The London elections will be decided on three key policy areas, fares, policing and responding to London’s housing crisis.

An issue of major importance to every Londoner is the cost of public transport. We have the most expensive tube fares in the world thanks to four years of above inflation increases from Boris Johnson. The cost of off-peak travel in outer London has risen by 86 per cent in just three years. That’s before last week’s New Year greeting from Boris of another 5.6 per cent fares increase. Low-paid Londoners have also been hit, with the cost of a single bus journey up an eye-watering 50 per cent since 2008.

2011’s Annual London Survey showed that cheaper fares were Londoners’ top concern. Polling shows that his high fares are Johnson’s weak spot. So Ken’s Fare Deal campaign and his promise to cut fares by

7 per cent, followed by a year long freeze, is welcome. It will save people £1,000 over his mayoral term and is fully affordable because passenger numbers are increasing and there is now over £200m per year operating surplus in the mayor’s accounts. Rather than hoarding excess revenue he should be using it to put money back in Londoners’ pockets. This is what Ken will do.

On policing, overall crime has not risen under Boris Johnson. But after last year’s August disturbances and rising youth and violent crime, effective policing that protects Londoners while at the same time reaches out to disaffected groups is now more vital than ever.

Since the last Livingstone City Hall budget, police numbers have fallen and there is now a huge black hole in the finances. The Tory Mayor will probably receive some short-term funding from George Osborne and David Cameron to see him through the election, but then what? Johnson’s track record is extremely worrying. He is hollowing out the popular and effective safer neighbourhood teams and was nowhere to be seen during the August riots. We need to defend neighbourhood policing and maintain police numbers.

The third key battleground is housing. Millions of Londoners renting from social landlords or in the private-rented sector need help in the form of housing benefit. The Government is capping this support at 30 per cent of local market rents – a ­policy that will ghettoise the capital as four out of five inner London neighbourhoods become unaffordable by 2016. This will force people to outer London (or out of the city altogether) putting excessive strain on local services. Secure tenancies are also being abolished as the Government has pushed through fixed-term tenancies, making long-term security for many people a thing of the past. Families will soon have no way to be sure that their homes will not be taken away from them.

Boris Johnson has broken his pledge to build 50,000 affordable homes by 2011. He says 30,000 homes have been started. Good news. But if your idea of “starting” coincides with the National House-Building Council’s definition – in other words, when the foundations are laid– then the figure is actually 19,000. And that’s all before the Government cuts funding for affordable housing in London by 87 per cent.

All this while homelessness and overcrowding are going up. Almost half of all children in socially rented homes in ­London live in overcrowded conditions. The number of families accepted as homeless has jumped by 17 per cent in the last year. This is reflected in the “beds in the shed” scandal hitting many parts of ­suburban London where families are ­increasingly finding themselves housed in Dickensian sheds, unfit for human ­habitation. Ken’s response to the pressure on families is to introduce a “living rent” (following the success of the London ­Living Wage ­campaign) so those renting spend no more than 30 per cent of their ­income on housing costs.

The choice in May is simple: four more years of laissez-faire posturing and photo stunts with Boris Johnson, or four years of Ken Livingstone standing up for all ­Londoners, driving down fares, protecting neighbourhood policing and introducing a living rent. Our job is to get the vote out for Ken and all our Labour candidates for the London Assembly. With your help,  we can win for London.

The news that Barack Obama has signed new sanctions against Iran was swiftly followed by reports that Iran had test-fired shore-to-sea and surface-to-surface long-range missiles close to the Strait of Hormuz. The missile tests came at the end of a massive 10-day Iranian military exercise in the Gulf and accompanied a reported threat by Vice-President Ahi Rahimi to close the Strait of Hormuz should further sanctions be imposed on Iran.

In response, spokespersons for the Pentagon and the United States Navy’s Fifth Fleet stated that any disruption of traffic through the Strait of Hormuz oil route “will not be tolerated”. Iran then warned a US aircraft carrier to stay away from the Gulf. The military response of the United States was to state that: “The deployment of US military assets in the Persian Gulf region will continue as it has for decades.”

Diplomatic relations between Iran and Western nations hit an all-time low after the storming of the British Embassy by hardliners in Tehran at the end of last November. The attack led to the withdrawal of British diplomatic staff and the expulsion of Iranian diplomats from London. While there may have been sound security reasons for the withdrawal of ­diplomats, the breaking off of diplomatic relations has severed an important channel of communication which had remained intact throughout the Iran-Iraq war and the 1979 revolution.

The possibility that Germany, France, Holland and Italy – all of which recalled their ambassadors from Iran for consultations following the attacks – might follow Britain’s example, and with America having no ­formal diplomatic engagement with Tehran, future negotiations with Iran are set to ­become significantly more difficult.

It is all a far cry from 2008 when a newly-elected President Obama showed a determination to engage directly with Tehran. In his broadcast to Iran, he publicly acknowledged that country’s right to enrich uranium. In October 2009, he held direct talks with the Iranians in Geneva. ­Commenting on these talks at the time, the ­Financial Times noted that President Obama “got more out of Iran in eight hours than his predecessor’s muscular posturing did in eight years”.

But Geneva was to prove a high-water mark in good US-Iranian relations. In the intervening years, Iran has accelerated its ­enrichment activities and Obama has long since withdrawn his “hand of friendship”.

At the Geneva talks a proposed agreement devised by the US would have seen Iran exchange most of its current stockpile of low-enriched uranium (LEU) for fuel rods from Russia and France. This “fuel-for-fuel” swap was largely accepted by President Mahmoud Ahmadinejad but he proposed that the International Atomic Energy Agency assume control of the LEU in Iran until the fuel rods were delivered. The Americans rejected this proposal.

The following year Brazil and Turkey ­negotiated a deal with the Islamic Republic where LEU would be taken to a neutral country. The deal was almost identical to one put forward by the US in Geneva but rather than welcoming it Washington ­responded with scepticism and imposed new sanctions on Iran. In September,

while attending the United Nations General ­Assembly meeting in New York, Ahmadinejad hinted that he would be ­willing revive the fuel swap deal saying that Tehran would stop producing 20 per cent enriched uranium if it was guaranteed fuel for a medical research reactor. Whether or not this was a serious offer or political brinkmanship, we will never know, since the offer was never ­followed up.

