Executive pay argument is a distraction and not based on reality

Daniel Cowdrill 11.15am

Choose your battles wisely, Edward

Daniel Cowdrill 10.47am

The Tories’ election defeat in 1830 ended some forty years of dominance. What was left of the Tory party in Parliament came to be led by the former Home Secretary, Robert Peel.

Peel’s preferred strategy was, as far as possible, to support Whig measures. He resisted the temptation to enter into opportunistic alliances to inflict embarrassing defeats on the government. Instead, where appropriate, he would support it and allow its nominal supporters to attack instead.

Peel’s aim was to break-down gradually from within the government’s majority. It worked. After significant gains in 1835 and 1837, in 1841 the Conservatives won a majority of 70.

Opposition exercised judiciously is the best choice out of a bare arsenal for opposition leaders. It takes judgement, discipline, and quite often a long spell out of government.

The advantages are numerous. It shows that the Opposition party is a disciplined force and likely to conduct government business in an apropriate manner. It also prevents the Opposition from becoming background noise. By predictably opposing everything you become a fixture in the game rather than a player.

Edward Miliband has made his choice: headlines, rather than credibility. Officially, the Labour party remains implacably opposed to the coalition government’s spending reductions, 80 per cent of which would have taken place were Labour still in office. Mr Miliband continues to attack each ‘cut’ without proposing any of his own.

Another example is David Cameron’s veto at last month’s EU summit. Agree or disagree, the Prime Minister made a decision. Edward Miliband, contrastingly, argued that it was a bad deal for Britain, that the Prime Minister had put party before country. Yet Edward refused to answer whether he would have signed up to the treaty himself.

It is a self perpetuating spiral. The less credible Edward becomes the more he and his colleagues resort to cheap shots and gimmicks. It is not the stuff great opposition parties are made of.

Edward Miliband is also unfortunate. David Cameron looks, sounds and acts like a statesman. And his “big, open and comprehensive offer” to the Liberal Democrats appeared to position him above party politics.

Examine the two leaders’ personal ratings. Mr Cameron has remained consistently the most popular. By the end of 2011 his personal approval was approximately 25 points ahead of Mr Miliband’s, with the gap widening. Even voting intention as we head towards the peak of the public spending cuts is edging in favour of the Conservatives.

After Sir Robert Peel’s death, William Gladstone observed from Peel’s handling of opposition that he had matured into a ‘profound statesman’. People are likely to say the same about David Cameron in years to come, but not the younger Miliband.

Why atheists can agree with Mr Cameron too

Daniel Cowdrill 6.01am

David Cameron’s speech at Christ Church to commemorate 400 years since the publication of the King James Bible was a commendable attempt by the Prime Minister to engage with faith in a way that predecessors have tried to avoid.

Mr Cameron makes an interesting point that in politics, as in political history, faith is important.

A study into Margaret Thatcher, for example, would be incomplete without reference to the fact that she listened dutifully to her father, a Methodist lay preacher, every week of her childhood (and a fascinating new book on ‘God and Mrs Thatcher’ is due in 2012). Indeed, future studies of Cameron will also be incomplete without reference to his upbringing next to a parish church where both his parents volunteered.

David Cameron’s thesis is that the realisation that God created man in his own image was a ‘game-changer’ for human civilisation. When each individual has a common power above them, and when every individual is of equal and infinite importance, created in the very image of God, it created an irrepressible foundation for human dignity and the basis for Christian values such as responsibility, charity, compassion, tolerance, humility, self-sacrifice, love, and the common good.

As an atheist I think these are all virtues, but I approach them from a different angle. The German philospher Ludwig Feuerbach disagreed with the idea that God created man in his own image, but that man created God in his own image. God is the outward projection of the wise, moral, and sympathetic being that man can only aspire to be.

It is the reverse of the ‘Creation of Adam’, the centre of Michelangelo’s ceiling at the Sistine Chapel. God and Adam hold their hands out towards each another, one passively the other forcefully, poised on the brink of creation. Feuerbach would see it differently. He might point to the obvious fact that although God and Adam reach towards eachother they don’t actually touch. Adam gazes longingly into the sky at a vision of godliness, a projection of his own good qualities.

Where I diverge with Feuerbach, however, is in Part Two of Feuerbach’s ‘Essence of Christianity’, published in 1842. He suggests that the Chrisitian belief in salvation makes us more tolerant of vice than we would otherwise be. In other words, we don’t have to stand-up to bad people because they’ll get their comupance when they arrive at the pearly gates.

However, this seems to jar with the good intentions of so many faith based groups. David Cameron is correct to point to the tremendous work that faith charities and churches do here in the UK and abroad to uphold human dignity and rights, and to their role in the social fabric.

