BRITAIN DOWN THE PIT: Will Hutton sums up the position admirably, but reaches for the wrong solutions.

Hutton…if the cap fits….

As ever, Will Hutton remains wedded to Nanny State and Dominatrix EU

It is a truism in life that highly intelligent people living in the same universe will always agree about what the data say; they just won’t agree about how it happened and what to do about it. This explains why I was able to read Will Hutton’s assessment of Britain’s condition in today’s Observer, and agree with every word – even though I know we would disagree violently about the reasons, cures and all the rest of the usual endless debate that surrounds them….those  many and mixed clouds of obfuscation and fanciful theory from Government and Opposition respectively.

I’ll pick out some key passages here, because they do show that Will is a very bright guy indeed:

‘…there is official acknowledgment that a country burdened by bank assets five times its GDP and chronically poor productivity is being dragged into the deepest and longest economic setback in modern times….In the 1930s, Britain had an empire to fall back on as a protected market to help support recovery; in the 1970s, North Sea oil was to come to our rescue; in the 1990s, the great credit boom seemed to solve the economic question. Nothing like that is going to happen now. Britain has to answer the riddle about how to make its living in the world with no soft options – with a grossly unbalanced and underperforming economy….This is a crisis of bad capitalism, a capitalism distorted by the ideological prattle that claims it is moral and efficient that all risk be borne individually.’

Therein is everything the policymakers need to know in order to decide what to do next. And give Will credit, like me he has been saying this for years. I’ve just been back to the album upstairs to confirm that he and I argued for more UK manufacturing and more closely regulated banking over a dinner table in Menorca during 2002. In fact, Will and I are always fine during the first course; it’s during dessert that we tend to wind up flicking custard at each other.

As regular Sloggers will be unsurprised to learn, I’m still with Will in the Observer piece as he asserts that, ‘We need vision and visionaries – but what we have is journeymen espousing bankrupt world views’. We are thus both at one about the nature of the problem, and the unworthiness of the problem-solvers: so what could possible go wrong, and where?

Well, roughly here: (my italics)

‘…everyone else will not just go hang. They will ask ever harder questions about how reward and risk are distributed in our society. What are the 2,800 bankers in London estimated to be earning more than £1m a year doing to deserve such rewards? As the pension age is extended to 67, the education system Balkanised, unemployment institutionalised and workplace rights removed, what is the quid pro quo, the social deal?

I differ radically from this view of what will happen. Putting the italicised bits in a different order, thanks to the Education System having been Orwellised by the fluffy Left, no hard questions will be asked because (a) they weren’t on the syllabus, (b) the downmarket unemployed don’t know what quid pro quo means, and (c) they’d rather have a riot and grab some trainers.

Britain’s central social failure of the last forty years has been education – during which time an anti-individualist, Left-of-centre ethic has suffused the system from end to end and without respite. The chances are that most of those between 30 and 50 will not rebel against the obscene rationale of investment banking madness, because Health & Safety would tell them it was fraught with danger and the bankers themselves might be infectious.

Britain’s consequent and second biggest failure was to hand the economy over to the City. We have Thatcher and a shedload of greed to thank for that….and New Labour’s 13 years of licking them all over until it was far too late.

Adventurous as he is – and I do love Will, he is very good value indeed – the bloke is, I’m afraid, still saddled firmly (and happily) on the idea that Dobbin the State Horse can and will provide what he calls ‘a social contract’….and that this will be honest, have substance, and be delivered. Sadly, this Stateist belief extends to the EU, and a somewhat flabby assertion that Britain cannot ‘allow itself to become disconnected from the continent to which we are bound by geography and history.’ To which there are two questioning ripostes: why would it have to? And why not?

One area where we might find ourselves on common ground is in my enthusiasm for mutualising many of the State sector and civil service functions. But Will never seems to mention this (for me, important) economic diversity factor in his pieces. Now that Camerlot have started trying to hijack the idea, perhaps he fears – and perhaps he’s right – that it is about to be tainted with spin.

Ultimately, history is useful, but this is now: history needs to inform the future, not chain us down so we can’t get there. Will Hutton gets the reality alright – and expresses it better this morning than anyone else so far. But he’s part of the cultural Establishment. And that’s no longer anywhere near radical enough to make the big difference.




28 thoughts on “BRITAIN DOWN THE PIT: Will Hutton sums up the position admirably, but reaches for the wrong solutions.

  1. It seems to me that the establishment elite are wedded to the current ‘unsustainable, ponzi-money, keep the place spinning, all things to all people big state,’ because the alternative is just too awful for them to acknowledge.

    To do so would be an admission that the last 50 years have been a gigantic, failed social experiment centered on buying votes on tick and damn the consequences.

    Those consequences are now here and the best the towel folder can do is to make up ‘Harry Potter’ like future growth figures that will save us, they won’t happen and they won’t!


