4G spectrum failure hardly surprising, but what is Ofcom playing at?

Nik Darlington 9.58am

When George Osborne said the Treasury would raise several billion pounds from the upcoming 4G auction, I along with many others feared (or even expected) that wouldn’t be the case. Some technical and financial reasons for why, but largely an informed hunch.

So it has come to pass. ‘Only’ £2.34 billion has been raised by Ofcom, despite the OBR’s forecast of £3.5 billion.

A couple of observations about the reporting of all this: first, £2.34 billion is still a useful fillip not to be sniffed at; and second, this mini embarrassment has given journalists a perfect excuse to ignore the good employment figures also released today.

Yet a mini embarrassment it is. Perhaps Mr Osborne should not have brandished an outcome ahead of time, but auctioneers tend to set target prices with little impact on bidding behaviour other than to focus it around said target. It isn’t a patch on Gordon Brown selling our gold reserves having already announced to the world his intention to do so.

On the subject of auctioneers, however, something odd happened on BBC Breakfast earlier today. Ed Richards, Ofcom’s chief executive and unsuccessful candidate for BBC director-general (despite being the bookies’ favourite), was on talking about the auction. Mr Richards stated that Ofcom’s priority - as auctioneers - was straightforwardly to hold a fair and proper auction and “ensure that a valuable economic resource was brought into productive commercial use”. Ofcom’s priority - as auctioneers - was certainly not to maximise revenue.

Whether or not this was on instruction from the Government doesn’t matter. It is still odd. Tell auctioneers at Christie’s that the whole point is just to shift stuff and not to maximise revenues, you’ll be laughed out of the room. These are, as Mr Richards also said, “very different times” compared to the 3G spectrum auction, which raised £22 billion in 2000. But it doesn’t mean you shouldn’t at least have a go at it.

Follow Nik on Twitter @NikDarlington

Inflation targeting, or what Arsene Wenger and Mark Carney have in common

Matthew Robertson 1.36pm

• May 2004: Arsène Wenger hailed as Arsenal go entire season undefeated to win the Premier League
• December 2012: Arsène Wenger under increasing pressure as Arsenal lose to League Two side Bradford City in the Capital One Cup
• October 1992: for the first time monetary policy in Britain would be based on an explicit target for inflation
• December 2012: Mark Carney, the incoming Governor of the Bank of England, has suggested abandoning inflation targeting

“When the facts change, I change my mind”. A quote that has long been attributed to the father of modern economics, John Maynard Keynes. It is a belief that policy should be implemented to tackle the world as it is today, not as it was yesterday.  

The position of an English football team and the comments of the Governor of the Bank of Canada may not seem interlinked but they do shed light on whether it is beneficial to adapt to changing circumstances or to maintain the current strategy in total belief that it is the correct way.

One of the great success stories of modern economics is the taming of inflation. As Mervyn King, the departing Governor of the Bank of England, stated in a speech in October:

“Over the previous twenty years (1972-1992) inflation had been the single biggest problem facing the UK economy, peaking at 27 per cent a year in 1975. Over the subsequent twenty years (1992-2012), inflation, as I mentioned earlier, would average only 2.1 per cent.”

The key to this success was controlling inflationary expectations and the key to that was inflation targeting underpinned by an independent central bank. Exiting the European Exchange Rate Mechanism freed Britain to set their own monetary policy, which culminated in Bank of England independence in 1997.

A target would be set and it would be free of political interference. As long as the target over the long term was met, the expectation was anchored as any deviation would be expected to return to the anchor. This was the case for most of the past twenty years.

This policy was a reaction to the economic difficulties of the time and has been reproduced in many countries over the world. Inflation is well above expectation at the moment but inflation between 2.5 per cent and 5 per cent is low by historical standards and the reason is that the inflationary expectation is still around the 2 per cent mark.

The footballing philosophy of Arsène Wenger when he first arrived in England was equally as successful. His devotion to ‘pass and move’ football led to five trophies in six seasons as well as the first team in 116 years to go a league season unbeaten.

