Let’s Get A Tighter Grip On Defence Spending

Britain’s performance on defence procurement is poor – it’s time to make those responsible face the consequences.














Equipped to do the job: British armoured forces in action in Afghanistan.

The history of defence procurement is not a happy one. Ensuring that our Armed Forces get the best possible equipment they need, when they need it, is easier said than done. Today, Labour will publish the findings of a comprehensive 10-month study into defence acquisition policy that will inform a wholesale review of party policy launched by Ed Miliband last year. There are few benefits of being in opposition, but being able to take a step back and reflect is one.

Labour can be proud of the fact that we increased the defence budget by 10 per cent in real terms during our years in power. Defence procurement was reformed and equipment, from drones to personal kit, was transformed – so much so that, by 2009, the last chief of the defence staff, Air Chief Marshal Sir Jock Stirrup, remarked that our troops had never been so well equipped. The welfare of our forces, and crucially that of their families, was also improved.

But defence procurement is a complex and challenging activity. The lead times are enormous and technology changes So what is to be done? It is often said that there is a “conspiracy of optimism” in defence procurement. At best, there is a tendency to muddle through in the hope that both the customer and supplier “get there in the end”. At worst, defence procurement has been based on unrealistic assumptions and over-ambitious plans that balloon beyond all recognition, along with the costs. This conspiracy of optimism has to be replaced by a culture of consequences.

This must apply to the defence industry. In the past, the taxpayer has been left carrying the can for some of its lamentable failings, with some suppliers seeing the UK government as little more than a cash cow. Too many times, once a company or consortia has been awarded a contract, the price begins to ramp up.

First, we need firmer and fairer contracts that incentivise good performance, with industry asked to provide higher warranties for performance. There should be far greater penalties for those that fail to deliver on time and on cost, and the MoD should not be afraid of taking companies back to the initial approval stage, or indeed calling time on contracts that are simply not working. Experience should triumph over hope.

Second, in the case of de facto and actual monopoly suppliers to the MoD, there should be what is known as “open book” contracting once a contract is let. This means far greater transparency of costs and profits in a long-term partnering approach. Within such an approach, there should be not just an agreed price but an agreed target level of profit, too. If the MoD’s requirements change due to operational imperatives – where, say, our Armed Forces need something extra on top of the original specifications – industry must not be allowed to cash in and make super-normal profits on the change in price.

And third, we need shorter, less complex projects with streamlined processes and decision-making. In defence procurement, time is money.

But we also need that same culture of consequences inside the MoD. In the commercial world, promotion and bonuses are based on performance. But in the MoD, there is little sense that poorer performing individuals in very senior roles are ever held accountable. The people leading Integrated Project Teams (IPTs), who manage major procurement programmes, should have the authority, accountability and responsibility for project execution. Currently, they are given as little as four or five days’ training and tend to come from either the Civil Service or from the military – this does not always make them best able to manage hugely challenging commercial contracts.

These problems are compounded by the frequent changes in project managers. The norm in the MoD is to move jobs every two years. This leads to constant changes of strategy and emphasis, which are not helpful and avoid the need for managers to live with the consequences of their actions.

This autumn, the Government will publish its White Paper on the defence industry, but all the signs are that it will have little to say except – as is the case with the Bombardier contract for new trains – that we should give up at home and simply “buy off the shelf” from abroad. Today, Labour will present a host of ideas to reform defence procurement. But in beginning to shape policy for the future, all parties need to be honest about the past and learn from their mistakes.

Michael Dugher MP is shadow minister for defence equipment rapidly, as do our requirements, with the enemy having a say in all of this. And despite all the investment and improvements, we made mistakes. The problems of defence procurement have plagued all governments, but the huge delays and massive cost overruns continued on our watch.

That is why Labour in government commissioned the Gray Report in 2009 to identify the serious failures in acquisition. The current Government liked the report so much that it hired the author, Bernard Gray, to head up defence equipment and support at the Ministry of Defence.

The fact is Britain’s record is poor. Over the period for which there is consistent data (2003-2010), major projects costing the taxpayer in excess of £200 million, and those that were planned to take four to five years between “Main Gate” decision and entry into service, exceeded their most likely out-turn estimate of costs by more than 10 per cent on average – with extremes of up to 40 per cent. These programmes also slipped by 40-50 per cent – some by as much as 250 per cent – from their expected schedule.

So what is to be done? It is often said that there is a “conspiracy of optimism” in defence procurement. At best, there is a tendency to muddle through in the hope that both the customer and supplier “get there in the end”. At worst, defence procurement has been based on unrealistic assumptions and over-ambitious plans that balloon beyond all recognition, along with the costs. This conspiracy of optimism has to be replaced by a culture of consequences.

