A National Disgrace

         

There are 1.6 million children living in severe poverty in this country. According to Save the Children, there are 29 local authorities across the UK where more than one in five children are living in households with half the average income – for a family of four this would be pay of less than £12,500 – £34 a day to meet all essential needs. In Tower Hamlets and Manchester, the figure is 27%. 14% of children in Wales and 13% in England are living in these conditions. 

In an interview with the BBC, Sally Copley, Save the Children's Head of UK policy, explained the level of 'material deprivation': 

"Children up and down the country are going to sleep at night in homes with no heating, without eating a proper meal and without proper school uniforms to put on in the morning." 

According to a report by Save the Children in 2008, two-thirds of these households have to borrow money to meet utility bills, 1.3 million can't afford new clothes for their children, half of the households cannot afford to provide three meals a day for their children and a million children live in houses with rotting walls or floors.  

A report last year, An Anatomy of Economic Inequality in the UK by Professor John Hills of the London School of Economics, commissioned by the Labour government, concluded that being born into a disadvantaged social class had a profound, lifelong negative impact. These inequalities accumulate over the life cycle, the report concludes. Social class has a big impact on children's school readiness at the age of three, but continues to drag children back through school and beyond. With few exceptions, the children born into poverty will get fewer qualifications, lower paid jobs, suffer more health problems and die younger than their peers. 

In 1999 Tony Blair made a commitment to end child poverty in the UK by 2020. By 2008 Labour had pulled 600,000 children out of poverty thanks to tax credits and other initiatives. Yet, despite the Government's efforts, the UK still has one of the worst records on child poverty in the EU. We are the 6th biggest economy in the world and yet we rank 21st out of 27th in Europe on this crucial indicator. 

Meanwhile, the UK's present inequality in wealth distribution, the gap between rich and poor, is at its widest point since the 1920s. Professor Hills, indicated that the richest 10% of the UK's population was over 100 times richer than the poorest 10%. Researchers analysed the total wealth accrued by households over a lifetime. The top 10%, led by higher professionals, had amassed wealth of £2.2m, including property and pension assets, by the time they drew close to retirement (aged 55-64), while the bottom 10% of households, led by routine manual workers, had amassed less than £8,000. 


In this context, the Coalition has proposed switching the focus on tackling child poverty from traditional anti-poverty measures, based on income, to improving children's life chances. However, with the material deprivation described in the report it is not hard to understand why Save the Children are adamant that income plays such a crucial role. They have called on George Osborne to announce an emergency plan to create new jobs in the poorest areas and increase financial support for low-income families. This, of course, is unlikely to happen. The Coalition have replaced Labour's pledge to 'eradicate' with proposals to 'tackle' child poverty and Osborne has promised that cutting the deficit would not increase child poverty. 

In the light of rising unemployment, rising inflation, welfare cuts and the VAT increase, it would appear to be the sort of promise Sir Humphrey in Yes Minister might have described as 'courageous'. I can think of other words. Save the Children calls it a 'national disgrace.' 

I think they are right. 

Nick Clegg in Bath - "It will prove to be a fairer system"

"Social engineering?" Clegg dismissed claims that higher fees would make university the preserve of a privileged few. "It will prove to be a fairer system." But for whom? Students will have a much higher debt and will be paying off the debt for most of their working lives. Is that fair? In the last of my three posts on the student fee issue, like Woodward and Bernstein, I will be following the money and trying to bring down the government, or, more likely, just discussing who really benefits from the increase in student fees. 

In answering the question, we need to look at the assumptions underpinning the increase. The UK has the sixth largest economy in the world and it may surprise you, but the UK is also the sixth biggest manufacturing economy in the world. However, that position looks decidedly precarious. Russia, S Korea and Brazil are all closing in on poor little UK Ltd. Unfortunately, while those upstarts continue to grow, our manufacturing sector has shrunk considerably. Furthermore it is struggling to regain lost markets despite the collapse in the value of the pound making it far cheaper to export. According to the Institute of Fiscal Research this could be part of a structural decline rather than a temporary blip. 

