Brown's bid to depict himself as the saviour of the world economy and champion of Joe Taxpayer against Big Finance fell flat at the weekend.

So keen is the British prime minister to airbrush out his decade as a "light touch" finance minister that he embraced the heretical idea of a levy on financial transactions as one way to make banks pay for future bail-outs -- the so-called Tobin tax.

The idea was swiftly slapped down by the Americans and Canadians, although it enjoys warm support in Europe. But Brown's Damascene conversion may have more to do with British politics than international finance.

Facing public fury over the tens of billions of pounds spent on bailing out British banks, Brown needs to reassert leadership on the global economy and show he is on the side of voters, not bankers, if he is to have any chance of averting likely defeat at a general election next year.

He and Conservative opposition leader David Cameron are vying with each other to sound more beastly towards the bankers -- to the horror of the City of London, which opposes any form of tax on currency or derivatives trading.

The prime minister also hopes to rekindle the belief that his experience and judgment are sought after on the international stage. His call was warmly welcomed by France, which has campaigned for a tax on speculation to fund development aid.

The Tobin tax may have gained some respectability in Britain after the head of the Financial Services Authority, Adair Turner, advocated it as a way to slim down the bloated sector. However it will take more to convince the Americans.

Since any effective transaction tax would have to be levied in all financial centres to avoid evasion, a U.S. refusal could doom the idea, as Brown must have expected.

His Downing Street office has swiftly rowed back, saying the so-called Tobin tax was only one of four options he outlined, and highlighting instead the idea of an international agreement to make banks pay an insurance fee on risky trading.

This has more chance of drawing wide support, since the United States is already considering such ideas domestically and the IMF is working on proposals to be presented next April.

Voters won't necessarily look at the fine print. So it is not far-fetched to think Brown was deliberately underlining a difference with the United States, in which he is on the side of taxing speculation, to rally his Labour Party's faithful and go one-up on the Tories.

If some sort of global banking insurance levy does come about, Brown may claim at least a share of paternity. But his aura as a sage of global finance appears to be fading fast.

- Guy Aitchison is a contributing editor at openDemocracy and writes regularly for its UK blog, OurKingdom -

The Labour politician and intellectual Richard Crossman once described the British constitution, with a sovereign Parliament at its centre, as a “rock” against periodic “waves of popular emotion”.

As MPs reflect on the recent expenses scandal during their 82-day summer break, many will be tempted to congratulate themselves for once again weathering the storm of public outrage.

At the height of the crisis the Prime Minister and the leader of the opposition were competing with each other to propose ever-more radical constitutional solutions to the catastrophic loss of trust precipitated by the Telegraph’s revelations of MPs’ shameless, and in many cases fraudulent, abuse of taxpayers’ money. Gordon Brown called for “a written constitution”, David Cameron for giving “power to the powerless” and Nick Clegg, whose party has long been calling for reform of a “rotten” Westminster system, demanded change in “100 days”.

The impulse of all three party leaders to respond to the furore with promises of democratic reform showed they understood public anger was about more than simply duck houses, moats, dry rot, and other abuses of expenses, however petty or extravagant: it was symptomatic of a much deeper disconnect between the public and politicians that has been building for years.

The problem comes from an over-centralised and antiquated British state whose monarchical constitution is totally unsuited to represent the interests of a modern pluralist society. Parliament itself is a creature of the executive that has permitted the systematic erosion of rights and freedoms under a barrage of illiberal legislation and failed to prevent disastrous decisions like the Iraq war.

Our absurdly unjust electoral system means that, when the Prime Minister exercises his royal power to call an election, the effective choice of voters is confined to two parties born out of ancient class antagonisms but now purged of ideology by party managers chasing “floating voters” in the handful of marginal constituencies that determine who wins.

Local government meanwhile lacks independence or any meaningful power with 90% of its funding coming from the centre. In these circumstances it’s no wonder the public feels alienated and cut off from the political system with so many choosing not to vote (40% in recent general elections).

But now that the two main party leaders have shown signs they understand the problem, where is the revolution we’ve been promised? Unfortunately, there’s every indication that much of what was said in the heat of the crisis was mere rhetoric aimed at appeasing angry voters until the whole thing blows over.

Cameron has quietly dropped his earlier talk of reform emphasising the victory of his party in a general election as the best solution to the democratic crisis. The comfortable victory of the Tories in the recent by-election in Norwich North will only strengthen defenders of the status quo within his party, despite the abysmal 45% turnout.

