Government likely to face very difficult dilemmas over Europe very soon

Last Sunday, European finance ministers met.  In reporting that meeting, The UK and Irish media focused on the terms of Ireland’s bailout. However, something far more important and fundamental to the future of Europe was also discussed at that meeting .

The Finance Ministers agreed the outline of a new plan for a permanent mechanism for to resolve the debts of Sovereign nations within the Eurozone. As reported by Yahoo Finance

“They also approved the outlines of a long-term European Stability Mechanism (ESM), based on a Franco-German proposal, that will create a permanent bailout facility and make the private sector gradually share the burden of any future default”

The prime purpose of creating this mechanism now is to calm the money markets and keep the Euro safe.  At fist sight, the plan looks to have been well thought out. Earlier statements by Angela Merkel, alluding to the “punishment” of investors were destabilising. The new plan now looks to be much more measured. There will be a risk to bondholders in the sharing of losses but only in the future – after 2013 and on a case by case basis. The finer details of this plan have yet to be worked out and finalised.

The French and the Germans say that “the Euro is saved”

Is it really? In the last couple of days, the markets have reacted negatively. The Euro has fallen in value against the dollar. Interest on bond yields for Italy, Portugal and Spain continue to rise.

The UK has a huge interest in seeing the Euro survive and stabilised from two perspectives. Firstly, there is the vulnerability of our banks. The amount owed to UK banks by Irish Banks totals around 140 billion. A similar sum is owed to the UK banks by the Spanish Banks. Secondly, a collapse of the Euro would cause huge damage to our exports and probably plunge us into another recession. A collapse of the Euro would be an unmitigated disaster for the UK. It is hard to know exactly how international markets will see Britain after such a collapse.

Britain’s very high level of indebtedness could become a feature of a future panic on the markets. The full spectrum of British debt owed between Banks, Government, Corporations and individuals is frightening. The UK is the most heavily indebted nation per capita in the world behind Japan. Japan has been earmarked as potentially the world’s biggest ever national bankruptcy. I don’t believe that the UK is likely to become bankrupt. Unlike the UK, most of the debt owed by the Japanese is owed by its government. However, should our own banks require further re-capitalization, the Government will not wish to risk going down the road taken by the Irish Government in 2008.  It is only likely to allow the strongest Banks to survive.

In conclusion, we are in this crisis as deeply as the rest of the Eurozone nations are, whether we like it or not.  Our vulnerability is likely to result in huge pressure from the Europeans to join them in measures to save the Euro.  The problem is, we do not yet know if the euro can be saved or is indeed worth saving.  The most puritanical view is that the Euro can only survive if there is political union. John Redwood MP recently advocated that view.

Very soon, I suspect that our Government will require the wisdom of Solomon.

Cutting public spending early now vindicated by OBR report

Yesterday, in the House of Commons, George Osborne provided an upbeat statement of Britain’s economic prospects following the publication of the latest OBR report.   The main findings of the report are

(1) GDP growth for this year revised up from 1.2% to 1.8%

(2) Sustainable growth averaging more than 2% over the next 5 years

(3) public sector job cuts over the next 4 years are revised downwards from 490,000 to 330,000.

(4) Borrowing this year expected to be £1bn less than predicted in June

(5) There will not be a “double dip” recession.

Amongst Mr. Osborne’s most interesting announcements was the proposal to reduce Corporation Tax to 10% UK wide on profits from newly commercialised patents to encourage hi-tech business.  I fully expect this Government to introduce further reductions in Corporation tax across the UK in the future

Already, the Government is hoping that a 10% Corporation tax can be introduced in relation to the income of all Companies based in Northern Ireland.  The synergy between these two proposals should not be ignored by the Executive.  Northern Ireland will not see any benefit if it waits for the rest of the UK to bring down the tax.  They must take advantage of this proposal and press for its implementation immediately.

There is an interesting aside to this story.  In reply to questions, following his statement, George Osborne indicated that he supports other countries who set their own taxes in the way they see fit.  That was a reference to possible pressure being put on Ireland to “harmonise” with the rest of Europe.  That sets the UK on a collision course with the Germans and the French.