This must apply to the defence industry. In the past, the taxpayer has been left carrying the can for some of its lamentable failings, with some suppliers seeing the UK government as little more than a cash cow. Too many times, once a company or consortia has been awarded a contract, the price begins to ramp up.

First, we need firmer and fairer contracts that incentivise good performance, with industry asked to provide higher warranties for performance. There should be far greater penalties for those that fail to deliver on time and on cost, and the MoD should not be afraid of taking companies back to the initial approval stage, or indeed calling time on contracts that are simply not working. Experience should triumph over hope.

Second, in the case of de facto and actual monopoly suppliers to the MoD, there should be what is known as “open book” contracting once a contract is let. This means far greater transparency of costs and profits in a long-term partnering approach. Within such an approach, there should be not just an agreed price but an agreed target level of profit, too. If the MoD’s requirements change due to operational imperatives – where, say, our Armed Forces need something extra on top of the original specifications – industry must not be allowed to cash in and make super-normal profits on the change in price.

And third, we need shorter, less complex projects with streamlined processes and decision-making. In defence procurement, time is money.

But we also need that same culture of consequences inside the MoD. In the commercial world, promotion and bonuses are based on performance. But in the MoD, there is little sense that poorer performing individuals in very senior roles are ever held accountable. The people leading Integrated Project Teams (IPTs), who manage major procurement programmes, should have the authority, accountability and responsibility for project execution. Currently, they are given as little as four or five days’ training and tend to come from either the Civil Service or from the military – this does not always make them best able to manage hugely challenging commercial contracts.

These problems are compounded by the frequent changes in project managers. The norm in the MoD is to move jobs every two years. This leads to constant changes of strategy and emphasis, which are not helpful and avoid the need for managers to live with the consequences of their actions.

This autumn, the Government will publish its White Paper on the defence industry, but all the signs are that it will have little to say except – as is the case with the Bombardier contract for new trains – that we should give up at home and simply “buy off the shelf” from abroad. Today, Labour will present a host of ideas to reform defence procurement. But in beginning to shape policy for the future, all parties need to be honest about the past and learn from their mistakes.

Michael Dugher MP is shadow minister for defence equipment.

David Cameron Under Pressure To Soften Hardline Deficit Strategy

Institute of Directors, the Prince's Trust and the TUC join the opposition in demanding action to boost the flagging economy.












David Cameron has been urged to take urgent action to boost the economy.

David Cameron is under growing pressure to soften his hardline deficit reduction strategy after a wave of redundancies in central and local government sent unemployment surging beyond 2.5m.

With the City predicting joblessness would hit 2.75m next year, the Institute of Directors, the Prince's Trust and the TUC joined the opposition in demanding urgent action to boost the flagging economy.

Cameron admitted the official figures – which included the highest female unemployment in 23 years and almost a million young people shut out of the labour market – were "disappointing".

But he insisted that the coalition would not do a U-turn as it attempted to repair Britain's public finances over the course of the current parliament. He said: "All governments are having to take difficult decisions about cutting public spending. Anyone standing here would have to make those decisions. This government is reducing the welfare bill and reforming public sector pensions. If we weren't taking those steps you would have to make deeper cuts in the rest of the public sector."

Ed Miliband, the Labour leader, said the government's plan for an expanding private sector to replace jobs lost as a result of the austerity programme was not working after the Office for National Statistics reported on Tuesday that 111,000 jobs were lost in the public sector in the three months to June 2011, against 41,000 created in the rest of the economy.

"The message to all those people who have lost their jobs is the prime minister is not going to change course," he said. "For every two jobs being cut in the public sector, less than one is being created in the private sector. Isn't that the clearest sign yet that your policy just isn't working?"

Ministers had been preparing for poor unemployment figures after evidence emerged in recent months to show the economy's recovery from the deep recession of 2008-09 had almost stalled.

The ONS said joblessness was rising on both measures used by the government, the internationally agreed Labour Force Survey (LFS) and the more narrowly based claimant count.

Using the LFS yardstick, unemployment stood at 7.9% in the three months to July, while a 20,300 jump to 1.58m in August left the claimant count jobless rate at 4.9%. Unemployment among the under-25s rose by 77,000 in the three months to July, taking the total of unemployed 16-24 year olds to 972,000.

A spokeswoman from The Prince's Trust youth charity said: "It is deeply concerning that youth unemployment has risen sharply, with young people hit hardest and those out of work for more than a year increasing by nearly a fifth. To tackle this downward spiral of youth unemployment, government, businesses and charities need to work together on schemes that work. More than three in four young people supported by The Prince's Trust last year moved into work, education or training."

Scotland was the one region of the UK to see a fall in unemployment between May and July. Alex Salmond, the first minister, said the decline was due to extra spending on infrastructure projects and support for small and medium sized companies.