What are the reasons for this? The IFS highlight a historical decline in manufacturing investment. Investors have been drawn to the 'higher' returns from the City to the detriment of our manufacturing base. Roughly 75% of UK GDP is accounted for by financial services and service industries. Just over 22% is manufacturing. Another reason, according to the OECD, is that we are slipping down the league tables of productivity. Central to this is having an well-educated workforce. We rank only 19th for the percentage of 'young' workers, 18 to 34 year olds, who have got a degree. We have been overtaken by a number of countries during the last few years, including S Korea and Ireland (although Ireland might slip back again given its own problems). 

The Coalition, and Clegg in particular, are talking up the importance of re-balancing the economy, so we have less reliance on the City and financial services. I think we can all agree that less reliance on the City would be a good idea. A healthier manufacturing base would also allow for a re-balancing of the country. Rather than drawing increasing numbers to the South-east it would provide opportunities across the country and regenerate the regions. How far have we got to go? To put it into context our role-models, the Germans, currently account for 30% of GDP from manufacturing.

The Germans

 

The argument, therefore, is that the UK's competitive edge can only be maintained in technical, high value sectors requiring a very well educated workforce. So, you would expect our school-swot German neighbours, with their healthy manufacturing and balanced economy to have a much greater number of graduates than the forlorn UK. In fact, they have a much smaller proportion, 23% to the UK's 38%. Despite this, German productivity is 11.8% higher.  

Yet, the Government insists that the UK needs to produce even more graduates. However, given the present economic constraints, who pays? They think the answer to that question is whoever benefits.   

At the meeting in Bath, Clegg stated that graduates earn, on average, £100000 more during their lifetime than non-graduates. According to the IFS, a woman with a degree can expect to earn 25-27% more and a man with a degree can expect to earn 18%- 21% more. The students personally benefit and therefore they should pay. On this basis it seems a reasonable assumption.

However, there is a social benefit as well as private benefit to higher education. Unfortunately, the social returns to higher education are very difficult to quantify, especially if you want to raise fees. Social returns can measure the effect of university education upon general productivity, the ability to adopt new technology quickly or even create new technology. Finally, there are a whole raft of benefits associated with having a better educated population that provide savings to the state: better health, a reduction in crime, social cohesion, less drug abuse and teenage pregnancies.

Quantifying the value of social returns is proving to be extremely controversial amongst academics. Methodology and conclusions are criticised.  Richard Venniker, from Tilburgen University in Holland, in a review of the work done on this subject, concluded that social returns are higher than private returns and may even be worth double. According to Venniker, the strongest evidence of social returns were not linked directly to economic output but rather in indirect benefits like reduced crime and social problems. 

If society is benefitting to the levels suggested by many academics, then this is clearly at odds with the Government's assumptions. As I noted yesterday, there are also concerns that students' private returns may have been wildly over-estimated. That would also agree with Venniker's conclusions. There are a lot of provisos attached to the research so it is difficult to draw any firm conclusions. However, it is surprising, given that public policy is being driven by assumptions of private benefit that there is so little research on the subject. I suspect that won't remain the case.

Even before we consider the broader benefits of education to creating a just state, such as social mobility, there is a strong argument that the students contribution will be too high. Overall, the research suggests that there is a benefit to society for providing higher education which, at the very least, is comparable to the private benefit. According to the IFS, the new fees will mean that students will pick up 60% of the cost, an increase from 24% under the present fees. From a conservative interpretation of the data available it seems reasonable to conclude that the new fee regime will overcharge students by anywhere between, 10 and 25%. Using the Government's own logic it appears society will be getting a free ride on the back of our students.

Meanwhile, graduate unemployment has risen by 25% to 8.9%, its highest level for 17 years according to the Higher Education Careers Services Unit. Yet, politicians continue to fuel this higher education boom. Why? Well the answer is probably down to universities proving to be very good at absorbing large amounts of young people for relatively little cost. Dr Bahram Bekradnia from the Higher Education Policy Institute, argues,

"The government's entire strategy is based around reducing public borrowing. Borrowing to give grants to universities counts as public borrowing. Borrowing in order to make loans to students does not count as public borrowing, to the extent that the government can show a stream of income to offset the loans."