  2. Hutton may be clever but he has a ‘state knows best’ mindset.
    This mind set maintains – when I agree with it ,it’s democratic,when
    I don’t ,it’s populist.
    This should always set the alarm bells ringing.


  3. Didn’t Will support New Labour in most of its policies? His problem was that they didn’t go far enough left for him.
    I read “The State We’re In” and that was quite enough to convince me that here was a man who believed if you keep doing the same thing (but more) you’d get a different and better result-another bien pensant fool.
    The problem with British manufacturing was the products were utter sh*te and overpriced. Thatcher didn’t kill it off-it was slowly dying-she just put the bullet through its head. It was dying because the management were incompetent and the unions too blinkered and greedy (I don’t blame them really-the workers had the p*ss taken out of them for so long, it was inevitable they’d do the same if given the chance -I would). The real problem was that with the destruction of the massive inefficient companies went the destruction of what Mittelstand the UK had. After all, why flog yourself to death trying to make things if you can make (almost said earn) more by selling mortgages/insurance policies etc.
    No doubt there’ll be a few years of penury and then the politicians will want to be re-elected and the credit will be turned back on-and it’ll be party time again!


  4. My father worked at Park Royal Vehicles developing and testing the (then) new Titan bus until he died in early 1978. The factory was closed a couple of years later due to appalling productivity, despite huge order books home and abroad for this bus. Read this as an illumination into what happened at the time:-

    Obviously, it is a little one-sided according to the politics of the MP speaking – but the phrase that stuck out for me was “Once the closure and golden handshakes were agreed, production went up from two to five buses a week.”

    If we’re going to get back into manufacturing, we have to ensure that this kind of thing can’t and won’t happen again.


  5. If there really are 2800 bankers earning £1m+ in the city then it kind of puts the whole thing in perspective really. You could enslave all of them, force them to work and expropriate all their income and still only fund State spending for what, 10 days per year? (Assuming total banker pay is about £20bn and the State spends £2bn/day)

    What few thousand people earn in the City is utterly irrelevant to the reality of what people in this country pay in tax, and what level of spending they expect in return. The two things are so totally out of whack, they aren’t even in the same book, let alone the same page.

    But seeking an ‘enemy within’ to be a scapegoat is the usual way of trying to solve a crisis, so we’re lucky its only bankers, and not foreigners/Jews/the bourgeoisie I guess (select scapegoat group to your political predilection).


  6. I agree with the premise wholeheartedly but we really need to be doing something about it now. I would rather go down fighting then suffer death by a thousand cuts, literally! Any sane individual can see where we have gone wrong and where we are going wrong, why isn’t there a new focus instead of just trying to continue the same old failed policies and procedures.
    It doesn’t even need a revolution to change tack just a gentle weaning off and new ideas given a chance. Continuing on present course will probably result in a far more fractious and fractured society just at a time when we need to bolt ourselves together behind new practices which result in digging the UK out of the rut it has become stuck in.
    We need a 21st century solution to 21st century problems not 18th and 19th century ones.


  7. Leaving aside Hutton and his view that Nannyknows best. The statement that the UK is bound by history to Europe is completely wrong. Let me explain, for 200 years our major association with Europe has been to fight wars for freedom when their despots, Bomaparte, Kaiser Bill, Hitler and Stalin, have tried to sickly Europe mainland and us. Our big successes have come from global trade, at first contingent upon empire and later by being better at than most. Hence the rise of The City. It is global trade that will save us not being shackled to a little-Europe self interest club run by quasi-despots, albeit civilised ones, based in Brussels.


  8. Throw in Louis XIV and you can go back 300 years. Add in Elizabeth I and Spain and it becomes 450 years to the period we began to go global.


  9. Trade is indeed the answer but I’m not certain that the City was much good after the empire was gone. During the empire, what was traded was commodities/goods from the empire (and derivatives created from them). Once that was gone the City had to trade without such protection-it doesn’t seem to have turned out too well really, does it?
    Probably, like all British institutions, the reputation was greater than the reality-when put to a true test, it came up a little short.
    It could well be that what Britain is good at is, in fact, the creation of reputation e.g. advertising!


  10. Hi Jim,
    I see your point about blaming one group of people or organisation for all the troubles, but in this case we have economies on the brink of failure, so it therefore makes a good place to start does it not?
    Without functioning economies what hope is there?
    Right now we have a banking sector that is parasitic in nature rather, than functioning as a service to aid prosperity.


  11. I heard Hutton on the radio the other day saying that we need some inflation to get us out of this mess. Tell that Will to all the pensioners and people on fixed incomes. Clueless! Still we’ll get inflation alright when the QE money starts chasing a fixed amount of goods.Then interest rates will follow upwards. Already, mortgages rates are going up thanks to the increases in LIBOR and market rates. Just a taster of what will happen, Hutton.


