises fed off one another, the government of the day took the initiative with a co-ordinated international media campaign.

Experienced journalists and communications professionals were recruited ad hoc and sent abroad with instructions to brief editors and programme chiefs in world capitals. They worked every contact and network they had so they could get in to where policy and key editorial decisions were being made.

Irish people in senior positions in international media were tapped. A London-based media relations company with good international contacts was contracted. The results were positive. Ireland’s reputation was assailed but the wider, fuller picture was successfully put across.

Out of recession

This morning's news that Britain is finally out of recession is hardly a great surprise. And the rate of growth in the last quarter may have been low. But it is welcome news, despite David Cameron's best efforts to rubbish the Government over it yesterday. There is a lot talked about what was done wrong during this recession. But credit where it is due, a lot has also been done right. The banks were saved from collapse by an intervention that may be controversial now, but for which there was no alternative. Unemployment has not risen as high as most pundits expected, nor have there been the repossessions there were in the 90s. One reason for that is surely the successful way that many of our best run firms weathered the rececession. Of course, there is still a big problem with youth unemployment, and Gordon Brown's announcement yesterday should help. But had we taken Cameron and George Osborne's advice that we should not only have had no stimulus and no quantitative easing, but that we should have slashed spending eighteen months ago, this would certainly not have been the case.

I have no doubt that we need a clear plan to bring the budget deficit down over the next five years, and that the Budget should start to set it out. However, we must try to strike a balance between gaining the benefits from future growth - including tax revenues - and spending cuts. The idea that 17% cuts can be absorbed easily in many aspects of public spending is wishful thinking. Even the smaller than expected unemployment rate makes a difference to potential revenues. A little humility from Osborne and Cameron on this of all days might show that they had even a little understanding of this.

Gordon's G20 triumph

Listening to the doom-mongers in the media in recent weeks, one would have been led to believe that the G20 would be anything from a disappointment to a disaster for the Prime Minister. While there may be no financial stimulus, the summit has made some genuinely historic and big decisions. The trillion dollars for the IMF is one. So are the tighter regulation of hedge funds and bank capital deposits and the clampdown on tax havens. Even the markets have been lifted.

Equally, there is no doubt that the images of the Obamas and other world leaders in London - including yesterday's press conference - have clearly rejuvenated the Prime Minister, who has not looked so good for a long time. Those who doubted the wisdom of placing so much store on the G20 have been seriously wrongfooted. This has been a real success for the PM, albeit one that he really needed.

Wise counsel from Peter Mandelson

My dealings with Peter Mandelson may go back a little further than Matthew Taylor - I worked as a temporary Labour press officer during the 1987 election with a desk just outside his office in the smoky Walworth Road complex then occupied by the People's Party - but I entirely share his analysis of the business secretary's speech in New York. It is just the sort of speech we need from Labour ministers at this time.

Advance billing for his speech to the Council of Foreign Relations suggests that he will say that governments in a recession

"have to be right, even if it means more time before we are seen to deliver.....As nations, we must keep a steady nerve and cool judgement, constantly refining our policies as necessary."

According to a briefing to the Guardian, he will say Labour is in a tough place politically as he urges his cabinet colleagues against daily initiatives to combat the recession, as they only raise false media and public expectations of instant results, while the end of the recession simply cannot be forecast. There are no manuals, blueprints or precedents to dictate what to do.

With today's Mori poll putting the Tories in a 20-point lead, this is wise counsel. The public wants to see results from the big injections of funding and VAT cuts already made rather than new ideas each day. It wants the banks to lend again and more job security. The government needs to show how it has made a difference - and, given that Germany and Japan are clearly also very badly affected by the recession, there is still a case to be made for explaining the international aspects of the recession without underplaying what is happening here.

Mandelson recognises the need for honesty from the government both about the scale of the problem, what we know, what is being done and the chances of success. I don't share the Cameron desire for a full-scale mea culpa from Gordon Brown, but an acknowledgement that politicians of all colours - including the Tory front bench - supported the deregulated environment that led to the City boom and bankers' irresponsibility would not go amiss.

