George Osborne's ABC

The economy is shrinking, so George Osborne's economic policy is a failure, right?

Depends how you look at it.  Yes, the best the UK is flatlining, but growth isn't the only consideration.  If you look around Europe you'll see everywhere economies in trouble.  Ireland and Greece have needed bail-outs.  Spain and Italy's borrowing costs are pushing the 7% barrier thought to be the point of no return.  How's Britain doing?  Well the cost of borrowing depends how long you want the money for, but while not as low as Germany, our borrowing costs are at historically low levels.  This morning the UK sold some index-linked 17 year bonds at a negative rate - that's to say borrowers actually paid the UK to look after their money. The massive deficit Osborne inherited from Labour is falling, both in nominal and real terms and as a percentage of GDP.

Someone said recently that our borrowing costs were low because we were one of the best looking horses in the glue factory.  It's certainly true that markets, terrified of the state of the southern European economies, are desperate for somewhere safer to put their money. No matter how unpromisingly things are going here, we still look a bit better than some of our neighbours across the Channel.

Put it like that, and Osborne's policy is working rather well.  Certainly the markets think he'll pull it off.  If they didn't, we wouldn't be borrowing at under 2%.  Anyone who thinks, as the two Eds apparently do, that just borrowing a bit more money will set our economy going again at trend rate or something like it (2.5%), when all around us European governments are tumbling, China faltering and even the US set for a dose of fiscal rectitude after Obama's re-election in November, is living in cloud-cuckoo land.  In these circumstances the best we can hope for is to stay afloat.

Its failure to recognise this that makes Labour's economic policy, sadly, a joke. Labour tells the Tories they must spend more to reflate the economy. The Tories borrow (and thus spend) more, but the economy doesn't grow. So Labour says Osborne's policy isn't working, overlooking the reality that he is doing pretty much what they wanted.

Of course it's also arguable that this paradox makes Osborne look foolish too: he says that extra borrowing will push up bond rates. It hasn't happened; or at least not so as you'd notice.

In this mutual game of it-was-him-no-it-was-him, my sympathies lie slightly with Osborne, because undoubtedly every extra billion we borrow pushes us slightly closer to the point where the UK slips beyond the financial event horizon and down into the vortex of death. Which is why this morning's borrowing figures this morning were bad for the Chancellor.  It's early in the year, and borrowing fluctuates from month to month, but May borrowing was up to nearly £18bn from £15bn last year.  And this is the danger for Osborne.  Economies weaken across Europe.  UK tax revenues shrink and benefits payments rise.  Borrowing rises to pay for it.  The deficit goes up instead of down.  Our interest costs rise accordingly.  We are sucked into the same whirlpool that did for Greece and is now doing for Spain and Italy.  We are not there yet, but you can see how it might happen.

If it does, you can forget not just Plan A, but all the rest of the alphabet as well.

At least it wasn't the Germans

Against my better judgment, football has been on my mind quite a lot in the last fortnight (old naiveties die hard), and it is something of a relief that England's voyage towards the Final of the European Championship has been brought to an abrupt end by the Italians.

For one thing, when the Final takes place next Sunday night I will, pretty much to the minute, be walking out onstage at Salford University to conduct Mahler's 4th Symphony, a prospect which, had England still been in the competition, would have involved the difficulty of having to be in two places at once, ie in Salford and somewhere in front of a TV.

But also, if we had beaten Italy our opponents in the semis would have been Germany.  While Italy are distinctly average at the moment, with only one great player (Pirlo, last night sending the ball curling to all parts of the ground, unimpeded by Rooney who was supposed to be marking him), the Germans are a great team, perhaps the only ones with a prayer of beating Spain.  I shudder to think what humiliation the Hun would have visited on Roy Hodgson's journeymen.

The Finals have brought those in my family not much interested in football (ie 4/5ths of them) into close contact with the game, and I have been trying to help them by creating a bluffer's guide to what to say whilst watching England.  Here it is.

"Early ball, Joe!" - an exhortation to England's goalkeeper to distribute the ball quickly to one of the wide players to set up another attack (in fact what Joe Hart does is hoof the ball upfield, thus giving away possession to the opposition).

"Stop giving the £$%&ing ball away!" - To be said after Hart has hoofed the ball upfield, giving away possession to the opposition; or after any of his team mates has done the same thing.

"I don't like this!" - To be said after "Stop giving the £$%&ing ball away!" when the opposition, having been gifted possession by England, are bearing down on our penalty area.

"Close him down!" - When, having reached the penalty area, the opposition have been given time and space to set themselves up for an attempt on goal.

"Row Z!" - When the opposition have lashed the ball goalwards, this cry, uttered loudly enough, can often act as a charm, mysteriously directing the ball to the uppermost tier of the stand.