Iberian debt crisis early next year likely to herald the collapse of the Euro

As the dust settles on the terms set out for Ireland’s bailout agreement, the public continue to balk and gasp at the sheer size and scale of Ireland’s indebtedness. Doubts about its ability to carry burden of it remain high.

Notwithstanding this, out of all the PIIGS nations, Ireland is in a much stronger position to gain the economic strength required to withstand the hardship of re-paying the debt. The jungle where the Celtic Tiger thrived may have been devastated by a forest fire but at least this cat is still alive. Very soon, Ireland will reclaim its status as a net exporter. The jungle will renew itself.  Ireland can become a rich country again.

The Irish people, unlikely to expect any respite from the crisis, in the short term, are, understandably, now turning their anger on their Government. Meanwhile, the rest of the World will shift its attention towards the next hot spot for Euro turbulence – Portugal.

Unlike Ireland, Portugal’s problems are not related to a banking crisis based upon a property boom and crash. Portugal’s problems are structural. It is suffering precisely because it is in the Euro zone. In the past decade, Portugal’s economy has undergone very little growth. Its industry has become less efficient and competitive. Unemployment has risen above 10 per cent.

In 2009, Portugal’s budget deficit reached 9.4% of its Gross Domestic Product (6.4% higher than allowed under Euro zone rules). Its National debt is 75% of GDP (15% above the allowed limit). Portugal plans to reduce its budget deficit this year to 7.3 per cent, and to 4.3 percent in 2011. Furthermore, it plans to raise VAT from 21 to 23 percent and increase Corporation tax by 2.5%.

Portugal’s planned capital projects, such as the new airport and the construction of high-speed rail lines have been suspended. State-owned companies, including energy utilities and banks are either to be fully or partly privatized. These measures will bring approximately €6 billion into the Portugal’s coffers. Salaries for its civil service are to be cut by 5 percent.

Despite the austerity, Portugal remains in recession. Growth forecasts for next year are only 0.2%. In order to re-finance its old debts, Portugal needs to raise €15 billion by next spring and a further €40 next year. With the bond markets in turbulence, Portugal is finding it extremely difficult, if not impossible, to obtain inexpensive credit. The markets are extremely unlikely to feel confident about Portugal’s ability to resolve its problems. A bailout for Portugal is all but imminent.

If Portugal was the only other problem country left for Europe, Angel Merkel would now be relegating her worries about the Euro beneath her forthcoming Christmas shopping dilemmas. The current fear now is that once Portugal is bailed out, the contagion will spread to one of the Euro-zone’s larger economies, such as Spain or Italy. Out of those two economies, it is Spain, whose alarm bells are bellowing.

At first sight, Spain does not yet look like a problem Nation. Its National debt is only 53% of GDP – still under the Euro zone’s permitted limit. Like Ireland, Spain is suffering from the after-effects of a burst property price bubble. Hundreds of thousands of Spaniards have lost their homes. Spain’s mortgage lending institutions are now saddled with €180 billion of bad debt. Like Portugal, Spain’s economy has been made weaker as a result of being in the Euro zone. The recession in the construction industry has left 1.2 million without jobs. Unemployment is at 20%. Youth unemployment is at 40%.

Spain’s ruling socialist Government has been tardy at tackling its mounting debt problems. As a result of pressure from the IMF and the EU, it has begun to tackle them since the spring of this year. This Summer VAT rate was increased by 2%. This failed to generate revenue because Spaniards cut back on consumption. This also seems to have delayed the end of the recession.

During the next three years, the Spanish Government hopes to save €50 billion through drastic cuts. A further €15 billion will be slashed from this year’s and next year’s budget. Measures designed to achieve this include cutting civil servants’ salaries and slashing subsidies. The Government target is to reduce its budget deficit from 11.2 percent of GDP to less than 3 percent by 2013.

Next year, Spain must raise €65 billion from Capital markets in order to re-finance its debts. Is it realistic to expect the bond markets to supply that amount of money at manageable levels of interest?

If it is not, then is a bailout of Spain a political likelihood?

