Category Archives: Politics UK

Reflections on general political developments and ideas in the UK

The Westminster elite aren’t criminals and they do listen – but they could sharpen up

Ukip supporters are rampant in Essex, in Kent, in Greater Manchester, and in many other places too. They turn up in vox-pops and in blog comments. And what comes through is a vitriolic hatred of the “Westminster elite”, by which they seem to mean any MP belonging to the Conservatives, Labour or the Lib Dems, plus anybody associated with them. “They aren’t listening”, or if the they are listening, “they aren’t hearing”. Any politician that does not agree that immigration is the root of the country’s troubles, and should be curbed drastically, is regarded as corrupt and useless. I have gone on about the Westminster elite myself, but these sentiments are nonsense.

Some members of the elite, for example Labour’s Simon Danczuk (whose seat neighbours the one Ukip nearly took in a by-election last week) and many Tories, are jumping onto the bandwagon – to try and show that they are “listening”. Yesterday David Cameron, the Prime Minister, promised that putting curbs on intra-EU migration would be part of his renegotiation of Britain’s EU membership. He seems to be talking about something much more drastic than curbing benefit claimants, which is about all that Labour (and Lib Dems) are offering.

To the angry, white, older blue-collar voters who seem to be the Ukip bedrock, “listening” means “agreeing and acting on”. Their anger is based on a series of half-truths or untruths, but they will not engage in any attempt at dialogue.

Westminster politicians are finding it very hard to engage with people who think this way. But let’s be clear about what the Westminster elite are and aren’t. They are not corrupt. Many campaigners think they are too open to big business lobbyists, and I suspect they are right. But the issues here are nuclear energy, weapons, environmental protection, GM crops, and so on, to which most of the angry voters are indifferent. And even so, politicians have proved far from a pushover. Also the Westminster elite do listen to “ordinary” people. They intensively study focus groups and opinion polls. Quite a few knock on doors; most do constituency surgeries. And as a result politicians have been talking non-stop about immigration and the EU since before the 2010 election. I have a deep suspicion that the voters complaining that politicians don’t listen are the ones that refuse to talk to them when they call.

The problem is that politicians are also wrestling with other problems, such as how to keep public services going, state pensions affordable, wages up, and people in employment. And they know only one way that works, which is through a healthy economy. This requires a degree of economic liberalism, though there is much argument about how much. That includes free movement of labour. Without EU migrants from Poland and elsewhere in the early 2000s, the British economy would have run into the buffers long before 2007. It is dishonest or ignorant of current Labour politicians to suggest that letting them in was a mistake; without them they may not have won the 2005 election.The economy is still in a hole now, but limiting EU migration would be a shot aimed straight at the foot, as limiting non-EU immigration is proving. The economy is held back by bottlenecks, skill shortages and a reluctance by some to do certain jobs, like fruit-picking; we need workers of all skills levels to tackle these gaps to get and keep the economy moving. Trying to second guess where these shortages are through ingenious bureaucracy is at best an inefficient remedy. Most of the Westminster elite recognise this, so they do not respond aggressively to public pressure for immigration curbs.

Still, the Westminster elite could help themselves by doing a number of things better. First they should be more sincere. That means not sticking to pre-prepared sound-bites and evasive answers to questions; it means exposing themselves to more risks. As an example, both Labour and Conservative managers want to neuter the television leaders debates at the next general election, because they have too many unknowns that might make their leaders look bad – still less do they want embrace new, more anarchic social media formats. And yet these debates are a priceless way of engaging the public. More sincerity means more gaffes and more rough edges – that is the price of honesty. You only have to look at the remarkable political success of gaffe-prone Boris Johnson to understand this. And if that means standing your ground on unpopular issues, so be it.

Next they need to think harder about the causes of pain rather than just its symptoms. The angst about immigration looks like a displacement of other ills. We can speculate what they might be: over-centralised political power, fewer opportunities to get a decent job, and so on. These aren’t easy to fix, and some problems aren’t even capable of being fixed – but there can be more creativity as to how to soften the pain.

Finally, they should get out more. Politicians that make regular, face-to-face contacts with their electors do much better than others. It reduces the sense of disenfranchisement. Douglas Carswell, the Tory defector to Ukip who won the Clacton by-election, seems to have realised this – and there are other examples in all parties. The MP’s job is to be interface between the public and political power. Too many focus just on the workings of power itself.