As Matthew says, there is a sense that the Mandelson speech supports his view that the government needs to focus on governing rather than actively maneouvering over the next election (or worse, a post-election leadership contest), when the latter is not only pointless, but self-defeating (indeed taking a more stately position would show a marked contrast with Cameron's petty point-scoring).

And in a timely warning to colleagues about avoiding populist panic measures, Mandelson also calls for some restraint there too.

"Governments must neither ignore the public's anger and impatience, for example on bank bonuses, nor be pushed into hurried judgments because we fear accusations of indecision."

We need to hear more along these lines.

Ireland shows the Tory approach to the recession in action

The Conservatives used to be fond of urging people to look to Ireland for an example of how to organise your tax system. They have gone a little silent on the subject of late. I can't see why, since the hapless Irish Taoiseach Brian Cowen is following the Cameron-Osborne prescription for what to do in a recession almost to the letter.

Cowen has increased VAT while Britain reduced it, which has led to a mass cross-border exodus to the bargain prices of Newry and a big VAT-induced boost for stores there. He delayed a bank bailout for months which has contributed to unemployment rising above 9 per cent. Now he is cutting public spending by slashing the pay of civil servants by imposing a levy of up to 9.6 per cent on their gross earnings to cut the Government contribution to pensions.

Gordon Brown should stop calling the Tories the Do Nothing party. He should spell out exactly what their prescription has meant for John Redwood's favourite low tax economy.

This post has been picked up by Slugger O'Toole and Hopi Sen.

Lies, damned lies and forecasts?

Hopi Sen has an excellent reminder on his blog of how much weight we ought to give to predictions from the IMF . As he puts it:

Back in July, the IMF thought US growth would be 1.7% in 2008, and 1.4% in 2009. The Eurozone would grow by 1.7% and 1.2% in the same time period, while for the UK the figures would be 1.8% and 1.7%. In Japan, growth would be evenly distributed with 1.5% growth in both years. Less than six months later, and the figures are all startlingly different. Japan goes from 1.5% to an economic decline of 0.3% and is expected to decline by another 2.6% in 2009. 2008 Eurozone growth drops from 1.7% to 1% and then to -2 in 2009. The UK goes to 0.7% and-2.8 while the US drops to 1.% growth in 2008 and a decline of 1.1% in 2009.

Great expectations

As Barack Obama takes the Presidential seal of office this afternoon, he will have the whole world in his hands. Despite the pragmatic good sense of his cabinet picks, he remains a figure on whom everyone wishes to project their views and hopes. And, of course, he will disappoint some of them. But that is not to say that he has to disappoint as a President.

On the contrary, good governance will require a combination of pragmatism and idealism. As The New Republic puts it in their editorial this week, "the real question is how Obama will determine the relative balance between the two." After today's pageantry, his in-tray is more than full enough: sorting out just one of the five big challenges - the recession and credit crunch, Middle East peace, Afghanistan, health care and climate change - would be enough for any Presidential first term, but he has no choice but to try to tackle all five.

Despite the churlish efforts of some to rain on his parade, there is good reason to believe that the combination of pragmatism and idealism that Obama has so far demonstrated will bring us closer to solutions to these seemingly intractable problems. On health care, for example, he has chosen in Tom Daschle the right man for the job, one who has already thought things through, and has already started to co-opt Republican opponents of Hillary Clinton's doomed efforts in the nineties. Of course, we need to see the meat of his and Hillary's foreign policy - 'smart power' is a good phrase, but doesn't yet mean a lot. And one gets the sense that no government has yet hit on the magic solution to get us out of the recession, though Obama's proposals - like Gordon Brown's - seem a lot more likely to do so than doing nothing. Yet even his transition has been smoother and smarter than most.

So we have great expectations for Obama today. The cynics would like us to think that those expectations will be dashed within months. Obama has already broken lots of records and set lots of precedents just by being elected. If he is honest about what he can do - and what others must do to help it happen - there is a real chance he can defy the doom-mongers and ensure that his blend of pragmatic idealism shines through.