The Prime Minister, meanwhile, served up a pathetic Constitutional Reform Bill in the last few days of Parliament which makes a few tweaks to the House of Lords without taking us much further towards a democratic second chamber. There’s apparently talk from inside Number 10 of a possible referendum on the voting system at the next election, but the only alternative to first-past-the-post being muted is the unproportional AV system which would do nothing to ensure the seats a party has fairly reflects the number of votes it receives.

It’s almost impossible to feel inspired by such weak proposals for reform aimed at party advantage and offered in a controlling and calculating spirit without popular involvement. It’s clear that if we’re going to seize the political moment opened up by the expenses crisis and secure the kind of modern constitutional democracy polls consistently show voters want then we cannot rely on politicians to do this for us.

What is needed is a popular force of opinion outside Parliament demanding change at the next election. This means citizens meeting together in living rooms, pubs and town-halls across the country to discuss the kind of democracy we want before joining together independently of parties, corporate media and the formal structures of political power, to pressure parties and candidates at the next election.

In the coming weeks the Rowntree Trusts will be launching an open politics network that aims to help galvanise such a movement. It will assist citizens to organise, draw up and articulate a clear demand for change at the next election, reinforced by the involvement of thousands across the country. If it succeeds, we, the people, will exercise a moral hold over the next Parliament and make real change happen. The alternative is a return to business as usual with an angry and helpless electorate even more alienated from a political system they feel does not represent them - and politicians smug and insulated in their “rock”.

– Paul Taylor is a Reuters columnist. The opinions expressed are his own –

Pacta sunt servanda. For centuries international law has rested on the Latin principle that agreements must be kept.

Now Britain’s Conservative party, widely expected to win power in a general election next year, is vowing to go back on the country’s signature on European Union treaties. The Tories say voters were denied a promised referendum on the EU’s Lisbon reform treaty. Opponents of closer European integration — the Conservatives and the more radical UK Independence Party (UKIP) — won most of Britain’s seats in the European Parliament elections last month.

If implemented, the Tory policy would set a government under David Cameron on a collision course with its European partners that could harm Britain’s wider political and economic interests, which rely on EU cooperation and leverage.

The Conservatives have already taken a first step away from the centre-right mainstream by quitting the European People’s Party (EPP), the biggest group in the European legislature, and forming a caucus with nationalists and sceptics from Poland, the Czech Republic and other mostly east European countries.

Swedish Prime Minister Fredrik Reinfeldt, a fellow centre-right leader from a moderately Eurosceptic country, lamented that step and told The Guardian newspaper Cameron will need mainstream European partners to achieve his objectives, including on climate change. He is right.

The Tories have said that if they take office before all 27 EU states ratify the Lisbon treaty, they will call a referendum on withdrawing British ratification, which was completed by parliament last year. That would put the government in the unprecedented position of campaigning against a treaty which Britain had already signed and ratified.

It could take Britain back to the isolation of John Major’s last Conservative government. Major stopped cooperating with the EU in 1996 after British beef exports to the continent were banned over mad cow disease.

But there is a chance that disaster may be averted. Cameron must be secretly hoping that Irish voters approve the treaty in a second referendum in October and the Eurosceptic Polish and Czech presidents then sign it, averting an immediate crisis for a new Conservative administration.

If Lisbon is already in effect, the Tories say: “We would not let matters rest there.” This deliberately vague phrase gives Cameron some wiggle room. Conservative leaders have said they would demand a negotiation to return EU powers over social affairs, employment, fisheries and some aspects of justice and home affairs to national level.

That would cause a clash at Cameron’s first EU summit, since it is highly unlikely that any of Britain’s partners will agree to open talks on repatriating major competences from Brussels.

Cameron is deluding himself if he thinks Britain can expect Paris or Berlin to cooperate on financial regulation, policy towards Iran and the Middle East, carbon trading or free trade if it is at loggerheads with all its EU partners on the treaty. The United States has often made clear that Britain’s influence in Washington is directly proportionate to its influence in Europe. Britain’s neutral civil service has been conveying that message privately to the Conservatives.

The danger of a UK-EU confrontation comes at a time when London has a strong interest in shaping European regulation of financial markets to preserve the position of the City of London, which generated some 10 percent of Britain’s gross domestic product before the financial crisis. Britain does some 60 percent of its trade with the EU.