While as an atheist I cannot accept the creation of man by God, as a human being I can agree with the virtues that spring from Christianity. They are, in the end, human qualities.

While the Euro remains on life support, it’s business as usual for the City

Daniel Cowdrill 10.04am

Listening to David Cameron’s opponents during the weekend, you would think his veto signals the end of civilisation - or at least the UK’s participation in it.

One of their scare stories is that the City of London is worse-off than before the EU summit. In reality, however, it is in much the same position.

The sticking point was the financial transaction tax (FTT). This is a tax on every sale or purchase of stocks and bonds or other financial products by banks. On these pages, Craig has dismissed a FTT as an unhelpful ‘soundbite tax’, while Alex described it as ‘misguided’. Elsewhere, Sir John Major has labelled it a ‘heat-seeking missile aimed at the City of London’.

As 75 per cent of the EU’s financial services industry is located within the City of London the burden of this tax would fall disproportionately on the UK economy and the two million people who are employed in financial services in this country.

Unfortunately, France was not willing to listen to British demands. President Sarkozy’s refusal to concede led to a fiscal ‘pact’ rather than the fiscal union the markets had desired. What is set to be agreed over the coming months without the UK is unlikely to be enough to stop the deterioration of the European debt crisis, and President Sarkozy won’t be so ‘heartened’ if (or when?) France’s credit rating is downgraded.

However, beyond all this the fundamentals remain the same for the City. The UK remains part of a single market that allows the (reasonably) free movement of people, capital and services across a trading block of 500 million people. The City will continue to benefit from the single market - Mr Cameron’s veto does nothing to alter this.

To be sure, it could be argued that the new 17+ euro block will foist regulations on the City when Qualified Majority Voting (QMV) is introduced in 2014. But these are future deals that are yet to be negotiated and agreed. When the time comes there is no reason why Britain can’t win support and obstruct the worst that might come our way.

In any case, there are some people who believe that had the UK not vetoed the new treaty the French would be less determined to impose other regulations on the City. This thinking is deluded. French dirigiste tendencies have been strengthened by a financial crisis that many in France perceive as the fault of speculators in the City of London. This isn’t going to change no matter how much sovereignty we sign away.

Furthermore, access to the single market is not the only thing that attracts business to the City. In the 1980s the ‘Big Bang’ attracted financial services to London from all over the globe, not just Europe.

The UK’s competitive regulatory and tax framework continues to attract financial services to these shores. We are also near the main European continent and, of course, we speak English. Even the EU tends to deliberate great matters in English - now the global lingua franca (such irony might be lost on the French).

The City will live to fight another day. The euro, on the other hand, may not.

Theresa May’s shrill and misleading attack on the Human Rights Act

Daniel Cowdrill 6.10am

As Sir John Major pointed out on the Andrew Marr Show on Sunday, the European Union has to change. There is a need for greater fiscal union, and this invokes important questions about our own future in Britain.

However, the debate over our relationship with the rest of the EU must not be conflated with the debate over human rights. The European Convention on Human Rights (ECHR) is a separate treaty enforced by a separate institution.

In May 1949, Britain became a founding signatory of the Treaty of London, which established the Council of Europe. Membership is open to all European nations that are committed to fundamental rights and freedoms enshrined in the Convention articles. The Council of Europe is an achievement that Britain should be proud of.

Sixty years on, it is disappointing to hear a Conservative Home Secretary demand that the Human Rights Act “must go”, as Theresa May has done. The Act gives a legal basis to the Convention within the UK. When put on the stop, David Cameorn has supported Mrs May, reaffirming the Conservative party’s manifesto commitment to repeal the Act and replace it with a British Bill of Rights.

This is the kind of populist pledge that parties are prone to make in opposition. It is not something for responsible governments. One suspects that despite the Prime Minister’s support for his Home Secretary’s comments, ultimately he is not prepared to repeal the Human Rights Act.

Mr Cameron, conveniently enough, blames the Lib Dems for making him go slowly on the issue. The truth is that any replacement of the Human Rights Act would be along broadly similar lines and likely to allow for the same judgements that so offend the likes of the Daily Mail. It is a waste of government time and effort and certainly not worth the internal coalition fight it would create.

Certainly, there has been what one might call ‘human rights inflation’ since the Convention articles were introduced into domestic law but scrapping the Act entirely would be throwing the baby out with the bathwater. It is the judiciary’s interpretation of those rights - sometimes going far beyond the rulings passed down from Strasbourg - that is at fault.

The main example of this ‘inflation’ is the extension of deportation restrictions on the grounds of the Article 8 ‘right to family life’. These judgements are the product of English courts. They are not stipulated by European courts. The only restriction that Strasbourg case law places on the deportation of foreign criminals is on the grounds of the Article 3 right to freedom from torture.