  12. I agree John, Hutton is long on understanding the problems but short on solutions and of admitting the causes…

    He rightly says this:

    “This is a first-order crisis to which socialism, certainly as conceived and practised over the past 100 years, is no plausible answer.”

    …but then goes on to demonstrate his lack of understanding with this:

    “But equally, nobody can dare argue that the solution is to press ahead with yet more of the free-market capitalism that has laid Britain and the west so low.”

    The destructive policies which got Britain into this current mess were dreamed up by his comrades in the Labour Party, where Brown abused and misused free market capitalism for his own selfish ends (his credit bubble, excessive state borrowing/spending, rising taxation and of course a complete failure to apply regulatory oversight on The City).

    When his house of cards came crashing down, why yes, he bailed it out with taxpayers money in a desperate attempt to keep his bubble inflated until the general election.

    To the likes of Brown, OUR money is simply HIS money which he hasn’t stolen from us yet through confiscatory taxation. That remains Labour Party thinking and always will be.

    For its part, the Conservative ‘Blue Labour’ Party have done little more than continue Brown’s misguided policies aided and abetted by the intellectual socialist Merv at the BoE. The British Establishment is stuffed full of Leftist thinking. Merv and his MPC cronies should be sacked…they have failed in their primary stated duty to control inflation …and we know the real reasons for QE; not as he states publicly.


  13. In cash terms the banking bailout has cost the UK £125bn, all in borrowed money, though potentially we are on the hook for a lot more as we have guaranteed ten times that amount of loans. But we do own significant bits of the banking industry now, and get a big payment from all the banks for the guarantees provided (a sort of insurance premium). All the figures are here:

    My point it this – the banking crisis, when its all over, everything sold off and accounted for, is probably going to cost the UK taxpayer £50-100bn net, one off payment. Thats less than one years deficit spending at the current burn rate. That deficit is why we are in the deep stuff. A one off hit of £50-100bn for a country this size, that was otherwise in balance between its spending and tax revenue, would be easily managed. Its the ongoing imbalance between what the puplic want, and what the public are prepared to pay for thats causing the problem. If we waved a magic wand and got rid of the banking bailout the UK deficit would be reduced by £5bn – thats the cost of the £125bn we borrowed. The rest of our budget deficit of £125-130bn would be otherwise totally unaffected. We are spending 8-10% of GDP on goods and services that we want but are not prepared to pay for.

    That, and the fact we have no growth prospects as the private sector is even more indebted than the public one, is why we are deep in the mire, not the cost of the banking crisis, big though it is.


  14. One might also notice that all the trouble that led up to its demise (apart from the final months of coup-de-grace) was under a Labour Government.

    Not just the smart-alec MBA-type management, but also over-indulged trade union bosses aspiring to be little Arthur Scargills (the man who “started with a small house and a big union but ended up with a big house and a small union”),


  15. @Jim

    “That, and the fact we have no growth prospects as the private sector is even more indebted than the public one, is why we are deep in the mire, not the cost of the banking crisis, big though it is.”

    Jim I cant help but think that its a bit too early to make any statement re the cost of the banking crises as we have yet to be served the main course of the financial crises. Granted with a healthy economy the costs would so far have bmanageableable but its those darn liabilities we’ve taken on that might yet bite us on the arse big time. The liabilities of RBS alone are over 4 or 5 times UK GDP. Even if only 20% go sour we are severely in trouble. Then we have Lloyds and the bad bits of the Northern Crock Branson did not want. The party is only just beginning in this horrible mess.


  16. Just heard on the BBC news that the Con -Libs are going to legislate
    against excessive *ankers pay.
    Will they also legislate against excessive Brussels dictates.
    Or am I living in a fools paradise?


  17. What I find puzzling that if it’s it’s all Brown’s fault how it is that Cameron’s response was to make the same errors only more so? For example, pledging to match every pound of Labour spending and inflate the bubble faster to pay for tax cuts on too. Or by berating Brown “the great regulator” for his crimes of regulating the city too much.


  18. In response to Jim,

    It’s not just that 2800 bankers earn £1m+ per year, it’s that they’re “earning” this obscene sums while the behaviour of those same banks they work for are dragging down the British/European/World economy. Where’s the value?


  19. The banks are NOT ‘dragging the economy’ down. Debt is dragging the economy down. Thats why we are in the sh1t. Too much debt for individuals, too much debt for companies, too much debt for the State. We have collectively spent massive amounts (overall debt is now 500% of GDP) over the last 10-15 years, and thats why we are up queer street. The bankers may not be helping but they are not THE reason we are in trouble, and neither is the amount they get paid. In fact the more they earn the more the Treasury gets in tax. We should be begging the banks to pay out as much as possible of their profits in bonuses to bankers because we get 50% of everything over £150K. Leave the money on the corporate balance sheet and we get 26% of it.