The political and financial commitment required by Germany would be enormous. Already, German Banks are owed €134 billion by Spanish Banks and companies. Portugal, Greece and Ireland aggregated together represent 7% of Europe’s economy. Spain is Europe’s fourth largest Euro zone economy. A bailout for Spain could cost up to €700 billion. That would “clean out” what remains of the EU rescue fund. Furthermore, a bailout of Spain does not guarantee that euro turbulence would be brought to an end.

It is hard to see how Spain will not require a bailout. It is also hard to see a bailout for Spain being accepted by the Germans. Can anything else be done to save the Euro?

Timothy Garton Ash, writing in the Guardian last week, argues that it is possible, but only if Germany commits itself to a new political and financial structure in place to deal with Europe’s sovereign debt and economic problems very soon.  The next few weeks appear to be crucial.  Frau Merkel, if she is getting to grips with this crisis, is unlikely to have Christmas shopping uppermost in her mind.

No satisfactory rationale emerges from the Government on 7 billion loan to Ireland

So Britain is making a loan to Ireland of €7 billion, just like that. 

We are told that it is in the National interest for Britain to do this.  George Osborne has said that Ireland is a “friend in need.”  It has been emphasised that Ireland is the only nation with a land Border with the UK, that Ireland’s own banks have 40% of the banking in Northern Ireland, that Ireland is Britain’s largest export market and that British Banks are owed a very large amount of money by Ireland. Yes, but….

…was that money not available from European or IMF sources in any event?

None of this properly explains why Britain loaned the money. What would have been the position if Britain had not loaned the money?

What “bad happening” to the UK has been prevented by lending the money?

What good has the Government achieved which could not have been achieved without lending the money?

When you consider all that Mr. Osborne and Mr. Cameron have said, we have not actually been told anything.

The political problem for the Government is that, whatever the answers to these questions, they can not be kept a secret for very long.   Even if they could keep it a secret, the media will fill the gaps in their knowledge with accusations.  Already, Simon Heffer of the Daily Telegraph has written a very provocative piece, accusing the Government of indulgence.

“…we must help the Irish because of the Coalition’s commitment to the European dream,” accuses Heffer.

So please, Messrs. Osborne and Cameron, let us have the full facts. Let’s have it out now.

Ireland “A society that disappeared up its own backside”

Whilst we witness the awful events unfold relating to Ireland’s economic difficulties, it is vitally important, for democracy in the future, that the mass of the voting population acquires a basic understanding of the mechanics of this disaster.

Following on from my previous post on the warnings by Mrs. Thatcher, I was about to write an article, using the Republic of Ireland as an example, depicting the link between National Sovereignty, democracy, currency and the ultimate prosperity of a Nation. Then yesterday, I read Newton Emerson’s excellent article in the Sunday Times. When I read it, it made me wonder if it was possible to solve regional inequality by setting up different regional currencies within a sovereign state. Then I thought the better of it. The best that a Nation can do about its regional inequalities is to have regional development plans to address it. 

In the United Kingdom, it was the Conservative Party which led the way with regeneration policies for inner urban areas in the 1980s. Today, it has a long-term regional development policy for Northern Ireland. At the heart of that policy is the proposal to bring down the rate of Corporation Tax. Will Northern Ireland’s politicians grasp this nettle? We shall see.

As there is no free link to the Times website, I have reproduced the full text of Emerson’s article below in coloured font:

“The prospect of Northern Ireland’s corporation tax going down, just as the republic’s may be forced up, has huge implications for the relative competitiveness.  There are problems and opportunities galore, and a large number of individuals will be personally affected, but the plain fact is that with three quarters of all economic activity directly due to public spending, and welfare not developed to Stormont, Northern Ireland looks to British budgets rather than Irish business for its economic fate.  And the dole cheque is still expected to arrive.

That leaves people free to discuss the constitutional ramifications – always the preferred northern pastime.  “Could the republic actually afford unity, now or ever?” mused one Belfast Telegraph headline.  ‘Partition hampers the economy,’ Sinn Fein is increasingly wont to claim.  Talk of a British bailout has raised the usual eyebrows.

It is all tired, predictable nonsense.  There is no correlation between the strength of republican sentiment and the strength of the southern economy.  The financial implications of Irish unity can be argued either way, and no financial argument persuades either side.  Nationality is above) or perhaps beneath) economics.

