Time the Bank of England Was Brought Back Under Democratic Control

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The Bank of England: Unelected, Unaccountable and Plain Wrong

I commented yesterday about the nasty new inflation figures.

The Bank of England has now released the minutes of its latest meeting of the Monetary Policy Committee, at which the Committee again voted to keep interest rates on hold. Again, only three members of the committee voted for a rise.

The Bank says there is a “significant risk” that inflation could exceed 5 percent over the next few months. (By inflation, they mean the Consumer Prices Index – the older Retail Prices Index is already well over 5 percent.)

The Bank itself said:

It was not yet clear that the weakness in output growth seen in the latter part of 2010 would prove temporary, particularly in light of the latest indicators of a further weakening in consumer spending.

And the BBC quotes Ross Walker, of RBS Financial Markets:

We didn’t expect any more dissenters this month. It’s the same dilemma, weighing up competing risks of rising inflation versus still weak activity numbers.

All of this really misses the point. The Bank of England was given its independence to set interest rates, and expressly given the legal responsibility to keep inflation as close as possible to 2 percent. Note: it was expressly not asked to consider prospects for growth, except as far as they might impact on the inflation rate.

The Bank of England is now trying to manage the economy in its entireity, via interest rates, and has clearly abandoned the idea that its target is the inflation rate. Quite apart from being an error of policy, that is a departure from its legal responsibilities.

This matters, because if inflation is allowed to let rip, as it is currently being allowed to do, then we all know from the past what the result will be – a wrecked economy, unemployment, destroyed savings and much misery.

It also matters for our democracy itself. The Bank is completely unaccountable. We cannot exercise democratic control over it. At least in the old days, before Labour (with the support of the Tories) made the Bank independent, it was clear that the government of the day was responsible for interest rates. And we could vote them out at an election.

It is now obvious that the independence of the Bank of England has been a complete disaster, like most of the rest of what Gordon Brown did. The Bank needs to be brought back under political and democratic control, so that its decisions on interest rates are part of an overall economic strategy that is accountable to the electorate.

Inflation and the Deficit

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Eric Pickles – Showing the Way

The latest economic figures make gloomy reading – and a wake-up call for the Coalition.

The Retail Prices Index (RPI), the older and trusted measure of inflation, last month hit the highest level for 20 years, at 5.5 percent.

Meanwhile, the newer Consumer Prices Index (CPI) is now at 4.4 percent. “More than had been forecast by economists”, notes the BBC, as usual.

Clothing, footwear, toys, books and financial services all contributed to the increase, along with transport, which was pushed up by higher fuel prices. The only bright spot was alcohol, which fell by 1.1 percent – so we can all drown our sorrows.

The British Chambers of Commerce, predictably, are keen to encourage the Bank of England to hold down interest rates even in the face of the steadily rising inflation. Their Chief Economist is quoted by the BBC:

The MPC must be careful before it takes action that may threaten the fragile recovery, particularly in the face of a tough austerity plan.

The fact is though, that the tough austerity plan is not yet, at least, in evidence. The same BBC article notes:

The ONS also announced that public sector borrowing last month was £11.8bn, a record for the month of February.

The official figure was nearly double the £6.9bn forecast by economists.

The present government have been in power now for nearly a year. They have talked tough on spending – and spending has grown signficantly. They have claimed to be instinctively in favour of low taxes – and have put taxes up significantly.

And despite the tax rises we have seen, spending has in fact risen so fast that borrowing levels are up rather than down. We are already a fifth of the way into the government’s programme to eliminate Britain’s deficit crisis – and so far, the deficit has gone up. All of which, of course, has not stopped Labour claiming the government have been imposing “savage cuts”.

There has been only one area where real cuts have been in evidence, and that is local government. Eric Pickles, as Local Government Secretary, has been conspicuously successful in restraining that part of public spending.

I suspect the reasons for Mr Pickles’ success are two-fold: first, that he himself is personally committed to cutting back local government spending, and probably more importantly, that there is no love lost between the national civil servants in his department and those local councils. Most government ministers have no doubt been struggling to get support from their departments for the necessary cuts, whereas Mr Pickles has probably had sterling support from his department.

The deficit is destroying our country, and it simply must be brought down. So far the Tories and Liberal Democrats have had little success doing that. They still have time – but the clock is ticking.