    Bankers are a convenient scapegoat to distract people from the reality of our situation – we have been living beyond our means for decades and the bill is just arriving. You can tax bankers all you want, close down the City if you so desire. It won’t solve our problems, and would probably make them worse. But hey, it’ll make you feel better, so thats all that matters I suppose.


  20. Jim
    Banks sell debt.
    Banks have debt sales targets.
    Banks invented derivatives in general and the CDS in particular.
    Banks underwrite globalist megamergers.
    Banks starve entrepreneurial capitalism of funds.
    Banks would rather kill a sovereign country than take a haircut.
    Bank liabilities are 58% of the British national debt, and 6 times UK gdp.
    Banks mis-sell to customers. When caught, they find another way to mis-sell.
    Banks get bailed out by taxpayers and then pay themselves obscene bonuses.
    And per-lease, the tax input to the Treasury argument is now worn out. It is vastly outweighed by the cost of the 2008 bailout, because our (UK) economy was so ridiclously dependent on the banks in the first place.
    Banks have no shame.
    There is no apologae for banks.


  21. Blame the Americans for CDS. I read that they were invented in Florida by some drunken young bank employees (can’t remember the firm) in the early ’90s.
    In the US there are some very rich companies, not necessarily publically traded, called “venture capital firms.” Entrepreneurs apply to them to finance their “big idea.” Venture capital firms taken on an enormous amount of risk because most of the big ideas they invest in fail, but when they succeed the firm makes an enormous amount of money. Venture capital firms financed all of the US tech industry from the earliest days. Not all of those tech firms were successful. The first big successful tech investment by a venture capitalist that I can remember is the semiconductor. That had to be back in the ’60s or earlier. When I was in high school I lived near a Fairchild Semiconductor plant and that was back in the early to mid ’60s.
    I just have one other comment to make and that concerns remarks about “free market capitalism.” I don’t know what you do in the UK, but in the US we do not have anything approaching “free market capitalism.” We have crony capitalism also known as pay to play or in some crueler circles as fascism. If you want to have a successful business in the US you have to pay off the politicians of the political party you think is going to be most sympathetic to your business. The political parties and their politicians receive enormous campaign contributions in return for favorable treatment which may come in the form of favorable tax treatment, regulatory treatment, investment financing under the guise of stimulus, tax payer financed subsidies, and last but not least bail out. I’m sure there are other ways that so called capitalists and their political pals massage each other that I am unaware of. In the US we have very strict “insider trading” laws, in other words you cannot make a trade in the markets based on nonpublic information. These laws do not apply to members of the Senate, the House of Representatives or their staffs. Thus, they leave office as very rich men and wormen. There are a few who value their integrity as so-called public servants but not many. The temptation is too great. Our business and political system is completely corrupt. I have grave fears for my country. The president passes laws via “executive order” rather than through the Constitutional mandated means of Congress. There is no mention in the Constitution of a Federal Reserve. It is widely believed that the stock exchanges and the commodities and future exchanges are manipulated. Hank Paulson, Secretary of the Treasury under Bush, told us that the big banks had to be bailed out because of systemic failure and they were “too big to fail.” I believed at the time and still believe it was a crime to bail them out; in fact, one of them J.P. Morgan Chase didn’t need a bail out but was required to take the billions anyway. It repaid the Treasury Dept. as soon as allowed. The others should have been allowed to collapse. The US government today bears no resemblance to what the Founders had envisioned, (but they too were flawed. They were slave owners. ) It much more nearly resembles the political “bosses” who ruled the big cities as their personal fiefdoms during the 19th century. So much for progress. Very likely this breakdown is the cause of the hugh increase in the number of requests to the FBI for permits to own firearms. More than ever before women are buying guns. I plan to be one of them. Thank you for allowing me to vent.


  22. @Mary

    I agree with you. A CDS in and of itself is not entirely a bad thing – though it could do with some serious regulation in the manner of insurances. The big problem was the derivative of the CDS, the naked CDS.

    Bank of America had a lot of derivatives (which must have included a few side-bets on CDSs) but moved them quietly enough to a taxpayer bank. They were quiet enough that they woke the regulator, but it did not bark. The amount they moved was $76 trillion, and I hear whispers that other banks have copied them. More here, from Bloomberg:

    I can imagine that the British hedge funds will have sold all their derivatives to taxpayer-backed banks by now. Who would want to hold a naked CDS in a market that has already fallen 8% today? It would be a disaster for the City.

    They will be raising their champagne glasses to the taxpayer tonight. Just as they will across Europe!


  23. And who do they sell debt to? Aliens? No, they sell to people of course, and companies, and States, who are lured in with the promise of ‘have now pay later’, the siren call of debt since money was invented.

    Blaming banks is like blaming the drug dealer. Without customers he’s nothing.


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