Newsnight: Head-to-head with Clegg and Huhne

One of the downsides of being married is that one is never the first person to post about a recent event. (There are fringe benefits, however). So I imagine that the LibDemosphere is already awash with accounts of tonight’s Newsnight, however, where Nick Clegg and Chris Huhne battled it out in a leadership special.

It began pretty painfully. Having shunted us to second billing after Alistair Darling lost the personal and bank details of half the British population, we were then met by the two contenders failing to agree on who should start, so that Jeremy Paxman was obliged to ostentatiously “toss the Euro” to see who should begin.

Chris won, and began with his one minute speech in which he stressed the need to be radical, to give away power, to decentralise, to be “Fairer and Greener” (remember that one!), and stressed his ability to get our message across. He appeared a little hurried; a little tense. Nick was calmer and better prepared, and began by explaining that he did not want to be leader because it was an end in itself, but because he wanted to be part of a liberal society, “to make politics less boring” and to “speak like a human being.” Oh, and make Britain “fairer and greener”. I feel they rested my earlier case!

On the question (so oft repeated) as to whether anybody should care, Chris pointed out quite fairly that his background in economics is extremely germane; we are undoubtedly entering into a period of economic stability where are leader with a sound understanding of economics will be needed. Nick, on the other hand, emphasised the need to reach out to the non-voting 40 per cent, a plea that carries much emotional but little practical weight (remember, three quarters of them weren’t voting 30 years ago, either).

Paxman then resorted to his favourite leadership head-to-head tactic (and one I actually enjoy) which was to ask for straight answers to straight questions: the “yes or no” round. I preferred Nick’s answers for the same reason that I preferred Alan Johnson’s in Labour’s deputy leadership: he gave the succinct answers requested. Nick categorically ruled out in one word adopting school vouchers (the fool!), while both agreed to rule in Trident “right now”, but Huhne waffled whereas Nick was succinct. On tax, Chris stressed the desire to see “broader shoulders bearing more of the burden” (which one assumes is not-very-complex code for more “progressive” taxation) while Nick emphasised the reduction of taxes on income and the shift onto environmental taxation (which some might argue was Huhne’s home ground).

On immigration, however, Nick put a ball firmly in the back of my net and that of many Liberal Democrats: asked whether there had been “too much immigration into Britain” he stated categorically no. He is of course correct. But I was very disappointed by Chris’s answer, that while immigration had been good overall, some communities had suffered from too much, too quickly. It was particularly worrying that he cited workers in his Eastleigh constituency that had had to deal with increased competition, as though they should be protected from outsiders coming into their town to compete with them for business. This had the whiff of protectionism about it, and contrasted with Nick’s explanation that the problem with immigration was that resources were not provided to local authorities by government (which is too slow to recognise population shifts in towns and districts), that they were not required to learn English, and that a lack of exit controls meant that we had a distorted image of who was in our country.

On the Euro, both agreed that Britain should not be a member now – which is orthodox Lib Dem policy – and neither wanted to get dragged into discussing future coalitions. Chris suggested that electoral reform would lead to a more sensible approach to partnership politics, while Nick got a little shirty with Paxman (which I quite enjoyed).

To conclude, both said that they liked each other personally and, when pressed, Nick said that the “Calamity Clegg” dossier was mean but that he could put it behind him, while Chris said that he took full responsibility, that he apologised, but that it had been drafted by a junior member of his team. Both promised a place in the future shadow-cabinet to his opponent.

While not hugely informative on substance (a couple of issues aside) it nonetheless was clear who won on style. This was summed up best by Mrs. Polemic – so far a Huhne fan – who was fairly frank towards the end in recognising that “Clegg’s wiped the floor with Huhne, hasn’t he?” The question was rhetorical, and justifiably so. I don’t know if this performance alone will have swayed her, but it may have swayed some. I’m looking forward to the hustings more and more.