Electoral reform would help, though it is not a panacea. Many countries with different electoral systems have similar problems to Britain. But the whole attitude of mind that revolves around the idea of safe seats is surely toxic.

But really, for all its faults, the Westminster elite isn’t that bad.

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The Economist’s disgraceful prejudice on education policy

economist coverSome people hate The Economist; to them it is a proselytiser of that despised creed “neoliberalism” or just plain capitalism. Not me. I have been reading the Economist weekly since 1974 (from between the two British General Elections of that year), when I was just 16 and still at school. I loved its cosmopolitanism and that that it did not lets its opinions obscure the reporting of facts. It was opinionated, yes, but not prejudiced. Much of my writing in this blog has been inspired by my 40 years of readership. No other journal has come close in winning my loyalty.

The Economist has annoyed me of course. I felt a deep sense of betrayal when in 2011 it backed a No vote in the referendum on the Alternative Vote. My own strong support for AV dates from when The Economist itself persuaded me that it would be an appropriate and sensible reform. The chattering classes had taken against AV, and the paper followed the crowd. A perverse election result in Canada under first-past-the-post, reported in the very same edition of the paper, illustrated the case for AV perfectly. The paper’s support for the education reforms of the current government were built on similarly weak foundations, I thought, but these hadn’t strayed beyond mistaken opinion. Until this week.

The top article in the UK section, The new school rules, presents itself as a serious examination of the government’s education reforms. It reads like an article placed by a pro-government think tank, and not the original and critical journalism upon which the newspaper’s reputation has been built.

A bit of background. Under its first Education Secretary, the Conservative Michael Gove, the coalition government has driven through an eye-catching programme of reforms to England’s schools (in Scotland, Wales and Northern Ireland education is devolved). The centrepiece of this has been the establishment of autonomous “Academy” schools, independent of local council control. This built on the previous government’s policy, where Academies often replaced failed schools, and had to secure external sponsors to provide extra finance. This government has made it much easier to set up new Academies (referred to as “Free Schools”), and allowed existing schools to convert to Academy status without a sponsor. The government has done many other things too: established a “pupil premium” to channel extra funding to schools with needier children; refocused the school inspectorate, Ofsted; changed secondary school qualifications towards more academic subjects; refashioned the primary curriculum to something a more prescriptive and more to its political taste; changed teachers’ pay and conditions to give school managers more power; moved measurement of progress away from achieving arbitrary thresholds to measuring total progress. Given the general climate of government austerity, which has limited resources, these changes have been mainly to the good, though I fail to see the point of the changes to the primary curriculum, and the jury is out on the secondary reforms of qualifications.

But the Economist focuses almost entirely on the Academy programme, which it is claims is transforming schools and driving progress. It quotes evidence that secondary academies achieve more good GCSEs (the main secondary exam – “good” meaning achieving the grade C or above) than non-academies, even allowing for the number of pupils from poorer backgrounds. As it describes this progress it fails to mention two facts that throw an entirely different light on what is happening.

The first is that the most striking progress in recent times achieved by Britain’s schools has been in London, in the years up to 2010. Schools in apparently hopeless boroughs like Tower Hamlets pulled ahead of schools in much wealthier areas. This has been much written about and commented on – but it was achieved under the previous Labour government’s tutelage, working with councils of several political stripes. It was based on what I call “good old fashioned management”. A lot of focus was put on school performance, and where results were poor, school management was changed. Some failing schools were converted to Academies, not always successfully, but otherwise existing governance structures were used. The coalition has not undermined this achievement, which has largely continued under its watch (at least in areas I know about). But it is awkward for the article’s central thesis; the upward momentum in England’s schools predates the government’s reforms; it is far from clear whether greater autonomy has much to do with school progress.

The second awkward fact is that for ordinary schools that have converted to Academy status there is a bias towards better schools making the change. Schools who want to make the move on their own (i.e. without being folded into an externally run chain of schools) must achieve a high quality threshold. Rumour has it that one my local schools has been refused because standards aren’t high enough. Conversely schools with good performance often want to convert, in case an unexpected hiccup means that they are forced into being part of a chain. The article quotes evidence that the performance of schools that have converted is better than non-converters. Well, that is hardly surprising, but cause and effect have not been disentangled.

