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Bagehot: The death of meritocracy

TWICE during the 1970s, a stroppy decade, leftish British politicians tried to turn the monarchy into a nationalised industry. There were plans to place Queen Elizabeth II and a few close relatives on state salaries and sack the rest of her family, and?a few years later?for a Department for Royal Affairs, bringing the crown under Whitehall?s management. Both attempts were resisted. Since then, royal aides have cannily worked to secure autonomy and arms-length financing from government. Just now, the mood behind palace walls must be giddy relief.The queen has rarely been as popular as she is now, in her Diamond Jubilee year. The contrast with other arms of the establishment is striking, and revealing. For most people at the top of the public sector, this is a perilous time.For months there has been angry scrutiny of the sums paid to the bosses of public or publicly controlled bodies, from the BBC to the railways and the bailed out Royal Bank of Scotland (RBS). The BBC says that its next director-general will take a big pay cut. Network Rail directors this week bowed to ministerial nagging and promised to donate...
The coalition?s performance: Pulled hither and thither

IMPRESSIVELY for a government led by a former public-relations man, the coalition avoided responding tactically to the news of the day in its first 18 months. David Cameron took big strategic decisions?on fiscal policy, education, policing, welfare, health care?and, for the most part, stuck to them. The government seemed to offer a sense of direction in convulsive times.Some of this has been lost in recent weeks. First the prime minister zig-zagged on the issue of a new European Union treaty designed to save the euro. Having refused to support it in December, to domestic acclaim, he has softened his opposition to the signatories using EU institutions to enforce their ?fiscal compact?. Europhiles and Eurosceptics alike doubt that he ever had a diplomatic game plan to begin with. This is policy by pragmatic reaction.Meanwhile the government trims and tilts on its proposed reform of the National Health Service. The initially radical bill, which would give family doctors more power to commission services and allow private provision to expand, enraged health workers. The coalition has mangled the legislation with so...
The Tories and European justice: A legal bombshell

?SACK the lot of them? came a cry from the Conservative benches of the House of Commons on February 7th, backed by a rumbling chorus of ?disgrace? and ?shame?. The object of the backbenchers? ire was the European Court of Human Rights in Strasbourg. Its judges had sorely provoked Parliament?not to mention the press and public opinion?by preventing Britain from deporting a radical Muslim cleric, Abu Qatada, to his native Jordan, citing concerns that evidence obtained by torture might be used against him there. That had led a British judge to grant him bail, albeit with strict curbs on his movements. No matter that Theresa May, the home secretary, calls the cleric a serious threat to national security.Some Conservative MPs urged Mrs May to defy the court in Strasbourg, the judicial arm of the 47-member Council of Europe and guardian of the European Convention on Human Rights (ECHR). Others want her to go further and suspend recognition of the convention, a rights charter crafted soon after the second world war. Such calls are in vain. Lib Dem ministers, backed by two liberal-minded Conservatives?Ken Clarke, the...
Manufacturing industry: The Midlandstand

KEVIN WARD shudders when he recalls December 2008. His engineering company, Brown & Holmes of Tamworth, began the month with a pretty full order book. Spooked by the financial crisis, though, the carmakers and aerospace firms that buy his workshop equipment suddenly cut back. The company lived off ?scraps of work? throughout 2009. Turnover tumbled by one-third and the company went into loss. Mr Ward was unable to raise the financing needed to buy another firm that was going bust; to make matters worse, his company was put on credit watch, with extra banking charges.And now look at it. Brown & Holmes?s sales recovered strongly, rising from �2.3m ($3.6m) in 2009 to �4.3m in 2010, and have continued to go up since. Along with other Midlands manufacturers, it is thriving despite generally tight credit conditions. The former workshop of the world, which was crushed by the early 1980s recession and the rise of Asia?s low-cost manufacturers, is seeing work drift back. In Britain as a whole, some 100,000 manufacturing jobs have been lost in the past two years. In the Midlands, manufacturing employment has grown...
Private equity: Keep calm and carry on

PEOPLE who work in private equity love a good party. But at a recent gala, many revellers looked beleaguered. ?This industry is going to go through a period where everybody gets sacked,? groused one private-equity executive to another.Life isn?t as flush as it used to be for private-equity, or buy-out, firms, which purchase companies with debt, fix them up and sell them. Debt, which juices the profits of private-equity firms, is harder to come by. And firms are stuck holding investments for longer, since the public markets are not strong enough to list companies and cash out.All buy-out firms share these tough conditions. But British outfits, which managed �146 billion ($234 billion) and 19% of global buy-out assets in June 2011, are having a tougher time than their American peers. Many British firms focus on investing in Europe, where the economic outlook is rotten. European banks are more loth to provide debt given their own funding difficulties. Another source of financing?the high-yield debt market?is weaker in Europe than in America.Many investors are wary of putting money into the euro-denominated funds that many British buy-out firms raise. Executives complain that they show up to meetings to be pummelled with questions about the European sovereign-debt crisis, not about their fund. One buy-out boss said that before the crisis, his executives had to meet with no more...
Grammar schools: Natural selection