With youth unemployment running at nearly 18%, you have to admire a government policy that gets young people off the unemployment statistics and at the same time gets them to foot the bill.

Nick Clegg in Bath - "more progressive"

"It will prove to be a fairer system". Nick Clegg assured the tame Lib Dems and slightly less house-trained students that the reform to student fees is "more progressive. More people will pay nothing back at all and a large proportion will never have to pay the fees off." With fees increasing almost 300% can the system really be fairer? As you have probably realised, student fees are a complicated business. However, whether you are a young person about to enter university or a parent with children who want to attend university, this issue is going to come back and bite you. 

The Browne Review, initiated under the Labour Government, reported in October 2010. It was asked to develop proposals to tackle the following issues: widening university participation, affordability of higher education for students and the taxpayer, how to simplify the current system of support and, given the current economic circumstances, how to ensure the financial sustainability of the system. Browne recommended that the Government should allow universities to charge whatever fees they liked, ensure all students have access to a maintenance loan and charge a 2.2% rate on loans, and start repayment after students start earning. 

As we now know the Government has made changes to the Browne recommendations. With grants from central government to universities being cut by 80%, widening university participation means making students pay higher fees. However, not setting a fee 'cap' would have been politically untenable at the moment, although I suspect it will come, so universities will be able to set fees up to £9000. Affordability was addressed by means-tested rather than the recommended universal maintenance loans and grants for students from poorer households. 

In order not to discourage students from deprived backgrounds, the children from 'free school meals' households will get scholarships that will pay the final year tuition fees and if universities charge over £6000, they will have to provide a scholarship for the first year's fees. In terms of repayment the government has introduced a sliding scale of interest charges on loans. 0% on earnings of less than £21,000 and 3% over £41,000. 

So is the system more progressive? According to the IFS, yes(ish). Compared to both Browne's proposal and the current system, the Government's proposals are more progressive when looking at repayments across graduate lifetime earnings. So the more you earn, the higher rate of interest you pay and the more you will pay back. In fact, the top 10% earners will pay back more than they borrowed.  However, because of the rather complicated system of maintenance grants the highest burden will fall on those from the middle income families because they qualify for the highest loans but without benefiting from the scholarships so their debt will be higher. 

Also, because of the increased repayment threshold of £21000 per annum, up from £15000, Clegg is correct to say that more of the lowest earners will not pay anything at all. Although, it should be noted that the threshold figure - the income level at which graduates will have to start repaying debts - due to be increased annually in line with earnings growth, not inflation, will not be increased until 2016, making it less generous in real terms.  Students will pay for 30 years and then have the remaining debt written off. The Government have assumed that 23% of the debt will be written off. Roughly the same amount as is written off now, however, the total debt will be much higher. 

The Higher Education Funding Institute have argued that this could be the sting in the tail. Based on historical data, the Government has projected graduate income to increase to an average of £100,000 per year over 30 years. HEFI suggest that because the number of graduates is increasing so fast the historical trend is not a good indicator of future pay growth and, also, because loans are being opened to part-time students, who have a higher drop out rate, then the 'government is more likely to lose over 50%. HEFI concludes that the reforms cannot be expected to save money in the long term and that the Treasury is likely to demand changes which may include raising loan interest rates, reducing student numbers or a further fees hike.

Another possible problem is that universities charging over £6000 will have to fund pupils from 'free school meal' households for their first year. Clearly a disincentive to accept those pupils. Clegg has been insistent the Office of Fair Access will ensure the top universities actually take a higher proportion of these students. We await the outcome of their efforts to impose 'quotas', but there is already signs that they wil face strong opposition. Also, as the IFS have pointed out, an increase in fees reduces the level of applicants at double the rate a corresponding increase in finance through grant or loans encourages applications. Quite simply putting fees up discourages applicants. Inevitably, poorer students will be the most disadvantaged. 