There is one grown-up discussion on economic sovereignty that can be shared across the border.  Northern Ireland is a text-book case of the problems of a currency union.  Indeed, it is such a glaring illustration that it is almost rude of the south to have ignored it before joining the euro.  Like most big countries, the UK suffers from having one currency across the disparate regions, without an exchange rate, varying productivity can be reflected only by prices and wages, which are rarely flexible enough to do the job.  So the less productive regions end up with higher unemployment, while the more productive regions end up with higher taxes.

This is the internal bargain all nations strike, but it is rare to find such a clear example as Northern Ireland.  Because of its huge public sector, whose wages are often agreed nationally, Northern Ireland has too many people expecting British pay in British pounds with no allowance for the geographical consequences of their Irish location.

Many public-sector workers get a London weighting, but there is no equivalent Belfast lightening.  Instead, throughout Northern Ireland, there is persistent long-term unemployment, the UK’s highest level of economic inactivity, and a subsidy of about £10 billion a year, more than the one-off bailout London is considering for the republic.

As well as contributing to these problems, currency union denies even a region as developed as Northern Ireland the tools to solve them.  Stormont is unable to print money or set interest rates, but it also has little scope to vary taxes because of the legal, political and practical problems of having different fiscal regimes under the same currency.  The possibility of lowering Northern Ireland’s corporation tax has been debated for years, but it will still require London’s permission.  Even then, there is no guarantee of getting it past the European commission.

When such policies are discussed, Stormont’s status as a glorified county council becomes apparent.  This is precisely the status Dail Eireann acquired when Ireland joined the euro.  It may have taken a crisis to make it apparent but the surrender of economic sovereignty was complete from day one.

Taxes and public sector wages have not yet been harmonised across the continent, but convergence is the inexorable logic of the euro, whether it is hastened by a bailout or not.  If Ireland is rescued, it will be rescued as a region, and compensated by subsidy for being a region.  It will be just like Northern Ireland.

However, in many fundamental respects, the republic’s position within the eurozone is worse than the north’s within the UK.  The republic is a smaller part of its currency area by GDP and population.  It is less connected to the eurozone’s centre than Northern Ireland is to the Southeast of England.  The eurozone is an expanse of 16 countries encompassing far more economic variation than is found within the UK, which makes a one-size-fits-all monetary policy that is much less likely to fit any one in particular.  Finally, Northern Ireland still has the relative flexibility of sterling, whatever its imperfections.

Since the recession began, every British employee has taken a 25% pay cut compared with the UK’s main trading partners.   Few even noticed it happening.  In the republic, with no exchange rate between most of its trading partners and the euro-sterling rate going the wrong way, public and private employers have had to cut salaries directly – a process that is slow, demoralising and politically toxic.

Perhaps it is a bit much to expect those in the south to look north for any kind of lesson, but it is surprising that they do not recall their own quite recent example.  Between 1979, when it uncoupled the Irish pound from Sterling, and 1999, when it joined the euro, the republic had a freely floating currency.

It was not meant to float quite as freely as it did – the ill-fated European Exchange Rate Mechanism was supposed to keep it within bounds.  It swung all over the place, going considerably below and above sterling and depreciating significantly against the deutschmark.

This helped Ireland’s competitiveness when foundations for its growth were laid down.  It also imposed enough financial discipline on Irish governments to stop them bankrupting the country.  Floating currencies start to sing, rather quickly and obviously, under the weight of excessive spending and borrowing.  It was enough to rein in even Charles Haughey.

It is one of the great ironies of the euro that it is promoted as a means of enforcing financial discipline.  Instead, it has become a means of running up enormous debt without the symptoms showing until it is too late.   The republic’s history proves it, and also disproves the common claim that without the euro it would have ended up like Iceland.  This puts the cart before the horse.  Without the euro, the republic would never have got into as much trouble as Iceland in the first place.

Still, there they are – or “we are where we are,“ as Brian Cowen, the Taoiseach, so eloquently put it – with no visible route back to a currency of their own.  Recessions and depressions come and go, but Ireland’s financial sovereignty is gone forever.

