Just in case LibDems in London were in any doubt about Tory triumphalism, the LibDem role as (very) junior partners in the coalition and what the Government’s stance on Europe is all about James Cleverly AM, Leader of the Tory Group on the London Assembly, has spelt it out:

“The Indi is running a story about a potential “rift” between Clegg and Cameron over Europe and the veto.  This is such a non-story, Clegg’s position on Europe is well known.  Cameron’s position on Europe has been made clear and is much more in tune with the wishes of the British people.

David Cameron is the Prime Minister and his position is both right and popular.  Nick Clegg is not Prime Minister and his position is wrong and unpopular.  Bets please on whose views will win out.”

Squelch!

At some point, the LibDems are going to realise that their post-General Election sell-out to the Tories is getting them nowhere …..

Michael White, the Guardian’s veteran Assistant Editor, has an article today assessing the shape of UK politics over the year ahead.  Although sometimes verbose (a problem I am well aware that I suffer from myself), he is usually extremely perceptive.  Today’s article is therefore well worth reading and I agree with many of his conclusions.

However, there is one line in it that is total nonsense.  After pointing out the threat that reinvigorated Boris Johnson would present to David Cameron if re-elected to the London Mayorality in May, he goes on to say:

“If Ken beats Boris he will make Miliband’s task harder.”

The reality is the exact opposite.  So much so that David Cameron has recognised that his number one priority in 2012 is to ensure that London’s City Hall must remain in Conservative hands.  Not the economy; not the growing housing crisis; not Europe and the Eurozone; but London.  That is the Prime Minister’s priority for the coming year.

Why?  He knows that a Ken Livingstone victory in May would be an essential first step for the Labour Party to win a General Election in 2015.

He also knows that Ken Livingstone’s flair for articulating the impact of Tory policies on the people of London would resonate with millions elsewhere in the country.

The Prime Minister’s grasp on history is probably a little shaky, so he may not be aware that a Labour-run London County Council in the 1930s laid the groundwork for the victorious and reforming Labour Government of 1945: trialling and showcasing how the power of Government can be harnessed to boost the chances of the vast majority of the population.

However, Cameron’s instincts will tell him that a Labour Mayor in City Hall would demonstrate that there  is an alternative to a Conservative-led Government more concerned with the interests of a privileged minority than the rest of society.  (A Conservative trait also shown by Mayor Johnson and his penchant for meeting bankers and representatives of the financial services in preference to other interests in London.)

So if Cameron is so desperate for Ken Livingstone not to be elected in May, it follows that Ed Miliband is, if anything, even keener to see the Conservatives turned out of City Hall in four months time.  This is where Michael White is wrong and dwelling in a 1980s past.  Ken Livingstone has more positive and supportive relations with the national Labour leadership than ever before.

A Livingstone victory will be a boost for Ed Miliband and the Labour Party.  It will be a sign that the people of London have rejected not only a Conservative Mayor but also those Conservative policies being pursued by his friends holding national office.

I have only just caught up with a speech made in the Moses Room (an alternative Lords Chamber for hosting smaller debates) last Thursday by Lord John Eatwell which sets out cogently what is wrong with the Government’s response to the economic situation and sets out a clear alternative vision.

He was responding to a motion from Lord Lamont of Lerwick on ”the economic situation of the United Kingdom, including the impact of the eurozone crisis on the United Kingdom and other non-eurozone members.”

He said:

“My Lords, like other noble Lords I am grateful to the noble Lord, Lord Lamont, for securing this debate, even though the topic has widened from that he initially intended. I also wish to congratulate the noble Lord, Lord Wolfson of Aspley Guise, on his witty maiden speech.

Despite appearances to the contrary, the debate has not been about economics. Instead, as the noble Lord, Lord Ashdown, pointed out, it has been about politics-the political choices made by Governments in the eurozone, most notably the Government of Germany, and the choices made by Her Majesty’s Government. Indeed, the common theme that has run through much of the debate has been the severe austerity that Germany demands of the rest of the eurozone and the similar economic misery that the coalition is inflicting on Britain. It is now clear that the eurozone embodies fundamental design flaws. These have been addressed by the noble Lords, Lord Lamont, Lord Alderdice and Lord Higgins, my noble friend Lord Myners and the noble Baroness, Lady Wheatcroft. A successful monetary union requires a powerful and active central
bank, an all-Union bond market managed by a central treasury function, some means of balancing the economic benefit between the most successful and least successful parts of the Union, easy migration and, it is hoped, some sort of all-Union employment policy. This is a reasonable description of the United States of America, with the employment policy being provided by the military.