Analysts said the weakness of the labour market was highlighted by a fall in vacancies, a 40% jump in redundancies and a record number of people working part-time but in search of full-time jobs.

Scott Corfe, senior economist at the Centre for Economic and Business Research, said: "The UK government will now be under immense pressure to deal with unemployment, especially given President Obama's announcement of a $450bn (£280bn) job creation package in the US last week. The focus of a UK jobs creation package would almost certainly be on private sector deregulation and measures aimed at reducing the risk associated with hiring new workers – rather than a slowdown in the pace of deficit reduction – given the political costs of moving away from plan A."

Graeme Leach, chief economist at the IoD, said it was time for the Bank of England to announce a second round of quantitative easing (QE), with the Bank of England buying bonds in order to create money. He said: "The storm clouds are gathering, with falling employment and rising unemployment at a time when it is difficult to see how this might reverse. Today's figures reinforce our belief that we need to launch QE2 as soon as possible."

The TUC general secretary, Brendan Barber, said: "These are terrible figures. They are further evidence that the recovery has been choked off by a self-defeating rush to austerity. Government policies are hurting, but they aren't working."

Nigel Meager, Director of the Institute for Employment Studies, said: ""It's hard to avoid the conclusion that policy-makers now need to stop sitting on their hands and start looking for ways to get spending power into the economy quickly."

Hague Unveils Foreign Office 'Renaissance'

The UK is bringing ambassadors out of retirement and improving training as part of a drive to bring about a "renaissance" at the Foreign Office.









William Hague claims his department declined in status under the previous government.

More staff are also being sent to emerging powers like China and India.

Foreign Secretary William Hague said the FCO's status had declined under the previous Labour government.

But former foreign secretary Jack Straw said Labour had increased spending on the FCO and accused Mr Hague of setting out "a parody" of the department.

Speaking at the FCO's Whitehall headquarters, in central London, Mr Hague said: "I formed the firm view in opposition that the Foreign Office had been devalued and sidelined in British government, too often ignored by prime ministers and weakened as an institution.

"After years in which the level of ambition of ministers has been that government departments are simply fit for purpose, in the Foreign Office we have set ourselves the goal of excellence in every crucial area of our work."

Staff turnover

When he arrived at the Foreign Office, Mr Hague said he "found evidence that dysfunction and rivalry" in the relationship between ministers had "corroded ties between the FCO and its closest partners" in government.

"In my first weeks in office I received advice warning me about a planned overseas visit by another secretary of state, assuming that I would want to stop that visit going ahead and advising me how to do this.

"It spoke volumes about the relationship between some ministers under the last government that officials believed this would be what I wanted.

"It may also reflect the astonishing turnover in junior ministers in the Foreign Office in recent years."

"Spending on the Foreign Office rose under Labour and is being cut under Hague"
Jack Straw Former Labour foreign secretary

In May, the foreign secretary announced plans for five new embassies: in El Salvador, Kyrgyzstan and South Sudan, and in Madagascar and Somalia when local circumstances permit.

Extra offices are set to open in the world's fastest growing economies including Brazil, Mexico, Turkey and Indonesia.

Mr Hague also told MPs there would be 50 extra British staff in China and 30 more in India.

The BBC's diplomatic correspondent Bridget Kendall said the plans were "a tall order" at a time of swingeing Whitehall cuts, but they reflected a general shift in focus away from seeing the world solely as a globalised network towards the old-fashioned business of diplomacy between nation states.

Mr Hague told the BBC his plans were achievable despite a 10% budget cut, and insisted it would be "a false economy" to reduce Britain's overseas presence when there were "more and more centres of decision-making in the world".

'Strong on rhetoric'

"We have to be under their skin, we have to really know them, their languages, just going to international meetings in not sufficient," he said.

"We've got to have the strong, deep bilateral relationships as well and I think that point was missed by the previous government."

But Mr Straw, who was Labour foreign secretary between 2001 and 2006, rejected Mr Hague's allegations, calling his speech "strong on rhetoric and very short on facts".

"Spending on the Foreign Office rose under Labour and is being cut under Hague," he told the BBC.

"His description of the Foreign Office when I was there is not one I recognise. What he sets out is a parody."

Mr Hague said his department was spending £1m more a year on language teaching and diplomats were being equipped with "sharper economic skills" through beefed-up training.

He also pledged greater emphasis on "cultivating and retaining knowledge throughout the institution" by ensuring the expertise of senior diplomats was not lost after they retired aged 60.

To do this, an advisory group of former ambassadors and other diplomats will be set up to offer advise to ministers on policy.

Government To Investigate 'West Lothian Question'

Commission will look into long-running complaints about rights of MPs from parts of UK with their own parliaments or assemblies to vote on legislation affecting only England.












