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Archive for January, 2013

Tuesday
Jan 29,2013

There is a debate going on in the House of Lords today on the economy.  It was intended as platform for the new Treasury Minister, Lord Deighton, to strut his stuff.

However instead Labour’s Lord John Eatwell eviscerated the Government’s economic policy and its (lack of) growth policy:

 ”Lord Eatwell:

My Lords, it is a particular pleasure for me to welcome the noble Lord, Lord Deighton, to the Dispatch Box and to congratulate him on his appointment to the Treasury team. It is always a special delight to see one’s former pupils do so well. When I marked his economic essays back in the mid-1970s, I never imagined—nor do I suppose did he—that we would find ourselves in this situation. I think it is appropriate to report that his essays were typically examples of excellent economic analysis, and I hope and believe that he will put those skills to good use in re-educating the Treasury. It certainly needs it.

Today, he has been placed in an extraordinarily difficult position. It is rather difficult to defend the Government’s growth record when there is none—growth, that is. The latest figures are truly awful, with no growth at all in 2012, despite the heroic efforts of the noble Lord, Lord Deighton, and his team at the Olympics.

Taking the longer view, since the Government’s spending review in the fourth quarter of 2010, when it might be said that coalition policies replaced Labour policies, the UK economy has grown by just 0.4% over that entire period. Over the same period, the USA has grown by 4.2%, Germany by 3.6% and France by 1.5%. Accordingly, while the UK economy is now still over 3% below its pre-crisis peak, the USA is 2.5% above and Germany is 2% above.

The question before us today is: in the situation in which we find ourselves, what is to be done? How can we get Britain back on to a secure growth path? Should we follow the recommendations of the Chancellor of the Exchequer that we stick with austerity, accepting his declaration that “Britain is on the right path”? Let us call this plan A. Or should we adopt plan B, following the advice of Adam Posen, former member of the Monetary Policy Committee, and particularly of Olivier Blanchard, chief economist of the IMF, who said last week,

“if things look bad at the beginning of 2013—which they do—then there should be a reassessment of fiscal policy … We think that slower fiscal consolidation in some form may well be appropriate”.

That is the IMF view on Britain.

The answer to our question, “What do we do?”—the fundamental issue in this debate—rests on a consideration of three issues. First, how did the Government get into this mess and are they tackling it in the best way? Secondly, what is necessary to restore the UK economy to growth? Thirdly, what is there to prevent us following this path of restoration?

So, first, how did we get into this mess? As the noble Lord said, the Government inherited the terrible economic consequences of the international financial crisis—everyone agrees about that. These consequences were and are particularly severe for a country as dependent on financial services as we are. But then the crucial question is: in the past two and a half years, have the coalition’s policies made things better or worse?

The previous Chancellor, my right honourable friend Alistair Darling, had been battling the crisis since 2008, and by the spring of 2010 he had succeeded in beginning to turn things around. Recovery was under way at a similar rate to that in the US and Germany, so that George Osborne inherited an economy growing at an annual rate in excess of 2%. He killed that recovery stone dead. He destroyed business confidence by preaching the coalition dogma of austerity and by foolish and demeaning comparisons with the plight of Greece and other eurozone countries without their own currency and exchange rate; he slashed public investment so that in the past three years the Government have spent £12.8 billion less in capital investment than Alistair Darling had planned; and, with savage glee, the coalition set about shrinking the state and impoverishing the poor. This is all justified in terms of the Tory manifesto commitment to eliminate the deficit in one Parliament—a commitment, by the way, which will not be kept, for the deficit is not falling.

Recent figures published by the Office for National Statistics show that public sector net borrowing in the first nine months of fiscal 2012-13 was about £107 billion compared with £99 billion in the same period last year—a rise of 7.3%. I repeat: the deficit is over 7% up on the equivalent period last year. So the answer to the first question is that the coalition inherited a very difficult but recovering economic situation and proceeded to make it much, much worse.

