WIlliam Norton: How a Sinking Fund could stave off a gilts strike

William Norton is a solicitor anc Conservative candidate for Birmingham Perry Barr.  He has been an adviser on tax affairs and legislation to the Conservative frontbench and was a member of the permanent staff of the James Review on Taxpayer Value between 2004 and 2005. William was also the referendum agent for the victorious No campaign in the North East Regional Referendum and is currently a trustee of the Social Affairs Unit and a borough councillor in Worcestershire.

The National Debt, famously, has never been repaid, and no one expects that it ever will be.  Markets have been prepared to lend money to the British Government because it has always been able to service its debt by paying the interest owed and covering the redemption of gilts as they fall due.

All this assumes that the British state is not going to go bankrupt, i.e. that the Treasury is good for the money at whatever inflated rate it has to pay to get itself out of its latest mess.  Gilts have always looked like retaining enough value to make it worth someone’s while to buy them.

But a government can run out of cash without going bankrupt in the formal sense of bailiffs coming round to seize the TV set, the sofa or the keys to the family car.  Its creditworthiness can get so poor that it can no longer cover the interest on new debt, and it could be issuing debt in such quantities that its bonds no longer hold value.  So, the markets stop lending any more money: there is a “gilts strike”.  Before that point is reached, escalating interest costs may mean that a government has insufficient cash to cover its other essential services, such as telling people to eat five pieces of fruit a day.

William Norton is a solicitor anc Conservative candidate for Birmingham Perry Barr.  He has been an adviser on tax affairs and legislation to the Conservative frontbench and was a member of the permanent staff of the James Review on Taxpayer Value between 2004 and 2005. William was also the referendum agent for the victorious No campaign in the North East Regional Referendum and is currently a trustee of the Social Affairs Unit and a borough councillor in Worcestershire.

The National Debt, famously, has never been repaid, and no one expects that it ever will be.  Markets have been prepared to lend money to the British Government because it has always been able to service its debt by paying the interest owed and covering the redemption of gilts as they fall due.

All this assumes that the British state is not going to go bankrupt, i.e. that the Treasury is good for the money at whatever inflated rate it has to pay to get itself out of its latest mess.  Gilts have always looked like retaining enough value to make it worth someone’s while to buy them.

But a government can run out of cash without going bankrupt in the formal sense of bailiffs coming round to seize the TV set, the sofa or the keys to the family car.  Its creditworthiness can get so poor that it can no longer cover the interest on new debt, and it could be issuing debt in such quantities that its bonds no longer hold value.  So, the markets stop lending any more money: there is a “gilts strike”.  Before that point is reached, escalating interest costs may mean that a government has insufficient cash to cover its other essential services, such as telling people to eat five pieces of fruit a day.

William Norton: The avoidable 45% tax rate

William Norton is a solicitor.  He has been an adviser on tax affairs and legislation to the Conservative frontbench and was a member of the permanent staff of the James Review on Taxpayer Value between 2004 and 2005. William was also the referendum agent for the victorious No campaign in the North East Regional Referendum and is currently a trustee of the Social Affairs Unit and a borough councillor in Worcestershire. The TaxPayers' Alliance recently published his report Paying for the Credit Crunch: Sharing the Proceeds of Thrift.

The Government’s proposed new 45% income tax band for people earning over £150,000 will not raise any money.  There is no need for anyone to worry about it, if they know what they are doing.

Let’s look at some numbers.  According to the November 2008 Pre Budget Report, the measure will raise £670 million in 2011/12 – which is less than the cost of the Millennium Dome – and that’s even after combining a knock-on effect of the higher rate for trusts.  There are about 500,000 people affected, so they expect to raise about £1,340 from each of them, which in turn implies that that average earnings for this group is around £176,800 per annum.

The Government will actually raise far more money through their mean-minded plans to claw back the personal allowance for people earning over £100,000 (£830 million for 2010/11 and £1,320 million for 2011/12).  For every £2 you earn over £100,000 you will lose £1 of personal allowance, until you’ve lost half of it, and then for incomes over £140,000 you lose a further £1 of personal allowance for every £2 earned, until it has all gone.  Follow that?  Do try to keep up.  I haven’t noticed if there has been any debate about our policy on this aspect of the changes, which will hit more people than the 45% band.

William Norton: How we could share the proceeds of thrift

William Norton is a solicitor.  He has been an adviser on tax affairs and legislation to the Conservative frontbench and was a member of the permanent staff of the James Review on Taxpayer Value between 2004 and 2005. William was also the referendum agent for the victorious No campaign in the North East Regional Referendum and is currently a trustee of the Social Affairs Unit and a borough councillor in Worcestershire.

As the UK enters a painful recession, millions of Britons will be forced to tighten their belts.  We cannot afford to carry the cost of an extravagant and ineffective Government which squanders cash and does not understand how to spend other people’s money.