Cameron has modernised his party and shifted it towards the pragmatic centre on a swathe of policies from gay marriage to the environment and public services. But he has used Europe as one area on which he can throw red meat to the party faithful, and protect his right flank against inroads by UKIP. He promised to withdraw from the EPP when he ran for party leader in 2005.

Cameron is seeking to balance shadow Foreign Secretary William Hague, who lost a 2001 election on an anti-European platform, and pro-European cabinet veteran Kenneth Clarke, whom he brought back to the front bench for his economic competence.

Clarke said recently a Tory government would not reopen the Lisbon treaty if the Irish ratified it, and would seek instead a practical arrangement on repatriating employment rights. He was swiftly denounced by Eurosceptics in the party.

True, the governing Labour party has failed in 12 years in office to achieve Tony Blair’s objective of putting Britain at the heart of Europe, and reconciling the British with the EU.

Blair achieved some progress on EU defence cooperation and economic reform. But he never used his political capital to win public backing for taking Britain into the euro, despite his personal support for the objective. His successor, Gordon Brown, no fan of the euro, has warmed to the EU somewhat since the financial crisis struck.

Public opinion, as Blair acknowledged before he resigned, remains as Eurosceptic as ever. Grassroots Conservative members are even more hostile, as are some big Tory donors.

That constrains Cameron’s room for manoeuvre. But if he wants to maximise Britian’s international influence and avoid his first term being blighted by conflict with Europe, he should brush up his Latin and declare “pacta sunt servanda”.
(Editing by David Evans)

-Richard Wellings is deputy editorial director at the Institute of Economic Affairs and editor of the IEA blog. The opinions expressed are his own.-

If the Conservatives are elected, as the polls currently predict, they will have to tackle the worst fiscal crisis in peacetime history.

At current spending levels, the government will have to raise around 200 billion pounds a year to fund a huge deficit that has spiralled out of control. Such high levels of borrowing will starve the private sector of investment.

There is also a real danger that the markets will eventually refuse to lend money in the absence of a realistic programme to pay off the debts. At the very least, investors in gilts may demand a larger risk premium. This would mean higher interest rates which would raise the cost of financing the debt, risking a debt spiral.

Tax rises, such as the planned 50 percent income tax rate for high earners, will not be sufficient to resolve the crisis. The income tax rise will perhaps raise a few hundred million pounds - maybe closing 1 percent of the gap. Tax increases will also damage the recovery by acting as a brake on entrepreneurship and investment.

The next government must therefore focus on cutting public spending if it is to create the conditions for a sustained economic recovery. And the scale of the cuts required to balance the books is beyond any historical precedent.

There are different estimates, and it depends on how badly the economy performs, but reductions of perhaps 150 billion pounds in annual public expenditure are probably necessary in order to put the public finances on a sound footing. This means losing almost one in four pounds spent by the government.

While relatively easy cuts - such as abandoning Crossrail, abolishing pointless quangos and cancelling urban regeneration schemes - are worthwhile, such tinkering at the edges will not be enough. The UK will have to consider emergency austerity measures, as seen in countries hit even harder by the current recession, such as Ireland, Iceland and Latvia.

Accordingly, the welfare state must be a key focus. An across the board cut in benefits and state pensions may be necessary. But the fiscal crisis could also provide the impetus for long-needed reform. Changes to tax credits and housing benefit – both of them hugely expensive and counter-productive – should be urgent priorities.

There is also huge scope for reducing the state’s role in education. Local Education Authorities could be abolished, cutting out a whole tier of bureaucracy from schooling. And further education, which tends to offer the taxpayer very poor value for money, could be cut back significantly without any negative economic impact.

A greater share of university funding could be shifted to the private sector. If education were funded directly through parents, much better education could be provided for less money. Real-terms funding could be fixed for a decade using a voucher system.

Unfortunately cutting health spending may be more difficult. Britain faces a significant demographic problem, with post-war baby boomers hitting retirement age, adding an additional burden to the already struggling NHS. Nevertheless, reform is desperately needed. One option would be a move to individual health savings accounts as operated successfully, and at low cost, in Singapore.

Such changes will face strong opposition from vested interests within privileged professions and long-established bureaucracies.