Ken Clarke's return

George Osborne's gaffes have left David Cameron without a strong voice on the economy. Hence his decision to recall the Europhile former Chancellor Kenneth Clarke as shadow business secretary in place of a lacklustre Alan Duncan.

I'm sure Labour looks forward to Ken's robust advice on issues such as the value of temporarily cutting VAT - something regarded with contempt by Cameron and Osborne - and joining the Euro, reviving the good old days of Tory internecine warfare.

But in these uncertain times, we need more people of Clarke's calibre and experience to the fore. Just as Gordon Brown was right to bring back Peter Mandelson, David Cameron is right to turn to the experienced Clarke. He just shouldn't expect it to be a trouble-free appointment.

Shriti's crime: answering the question

Trade Minister Baroness Shriti Vadera has been hauled over the coals for her 'insensitivity' by the Do Nothing Tories for saying she detected the odd shoots of recovery in the economy. There may be some civil servants who will relish the sight of a minister never known to suffer fools gladly coming a cropper. But Shriti's real crime was to repeat the question she was asked.

For the mention of 'green shoots' was first mischievously made by the ITV news interviewer, not Baroness Vadera. Her mistake was to repeat that part of the question in her answer. It is a common problem. Answering 'yes' while thinking through the answer to a tricky question can see headlines 'quoting' you as having said what the interviewer said: doing that on a question on then controversial contraception nearly cost Mary Robinson the Irish Presidential election in 1990.

Media types love to salute ministers for answering the question. But any adviser knows that it is far safer to have your answer prepared and stick to it whatever the interviewer says. As Shriti Vadera now knows, it is generally not a good idea to answer the precise question; it is an even bigger problem when you accept its basic premiss.

Internships a good idea - beyond the recession too

News that the government is developing a series of paid internships with leading companies for this year's graduates is another welcome sign of the Government's willingness to act to mitigate the worst effects of the recession.

But internships shouldn't just be developed for these recessionary times. They should become a part of every university course. One reason why we are so often regaled by tales of underemployed recent graduates is their failure to get useful work experience.

Where courses are not directly linked to a particular career path, it is particularly important that students gain proper work experience; rather than bemoaning the fact that most students have to do some work, we should be looking at ensuring that some of their work will help them gain more lasting and relevant employment after they graduate.

The dangers of Cameron's latest wheeze

On the radio this morning, David Cameron sounded ever more preposterous in his faux-shock at the Prime Minister's borrowing strategy and the decision to spend £12 billion on a 2.5% cut in VAT. No term of abuse was too strong for this idea, despite its being first proposed by one Kenneth Clarke, because of its impact on public debt (though significantly, Cameron admitted he wasn't suggesting much lower debt levels himself).

By lunchtime, we saw where Cameron was headed. He had his own tax cut plans - worth £4 billion a year with no indication from whence they might be funded, though health, schools, defence and international development budgets would be left unaltered. Tax-free income would rise £2000 a year for the average pensioner and basic rate taxpayers would pay no tax on savings.

But what would the economic impact of this unfunded largesse be? As the respected Institute for Fiscal Studies pointed out, there was a chance that it would result in less money flowing into the economy. Moreover, once the four ringfenced areas were left unscathed it could result in a "very sharp slowdown" in the rate of spending growth across many areas of government.

Which might, incidentally, also lead to higher council taxes, as DCLG is not protected. Back to the drawing board, chaps?

The truth about the VAT story

When I was running David Blunkett's office in Opposition, we received a bit of paper that been designed to pressure No 10 for more money, with the admission that schools were short of money with the phrase "insufficient resources threaten the provision of education in the state school sector". I duly passed it on to the much-missed political editor of the Evening Standard, Charles Reiss, who made it his splash as it happily coincided with a cabinet awayday which was being seen as another relaunch of John Major's beleaguered government.

Needless to say the media diverted its attention to the leak story and the relaunch was suspended. Nobody remembers the leak now and it was of little long term consequence. Afterwards, when in government, one official told me that they were just relieved we hadn't seen the more radical statements in the rest of the paper.

