Kelvin MacKenzie isn't a good macroeconomist

Transfers from rich areas to poor ones are really very useful for not screwing up the economy.

Former Sun editor Kelvin MacKenzie wrote a silly column yesterday. In it, he argued that "the middle class of London and the South East" are underserved by politicians, and called for a new political party which "believes that the striving classes in the South are overtaxed and overburdened".

It was, clearly, bunk. Charlie Hallam took most of it apart yesterday, pointing out that high pay is not the same as a large contribution to society, and that much of the boost London and the South East gets is merely entrenched advantage:

A start-up will find loans easier to obtain with a London address. Contacts are easier to make. Lobbying is easier. And there's that whole prejudice thing you don't have to deal with if you're based in the south.

The Economist's Daniel Knowles also points out that:

Every example he offers of London and the south being attacked takes the form of taxes on the rich—stamp duty for example—which also apply in the north. Meanwhile, the subsidy he says that the north gets is in the form of public spending: welfare benefits or social housing for example, which also apply in the south.

That is, far from wanting to fight for the South, MacKenzie is arguing for the rich of Britain and against the poor, wherever they actually are.

But there's a far simpler reason why MacKenzie is talking crap. The Telegraph's Ed West touched upon it in an otherwise faintly patronising post, writing:

Different parts of the economy require different economic policies, which is why the convergence of interest rates made the euro such a fundamentally bad idea for those countries on the fringe, such as Greece and Spain, since monetary policy would be set by people in Frankfurt and Brussels and therefore would be suited towards Frankfurt and Brussels. That’s a model that will work fine so long as the Greeks are prepared to live in perpetual poverty in the name of European solidarity, and that Germans are happy to pay the Greeks’ welfare bills.

The north and south of Britain are, by virtue of sharing the same currency, yoked to the same monetary policy. Short of some extraordinarily unorthodox economics – banknotes which catch fire south of Watford Gap? – that policy will be suboptimal for one or both areas of the country. Aggregate demand shocks rarely affect the nation uniformly, and so the Bank of England has to decide whether (say) inflation in the south is worth preventing a recession in the north.

But one way of lessening that impact is with common fiscal policy. That way, shocks in part of the country can be dealt with more quickly by transferring revenue from the healthy part to the struggling part. Which is, of course, exactly what MacKenzie was complaining about.

(It is worth noting that this analysis is roughly that which was relied on by every anti-Euro economist ever, who all feel very smug these days as Greece needs continual fiscal transfers just to stay in the economic bloc.)

The alternative – giving the north its own currency and monetary policy – may, I suppose, be what MacKenzie was angling for all along. It would certainly get those pesky Scousers out of his hair.

The North. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Commons confidential: Away in Pret a Manger

Corbyn's lunch, a Keith "Vazz" hunch and the New Left Book club.

Comrade Corbyn, despite the pressures of leadership, remains the Anne of Green Gables of British politics, maintaining an almost childlike joy in everything he does. Pride of place in Jezza’s Westminster office is a Lorraine Kelly mug. Corbyn asked for the memento after appearing on the popular telly host’s ITV show – where the pair discussed his interest
in manhole covers.

There’s no record, as far as I can ascertain, of Kelly requesting a Corbyn mug. And yet the sustained abuse Corbyn receives from Labour critics, Conservative enemies and the Tory press isn’t generating hostility on the streets. People still clamour for selfies with the bearded lefty. My snout sat in awe in a Pret a Manger (Comrade Corbyn likes to pop out for his own sarnies, rather than dispatch a flunky) as the queue disintegrated, with punters hungry for snaps.

The Corbyn apparatchik and London City Hall escapee Neale Coleman said: “The one thing I learned from Boris Johnson was never say no to a selfie.” Corbyn must hope he absorbed more than that.

Perhaps the unlikeliest odd couple in parliament is Labour’s Warley Warrior John Spellar and the purple shirt Nigel Farage. Both went to the private Dulwich College in south London. Spellar, who spearheaded his party’s anti-Ukip campaign before the election, won a free scholarship and likes to remind Farage that the Kipper’s fees would now be £18,000 a year. “I passed the exam, too,” sniffs Farage, “but my father earned too much, so we had to pay.” One school, two backgrounds.

Trade unionists no longer regard attacks by the Tory press as just a badge of honour. Aslef’s president, Tosh McDonald, a train driver, wears a black T-shirt with the slogan “Hated by the Daily Mail” on it, after being denounced by Paul Dacre’s organ. I suspect Labour’s Keith Vaz is unlikely to revel in a message sprayed on the side of a van in Leicester. The fastidious chair of the home affairs committee is entitled to challenge at least one inaccuracy in the statement: “KEITH VAZZ IS A KNOB.”

“Any idiot in opposition who argues that government legislation can somehow be got through without programme motions should be taken out to the nearest lunatic asylum.” Who said that? Ken Livingstone? No, Kevan Jones. In June 2010. How times, and language, change.

To the launch of the new Left Book Club, where a director of the Corbynista reading circle, Anna Minton, waved a personalised glossy invitation to join the Institute of Directors. The Pall Mall bosses’ club’s direct mailing system is way off target.

I wonder: what could expelled Tory trickster Mark Clarke have on Grant Shapps?

Kevin Maguire is the associate editor (politics) of the Daily Mirror

Kevin Maguire is Associate Editor (Politics) on the Daily Mirror and author of our Commons Confidential column on the high politics and low life in Westminster. An award-winning journalist, he is in frequent demand on television and radio and co-authored a book on great parliamentary scandals. He was formerly Chief Reporter on the Guardian and Labour Correspondent on the Daily Telegraph.

This article first appeared in the 26 November 2015 issue of the New Statesman, Terror vs the State