Margaret Thatcher was absolutely right

It is 20 years since Margaret Thatcher was removed from power in a leadership challenge instigated by Michael Heseltine and others.  It was a time when the Conservatives lost their nerve, having seen opinion poll ratings fall.  The issue which divided Conservatives, at the time, was the proposed single European currency.  Her successor, John Major was unable to unite the two wings of the Conservative Party despite winning the 1992 election.  The combined effect of the EMS crisis of 1992 and the splits in the Conservative Party over Europe led to a crushing defeat by New Labour in the 1997 election. 

Writing in the Daily Telegraph
Peter Oborne revisits the warnings that Margaret gave during her term of office and which were recorded in her autobiography, first published in 1993. 

“Today, Margaret Thatcher’s autobiography, first published in 1993, reads like a prophecy. It shows how deeply and with what extraordinary wisdom she had examined Delors’ proposals for the single currency. Her overriding objection was not ill-considered or xenophobic, as subsequent critics have repeatedly claimed.”

“They were economic. Right back in 1990, Mrs Thatcher foresaw with painful clarity the devastation it was bound to cause. Her autobiography records how she warned John Major, her euro-friendly chancellor of the exchequer, that the single currency could not accommodate both industrial powerhouses such as Germany and smaller countries such as Greece. Germany, forecast Thatcher, would be phobic about inflation, while the euro would prove fatal to the poorer countries because it would “devastate their inefficient economies

“It is as if, all those years ago, the British prime minister possessed a crystal ball that enabled her to foresee the catastrophic events of the past year or so in Ireland, Greece and Portugal. Indeed, it is one of the tragedies of European history that the world chose not to believe her. President Mitterrand of France and Chancellor Kohl of Germany dismissed her words of caution. And when Mrs Thatcher was driven from

office in 1990, a crucial voice was lost, and a new consensus started to form in Britain in favour of the euro.”

Oborne also pays tribute to William Hague and Ian Duncan Smith, who maintained support for Mrs. Thatcher’s policy during a period of intense unpopularity for the Conservatives.

Margaret Thatcher was hardly a popular figure in the Republic of Ireland.  In the 1980s, she was seen as an obstacle to Ireland’s interests.  I wonder how many now wished that their politicians had paid more heed to her warnings.

Could we have a constitutional lock to protect our economy?

There were plenty of attacks on the Labour Party during the Conservative Party conference.  They were not just enjoyable to listen to.  They were justified.

However, there was one part of David Cameron’s speech which did perplex me slightly.  Of the Labour Party, he said:

“they must not be allowed anywhere near our economy ever, ever again”

A song from ‘H.M.S. Pinafore‘ (Gilbert and Sullivan) entered my mind.  I imagined David Cameron as Captain Corcoran and the chorus challenging that part of his speech.  

Chorus: “what never?”
Cameron: “No never”
Chorus: “what never?
Cameron: “Hardly ever

Yes, it would be nice to imagine that the Labour Party will never be in power again.  Sadly, that would be taking political fantasy too far.  I don’t think that David Cameron was suggesting that either.  On the other hand, would it not be possible to devise a constitutional locking mechanism to prevent a Government from “ruining” the economy?

We may now be in a new era of constitutional locking.  Last week, at the party conference, William Hague announced that a new Act would be passed with the object that no further powers would be ceded to Europe without a referendum.

That leads me to a question.  Could Britain’s financial mess have been prevented if there was a constitutional locking mechanism in place which protected the economy?

In a sense, we already have some locking mechanisms within the EU rules brought about by the Maastricht Treaty.  The EU rules require that the ratio of the annual government fiscal deficit to gross domestic product (GDP) must not exceed 3% at the end of the preceding fiscal year.  They further require that the ratio of gross government debt to GDP must not exceed 60% at the end of the preceding fiscal year.

According to the Office for National Statistics, the UK breached these rules in the year 2007/8 in relation to Budget deficit and in the year 2009/10 in relation to National debt.  Quite obviously, part of the reason for our present deficit and rising national debt was the banking crisis.  For the purpose of this post, I ask readers to ignore the dramatic rise caused by the Banking crisis.