The Home Secretary is tasked with the maintenance of public safety. However, she would be better advised to aim her fire at the judiciary, who have perhaps been to deferent to their own assumptions about how Strasbour would rule on the same case.

A good argument can be made that the judiciary has failed to use the margin of appreciation permitted under the Convention to apply human rights with the correct sense of proportion.

Instead, the Home Secretary has opted for a shrill and misleading attack on the Human Rights Act itself, so sweeping over all the good work done in resolving miscarriages of justice.

This wrong-headed assault on the Human Rights Act is an unfortunate hangover from opposition politics and the Government should take the first possible opportunity to abandon it.

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A Reply to Charles Moore…

Daniel Cowdrill 6.40am

The collapse of the banking system and the recent phone-hacking scandal have led some to question the wisdom of market forces.  In a now famous piece in the Telegraph, Charles Moore considers whether the Left were right all along about the free market being a ‘set-up’ designed to benefit only the rich. After recent events, ‘Everything is different now’ - but is it?

 In the post-war period the Conservative party was haunted by the memory of the ‘hungry thirties’ - a period of mass unemployment. This was compounded by election defeat in 1945, viewed by many on the Right as a delayed verdict on their economic policies during the wars.

Across public policy, but especially with the nationalised industries, industrial relations, and economic management, the Conservative party ceded ground to the left. Churchill focused his fading energies on establishing his position as an international statesman. The grand old man was not prepared to risk his reputation over a battle with the unions, and every effort was made to avoid confrontation. Tories fond of State planning, like Harold Macmillan, sidelined before the war yet profoundly affected by his time as a MP in the industrial north-east, were now promoted.

But had things really changed that much? As Andrew Roberts has argued, instead of treating the 1945 election as the freak result it was, Tory politicians were emasculated by it. They drew the false conclusion that it represented a turning tide which they were unable to hold back, even if they had wanted to.

There is a danger of the same happening again. Most Conservatives still believe that spontaneity is preferable to state direction, and that variation and competition lead not just to higher productivity but to a richer society. I assume that Charles Moore still believes these things. What disappoints me is his willingness to buy into a left-of-centre narrative of recent events.  We need to beware the false conclusion that confidence in the free market has collapsed.

 Some of those who benefited the most have certainly abused their power. Rupert Murdoch, once the heroic defender of a free press versus union intimidation, has presided over (unknowingly or not) allegedly corrupt and illegal practices at some of his newspaper titles. Bankers made reckless investments tied to the US subprime market. Some of our largest banks have been humbled. These are indelible stains on capitalism’s record but the lessons of the post-war period stand.

Between the end of the Second World War and 1980 the British economy was in relative decline. Harold Macmillan’s claim that we had ‘never had it so good’ and Harold Wilson’s ‘technological revolution’ belied lacklustre productivity, rising inflation, and deteriorating industrial relations. Mrs Thatcher’s governments changed course and Britain began to gain some lost ground.

Relatively unfettered markets and a relatively light, normative tax regime are a source of much higher growth and technical innovation than nationalised industries and are more compatible with democratic values than centralised bureaucracies.  The free movement of capital allows for the more efficient allocation of resources in an economy.  This allows for more entrepreneurship, innovation and job creation.  In a globalised market, those economies that are uncompetitive and protectionist will spiral into high unemployment and low growth, leading to sovereign debt difficulties, as Southern Europe is discovering today and Latin America discovered a decade ago.

In the 1970s, a new generation of economically liberal Conservatives made a vigorous case for de-regulated markets. As the economy struggles to adjust to recent hardships, this is the worst possible time to cede ground to the Left and thus allow the state and not the market to direct the economy.

Read more on this subject:

‘I’m starting to think Charles Moore might be right, but not quite’, by NIk Darlington (25 July)

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Failing schools should face the same fate as Lehman Brothers

Daniel Cowdrill 6.00am

‘Meme’ is short for the ancient Greek ‘mimene’, or in English, ‘something inherited’. It was coined by Professor Richard Dawkins in his book The Selfish Gene (1976). A ‘meme’ is an idea that behaves like a gene. It describes a process whereby ideas and practices are transmitted from one mind to another via variation, competition and inheritance. The result is that self-evidently we improve over time.

Improvement springs from social interaction and exposure to how other people do things. A simple example is driving on the left-hand side of the road. It was enshrined in law only recently but through interaction people learned to ride their carriages on the left and later their cars.

Without ‘Meme’, bad practices can develop. We witness this regularly in the market economy. Who would have thought, for instance, that by the end of 2008 some investment banks would have disappeared? From the 1990s onwards their leaders acquired an elevated position as ‘masters of the universe’. Inertia limited the functioning of the Meme. Bear Stearns, Lehman Brothers, Merrill Lynch, and Morgan Stanley since either collapsed or abandoned their lofty positions.

