Saturday, 7 March 2009

Is that a goat? Let's scape it.

One problem with democratic politics is that the politicians need votes to get power. They neither want nor need votes for the sake of getting votes. They want power and gaining votes is a means to that end. There was a time when it was pretty much the only way of gaining power, but now there is a string of well-paid jobs with huge power for those who proved themselves unfit for office in their own country. But I'm not going to dwell on the EU, I want to look at domestic politics because today we saw a pathetic, posturing, amoral lunge for power by the meaningless Liberal Democrats which means, in practical terms, a pathetic, posturing, amoral lunge for votes.

I know that the occasional person pops into my parlour from outside the UK, so I should say something about the Lib Dems, as they are known, because only a very close observer of UK politics from overseas is likely to have any idea they even exist. The Lib Dems are our third largest political party, generally gathering a few percent either side of one fifth of the votes cast at general elections. Although there is no direct connection between the percentage of votes cast for each party and the number of seats in Parliament that each party wins, the Lib Dems usually have roughly proportionate representation in the House of Commons. They have a habit of blowing with the wind, switching their policy platform quite radically from left to right according to the whim of opinion polls, but still they are a minority party with no chance of power unless an election results in no majority in the House of Commons for either of the main parties, in which case they can pledge their voting power in the house to either Labour or the Conservatives, depending on which of the larger parties offers them the tastiest sweeteners. The Lib Dems were formed in the late 1980s by a merger of the Liberal Party and a breakaway faction of the Labour Party which decided Labour had lurched too far to the left (despite the most prominent members of the faction, known as the SDP, being leading figures in the heavily left and heavily disastrous 1974-1979 Labour government).

The Lib Dems have been a bit of a mess for many years. They have had competent leaders and some competent MPs from time to time but something always turns up to spoil things just as they seem to be getting somewhere. Without doubt the most able Liberal leader in recent times was Jeremy Thorpe, until he found himself on trial for conspiracy to murder; his acquittal proving insufficient to resurrect his career. Then they had David Steel for some years followed by Paddy Ashdown, two chaps of great ability but unable to present a third course while the country was arguing between 1970s-style state socialism and dipping a toe in the waters of free enterprise. Charles Kennedy followed Paddy Ashdown. An immensely impressive speaker, poor Charlie was an even more impressive drinker and left behind him a party machinery exhausted by having to cover his arse when he was on a bender. Then came Menzies "Ming" Campbell, a hugely sensible and pleasant man, an Olympic medallist and a perfect choice to be a fair-minded and much liked High Court Judge. Unfortunately he was a party leader instead, in which role his rice pudding-like lack of charisma came to the fore. Now their leader is someone called Nick Clegg, young and rich and with even less presence than Sir Ming Campbell. Their real leader is their Treasury spokesman, Vince Cable, created real leader by the BBC which seems to give him far more coverage than any politician other than poor Gordon Brown. Today Vince had a spot in the party limelight at the Lib Dem's Spring Conference.

One reason, indeed the only reason, Vince deserves the limelight is that he was the only leading politician from any of our three main parties (other than former Chancellors of the Exchequer Ken Clarke and Nigel Lawson and former PM John Major) who warned consistently about the problem of excessive credit. The opinions of Clarke, Lawson and Major were dismissed as the bitter bleatings of yesterday's men, whereas Vince was seen to be a here and now politician. All credit to him (no pun intended) he was right. He was also right in arguing against the government taking major interests in struggling banks because the result would be transferring massive debts from the existing creditors and shareholders, all of whom volunteered for the risk of losing money, onto the shoulders of Mr and Mrs Ordinary-Taxpayer, who did not. Full marks, Vince can spot a problem and explain it clearly. He is not so good at coming up with workable alternatives to the government's panicked lunges from one bail-out to another, but no one's perfect.

The time he becomes awful is when he descends into raw vote-grabbing, then he is cringeworthiness personified. Today provided a classic example. He made a speech to the Spring Conference, a rallying cry to both the party faithful (for whom "both" seems an apt description) and to disaffected Labour supporters. The Lib Dems know there are lots of people who voted Labour at the last election who are not prepared to do so at the next. Some will switch to the Conservatives, just as they switched from Conservative to Labour in previous elections. Others might vote Conservative but might vote Lib Dem, it is these he seeks to woo. The course he chose to take today was to appeal to the basest and most mindless political emotions, envy and revenge. After ensuring he would get the attention of Labour voters by blaming everything on Mrs Thatcher he turned to his target du jour, "fat cats".