In effect, the changes mean students will be paying a 9% 'graduate tax'. The majority will not pay off the debt, and will pay 9% of their income over the £21000 threshold for the full 30 year term. A pretty hefty reduction. The Institute for Fiscal Studies concludes that under the proposed system, the average cost to each student will increase by £9500 and 78% of students will be worse off. Most of them significantly worse off. In this context, although Clegg is largely correct when he says the system is more progressive, that many students will never pay off their loan and that there will be a huge proportion who never pay their debt off. But, does that tell the full story? Clegg may be speaking the truth but does that make it a fairer system? Much higher debts and 30 years of repayments suggests not.


Are they putting up the fees to the University of Life? 

Nick Clegg in Bath - "I am a human being"

Frost Vs Nixon

What sort of man is Nick Clegg? First, you had Frost Vs Nixon, then came Chris Evans and Sean Ryder and now: the rumble in the World Heritage Site, the thriller in a small city in Somerset. Yes, Clegg Vs Me. Using all the influence at the disposal of Things Can Only Get Better?, a tip off from my local Lib Dem MP, Don Foster - hasn't he read the blog? And, the remarkable power of waiting outside for quite a long time, I was able gain access to the Deputy Prime Minister for a whole hour of Q&A. Well, me and 200 largely tame Lib Dems. 

Given the 20,000 or so students who live in Bath and the anger across the country at the rise in tuition fees, it was not unreasonable to expect a show of force from the local NUS. But Friday night in Bath, clearly has greater attractions for students than political demonstrations. Any sense of tension was dissipated early on when it became apparent that the demonstrators were outnumbered by the police, roughly eight to one. They were probably outnumbered by the BBC news crew as well. Inside was a similar story, with at least two thirds of the audience made up of loyal Lib Dems. 

Clegg looked tired after a whole day criss-crossing the Southwest, and he introduced himself by reminding the audience "I am a human being". Yes, Nick Clegg has feelings too. He was met with a few boos as he entered the room but it all felt more pantomime rather than gladiatorial. Only the issue of student fees provoked any strong dissent from the floor. Clegg argued that the reforms, "will prove to be a fairer system. The new structure is more progressive. More people will pay nothing back at all and a large proportion will never have to pay the fees off." "Liar" was the response from a small pocket of students. Clegg was not impressed. 

Is he a liar? Did he lie about tuition fees during the election campaign? Clegg argues the Lib Dems proposed to scrap fees if they won the election - but, unfortunately, they didn't win - and as far as he is concerned that means that all bets were off when it came to student fees. They were in the business of forming a coalition and so something had to give. But how serious were they about the student fee issue?

The Liberal Democrats say that scrapping student fees was never a priority. They point to their four key aims which appeared on the front of their election manifesto: 'Fair taxes, A Fair Chance, a Fair Deal and A Fair Future,' and argue that all of these were agreed in the coalition agreement. I would have thought student fees could have fitted neatly into any of those categories. 'A Fair Future' promised 'honesty about the tough choices needed to cut the deficit'. How hard did they press the Tories on student fees? Given the likelihood of a hung parliament how 'honest' was their manifesto promise? 

In November 2010 on ITV1's Daybreak programme, Clegg admitted that:

"I should have been more careful perhaps in signing that pledge at the time. At the time I thought we could do it." 

Did he really think he could do it? Back in September 2009 there was already speculation that Clegg wanted to scrap the party’s policy of abolishing tuition fees. He told the Party Conference that he had to be “realistic” about whether it is affordable given the country’s mountain of debt. 

"Ending tuition fees would cost billions of pounds every year. We need to be certain we can afford it before we make any promises. But I can make this pledge – at the next election we will have the best, most progressive package for students of any mainstream party.” 

With two million student votes waiting to be won and both Labour and Conservatives indicating that fees would rise, all doubts about costs were resolved. It was certainly the most progressive policy because Clegg retained his promise to scrap tuition fees and they subsequently won 15 of their 57 seats in university cities. So it is fair to say that the pledge won a lot of student votes.