The commission will look into complaints about the rights of MPs from parts of the UK with their own parliaments or assemblies to vote on legislation at Westminster affecting only England.
Ministers are to set up an expert inquiry into limiting the voting rights of Scottish, Welsh and Northern Irish MPs at Westminster, the government has confirmed.

The commission into the so-called West Lothian question will look into long-running complaints about the continuing right of MPs from parts of the UK with their own parliaments or assemblies to vote on legislation affecting only England.

Mark Harper, a junior Cabinet Office minister, said the panel of "non-partisan" academic experts on the constitution, the law and parliament would investigate how England-only laws are handled by both the Commons and the Lords, now that there are devolved legislatures in Cardiff, Edinburgh and Belfast.

Backbench MPs in the main UK parties have stepped up their complaints about the anomaly at Westminster where Scottish, Welsh and Northern Irish MPs can still vote on issues such as health, policing and education issues when they are onlyrelevant to England.

Many non-English backbenchers, particularly nationalist MPs in the Scottish National party and Plaid Cymru, voluntarily often avoid votes on England-only legislation except on controversial measures or on bills which have a significant financial impact on their countries.

Michael Moore, the Scottish secretary, said: "We understand how exercised colleagues in England are but if there was a simple solution to this, it might have been found some years ago but we will endeavour to do this because it has been ignored for a very long time."

The West Lothian question was first posed by Tam Dalyell, then MP for West Lothian during a debate about devolution in 1977.

It is regarded as one of the most serious anomalies of devolution, with control over most major domestic policies in Scotland, Wales and Northern Ireland now solely in the hands of the devolved parliaments and assemblies.

Successive governments have played down its significance because they feared it would play into the hands of nationalist parties by weakening ties to the UK parliament, and diluting the influence of Scotland, Wales and Northern Ireland at Westminster. It could also accelerate pressure for a more federal structure for the UK.

Even so, the UK government promised to set up a commission on the West Lothian question as part of their coalition agreement in May last year, chiefly under pressure from the Tories. The government had been expecting to make a formal announcement on the commission's remit and membership after the October recess. It will publish the final details about its scope later this year.

UK ministers were forced into an early announcement on Thursday to block a private member's bill from the Tory backbencher Harriett Baldwin, the MP for West Worcestershire, which seeks to limit voting rights at Westminster, and has unexpectedly passed a series of hurdles in the Commons.

Baldwin's bill, which is not supported by the UK government, is due to complete its passage of the Commons on Friday and would then go to the Lords. It would require ministers to state on each bill whether it only affected England, to put non-English MPs under pressure not to vote on it.

Baldwin said she wanted to study Harper's statement before deciding whether she would drop the legislation (territorial extent) bill and allow the issue to be studied by the commission instead.

Harper said the commission would not study the financial impact of devolution because of existing work by Treasury ministers, nor would it question the number of MPs sitting in the Commons. This issue was already being addressed by existing proposals to cut the number of MPs.

"The government is clear that the commission's primary task should be to examine how this house and parliament as a whole can deal most effectively with business that affects England wholly or primarily, when at the same time similar matters in some or all of Scotland, Wales and Northern Ireland are lawfully and democratically the responsibility of the separate parliament or assemblies," Harper said.

Many English backbenchers across all the major parties have been critical of and irritated by the issue. As she unveiled her bill in February, Baldwin said the West Lothian question came from the "heart of middle England".

She told the Commons: "How can it be right for it to be possible for potentially decisive pieces of legislation to be voted on in this place by, and carried by a majority of, members of parliament who are not legislating on behalf of their own constituents? That is not a question that we can carry on parking in that car park for ever."

Tom Harris, the Labour MP for Glasgow South, said he disagreed fundamentally with limiting MPs' voting rights. He said the Conservatives had relied heavily on Northern Irish unionist votes at Westminster for 50 years, even while Northern Ireland had its own legislature.

It was right to do so, he said. "We're a UK parliament. MPs always have responsibilities outside their own constituencies and even outside their nations. MPs vote on issues affecting Libya, for example, and I don't have many Libyans in my constituency."

He said the ability of Scottish or Welsh or Northern Irish MPs to control or influence English policy was overstated. There were far more English MPs than those from other nations or areas: there are currently 533 English constituencies against 59 in Scotland, 40 in Wales and 18 in Northern Ireland.

The UK government's legislation to cut the total number of MPs to 600 for the next general election in 2015 will leave England with between 500 and 502 seats, depending on the size of the electorate in 2015, Scotland with 50 to 52, Wales with 30 and Northern Ireland with 16.

"My bottom line is this: Scotland got devolution because it is a small nation, and it's easily possible for every single Scottish MP to vote one way and be out-voted by a small fraction of English MPs, but Scottish MPs don't decide English issues. You would need every single non-English MP to vote in that direction."