A serious administration which genuinely cut politicians’ waste would need lower borrowing and so could afford more effective measures for an earlier recovery.  I call this “Sharing the Proceeds of Thrift”.

In a new report to be published tomorrow by the TaxPayers' Alliance, Paying for the Credit Crunch - now available to download as a pdf - I outline how much waste there is in the public sector, and how it can be cut.  My assessment is that the Government is wasting about 15p in every £1 it spends.  That may not sound like much but, when Gordon Brown is planning to spend well over £600 billion per year of your money, that adds up to a lot of 15ps.  Waste in total exceeds £100 billion.

William Norton: Election fever hits Cuba

It’s the end of an era as the Grand Old Man of world revolution, Fidel Castro, announces he is to stand down after 49 years in charge of Cuba.  So what does the future hold for this idyllic, happy, paradise island in the sun?  To ensure that readers of Conservative Home have the very latest up-to-date news, we asked Our Man In Havana, Guillermo Norton, to review the race.

Hola, senors!  Fidel Castro will be a hard act to follow.  This incredibly talented man has managed to hold down simultaneously the positions of President, Prime Minister, President of the Council of State, President of the Council of Ministers, Commander-in-Chief of the Armed Forces, First Secretary of the Cuban Communist Party, Secretary-General of the Non-Aligned Movement and editor of the Guardian website.

However, true to the values of democracy and openness he has espoused all his life, Fidel has promised that the search for his successor will be conducted through a free and fair open election “just like they have in Britain”.  So there’ll be just the one candidate, then.

At the moment, however, the word on the street – well, actually, it’s a back alley out of the way of the security services – indicates that the following five people are being talked about as potential successors.

(1) Maximum General Raul Castro
As those inscrutable North Koreans have demonstrated so well, the best way to continue a successful people’s democracy is to keep it in the family.  With plummeting education standards – caused entirely by the US blockade – it would only confuse the peasants if they had to learn to chant a new surname for their Leader.  Raul is a formidable candidate, drawing unanimous support from four key battleground groups in Cuban society: the army, the Communist Party, the police and the bureaucracy.  But he modestly downplays the advantages he has as Fidel’s brother and says he sees himself as the change candidate: “I am a Liberal by temperament, by instinct and by upbringing.  I want a new politics, a people’s politics.  To lead well, a leader needs to listen.  I’ll be listening on all telephone lines and all frequencies, 24/7.”

How to fight a referendum: Hire lawyers

This is the final part of a series on how to win a referendum by William Norton, referendum agent for the successful NESNO campaign.

The UK law on referendums is a complete and utter mess.  The Political Parties, Elections & Referendums Act 2000 (“PPERA”) is poorly drafted, being vague and littered with inconsistencies.  At one point in the North East we had a ludicrous argument about the hire of some rooms – and the Electoral Commission wanted us to take Newcastle City Council to court so they could have a judgment which explained what that part of PPERA actually meant.

Ultimately the scale of the NESNO win (78% to 22%) allowed us to overcome these problems.  In the high profile stress of a Euro referendum, however, this defective law will break down.  The only remedy will be to have an expensive team of lawyers on standby for when it happens.  There are two particular areas where I would expect trouble.

How to fight a referendum: Ignore the maniacs

This is the fourth of a five part series on how to win a referendum by William Norton, referendum agent for the successful NESNO campaign.

The best chance for the Yes Men to win a referendum on the Constitution-Treaty is to avoid any discussion of the actual hard details and instead try to fight on the waffle-level of whether or not the UK should be a member of the EU.

Unfortunately there will be many supporters on the No side who will be more than happy to have that argument.  The Yes Men will move heaven and earth to find the most, er, um, eccentric Eurosceptics and put them in front of as many television cameras as they can muster.

There has got to be discipline in this campaign.  Everyone will have to accept the line laid down by the official No Campaign, so as to fight the referendum on the best ground available.

This is the fourth of a five part series on how to win a referendum by William Norton, referendum agent for the successful NESNO campaign.

How to fight a referendum: Do the homework, and use it

This is the third of a five part series on how to win a referendum by William Norton, referendum agent for the successful NESNO campaign.

Staffwork is what wins elections, and in any referendum on the Constitution-Treaty the No Campaign will have a massive in-built advantage: it will be a referendum about a specific document, and that document is going to be very long and very boring.

This opens up a number of easy plays:

• Demand that the Government post a copy of the Constitution-Treaty to every voter. The Government, of course, will refuse on the perfectly sensible grounds that it would be a ruinously expensive exercise – at which point they look like they are trying to cover-up something.
• This opens up the opportunity for the No Campaign to present their analysis of the document, from the standpoint of honest men who just want to educate the public.
• Every single representative of the No Campaign who appears in public should be carrying a copy of the Constitution-Treaty and waving it like a windmill. You have to ram home the message that this is a vote on the detail contained in that document (which voters haven’t seen).