The article discusses the rather awkward fact that academy chains have delivered disappointing performance – I must acknowledge that it does raise difficult evidence in this case. These chains have a reputation of being brutally managed and focusing on a narrow curriculum – one reason that so many schools are anxious not to be swept into one. A bit of brutality is required in order to lift badly managed schools up to the standards of the best, and the London experience confirms that – but a broader, less performance-focused curriculum is needed to deliver the wider set of skills that the world of work (and outside it) demands. Schools have to be soft and hard both at once. It is no surprise to many that aggressively managed chains deliver at best only short-term results.

But the Economist seems to think that the problem is that management of the chains is is not aggressive enough. It suggests that one way to “turbocharge” the reforms would be to open up management of schools to for-profit companies, rather than just charitable foundations as now. If I was a cynic, I would suggest that the article was prompted by private sector company lobbying to be allowed to take over state schools – but I don’t believe that.

Unlike many I have no ideological objection to the use of the private sector in public services. But I do wonder whether the sort of aggressive performance-driven management that the private sector does well is what most state schools need. Private managers will be tempted to take two shortcuts. The first is to narrow the curriculum, which undermines the overall mission of education. At least competition might act as a check on this, as schools with too narrow a focus may be less popular. The second is more insidious: selecting the pupils by avoiding the neediest, through selective recruitment or exclusion. Whatever the formal controls against this, we can expect the private sector to find innovative ways around them, as this is the quickest way to improve margins. This then leaves a pool of needier pupils which will tend to be concentrated in other schools – when in almost all cases the best chances of meeting their needs is in schools with a good social mix. A vital social objective for state schools is to reduce the number of people who get into trouble of one kind or another later in life (crime, unemployment, poor mental and physical health). It is very important that schools handle the neediest cases well – and it is something that English schools have often been bad at. It is not something that private sector organisations have a strong enough incentive to deal with, and concentrating the problem into specialist schools is no way out.

When considering education policy in an international context, The Economist often says that teaching and management are the critical issues, and not other issues such as class sizes, money – or autonomy. English (and indeed British) education is nowhere near as good as it needs to be, and many schools and local authorities are complacent or defensive. Continued reform is needed. This needs to focus on getting good leaders in place, raising teaching standards, and ensuring that incentives and accountability are functional. No doubt academies, and even private sector expertise, has a role to play. It gives the politicians a few extra tools in the box. But to make autonomy the centrepiece of reform is a highly questionable approach, especially in a country, like Britain and unlike the US, where central government has such power over schools.

The author of the article was clearly inspired by visits made to well-run Academies. If he or she wants evidence that you don’t have to be an Academy to be a very impressive school, I am happy to offer them a tour of the wonderful primary school where I am Chair of Governors. That at least may open theirs eyes to what is possible without being an Academy.

I must allow The Economist to hold firm opinions rather sit on the fence. What is so disappointing is that this time that opinion seems based on such shallow foundations. And its discussion of the evidence and wider debate lowers the papers standards to those of less distinguished papers.

 

 

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Heywood & Middleton: banging on about the NHS is not enough for Labour

There were two parliamentary by-elections in England last night. At Clacton Tory defector Douglas Carswell was re-elected under the Ukip banner with a massive vote. This is a very striking result, but one that was entirely expected. The Essex seaside town of Clacton has a unique concentration of the older, white blue-collar types that are Ukip’s best hunting ground, and not a few lower middle class older white Tory types that are also tempted to vote for the party. The more thought provoking result was in the other election in the Greater Manchester seat of Heywood & Middleton. Ukip came within a whisker of beating Labour.

The best place to see the result is on Wikipedia. After searching the BBC and the main newspapers, all give snippets and verbiage, but don’t present the result simply and clearly – which says much about the narcissism of modern news reporting. The Labour vote share held at 40%, and even increased by a small fraction, albeit on a reduced turnout. The Conservative and Lib Dem votes collapsed (though both parties retained their deposits, a relief for the latter party); the racist BNP did well in 2010 (7% of the vote) but did not stand this time. Ukip gathered voters from all these sources to move from 2.6% to just over 40%. Given that this was a very short campaign – Labour moved the writ before its former MP’s funeral – this is a very significant achievement.