I refer to the years that the Government was NOT in breach of the Maastricht rules.  The really revealing aspect of Government borrowing before 2008 is this.

In the years before the Government breached the rules, it was borrowing almost as much as it could, without breaking them.  You can imagine Gordon Brown 4 years ago talking about the strategy for winning the next general election.  Looking at the right hand graph showing the national debt, it was obvious that before the year 2009/9 the Government would have thought it had plenty of borrowing “to play with.”  The banking crisis drove a “coach and horses” through their plans.  That was obviously not foreseen by them.

Government borrowing is very rarely a genuine investment which makes the economy more productive.  The proper ethical, broad National interest, approach of the Government would have been to reduce the National debt with a view to building some surplus during the high growth years, rather than borrow more money.  Over a longer period, it means that taxes are being used raised to pay for interest.  The Labour Party, in their last Government, put selfish political calculation ahead of the National interest.  For the sake of political balance, not every Conservative Government has an impressive record in relation to managing the National debt.  Margaret Thatcher’s record is exemplary.  From 1979 to 1990, under her Government, the National debt fell from 47% to 26% as a percentage of GDP.  In the years 2001 to 2007, the Blair/Brown Labour Government added £195 billion to the National debt.

When we are overtaxed, we feel it.  When interest rates shoot up, we feel it.  When public services are poorly delivered or cut, we feel it.  On these points, at least, the voters can see a visible link between these problems and the performance of the Government.  However, when there is creeping over-borrowing, we don’t feel until after it builds up over a long time.  A Government is unlikely to be punished electorally for that and yet when a Government.  There lies the heart of the problem.  We can not rely on electoral accountability when Government irresponsibility is so difficult for voters to see.  So can new constitutional locking mechanisms help us?

Having rules can be a good thing.  The evidence indicates that the last Labour Government did, at least, try to follow the Maastricht rules.  This Government should give very serious consideration to bringing in new rules of its own.

The following is a suggestion for a constitutional locking mechanism on the budget deficit.  In any fiscal year, the budget deficit must never exceed the greater of

(a)   3% of GDP (as per the EU rules); or
(b)   0.5% less than the rate of growth of GDP for the previous year.

Under this proposal, the National debt could theoretically increase BUT it is bound to continue going down as a percentage of GDP.  Of course, there might be exceptional circumstances where the Government has to exceed the borrowing requirement (such as a very deep recession or a war) so the proviso would be that those figures could only be exceeded if two thirds of all MPs elected to the House of Commons vote in favour of it.

I commend this proposal with a quotation of Thomas Jefferson (US President 1801-1809).

“In questions of power let us hear no more of trust in men, but bind them down from mischief with the chains of the Constitution”

Conservatives on the verge of long term coalition with Lib Dems

Yesterday, following Gordon Brown’s resignation as Labour leader, the Conservatives took a calculated risk with their future by offering the Liberal Democrats a referendum on Alternative Voting (“AV”).  It was a move which was designed to prevent giving Labour anything concrete to offer the Liberal Democrats.  In a post written by me before the General Election, I indicated that the Conservatives should be prepared to make that offer.

Mathematically, it is possible for Labour to obtain a working majority with the Liberal Democrats by adding the Scottish and Welsh Nationalists.    That would take them to 324 MPs.  Bearing in mind that Sinn Fein do not take up their seats, that would be enough.  Certainly, there has been talk of Labour offering the Liberal Democrats a referendum on full proportional representation.  However, that would be a very different offer.  AV was in Labour’s manifesto.  PR was not.  The two voting systems are entirely different and there are many Labour MPs who will never accept PR.   The Conservative offer has effectively killed any chance that Labour had of remaining in power. 

The Liberal Democrats will know there are risks with entering into a coalition with the Conservatives.  Then again, there are political risks for them whatever they do.   A coalition with Labour would be without the legitimacy of an elected Prime Minister.   It would also be highly unstable and very unlikely to survive long.  That is why I am now confident that the Liberal Democrats will decide that their best position is in Government with the Conservatives.