How to fight a referendum: Get the message right, and stick to it

This is the second of a five part series on how to win a referendum by William Norton, referendum agent for the successful NESNO campaign.

You’d be surprised how many people forget this, but elections are all about getting the most votes, and the idea therefore is to choose the campaign message which maximises your chance of winning.  That in turn means – and please concentrate, because this is the difficult part – gaining the support of people who don’t normally support you.

You have to select a campaign message which opens up soft areas of the other side’s potential supporters.  Your objective will be to frame the entire debate so that the referendum question is seen by the voters on your terms, and not your opponent’s.  Once you’ve decided on the winning line: keep to it and don’t waiver.

In the North East Referendum, the team running NESNO were entirely against the idea of regional assemblies altogether.  But we knew that if we ran with that as a campaign line it would frame the debate as being about whether regional government/devolution was a good idea in principle – and we knew we would lose such a debate.  That was the fight which the Yes Men wanted to have, and had prepared for.

How to fight a referendum: Get the structure right, and enforce it

This is the first of a five part series on how to win a referendum by William Norton, referendum agent for the successful NESNO campaign.

A referendum is not a party political contest.  To reach the 51% winning line a successful campaign will require the support of people who normally vote for different parties (or not at all).  Too close an identification with one party risks damaging your ability to win.

On the other hand, it is still an election, and to physically fight it will require the skills and manpower only really found in political parties.  The designated official Yes and No Campaigns are entitled to a free mailshot, TV broadcast slots and some public money but the Electoral Commission can only designate for both sides or neither, and it will only designate an organisation that can demonstrate it is competent to present its case, and is best representative of that viewpoint.  Being able to draw on the support of political parties makes a more compelling application for designated status.

How to solve this conundrum?  Well you don’t do it by assembling a Big Tent or a Broad Church.  All that happens then is that lots of little groups who don’t really have much in common end up having a veto over the campaign, and it falls apart.

William Norton: Only losers like PR

William Norton was the Referendum Agent for NESNO, the designated No Campaign for the North East Referendum.  William is writing the first in a series of Platform pieces from Conservative authors about the dangers and opportunities of LibCon co-operation.  Tomorrow Robert Colville will look at the possible for co-operation on the localisation agenda.  Click here to read ConservativeHome's poll-based assessment of growing LibCon alignment.

There are two things you can guarantee that a supporter of PR will say: (1) “First-past-the-post is unfair”; and (2) “No, you’re criticising a form of PR I don’t support”.

Of course, we already have some form of PR: in the London and Welsh Assembly elections, in Scotland (Holyrood and, from May, local authorities) and also the “European Parliament”.  Had the regionalisation project not hit a nasty cropper, the English Assemblies would have had a form of PR, too.  We can already hear the Minister as he makes his speech in 2010, explaining that PR is an established and unthreatening part of “our” constitution and its “rich, diverse heritage” etc, etc [add your own clichés here].

PR spreads. It has an indestructible ratchet effect.  Once it arrives in a body, there can never be a majority in that body to remove PR.  Coalition politics suffer from their own form of galloping inflation, and there will come a time when the price of the Lib Dems’ support rises another notch, and so PR has to be extended to another body.  Whatever is promised, once it starts PR will eventually be extended to the House of Commons.

William Norton: John Prescott has trouble with laws

William Norton was the Referendum Agent for NESNO, the designated No Campaign for the North East Referendum.  At the start of the campaign in September the opinion polls were giving an effective Yes vote of 67% to a No vote of 33%.  In the end Yes received 22% and No received 78%.

John Prescott is going through a bad patch at the moment: he’s lost his department, he’s lost his country house, he’s lost another diary secretary and he’s being investigated over his expenses. 

Don’t feel sorry for Prescott.  The system is not geared to discipline a minister with a cavalier approach toward rules of conduct (unless the Prime Minister wants him to go).  That was made abundantly clear during the North East Referendum.

Some background: in autumn 2004 there was a referendum in the north east of England on establishing a regional assembly.  This was the first vote under the Political Parties, Elections & Referendums Act 2000 (“PPERA”) and it was being studied particularly closely because at that time everyone expected it to be a dry-run for the EU Constitution. 

Interest was especially intense in the operation of PPERA section 125 which contains the famous “purdah”: no material to which this section applies (i.e. relevant to the referendum) shall be published during the relevant period (i.e. the 28 day period ending on polling day) by or on behalf of any Minister of the Crown, government department or local authority.