What should be done to turn the position around again and to set the economy on a new growth path or, to put the question in a more practical fashion, how can businesses be encouraged to invest? Firms invest because they are reasonably confident in the future demand for their products. Without demand, if they are shackled by a framework of fiscal discipline, as referred to by the noble Lord, it does not matter how much cheap money there is, as no one will invest. That is why monetary policy is not working. Interest rates can go no lower and the first positive announcement effect of quantitative easing has now worn off. Quantitative easing may be inflating asset prices and ruining pension funds but cheap money will not encourage investment when the Government are intent on slowing the growth of demand.

However, if there is a prospect of growing demand then, to invest, firms need finance and access to the very best skills and technologies to secure markets in a competitive world. Demand is the key to making all the measures that the noble Lord referred to as his fourth pillar work.

That is why my right honourable friend Ed Balls has proposed a temporary cut in VAT to boost family incomes, together with the boost to demand and capacity that would result from bringing forward infrastructure investment, including building thousands of affordable homes. Enhanced demand prospects would then be underpinned by a British investment bank to boost lending to small businesses, complementing fundamental regulatory reform of the banks. To sustain confidence there should be a compulsory jobs guarantee for the long-term unemployed and, further up the employment chain, investment in skills and in transformational science and technology. That is plan B.

Why cannot this be done? “Because”, cry the coalition, “it’s a policy for borrowing more when debt is the problem”, and we heard a similar statement from the noble Lord today. But hang on, at the moment, as we all know to our cost, spending cuts are resulting in a growing deficit. How can this be happening? The IMF has provided the answer and it, at least, has acknowledged its earlier mistaken commitment to austerity.

The answer lies in the relationship between changes in spending and the overall performance of the economy. This is measured by what, in the economics jargon that the noble Lord and I used to discuss, is called the multiplier. If a cut in government spending of, say, £2 billion results, for whatever reason, in a fall of output of just £1 billion, then the multiplier is a half. That is what the IMF believed the multiplier to be back in 2009. The share of taxes in output is about 40%, so if government spending is cut by £2 billion and output falls by £1 billion, tax revenues fall by about £400 million. The fall in tax revenues is much less than the cut in spending, and so the deficit falls by £1.6 billion. That was the policy that the Government thought they were implementing.

However, what if the multiplier happens to be bigger than that? Supposing that it is as large as 2.5, the cut in spending results in a fall in tax revenue of exactly the same amount. You can go on cutting taxes until the cows come home and there will be no change in the deficit at all. All that will happen is that the economy will be driven further and further into the mire of depression.

In acknowledging a previous error, the IMF estimated the multiplier to be a bit less than two, so a £2 billion cut in government spending will drive the economy down by about £4 billion and, when cuts in revenue are taken into account, the deficit will fall by only £400 million. Throw in a depressed European Union and you arrive at our current miserable situation: ever bigger cuts and a growing deficit. But the good news is that what goes down can also go up. What if government spending is increased by £2 billion and the multiplier, optimistically, is 2.5? The economy then grows by £5 billion and the increase in tax revenues pays for the extra spending; there is no extra borrowing at all. I repeat: increased spending results in no extra net borrowing. Plan B is a strategy to cut government spending. And there is more. The government cuts—particularly those disastrous cuts in government investment—not only reduce output now by cutting demand; as the OBR has pointed out, they also cut future output by reducing the real productive capacity of the economy.

Lord Forsyth of Drumlean:My Lords, I am a simple lad. Can the noble Lord tell me what the difference is between his party’s policy and that of the government Front Bench? He gave the figure of £2 billion as the extra borrowing and the extra expenditure that would be required. In quantitative terms, what separates the Opposition from the Government? How much money are we talking about?

Lord Eatwell:The figure of £2 billion was purely for illustrative purposes; it was a simple number. I thought that people could do the arithmetic in their heads. The issue is directly whether we continue with a policy of cutting government expenditure or whether we are committed to an increase in expenditure, particularly on infrastructure. Your Lordships will note that the noble Lord did not say that his infrastructure plans fell outside the tight vice of austerity policy. That vice must be unwound. That is what I am talking about today.

As I was saying, there is more to it than that. As the OBR has pointed out, government cuts in investment cut future output by reducing the real productive capacity of the economy. This long-term loss of output brings with it a long-term reduction in tax revenue, in addition to the medium-term effect that I have just outlined. In other words, the Government are not just failing to cut the deficit now; they are increasing deficits for years to come. By contrast, if the IMF is right, the measures proposed by my right honourable friend will be substantially self-financing in the medium term and will stimulate tax revenues in excess of spending in the longer term. This point has also been argued by the Harvard professor and former US Treasury Secretary, Larry Summers.