"That'll do!" - When the ball is nestling in the uppermost tier of the stand, prior to it being returned to Joe Hart to hoof upfield again, thus conceding possession to the opposition.

"Early ball, Joe!" - It will be seen that only a small number of cries are required to follow England successfully on TV.  Merely proceed through the above cycle during the 90 minutes.

"Shall I put the kettle on?" - A good way of breaking the silence when England have lost.

Anyway, enough footy till Brazil 2014.  Bring on the Mahler!

Jimmy Carr and Amazon

"I've applied for a car loan", runs the newly minted joke.  "He's the only one with any money".

What to make of David Cameron's condemnation of the comic's tax affairs?

No two people can agree on how much tax it's right to pay.  Given the relativism inherent in this, it seems sensible for the law to cut through moral disagreements and tells us when tax is due.  After all, the law is merely the legislative opinion of the government of the day.  Anything not caught by the law is fair game, one might think.

Well, up to a point.  I wouldn't condemn Carr for minimising his exposure to tax.  But for someone whose career depends on ordinary people liking him (ordinary people who not only don't have Carr's money but moreover don't have the opportunity to evade the chilly embrace of PAYE), reducing the amount of tax you pay to single figure levels seems like remarkably bad PR.  The fact that Carr once took part in a lame TV sketch show which lampooned Barclays for tax avoidance is useful ammunition for his opponents, but essentially something of a sideshow.  For the real crime of tax avoiders like Carr, whose USP to some extent rests on their identification with the common man, is hypocrisy.

Spare a thought for journalists on the Guardian, fulminating every other month about some corporate tax avoider like Vodaphone but knowing (I try and remember to write in and tell them, just in case they've forgotten) that Guardian Media Group bought the publisher Emap via a series of offshore companies in order to avoid tax.  How they must be grinding their teeth into their skinny lattes.  Or not.

Think of those latter day saints U2, fulminating about the poor whilst squirrelling their own vast wealth away offshore to make sure not too much money goes to the Irish exchequer, an exchequer whose spending cuts are even as I write forcing people out of their jobs and homes.  If U2's fans were capable of joined up thinking, they would never fork out again to experience the compassionate warbling of diminitive tax dodger Bono and his mates.  But I'm not holding my breath.

For while it may be perfectly legitimate for Carr and his fellow travellers to minimise tax, the rest of us don't have to like it much.  I have for example recently decided to stop buying books from Amazon, and I recommend that you do the same.  Amazon do millions, if not billions, of business in the UK.  But they don't pay any tax here.  Amazon have the right to arrange their tax affairs in any legal way they like.  But we don't have to buy books from them.  I find www.abebooks.co.uk a perfectly good substitute.

As for David Cameron, if he doesn't like Jimmy Carr's tax arrangements, he could always change the law, no?

Mrs Merkel blinks second; or not at all

So perhaps the Torygraph's reports of a European Redemption Pact were a bit premature.  Or maybe just wrong.  I saw a German banker on Newsnight last night, eerily reminiscent of Hardy Kruger in The Flight of the Phoenix, explaining with patient complacency that Germany was willing to put in more money; it was just that there would always be a quid pro quo.  In other words, social reforms.  So maybe Merkel's coat-trailing of an ERP was just part of this process - jam tomorrow.  If you're good.  Of course all that ignores the fact that Greece and Spain have to live with this crushing austerity now.  Hope that in five years things might be a bit better (or not) do not sustain people who aren't sure where their next meal is coming from.

Apologies if I've mentioned this before, but some Torygraph journalist - it might have been Jeremy Warner - wrote a while back that we've been standing on the edge of the abyss for so long that we might not have noticed that we are actually falling into it.  I suspect that we probably now are falling into it, and that's what accounts for the vague feelings of hysteria and unreality which accompany the sight of the G20 leaders flailing around at a Mexican seaside resort.  David Cameron apparently declined to be filmed in front of this scenic backdrop, and one can hardly blame him.  No doubt he would much rather be at home than hobnobbing with people like the egregious Manuel Barroso, a bureaucrat of the first water whose bad-tempered reproof for President Obama carried with it a sense of outrage that the facts are, inexiplicably, refusing to conform to the scheme enthusiasts like him had planned for the Eurozone.

Those whom the Gods wish to destroy . . .

England's date with the quarter-finals

I have spent too many summer afternoons and evenings hyperventilating in front of the TV to put much faith in England's ability to win the Euros.  We are not good enough.  As someone said, it's the hope that kills you.  And the hope I felt at 1-0 in the Sweden game was still tempered with the frustration of seeing England give the ball away.  Again and again.  My wife told me to shut up, and so I have arranged to watch the Ukraine game tonight in licensed premises.