Last June, following IAEA chief Yukiya Amano’s statement that he had “received further information related to possible past or current undisclosed nuclear-related activities that seem to point to the existence of possible military dimensions to Iran’s ­nuclear programme” Tehran announced that it would shift its production of higher grade uranium to an underground bunker and triple its production capacity.

In the meantime, the US has ­strengthened its military force in the Gulf, carrying out large-scale naval manoeuvres in the Atlantic with the British and French and allowing Israel to use Nato bases for ­exercises. Nato’s missile defence system has been deployed across the region and reports suggest the US has shipped hundreds of “bunker-buster” bombs to military bases on the island of Diego Garcia and supplied 55 of the bombs to Israel.

In Iran, the ratcheting-up of nuclear tensions has had a negative impact on the beleaguered Green Movement diverting attention from demands for greater democracy. Hopes that the movement would be reinvigorated by the Arab Spring have not been realised. With its leaders under house arrest and activists and intellectuals imprisoned or forced to flee abroad, the Green Movement has been largely contained.

With elections looming in America and the US in the midst of economic troubles, Obama will not be keen to get involved in another unpopular military adventure in the Middle East. However, he may well be coming under increasing pressure to take a harder line against Iran, not just from ­Congress but also from within his own party. Like the conservative Iranian ­leadership, neo-conservatives and policymakers in Washington are concerned by the ­unprecedented rise of people power ­sweeping the Middle East and the resulting loss of strategic influence. Withdrawal of US troops from Iraq has only helped to extend Iran’s sphere of influence in the region.

Western anxieties about Iran’s influence are nothing new. In 1953, the CIA and British secret services orchestrated the overthrow of Iran’s President Mohammad Mossadegh and the recent disclosure of British political documents from 1981 revealed that Margaret Thatcher’s Government was covertly supplying military equipment to Saddam Hussein during the Iran-Iraq war. While Iran has clearly has reasons to mistrust the Western powers, Western concerns about Iran’s possible nuclear weapons programme are also genuine.

With tensions escalating this should be a time for increased diplomatic activity rather than a diplomatic shut down. The best way to ensure that Iran does not become a ­nuclear-armed nation is not to isolate Tehran but to revive discussions around the fuel-for-fuel swap and reinstate the IAEA’s rigorous international monitoring activities. Rhetoric on both sides should be toned down and the parties should be encouraged to move back towards the negotiation table. Only then might war be prevented from spilling from the minds of men and onto the bloody canvas of the battlefield.

the story.

The unspoken issue in this drama is the lamentable state of the British economy. Staying out of the euro was not a cunning example of our national sagacity but, rather, a potent symbol of the weakness of the British economy. What was not admitted was that, although still the sixth largest economy in the world, Britain was judged not fit to compete in an open European economy where a single currency was ­underpinned by fixed exchange rate and interest rates.

That judgement has been amply confirmed by events. In 1982, the United Kingdom had a surplus on its trading ­account in goods of £1.9 billion. Since then it has steadily deteriorated until this country’s deficit on traded goods reached an unprecedented £100 billon, no less than 6.8 per cent of our gross domestic product. What makes this decline so staggering is that it occurred despite a 23 per cent devaluation of sterling over the past three years. Such a precipitate decline is simply unsustainable. We cannot continue to enjoy our standard of living when it is dependent on such a huge loss of competitiveness.

In that context, to try to preserve the City of London untouched, when it is a major cause of that competitive breakdown as well as largely responsible for the £850 billon increase in Britain’s indebtedness following the financial crash, is utterly perverse. Instead the number one objective for Britain should be a single-minded concentration on a renascence of our manufacturing as the only means to regain the competitiveness on which our future depends. That should be accompanied by a radical reform of UK banking so that its prime role becomes the promotion and enhancement of British industry. This approach should then determine our policy towards the euro and any future EU directive on financial services regulation.

Hitherto Britain has attracted foreign direct investment largely as a base for export to the EU market and because costs are lower through low pay and ­

de-regulated working conditions. Research and development are generally centred abroad, and profits generally repatriated to the foreign country. This is not an adequate platform on which to build a dynamic, competitive and sustainable manufacturing base as the core of British economic growth.

Instead a successful national manufacturing system requires indigenous supply chains which profitably connect the ­different competencies of a diverse population of small, medium and giant ­enterprises within powerful cluster networks. British manufacturing at present has few large corporate players with UK headquarters that have a global reach, broad capabilities and a large workforce over 50,000. Yet critically these are the companies that boost  recovery by selling branded finished goods, sustain civil R&D, build high-tech capabilities, as well as connect to domestic suppliers.

Britain lacks these crucial chain-supporting enterprises because short-termism always trumps long-term market share, giant manufacturing firms such as GEC, ICI, Lucas and TI were broken up when assessed as inadequately profitable, and privatisations (for example, rail and electric power) were carried through without ­regard to a domestic supplying industry. As a result, Britain is now an economy of small workshops, with fewer than 2,000 factories employing more than 200 people compared with 107,000 employing less than 10. This country’s propensity to ­import is therefore much higher, largely because of our reliance on foreign-owned ­assembly within global systems. Further, our balance of trade prospects project an unsustainable increase in the deficit which will require permanent deflation to damp down import demand.

All these entrenched problems point to the need for systematic prioritising on ­capacity building and investment right across the whole spectrum in manufacturing, as has been advocated by the CBI’s

20-year export recovery plan. Central to achieving that is radical banking reform. The City of London remains heavily ­focused on mortgage lending, derivatives and offshore speculation. Worse still, many banks lend on a one-off basis for a specific project on a limited timescale and expect high annual returns on investments to meet their loan repayments which

often appear too risky in uncertain market conditions.

By contrast, relational banking is a central factor underpinning Germany’s manufacturing success, linked with the clustering concept of the Mittelstand offering a strong local or regional network uniting major manufacturing companies with their suppliers, ancillaries and customers, as well as their banks. This is the business model in Baden Wurttenburg, Emilia Romagna and other European ­regions. It is the sort of model Britain should develop in manufacturing arcs around Birmingham, Manchester, ­Liverpool and Newcastle, as well as the south-east of England.

