The land of broken promises

The coalition may claim to be committed to front-line services and public-sector jobs, but the econo

I listened to the Old and Sad by-election results online on Radio 5 Live from sunny Florida, which, incidentally, was the only US state that didn't have snow this past week. The British electorate was inevitably going to turn against the coalition and Nick Clegg was only able to avoid disaster because the Tories didn't try very hard. Apparently, they were away skiing with their banker friends -- George Osborne was, anyway.

Economic data continues to worsen in four crucial areas -- construction, net trade, business investment and unemployment -- even before the cuts and tax rises take effect. The volume of construction output in the latest data release fell by 0.7 per cent. New work fell by 0.5 per cent and repair and maintenance fell by 1.1 per cent. The biggest fall -- 6.4 per cent -- was in infrastructure new work. Construction was the main driver for the growth that was observed in the second and third quarters of 2010.

New figures for 2010 Q3, published by the Office for National Statistics [PDF] on 22 December, show that business investment, in seasonally adjusted terms, rose by 3.1 per cent. This is good news -- but total manufacturing investment decreased by 2.5 per cent compared with the previous quarter. Apart from a period of strong growth in 2010 Q1, business investment is yet to show any significant momentum since GDP started to recover in 2009 Q4. No individual industry has acted as a catalyst for overall growth. The Office for Budget Responsibility's forecast assumes that investment is a major driver in the recovery and will grow by more than 10 per cent per annum.

The latest net trade data was also bad. The UK's deficit on trade in goods and services was £4.1bn in November, compared with a deficit of £4.0bn in October. On average, forecasters expect the UK net trade deficit to make a 0.5 per cent contribution to GDP growth in 2011, having detracted from growth in 2010.

Worst of all, the number of unemployed youngsters under the age of 25 has hit a record 951,000, surpassing the previous record of 944,000 reached in June and September 2009. This represents an increase of more than 50,000 over the past three months.

More than 225,000 youngsters have been unemployed [PDF] for more than 12 months, increasing fears of a "lost generation". What a shame, then, that Alastair Darling's plan to tax the bankers and use the money to pay for measures to reduce youth unemployment has now been ditched for no good reason by the Con-Dem coalition

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The list of the government's broken promises is growing. Before the election, the Tories promised a "fair fuel stabiliser" to keep petrol tax rises down when oil prices are high. It looks as if they have reneged on that promise, even though David Cameron raised hopes that it would be implemented. And then there are those bankers. In opposition, Osborne and Cameron played a dirty political game, suggesting that they were going to restrict bonuses. They said that no banker's bonus would be higher than £2,000 -- a policy that is still on the Conservative Party website. Slasher Osborne has also delayed plans to force banks to disclose all bonus payments exceeding £1m -- despite the government naming every public official earning more than £55,000.

As my old friend Will Hutton wrote in the Observer this week:

Bankers' bonuses unite everyone in outrage -- from captains of industry, bewildered how top bankers can earn so much more than they do, to the newly unemployed, who wonder what they have done to deserve poverty and hardship while the money men pocket millions . . . The banks, far from serving the real economy, have become a tax on it.

The public has no objection, as far as I can tell, for payment for performance. The objection is mostly about payments for lack of performance.

Comments by the CEO of Barclays, Bob Diamond, in front of the Treasury select committee that the "period of remorse and apology for banks . . . needs to be over" didn't seem to capture the public mood. You would have thought Diamond's advisers would have warned him about other recent PR disasters, including that of BP's Tony Hayward, who said "I want my life back" after the Deepwater Horizon oil rig explosion killed 11 workers and leaked 206 million gallons of oil into the Gulf of Mexico. Similarly, the CEOs of the big three car makers flew in on luxurious private jets to give testimony to the US Congress that the auto industry was running out of cash and needed $25bn in taxpayer money to avoid bankruptcy. The next time they testified, the CEOs of Chrysler, Ford and GM drove the 500-plus miles in their latest fuel-efficient models.

People compare themselves to their friends and neighbours and workers care about the salaries of their colleagues. So taxpayers are angry about bankers getting big bonuses at a time when almost everyone else is experiencing declining real incomes. The recently published earnings data from the Annual Survey of Hours and Earnings (Ashe) for 2010 show how tough things are. Mean annual earnings for the 25 million employees in the UK grew, on average by only 0.2 per cent on the year; while in the private sector earnings fell by 0.8 per cent. Public-sector earnings grew by just 0.6 per cent. However, this wage growth partly reflects the transfer of the publicly owned banks Lloyds and RBS in October 2008 from the private to the public sector -- moving a number of relatively well-paid workers with them. And there is a public-sector wage freeze, along with a hiring embargo, so there is no likelihood of an explosion in wage inflation.

The table below shows the differing levels of importance of the public sector by regions in Britain, according to the Ashe survey. The public sector accounts for 39 per cent of workers in Wales, 38 per cent in Scotland and 37 per cent in the north east; it accounts for around a quarter in London and the south east. The second column shows that public-sector jobs outside London and the south east, on average, are better paid than private-sector jobs. Public-sector job losses are going to hit hardest regions such as the north east, Wales and Scotland, which have relatively high unemployment rates. We are demonstrably not all in this together.

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In a speech on public services on 17 January 2011, David Cameron said: "As we take the tough but necessary steps to deal with the deficit, our first priority is to protect front-line services and to protect jobs in the public services." Don't laugh.