Unconsciously or otherwise, the aim of all England managers is to keep their job.  They know that in order to do so they must reach the quarter-finals.  We, the public, will be satisfied with that.  So they play pragmatic football to get us out of the group stage.  The trouble is that a pragmatic team never, or almost never - Greece and Denmark are the only countries to have done it that I can remember - wins the competition.  So why bother?  We know we aren't good enough to win anyway, so why not go out playing the best and most attractive football we possibly can?

Before the 2002 World Cup in Japan there was a debate in the press about whether Sven Goran Eriksson should take the mercurial Liverpool player Steve McManaman.  McManaman often flattered to deceive, but then he sometimes deceived opposition defences as well, and was one of the few players we had with genuine flair.  OK, McManaman might not start many games, but he was exactly the kind of player we would need a goal down with twenty minutes to go.

In the final group game against Nigeria England only needed a draw.  A win however would have enabled us to avoid Brazil in the quarter final, a fixture moreover that would be played in the heat and humidity of the afternoon.  But Eriksson's team settled for a listless 0-0; unaccountably the players torpid meanderings around the pitch were unaffected by my shouting at the TV thousands of miles away.
In the Brazil game, England struggled in the heat and humidity of the afternoon.  Michael Owen got an opportunistic early goal.  Brazil equalised.  Ronaldinho beat David Seaman with that amazing lob.  Twenty minutes to go.  Eriksson brought on Steve McManaman.

Well it would have been nice if that had been true.  But McManaman had been left behind in favour of Trevor Sinclair, a good club pro.  Sinclair did nothing, and we were on our way home.

Pragmatism does not win these competitions.

A final word about England's woeful ball retention.  It's possible that the players, drawn on the whole from the dimmest strata of English society, are too stupid to understand the imperative: don't play the risky pass until the final third of the field.  But that seems unlikely given that, on the whole, we don't give it away in the first third.  No, it seems to me that English players like to take risks, to have a go, because lack of foresight is part of our culture.

That's why we blew our oil wealth on, well, nothing much (as opposed to the Norwegians who stuck it in a sovereign wealth fund); that's why we have not had a coherent energy policy since Mrs Thatcher's dash for gas; that's why we spend our money on having the patio re-done instead of sticking it in a pension.  I could go on.  We are the kind of people who say, "Oh sod it", and lump the ball upfield to the big target man.  Who has it taken off his toe by the defender.  Who passes it to the silkily-skilled playmaker.  And so on as long as English football exists.

Whenever this happens, somewhere in the north of England I am screaming, "Keep the &^%$£ing ball!" and my wife is saying, "Will you stop doing that?"  Actually tonight I will be doing it in a pub.  My wife is disappointed.  "It's more of an event if you're there", she says wistfully.

Mrs Merkel blinks first?

The very day after I lambasted Angela Merkel for her failure of leadership in the Eurozone, the Torygraph reports here that Mutti is showing signs of relenting on her opposition to Eurobonds.  Now the writer of the Torygraph article, Ambrose Evans Pritchard, is a well known Eurosceptic, and should be taken with a pinch of salt.  But if he is right, and Mrs Merkel is willing to drop her opposition to a European Redemption Pact, that is quite big news.

How would the ERP work?  Not surprisingly details of a fund that doesn't yet exist are sketchy, but the idea seems to be that countries' debts above and beyond the 60% of GDP permitted by the Maastricht treaty (remember that?) would be gradually transferred into that fund, paid for by bonds issued jointly by Eurozone countries, and supported by collateral from within the existing reserves of individual states.  Effectively it would allow struggling countries to borrow at bond rates more like those of the Germans.

Obviously I do not know whether this will work in the long term.  The interesting thing is that two of Germany's opposition parties say they support the idea, and Frau Merkel depends on their support to get the recent Stability and Growth Pact ratified.  Ultimately these things only work if the financial markets believe in the structure, and any such scheme will be examined in cold-eyed forensic detail by people who are really interested in money.  So it may not fly.

The overarching problem of the Euro however, namely the crippling currency imbalance between northern and southern Europe, is not remotely addressed by the ERP.  It will do nothing to make Spain, for instance, more competitive or German exports more expensive.  At very best it looks like the mother of all can-kicking exercises, guaranteed to stave off the immediate borrowing problems faced by Italy and Spain, but doing absolutely nothing to solve the design faults which led to those borrowing problems in the first place.  As Evans Pritchard himself wrote when this idea was first mooted at the end of May, "the South would still face the long grind of internal devaluation - or wage deflation - breaking societies on the wheel".