However, back in March, before the election, they were already recommending that the policy should be jettisoned. The Liberals had no chance of winning the election outright, but there was a very strong possibility of there being a hung parliament. A leaked memo preparing the party for future coalition discussions by Danny Alexander, Clegg's Chief of Staff, suggested that student fees were not a high priority:

"On tuition fees, we should seek agreement on part-time students and leave the rest. We will have clear yellow water with the other [parties] on raising the tuition fee cap, so let us not cause ourselves more headaches."

"More headaches". Oh, Danny, how wrong you were. I suppose, given the recent history of student lethargy in the political arena, it was a reasonable assumption that they could ride out any criticism. A reasonable assumption, yes, but a cynical one. While planning for a coalition they were selling a pipe dream. Isn't that what all parties do? Yes, but the trouble for Clegg is that their election strategy sold an image of a new kind of politics. 'Believe the Liberal Democrats because we are different to the other parties.'  Public pledges were signed by MPs and party political broadcasts sold the tagline: "No more broken promises."

Not surprisingly the whole thing has blown up in Clegg's face. During the meeting he seemed to be confused by the inability of the students to get to grips with the detail of the reforms. In fact, they simply aren't interested in the details. They feel they have been lied to and they are very angry. After the meeting I had a chat with some Liberal supporters who were very keen to point out that, in government,  Labour had also gone back on its own election promise not to introduce fees. Sadly true. But, it is pretty desperate when your defence is that you are as bad as the other guys.

Unfortunately, for Clegg, Facebook and Twitter have not just changed the political landscape in North Africa. Who would have expected 50,000 students on the streets, rioting and attacking Millbank? Clearly, the new social media has once again put political protest, anywhere but Bath, back in vogue. That may change if it actually is in Vogue. The truth is - sorry to use that word - I simply don't think the Lib Dems quite understand the indignation.

As anyone who has worked with Liberal Democrats in local government knows - they are just as ruthless as either of the other parties. No better or worse. Liberal Democrats know this themselves. During the meeting when Clegg exclaimed, "I am a democrat",  he was not alluding to the election broadcast image of gleaming right and darkest wrong, but a world of grubby compromise. Clegg's message to the students at the meeting was basically: grow-up, what do you expect from politics? Ah, the truth!

The problem for Clegg is that I don't think that is a lesson the Liberal Democrats could afford to teach.

Oxbridge and the great escape

Poor old Nick Clegg, he just can't win, can he? On Wednesday's BBC 10 O' Clock News, a student said he was "either mad, stupid or malicious" for raising student fees. Then, after retreating from that meeting, looking very angry and rather ruffled, he was confronted with a Commons motion, signed by 25 Tory MPs, criticising his attempt to encourage 'fair access' to England's most prestigious universities.

Not that long ago Clegg had the appearance of an enthusiastic fresher with a disarmingly straightforward manner. We now realise that most of it was achieved through sleight of hand and being taught the magical trick of looking straight into the camera when answering questions during election TV debates. Now, he and his team are looking increasingly beleaguered as they tie themselves up in knots trying to keep their own party happy while at the same time remaining in government.

For his next trick, Clegg will find himself tripling student fees and at the same time berating top universities for not accepting enough students from poor backgrounds. At the moment, children from private schools, about 7% of total students, take up half of the places at Oxford and Cambridge. Private school pupils are 55 times more likely to get a place. According to the Sutton Trust, out of the one in five children currently eligible to 'free school meals' in England, only 2% of make it into England's top 25 universities. It's been quite an achievement for successive governments to make 98% disappear.

Fees are due to rise to £9000 from 2012, but Clegg wants to ensure that poorer pupils will not be put off applying because of the increase. Out of his hat he has pulled the proposal that any university wishing to charge more than £6000 will have to agree a target with the Office for Fair Access (OFFA) each year. The highest fee charging universities will have to agree how many students from state schools or poorer backgrounds they recruit in future years. Speaking to the BBC, Clegg argued,

"These statistics demonstrate just how closed many of our universities are to students from disadvantaged backgrounds. Universities should be the greatest agent of social mobility that we have in this country, but too often instead they are serving as instruments of social segregation."