Furthermore, “publish” means make available to the public at large, or any section of the public, in whatever form and by whatever means.  The meaning and policy of this law is clear.  Government cannot rig a referendum by releasing material which could sway voters in the last 28 days of the campaign. 

So it was something of a surprise to see on the front page of the Newcastle Journal for 2nd November 2004, two days before the close of postal voting, the headline:

"PRESCOTT LAST DITCH VOTE BID"

Prescott gave an interview to The Journal announcing an agreement with Alistair Darling, Transport Secretary.  A new Transport Bill would permit any elected assembly to operate a passenger transport authority to oversee rail and road in its region.  So what?

William Norton: Distortional Misrepresentation

ConservativeHome regular William Norton responds to Tim Bale's pro-PR piece.

If politicians claim to be doing something more than haggling over our cash, what are they for?  We live in a time of accelerating disrespect for our political institutions.  What is to be done?

In liberal circles there has always been something of a ferment in favour of Proportional Representation.  Now they have begun to be joined by a new breed of Tory.  Both agree that the voting system must be changed.

Appraising proportional representation is rather like attacking some vast quivering blancmange with a knife and fork; the amorphous, ridiculous mass merely wobbles, yields and assumes a new form.  There are as many forms of PR as there are countries using it, and as many more “perfected” theories on the drawing board, so it would be best to discuss it in purely general terms. 

We can dismiss quickly some of the weaker arguments for PR:

• it is more European (so what?);
• it is more modern (so is bird flu’);
• it will create long-term stability (no, it will create un-removable coalitions);
• it offers a safeguard against “elective dictatorship” (actually, the cause of that is the political desire to meddle and control);
• it will create greater social unity by providing an example of cross-party co-operation (oh, grow up).

There is, in fact, only one serious argument in favour of PR: it is fairer.  In the Liberal version this takes the argument that since the government legislates over the entire country it ought to be composed of representatives elected by a majority of the votes.  The Tory interpretation is more trenchant: it takes only 26,908 votes to elect a Labour MP, but 44,373 votes to elect a Conservative; the system is rigged.  Which are perfectly respectable arguments for political parties to make.  Until you analyse them a little further.

Let’s suppose under a purely hypothetical PR election in 2010, Labour under Gordon Brown get 40%; the Conservatives under Cameron get 40%; and the Lib Dems under Sir Ming (we’re being very hypothetical here) get 20%.  After much heart-searching, and some swaying about, Sir Ming forms a coalition with Mr Brown.  In 2011 the coalition breaks up because Sir Ming demands a crushing wealth tax.  Being a man of sincere integrity he insists on an election.  The results are exactly the same, but this time Ming forms a coalition with David Cameron.  In 2012 this new coalition breaks up because the Liberals demand free teeth and roughage for students.  Being a man of bottomless principle, Sir Ming insists on an election, and again the results are identical.  However he is now thoroughly disenchanted with party government and after much frantic telephoning and many quiet conversations in the corners of pubs, he announces that there is to be a Government of National Unity.  Ken Clarke is to be recalled as Foreign Secretary, Mark Oaten will be Lord Chancellor, George Galloway gets the Treasury and, reluctantly of course, Sir Ming will be, for want of a better term, Prime Minister.  This cobbled coalition limps through, surviving every parliamentary debate with 51% of the MPs, although they are not always the same individuals supporting them every time.

This example illustrates the three great fallacies of PR theory.  Nobody votes “for” a hung parliament.  Some people vote for one party, others another and a few for a third, but nobody ever cast 40% of a vote for the Conservatives, 40% of a vote for Labour and 20% of a vote for the Liberals.  Equally, unless there is a prior deal on seats, nobody votes “for” a Coalition.  And it still leaves Ming Campbell with an absolute veto over the auction of integrity at the heart of coalition government.

William Norton: The way forward (and why)

William Norton was the Referendum Agent for the No Campaign in the North East referendum of 2004 which delivered a 78% win in Labour’s strongest English region.  He was a member of the James Review of Taxpayer Value and was attached to the Policy Unit during the General Election.  William is Area Deputy Chairman for Political Campaigning in London North East, and was a member of David Davis’ leadership team.

It’s a good time to be a Conservative, just now.  We have a new leader and some momentum in the polls.  Labour have suffered humiliating defeats.  This is not enough, however, to guarantee a Conservative Government.  The 2005 General Election demonstrated that an unpopular Labour administration does not lead automatically to a Tory victory.  What do we do for our next trick?

The starting point is that wretched focus group where there was rapturous and unanimous enthusiasm for all of our policies, until the poor guinea pigs learned that they were Tory policies, at which point our ideas found no takers.  Or whatever.  The precise details do not actually matter; what counts in this debate is what everyone thinks the details were. 
Unfortunately, this evidence cannot be ignored.  It is so strong it must even be addressed. 

There are two basic alternative responses...