Before we sign up to plan B, however, another issue must be confronted. Today, any Government’s finances can be devastated by a loss of confidence in the international bond markets. The noble Lord referred to this. After a particularly violent example of sovereign bond market hysteria, James Carville, the political adviser to President Clinton, famously remarked,

“I used to think if there was reincarnation, I wanted to come back as the President or the Pope … But now I want to come back as the bond market. You can intimidate everybody”.

Well, the bond market certainly seems to have intimidated the coalition. Whenever its destructive policies are challenged, it argues that unless the vice on Britain is tightened, the financial markets will lose confidence, interest rates will rise and any prospect of recovery will be destroyed.

There are three things wrong with that argument. First, no one is suggesting a spending spree. Plan B is a cautious expansion to begin the task of building the foundations for growth. Secondly, it is austerity that is now undermining market confidence. All three of the main credit rating agencies—Standard & Poor’s, Moody’s and Fitch—have put Britain on “negative outlook”, citing concerns over the weak recovery and the public finances.

Thirdly, let us consider the experience of the United States, which lost its AAA rating last year. Would you rather have our AAA rating and zero growth or the lower US rating and 3% growth in the last quarter? I know which I would prefer.

The noble Lord, Lord Deighton, outlined in his speech a number of desirable measures that the Government can take to help to build productive capacity—the structural measures to which he devoted the majority of his speech. However, the Chancellor’s commitment to cutting demand and shrinking the state—less Bullingdon Club, more Tea Party—is eliminating any significant impact of those worthy measures. The Government’s attempt to stimulate growth has been a failure; the Government’s attempt to cut the deficit is a failure; and, if informed predictions are correct, even the Government’s attempts to preserve Britain’s AAA rating in the markets will prove to be a failure.

The coalition is now responsible for the longest slump in the British economy in the past century—longer than the great depression—yet last week George Osborne said something truly chilling. He said:

“We can either run away from these problems or we can confront them and I am determined to confront them”.

What is it in the word “failure” that George Osborne does not understand? For the sake of this country’s economy, it is time for him to run away. He is the living embodiment of plan A and must accept responsibility for its failure. Perhaps I may suggest that an excellent replacement as Chancellor would be my former pupil, the noble Lord, Lord Deighton.”

Monday
Jan 28,2013

There were a series of exchanges during Question Time in the House of Lords this afternoon on the Arctic and the implications of the melting of the ice cap.  The implications are substantial – and not just because of the impact on global sea levels.  There is the potential opening up of a new sea route: the North West Passage sought by explorers so assiduously for centuries.  There is the potentially easier access to mineral deposits and the possibility of oil drilling as the ice recedes.  The ocean (and this brings with it the rights to exploitation of natural resources) itself falls within the territorial waters of a handful of countries – principally Canada, Russia and Greenland.

So what is the strategy being followed to protect UK interests (indeed have those interests even been defined)?

Alas, the answer is not to be found in today’s Hansard:

Lord Giddens

To ask Her Majesty’s Government what is their assessment of the 2012 Arctic Report Card of the National Oceanic and Atmospheric Administration of the United States showing record-low sea ice extent in the Arctic Ocean during the past year.

The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma):My Lords, the Government have noted the contents of the NOAA report with concern. The observed reductions of Arctic sea ice extent and thickness and the consequent regional environmental and societal impacts re-emphasise the urgent need for strong international action to tackle climate change. The UK has a leading role in the international negotiations and is working through the European Union, the G8 and the UN Framework Convention on Climate Change to reach further global agreement to reduce emissions. Domestically, we are also taking action through the Green Deal and through the Energy Bill.

Lord Giddens:I thank the Minister for that Answer. The self-same report says, in heavy scientific jargon, that the extreme melting of the Arctic is a kick up the pants to the world. In terms of doing more to combat climate change, I take it that the Minister will agree with that assessment. Are the Government prepared to work bilaterally with the Americans on the possible implications for changing weather patterns in the north Atlantic, since such changes look quite likely? These changes will have radical implications for our own weather and are perhaps already beginning. Are the Government working, or planning to work, with the Americans on these issues?