But the key banking reform we need is the restoration of public control over the money supply. As a result of the competition and credit control measures in 1971, the lifting of exchange controls in 1979, and the abolition of all controls over consumer credit and the de-regulation of housing finance in the 1986 Big Bang, the commercial banks have become responsible for the issuance of more than 97 per cent of domestic credit creation. They have used that power to become the major generator of unsustainable asset bubbles and thus of great economic instability. Through the shadow banking system, the proliferation of derivatives and securitisation, they have gone to great lengths to evade public controls and to pursue their private interests at the expense of the national interest. They have used their control over the money supply largely to feed the property boom and foreign speculation while allocating as little as 8 per cent to productive investment.

For all these reasons, control over the money supply should be brought back into the public domain. This was the mechanism used many of the most successful countries in the 20th century, especially Japan, Korea and Taiwan after the Second World War. Under this “window guidance”, the central bank would determine the desired nominal GDP growth and then estimate the amount of credit creation necessary to achieve this. Then, in consultation with the main financial and industrial sectors but in accordance with strict criteria, it would spread this credit across the range of various types of banks and industrial sectors.

Speculative transactions like today’s lending to hedge funds were firmly suppressed. Consumer loans on any significant scale which would trigger inflationary demand for consumer goods and draw in increased imports were discouraged and hard to get. Priority was given to productive investment – plant and equipment, key services, and enhanced productivity via new technologies and R&D.

By contrast, rejection of the eurozone and keeping the City untouched and unregulated is a tunnel vision leading to economic unviability and ultimately

self-destruction. Only a sustained revitalisation of British manufacturing, the real lifeblood of the economy, together with fundamental banking reform, can save this country.

For few then accepted the argument that the financial markets were out of ­control, that the speculators had created a casino economy all but completely ­divorced from the real world. Where new financial instruments were thought up by abstruse mathematicians rather than ­working economists and where the sheer volume of speculative trading had escalated to a level where less than 1 per cent of deals were for the purchase of goods, ­services and raw materials to supply industry and more than 99 per cent were straight ­gambling.

These wagers, dominated more by the wider calculations of pure mathematics than by the dismal science of economics, used other people’s money for personal enrichment putting at risk in their thoughtless avarice the stability of countries and the survival of communities. Yet barely a dozen years later these direst nightmares look like pleasant daydreams in the wake of a global financial collapse triggered by the toxic combination of ideologically driven political neglect, corporate greed and cowardly regulators. The result in much of Europe and the United States is the impoverishment of a generation and a slashing back of public services to levels that will become little better than those before the post-war settlement of the late 1940s.

All this was the consequence of a failure to protect people in the Thatcherite “no such thing as society” era. Back then, the other face of Nobel Prize-winning economist James Tobin’s eponymous tax was how it was to be spent. The original vision was simple. Even at tax rates as low as 0.05 per cent – 50 cents for every $1,000 – it would raise up to $200 billion that would have been enough to provide all those ­living in deep poverty (earning less than $1 a day) in the world with basic ­healthcare, education and housing.

The current crisis has seen a Damascene conversion of politicians, if not bankers. Now the European Commission is in the Tobin church and Commission President José Manuel Barroso is the high priest. In the European Parliament, support has penetrated deep into Christian democracy after sweeping up the remnants of the near and far left. The majority of EU member states have jumped on the bandwagon – the main exception, to no- one’s great surprise, being David Cameron, the bankers’ friend, and the British Government.

Britain’s Tories have long been in thrall to finance capital in the City of London to the long term detriment of Britain’s industrial and service sectors, its uncontrolled growth being more like a cancer in the heart of the economy rather than its motor. Yet why this extends across politics is unclear. The arguments are three-fold. First the climate is not right to see the imposition of new European taxes with the Eurosceptic tsunami that threatens to sweep England out of the EU. Second, that it is not possible to have such a tax that fails to be all encompassing  – imposing its charge not only on Frankfurt and London, but New York and Dubai, Singapore and Tokyo. Third, that the particular proposal is flawed.

There seems to be a contradiction between the first two arguments. If we are to get to the latter, there seems no other way but through the EU. Are we really so out of touch with reality that we think anyone in this day and age in the global chancelleries is going to listen to Britain’s lonely ­pleading? Even so, Algirdas Semeta, the European Commissioner for Taxation and the Customs Union, has made it clear that money raised would stay with member states and so would not be so much an EU tax as a common EU approach to restoring financial stability, leaving member states with no restrictions on how the money raised is spent.

The notion that it is impossible to apply other than on a global scale is plain nonsense. No major financial player can opt out of the EU and even the claim that it would lead to a drift of trading away from Frankfurt and London is not supported by reality. The Bombay Stock Exchange ­doesn’t face a single financial transaction tax. Rather, it faces two and that,

as its charismatic chairman Subramanian ­Ramadorai says of Asia’s oldest exchange, has not impeded its success, or its ­continued growth.

The final argument, that the current proposals are ill-conceived, is easily answered. If we don’t like what is on offer, then propose an alternative. If we think a stamp duty-type approach is better – with the loopholes solidly filled in – then we should propose that system instead.

The final and most important point is that a financial transaction tax could be a political game-changer for Labour as we approach the next general election. If the Tories stick to their ideological guns and, even as the tax is adopted by the eurozone, resist Britain’s inclusion or, worse, veto the tax for the EU as a whole, then Labour has the opportunity to promise to end ­either the opt-out or veto if it forms the next government.

True, in consequence, bankers’ votes might be at a premium in 2015, but then others would be tempted to support the promise of an annual cumulative total of public expenditure increases and tax cuts of as much as £17 billion in the United Kingdom, giving voters both hope and ­inspiration. That’s an impressive trump card to have.

This new responsibility won’t work. The pundits will move on to other criticisms. The trade unions won’t like it, because they’re left to fight the cuts alone, while those in social groups C, D and E who stayed away in droves at the 2010 general election because Labour had not done enough for them, will get the message that we’re not going to do anything now either.