A house-price crash will save the Government from finding a policy solution

I’m sure Henry George was spinning in his communally-owned grave last night (though having seen this, I wonder if he’s been spinning for some time!).

Newsnight devoted most of their programme last night to housing. (Not that you’d guess by reading the first comment on the Newsnight blog, which drips anti-Semitic bile). Gavin Estler chaired a debate between Housing Minister Yvette Cooper, a Tory shadow less aristocratic than Michael Gove, the owner of a chain of estate agents and somebody from pricedout.org. It was interspersed with a few reports.

In the first instance, just about everybody agreed that more housing was needed. The Government recognised that 220,000 new houses were needed each year, but blamed Tory councils for blocking planning permission. One commentator then noted that it had taken the Government ten years to raise house-building from 100,000 to 110,000, whereas in the 1950s the Tories managed to raise house-building from 200,000 to 300,000 in a couple of years. The lady from pricedout.org agreed that more housing was needed. Everybody agreed that there was a supply problem, but nobody explained how it was to be solved, or why we are tearing down houses in the North of England while building new ones in the South.

There followed a series of truly bizarre proposals, including the usual anti-capitalist assault on second-homers and those buying to let (in an example of economic illiteracy, Ms. pricedout argued that more supply would merely be mopped up by wealthy buy-to-let landlords and so would not benefit first time buyers, which showed a total ignorance of the most basic principle of economics). Poor hippies could no longer afford to buy houses in the bohemian paradise of Totnes, lamented one Newsnight reporter, who seemed to wilfully ignore the fact that those selling their houses to property magnates and .com millionaires were the very hippies and artists who had given the place its character, and were now happily cashing in on the very material windfall that they had enjoyed.

It’s all the fault of the money-lenders, went up a cry that would not have been out of place in twelfth century York. House prices are over inflated because people are now able to borrow vast sums of money (up to ten times their salaries!). The words “credit control” appeared on the screen. The panellists happily discussed whether there should be a cap on the amount one is allowed to lend. Apparently, it is the job of the lender to lend responsibly. I had always though that it was the job of the borrower to borrow responsibly – it is they, after all, who must meet the repayments or lose their house – but nobody spoke up for the freedom of the individual to borrow whatever sum they deem necessary (or desirable) to make whatever arrangements they see fit.

At one point the Newsnight team mentioned property taxes. Apparently, they solve the whole problem. But Middle England wouldn’t like it, so it was brushed aside with a politically expedient waive. There was only one thing for it, they concluded. A nice house price crash will sort it out; but lets hope its not too hard, added the politicians.

It is a shame that Dan Rogerson was not available, as a Lib Dem might have tried to keep the discussion about property taxes alive for just a little longer. Like the issue of road user pricing (which is a Lib Dem manifesto pledge, though we have cooled to it since two million people signed a petition objecting to it), it is the right policy and one that needs to be defended, explained and pursued.

Land is a finite resource that owes nothing to the ingenuity or effort of mankind. It has more in common with fossil fuels or spectrum band-width than labour or capital. Because it is both limited and essential (unless one is a pirate radio station), it’s value constantly rises as society grows richer: money chases more and better goods, so prices actually fall in real terms (imagine how much a brand new ZX Spectrum would be worth now – kitsch value aside); wealth outstrips population growth, so real incomes slowly rise; but land is static, so rising wealth and demand must push prices up. Land value inflation is inevitable.

The most efficient way to prevent land becoming the preserve of the wealthy few (which George argues must inevitably lead to the impoverishment of those who do not own land, as any extra wealth they produce will be taken in rent) is for the state to capture rent and distribute it among the populous. The Lib Dem proposals are rather more modest; they would tax property values at 1 per cent per annum, with a view in the long-run to taxing only land values and not the value of improvements.