My noble friend Lord Desai was right to point to problems in the bond market as far as short-term financial stability is concerned, for it is the existence of an all-Union bond market that is crucial. Given that the eurozone economy is the largest in the world, any major bond fund must have significant exposure to the euro, just as it must have exposure to the US dollar and, to a lesser extent, to sterling. This can be obtained by holding any eurozone sovereign bond. Moreover, the exposure can be maintained by switching between different sovereign bonds with no foreign exchange risk whatever. Hence the huge flows between eurozone sovereigns that have produced wild gyrations in interest rates over the past few months as uncertainty and rumour have fuelled massive capital flight. The point was made by the noble Lords, Lord Wolfson and Lord Flight: it is like walking along a rocky path carrying a large amount of water in a shallow pan.

Compare this with the situation in the US. The state of California, which represents 13 per cent of the US economy, is bankrupt. This has no impact on the US Treasury bond market at all. Similar problems in Greece, which represents 2 per cent of the eurozone economy, have produced a wave of destructive contagion. The creation of a eurobond market equivalent to the market of the US Treasury-no bailout, no austerity, no ECB as lender of last resort-will bring durable financial stability. Of course, creating a eurobond market is a formidable political problem, but it is not impossible to imagine that this could be solved. It is not necessary to have a United States of Europe, as the noble Lord, Lord Lawson, claims. It is conceivable to have a powerful central bank, a central bond market funding a monetary union with a centre that is still politically weak relative to powerful member states. Indeed, that is a description of the most stable monetary union in the world, the Confederation of Switzerland. Clear identification of the design flaws of the eurozone that have resulted in such appalling financial instability should finally dispose of the illiterate comparisons often made between Britain’s fiscal problems and those of the eurozone members.

Are the Government right to argue, as they do over and over again, that their austerity policy is necessary to maintain the confidence of the bond markets and keep UK interest rates low? Perhaps it is, but only because of their own political folly. The Government have repeated this mantra so often that the markets probably believe it by now, and in believing the Government’s pro-cuts propaganda, they demand a redoubling of austerity. We have financial stability, but it is the stability of the grave. We are repeating Japan’s lost decade in an economy that is much poorer and much more unequal. I warned at the time of the Budget that the Government’s austerity policy risked creating a vicious cycle in which expenditure cuts and tax rises would lead to lower growth, which in turn
would lead to falling tax revenues and rising costs of recession. This in turn has led to yet further higher deficits, and so on in a downward spiral. But there is another twist in the tail that I had not fully appreciated until I read the OBR report.

The austerity programme also reduces the medium-term productive potential of the economy and hence reduces the possible future growth rate that is supposed to restore the nation’s finances, so now we have two mutually reinforcing engines of economic decline-the merry-go-round of cuts that do nothing to cut the deficit, and the recession-induced fall in growth potential that is making the deficit bigger too. And what is the Government’s response? It is more of the same. That is not my verdict. As the noble Lord, Lord Hollick, pointed out, it is the verdict of the OBR. Reviewing the plethora of schemes to turn the economy around, the OBR concludes:

“We have not made any material adjustments to our economy forecast on the basis of these policy announcements”.

In other words, the OBR concludes that the Government’s much spun “growth strategy” will achieve a net result of precisely nothing. However, I believe that the OBR is being overly optimistic.

First, the OBR persists in being excessively optimistic about where future demand will come from. In March, it predicted that private sector investment would grow this year by 6.7 per cent. Now, eight months on, it admits that investment has fallen. In March, it predicted that investment next year would grow by 8.9 per cent, and it still thinks that that is almost achievable. It says that investment in 2015 will be roaring along at 12.6 per cent growth a year, up from the 8 per cent it predicted in March. Where do these fantasy figures come from? Where is the incentive to invest when household incomes are going to be as low in 2014 as they were in 2002? It does not matter if interest rates are low: if there is no demand, there is no reason to invest.

Secondly, the other component of the rebalancing of the economy referred to by the OBR is supposed to be net trade. Again, the OBR is being excessively optimistic. It admits that most of the beneficial impact of the devaluation of sterling has now been exhausted, and recognises that markets in Europe will be depressed for some time, and yet somehow conjures up a significant improvement in trade performance, so overall the OBR is far too optimistic. The situation is much worse than it thinks. The people for whom matters are really worse are the poorer members of our society. If the OBR’s predictions are correct-I think that they are over-optimistic-household real disposable income will fall by 4.7 per cent over the next three years. However, that is an average figure and well over 60 per cent of the population have below-average incomes. If we examine the impact of the Government’s policies on median income-that is, the level of income in the middle of the income distribution-then the fall in disposable income will be 7.5 per cent. The cuts in real income are concentrated at the bottom end. Indeed, as the IFS analysis of the Autumn Statement has shown, the measures taken this week will lead to further cuts in the real income of the bottom 30 per cent and give benefits to the top 30 per cent. Nothing is more disgraceful and distasteful than the savage pleasure that Liberal Democrats and Conservatives take in cutting support for the poorest in Britain.