There are those in the Conservative Party who believe that David Cameron has offered the Liberal Democrats too much.  I don’t think he has, not just for the reasons outlined above.  The Conservative objective remains to provide stable government for a minimum fixed term.  I now fully expect that term to be four years.  I also expect to see the Liberals in coalition.  That is what the majority of the Nation wants.  That is also what the Nation needs.

The future will be brighter in Northern Ireland under a Conservative Government

As we reach the final stages of the election campaign, the polls suggest that the Conservatives are going to gain the largest number of seats but will be just short of an overall majority.  The situation is still, of course, highly volatile but with the likelihood of a hung parliament, the importance of how Northern Irish voters make their decision in a General Election has never been greater. 

The backdrop for Northern Ireland voters is that with the UK in so much debt and the Republic of Ireland economy in so much trouble, there are very tough times ahead, whatever the outcome of the election.  However, I maintain that the outcome of the election, whatever your tradition, will be as important to you as it will be to any citizen in Britain.  What I say here is directed to anybody who is a voter in a Northern Ireland constituency, with the exception of Fermanagh and South Tyrone.  I have expressed my view on the circumstances of that constituency here and here.

All of the political parties that are represented in Northern Ireland have now produced their manifestoes. 

Sinn Fein was the last party to produce their manifesto.  Their policies are as vacuous as ever.  They do not take up their seats in Parliament.  Taken together, they have absolutely nothing to offer the electorate.  All that a Sinn Fein MP achieves by election is the title “MP” and a salary with expenses.  When the Conservatives are elected, they will pass legislation so that neither Sinn Fein MPs, nor any other MPs that do not take up their seats, will be able to draw upon expenses.

The SDLP, by identity, is an Irish Nationalist party but for the purpose of the General Election, I am not interested in their Nationalism. Historically, they line up with the Labour Party in the Westminster Parliament on matters which don’t specifically concern Northern Ireland.  What is most important, for the purposes of this election, is that SDLP MPs support the Labour Government.  If you watched the Northern Ireland leader’s debate last week, you would have heard Margaret Ritchie explaining that. 

If you habitually vote for the SDLP or you are thinking of voting for them, I ask you to think of them as the Labour Party.  If your constituency is North Down, it is also reasonable to treat Lady Sylvia Hermon, who is now supported by the SDLP, as a representative of Labour. 

NI voters need not concern themselves with Labour’s policies for Education or the Health service.  Those are matters for the Assembly.  However, I would urge NI voters to think in terms of which party is best suited to run the Economy and deal with other non-devolved matters such as Immigration.  If you have decided on the answer to that question, then I respect your voting choice if the Labour Party is still your preferred party of Government.

If you feel that Britain and Northern Ireland need a change of Government and you are broadly in agreement with Conservative economic policy, I urge you to put aside any notion of what has gone on before and vote for one of the 17 Parliamentary Conservative and Unionist candidates who are campaigning on behalf of the Conservative Party.

The Democratic Unionist Party currently has 9 MPs.  Their core policy for the UK Parliament is simple and clear.  They are telling unionists that they will use a hung Parliament in order to extract or defend funding for Northern Ireland.  If you are a Unionist and you are taking that prospect seriously, then I urge you further to take into account the following points.

It has been suggested that during the Labour administration, the DUP extracted concessions from the Government.  Peter Robinson has alluded to concessions given when they supported them over the 42 bill.  Do not be fooled by that or by anything else the DUP tell you.  There was, in reality, no funding for Northern Ireland as a result of that vote. 

The DUP may also point to Policing and Justice, where extra funding was obtained to support devolution.  There are two things to say about that.  Firstly, it was the last piece of the Devolution jigsaw puzzle.  The supportive funding was a one-off.  Secondly, the Government made those funding concessions to support devolution, not the DUP specifically. 

The reality is that Gordon Brown has not bribed Peter Robinson at all.  If Brown was into that game, the outcome of the Presbyterian Mutual Society problem might have been different.  Incidentally, savers with the PMS have every reason to hope for a different result when the Conservatives take office.  When in office, they will look at the affair afresh and consider taking a different approach.