The result would be to calm house price fluctuation. It would discourage hoarding; it would be costly to own land that was not in use. It also rewards improvement: a field would have the same land tax whether or not a block of flats were built on it, so the owner’s interest would be in developing his land. It would capture a proportion of the wealth (as opposed to income) that would otherwise entrench privilege in families, and would capture unearned income (that deriving just from owning a rising asset). From an economic perspective, it would have a far more benign effect than taxation of labour or capital, both of which we should encourage. And it is devilishly hard to evade.

Middle England’s objection comes primarily from the fear that it will lead to a net increase in taxation. This is – or at least, ought to be – misguided. If land value taxation were the preserve of local authorities, it could replace the hated Council Tax. If it yielded higher returns than the Council Tax, the Government should respond by reducing the grant it gives local authorities and tax labour and capital correspondingly less (that is to say, reduce income, capital gains and business taxes). This would additionally hand much more fiscal authority to councils and so promote the devolution agenda. Tax changes should be at worst neutral, but would be altogether fairer, simpler, greener, more local and more efficient. Sound familiar?

Newsnight plumbs new depths (an impressive feat!)

It was an impressive achievement, but Newsnight managed to plumb new depths last night. Its main article, devoted to questions surrounding companies that buy and sell national debt, repeatedly described them by the far-from-impartial moniker “Vulture Funds” and made no effort to give a balanced view. Rather, there was a disgraceful piece of polemic dressed up as journalism (I prefer my polemic naked). A less charitable viewer of Newsnight might say “business as usual, then”.

Third world debt is an emotive issue. Now that the West has largely put famine and pestilence behind is, we find it abhorrent that people should continue to suffer in conditions that we consider to be mediaeval, and we are understandably eager to do something about it. Thus we pick through Third World budgets, and particularly those that transfer money to the affluent West, and ask whether this expenditure would be better diverted to alleviating poverty. The money that Third World countries spend on servicing debt has become a totemic issue for many.
Meanwhile, for a very separate group of people, debt is a business, without which individuals, companies and countries would be unable to spend large sums of money that yield long-term benefits. If I could not borrow money I would forever be paying rent to a landlord instead of buying my own house; if our government could not borrow money it would not be able to build as many railways or hospitals; and if Third World countries could not borrow money they could not build the roads and ports they desperately need to trade their way out of poverty.

Sadly, the debt business is always viewed in rather emotional terms. “Never a borrower nor a git be,” as the witty wag, Stephen Fry, once said. Those who loan money are easily demonised, as Europe’s relationship with the Jews during the Middle Ages demonstrates. In fact, the trade in debt is not nearly the necrophagic business that anti-capitalists would like to pretend. In the event that a creditor is struggling to recover lent capital, it is entirely reasonable that they may accept a smaller sum to clear the business up quickly, and that a speculator might agree to take on the risk in the hope of recovering the full debt in the long run, and so make a profit over the knock-down price they paid.

To talk, as Newsnight did, of companies turning $5m dollar investments into $40m demands on Third World countries is disingenuous. The original debt would have been worth $40m whether or not it was sold on to a third party, but the original creditor had so despaired of ever seeing a return on their loan that they sold it on at a bargain price. The Third Word nation (in this case Zambia) did not lose out by seeing their debt sold on, except in as much as their original creditor may otherwise have despaired so utterly that the debt would never have been settled. The creditor (Romania, not exactly rolling in wealth and luxury itself) did not lose out, either, but rather judged that at the time it sold the debt, it needed the £5m more than it needed the hope of gaining the full value of the debt after a long, bitter and possibly hopeless battle. And the “Vulture fund” did not rip off the debtor, but instead met Romania’s need for a quick injection of cash and continued to pursue Zambia for an already existing debt.