We may denounce the cuts, deplore the decimation of welfare and the damage to women, the north of England, the poor and the disabled but, tough luck, they all need to face up to an age of austerity. No joy there, then, but this Gradgrind ­Government, busily pushing the country back into recession by cuts, freezes and rising unemployment to reduce debt, will be deeply grateful.

Not only is the Conservative-Liberal Democrat coalition right to cut and freeze, but Labour would do the same. That won’t stop them asking us to abase ourselves even more, but George Osborne’s smirk will ­become even more malign.

It’s difficult to see who the Labour leadership is doing this for. It’s certainly not the Parliamentary Labour Party, which wasn’t consulted, but it must have been a collective leadership decision to preach the responsible gospel, because all the shadow ministers are singing from the same neo-liberal hymn sheet, – although Rachel Reeves, the Shadow Chief Secretary to the Treasury hints that a few recalcitrant MPs need re-education when she says we’re not ready for government yet. But for all practical purposes we’ve killed off John Maynard Keynes (again), commended cuts and accepted debt reduction as more urgent than boosting demand. All this is designed to ensure that “responsible” Labour is sober, serious and as ready to serve the interests of finance and the City as it was before the fall. If this Government’s Thatcherite policies don’t work (as they won’t and can’t), don’t expect anything different from us.

So, no hope here for the victims of cuts. We’re not going to reverse them, however brutal. As for our friends, the trade unions, they should submit because strikes only embarrass us and annoy people. Labour may once have been the party of bigger public spending to make life better and society fairer but those days are over and Gordon Brown is in internal exile.

People don’t join Labour to wear hair shirts. So party members won’t like it, but the most disastrous message is to the nation. The details and qualifications of our volte-face (and I hope there are many) won’t get through to the voters. The headlines will. And they will distort our new respectability into misanthropy and a renunciation of our record, building a public perception that the crisis is all Labour’s fault and only the Tories have the answers.

Which is all untrue. In the dying days of the last Labour Government, borrowing and the deficit did soar, but in order to save the banks, fight the two expensive and unnecessary wars as the world’s police community support office and to stimulate an economy plunged into recession by the speculative irresponsibility of finance.

The Tories supported most of this and up to 2008 were ready to endorse Labour’s spending. The stimulus was working as council houses were built, young people trained and unemployment fell. Now we need again the sort of spending which ­Gordon Brown called “investment”. The outgoing Labour Government gave an ­undertaking to halve the deficit in the next Parliament, but an administration facing an election had to make that bow to ­respectability – even if Labour was the only party to make such a clear and substantial commitment.

We made it in vain. The Tories came in, pretended to discover a horrendous ­mountain of debt and used it to recruit the sado-masochist ways of the Liberal Democrats and justify massive cuts. In fact, the debt crisis wasn’t the real problem. It was demand deficiency made worse by the Government-imposed deflation. The only answer is more spending to generate growth and get the economy moving, but that is difficult to sell to a frightened ­electorate which understands piggy-bank economics but not Keynes.

So we failed. The Conservative-led coalition’s claim that we left a huge mess and a mountain of debt became widely ­believed. As did the Tory divide-and-rule claim that spending was too high because Labour had poured money into the ­pockets of scroungers, fiddlers, idle lifestyle beneficiaries and immigrants, and into grandiose projects (totally different to HS2). All that struck populist chords.

Ed Balls put forward a modest five-point expansion plan, although with the careful rubric that this would not increase borrowing. We have pointed out that the Government’s own programmes increase the deficit, because unemployment ­reduces tax receipts and boosts social ­security spending. But our criticisms of the cuts are always countered with the ­question: “What would you cut?”

So, now tired of throwing our seed on stony ground, we have given in and abandoned good sense in favour of supposedly fairer Thatcherism. The Tories were right, after all. This may delight the ageing New Labour sob-sisterhood and allow Ed Miliband to pose as a Prime Minister in exile, but it is no position for any opposition facing a Government which is both more reactionary and less competent than Margaret Thatcher’s. The job of opposition is to oppose and do so strenuously when government is as wrongheaded as this with its Neolithic economics and decimation of the welfare state. In the gloom of recession, opposition must hold out hope, offer a better alternative and generate polices for improvement. Yet now we are supposed to give up on all that and sing Tory tunes at lower volume. How can that appeal to our people, youth, women and the poor who are the worst hit by the Tory deflation, or to those who deserted us in 2010 because New Labour hadn’t done enough for them. What is to bring them back now?

Self-castration is never a sensible policy. We tried it once before when we’d lost so much confidence in ourselves in 1997 that New Labour offered to avoid tax and spend, and to hold to Tory expenditure plans (which the Tories themselves would never have observed) for two years. It was an unnecessary gesture. It damaged the performance of our Government and postponed everything by two years. Yet it was made at a time of economic growth and buoyancy. Today’s act of self-immolation is made by a leadership with too little ­confidence in itself in the face of a damaging ­recession from which the recovery is going to be slow because Britain is a nation in comparative decline.

The only possible policy answers ­involve going back to Labour basics by using the power of the state to generate growth. We need an industrial policy to boost manufacturing. We must shift the balance from consumption to production by tough regulation to stop the speculative follies of finance.

And we need fair and generous benefits to protect people. We should explain all that, preach the need to restore the good society, and appeal to nationalist instincts and pride by promising to rebuild the ­nation’s strength and an economy which will support the levels of employment, spending and defence of the good society. Then we can mobilise the people behind us. Tell them betterment is over and that we’re doomed to austerity, misery, cuts and pay freezes, and you also tell them that Labour can neither do the job they want done nor turn the country round. Offered that, people might as well vote for the Tories. They’re much better at cuts, freezes and piggy bank economics.

Probably this may only be judged when the outcome of the poll is known, three years down the line. What is clear already is that the bullying manoeuvre has plunged all the contending political forces into a fine stew of confusion and uncertainty.

It was unquestionably the ruling SNP government’s right to spurn the coalition’s demands to bring the poll forward, and to insist on its electoral mandate to call its own advisory referendum in the autumn

of 2014.