There is one further chapter of this dreadful story that must be taken into account in any overall assessment of the state of the economy: that is the level of unemployment, particularly of youth unemployment. It is simply uncivilised to have more than a million young people unemployed and their lives blighted at just the time when they should be looking forward to building a future, careers, stable households and families. Yet the prolonged recession holds out that prospect not just for the 22 per cent of young people now unemployed but for thousands more. We can begin to solve these problems only if there is a return to significant rates of growth in the eurozone and in Britain. The austerity imposed on the eurozone by Mrs Merkel, and on Britain by the coalition Government, will achieve nothing but a lost decade, or more. Stable financial markets will not produce an automatic increase in business confidence. There is no confidence fairy; she was killed by the Government’s austerity rhetoric.

What is necessary is a radical rethink of economic policies and even economic institutions. We need a major increase in government investment to kick-start private sector investment. We need new funding for industry on a greatly enhanced scale-not just what the Financial Times called the “gimmicks” of the Autumn Statement. We need a realisation that demand can be boosted by redistributing income towards the poorest, because they spend every pound they get and their spending has a lower import content than that of the wealthier sections of the community. The Government must become an employer of last resort to tackle youth unemployment.

How should we pay for all this? First, we should realise that unless something radical is done, the deficit will go on rising; we will go on borrowing more as we cut more. Secondly, if there is to be quantitative easing, it should be far better directed than it is under the shotgun approach used at the moment. Thirdly, even small amounts of redistribution could have a significant effect on the rate of growth of demand.

It will be evident from what I have said that I am fearful for the prospects of the eurozone and of our economy. Of course our current economic circumstances are dreadful, but they are made by human hand and they can be unmade by human hand. The key is political: political will and political intelligence, allied to sound economic analysis. All three ingredients are notably absent from the Government’s policy.

In a few short words he set out an effective three point plan for the economy:

• A National Investment Bank to target the “quantitative easing” to where it will really make a difference - in business investment to deliver future jobs;
• A recognition that further cuts in the income of the poorest in society will have a disproportionate impact on demand; and
• The role of the Government in being an employer of last resort for young people.

It would make a real difference – a pity that the Government isn’t listening.

The Wall Street Journal reports that:

“British intelligence picked up “talk” from terrorists planning an Internet-based attack against the U.K.’s national infrastructure, a British official said, as the government released a long-awaited report on cyber security.

Terrorists have for some time used the Internet to recruit, spread propaganda and raise funds. Now, this official said, U.K. intelligence has seen evidence that terrorists are talking about using the Internet to actually attack a country, which could include sending viruses to disrupt the country’s infrastructure, much of which is now connected online. The official spoke on condition of anonymity and didn’t say when the infrastructure threat was detected and how it was dealt with.

Terrorists, however, are still more focused on physical attacks that lead to high casualties and grab attention. “For the moment they prefer to cover the streets in blood,” he said.”

I first started raising these concerns more than seven years ago, pointing out in a debate in the House of Lords on the 9th December 2004:

“As a nation, the systems that are essential for our health and well-being rely on computer and communications networks – whether we are talking about the energy utilities, the water and food distribution networks, transportation, the emergency services, telephones, the banking and financial systems, indeed government and public services in general – and all of them are vulnerable to serious disruption by cyber-attack with potentially enormous consequences.  Indeed, the Coastguard Service was laid low by the “Sasser” worm in May this year.

The threat could come from teenage hackers with no more motivation than proving that it could be done, but even more seriously it could come from cyber-terrorists intent on bringing about the downfall of our society. “

At the time, I was assured that there was no intelligence to suggest that such a threat was significant.  The then junior Home Office Minister, Lord Steve Bassam, now no less a person (if such a thing were possible) than the Opposition Chief Whip in the Lords, said:

“there are also terrorists who would challenge and seek to undermine democratic society using any methods within their grasp. It is not complacent to say this; but perhaps it should be made plain that at the moment they do not appear to be interested in attacking us electronically.”

Of course, in the intervening seven years there has been a burgeoning realisation of an increasing number of cyber-threats and, if there is now intelligence to suggest that international terrorists are thinking in that way, I take no satisfaction from having predicted it in 2004.

What is important is that the substantial resources provided to GCHQ under the Government’s new Cyber Security Strategy, published last week, are used effectively to combat the threat. GCHQ and the other intelligence agencies are to get 59% of the £650 million that the Government has allocated to cyber security over the next three years.  It is unlikely that there will ever be much detail published as to how the resources are used, so we can only hope ….