Eddie Bone, chairman of the Campaign for an English Parliament, said the issue needed urgently to be addressed as discontent in England about the "imbalance" between Westminster and the devolved areas was increasing rapidly, particularly with the upsurge in support for the Scottish National party.

"If they don't deal with it soon, they will have missed the window of opportunity with the people of England to save the union," Bone said.

Elfyn Llwyd MP, Plaid Cymru's constitution spokesman, said it was time for a federal system: "The problem is that Westminster is trying to do two jobs. It is trying to act as both an England and a UK parliament.

"England deserves to have its own administration to deal with issues which affect England only. This would then ensure that there is a clear distinction between what is a matter for England and what is a matter for other countries too. The lines are too blurred as they are."

Support Grows For Keeping 50p Tax Rate

Politicians from Labour and the Liberal Democrats joined forces with trade unions to argue for a retention of the 50p top rate of income tax after 20 leading economists called for it to be scrapped “as soon as possible” in a letter to the FT.










Alistair Darling, the chancellor who introduced the rate in 2009, and Tim Farron, the Lib Dem president, said on Wednesday that lowering the top rate of tax would be unfair while the economy was still in difficulty.

Mr Darling said: “This has got to stay in place until we get out of the crisis. It would be grossly unfair to remove it. In the long run you have got to keep your tax rates internationally competitive which means something like the two rates we used to have. To remove it today would be grossly unfair. If they do not pay their taxes then it is poorer people who are going to pay.”

He was supported by Mr Farron, who said scrapping the 50p rate would be “phenomenally immoral and send an appalling message to the overwhelming majority of hard-working people in this country”.

Ed Balls, Labour shadow chancellor, also weighed in: “If we really are all in this together then the right priority to boost the stalled economy now should be temporarily reversing the VAT rise, which is costing families with children around £450 a year. This temporary tax cut would help to kick-start the recovery and give a much needed boost to millions of people regardless of their income.

“If the chancellor really wants to know how effective the top rate of tax is he should immediately ask the Office for Budget Responsibility, not just HMRC, to produce a report genuinely independent of government.”

Their warnings came after the Trades Union Congress also took issue with the suggestion of an immediate tax cut for top earners.

Brendan Barber, general secretary of the Trades Union Congress called the economists’ opinion “monstrously unfair”, adding: “At a time when cuts are biting hard and ordinary people are suffering the biggest squeeze on their living standards in years, the last thing we need is a handout to the wealthiest in our society.”

But DeAnne Julius, the former member of the Bank of England’s monetary policy committee and one of the signatories of the letter, defended her position to the BBC, saying many hedge funds had already moved to Switzerland and that, if marginal rates were raised on a small number of highly mobile people, “You end up not collecting the tax that you’d hoped to.”

“Only by returning to an internationally competitive tax regime will Britain enjoy long-term sustainable economic growth,” the economists say in their letter.

The signatories include many figures not usually associated with conservative causes, such as Bob Rowthorn of Cambridge University, and two former members of the Bank of England’s policy committee, Ms Julius and Sushil Wadhwani.

George Osborne, chancellor of the exchequer, is already facing pressure from the Tory right and CBI employers’ organisation to scrap the “temporary” top tax rate.

The Treasury believed that the 50p rate, introduced by the former Labour government in April 2010 on annual taxable incomes above £150,000, would eventually raise £2.7bn a year. Combined with restrictions on income tax relief for pension contributions and the abolition of the income tax personal allowance for people with annual incomes above £100,000, last year’s tax increases on the rich were designed to raise £7bn per annum.

The economists dispute these estimates, arguing the 50p rate “punishes” wealth and entrepreneurship. “It is often portrayed as a justified tax on the rich, but the economic damage it causes means that it is against the interests even of ordinary workers who don’t pay it,” they write.

Last month Mr Osborne said “there’s not much point in having taxes that are economically inefficient”. He added that the rate was uncompetitive internationally and targeted wealthy people who were already paying taxes on their capital gains.

Government officials, however, have suggested that the top rate is unlikely to be scrapped until 2013 at the earliest, when a pay freeze affecting millions of public sector workers is due to be lifted.

Nick Clegg, Liberal Democrat leader, will insist the 50p top rate can only be scrapped if other measures, such as a property or “mansion” tax, are introduced to ensure the wealthy pay their “fair share” towards cutting the deficit. The Lib Dems will also insist that the 50p rate’s abolition is accompanied by accelerated moves to raise the annual tax threshold to £10,000.

Other leading economists are more sceptical. Paul Johnson, director of the Institute for Fiscal Studies and not a signatory of the letter, said it was much too early to give up on the 50p rate: “The Treasury has been taking a punt on whether [the 50p rate] will raise money. It is taking a risk, but it is not a stupid punt.”

Scrap 'Reckless And Needless' Public Sector Reforms, Says Ed Miliband

Labour leader tells PM that money spent on elected police chiefs and NHS shakeup could be better spent recruiting frontline staff.