The SNP has always judged, for a ­variety of reasons, that its chances of turning a ­minority in favour of independence into a ­majority will be better by then, but it can also be argued that a 1,000 days of debate are much needed to thrash out and clarify the issues.

What the coalition’s attempted railroading has done is to bring the whole matter right up into the political forefront, not only in Scotland, but across the United Kingdom and internationally – and this is a good thing.

What is a bad thing is the Tory-Lib Democrat endeavour to force the poll into a single question of “Yes” or “No” to independence itself, and worse is that

the Labour opposition has willingly ­acquiesced.

The SNP has yet to declare its hand, because of internal divisions. Many in its ranks are equally keen to limit the question to one, in the belief that this is a once-in-a-generation chance to break through to their cherished goal.

On the other hand, they realise that a “Yes” to a second question, radically ­increasing Holyrood’s fiscal powers, known as “devo-max,” would enable them to ­operate a considerably more effective ­administration, albeit within the Union.

The nationalists have shilly-shallied on this for far too long and need to make up their minds to supporting two questions. Maximum devolution is the preferred way forward for most Scots expressed in one opinion poll after another.

Devo-max – a horrid but handy term – means Scotland raising and spending all its own taxes, reserving only defence and ­foreign affairs to the Westminster ­government. This can also be called the federal solution.

The Lib Dems, once a strongly ­federalist party, will now oblige their Tory masters by seeking to exclude this option during the negotiations which they have been delegated to undertake with the SNP.

The most startling response to the coalition’s bombardment was Labour’s, both Ed Miliband and new Scottish Labour leader Johann Lamont lining themselves up to campaign with the Tories and Lib Dems for a single, ­independence or nothing question and a “No” vote.

What persuaded them to get boxed in like this? Their tactic is to bury ­independence, and leave any significant ­development of the existing devolution ­settlement to the distant future. But this ­betrays that same negativity, lack of vision and ambition for Scotland which has seen Labour’s recent downfall.

At bottom, it could be down to simple Westminster parliamentary arithmetic. With independence, Labour would lose 40-50 MPs. With devo-max, Scottish ­representation in the House of Commons would be cut back.

Not everyone in Scottish Labour is as hidebound as its London and Holyrood leaderships. The former First Minister Henry McLeish has stated:  “Instead of ­saving the Union, the key objective must be to change it. In my view, the Union is not fit for purpose.”

He wants to see an autonomous ­Scotland with full fiscal powers. He warned his party not to link its anti-independence campaign with the toxic Tories, or the ­dysfunctional Lib Dems.

Taken with the London leadership’s ­recent volte face of largely accepting the coalition cuts programme, it is difficult to see how Labour can regain power in Scotland on any terms, never mind the rest of Britain.

Canon Kenyon Wright, the venerable church leader, has made a strong intervention. He said the Westminster Government “must not be allowed to dictate the terms of the referendum or the options to

be offered”.

He declared: “My own view is that a straight choice between independence and the status quo effectively disenfranchises a large number of Scots who want neither.”

He strongly urged that discussions on a second question about more powers must be included in the ensuing consultations.

Why should the views of this worthy cleric carry so much weight? He will be little known south of the border, but is highly regarded in Scotland as one of the architects behind the recreation of the Scottish Parliament in 1999.

He convened the cross-party Scottish Constitutional Convention, which provided the blueprint for the two-question referendum of 1997, and for the powers of the Scottish Parliament.

If only that Scottish Constitutional Convention, or an equivalent body, was ­sitting today. Under its umbrella, all the main political parties co-operated (except the SNP), together with a broad range of civic bodies, from the Scottish TUC, to ­individual trade unions, the churches, voluntary organisations and pressure groups.

Its participants worked for years to reach a consensus in devising a package for the restored Parliament, for which the ­incoming Labour Government was largely able to accept and legislate.

It is much to be hoped that the ­consultations shortly to be launched by the Westminster and Scottish governments will embrace views from across Scottish society, ensuring that they are ultimately given a voice in a two-question referendum

The South Sea Company. A combination of government guarantees and hype pumped up the South Sea Bubble

2) Who was the Chancellor?

John Aislabie

3) How much was he forced to repay (from the bribes he had taken) after the company ­collapsed:

(a) £2.014 million (b) £794,451 (c) £0

(d) None of the above?

c) But he was expelled from Parliament and imprisoned in the Tower. Parliament resolved “that Mr Aislabie had encouraged the directors in their pernicious practices to the ruin of the public trade and credit of the kingdom.” The directors had most of their property confiscated, a sum of £2.014 million. Aislabie had taken bribes including being credited with £794,451 of fictitious stock in the company.

4) William Cobbett observed that in England public enterprises are generally “royal”. Who pointed out that the exception was the national debt?

Karl Marx corrected William Cobbett’s oversight.

5) Who were the sisters of the bank?

London prostitutes. (The bank in question is that of the Thames)

6) How much did Fred Goodwin repay after leaving RBS:

(a) £24.1 billion (b) £4.7 million (c) £0

(d) None of the above?

(d) None of the above, RBS losses were £24.1 billion but the year before he quit his pension pot as increased by £8 million, later reduced by

£4.7 million,  although true cost to RBS of guaranteed pension pot will be £30 million

7) Which 18th-century MP talked about an elderly lady who had made a faux pas by allowing herself to be seduced by a young gentleman from the St James’s end of town?

Stafford MP and playwright Richard Brinsley Sheridan

Who was that lady?

The Bank of England (thought to be the first reference to the Bank of England as “the Old Lady”)

9) And who the young gentleman?

Pitt (the younger, of course).

10) What does a king of England have in common with Chicago’s grain king?

William IV and Alexander Geddes, who made his fortune speculating on grain futures particularly when the stock burned, are both ancestors of David Cameron.

11) Which Chancellor was singing in his bath as his economic policy collapsed?

Norman Lamont

12) And who was watching his back?

David Cameron

13) Which Chancellor, after being driven to seek an International Monetary Fund loan by wildly inaccurate Treasury forecasts, decided “to do for forecasters what the Boston Strangler did for door-to-door salesmen”?

Denis Healey

14) What, according to Norman Lamont, was the last accurate Treasury forecast he received as Chancellor?