I see that the US Congress is to investigate Chinese equipment suppliers Huawei and ZTE to see whether they present a threat to US national security.  According to PC World, the House Intelligence Committee wants to:

“examine if Huawei’s and ZTE’s expansion into the U.S. market gives the Chinese government an opportunity to hijack the nation’s infrastructure to conduct espionage. U.S. lawmakers worry that the networking equipment sold could secretly contain Chinese military technology to spy and interfere with U.S. telecommunications.”

Huawei has many links to the Chinese Government and its security apparatus.  As Jeffrey Carr summarises the key facts as follows:

1. The company’s founder Ren Zhengfei was an engineer in the PLA prior to forming his company.
2. The company’s chairwoman Sun Yafang worked for the Ministry of State Security and while there helped arrange loans for Huawei before joining the company as an employee.
3. The government of China is Huawei’s biggest customer; specifically the State-owned telecommunications services.
4. Huawei equipment is used to intercept communications in China for state-mandated monitoring.

Nevertheless, despite this its products are already widely used in the UK’s infrastructure particularly given its role in providing key components to BT.  I have expressed concern about this before and back in 2006 Newsweek recorded the Conservative Party’s concerns, saying:

“Political conservatives in Britain expressed the same security concerns about Huawei last spring. In April, the company won a $140 million contract to build part of British Telecom’s “21st Century Network,” a major overhaul of its equipment. But when rumors began circulating that the Chinese company might then bid on Marconi, a landmark electronics and information technology firm that was being put up for sale, a Conservative Party spokesman sounded the alarm. The Tories asked the British government to consider the implications for Britain’s defense industry of a Chinese takeover of Marconi. In the end, Huawei didn’t make an offer, and the Swedish telecom giant Ericsson is in the process of buying Marconi.”

Huawei continue to try and expand their access to the UK infrastructure market – see, for example, their wooing of Mayor Boris Johnson with an offer to provide mobile phone infrastructure for the Underground in time for the London Olympics.  In August, they recruited the former Government chief information officer, John Suffolk.

Their latest move to gain respectability is to sponsor a charity Christmas concert in support of The Prince’s Trust at the Royal Festival Hall next month, to which they have invited large numbers of senior Government officials and Parliamentarians.

No doubt, Huawei will say they are much-maligned, but I do wonder whether a UK Parliamentary Committee shouldn’t be following the lead of the US House Intelligence Committee and launch an investigation into the company’s growing influence in the UK and any possible implications for security.

I’ve already asked what exactly was William Hague’s grand international conference on cyberspace for, but it is clear that my scepticism is shared by the journalists who were sent to cover it and came away disappointed or as the Daily Telegraph put it:

“So what did we learn over the course of the two-day meeting? Well, in short, almost nothing. ….

As the show limped to its finale on Wednesday, many of Mr Hague’s conclusions could have been written at any point in the last six months.

“All delegates agreed that the immediate next steps must be to take practical measures to develop shared understanding and agree common approaches and confidence-building measures,” the Foreign Secretary declared. Well, quite.”

In August, David Cameron wanted to block Twitter, Facebook and Blackberry Messenger.

Today, William Hague said:

“Some governments block online services and content, imposing restrictive regulation, or incorporate surveillance tools into their internet infrastructure so that they can identify activists and critics. Such actions either directly restrict freedom of expression or aim to deter political debate.”

And just in case the Prime Minister had missed the point went on:

““Human rights are universal, and apply online as much as they do offline… Everyone has the right to free and uncensored access to the internet.  … We saw in Tunisia, Egypt and Libya that cutting off the internet, blocking Facebook, jamming Al Jazeera, intimidating journalists and imprisoning bloggers does not create stability or make grievances go away.”

Oh dear …..

Twice in the last forty-eight hours I have been stopped by tourists asking me to explain the significance of the Remembrance Poppy that I was wearing.

Is this a record?

I gather that the Total Politics Blog Awards are now in progress.  I want to make it quite clear that I will not be in the least bit affronted should you chose to vote for this blog by clicking here.

The Royal Air Force mission statement is:

“‘An agile, adaptable and capable Air Force that, person for person, is second to none, and that makes a decisive air power contribution in support of the UK Defence Mission”.

That is pretty clear and fits in with the RAF image, “The Few” and all that.

By contrast the mission of the United States Air Force is:

 ”To fly, fight and win in air, space and cyber space.”

The “and win” bit is maybe a tad more aggressive than making a decisive contribution, but the interesting bit is the inclusion of cyber space.

Now this may be a bureaucratic land-grab with the USAF making a bid for the cyber-security leadership role in the United States Government, but it does pose the question who has the lead for cyber-defence in the United Kingdom?  Answers on a postcard (or email) please.