In many ways the 1995 leak was more explosive than today's accidental publication of an earlier Treasury document on the Internet, because it confirmed what everyone in education already knew at the time, but which ministers had been denying. But it was also reasssuring to know that officials were aware of what was happening in the real world.

I was reminded of those events hearing the excitement surrounding today's story showing that ministers considered raising VAT to 18.5% in order to pay for the temporary cut. The controversy will play out but it is worth recognising the reassuring elements, which are stronger than those in the 1995 leak.

All sensible - and some radical - options are considered and should be considered over any policy. The only bombshell would have been if they had not considered the VAT increase option. The issue is not whether such options are considered, but what decision is made in the end and why. In a sense, a rise to 18.5% would have been the most logical way to pay for the VAT cut. But it would also have been the most regressive, as even the poorest have to pay it on many goods and services. The government opted for a more progressive method of repayment, which is to their credit.

But the fact that this was a serious option until the last minute also gives the lie to the notion that ministers have deliberately set out to wreck New Labour principles in order to pacify leftwing backbenchers; the top rate rise and NI increase were simply the least worst options.

Overall, a strong package

The Pre-Budget Report was a bit like Budget day, but with fewer real rabbits from the hat. The Chancellor did well to set out not only the giveaways but how it would be paid for. There were also well-judged measures for businesses, on the environment, for families and for pensioners. I still wonder just how much impact the VAT cut will really have. But it will hopefully give people confidence in the run-up to Christmas, alongside rises in pensions and child benefit. And nobody can now repeat the Tory rubbish about a tax bombshell. For George Osborne, it was a shrill shrieking response suggesting more concern about pre-rehearsed slogans than the economy. His days must surely be numbered.

Stimulating times

Today's Pre-Budget Report is expected to see two flagship measures: a 2.5% cut in VAT and plans for a higher rate tax increase in 2010. The latter is intended to reassure people that the former will be funded and will not hit them, for the most part.

I wonder what the impact of these measures will really be. The VAT cut - advocated by Kenneth Clarke on Saturday - will reduce average household bills by a tenner a week, which is not unwelcome. But at a time when major stores are typically cutting 20-30% off their prices in unprecedented pre-Christmas sales, will the VAT cut be enough? I'm not always taken by Jon Cruddas's prescriptions, but his suggestion that all basic rate taxpayers get sent a cheque for £500 could have a more dramatic and targeted impact at similar cost.

As for the tax rise on those earning upwards of £150,000, it will not raise much money and will not really impact much on those having to pay it. But what is the message that it sends? I hope that Brown and Darling are right that in these post-Obama times, and such a rise is politically acceptable to middle England. The concern about raising higher rates in the past - when some lobbied for higher rates above £100k - was the fact that far more people believed they might earn such sums than ever had a realistic prospect of doing so, but £150k may be high enough to allay such fears.

Nevertheless, the government needs to be very clear about who will pay and what they pay; media reports erroneously make out that people pay 45% on their whole income rather than on sums in addition to the £150k. More importantly, the Chancellor will need to say more today about where else the money is coming from; he must not give the Tories ammunition to claim there are hidden taxes to come.

That said, the Tories' attitude to the crisis is utterly bizarre and a recipe for wholesale depression. One might debate the government's methods, but they are producing plausible policies. The same cannot be said for their do-nothing opponents.

Will the bombshell line bomb?

Listening to David Cameron and the ever more unconvincing George Osborne on the Sunday talk shows this morning, one is struck by how much they keep repeating the word 'bombshell'. The Mail on Sunday explains that this is part of a strategy to remind us of the golden age of John Major. Given that their economic policy has bombed so far in this crisis, is there any reason to believe that what the public really wants in time of crisis is the constant repetition of 16 year-old advertising slogans rather than a serious fiscal stimulus?

Will voters trust Cameron again?