However, times have changed both for the economy and for English professional football. The financial crisis of 2007-2008 precipitated a new thinking in central banking theory. The Bank of England ignored concerns about inflation and reduced interest rates to almost zero per cent in an effort to enhance liquidity and reduce borrowing costs. The greater concern for the Bank at the time was economic output and preventing the economy stagnating into a long term liquidity trap. There were numerous inflationary concerns regarding world food prices at the time but the Bank, quite rightly, decided that the crisis needed urgent, unorthodox central banking. This was further reinforced by a period of quantitative easing where the Bank of England purchased financial assets from commercial banks to inject money into the economy.

In a speech on 23rd January, Mervyn King argued that pursuing a two per cent inflation rate target throughout the financial crisis, would have worsened the recession:

“To bring inflation down ‘would have meant driving down wages by creating a deeper recession, even higher unemployment and lasting damage to the job prospects of many young people.”

The question now is whether inflation targeting should be abandoned for nominal GDP targets, something the new incoming Governor, Mark Carney, has suggested. A deeper question is whether the economic circumstances of the economy have altered significantly to warrant a change in approach.  Are the economic conditions so benign that there will be insufficient demand to produce growth without active interference from a central bank?

Central bankers will need to factor in these conditions along with inflationary expectations to assess which approach to take. The history of the 1970s suggests that active GDP targets don’t work but that might have been for a different time with contrasting conditions.

Whatever route is taken it raises the question of whether to change one’s mid when the facts change. The arrival of Roman Abramovich and latterly Sheikh Mansour altered the nature of English football completely. Chelsea and Manchester City have the ability to outbid and outspend any club to attract the best talent from around the globe. There is growing doubt as to whether Mr Wenger’s prudent approach of developing youngsters and buying affordable players can be successful in today’s Premier League. Despite constant criticism, Arsenal’s manager has remained dogmatic about what he considers the correct method.

Is this appropriate when the facts change? We shall see when Mark Carney takes over the helm in the summer.

By that time there may even be a trophy in that Arsenal cabinet.

Follow Matthew on Twitter @FlatFootTory

The Conservative Party must connect with ordinary working people

Francis Davis 2.00 pm

Recently, in the Conservative Party, there have been a slew of speeches, pamphlets and exhortations arguing to extend the ‘modernising’ project if the party is to stay in power.  Yet among the least noticed developments in Conservative circles , but the most clocked among Labour’s team, was a break from the vitriol of ‘strivers’ versus ‘shirkers’ as Greg Clark set out to advance the cause of ‘ordinary people’ . In one fell swoop the Treasury and regional Cities Minister seemed to have framed a paradigm which may lay the seeds of a response to ‘one nation’ Labour and its patriotic cast of mind.

Worklessness, Clark argued, was complex and not just a sign of sloth.  More to the point plenty of families want to work hard, keep their kids safe, have a holiday and cover off their pension. To do that they will work conscientiously but still long for ‘a life’. You can get the picture: ‘ordinary’ families want to minimise economic insecurity but this does not mean they all want to give their every moment over to chasing the dreams of a ‘Dragon’s Den’, or the exhaustion of a life underpinned by breathtaking overtime.  A practical family car will do them rather a Merc; a fortnight in a hotel in the Canaries rather than a month in a holiday home in France; access to good doctors for when their gran’ is ill; the support of a flexible welfare system when an Uncle is laid off by that local company where until his redundancy consultation came he thought what he did really mattered to his boss.  The ‘ordinary’ do some volunteering and an increasing number are carers. Moreover, one could infer, ‘ordinary’ people think that politicians who have only worked in the City, think tanks or London, and never in the public sector or a small firm, are ‘weird’.  And such voters will play a defining role in the general election’s English marginal seats.

The trouble for the current Conservative party is that it is the least prepared of the major parties to reach out to this crucial core of the largest part of the United Kingdom. Whilst ‘modernisation’ has produced many pamphlets, its narratives are still dominated by two clusters of reflection rooted in geographical cultures that unconvincingly reflect English aspirations. These are the ‘Glasgow’ modernisers with their centralising instincts, and social conservatism, and the ‘Notting Hill’ modernisers with their metropolitan and commodifying ethics.  The result is that the experience of ‘the ordinary’ gets mis-translated into the less compassionate, more marketising, more moralising, more white models of the ‘modernisers to date’, who in turn think they are cleverly ready for modernisation 2.0. Consequently, the urge to institutional renewal and local community revival on the part of the English Conservative party in the country is all but exhausted.