The Office for National Statistics

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The Office for National Statistics Offices at Titchfield Park

I have in this blog been very uncomplimentary about the public sector. Not only do I think it is grossly inefficient and badly run, but I even believe it is much less well run in general than it was say 20 years ago. Even departments that used to be bastions of competence, like the Inland Revenue (now merged with Customs and Excise to form HMRC) seem to me to be less competent today.

However, there is a small department in the public sector that seems not only to be as well run as ever, but even to be getting better. And that is the Office for National Statistics.

Most people see statistics as boring. I suspect our national perception that statistics are boring is linked to our national hostility to mathematics in general.

Statistics are often very difficult to interpret. It is not always easy to see what the real truth is behind the numbers. This means that it is often quite easy to misuse the numbers to “prove” anything you want to prove. There are, indeed, “lies, damned lies, and statistics” – or more accurately, lies, damned lies, and misused statistics.

Statistics, though, do represent the “facts” of the matter in hand. They are indispensible to any discussion of politics.

We are blessed in this country in having an outstandingly competent and thorough government statistical service. What is more, its output is made fully available to all and sundry via the ONS website.

Whether you are interested in historical figures for the number of smokers in Britain, immigration numbers or inflation rates, the ONS provides reliable and easily found information. Whether you are the Chancellor of the Exchequer, a university professor, or a humble blogger like me, those figures are available to shed light on the debates we all have.

Some bloggers have attacked the census that is currently being carried out. There is even a Youtube video (which I will not link to) showing somebody putting the census form through a shredder. But the facts that will be obtained from the census, and made available to everyone through the ONS, will be the foundation for the key public policy debates to come over the next decade.

The ONS’s predecessor, the Central Statistical Office, was created in 1941 on the instructions of Winston Churchill, to provide statistics to help with the war effort. Over the years, there have naturally been occasional problems with the quality of the statistics produced, but overall it has been an outstandingly successful organisation.

The ONS has been making great efforts to open its work up to a wider audience recently. One example is a page on the BBC News site today, that explains what inflation is. Many people, not least many BBC journalists, seem confused about this, but that page provides a simple and clear explanation. And it was

compiled with information from Pam Davies at the ONS.

The ONS is a national treasure, in fact, and those who work there should be proud of the work they do.

The Libyan Muddle and British Democracy

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Are We Trying to Remove this Man?

British, French and American forces have been in action against Libya, including strikes on targets in Tripoli, the capital.

David Cameron has been basking in his status as “the man who called for the no-fly zone”. And yet it is completely unclear whether the current military actions are in fact designed to enforce a no-fly zone, or whether they are designed to oust Colonel Gaddafi.

The British Government has explicitly said that Gaddafi has to go, which does not help with the clarity on this.

All of this has an unpleasant similarity to the approach to Saddam Hussein before the Iraq invasion. The Government has been very clear that there will not be an invasion of Libya. However, they have been very far from clear as to what “success” means for this mission.

Clearly Gaddafi is a pretty unsavoury leader. It is also the case that he has in the past not been a friend of the UK, to say the least. But deliberately seeking regime change would clearly be outside the remit of the United Nations resolution that “authorises” this military action, so the Government is unable to state openly that the aim is to topple Mr Gaddafi.

As usual, the need to chase the will-o-the-wisp of “International Law” and the “supremacy of the United Nations” means that our Government is unable to be honest or clear about its objectives and policy. And that in turn means that we, as the British people whom David Cameron supposedly serves, cannot hold him accountable or determine for ourselves whether his objectives are sound.

The implication of the public position of the British Government is that the aim is to leave Libya indefinitely partitioned and therefore weakened, to limit Gaddafi’s power to threaten his people. That would be a pretty Machiavellian approach. And it begs the question: if it is right to protect Benghazi from Mr Gaddafi, then why is it not right to try and protect Tripoli from him?

Alternatively, perhaps the aim of trying to achieve a divided and weakened Libya is to limit Gaddafi’s power to threaten the West, rather than to try to limit his power to threaten his own people. That might be a legitimate use of British armed forces, but the extent of his threat to us over many years now has seemed remote.