The Tory base and its newspaper supporters are ecstatic. David Cameron has abandoned his commitment to match Labour's spending pledges, so that he can get out of the self-imposed strictures that would prevent him supporting any tax cuts in Monday's Pre-Budget Report. Meanwhile, a new poll shows that the Tory lead is down to a mere three points, placing it well within margins of error, and confirming the trend of most recent polling.

The consensus among Tory commentators seems to be that Cameron has executed a terribly clever move which will pay dividends in the coming months as voters tire of the Labour government. Maybe. But isn't it just as likely that swing voters, having been persuaded that the Tories had shown real signs of change, might conclude that the earlier Cameron strategy was pure PR: once the Tories are in a corner, they revert to their true instincts. And if that is the case, perhaps they won't want to make the same mistake twice?

Osborne is no longer just hurting the Tories

The sooner David Cameron shifts his increasingly gaffe-prone Shadow Chancellor the better. What was simply a case of private grief for the Tories is now a public menace with today's grossly irresponsible talking down the pound. Osborne has shown himself utterly unfit for the job of Chancellor and has displayed a McCain-like sureness of touch in the economic crisis. The time has come for Dave to spare us all from any more such utterances from his Bullingdon buddy.

Cameron's confusion helps the Brown bounce

Iain is terribly excited by Dave's latest wheeze on the economy. I'm not sure it will resonate very far with voters who have been distinctly underwhelmed by the McCain-like confusion with which Cameron and Osborne have treated the economy in recent months. If proof were needed, look no further than today's Populus poll for The Times. Not only does it show the lowest Tory lead over Labour for months at 41-35, it also shows that the voters don't trust the Tory duo on the economy, preferring Brown-Darling by a 20-point margin. If I were David Cameron, I would be most worried about the growing personal economic optimism, where people think their own prospects are better than those of the economy.

The poll also shows that Cameron is more popular as PM for the long-term by a margin of 42-35. Peter Riddell interprets this to mean that voters prefer Brown in a crisis, but Cameron in fair weather. Yet, when asked who represents Obama-style change, Cameron barely squeaks a four point lead. Rather than showing great enthusiasm for Dave in 2010, both these polling figures simply reflect the latest voting intentions, and show the remarkable recovery Brown has made in recent weeks. Gordon is right to say that the public want serious people for serious times. But there is no evidence to suggest that they are pining for lightweights when the good times return.

UPDATE: Labour Matters has a great rebuttal to Cameron's scheme from DWP minister Tony McNulty showing the astonishing financially illiteracy of Osborne's people. They seem completely to have ignored all the deadweight costs associated with their wheeze as well as the perverse incentives to keep people jobless longer than the norm.

An indiscreet fool who hasn't grown up: the perfect qualities for a Tory chancellor?

The entertainment provided by the ludicrous saga of the Bullingdon Set at war is tempered by a realisation of what this tells us about the would-be Chancellor of the Exchequer, George Osborne.

• First, he is a fool. Otherwise, why would he have leaked the details of Peter Mandelson's alleged indiscretions when he himself had been behaving rather more badly at the same time? And when the incident was at the private party of someone whose family was vital to Tory fundraising?


• Second, he is utterly indiscreet. Given that discretion is important for any government minister, especially a Chancellor, this hardly inspires confidence.


• And third, he hasn't grown up, and still enjoys schoolboy japes. A would-be Chancellor shouldn't be wasting his time dispensing witless gossip.

How any of this makes the man capable of being a Chancellor of the Exchequer at a time when - in the words of the governor of the Bank of England - we are going through a banking crisis as bad as anything seen since the first world war, is beyond me. That David Cameron thinks he is still fit to do so tells is a lot about the Leader of the Opposition.

Brown's rising stock

There is no doubt that Gordon Brown's stock has risen greatly as a result of his decisive action in the financial crisis. Being abroad and relying more on international news outlets makes this abundantly clear. Today's announcement by President Bush shows that Brown's solution of government buying stock in the banks is the preferred US option too. After a good conference speech and a strong reshuffle, it can surely only be a matter of time before the polls properly reflect this reinvigorated leadership.