His brilliant idea is that everyone paid more than the Prime Minister should have their income exposed to public gaze. Well, actually, not everyone. Only those who are employed by public companies. At the moment the remuneration of directors of public companies must be disclosed in the company's accounts and to the shareholders. This is a long-standing requirement because shareholders have the right to vote down remuneration packages. Many a large company hires the services of specialist advisors who do not actually act as directors because they do not guide the course the company takes, but their advice is relied on heavily. If they cross the line and become more than advisors they can find themselves in the legal waters of the "shadow director", and very deep and pungent waters they can be. Not a few senior business figures deliberately act as advisors only so that they can collect handsome remuneration without having to expose their private financial affairs to the world. Mr Cable's rant explains exactly why they do this.

A cynic might suggest that these people want money for nothing. I would suggest they want a good level of pay for sharing their experience and expertise with those who think it would be beneficial to receive it. We can all hold our own views about whether the remuneration is justified by the level of expertise behind the advice, but, frankly, it is nothing to do with us. And it is nothing to do with Mr Cable or any other politician. Every company has to disclose in its accounts how much it has paid to consultants because it affects the company's financial state, but how much each individual consultant has received is a private matter of no relevance to the financial state of the paying company, any more than it is relevant how much of the fee they pay their auditors goes to each of the individuals who conducted the audit.

Mr Cable was merely jumping on a particularly cretinous bandwagon. We now know that the directors of some banks were lacking in navigational skills. They directed their employers into a quagmire rather than to the land of milk and honey. So be it. It happens. It happens with Billy Blowtorch Plumbing Ltd and Steve Sirloin Butchers Ltd, now it has happened with a number of massive banks. What difference could it possibly have made for the remuneration of directors to be set out in more detail than the law currently requires and for other employees earnings more than £194,000 a year to be named?

How does he think the process would work? "Oh my gawd", says 53 year-old cleaner Gladys Higginbottom of 34 Acacia Avenue, "Royal Bank of Scotland paid some non-directors more than £194,000, they must be speculating on dodgy derivatives and accumulating toxic debt, I will alert my MP immediately and prepare for RBS to be nationalised in three highly inefficient stages." As they would say in the East End of London, do me a favour. Making public the remuneration of employees tells no one anything about how a business is being run. It's just Sunday tabloid prurience.

Perhaps Mr Cable was laying the groundwork for his party to return to a previously favoured policy of punitive additional income tax for those earning more than £100,000 a year. Or perhaps he has let his massive exposure on the BBC get to him. After announcing this absurd proposal he then said "we have to crack down hard on corporate tax avoidance". Not evasion, avoidance. Tax evasion involves not paying what the law requires you to pay, avoidance involves only paying what the law requires you to pay rather than paying more than the law requires you to pay. Did he really mean this? Let's be generous, let's assume he meant to say that he has identified ways in which more tax can be levied by closing so-called loopholes. Fair enough. Put forward your proposal to raise taxes, Vince, and let it be debated. Let's see if your efforts to close what you perceive to be one loophole will do anything other than encourage people to find another. I won't hold my breath.

He then suggested abolishing top-rate tax relief on pension contributions (just as we are beginning to see the true depth of the pensions black hole) and increasing some rates of Capital Gains Tax. This, he claims, will allow tax cuts for the lower paid. Great, that's how much? £5, £10 a year off Gladys Higginbottom's tax bill? Assuming there is any net increase in tax revenues at all, the impact at the bottom of the pile will be negligible.

Throughout Mr Cable's speech there were references to the new bogeyman, the well-paid banker, the current hate figure of populist oratory. It's all a load of complete guff. He can pick on them now to his heart's content. In six months they will be seen for what they are, a very few people who made a lot of money by making bad decisions. We will have moved on from the juvenile blame game to the more serious question of how we pay for the government's cack-handed attempts to deal with current problems. He really should have more sense than to scapegoat a handful of people we had never head of before and will soon forget.


Charon QC said...

Excellent! No further comment needed by me!

Anonymous said...

"punitive additional income tax for those earning more than £100,000 a year."

Let us not forget, that after a few years of "quantitative easing", MOST OF US will be earning more than £100,000 of the currency by then in circulation. Probably £100,000 will just about pay your council tax in the year 2030.

So, "punitive additional taxation".

Oh yes. Absolutely. It's called fiscal drag.