The potential hidden motives of the Government could be more emphatic. They have hinted that they want “regime change”, i.e. to oust Mr Gaddafi. To say so openly would be to infringe on Libya’s sovereignty. You aren’t allowed to say that unless the Supreme Soviet, sorry, UN Security Council, agrees to that aim.

But if that really is the aim, we should consider what happens after he is toppled. That was not done properly in the case of Iraq. We would need to assess the Opposition and what their leadership of the country would be like.

The media, especially the BBC, have portrayed the revolt as a popular one by civilians, and said that some units of Gaddafi’s armed forces have defected to the rebels. Is that credible? I would argue not. The rebels have so far been able to defend whole cities against the forces of Gaddafi, and descriptions have abounded of “fierce fighting” going on.

You don’t get fierce fighting when civilians go up against an army. You get a massacre.

Therefore, this uprising would be better described as a military revolt that has some support from civilians. The leaders of the revolt may well be less unsavoury than Gaddafi. They may be more friendly towards Western countries, including the UK. Or they may not.

From a British point of view, one justification for supporting the revolt against Gaddafi is that the leaders of the revolt are likely to be more friendly to the West than Gaddafi, or more likely to generate stability in that critical region of the world. Perhaps the British Government has made a clear-headed assessment that that is the case.

An even more Machiavellian interpretation might be that David Cameron’s aim in leading the action was to demonstrate to the rest of the EU the potential power of an Anglo-French military alliance. In that sense, this could be seen as a follow-up to the Anglo-french security agreement that was signed last year.

It is blindingly clear that Mr Cameron sees Britain’s future very firmly at the heart of Europe, and that he wants to maximise Britain’s place in the EU. His Euro-sceptic posturing has been clearly just a sop to the Right of his Party, who have been taken for fools by him for years now.

I have outlined at least four different possible objectives of the British Government. We simply do not know which of them is the real one.

The public have lost trust in politicians in Britain. And here we are, yet again, speculating about what the real aims are when our country is taking military action.

In the Second World War, the aims were clear and public: to defeat Nazi Germany, and to remove Hitler. In the Falklands Conflict, the aims were clear and public: to eject Argentine forces from the Islands and restore British rule. In the First Gulf War (as distinct from the Second) the aims were clear and public: to eject Iraqi forces from Kuwait and restore the Kuwaiti government.

The same has not been true either of the Second Gulf War (the invasion of Iraq) or this current conflict in Libya. I am afraid that the reason for that lack of clarity is the style of our leaders. In the first of those cases, Tony Blair was our leader, and in the second, the Heir to Blair, David Cameron, is the leader. Both of them marketing men to their fingertips.

We should not have to speculate on the real aims of military action taken by our Government. Our own democracy depends on our being able to assess for ourselves whether the Government is generally doing the right, or indeed the sensible, thing.

I am not saying the action against Libya is wrong. I am simply saying that as an ordinary citizen, I have not been given the means to judge. And that means I cannot tell whether to support the actions of my own Government, over which I supposedly have democratic control.

This is the problem with the modern approach to politics as marketing, and this lays bare the fundamental failings of David Cameron as a Prime Minister, just as the Iraq War laid bare the failings of Tony Blair before him.

Spin is not enough. We need honesty and straight talking in our politics.

Yet Another Budget Leak

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The BBC today has yet another leak of budget contents ahead of the budget.

This time it is a proposal to remove the need for planning permission for converting commercial properties (other than shops) to residential.

That should increase the number of new homes coming onto the market.

It will also have much wider implications. The current planning system is heavily influenced by the idea of local plans, drawn up by civil servants, with “zoning” for commercial, residential etc. Obviously if commercial properties can be converted to homes without planning permission, the zoning will be completely wrecked.

What is it with this leaking of budget contents though (assuming the leak is true)? Somebody in government needs to get a grip on this. Leaking this information probably doesn’t matter much. Leaking something more sensitive in the future might.

Secret Courts

Secret prisoners, found guilty in secret courts, not even allowed to speak to their MP?

It would never happen in Britain, would it?

Think again.

Prospects for UKIP – from a Tory

Interesting post on ConservativeHome from Paul Goodman, who looks at UKIP’s threat to the Tories. (Hat-tip Grant Tucker at Iain Dale’s Diary.)