 For example, Conservative HQ’s ‘mutuals’ unit arrived then closed as quickly as a passing storm. Its outreach to black and ethnic minority families has never taken off. There is no lively network of Conservatives in the public sector, or nurses, or mums.  It does not celebrate its Northern councillors as national champions outside the Local Government Association nor require those in the South to spend time out of their own areas.  And the party seems to think that the odd week in Bosnia or Bangladesh for its candidates passes as civic credibility when ‘ordinary’ voters have to fit in school governorships, neighbours’ needs, and supporting children’s soccer teams around everything else.

By contrast Miliband’s Labour has been running pilots which give its canvassers a brief to have doorstep conversations rather than merely voter registration drives.  In some seats it has signed up a thousand new allies by linking parents concerned about teenage drinking and supermarket pricing. It is turning its local staff into ‘community organisers’ to reach out to every walk of life and then targeting the training of committed activists to complement such new approaches. This and its engagement with ethnic minorities is measured by the moment rather than by luck. While Blair once transformed his constituency party in Sedgefield, Ed Miliband is seeking to go further by listening nationally from the bottom up.

If there is to be a revived Conservative modernisation then it needs to be equally zealous and break into English pathways of life for which ‘Glasgow’ and ‘Notting Hill’ are ill suited as guides.  It will need to learn more on Honda’s shop floor in Swindon and from those defending river habitats in Cumbria than fixed assumptions from elsewhere. It will need to know the people in Birmingham Central Mosque, the Dean of Liverpool’s Cathedral, the parents of Chester rich and poor and middle managers in Newcastle better than Surrey and Oxfordshire.  And for its advisors and civil servants, it will reach for the universities of Warwick and Southampton, Durham and Bristol, Nottingham and Leeds as much as London, Oxford and Cambridge. It should have the confidence to point to public innovations where mainland Europeans do better than ourselves. Above all it will need the skills to ‘hear’ that ordinary people are suspicious of all the political houses because ordinary people are focused on building up their own house in which they and their families can have enough, be safe, and enjoy the odd piece of luck.  Not a castle, not a penthouse, not an excuse not to work but an ‘ordinary’ English life with all the shocks that employers, ill health, family pressures, thinking that London is like England, and bureaucrats can put in its path.

Greg Clark has found the language from which a new English Conservative modernisation might emerge. Others must now take up that baton rather than stridently restate much that may have been misunderstood and misapplied.  After all, a party at ease with the ‘one nation’ label at a time of social complexity, and serious about modernising around the life of the whole country rather than itself, ought rightly to be proud of ‘the ordinary’.

Francis Davis is a Fellow at Res Publica and Visiting Fellow in Civic Innovation at Portsmouth University Business School.

If the younger generation won’t bother to vote, it’s no wonder the policies don’t favour them

Sara Benwell 10.34am

We all hear talk about the ‘lost generation’, the young people today struggling in a climate of few jobs, a steep housing ladder, and dwindling prospects of a good pension. I’m one of them.

The average age of a first-time buyer is well into one’s thirties and rising. Graduate debt is also on the up, and the state of the public finances means future generations will be picking up the baby-boomers’ bills for some years to come.

The past few years have witnessed a remarkable explosion in youth activism, supposedly a response to this demographic and economic ‘pinch’ (to borrow the terminology from a brilliant book by Tory minister David Willetts). But the fact is that until young people vote in larger numbers, nothing will change.

Before the 2010 general election many young people were enthused by the Liberal Democrats and pre-election polling seemed to indicate that Nick Clegg’s party had captured young people’s hearts and minds by speaking out about university fees and other issue important to the youth of today.

Regrettably for Mr Clegg, those young people failed to turn out to vote when it mattered.

Here’s the deal. The highest proportion of voters in the UK is overwhelmingly over 65. In fact, that cohort comprises approximately one-fifth of all voters. So the question is, if politicians know that more over-65s shall vote than any other demographic, and that young people are the unlikeliest to vote, who is likeliest to garner the most attention? The grey vote.

You could argue that young people don’t vote because they don’t identify themselves with any of the traditional political parties, and that politicians should therefore try harder to connect with them. Turn the system on its head.

Sadly that doesn’t work. It is what the Lib Dems tried to do and many young people said they intended to vote for them, but didn’t.