David Blanchflower is economics editor of the New Statesman and a professor at Dartmouth College, New Hampshire, and the University of Stirling.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

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Martin McGuinness's long game: why a united Ireland is now increasingly likely

McGuinness died with his ultimate goal of a united Ireland arguably closer to realisation than at any other time since the island’s partition in 1921.

In late 2011 Martin McGuinness stood as Sinn Fein’s candidate in Ireland’s presidential election, raising all sorts of intriguing possibilities.

Raised in a tiny terraced house in the Bogside, Derry, he would have ended up living in a 92-room presidential mansion in Dublin had he won. A former IRA commander, he would have become supreme commander of Ireland’s defence forces. Once banned from Britain under the Prevention of Terrorism Acts, he would have received the credentials of the next British ambassador to Dublin. Were he invited to pay a state visit to London, a man who had spent much of his youth shooting or bombing British soldiers would have found himself inspecting a guard of honour at Buckingham Palace.

McGuinness would certainly have shaken the hands of the English team before the Ireland-England rugby match at the Aviva Stadium in Dublin every other year. “I’d have no problem with that,” he told me, grinning, as he campaigned in the border county of Cavan one day that autumn. Though a staunch republican, he enjoyed the “Protestant” sports of rugby and cricket, just as he supported Manchester United and enjoyed BBC nature programmes and Last of the Summer Wine. He wrote poetry and loved fly-fishing, too. Unlike Gerry Adams, the coldest of cold fish, McGuinness was hard to dislike – provided you overlooked his brutal past.

In the event, McGuinness, weighed down by IRA baggage, came a distant third in that election but his story was astonishing enough in any case. He was the 15-year-old butcher’s assistant who rose to become the IRA chief of staff, responsible for numerous atrocities including Lord Mountbatten’s assassination and the Warrenpoint slaughter of 18 British soldiers in 1979.

Then, in 1981, an IRA prisoner named Bobby Sands won a parliamentary by-election while starving himself to death in the Maze Prison. McGuinness and Adams saw the mileage in pursuing a united Ireland via the ballot box as well as the bullet. Their long and tortuous conversion to democratic politics led to the Good Friday accord of 1998, with McGuinness using his stature and “street cred” to keep the provisional’s hard men on board. He became Northern Ireland’s improbable new education minister, and later served as its deputy first minister for a decade.

His journey from paramilitary pariah to peacemaker was punctuated by any number of astounding tableaux – visits to Downing Street and Chequers; the forging of a relationship with Ian Paisley, his erstwhile arch-enemy, so strong that they were dubbed the “Chuckle Brothers”; his denunciation of dissident republican militants as “traitors to the island of Ireland”; talks at the White House with Presidents Clinton, George W Bush and Obama; and, most remarkable of all, two meetings with the Queen as well as a state banquet at Windsor Castle at which he joined in the toast to the British head of state.

Following his death on 21 March, McGuinness received tributes from London that would have been unthinkable 20 years ago. Tony Blair said peace would not have happened “without Martin’s leadership, courage and quiet insistence that the past should not define the future”. Theresa May praised his “essential and historic contribution to the extraordinary journey of Northern Ireland from conflict to peace”.

What few noted was that McGuinness died with his ultimate goal of a united Ireland arguably closer to realisation – albeit by peaceful methods – than at any other time since the island’s partition in 1921.

The Brexit vote last June has changed political dynamics in Northern Ireland. The province voted by 56 per cent to 44 in favour of remaining in the European Union, and may suffer badly when Britain leaves. It fears the return of a “hard border” with the Republic of Ireland, and could lose £330m in EU subsidies.

Dismay at the Brexit vote helped to boost Sinn Fein’s performance in this month’s Stormont Assembly elections. The party came within 1,200 votes of overtaking the Democratic Unionist Party, which not only campaigned for Leave but used a legal loophole to funnel £425,000 in undeclared funds to the broader UK campaign. For the first time in Northern Ireland’s history, the combined unionist parties no longer have an overall majority. “The notion of a perpetual unionist majority has been demolished,” Gerry Adams declared.

Other factors are also working in Sinn Fein’s favour. The party is refusing to enter a new power-sharing agreement at Stormont unless the DUP agrees to terms more favourable to the Irish nationalists. Sinn Fein will win if the DUP agrees to this, but it will also win if there is no deal – and London further inflames nationalist sentiment by imposing direct rule.

McGuinness’s recent replacement as Sinn Fein’s leader in Northern Ireland by Michelle O’Neill, a personable, socially progressive 40-year-old unsullied by the Troubles, marks another significant step in the party’s move towards respectability. As Patrick Maguire recently wrote in the New Statesman, “the age of the IRA old boys at the top is over”.

More broadly, Scottish independence would make the notion of Northern Ireland leaving the UK seem less radical. The Irish republic’s economic recovery and the decline of the Roman Catholic Church have rendered the idea of Irish unity a little less anathema to moderate unionists. And all the time, the province’s Protestant majority is shrinking: just 48 per cent of the population identified itself as Protestant in the 2011 census and 45 per cent Catholic.

The Good Friday Agreement provides for a referendum if a majority appears to favour Irish unity. Sinn Fein is beginning to agitate for exactly that. When Adams and McGuinness turned from violence to constitutional politics back in the 1980s they opted for the long game. Unfortunately for McGuinness, it proved too long for him to see Irish nationalism victorious, but it is no longer inconceivable that his four grown-up children might. 

This article first appeared in the 23 March 2017 issue of the New Statesman, Trump's permanent revolution