Goodman concludes:

Lynch and Whitaker’s piece suggests that Nigel Farage’s aim of topping the poll in the Euro-elections is far from absurd.  As I wrote last time round, UKIP are in a good position both to peel off conservative voters disillusioned with the Government (as some always are when the party moves out of opposition) and make a pitch for anti-politics and protest voters (given the absorption of the Liberal Democrats into government and the collapse of the BNP).  Their support won’t soar – but it will rise.

He also comments:

All this bolsters the view that a significant tranche of voters can move in elections both from the Conservatives to UKIP and vice-versa.  This has implications for Tory strategy, and the debate between ultra-modernisers, who believe that the party should pitch for “centre ground” voters alone, and those who want “shift to the right” or else prefer “the politics of and”.

Interesting use of the word “strategy” there. Sounds more like tactics to me. It also sounds like there’s not much room amid Tory strategy/tactics for them actually to believe in anything.

Geeks’ Corner: Internet Explorer 9

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Blue = Microsoft Internet Explorer, Green = Google Chrome

I have always conservatively stuck with Internet Explorer. Obviously IE6 is a piece of obsolete junk now (and was never very good, in truth) but IE7 and especially IE8 seemed very good – every bit as good as Firefox, which I use at work.

Since Microsoft have now released IE9 as a production offering, and I use Windows Vista, which it supports, I downloaded it yesterday. Microsoft promised better performance. Ha ha.

It runs like a dog.

It is full of trivial changes that appear to have been made simply to make it different, rather than to help users. Why did they move the favourites button from the left to the right, for example?

It is full of rough edges. There’s that irritating “back” button, that’s partially overlapped by the toolbar, for example. It looks like somebody worked out the dimensions wrong:

And when you click on a link or an item in your favourites list, of course it doesn’t respond immediately. But neither does it give you the “please wait” icon to show you the PC is working. It just sits there. Now did I click that link properly or not?

And there’s that horrible scaling that makes it default to 125% zoom, complete with fuzziness caused by the scaling. I tried for ten minutes to get it to default to 100%. Then I decided to RTFM (read the f—ing manual) and clicked on Internet Explorer Help.

It provided me with the extremely unhelpful message:

The topic you are looking for is not available in this version of Windows. For more information, try searching on http://www.microsoft.com.

But most of all, it runs like a dog. Probably on the six-core processors in the state of the art PC’s in the Microsoft offices in Redmond it runs beautifully.

But my PC has an AMD Athlon 64 single core processor. Definitely not state of the art, but not too shabby either. Everything else runs just fine.

But IE9 runs like a dog.

I tried to go back to IE8, but it just produced an error message saying that a later version had been detected on my PC.

So this blog post is being written in Google Chrome. It is well laid out and easy to use, and it just works. And it too runs like a dog. Except this time it’s a greyhound.

Microsoft have really messed up with IE9. A colleague at work calls me a “Microsoft fan-boy”. If even people like me can be driven away from IE like that, it has no future.

Unknown Unknowns and Fukushima – the Challenge to the Greens

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As I write this, the Japanese are still desperately trying to cool down the Fukushima power station. Emergency crews and military personnel are being hampered by high radiation levels outside the plant. Even when the levels fall enough for them to do their work, it is clear that they are risking their lives to do so.

As well as admiring and praying for those people battling the crisis in Fukushima, though, we should consider the implications of it.

The nuclear industry has never denied that nuclear fission can be dangerous. However, the approach has been to build multiple redundant safety features into the power stations. The whole issue has been one of the probability of a serious incident, rather than the fact that one could occur. Each of the safety features built into the stations reduces the probability of a terrible accident.

The theory is that if you have enough safety features, the probability of a serious incident falls to a level where the risk is acceptable, based on the benefits to be obtained from the power generated.

The nuclear industry takes this one step further. They try to estimate the probability of each possible “failure mode” – each possible way that the reactor could fail. They multiply these probabilities together to determine how many years of reactor operation can be expected before disaster strikes. Each safety feature reduces the probability of one or more failure modes, and therefore reduces the overall probability of disaster.

This much is standard practice in major engineering projects, from the construction of chemical works to the building of bridges.