Meanwhile, the threat that their children might not be able to get a place at their old college has provoked Tory MPs and the Tory press. Yesterday they were accusing Clegg of pushing this issue as a way to make the tuition fee hike more palatable to his fellow Lib Dem MPs. Probably true. They also argued that it was social engineering and said universities should not be be forced to compromise educational standards in order to fill quotas. I would also agree that there is social engineering going on, just not in favour of state school students.

The Russell Group, representing the UK's top universities responded to the proposals by saying,

“It is important to be very clear about the underlying cause of under-representation of students from low-income families at university. As the report acknowledges, the primary reason why too few students from lower socio-economic backgrounds go to university is under-achievement at school.  Ensuring that students from low-income backgrounds fulfil their potential at school is by far and away the most effective way of increasing their chances of going to a leading university."

As an undergraduate I shared a house with a young Muslim man from Burnley. He had managed to scrape into university after completing 'A' levels during the evening while working full-time at a clothing store. Having left school with a handful of GCSEs, his manager spotted some talent and encouraged him to sit more exams. The university, too, felt he was a worthy candidate and he was given a  low offer. He worked hard, but not obsessively, was the life and soul of the department and got a 'first'. He is now a very successful man.

His story is exceptional. He was exceptionally lucky to have a boss who encouraged him to go back to school. He was exceptionally lucky the university were prepared to take a risk and gave him a low offer. Once he got the chance there was nothing lucky about his success. He was an exceptional candidate. Yet luck had to play such a huge part in the process. Compare his experience to the luck of being part of a family that puts you down for Eton the moment you are born.

I often think of my university friend when I hear organisations like the Russell Group talk about 'under achievement' at school. From what he told me, getting to school every morning had been an achievement. He came from a poor background, in a deprived neighbourhood and with English as a second language. He is an extreme example but like many state school pupils he was playing catch-up from day one. If the Russell Group were really interested in 'attracting students with the most potential from all backgrounds' they would have to adopt a more flexible approach to assessing that potential. 

One way of addressing potential is through 'value added' monitoring. The idea of 'value added' is much maligned by everyone in education except those at the sharp end who realise that a child's ability to learn can not be judged purely from their final results. It aims to measure a child's educational development with reference to where they were developmentally when they started at school. It is not a level playing field. On a very basic level, it's a lot easier to discover and read 'the book' when it's on the shelf at home. There is a big difference between being better educated and being more intelligent. At the moment many state school pupils are playing against a stacked deck. 

Obviously, development can be enhanced by a number of variables. The three Bs from a child whose parents left school with no qualifications, who does not get taken to cultural events and sat in a class of 34 might demonstrate enormous potential compared to a child who has had all the advantages and gets three As. I'm not trying to denigrate the success of three As but I do want the achievement of three Bs to be properly recognised. Who has the greater 'potential'? 

Last year in The Observer, Will Hutton argued that privilege not talent continued to define opportunity in this country. It was a damning indictment of our 21st Century democracy,

"For while most people would like to believe we "have got past" worrying about the role of Eton and private education because it is no longer said to matter, the social truth will out. Britain is a chronically unfair and increasingly closed society and private education plays a central role."

What better demonstrates Hutton's conclusion than the current cabinet? Eton - Oxford - Prime Minister. Cameron is the nineteenth Prime Minister educated at Eton. Only in a cabinet dominated by Old Etonians could Nick Clegg, a product of lowly Westminster School - £29,000 per year - think he is qualified to be the voice of the 'common man'? With these sorts of contradictions, no wonder his political career is looking increasingly like one of Houdini's more daring tricks. 

In my experience, if you ask state school students what studying at Oxford or Cambridge was like, they will tell you that the culture was dominated by an atmosphere of public school 'entitlement'. They belonged and the state school kids didn't. Clegg's solution, is quotas and targets. In these circumstances, to 'give' state school and poor students places at top universities, is dripping with that 'entitlement'. How very Victorian and paternalistic. State school students don't need to be 'given' a place. Many of them have already earned one. 

Luckily, just in case my kids don't get the grades, I've already put my kids down for an X Factor audition. 

Who will have the last laugh?