Baroness Verma:My Lords, the noble Lord raises a very important issue—we must be mindful of the different weather patterns that we are witnessing currently. We work through the UNFCCC process, and at the recent conference of the parties in Doha all countries restated their commitment to negotiate a global deal by 2015 on a single comprehensive and legally binding climate agreement to come into effect from 2020. The noble Lord also mentioned our relationship with the US. He is aware that the United Kingdom has bilateral relationships with many countries, particularly in the north Atlantic. Our relationship with the United States is crucial and we will be having ongoing discussions with it and with other partner countries.

Lord Trimble:My Lords, in the context of the United States, would the Minister consider that the US has greatly reduced its carbon emissions in the past year by reducing its dependence on coal plants through the development of shale gas?

Baroness Verma:Yes, my Lords; the noble Lord is right that the United States has reduced its carbon emissions and increased its production of shale gas. However, this country takes the view that we need to ensure that our energy supplies are a mix of renewables and traditional fossil-fuel based. Therefore, although we are looking at shale gas, it will be part of a mix of energy rather than our having a dependency on it.

Lord May of Oxford:My Lords, is the Minister aware that the cost of the actions that we should be energetically taking against climate change—the need for which is underlined by the faster than previously expected melting of Arctic ice—is significantly smaller than the discounted present value of the much more difficult actions that we will be faced with in future if we do not act? I declare an interest as a member of the Committee on Climate Change.

Baroness Verma:The noble Lord is of course right that we need to take action. I am pleased to say that this Government are taking action and working very hard with all partner countries to ensure that this global issue is tackled with a global response.

Viscount Hanworth:My Lords—

The Minister of State, Ministry of Justice (Lord McNally):My Lords, there is time for both sides. Perhaps we can hear first from the noble Viscount, Lord Hanworth.

Viscount Hanworth:My Lords, an example of extreme folly is the manner in which we are allowing petroleum companies to pursue the exploration of oil and gas in the Arctic as the reduction of ice cover renders this more practical. Can the Minister tell us what steps, if any, the Government are taking to restrain such activities?

Baroness Verma:My Lords, the fact of the matter is that we will need supplies of oil for the near future. Although we work very hard with our partner countries to ensure that everything is done in an environmentally safe way and with consideration to the environment and locations, we cannot dictate to the Arctic states or to the Arctic Council how they progress with their drilling. However, we know that they take the issue very seriously and are very environmentally effective when it comes to the security and safety of how they drill.

Baroness Parminter:What global greenhouse-gas emissions stabilisation levels do the Government believe will be necessary to protect Arctic summer sea ice for the remainder of this century? In asking this question I also congratulate the Government on the launch today of the Green Deal, which will help reduce greenhouse gas emissions from British homes.

Baroness Verma:My Lords, I thank my noble friend for mentioning the Green Deal, which will of course help very much in how we respond individually to a very serious issue. Greenhouse gases are the key cause of climate warming. We have invested heavily in research to ensure that, working with Defra, we have many ways of responding to the climate change which is happening around us and to ensure that other countries are working with us in that response.

Lord Harris of Haringey:In the past 60 years more than half of the ice in the Arctic has disappeared. That opens up the prospect of the north-west passage—which we all remember from our history books in childhood—becoming a reality. This has enormous strategic implications not only in the movement of goods but in extra exploration for both oil and other minerals. How do the Government see the United Kingdom’s strategic interests, and are they pursuing those through their associate membership of the Arctic Council?

Baroness Verma:My Lords, the noble Lord is right to raise that issue. Although we are not a member of the Arctic Council or an Arctic state, we have been invited in as observers and we are able to have a very constructive dialogue with those Arctic states and with other observer states as well.

Baroness Worthington:My Lords, the Arctic is experiencing rapid change due to the impact of man-made global warming. In recognition of the unique and fragile nature of this region, Greenpeace is calling for the establishment of a global Arctic sanctuary. The Environmental Audit Committee also recommended that a sanctuary be established in its report, Protecting the Arctic. Can the Minister please inform the House what actions the Government are taking to secure a marine protected area in the Arctic and what assessment they have made of the risks, both economic and environmental, of allowing oil extraction in the area?