Clearly, this approach depends on the assumptions that are made about the conditions under which the reactors will operate. For example, we are told that Fukushima was built to withstand an earthquake of magnitude 8.3. Since this earthquake had a magnitude of 8.9, that was outside the analysis that was done. Some have suggested that a higher threshold should have been assumed, and debate will no doubt rage over that.

There is, however, a much more important weakness in this whole approach. That weakness is, as Donald Rumsfeld memorably observed, the “unknown unknowns”.

For example, we know that an earthquake could damage the reactor. We don’t know if or when an earthquake will strike, or how big it will be. But we can estimate based on past occurences and so on, and build in a margin for error. Earthquake damage to the reactor wall was clearly a “known unknown”. We can’t predict in advance how many earthquakes there will be, or how strong. But we know that this potential route to disaster exists, and we can plan to block disasters happening from this, as was done at Fukushima by measures like the containment building.

But what about those cooling systems? The major issue at Fukushima, it seems, is not earthquake damage to the reactor itself or its containment, but earthquake damage to the electrical power systems that power the cooling systems at the plant.

As the BBC says today:

Officials also said they were hoping that they would restore “as soon as possible” the power supply to the plant, which is needed for the cooling system and back-up generators.

If the restoration work is completed, we will be able to activate various electric pumps and pour water into reactors and pools for spent nuclear fuel,” a spokesman for Tokyo Electric Power Company, which runs the plant, told the AFP news agency.

When they did their analysis on possible earthquake damage, they appear to have forgotten that an earthquake can damage the electricity supply. This damage was an unknown unknown, and therefore could not be mitigated in advance. This does not necessarily mean the risk analysis was incompetent. It just means that this failure mode was not anticipated. At the end of the day, the list of failure modes to be considered in a risk assessment simply comes from the experience and brainstorming of the people carrying out the assessment.

Because these unknown unknowns can hit any project, no risk analysis can ever be completely sound. If you are building a bridge, you can never be absolutely sure that something will not happen that you have not predicted, that will knock the bridge down. If you are building a chemical works, you can never be sure that you have thought of everything. Something unexpected may happen, and cause the whole thing to explode.

The difference is the scope for the disaster that may result from these incidents. A collapsing bridge could kill people crossing it at the time – perhaps a few hundred. An exploding chemical works could kill many more – perhaps thousands.

Let us continue to hope that a very serious disaster can be averted at Fukushima. But a very serious incident at a nuclear power station could kill hundreds of thousands, or even millions of people.

And all this is before you even begin discussing the disposal of the dangerous waste that results from nuclear power. Despite 50 years working on this, nobody has yet come up with anything better than sticking it in a tank of water and keeping an eye on it. For thousands of years.

Nuclear power is a seductive idea. But it is not wise. It is not wise simply because the consequences of failure are so great, that even a small risk probability is too much. It is time we stopped building nuclear power stations. The only way to do that, of course, is to build more fossil fuelled stations (because renewables are not enough on their own).

The Greens need to face up to the fact that it is their obsession with man-made global warming that has directly led to the resurgence of the nuclear industry. It is time we put it back in its grave with a stake through its heart and a piece of garlic at each shoulder. The Green movement ought to be pushing for that, and not simply attacking anything that smacks of progress.

Special Pleading in the Lettings Market Too

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While local councils scramble to protect the banks involved in imprudent home loans, there is more special pleading from the Association of Residential Letting Agents (ARLA), in response to a comment from the Property Ombudsman that tenants needed more protection.

The Ombudsman can take on cases where the letting agent involved is a member of an ombudsman scheme, but it is not compulsory for agents to belong.

ARLA said:

The increase in the number of complaints recorded by the Property Ombudsman is unsurprising, given that the ombudsman covered more tenancies during 2010.

However, as the ombudsman says, the regulation of letting agents is well overdue. The absence of regulation means the consumer is left vulnerable, with nowhere to go when there is service failure or fraud.

Well, there was me thinking that the police were there to act in cases of fraud, and potentially lawyers in cases of service failure. Not to mention local Trading Standards Offices.

No doubt the regulation they have in mind is compulsory membership of ARLA for all lettings agents.

Makes you wonder how we manage without a Food Supply Regulator or even a Bicycle Supply Regulator really. Or indeed a Regulator of Ombudsmen. Now there’s an idea. Should be a few quid in that.