So the message the younger generation is sending to politicians is this: “Don’t bother considering us when it comes to policies, because even if we like what you’re saying, we still won’t go out to vote.”

When put like that, it’s no wonder that policies don’t favour young people. Of course politicians will focus on pensioners, who are statistically more likely to put an all-important ‘X’ in the box.

Of course, there is a sizeable minority of younger people who do want to engage with politics and who do vote. Yet unless we all start voting, nothing will change. It is a vicious cycle.

I genuinely believe that if I don’t vote, I am giving away my chance to have a say on how I want this country to be run. And while young people may not think any of the traditional parties entirely match their world-view, there must surely be a candidate out there, someone, somewhere, to vote for.

I hate to be one of those people that harps on about what a privilege it is to be able to cast a vote. But it is. People have fought for it, throughout the world and throughout history.

Maybe we do feel like a ‘lost generation’, and maybe we do feel as though nothing’s going our way. So maybe we should exercise the precious rights we have, take a chance, and shape our own future.

Follow Sara on Twitter @sarabenwell

PMQs review: Score draw but the Prime Minister’s arsenal is worryingly bare

Jack Blackburn 2.08pm

The Government’s fortunes and the composure of its ministers have crumbled over recent months, though it is worth noting that the Leader of the Opposition’s polling numbers have still not managed to match his party’s.

So as we arrived at the first PMQs since April we found a leadership vacuum, created by a Government in disarray, a Prime Minister under pressure from all sides, and a Labour party leader seemingly unable to act like a leader.

This PMQs also took place in a very different context to the last. Disastrous local election results (London’s Mayor aside) for the Coalition parties still sting. The national economy seems to have tumbled into a double-dip recession. We are being badly buffeted by continuing turmoil in the Eurozone, where an anti-austerity Frenchman has just taken up residence in the Élysée palace and Greece is crippled by political upheaval.

To use a recent (and for me painful) sporting illustration, the leaders were level on points going into today’s match, with Mr Miliband ahead on goal difference. This was a mid-term fixture rather than an end-of-season cliff-hanger, but it as was scrappy, messy and confused as the Premier League’s climax, if nowhere near as exciting too.

Mr Miliband has plenty of arsenal at his disposal at the moment. Dreadful growth figures, unhappy nurses, protesting police officers, the controversial Leveson Inquiry, electoral reverses and the seemingly changing political breeze in Europe should have meant that Mr Cameron was in for a torrid time at the Despatch Box. Nevertheless, there was a crumb of comfort for the Prime Minister today in the form of falling unemployment.

Mr Cameron began by using this to his advantage, welcoming a question from his own backbenches, but stressing (as all the Cabinet has done this morning) that the Government is not complacent. There is more to be done. Etcetera. And for once, Mr Miliband also welcomed good economic news, but was quick to try to press home some advantage by questioning what discussions the PM had taken part in with President Hollande about growth plans for France and Europe.

The answer could have simply been, “Well, haven’t really spoken to him since he was elected.” So Edward suggested a text message with “LOL” in it would probably be sufficient. Uncharacteristically funny, and well delivered.

In fact, Mr Miliband’s entire style of performance has improved immensely. He is calm, considered and no longer whiny. Nonetheless, Mr Cameron remains an adept performer himself, and responded strongly: “I may well have used my mobile phone too much, but at least as Prime Minister I know how to use one rather than just throw it at those who work with me”. The Rt Hon Member for Kirkcaldy was, as usual, nowhere to be seen.

Mr Miliband was indeed more impressive today, though still blew it by failing once again to capitalise effectively on the Prime Minister’s all-too-evident woes. He left the economy debate too quickly, so eager was he to cram in questions on policing and nurses, while also failing to pose a question on his sixth time of coming. The eyes were bigger than his abilities.

Yet Mr Cameron also fumbled the ball today, particularly with his final response to his opponent, when he attempted to criticise Labour’s new policy supremo John Cruddas as someone too close to the trades unions. At moments such as those, one realises just how little ammunition the Prime Minister has at his disposal.

The Big Society has life in it still, but more must be done to avoid a repeat of Shaun Bailey’s My Generation

Samuel Kasumu 6.00am

The ‘big society’ was supposed to be the key Conservative policy that would tie the rest together. An underpinning philosophy that could rebuild communities, reshape public services and above all demonstrate that Conservatives could do compassion.