Baroness Verma:My Lords, as I think I have said in answer to a number of the questions put to me today, we have to work very closely with the Arctic states and the Arctic Council. However, I recognise the noble Baroness’s point about the depletion of marine life. If she will allow me, I will make sure that she receives a much fuller answer, given that this is quite a serious issue that needs to be tackled.”

Wednesday
Jan 23,2013

There were some exchanges on local government grants in House of Lords Question Time this afternoon.

The Bishop of Liverpool asked the Government “what steps they are taking to ensure that financial settlements for local government funding are fair.”

The subsequent exchanges had the Minister assuring the House that the settlements were in fact fair despite evidence to the contrary:

“The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham):
My Lords, the Government have proposed a fair settlement for 2013-14 and 2014-15. Each local authority’s baseline funding level and the calculation of its tariff and top-up are based on figures that take account of the different needs of each area. The settlement allows local government to keep nearly £11 billion of business rates and keep the growth on that share of business rates, providing a direct financial incentive for councils to deliver growth.

The Lord Bishop of Liverpool:
My Lords, I thank the Minister for her Answer, and I assure her that my Question arises out of very genuine pastoral concern. Can the Government not think again in the interests of greater fairness and make more allowance for the highest levels of deprivation in both rural and urban areas? For example, in Liverpool there is to be a 52% cut in services over four years, which will directly impact upon services to mentally ill children, vulnerable families and the elderly housebound.

Baroness Hanham:
My Lords, I know that the right reverend Prelate is very involved in the discussions that are taking place about settlements and the various levels of deprivation. I believe he held a conference last week that addressed this important subject.

However, the methodology that has been used and is set out in the formula funding document, which has been out to consultation several times, takes account of deprivation and the high cost of providing services in areas that have high deprivation, where local authorities have a low ability to raise funding. Such authorities will receive more funding than authorities with a low cost of providing services and a high ability to raise funding locally.

Lord McKenzie of Luton:
My Lords, under the local government settlement for the two years ending this March, the Audit Commission reported that in the 20 most deprived areas of the country revenue spending had fallen by 14% and in the 20 least deprived by 4.4%. In the most recent settlement, the 20 most deprived authorities will have their spending power cut by an average of 8% and the least deprived by 0.7%. Can the Minister tell me what definition of fairness justifies this distribution?

Baroness Hanham:
My Lords, the distribution has been carried out, as it always is, against a formula which makes sure that there is fairness of distribution across the piece.”

Hardly convincing, so I tried again:

“Lord Harris of Haringey:
The Minister tells us that she is presiding over this pure system of allocating resources between local authorities which is delivering fairness. Did Ministers change the formula for distribution so as to produce a result whereby, as my noble friend from the Dispatch Box pointed out, the most deprived areas are losing the most?

Baroness Hanham:
My Lords, the formula has not been, as has been suggested, tinkered with; that is how it has come out. It is fair to point out that the local government settlement is not the only funding that local authorities get; there is also the new homes bonus and other contributions that local authorities can have. It is not just the settlement.”

So it wasn’t tinkering, it just happened.

Pull the other one.

Thursday
Jan 17,2013

As Boris Johnson prepares to use the platform of the London Government dinner at the Mansion House tonight to try and upstage David Cameron’s long-awaited speech on Europe tomorrow, unsubstantiated gossip reaches me that the Mayor is moving to reward another of those associated with the Evening Standard’s campaign in 2008 to unseat Ken Livingstone and as a result help him to win the election as London Mayor.

Veronica Wadley (then the Standard’s editor) is now the Mayor’s (paid)appointee as chair of the London Arts Council.

A little bird tells me that now the Mayor is poised to appoint Andrew Gilligan (then the Evening Standard journalist who wrote some of the articles in the Standard most damaging to Ken Livingstone) as his new (paid) advisor on cycling in London.

Interesting, if true…..

I have now had it confirmed.