Ed Miliband and David Cameron clash at PMQs.

The prime minister, David Cameron, admitted that stand-alone elections for police commissioners will cost an additional £25m as he faced a barracking from Labour's Ed Miliband over "reckless and needless" public sector reforms.

Cameron faced accusations of "wasting money" which could be better used to recruit thousands of extra police officers, as he sought to defend moves to introduce elected police commissioners.

A plan to bring in elected police chiefs is set to go ahead after Liberal Democrat peers, who had been delaying the Tory initiated policy, accepted safeguards introduced into the legislation.

In a move likely to irritate many on the Conservative benches who feel their party is making too many concessions to Lib Dems and too few to their own side, the legislative delay will mean voting for the new posts will take place in November 2012 instead of at the same time as local elections in May.

The Labour leader told Cameron he was "making a bad policy worse by wasting money" after the prime minister said staging separate elections in November would cost £25m – money Cameron stressed would not come out of police budgets.

As MPs prepared to debate amendments to the health and social care bill on Wednesday afternoon, Miliband also criticised the NHS shakeup and urged the prime minister to "scrap both of these disruptive and dangerous plans".

Miliband told Cameron at the close of a heated exchange: "The truth is, under this government we are seeing two reckless and needless reorganisations of our public services, police numbers down and waiting lists up.

"Under Labour we saw police officers up and waiting lists down. Why don't you do the right thing for the future of our public services and scrap both of these disruptive and dangerous plans?"

Miliband seized on reforms to health and policing as MPs gathered for the first prime minister's questions session since July.

Regarding the cost of delaying the elections for police commissioners, Cameron told Miliband: "It is important to get this policy right and to make sure it works."

Turning the tables on Miliband, Cameron asked him why Labour was "so frightened of elections".

Cameron said the plan involved scrapping police authorities, which would save money, and accused Labour of making a "U-turn".

Labour previously had plans for "directly elected representatives to give local people more control over policing", said Cameron.

Miliband said: "We know what the public up and down this country know: this is the wrong priority for the country. What did we see during the riots? We saw visible, effective policing."

He went on: "The prime minister tells us we cannot afford the current police budget, we have got to cut the number of police officers by 16,000.

"But he tells the country it can afford £100m and more as a result of his decision to waste money on 42 elected politicians earning over £120,000 a year. That could pay for 2,000 extra police officers.

"Isn't the truth that this is the wrong priority at the wrong time for the country?"

As Miliband later moved on to the controversial health reforms, Cameron joked: "I'm not surprised you want to change subjects because on policing you were having your collar felt because you have done a complete U-turn on the policy you used to be committed to."

The Labour leader said the number of people who had to wait more than six months for an operation had gone up by more than 60% since Cameron entered Downing Street.

Cameron insisted the amount of time people were waiting for an outpatient operation had "actually gone down".

"As you know, we have targets for 90% of people to get their treatment within 18 weeks and those targets are being met," he said.

And he insisted the health reforms were now backed by a number of leading professional health groups as well as former Labour health minister and surgeon Lord Darzi – to the dismay of Miliband, who accused him of being "on another planet".

The Labour leader said the British Medical Association, the Royal College of GPs and the Royal College of Midwives "all rejected your bill".

The Reformist Case For Clegg

One ally of the deputy Prime Minister suggested to me yesterday that the press was missing the most significant aspect of Clegg’s speech on education: Clegg acknowledging that free schools would now be a permanent part of the educational landscape. This ally argued that this was a big deal given that a year ago Lib Dem conference had voted to boycott these schools.









The Lib Dem leader is considerably more liberal than his party. This means that he sometimes needs, so the argument goes, to sweeten the reformist pill with some Lib Dem rhetoric. Hence the emphasis on free schools being fair schools in yesterday’s speech.

But this internal Lib Dem party management is frustrating for Conservative ministers. They complain that it often leads to concessions which undermine the effectiveness of a whole policy.

Call for 'Clarity' On Independence

A senior Liberal Democrat has accused First Minister Alex Salmond of backing away from the key SNP policy for full independence.











Lord Wallace of Tankerness, the Advocate General and former deputy first minister, said Mr Salmond will stop short of the aim and settle instead for maximum powers within the UK.

In an interview with The Times newspaper, Lord Wallace said: "The First Minister is a very forceful character and someone who in spite of all the rhetoric about independence actually knows on which side the bread is buttered and therefore will push for maximum powers but stop short.

"I wouldn't say he was a feartie but he's got his head screwed on the right way."

He called for "clarity" on what independence means and an early referendum, and compared Mr Salmond with Jordi Pujol, a Catalonian politician who settled for devolved powers within the Spanish state.