As the financial crisis limps on, those at the top, their careers founded on devotion to The Project, have displayed a striking tenacity and inventiveness in keeping it going.  As long as the Euro is limping on, breaking societies on the wheel will seem to them a small price to pay.  Because, secure in their well remunerated jobs, it is not being paid by them.

the long silence from cheadle

No, it doesn't quite have the same resonance as The Long Silence from Jarvenpaa.  And if putting a foreign name at the end instead of a bland Manchester suburb doesn't illuminate anything for you, I should perhaps explain that Jarvenpaa in Finland was where Sibelius lived for the latter half of his life, and The Long Silence the period from the mid-1920s to the composer's death during which he wrote pretty much nothing at all.

No one really knows why Sibelius stopped writing.  He worked on an 8th Symphony, but, pestered by the conductor Koussevitsky who wanted the premiere for the Boston Symphony Orchestra, delayed and delayed completion and is thought eventually to have burned the score.  Perhaps he felt that his music was diametrically opposed to the spirit of the modernist times.  Perhaps he had written himself out.  It has happened to plenty of others, Elgar for instance.

At a slightly more mundane level, this year is the first for more than 30 during which I have written, thus far, pretty much nothing at all myself.  I am in the middle of a set of four orchestral pieces, tentatively entitled Absence of Clouds.  My own more modest silence has come about because I am becoming very slightly more successful (if you start from a low enough base, there is nowhere to go but up).  I have mostly been involved in revising some of my own pieces for performances and producing parts for them.  It's a time consuming business.  There have also been concerts to conduct, and builders to organise for the family dacha.  It is a busy life of privilege, and no doubt when the Occupy protestors get fed up of picketing banks and start to look for people who are enjoying themselves too much, I will be put up against a wall.  With any luck sufficient time will have passed for me to look old and pitiable.

Yesterday however I finally began writing the last movement of Absence, and I'll be carrying on when I've finished wasting time writing this blog.

There is one other silence to rectify.  I haven't written anything directly about the Eurozone for months.

How to find the words to convey the sense of the economic bike chain being swung in the china shop, the ratcheting up of the financial stakes, the strain on political systems, the damage to living standards across the world, the incompetence of the leadership?  The Euro was clearly not set up to bring our continent's economy to its knees, but if you had set out to create a device for doing so you would be pretty pleased with what the Euro has done.

Europe needs debt mutualisation and/or QE on a massive scale, now.  With every month that passes in which this doesn't happen things in Europe will get worse and worse.  First the Greeks can't pay their way.  Then Spanish and Italian bond yields go through the roof.  Mario Draghi's LTRO at the ECB takes up the strain for a few weeks, but now it becomes apparent that Spain's banking system is sitting on huge losses.  The proposed bail out adds about a third to Spain's national debt, suborns Spanish bondholders (making it more expensive for Spain to borrow), and, bizarrely, forces countries like Italy, itself in trouble, to borrow at, say, 5% to lend to Spain at 3%.  To call it an Alice in Wonderland world absolutely misses the dark and dangerous potentialities.

It doesn't help that the Eurozone has been hamstrung by bad leadership.  Only yesterday Manuel Barroso was proposing to fix the Spanish banking problems by way of a banking union where there was Europe-wide regulation.  Even a fool could see that this would never be a runner, because cross-Europe bank guarantees would enable southern banks to fund their governments, thus making northern European taxpayers responsible for southern debts, and Barroso was duly slapped down by Wolfgang Schauble.  Could Barroso not have worked this out before opening his mouth?  Apparently not.

I am reminded of Nero, fiddling while Rome burns.  This is even worse.  Now Nero is a committee (invent your own acronym), and it is not just Rome burning, but Madrid, Dublin and Athens too.

But of all the bad leadership on display, Angela Merkel must take the biscuit.  Yes of course, the Greeks have been profligate and corrupt, and it is very difficult for Frau Merkel to sell the prospect of pouring German taxpayers' money into the Hellenic black hole.  But where Merkel is truly guilty is in failing to explain to the German people (failing, so far as I know, even to acknowledge publicly) that while the Euro has made Greek exports expensive by shackling it to other stronger economies, principally Germany, the reverse also applies: Germany has benefited hugely by being tied to weak southern European economies which have lowered the value of the Euro and made German exports cheaper.  In other words, Germany's prosperity has been achieved partly by being in the Euro with the basket cases of the south.  Germany is trying to have its cake and eat it - it wants to have the benefit of a single currency without taking the responsibilities that must go with it if it is to work.

The Euro was meant to make everyone prosperous, but as I wrote a few weeks ago it has only served to make some countries very prosperous and others very poor.  And it will carry on doing that as long as the Eurozone exists in its current form.  The Eurozone needs either fiscal union, Germany's departure or total disbandment.

As for the prospects of getting any economic growth here in the UK, you can forget it until the Euro mess is sorted out.