Tuesday
Jan 15,2013

A few hours after I posted about the “explosive” purchasing of the UK’s critical national infrastructure by the Chinese, there was a series of exchanges about the privatised water companies during Question Time in the House of Lords:

Lord Bradshaw:

Does my noble friend believe that the people who privatised our utilities expected that within 10 years they would be in the hands not only of foreign administrations and foreign countries but actually of the Governments of those countries? We have denationalised here and renationalised from abroad. Surely the regulator should get a lot tougher on these people who are making absolute fools of people who have to subscribe increasing sums to the maintenance of essential services.

Lord De Mauley:

My noble friend makes a fair point, my Lords, but we believe in free capital markets.

Lord Harris of Haringey:

My Lords, does the answer to the noble Lord, Lord Bradshaw, mean that the Government are indifferent to the extent of foreign ownership of our critical national infrastructure? Are they indifferent to the possible implications of that?

Lord De Mauley:

No, my Lords, we are not indifferent; we take these things very seriously. As I say, however, we believe in free access to our capital markets.

So now we know.  The Government takes these matters very seriously, just so long as the national interest doesn’t get in the way of the free market.

Tuesday
Jan 15,2013

This will not be news to those of you who are avid readers of China’s People’s Daily. However, an article in that paper on 4th January spelt out baldly what I have been saying for some time: Chinese interests are steadily buying up a controlling stake in Britain’s critical national infrastructure.

The article says:

“China’s investment in the United Kingdom will continue its “explosive” growth, with high-end manufacturing and infrastructure leading the way, a senior diplomat predicted.

“The UK is the most open economy, and also the most market-oriented,” in Europe, said Zhou Xiaoming, minister counselor of the Chinese embassy in the UK.

Chinese companies have been answering the call from some members of the European Union for capital.

In 2011, the UK was the third-largest EU destination for Chinese investment, following Luxembourg and France, according to the Ministry of Commerce.

China’s overseas direct investment in the UK in 2011 was $2.5 billion, it said.

But Zhou said the real figure was far more as Chinese overall investment in the UK experienced “explosive” growth.

“It is estimated that the Chinese capital that flew into the country in 2011 reached $6.5 billion,” said Zhou.”

Am I alone in thinking that any sensible nation state should be concerned that control over its critical infrastructure is steadily being bought up by another country?

There is no debate about it and the Government seems at best to be complacently ignoring it or more sinisterly tacitly encouraging the sell off.

Tuesday
Jan 15,2013

This will not be news to those of you who are avid readers of China’s People’s Daily. However, an article in that paper on 4th January spelt out baldly what I have been saying for some time: Chinese interests are steadily buying up a controlling stake in Britain’s critical national infrastructure.

The article says:
“China’s investment in the United Kingdom will continue its “explosive” growth, with high-end manufacturing and infrastructure leading the way, a senior diplomat predicted.

“The UK is the most open economy, and also the most market-oriented,” in Europe, said Zhou Xiaoming, minister counselor of the Chinese embassy in the UK.

Chinese companies have been answering the call from some members of the European Union for capital.

In 2011, the UK was the third-largest EU destination for Chinese investment, following Luxembourg and France, according to the Ministry of Commerce.

China’s overseas direct investment in the UK in 2011 was $2.5 billion, it said.

But Zhou said the real figure was far more as Chinese overall investment in the UK experienced “explosive” growth.

“It is estimated that the Chinese capital that flew into the country in 2011 reached $6.5 billion,” said Zhou.”

Am I alone in thinking that any sensible nation state should be concerned that control over its critical infrastructure is steadily being bought up by another country?

There is no debate about it and the Government seems at best to be complacently ignoring it or more sinisterly tacitly encouraging the sell off.

Saturday
Jan 12,2013

Nicholas Watt in today’s Guardian has a fascinating insight into the dilemma facing David Cameron as he contemplates what he will say in his long-awaited speech on Europe or whether he can put it off yet again:

“Over the Christmas break William Hague dusted off a sacred text that has served as the lodestar for British Eurosceptics over the last quarter of a century: Margaret Thatcher’s Bruges speech of 1988.

The foreign secretary thought that in preparation for David Cameron’s most important speech on Europe later this month, it would be wise to remind himself how Thatcher memorably set herself against a “European super-state exercising a new dominance from Brussels”.

As officials and ministers chewed over Thatcher’s speech they reached a rather startling conclusion. Were Cameron to deliver such a “pinko and pro-European” speech, in the words of one source, at least 25 anti-EU Conservative MPs would walk out of the party.