That he would soon be the most unpopular man in Britain, a forecast he received as soon as he arrived at the Treasury.

15) Who is the odd one out:

(a) Stafford Cripps

(b) Roy Jenkins

(c) Denis Healey

(d) Gordon Brown

Gordon Brown. Stafford Cripps, Roy Jenkins and Denis Healey, as Labour Chancellors, had to seek IMF loans.

16) Pr [DA < 1, DB < 1] = ?2(??1(FA(1)), ??1(FB (1), ? ) is the formula for:

(a) The chance of the Con-Dem coalition collapsing before its full term (b) The chance of default on collateralised debt obligations in the subprime housing market (c) The chance of a widow or widower dying of a broken heart (d) pure nonsense

All of (a), (b), (c), and (d) Too bad it was also nonsense.  (DA and DB, the time to default, are normally represented by TA and TB, but that would be too easy to google.)

17) Who is the odd one out:

(a) Jérôme Kerviel

(b) Nick Leeson

(c) Fred Goodwin

Fred Goodwin. The other two were arrested and jailed. Kerviel was sentenced to three years for “rogue trading” thatlost his bank euro 4.9bn euro which he is appealing, Leeson spent three and a half years in a Singapore jail.

18) Debenhams department store was owned by private equity for two years in the last decade. In the year before it went private, it paid £40 million tax on profits of £144 million. How much tax did it pay during the two years it was in ­private hands?

None, it received £22.3  million from HMRC into its profit and loss account

19) Roughly how many years would a British worker on average (median) pay have to work to get what the average chief executive of a FTSE 100 company took home last year?

(a) 25 (b) 75 (c) 130 (d) 220 (e) 1,300

d) 220 years, the average remuneration of a FTSE100 chief executive  was about £4.8million

20) Roughly how many years would an adult on the minimum wage have to work to be paid the amount paid to Adam Applegarth, chief executive of Northern Rock, in 2006, the year before the bank crashed?

(a) 25 (b) 75 (c) 130 (d) 220 (e) 1,300

c) 130 years, Applegarth was paid £1.364 million in his final year.

21) Between 1985 and 2008 the average income of the top 10 per cent of households in the United Kingdom rose by 2.5 per cent in real terms.What is the equivalent figure for the bottom 10 per cent?

(a) 2.5 (b) 0.9 (c) 0.09

(b) 0.9

22) Based on the most recent annual accounts, FTSE 100 companies increased their value on the London Stock Exchange by 23.6 per cent in the previous year as the stock market recovered from the crash. By what percentage was the average chief executive’s remuneration increased?

(a) 3.1 (b) 15.5 (c) 31.5

(c) 31.5

23) The earnings taken by the top 0.1 per cent of British earners increased by 64.2 per cent in the past decade. What was the percentage increase in average (mean) pay?

(a) 72 (b) 61 (c) 24 (d) 7.

d) 7

24) When Standard & Poors downgraded the United States government’s credit rating this year it got its arithmetic wrong when justifying its decision. How big, in US dollars, was the error?

$2 trillion! When the error was pointed out S&P removed the argument on which the figure was based but left the conclusion unchanged

25) Two leading credit ratings agencies rated one European insurer as “very strong” and “excellent”, but a third rated the company’s stock as “junk”. Why the discrepancy?

Probably because the insurer, Hannover Re, paid Standard & Poor’s and AM Best six figure sums each year but spurned the increasingly insistent ­requests from Moody’s to engage it. The market responded to Moody’s subsequent rating by knocking $175 million off Hannover Re’s market value in just a few hours.

The winner is John Whitworth and the runner-up is David Roberts. They both live in London.

As always, the sound of silence was most deafening. In the media scrum around the candidates, no one seems to have noticed that, for all his faults, Barack Obama is effectively unchallenged. He will gracefully segue to be the Democratic nominee as the Republicans eviscerate each other in public.

If Gordon Brown, or Ed Miliband, had had the courage – or perhaps chutzpah is a more appropriate term – to do what the Republicans are doing, Labour would probably be in power now. If they had ­actively disavowed Tony Blair and New Labour along the way they could have ­benefited from the reflex vote.

But Republicans have not so much ­disavowed the two Bushes who represent their party’s last three terms in the White House as made them non-persons. They are not mentioned at all.

That neatly allows Republicans to smear Obama for the financial crisis and for the bailouts at the end of George W Bush’s presidency.

There is some justice there, since Bill Clinton’s term actually espoused much of the ethos of voodoo economics and deregulation, but it took the junior Bush to strip regulators of power and introduce the tax cuts that paved the way for the parallel financial and fiscal crises that now hamper any attempts at recover. Ironically, George Bush senior is a non-person for opposite reasons – because he opposed voodoo economics and actually increased taxes.

Two years ago, it would have been difficult to believe that a party could be re-elected on a platform that effectively vetoes any effective regulation of the banks and companies that caused the crisis. Despite their differences, that is what unites almost every Republican candidate. The sleight of hand is so audacious it is admirable: through the Tea Party, the “Grand Old Party” has channelled the understandable rage against big banks and big business against the only institutions that can challenge them – “big labour” and big government.

By invoking abstractions such as “freedom” and “enterprise” with the amplification that huge corporate donations give them, Republicans drown out their actual practice, which is to pander to any business interest that wields a cheque. Set against a faith-based minority that votes in the Republican primaries, they can get away with this. Their voters do not believe in climate change, evolution or Obama’s American citizenship, so they are addressing an audience already strongly inclined to credulity, to denying the evidence of reality. So Obama was responsible for the bailout and it was government interference in the free market that forced banks to give mortgages to the feckless poor (a coded terms for black) that brought about the crisis are easily digested counterfactuals.

However, the secret of their success is that they meet no ideological opposition. Since Bill Clinton, most of the media and most of the Democrats also hold the truths of the free market to be self-evident and scarcely attempt to defend against the attacks on regulation, unions, or government action. On the core issue, the economy, they have abandoned the field of battle to the conservative enemy.