If DUP MPs start looking for special favours from the Conservatives to keep them in power, the Conservatives will, firstly, appeal to Northern Ireland MPs to put the nation’s interests first, particularly in these difficult times.  However, they will not be making any concessions to the DUP.  Memories still linger of the “bribe” negotiations between Labour and Ulster Unionist MPs in 1978 and 1979.  Promises made by the Callaghan Government on the eve of no confidence motions erupted into national scandal.  The Conservatives would be taking a very bad gamble if they went down that route.

Voting for the DUP on the basis of potential leverage will not benefit Northern Ireland because it will not benefit the UK as a whole.  A strong Government with a working majority represents the best prospect for the UK during these difficult times.  

The broad way to differentiate between the Conservatives and Labour is in terms of their attitude towards state and economy.  The conservative approach is economy-centred.  Labour’s is state-centred.  Labour has never been able to break free from its “Robin Hood” approach to the economy.  Another description which sums up Labour’s approach is the “Nanny State.”  Whenever Labour has finished a spell in power, it has left the State sector larger, as a proportion of the overall economy, making it much harder for it to thrive in the future.

For people in Northern Ireland, the benefit of the Conservatives being interested in this region is that the Conservatives are committed to enabling Northern Ireland to break away from its dependance on the State.   The Conservative leadership has made its overtures on this subject.   This election represents an opportunity for voters in Northern Ireland to take ownership of that commitment by showing solidarity with the Conservatives and giving them the power that we all need them to have.

Unfortunately, because of the present state of the UK economy, Northern Ireland, like everywhere in Britain, is going to suffer from spending cuts during the first part of a Conservative administration.  That cannot be avoided.   In the medium and longer term, the Conservative Party is committed to reducing the dependency of the state sector and regenerating Northern Ireland’s private sector economy.  One measure for Northern Ireland, already promised to be implemented, is the is the reduction in the rate of Corporation tax so that it is consistent with the low levels of equivalent tax in the Republic of Ireland.  Further fiscal measures will be unveiled after the Conservatives have taken office while others, such as a review of Business rates, will be discussed with Northern Ireland politicians.  In conclusion, there is some short term economic pain ahead for Northern Ireland.  Further along, the future will be much brighter under the Conservatives.

David Cameron’s TV debate victory gives his troops the boost they needed

Last night, Conservative supporters were willing and wishing David Cameron to come out on top of the party leader’s TV debate.  David Cameron did not disappoint. 

Gordon Brown, having yesterday badly handled his “bigot” gaffe looked like a man whose confidence had been shot to pieces.  Indeed, he referred to it again. 

“There is a lot to this job and, as you saw yesterday, I don’t get all of it right.”

David Cameron managed to put clear blue water between the Conservatives and Labour on policy by highlighting the socialist tendancy to rely on the State to solve the nation’s problems. 

Cameron made two notable low blows against Gordon Brown.  He told the audience that Gordon Brown was unable to distinguish between the State and the Economy.  The nastiest punch of all came near the end when he accused Labour of regarding anybody earning more than £20,000 a year as being rich.

David Cameron needed to do more than just beat Gordon Brown.  He needed to come out on top of Nick Clegg.  He did not disappoint here either.  He shot two massive torpedoes into Nick Clegg’s cruiser on the Euro and Immigration. 

Commenting on the Lib Dem’s unstinting support for joining the Euro, David Cameron said this: 

“If we were in the euro now, your taxes and your National Insurance wouldn’t be going to schools and hospitals and police officers, they would be going to bail out Greece”, said David Cameron

Mr. Cameron also landed another blow on Nick Clegg over an amnesty proposal for some existing illegal immigrants.  The offending part of the Lib Dem manifesto says this

“We will allow people in Britain who have been in Britain without the correct papers for 10 years, but speak English, have a clean record and want to live long term to earn their citizenship”         [Lib-Dem Manifesto p.76]

Nick Clegg was caught in denial.  “I’m not advocating an amnesty,” he said.

It appears that Conservative prospects have gone up a couple of notches after last night but I would still not bet on a winning lead emerging in the opinion polls.  One thing is for sure. The outcome of the debate will sap Labour morale just as it will energise Conservative activists will go into the final week of the campaign.