Eurosceptics often forget that Thatcher balanced her warnings of the dangers of a European super-state with a staunch defence of Britain’s place at the heart of the EU. “Britain does not dream of some cosy, isolated existence on the fringes of the European community,” she said. “Our destiny is in Europe, as part of the community.”"

The real problem for Cameron is that there is now such a gap between what any sensible British Prime Minister might say about the country’s relationship with our European allies and partners and what the backbenchers on whom he has to rely believe. In practice, the gulf is unbridgeable. A fantasy that is rooted in a century-old vision of the United Kingdom as a world power straddling the Atlantic with a political and economic empire stretching round the globe is frankly incompatible with the realities of the twenty-first century.

It would be tempting to sit back and watch the fireworks as the Tory (and Coalition) meltdown unfolds, but the consequences for the country’s future are really too serious for that.

Friday
Jan 11,2013

Yesterday afternoon I initiated a short debate in the Moses Room of the House of Lords on the biological threats facing the United Kingdom, specifically I was asking “Her Majesty’s Government what arrangements they have in place to protect the residents of the United Kingdom against biological threats; and what measures they are taking to promote the international regulation of biological weapons and to ensure that security standards are sufficient in laboratories engaged in biological research around the world.”

The National Risk Register has in its top tier of risks facing the UK major natural hazards, such as a flu pandemic, but also includes as a serious threat in that top tier of risks a biological attack by terrorists.

As Lord Tony Giddens pointed out later in the debate:

“There are three sets of factors which make biological threats far more menacing than they were for previous generations. The first of these … is work in scientific laboratories that is designed to unpack the basic building blocks of nature but which can have spin-offs of a dangerous kind. … Secondly, there is the disruption to or destruction of the world’s ecosystems, releasing pathogens from their normal hosts. The process is normally known as zoonosis and it is one that is fraught with implications for human beings. Thirdly, … we have globalisation which can transmit pathogens almost immediately from one side of the world to the other.”

But the other big change that I had highlighted was the speed of technological advance that has taken place in the last ten or fifteen years in respect of genetic manipulation and as I explained:

“viruses are very simple. They are simply a capsule, often with perhaps 10 or 12 genes within them. The changing of just one gene within a virus can have a very profound effect on what that virus does: how easily it is transmitted, the extent to which it can be transmitted from an animal to a human being or between humans, and the consequences for the organism that is infected.

In fact, in 2001 the Journal of Virology published a research paper that demonstrated a whole number of ways of modifying the mousepox virus. This new virus was so effective that it overwhelmed the immune system of the test mice, causing massive liver failure and eventually killing the subjects. That reaction occurred even if the mice had been vaccinated against the mousepox virus. That was a legitimate scientific experiment—an effort to control the mouse population in Australia—but it demonstrated that a quite small change in a single gene with comparatively simple techniques could have major consequences.

These techniques are becoming more straightforward and all sorts of legitimate research is taking place in these areas around the world. Some of this could have the consequence of rendering a vaccine ineffective; some of it could confer resistance to therapeutically useful antibiotics and antiviral agents in pathogenic organisms; it could increase the virulence of a pathogen, or make it easier for that pathogen to be transmitted; or it could perhaps alter the range of hosts for that pathogen. A whole number of things are now technically possible that were not easily doable 10, 15 or 20 years ago. Entirely legitimate research on genetic manipulation and modification is of course going on all over the world for entirely benign purposes.

The question that I want to pose is: how well regulated around the world is that research? How confident can we be that other countries are applying the sorts of restrictions that we would wish to see? Some pharmaceutical companies may have an interest in carrying out experiments and developing their techniques in countries where the regulatory regime is far less intense than it might be in our own country.”

Biological weapons are outlawed under the Biological Weapons Convention, which has been signed by virtually every country in the world.  However, as I pointed out:

“although countries have said that they accept that they should not be developing biological weapons, the world has not set up what we might consider to be any effective system for monitoring compliance or verification. Some of the biggest and most powerful countries—the United States of America, for one—are extremely dubious about setting up any external system to monitor their own compliance and do not necessarily see the need for a supervisory body.