First the crammer, then the grammar
MICHAEL GOVE, the education secretary, wants to offer parents who send their kids to state schools the same choice and quality that is available in the private sector. He has introduced reforms to allow popular state schools to expand and sink schools to shut. His new academies, which are largely free from local-authority control, are mostly popular. But in west Kent, parental demand has led to a potentially troubling development for Mr Gove: the prospect of the first new grammar school to be created for 50 years.Some 164 grammar schools remain in England, remnants of a once-universal system of selection at the age of 11 that shunted most children into secondary moderns, and which was mostly abolished in the 1960s and 1970s. Grammars are the only state schools that can select which children to admit on academic grounds.Getting into grammar school has become increasingly difficult. Nowadays it is not always enough for a child to pass the 11-plus entrance test. The most selective schools rank applicants according to their test scores, admitting only...
Quantitative easing: Just more of the same?

THREE years ago the Bank of England, which had already cut interest rates to record lows, wheeled out a new, unconventional tool to stimulate the economy. It would buy government debt using newly-created cash?a policy that became known as ?quantitative easing? or QE. The Bank is now a market mammoth, owning over 30% of the �940 billion ($1.5 trillion) pool of outstanding government bonds. It is set to get bigger: on February 9th the Bank's monetary-policy committee authorised �50 billion of new purchases over the next three months. But is this strategy working?A surge of demand from a new buyer will push up prices in any market. Indeed, this is the Bank?s aim. Its current purchases outstrip the supply of new bonds by around �5 billion per month. This causes bond prices to rise, lowering yields and making them less attractive as investments. That, combined with the cash that investors receive from the Bank, ought to nudge them towards assets offering better yields, like corporate debt and equity. That, in turn, should lower businesses? financing costs and boost investment.Market movements suggest quantitative easing has achieved most of these things. Yields on ten-year government debt, a favoured purchase, have fallen from around 4% to 2% since the programme began. Over the same period the FTSE 100 index has risen by nearly 70%, although actions taken in America and Europe...
Beer: Brewers? droop

BRITAIN is known for its lager louts and beer bellies. But after two decades of drinking strong, continental-style lagers, their beer is weakening. Several brewers have launched new lower-alcohol lines in the past five years, including a new range of 2.8% brews. Even flagship brands are getting weaker.Carlsberg Export, Stella Artois, Budweiser, Beck?s and Cobra are all cutting their alcohol content from 5% to 4.8% in Britain. The shift is small?brewers hope consumers will not notice?but it will save money at a time when ingredients are pricey. Duty on beer, which is paid by producers, accounts for a large part of its cost. Of a typical �3 ($4.75) pub pint, around �1 is tax, far higher than elsewhere in Europe. Unlike wine and cider, beer is taxed on a sliding scale according to its strength. For big brands, a small adjustment can make a big difference, notes Neil Williams of the British Beer & Pub Association, a trade body.It is smart to get drinkers used to weak tipples, since the government seems determined to raise the cost of getting drunk. To lure punters some supermarkets and booze stores...
The coalition and Europe: The veto that wasn?t

FOR all its eventfulness, 2011 only produced one incident that really shifted the opinion polls. David Cameron?s refusal to support a new European Union (EU) treaty last December went down well with voters, who rewarded the Conservatives with their first lead over Labour in a year. It also cheered Tory MPs, many of whom had never warmed to their leader.Their initial joy increasingly looks misplaced, and they know it. Mr Cameron had initially said that the countries which signed up to the new ?fiscal compact? to strengthen the euro?potentially all 26 other members of the union?would not be able to use EU institutions such as the Commission and the Court of Justice. These are part-funded by the British taxpayer and meant to serve the whole EU.Soon after, Mr Cameron was deluged by behind-the-scenes legal advice, which suggested that Britain would not get its way on the institutional matter, and by angry Liberal Democrats, the more pro-European of the coalition parties. Sure enough, by the time of an unofficial EU summit in Brussels on January 30th, the government had watered down its position. It now says only that it has ?legal concerns? about the Court of Justice being used to enforce new fiscal rules. Although Mr Cameron says he will take action if the new arrangements compromise British interests, it is hard to see what, if anything, has been prevented by his veto.The...

The Economist: Britain Thu, 09 February 2012 16:02:40 GMT