"The replacement of Trident is going ahead". It's the type of announcement that is guaranteed to raise the morale of Tory backbenchers and constituency foot-soldiers. After all, the ability to wipe out millions of people is the reason that most people get involved in politics, isn't it? David Cameron's announcement was met with loud cheers by his MPs and produced a muted response from the Labour members, recognition that they also support a replacement for Trident. So general agreement during PMQs? Not quite. Did I hear the sound of Coalition partners, the Lib Dems, voicing dissent?

The statement came as a result of Tory MP, Julian Lewis, asking the Prime Minister to assure his party that scrapping Trident would not be the price for continued Lib Dem support if there was a hung parliament following the next election. However, the decision to go ahead with the replacement has been deferred until 2016. I was not entirely sure if Dr Lewis (a Phd in Strategic Studies), was more concerned about the Trident replacement or the Lib Dems getting 'one over' their coalition partners: "...the Liberal Democrats from their President downwards had been boasting that this was their achievement." It would be so annoying wouldn't it?

Particularly annoying because during the Coalition talks, David Cameron personally guaranteed a meeting of all Conservative MPs that the Liberal Democrats would support the replacement of Trident.  Cameron explained the delay had absolutely nothing to do with the Lib Dems, but was because the Government had referred the proposals for a "value for money study because we desperately need to save some money in the Ministry of Defence so we can invest in some frontline capabilities." 


In giving out some reassurance the PM may have let slip the true situation. It is rare that you hear a politician, never mind the Prime Minister, admitting to 'desperation' but it would tie in with the evidence. Back in February last year it was widely reported that army chiefs were questioning the usefulness of Trident. The Guardian reported that 'senior army sources felt that British military capabilities lacked relevance and were still equipped for the Cold War.' The Commons' Defence Select Committee have warned the Government that the armed forces have been deployed above their planned resourced levels for eight consecutive years.

The National Security Strategy, published in October 2010, highlighted the need of our armed forces to adapt. 'A Strong Britain in an Age of Uncertainty' summed up the challenges:

'Britain today is both more secure and more vulnerable than in most of her long history. More secure in the sense that we currently do not face, as so often in our past, a conventional threat of attack on our territory by a hostile power. But more vulnerable, because we are one of the most open societies, in a world that is more networked than ever before.'  


The change in emphasis was highlighted once again in Cameron's speech to the Munich Security Conference last week. While the Prime Minister refuted the accusations that the UK, 'the fourth biggest military power in the world', were retreating from an activist role, almost the entire speech focused on defence needs associated with terrorism. He argued that the conventional forces in Afghanistan had a vital role in this battle and he highlighted the need to, "beef up Britain's cyber security programme and our readiness to act on counter-proliferation." Dirty bombs and chemical weapons in the hands of terrorists, possibly in the hands of British citizens. In Cameron's worldview the frontline is on our city streets. Nuclear weapons did not merit a mention.

I've been told that having costed the reductions announced in the Strategic Defence Review last year, the MoD have come up a long way short and there will have to be a further round of cuts. With resources stretched to breaking point and the MoD already taking a lighter hit than other departments, there are some difficult decisions to be made. 'Boots on the ground' are the operational priority according to the SDR. Back in February, General Richard Dannett, former head of the army and ex-Tory advisor, said that renewing Trident, 'on balance, on a very narrow points decision - is probably right for now.' Hardly a ringing endorsement and would that still be the conclusion?  

Since launching a strike against Commercial Road in East London is highly unlikely, it would appear that the 'delay' not only suits the Lib Dems but is quite convenient for Cameron. After all, having a button to press is one thing, but British politicians of all shades seem to love that 'activist role.' Nothing like strolling around with the troops and wearing a flak jacket. So what will Cameron do?

Despite Cameron's initial statement saying the Trident replacement will go ahead, no vote will be taken on Trident during this parliament. Nor did he confirm it would be a submarine based replacement. More interesting was his later comment, "In terms of the future, I am in favour of a full replacement for Trident, that is Conservative policy and will remain Conservative policy as long as I'm the leader of this party." Does that sound like prevarication to you? Not really answering Lewis' question. No guarantees about Liberal support and, is it me, or does the phrase 'I am in favour' sounds a long way from the categorical assurance that was demanded from his Party?