If elected as Prime Minister, David Cameron will therefore have to deal with perhaps the most challenging economic and political conditions since World War II. He should take inspiration from his predecessor Margaret Thatcher. The kind of resolve she showed in taking on the unions will be needed now to tackle a bloated and powerful public sector.

- John Kampfner is chief executive of Index on Censorship and former editor of the New Statesman. His new book, “Freedom for Sale”, will be published by Simon and Schuster in September. The opinions expressed are his own. -

The news could not have come at a worse time for free speech campaigners. Revelations that private detectives have been paid large sums by the tabloid press to hack into the mobile phones and other records of public figures will cause damage to the newspaper at the heart of the practice, the “News of the World”.

It will not enhance the credibility of its former Editor, Andy Coulson, now David Cameron’s trusted Director of Communications at the Conservative Party.

But the consequences are far more important than the future of a tabloid and a spin doctor. The scandal – for it is a scandal – has unleashed a further bout of yelping from the “something must be done” brigade, the people in public life who argue that the media has long been “out of control”.

Their cheerleader is Tony Blair, who famously used one of his last days as prime minister to take revenge on journalists, deriding them as “feral beasts”.

The painful truth is that, in one respect, these people are not wrong. British journalism contains no shortage of sleazy practice. And yet the context is entirely misleading. The biggest problem with the Fourth Estate is not that it finds out too much, but that it finds out too little. Investigative journalism is a declining art.

Much of that is due to economics. It costs a considerable amount to deploy a team to eke out information about, say, a dodgy arms deal, unethical corporate practice, or British collusion in torture. Sometimes months of probing leads to nothing, and editors are under pressure to account for every penny they spend. Some of the decline is attributed to simply laziness. It takes a lot of effort to commission and see through difficult stories.

But the main impediment comes from Britain’s horrific libel laws. So skewed is the legislation and the practice that the burden of proof in court falls entirely on the media, rather than the plaintiff. The costs have grown beyond all proportion and are entirely out of sync with the original “offence”. This has led to malicious threats of prosecutions by the rich and famous, forcing newspapers to retract, even where they know the information to be correct, simply because they cannot afford to sustain their defence.

Britain has now become the libel capital of the world, the home of what has come to be known as “libel tourism”, the destination of choice for Russian oligarchs and others to prosecute not just journalists, but book authors, even NGOs. The chilling effect is hard to quantify, because beyond the prosecutions and threats lies the self censorship that is affecting so much journalism at the moment. The new mantra, from the BBC to most newspapers, even now to some bloggers, is: “why cause trouble?”

The House of Commons Select Committee on Culture, Media and Sport is putting the finishing to an enquiry it has been carrying out on “press standards, privacy and libel”—note the order. At Index on Censorship, in conjunction with English PEN, we have been conducting our own inquiry into the impact of libel. We have spoken to editors, lawyers, journalists, publishers, bloggers and NGO in a unified campaign for changes in the libel law.

We intend to issue our report in coming months as the government ponders its response to the Select Committee. We urge those preparing their conclusions to distinguish between robust investigative journalism that seeks to find out what the powerful would rather conceal from us and grubby and often illegal practice.

If they fail to make this distinction, if they tarnish us with the same brush, democracy and free expression will be the losers.

Have Your Say: Tabloid trickery versus the right to know

(UPDATED Dec 18 - This post is now closed for questions)

Conservative Party leader David Cameron will be speaking on the economy and the credit crunch at Thomson Reuters’ Canary Wharf office on Monday, followed by a question and answer session.

The Tory leader has argued that two main problems face Britain at present – a recession coupled with a record level of government debt, and that the government is trying to tackle one while ignoring the other.

“Every week this government is in power the mortgaging of the future gets greater. Every week the debt gets larger. Every week the burdens on our children mount up higher,” Cameron has said. He has accused Gordon Brown of “economic crimes” saying the Prime Minister “has brought this country to the brink of bankruptcy and the worst recession in the G7.”

Here is your chance to put your questions to the man credited with making the Conservative Party electable again. We will be putting questions from our Web readers to Cameron at the event.

For full coverage of the event, including a live Web cast from 1000 GMT on Monday, see our David Cameron Newsmaker page.

Readers who use the Twitter micro-blogging service can also use the tag #askDC and we will monitor all the responses.