But let us focus on education. The highly respected Programme for International Student Assessment (Pisa) shows that Britain has slumped to 28th place in maths (from 24th four years ago), 25th in reading (from 17th) and 15th in science (from 14th). Searching questions must be asked as to why this relative decline has taken place.

The tripartite system of education introduced after the Second World War - grammar schools, technical schools and secondary moderns - was inadequate for a number of reasons. However, the move to comprehensive schooling caused its own problems. It made a a virtue of reducing variation and competition, hence it has rightly been criticised for encouraging mediocrity at the expense of excellence.

It is vital in education to encourage variation and competition so that the transmission of good practice occurs most widely. One can argue that greater competition has driven educational standards higher in Europe. It can also be argued that Catholicism’s historic resistance to public schooling in France has resulted in a much greater proportion of independent schools than in the UK, thus creating a market that boosts educational standards.

Research published in the Economic Journal by academics at the Harvard School of Education and the University of Munich suggests that there is a causal link between higher numbers of privately educated students and higher educational attainment in general. This is not due to more people attending private schools but because the wider existence of private schools push up overall standards. State schools have to work harder to attract the best pupils against the competition of nearby affordable private schools, hence driving up standards for everyone. Good state schools in turn put pressure on private schools to justify the additional costs to parents.

Choice in education does not just mean more private schools, rather it means more independent schools with their own customs and practices that can be appropriated and improved on by others. While education policy certainly must address equality of opportunity, the Meme will do the rest.

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It is time to cut adrift Greece and its creditors

Daniel Cowdrill 6.00am

To all intents and purposes, Greece is insolvent. Greek public debt is €340 billion, or approximately 150 per cent of GDP. One of the highest public debt ratios in the world is accompanied with the lowest sovereign debt rating since Standard & Poor reduced it to CCC.

The IMF’s standard prescription is spending cuts and devaluation. The first element will be a struggle for Greece - for starters, the €50 billion privatisation pacakge is hopeless, as the Adam Smith Institute’s Eamonn Butler has pointed out. Secondly, devaluation is not an available option due to Greece’s membership of the single European currency. Like many profilgate western economies, Greece has a large trade deficit that is hampered by an overvalued currency. Greece can neither cut nor trade its way out of debt.

This would be less of a problem if it were not for the fact that several other European economies are also heavily indebted. The argument goes that if Greece defaults, general borrowing costs will soar and other economies like Spain’s will be pushed over the edge. Therefore the EU and the IMF have felt compelled to throw good money after bad.

It is now dawning on politicians that further loans to insolvent Greece are not just ineffectual but also counter-productive. The new package will ask banks to ‘roll-over’ their Greek bonds for thirty years, so deferring €30 billion of bond payouts. Basically the banks will receive high interest on extended maturities, which will be guaranteed by a surplus economy like Germany’s. The fact that this idea was floated by the French banking sector is not coincidental: French banks hold €40 billion worth of Greek bonds and are desperate to shift this liability on to taxpayers.

However, ‘rolling over’ is problematic. First, the market might see it as a default in all but name. One Standard & Poor source said, ‘While an exchange offer for longer-dated bonds may appear to be “voluntary”, we may conclude that investors have been pressured into accepting because they fear more adverse consequences were they to decline the exchange offer.’ Even if it works, the scheme reduces the incentive for Greece to curb its expenditure and to reform its economy - i.e. moral hazard. It is possible that Greece will end up in the same position a few years down the line.

The strategy is not only risky, it is morally wrong. This has also been mentioned today by the Daily Telegraph’s Peter Oborne. Allowing lenders to cash in on bad investments through high interest extended maturities (guaranteed by European taxpayers) is a disgraceful act. Lenders are responsible for their lending and they should take the hit for their mistakes. In their role as lenders of last resort, European governments must be judicious in their use of public funds to underwrite debts, thereby keeping banks alert. In this instance, a proper evaluation of European banks shows that their exposure to Greek debt is substantial but not excessive. They can survive a hair cut.

Furthermore, Europe must recognise that Greece is crying out for a devaluation. The EU must draw up a legislative framework that allows a temporary Greek withdrawal from the euro so that its economy can rebalance itself. It is then up to the Greek government to negotiate with its creditors and to implement structural reforms. Only then can the Greek economy prosper.

This is all very unlikely. The European political class is living in a world of shangri-la economics, believing that defaults can be avoided and that the euro can be saved via imaginative accounting. The longer this is believed, the higher the cost will be for ordinary Greeks and for the rest of us Europeans.

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