Instead of raising Obama’s standard on the right of every American to affordable healthcare, his genuine achievement of a healthcare bill was accompanied by a welter of bureaucratese that had all the appearance of guaranteeing insurance companies’ profits rather than being a charter for citizens dying in their thousands because they could not afford medical services. Polls showed that Americans were prepared to support a single payer system of national or state insurance. What they got was a mandatory requirement to pay some of the most bloated, corrupt and inefficient companies around.

That being said, those on the far left who do know different are as off-planet as the GOP. Far too many are prepared to overlook Ron Paul’s determination to do away with any social welfare provisions at all and give him elbow room for being opposed to foreign wars. He would of course have opposed American involvement in the Second World War as well, but then some of the American left would have picketed the Normandy Landings as foreign intervention.

Their insignificance means that this will have negligible electoral effect, but their detachment from real politics in the US has deprived America of a politics able to combat the Chicago school. It is significant that a bunch of anarchists around the Occupy Wall Street protests have done more to push Obama into egalitarian eloquence than the whole Noam Chomskyite left academia.

And despite those who prefer Ron Paul to Barack Obama, the President did get millions of uninsured on the rolls. He did end the war in Iraq. He has appointed a consumer protection head in the teeth of Republican opposition. On every count, even when disappointing, his record has been better than anything likely from the gaggle of reactionary Muppets on the other side.

So, while any diagnosis of the state of American politics based on the primaries is necessarily gloomy, the prognosis is not so bad.  The Republicans are busily making themselves unelectable, while Obama has a real chance to win. And he is by far the least worst option. What is more, if he and the Democrats can get their act together, it is possible that they might stave off disaster in Congress by tapping sane voters’ ­revulsion at the ugly face of American ­conservatism revealed in the ugly contest that is the Republican primary race.

B is for Brazil, which has now overtaken Britain in terms of economic output. Brazil is also supporting Argentina’s claim to the Falklands. Britain shamefully and stupidly ignores or patronises South America, ­closing embassies there.

C is for China, which is reverting to brutal communist repression as economic growth slows. China’s one child policy means there are no young workers left. How long before Chinese nationalism is unleashed to take minds off corrupt communist dictatorship?

D is for depression as the generalised crisis of world capitalism worsens in 2012. The 30-year era of globalisation based on debt and credit has ended even if Alan Greenspan’s bust is still in the Treasury. But no one has defined the next stage of ­economic development.

E is for Egypt, where we are seeing a ­fusion of mosques and military which will leave little room for democracy and ­freedom. Stand by for millions of Egyptian Christians seeking to leave as mono-faith governance seeks to create a monopoly of belief.

F is for France, where Nicholas Sarkozy and Francois Hollande face up to be ­president. Neither is a triple-A candidate, but it is 30 years since the Socialists won the Élysée Palace, so the French, who do not like or respect Sarko, may take a punt on change.

H is for Hungary, which is turning into a nasty nationalist, openly anti-Semitic country or at least or at least that is true for its ruling elites who don’t care about ­European values.

I is for Islamism, the latest “ism” to ­feature as a world ideology. Can Islamism be softened into a model of governance compatible with democracy or will its Sharia, anti-women, anti-gay, anti-alcohol and anti-freedom of expression elements predominate?

J is for Jews. It sometimes seems to be open season as we see and hear some Tory and Labour MPs use careless language that is profoundly offensive to many Jews. Their intent may not be anti-Semitic but those same MPs would doubtless exercise

greater care in their remarks about other communities.

K is for Kosovo. Serbia blew its chances of starting European Union accession talks in December because Belgrade will not come to terms with Kosovo’s existence. Stabilising the Balkans should be a manageable task for EU diplomacy, but the new policy of isolation adopted by David Cameron and William Hague make this difficult.

L is for the Liberal Democrats. Are they the worst rats, toads, vipers and skunks ever to crawl out from under a political rock? Or are they future partners of Labour, as Ed Balls suggested in an interview before Christmas? Or both?

M is for Miliband – Ed or Edward, as Hansard calls him. The amount of scorn the Tory commentariat and post-Andy Coulson briefers pour on him suggests that they are secretly worried. In transition eras like this, governments lose elections more than oppositions win them. Ed’s Zen calm, unflappable style may be better than the Con-Dems’ frenetic front bench.

N is for New Labour, still the best election-winning version of the party in its history. Look at the 1950s and 1980s when Labour was Labour anda  fat lot of good it did for those who need a government with a sense of fairness and social justice.

O is for Obama. Yes, we cannot change the world because we are not George W Bush. Like Jimmy Carter in the last transition era between two economic eras, the gap between delivery and expectations is massive. But politics is not a one-man show and the absence of any serious thinking about the next economic era has left Barack Obama without bearings or destination.

P is for Poland, once Britain’s closest friend and ally since the Battle of Britain. The rampant Polophobia by British ministers, the Daily Mail and, sadly, progressives such as Maurice Glasman and John Harris, has pushed Poland into the arms of ­Germany, as Warsaw sees no friends in London any more.

R is for Russia. Vladimir Putin may hang on, but it is clear that Russians are sick of his rule and the plundering of the land’s wealth by his bureaucracy that depends on him as he depends on it. Can the dream of a democratic, European rule of law Russia come closer in 2012

S is for Scotland. David Cameron’s Cabinet of southern millionaires, including the faux Sheffielder Nick Clegg, has given an enormous boost to Scottish independence or semi -detachment under the charismatic Alex Salmond. Scotland produced the ­giants of Labour’s 1997 election success – Gordon Brown, Robin Cook, George Robertson, John Reid, Donald Dewar, Derry Irvine, even the Edinburgh-educated Tony Blair. Today no one can take on Salmond. Labour has to learn to become a party of England if it wants to win power again.

T is for Turkey, the most exciting vibrant nation in the Euro-Mediterranean region. Britain should be forging a close alliance with Turkey, especially the likely more liberal post-Recep Tayyip Erdogan generation. The Islamophobes on the European extreme and mainstream right are doing Europe a major disservice with their primitive Turkophobia. But no one in Europe pays attention to the Eurosceptic David Cameron-William Hague line and few are much interested in a Labour Opposition which opposes the Tobin tax, is hostile to European defence cooperation and votes against support for the International ­Monetary Fund to help ease the crisis.