Lord Wallace's provocative claim follows interventions from other senior Lib Dem MPs in recent days. Scottish Secretary Michael Moore said the SNP has questions to answer on areas such as currency, bank regulation, EU membership and defence after independence.

Chief Treasury Secretary Danny Alexander, another Scottish Lib Dem MP, said the country's deficit would have been the largest in Europe, according to the gap between taxes raised and what was spent in 2009-10.

A spokesman for Mr Salmond said: "The First Minister is totally committed to independence, as are growing numbers of people in Scotland, and we will give people that chance to choose independence in the referendum we have promised.

"Jim Wallace's problem is that he didn't even manage to be Scotland's Jordi Pujol when he had the chance. With every week that passes his party seem to be retreating further and further from their supposed policy of more powers for Scotland's national Parliament - and instead are acting as a front for a Tory Government Scotland didn't vote for.

"The Lib Dems now sound like the Scottish Tories did in the 1990s, and it is having exactly the same result on their level of support."

Cameron Still Lacks A Foreign Policy Vision

What kind of a power do we want to be? How do we achieve that ambition? Cameron is unsure.












David Cameron greets troops after making a speech to British and American troops at Camp Leatherneck military base on July 4, 2011 in Helmand Province, Afghanistan.

Nato's mission in Libya looks like a foreign policy success for David Cameron, but that is not the same thing as having a successful foreign policy.

First, the obvious caveats: it is early days; the battle is not over, let alone the war. There are easily enough military and diplomatic traps ahead for the Libyan intervention to become a failure. The prime minister, the deputy prime minister, the foreign secretary and the defence secretary have all said as much. But for now, the politics of the situation are favouring Cameron. He took a big decision under considerable pressure and, after some nerve-wracking months, it appears to have paid off. "He definitely leapt before he looked," was how one senior Ministry of Defence official put it too me early on in the campaign. (The same source also said of the anti-Gaddafi rebels "the only good fighters among them are the al-Qaeda ones", a slightly wild allegation which should nonetheless be reason enough to put blind optimism for the future on hold.)

Libyans will decide whether they are better off in the long run for the UK's military partisanship in their insurrection-cum-civil war. The point is that, in the eyes of the British public, Cameron has effectively led a short war. There are usually political dividends to be drawn from that position.

But I suspect they will be limited in this case because, as with so much of Cameron's leadership, the good news story doesn't slot into a wider strategic narrative. It is worth remembering that the Conservatives came into power signalling reluctance to reshape the world - a la Blair - by military excursion. The new doctrine, as spelled out by William Hague in a series of speeches in July 2010, was a kind of bilateral mercantilism. The UK would continue to promote freedom and democracy around the globe, the foreign secretary said, but the main tool would be aggressive pursuit of trade interests. Overseas embassies would be reconfigured as pushy chambers of commerce.

Barely weeks before taking action in Libya, Cameron declared: "I am not a naive neocon who thinks you can drop democracy out of an aeroplane at 40,000ft." The fact that Cameron then decided to use British military assets against Gaddafi doesn't signal some visionary conversion to fanatical interventionism. Libya might be a one-off; Gaddafi might just have been low-hanging despotic fruit.

To get the maximum political advantage from the intervention, Cameron has to frame the episode in terms of his vision of Britain's role in the world - and it isn't clear that he has one. The project of expanding our national influence by trade is looking trickier as the global economy falters. As an ambition it is of a pair with George Osborne's hope of rebalancing the economy and driving growth through exports - which relies on a level of overseas demand for UK goods that has not yet materialised.

A big gap in Cameron's world view (at least the publicly known portion of it) is his sense of how Britain's position in the European Union will evolve as the single currency lurches ever onward in financial and institutional crisis. As I mentioned in my column this week, this omission is stirring dissent in the party. A lot of Tories see the eurozone crisis as an opportunity to start a wholesale renegotiation of Britain's EU deal, but there isn't much appetite for that at the top of the party. (This is partly because the leadership's view of all matters EU is coloured by their "modernising" crusade in opposition, so there is an association between public expressions of fierce euroscepticism and unelectability. Then, of course, there is the problem of the stubbornly Europhile Lib Dems.)

The Arab Spring; global economic turbulence; structural crisis at the heart of the European Union - three giant themes that raise profound questions about Britain's position in the world. What kind of a power do we want to be? How do we achieve that ambition? I don't get the impression that Cameron is any closer to having persuasive answers to those questions than he was when he moved into Downing Street last year.

The Tories’ Facile Metaphors Mask A Frightening Lack Of Insight

Osborne and Cameron have no way to express the global challenges they face without sounding as if they are making excuses for their failed policies.