But this ‘big idea’ failed to capture the imagination of the public from the start. And the recent news that one of the first Big Society Ambassadors has has to close his charity can only pile further pain on the tarnished ‘big society’ brand.

Shaun Bailey is the talented community leader and former Conservative candidate. He represents a section of British society - black, urban, working class - that the Conservative party has struggled to engage with in the past. Having failed to win the Hammersmith constituency in 2010, Mr Bailey was signed up as one of the Prime Minister’s special advisers. Yet the excellent charity he founded, My Generation, has now closed.

My Generation’s mission was all about what the ‘big society’ stands for, and its closure is a sad loss for the communities of Hammersmith - but it may actually be the most important thing Mr Bailey does as a Big Society Ambassador. In having to close his own charity, he has demonstrated to the Government and to leaders of similar organisations that he understands and shares the same challenges faced by most voluntary groups today.

There is no doubt that funding has always been community groups’ biggest challenge. And today we are in the midst of an economic downturn, with funding ever harder to come by: there is less of it, and it is harder to access.

During the Labour party’s time in office we saw large amounts of money distributed through local and national government schemes. Grants were more readily available.

But in recent times, funding for services for the likes of children and young people has dried up because local authorities have no statutory obligation to deliver those services. Other lifelines such as the Future Jobs Fund have gone, meaning that many voluntary sector organisations no longer benefit from extra staff funded by the government.

So the voluntary sector faces many challenges and the long-term survival of many of these organisations cannot be guaranteed. Some might see this situation as tragic but I see it as more of an opportunity to create newer, better solutions. Like a game of chess, with an opponent thinking the game to be over, the ‘big society’ may yet have one more move to play.

The Government must look at new ways of reshaping the voluntary sector. I suggest setting up Big Society Academies to train community leaders and give them the skills to identify funding sources that still exist, as well as other key skills (former Labour and Lib Dem MP Paul Marsden wrote of similar things on these pages last summer).

This training could be delivered by companies on a pro bono basis (or even a form of payment by results). The passion of community leaders must be harnessed and supported by training from experts in various fields.

Some major corporations are already donating their time for free to train larger groups of voluntary sector staff and volunteers - but on a smaller scale. This must increase. There’s no doubting the CSR benefits in doing so.

There is a variety of different activities still funded by national and local government but to be able to receive any money many organisations have to be a bit more entrepreneurial. Something like the National Citizen Service offers funding of more than £1,000 for every young person that is attracted to it. This is a lot of money but currently only very big organisations such as the Prince’s Trust and vInspired seem to be winning the contracts.

So how can smaller voluntary groups participate in the delivery of such schemes? Some do, but not nearly enough to fulfil the aspirations of the ‘big society’.

Smaller voluntary groups will need to team up with bigger organisations if they are struggling to survive on their own. Some will seriously need to consider merging. The Government must play its part in revolutionising the voluntary sector, but without taking it over. Make funding available for community groups with fewer strings attached and less bureaucracy in the application stage.

The Prime Minister must also find a way to get those involved in the voluntary sector into paid employment. It should be said that Mr Bailey’s role as a Big Society Ambassador has been unpaid, and he therefore represented those many community leaders who do the work most people claim to be too busy to do, and sacrificing his own time without being fairly recompensed.

There must also be targeted funding available for communities to create solutions where there are gaps in public services.

The ‘big society’ still has the potential to empower us all to engage more with others in our own communities. But this will only happen when the Government supports the people that were involved in the ‘big society’ before it became the Conservative party’s ‘big idea’. More support is needed, more engagement is essential, and a more collective strategy is crucial if we are to avoid a repeat of Shaun Bailey’s My Generation.

Follow Samuel on Twitter @samuelkasumu

PMQs review: Questions surrounding Edward’s leadership remain unanswered

Jack Blackburn 1.20pm

The battlelines for this week’s PMQs were bizarre. In theory, it should have been a tough day for the Prime Minister, given the overall rise in unemployment which had been announced earlier.

However, he was up against a Leader of the Opposition who has spent most of the past month doing a Norma Desmond impression in order to defend his record: “I am big. It’s the party that’s got small.”

In short, Dave needed to mount a fierce defence of the Government’s employment policies and Edward needed to deliver a knockout performance.