U is for Union, as in European and trade unions as in the TUC. Neither will have a happy 2012. But can Labour come back if the EU is re-nationalised and our

wealth-creating capacity, which depends on open trade, shrinks still further and faster? And what can Labour do to get unions back to life in the capitalist sector of the ­economy, not just the public services

with their hunger for more and more taxes from workers?

V is for victory. 2012 will see 60 years of Queen Elizabeth II on the throne and

50 years of the Rolling Stones. It will also be when the 2010-2015 Parliament hits half-time. How does Labour win in the ­second half?

X is xenophobia. It is so easy for the left to blame the other, the outsider, or the incomer. We, or many of us, were all foreigners once – Irish, Indian, East European, Jews, Pakistani or Polish. In 1958, John F Kennedy wrote A Nation of Immigrants about the United States. Two years later, he was President. Which politician in Britain would dare light the affirmative flame that our diversity is our strength, and the Daily Mail and other offshore-owned newspapers with their xenophobe and Europe-baiting writers shame us all?

Y is for Yesterday. Labour spends too much time scratching its yesterdays and not enough defining its tomorrow. It is good to see Chukka Umunna and Rachel Reeves in the Shadow Cabinet. But the 2010 intake or by by-election winners such as Seema Malhotra or Dan Jarvis are the most talented generation of young ­politicians ever to enter the House of ­Commons as a cohort. There are smart young Tory MPs, but they are stymied by having to allow ageing Liberal ­Democrat third division ministers control ­government. Labour should be the new generation party.

Z is for that crucial zone, the eurozone. Don’t worry – it will still be there in a year’s time. And the devalued George Osborne pound, like his discredited economic ­policies, will still be making life meaner and more miserable for British citizens.

It is too easy to see the election that is about to be fought as a proxy for the fortunes of the national political parties. Of course, many people will use their vote to protest at the actions of the Conservative Party in government. But fundamentally this is not a proxy-Westminster election. It will be fought out on many local issues as well as national ones. And let us not be under any illusion – Boris Johnson will do everything he can to ensure that the election is about celebrity sideshows, not the issues that affect ordinary Londoners.

The Conservatives need to take this approach because whenever the election debate focuses on issues affecting real people, voters say they prefer what my campaign has to say. It is because our campaign has grasped this central fact that we have been able to set the agenda now for many weeks – on the key issue of the Mayor of London’s stealth tax fare rises.

This week Labour’s campaign took out adverts in the London Evening Standard showing how Boris Johnson is pick-pocketing from public transport users by raising their fares. It follows our unprecedented campaigning on the first working day back under the new fares regime, with 2,000 activists covering over 400 stations across the capital. Supporters handed out half a million leaflets, tailored to their stations’ zone.

If elected, I will wipe out this January’s fare rise with a 7 per cent fares cut in an emergency October fares package this year. I will cut the bus fare to the 2010 price – down from £1.35 to £1.20, a cut of 11 per cent – essential after a 50 per cent rise in the bus fare under Boris Johnson. I will reinstate the zones 2-6 one-day Travelcard so that Londoners hit hard by its abolition are helped out. I will freeze fares throughout 2013 and ensure that after that fares overall do not rise by more than inflation.

We will implement this Fare Deal plan because fares have become increasingly out of step with the very real pressures people in London face. The cost of living in ­London is higher than the rest of country and the Mayor should be using his power to reduce the squeeze. That simple principle of protecting people in tough times is the core of our campaign message, and one the Tory Mayor’s record cannot match.

The impact of this has been to start to shape how the election is seen.  Richard Godwin for the Evening Standard covered the Fare Deal after our morning of mass leafleting under the headline “The mayoral battle will now be a fare fight” while Dave Hill in The Guardian wrote that: “There are signs that the Fare Deal campaign is ­drawing blood”.

Our message is that in tough times like these, Londoners can’t afford a Mayor who is so out of touch that he is raising transport fares, cutting police numbers but thinks it’s okay to have a second job paying £250,000 a year – an amount he calls “chicken feed”.  We are taking that message in a highly targeted way to voters in all parts of London, not limited to Labour heartlands, and receiving a very positive and warm reception for our fairer alternative.

Boris Johnson has a very distinct personal reputation, which he carefully seeks to maintain apart from his own party. Yet the reality is that he is a true blue Conservative whose re-election is a Tory priority.

The Evening Standard’s political editor Joe Murphy reported at the end of last year that:  “David Cameron has described Boris Johnson’s re-election for a second term as London Mayor as his ‘number one priority’ for 2012”, adding: “In a speech last night to Conservative backbenchers, the Prime Minister described victory in the capital city as ‘essential’ to the party’s strategy… According to an insider, he said there were other English and Scottish local elections on the same day but ‘keeping Boris in London was absolute priority’.

According to the Standard: “Conservative deputy chairman Michael Fallon said: ‘Boris’s election is the Big One. The whole party will be working flat out to make sure he wins London again’.”

In the Tories’ own briefings to the media, they make it clear how close the relationship is between the Tory Mayor and his Downing Street colleagues.  Benedict Brogan of the Daily Telegraph told his readers last summer that Boris Johnson, David Cameron and George Osborne have “near daily exchanges of text messages” and that “there is an informal understanding that when Boris plans to go off the reservation, he will alert the high command”.

We can be sure that, when these senior Tories are texting each other, they are not talking about how to put Londoners first – they are working out how to look after themselves.

By setting the terms of the debate on fares we are showing that there can be an alternative to Conservative policies that make you less safe and less well off. People are being made to pay through their jobs, pensions and services for an economic­ situation they did not create. Labour’s campaign in London stands for something fairer and better, firmly on the side of the majority. A Mayor who meets bankers more than police, who increases the number of people on six figure salaries in City Hall, and campaigns for a lower top rate of tax, is out of touch.

I care about this city and I cannot stand by when times are so tough. When millions of Londoners are struggling, I do not believe enough is being done to help them. Fares rocketing, police being cut, young people’s aspirations being shattered.  My kids are growing up in this city now and I don’t want them living in a city where no one is taking action to put Londoners first.

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