Pity George Osborne at the helm of the British economy, adrift in a sea of foreign economic troubles. To the east, the leaders of eurozone countries fight for the survival of their flagship project. It took a last-minute bailout of Greece on 21 July to assuage fears that the country's
insolvency would spread to other heavily indebted nations and sink the single currency. To the west, Barack Obama is locked in hand-to-hand combat with Republicans over the terms on which Congress might grant the government permission to borrow more money. Failure to reach an agreement risks a US debt default and panic in the markets.

Ministers are fond of maritime metaphors about the economy. The Justice Secretary, Kenneth Clarke, recently described the European and US crises as a pair of icebergs, between which the UK economy must sail. For months, Osborne has been warning that our recovery will be "choppy". When, on 26 July, the Office for National Statistics announced that gross domestic product grew by just 0.2 per cent in the second quarter of 2011, the Chancellor defended his strategy by insisting that austerity had made the UK "a safe harbour in a storm". The implication is that bond traders, reassured by the government's unbending discipline, will not question Britain's creditworthiness.

Made in Britain

You don't have to travel far from Osborne's office to find sceptical responses to the Chancellor's view. You don't even have to leave the Treasury. "That's a pretty lame argument," was the verdict of one senior mandarin. Without growth, the government risks falling short of its revenue and deficit-reduction targets. Markets would then be unforgiving. Austerity was supposed to be the means to an end - restoring confidence as a spur to growth. It isn't working. There isn't much point in securing a harbour without any ships in it.

The Chancellor's misguided metaphor signals a deeper failure of imagination, dating back to the onset of the financial crisis. Now that he is responsible for the economy, Osborne is keen to place Britain's predicament in the wider context of global financial instability. This perspective is newly acquired.

The global economic storm has been raging for nearly four years. For the first two of them, Osborne, as shadow chancellor, played down the international scale of the crisis. Tory election prospects depended on heaping as much blame as possible on Gordon Brown. Yes, there was an international crisis, Osborne conceded, but Labour's reckless spending had left the UK defenceless. The worst of the recession, he claimed, was "made in Britain". Labour deserved some of that scorn but not all. Brown's reputation for sound judgement expired with the hubristic claim to have abolished boom and bust. Yet the relentless focus on domestic politics stopped the Tories from developing a coherent account of what lay behind the financial meltdown. It is an omission that is making the Chancellor's job much harder today.

The credit crunch was, above all, a crisis in globalisation - the deep economic integration of market economies that accelerated exponentially after the end of the cold war. A defining feature of that process was the erosion of borders to facilitate the swift movement of goods, money and people. Power drained away from national governments, with their jurisdictions quaintly demarcated on old-fangled maps, towards global capital markets and multinational corporations.

The City of London was the hub of this globalised world order and host to some of its most reckless financial institutions. Britain became, in the words of the Business Secretary, Vince Cable, "a large offshore banking centre with a medium-sized country attached to it". That made the UK particularly vulnerable .

It is not, therefore, surprising that we experienced a particularly deep recession, followed by a feeble recovery. It is true, as the Conservatives claim, that more fiscal discipline during the boom might have cushioned the blow.

A Budget surplus would have been nice but it would not have changed the underlying reality that Britain was the most diligent disciple of an economic doctrine - ultra-liberal, free-market capitalism - that failed. Osborne and the Prime Minister, David Cameron, seem never fully to have grasped the implications of that failure. Instead, they constructed a morality tale about Labour profligacy causing both the deficit and the national debt. The two items are routinely and duplicitously conflated in the much-abused homily of the maxed-out national credit card. As a parable of domestic economics, it is neat. As an intellectual response to a global crisis, it is dangerously facile.

Fiscal masochism

Manifestly, Osborne's strategy is not going according to plan. Yet to admit even the possibility of an alternative would be to concede that his particular brand of fiscal masochism was a political choice all along and not, as advertised, a diktat from the bond market.

To avoid any discussion of a plan B, ministers privately talk up the flexibility of plan A. The headline ambition is to eliminate the structural deficit within four years but the Budget leaves room for manoeuvre. "If you read the small print," says one member of the cabinet, "it is really five years."

In political terms, the distinction is hardly relevant. The public has accepted austerity and, as the Tories never tire of pointing out, Labour fought the election offering cuts, too. Besides, the government's promotion of Osborne's deficit-reduction timetable as the only legitimate benchmark of credibility has become a self-fulfilling prophecy. Financial markets might have accepted a more flexible approach last May. Now, they are more likely to punish a fiscal wiggle as a failure of nerve.

Osborne and Cameron vigorously pushed a narrow domestic view of Britain's economic problems to serve the demands of last year's election campaign. Now, they are trapped in that parochial story. They have no way to express the global challenges they face without sounding as if they are making excuses for their failed policies - much as they accused Brown of doing. Without an adequate intellectual response to the underlying causes of the crisis, Britain's government floats rudderless through the storm.

Rafael Behr is chief political commentator of the New Statesman.