I wonder if Lib Dems might just have the last laugh?

A minor irritation?

Are the Government feeling the pressure? I only ask because it seems as if they are already playing to the galleries. Less than a year into their first term and the Tories have followed up their rabble rousing speech attacking Muslims with an attack on another oppressed minority. Yes, Little George Osborne from the Lower House has made his voice heard above the cries for a 'Plan B' and asserted himself with an attack on the only people less popular than Muslim 'extremists' and, of course, the dear old Liberal Democrats. Who? Bankers, of course.

The Chancellor has announced that he is increasing the levy on banks to £2.5 billion. It means an extra £800 million for the Treasury than had originally been announced. In December, Osborne said that the levy would be introduced at a reduced rate of 0.05% this year would rise to 0.075% for future years. However, in the last two months it appears the Chancellor has changed his mind over the state of the bank finances and now believes they are healthy enough to carry the full levy from this year. The change of heart will mean that the Treasury will have to play catch up and charge a higher rate until April.

If it seems like George is making it up as he goes along you may be right. Only last week, the Chancellor  was asked to visit the 'headmaster's study' for a chat in the shape of the Institute for Fiscal Studies' 'Green Budget'. While the IFS conclusions supported the Tory's fiscal strategy, the body of the report raised an alarming number of concerns which they underlined publicly by suggesting that it would be useful if Osborne has a 'Plan B'. It was as if the Head had given George an encouraging pat on the back for his ambitious application to Oxford University but then asked what he thought of Derby?

City analysts were arguing that a 'Plan B' would be reassuring rather than unsettling to the markets. The papers concluded that the refusal to countenance a 'Plan B' was because the Chancellor did not want to be seen to change direction so soon. Most agreed that to do so would weaken his personal authority within the government. It has been interesting to hear him barracking Ed Balls as Miliband's 'second choice' because young George was originally Michael Howard's third choice, behind Hague and Cameron. His appointment astonished Conservative MPs. Could his personal ambition and insecurity be driving economic policy?

After all, it is extremely rare for a Chancellor to make such announcement anywhere but in a budget. Ed Balls, called the change 'panicky' and a 'damp squib'. Balls claimed that even after the rise, the Government would be raising less from the banks than they did last year. A 'damp squib' - yes. The BBC's Robert Peston, called it a 'rounding error' as the total raised will amount to 0.1% of the fiscal deficit. Next week the banks are expected to announce bonus payments of £6 million. Peston concluded, 'the tax rise is probably of more importance from a symbolic point of view - perhaps indicating a touch more iciness in ministers' attitudes to the banks.'


The Banks, themselves, have been less poetic and attacked the rise as 'purely political'. Osborne has been in negotiation with the banks to reach a settlement on a range of issues, including a pledge to make £190 billion of credit available to small and medium size businesses this year. The agreement under the ludicrous name 'Project Merlin' (wasn't Merlin the name for the false source of information in the John Le Carre novel Tinker, Taylor, Soldier Spy? Someone has got a sense of humour) is due to be announced some time next week. However, as banks work under regulations that mean they must operate for the benefit of their shareholders, the Government simply doesn't have the authority to force the banks to lend. On one hand they are being asked to lend responsibly and on the other the Government are asking them to take extra risks. Like Labour before them the Tories are discovering that they are fighting with their hands tied behind their backs.

George might be flexing his muscles but no one is really watching. Although a few senior bankers were described as 'livid', the announcement had no effect on the share price, the true test. This suggests that something like this was expected. 'Panicky'? Well, inflation is rising, the IFS have suggested that he needs a 'Plan B' and we have the image of a Tory Chancellor making political capital from the City of London. As Louise Armistead explained in the  The Telegraph, 'the initial bank reaction has been irritation'. The fact is that the success of 'Project Merlin' ultimately rests on the 'goodwill' of the big clearing banks.

Perhaps, he has good reason to panic.