The question remains, is it moral at all to seek to collect the debt when the average Zambian lives on a dollar a day? Sadly, the income of the average Zambian is beside the point, for the average Zambian is unlikely to see that $40m whether the debt is paid or relieved. Having visited Lusaka, I recall being told the story of how the president was unhappy with the size of the two swimming pools at State House, and so installed a third, grander one. It struck me that it would have been hard to find room for so many pools, as much of the grounds of this urban presidential palace were taken up by the president’s private safari park. It is also worth noting that Zambia’s defence expenditure has nearly doubled in less than a decade, from $68m in 1998 to $105m in 2005. While I am not usually enamoured of the “Defence money could be better spent elsewhere” argument, this and other discretionary expenditure does put paid to the suggestion that Zambia was unable to pay the debt, which has only mounted to $40m in 2007 because it has not be serviced for many years.

If we in the West believe that Third World countries should not be obliged to service debts their government’s incurred because there are better things for them to spend the money on, we should pay off their debts. Debts owed to other governments are easily forgiven, and have been. Debts to international organisations can also be relieved, but unless Western governments make up the shortfall, these organisations will not have money to lend to other needy nations.

But the debts resulting from private lending, or where private lenders have bought debt from other organisations, are now private property. Just as we would not countenance a government seizing a person’s house to build a road without adequately compensating them, so we should expect governments to compensate creditors – yes, even “vulture funds” – if they require them to forgive the debt. If government does not act, we may ask that the creditors show charity of their own volition, but we must be wary of tarnishing our request with a prurient distaste for the legitimate means with which they make their living.

My own prurient distaste for the way that Newsnight, et al, make their living, may be plain to see, but in my naivety I had expected a more elevated tone to its reporting than I was subjected to this evening.

The Al Qaeda franchise

It is a commonplace these days to talk of Al Qaeda as a “franchise”. Osama Bin Laden’s organisation was broken up by the invasion of Afghanistan. While many of its leaders are still at large, and it still has money and committed adherents, its main role is now as a rallying cry and inspiration for jihadist groups across the world. Where in the 1990s it planned, funded and launched specific attacks, it is now more of a “brand” that other Islamist groups use to promote and justify their own acts of terrorism.

While there is undoubtedly truth in this, it is too clean a distinction. The truth is far more terrifying.

A few weeks ago Newsnight showed a Special Report entitled Inside al Qaeda - a spy's story, broadcast on 16 November. Details of the programme are available, as is the full broadcast. It was a truly terrifying look into the heart of this most committed and dangerous of enemies, and one of the most compelling 47 minutes of television I have watched in a long time.

While there was a lot of fascinating detail in the programme, one particular moment stood out. The interviewee, who spied on Islamist groups for many years and infiltrated Al Qaeda in 1995, described his time at an Afghan training camp. A CIA operative confirmed that tens of thousands of young men passed through the Afghan training camps during that time. What was particularly chilling was the interviewees description of how free they then were to take jihad abroad:

“They are just training you and you are free to choose your jihad. You are free – and I repeat, you are free – to say ‘No. I’m not going to fight there. I want to go and fight there.’”

To me, this explained much about the spread of chaos over the past decade. While Al Qaeda were training some particular individuals for special missions, tens or even hundreds of times as many young men were given long periods of military training (based, the CIA operative told us, on US and UK Special Forces training manuals) and ideological indoctrination, before being let loose on the world with no particular plan. These men would then travel to wherever they wished to cause mayhem.

This casts a new light on the tragedy of the July 2005 bombings. There was no need for Al Qaeda to coordinate these missions. Having trained the bombers how to run an operation and convinced them that it would be just, the leadership could release them, confident that they would bring terror to the West. They need not worry whether they would go through with it; if they did not, others would. We may rest far-from-assured that scores if not hundreds have been through these camps and returned to the UK. Even if some are caught it is no great loss to Al Qaeda; because they are autonomous groups, they will not be able to finger one another. This, too, might explain the copycat bombings on 21 July – having seen one group succeed, another was compelled to act.

It is a mercy that these camps have been broken up and that this level of training has ceased, but the danger that they have unleashed will be with us for years to come.