The US, for example, clearly has no official bioweapons capability but has constructed a huge research base, in many different centres around the United States, under the National Biodefense Analysis and Countermeasures programme. That is undertaking, no doubt quite properly, genetic research, development and testing. However, if the United States says, “We are not happy with our compliance with the Biological Weapons Convention ever being tested by anybody else”, it is very difficult to see how that could be enforced on other countries.

Scepticism also persists about whether Russia’s offensive bioweapons capabilities have been completely dismantled. There are, I think, five Russian military bioweapons facilities which remain closed to outside inspection. Many of the officials linked to their current defensive programme are the same officials that developed Soviet offensive capabilities during the Cold War. There is a question again about how secure those facilities are, particularly as we know that regimes change and that certain parts of the world become less stable as things move forward.”

I also warned that:

“There is clearly a risk that stocks of materials developed for one purpose could be misused or fall into the hands of terrorist groups or, potentially, rogue regimes.”

And concluded as follows:

“In responding, can the Minister first say what is being done to improve supervision of these matters? Secondly, what is being done to regulate the security of scientific establishments, including those that hold stocks of pathogens? It all ends with a fundamental question. We are at risk, as a nation, from a pandemic of whatever sort and from whatever origin, whether naturally or unnaturally occurring. Are we really satisfied that our emergency and health services are able to withstand that?”

The Minister who responded was Lord Wallace of Saltaire who acknowledged that:

“This is an important subject, and both a domestic and international one. We are concerned with the potential of a terrorist attack and the very distant potential of a global state attack. … We are also concerned with the possibility of accidental release from badly secured laboratories.”

Being a LibDem Minister he could not avoid taking the opportunity to snipe at his Conservative Coalition colleagues, saying:

“This is an area of domestic and international overlap. I would not discourage noble Lords from pointing out, as we deal with the intensely emotional issue of the defence of British sovereignty from European and other interference, that this is one of many areas where you cannot have entirely different British and foreign issues. We have to have international co-operation and, as far we can, regulation.”

He did confirm that:

“The Government are deeply committed to protecting the United Kingdom from biological threats. That requires us to have strong measures at home and co-operation abroad.”

but warned that:

“There is resistance to a strong international compliance programme … it is not simply from the United States, let alone from the American pharmaceutical industry, but from a range of other countries that I will not go through. For many of them it is a question of sovereignty and, for one or two south Asian countries, of suspicion of the West. There are limits to what we can achieve and we have to work as far as we can through education, co-operation and providing assistance. I also note that we are working with our partners inside the European Union through the establishment of centres of excellence with regional centres around the world to build this level of co-operation.”

His basic message was:

“There are some real problems here … this is a very complex area.”

And he concluded  - rather strangely for a Government Minister – with:

“I shall finish by saying that we need to keep on challenging our Government and even more so other governments.”

We?!

So I suppose those of us who took part in the debate were being told: keep on nagging us and maybe we (the Government) will finally take this as seriously as it deserves.

If you want to read the full debate it is here.

Thursday
Jan 10,2013

Seventeen years ago, I became Chair of the English National Stadium Trust (now the Wembley National Stadium Trust).  The Trust made the original bid for National Lottery funding to build a new national stadium for football and rugby league and, having successfully made the case for Wembley to continue to be the site for that stadium, secured £120 million towards the rebuilding costs.  One of the conditions of the Lottery grant were that eventually 1% of the turnover of the Stadium should be paid back to the public, who had bought their Lottery tickets to make that grant possible, in the form of grants to community organisations that would support a range of sports activities.

The money was only to start being made available five years after the new Stadium opened (which following a number of delays took place in the spring of 2007) and the first substantive funds were received at the end of 2012.

And this morning I chaired the meeting that decided which organisations should be the beneficiaries of the first £300,000 of grants. 37 organisations will benefit and will be receiving their cheques at a ceremony later this month at Wembley Stadium.  In this initial grant round all of the organisations will be delivering community sports activities in the London Borough of Brent (for those who don’t know their geography Brent is the Borough in which the Stadium is situated).  Later grant rounds will benefit the rest of London and the country as a whole.

It has been a long journey but it is difficult not to be excited about the range of organisations that have been successful.