David Cameron's decision to ditch a major Conservative pledge to match Labour spending plans pound for pound was hailed by commentators as an important step in the politics of the recession, opening up a clear gulf between the two main parties' economic policies but exposing the Tories to considerable risk.

Labour is expected to cut taxes, accelerate public spending and announce more borrowing in Monday's pre-budget report. Now their supporters can revive the spectre of "Tory cuts" to funding for schools and hospitals which helped the Conservatives lose the last two elections.

For many of the newspapers, this is all part of a game being forced on the Tories by Gordon Brown's rapid resurgence in the polls thanks to the economic crisis. A Mori poll this week found the once-mighty 26-point Conservative lead has slumped to just three points -- equivalent to a Commons majority of four seats.

"In the extraordinary game of chess that is being played out against the backdrop of the recession, Cameron had no choice," wrote The Independent. "But there are big risks for the Tories. Most non-partisan economists recognise the case for higher borrowing to pay for a fiscal stimulus. The Conservatives are virtually on their own in claiming spending cuts are an immediate answer.

"Spending cuts are also easier to announce than they are to implement, not least when the Conservatives have some ambitious spending programmes of their own. If Cameron comes up with any pain-free cuts, Brown will implement them first, as he did in the run-up to the last election."

The Guardian said a curiously quiet period in British politics has come to a close with the announcement.

"Over the past few months the economy has been in wartime, beset by a banking crisis and a global recession, while politicians have been unsure how to react. Sure, Gordon Brown got his fill of summit-hopping. But most MPs have been little more than restive spectators of a crisis which will define economic policy for years to come and set the terms of the next election. That all ended yesterday.

"The political battle lines have now been drawn around one key question: who can best manage the recession?"

The Financial Times was in no doubt of the importance of Cameron's policy tack. "He has taken one of the biggest gambles of his near three-year tenure ... bucking the corporate and economic consensus to bet on a fundamental shift in voters' attitudes in the next election," it wrote.

"He believes he will be proved right in the long term as the recession deepens and voters increasingly blame Mr Brown for the state of the public finances rather than turn to him as the best hope for economic recovery."

That may be a good move, the paper added, if the election comes in 2010 but could backfire if, as some commentators are suggesting, Brown decides to go to the country before things get too bad.

Several papers applauded Cameron for opening up a clear choice for voters in how deal with the coming hard times.

"On the big issue of the day, the route out of recession, there is now a genuine choice," The Times said, while the Daily Mail declared: "With one bold decision, Mr cameron set himself free to offer a meaningful alternative of real substance."

The Daily Mirror spoke of thick red lines now having been trawn between the two parties and warned the Conservatives  were missing the public mood.

"Every nurse, care worker, soldier and their families now has a vested interest in voting Labour," it wrote.

But The Sun applauded Cameron's move. "Labour seems ready to gamble the entire economy on a "cut now, pay tomorrow" burst of tax reductions financed by ever-higher borrowing," it said. "That is the economics of the madhouse."

"At last the Tories seem to be finding their voice. They have decided to put hard-working taxpayers first -- and dump their daft promise to match Labour's bloated spending."

Prime Minister Gordon Brown has suggested he will push expansionary fiscal policies to help boost the economy. Brown's comments were the latest in a series from him and Chancellor Alistair Darling stressing the importance of boosting the economy, which shrank in the third quarter of 2008 for the first time in 16 years and is expected to contract more sharply next year.

Bank of England Governor Mervyn King has also put his weight behind "some fiscal stimulus", just as the Bank predicted in its quarterly inflation report that the economy would shrink sharply next year.

But what is the way forward - tax cuts or higher public spending?

The dividing line between Brown and Tory leader David Cameron is whether to borrow to fund tax cuts. Cameron has argued that Britain's deficit is too high to allow further borrowing. Brown says Cameron's claim that he can pay for his tax cut by savings on welfare benefits isn't realistic.

Tax cutting is a populist measure and it may be tempting for Brown, who no longer appears to be married to fiscal prudence, to go down that road, not least because of the backlash he faced earlier this year over scrapping the 10 percent tax band.

But there are a number of reasons why tax cutting may not result in a boost to the economy: government borrowing gets dangerously high and will limit the economy's ability to recover swiftly from a recession, and people may decide to save rather than spend any extra money they might have in their pocket due to tax cuts.

What's your view - do you think increased public spending will stoke demand, are tax cuts the way forward to boost the economy or should the government go for a mix of both?