So, Dave had combed the figures to find anything positive. And to be fair, he did. There was a decrease in long-term unemployment and the number of young people who had been out of work for more than 12 months was also down. With the endless lists of government initiatives designed to create more jobs, there was some ammunition for him to use. However, when the economic climate is grim, it should - I repeat, should - be very hard for the Prime Minister to win an exchange such as the one he was faced with today.

Enter Edward Miliband. As with last week, we saw the calmer Edward, trying to not be preachy, screechy and, crucially, not attempting humour.

However, Edward’s problems have not just been presentational. They have also been strategic, and the element which was highlighted today was his lack of policy detail. Generally, Edward selects figures that are bad for the Government and seems to expect them to carry him through.

Increasingly, although he is becoming steadier, Edward still sounds like a biased newsreader, relating all of the government’s woes to the House without having the guts to suggest any hard policy in the chamber. Very soon he will discover that saying that the government is wrong is not enough. We still have no idea what Edward would do about it.

That perennial issue aside, this session remained in the balance. The Prime Minister had a couple of lines up his sleeve and managed to land some punches, executing a sturdy defence. He was still vulnerable because the news remained poor at its heart, no matter how many little positives he drew out of it. Edward didn’t have the ability to exploit this weakness at all. The questions surrounding his leadership remain utterly unanswered.

Follow Jack on Twitter @BlackburnJA

Does Compassionate Conservatism still have a place in a poorer Britain?

Alexander Pannett 6.45am

The worsening economic forecasts have suggested that the age of austerity could be a much longer period than first envisaged.  The UK economy has grown by only 0.1 per cent in the second quarter and unemployment has risen to its highest level in 17 years.

Outside the UK, the erratic movement of unfettered global capital continues, as no state appears to be safe from the jitters of speculation.  Even China, up to now the main hope of global economic revival, has seen its CDS spreads widen to an unprecedented amount.

With this economic gloom acting as the backdrop to the recent Conservative party conference in Manchester, David Cameron was at pains to remind his party and the country at large of his original project to “de-toxify” the Tory brand by emphasising the Conservative party’s compassionate side.

But with such little money at its disposal and the severest public expenditure cuts since 1945, can the Tories truly convince the electorate that it is no longer the ‘nasty party’?

The reality is that the terms that have defined Compassionate Conservatism must change to fit the needs of the people it attempts to help.  Right now, people do not want concern for their plight.  They want the security of employment.  Minor policy initiatives that might put a little extra money in people’s pocket are admirable but they are no substitute for the salvation that a job brings.  Mr Cameron should demonstrate his compassion by doing all he can to bring jobs to deprived areas. The Government’s Enterprise Zones initiative in economically disadvantaged areas is a strong step in the right direction.

David Cameron must not make the economist’s mistake of seeing GDP growth rates as indicative of increased employment or of a rejuvenated society.  This recession has exacerbated the widening gap between rich and poor.  Mr Cameron should take no comfort in strong economic growth in already affluent regions of the UK, which acts as a mirage of economic and social wellbeing.  For him truly to govern as a Compassionate Conservative he must bring opportunity to those areas that are economically and socially disadvantaged.

The Government should invest in infrastructure in those areas in order to inject direct capital expenditure, which will lead to jobs.  In a recession this is an effective way of supporting a region, while Enterprise Zones encourage private companies to invest locally.  The Government could spin-off parts of Lloyds and RBS into a national bank that lends directly to small and medium sized companies and encourage growth in disadvantaged areas.

The Government should cut regulation that dissuades companies from setting up in disadvantaged areas.  Ministers should also do more to move civil servants from economically buoyant regions such as the South East to more deprived regions, such as the North East.  Planning laws in disadvantaged areas should be made as flexible as possible, without taking unnecessary risks with the environment, to prevent hindrances to economic development.

Lastly, the Government could do more to reverse the ‘brain drain’ out of deprived areas towards the South East of England.  As well as using Enterprise Zones to offer tax incentives to companies, it should also consider lowering income taxes for individuals in regions with long-term unemployment. Or even income tax holidays.

Compassion must bring real opportunity to those in socio-economically disadvantaged areas.  Empathy without action will not fill stomachs nor will it fill hearts with hope of a better tomorrow.

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