Labour were taking some comfort from the way their vote share held up, while the Tory and Lib Dem votes fell. This pattern repeated across the country could gift them a number of Tory and Lib Dem seats. We should not be surprised that professional election strategists could take pride in winning a House of Commons majority with one of the worst popular votes in Labour’s history (as 2010’s was) – but what kind of a mandate would that give the party’s leaders? The truth is that Labour’s strategy has gone off the rails. The plan is to hang on to the hard core of voters that the party retained in 2010, and to take about half of the Lib Dem vote. That should have taken them well past 50% in this constituency. For every vote they won back off the Lib Dems (and Tories for that matter), they lost one of their core voters to Ukip. Worse: in seats were the Lib Dems are weaker, for every two votes Labour wins back from that party, another one or more goes to Labour’s main opponents. Labour’s appeal is simply to weak to win.

Labour’s campaign was one-dimensional. They banged on about saving the NHS, which they claim is being sold off to private companies. This seems to resonate with voters, even though its relationship to the truth is weak – and if Labour were in power they would not be able to help much with the NHS’s troubles. Ukip’s policies on the NHS are far from reassuring, so this seemed to be a safe strategy. So Labour did not talk about Ukip’s favoured issue: immigration. This strategy clearly failed. Labour’s core, working class voters clearly want to talk about immigration, and are feeling ignored. But Labour does not know what to say without putting off other voters, such as those from ethnic minorities and liberals, to say nothing of its activists.

The trouble is that Labour is a fragile coalition of people who are united only in their dislike of the Conservatives. As soon as Labour start to become clearer about what their programme for government actually is, the more this coalition will fragment. Worse still, their campaigning is a classic mix of dissembling, lies and the building up of false expectations. This cannot bridge the gap of trust that lies behind the rise of Ukip.

To bridge the trust gap politicians must do things that hurt – that are against the apparent interests of their party and electoral prospects. The Lib Dems seem to understand this, to give them credit – though the public is unlikely to appreciate this until after next May, and their leader, Nick Clegg, has moved on. Some Tories do too – though not their leader, who will seemingly say anything to achieve a short-term advantage. But Labour has no conception of this idea. To them bravery is simply folly.

In the highly unstable mix of British five-way politics (including the SNP), it is entirely possible that Labour will achieve an overall majority. It may turn out to be a victory they regret achieving.

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#ldconf Nick Clegg needs to be clearer on the “smart, liberal and enabling state”

The Liberal Democrat conference ended yesterday on its fifth day with the party leader, Nick Clegg, giving his speech. By then I was on the train home, wishing to save money on fares as well as arrive home at a decent hour – though I have read a text version of the speech, and seen the comments. It ended an uplifting conference for the party. While good for the spirits, has it answered doubts over the party and its leader? It is a step forward.

The doubts centre around the party clearly articulating what it stands for. To date it has been keen to identify itself as covering the “centre ground”, and to spend time justifying its role in the coalition government. The problem with defining yourself as being centrist is that that you are using other parties to define yourself. The party risks presenting itself as either or both of “Labour-Lite” or “Tory-Lite”. This is not a convincing rallying cry. Neither is a list of policy proposals; if they are popular, the other parties will steal them. The Conservatives are already “stealing” the raising of tax allowances, the Lib Dem signature policy of this parliament. Lib Dem whinging about this, and the Tories getting the credit for the economic recovery rather than them, is all rather pathetic and will win the party no credit with voters. The public does not give the party credit because they don’t know what it stands for – beyond winning the prestige that goes with being in government. The policies and the record of action are the supporting evidence for a proposition, not the proposition itself.

Lib Dem activists have a strong idea of what the party stands for: liberalism. This is not the economic liberalism of the 19th Century, but one where the state plays an active role in making sure everybody gets the opportunity to develop and fulfil their lives. That “everybody” is a central idea – it is not qualified by national, ethnic, class or other identity. This leads to clarity around a certain set of policies: human rights, written constitutions, distributed political power, strong social insurance and a degree of redistribution of wealth and income, to improve the chances of the less lucky. There is also a strong environmentalist steak.

Amongst the general public, who do the Lib Dems need to convince? There are two main groups. First are those who are liberals, but who are more convinced by other parties – mainly Labour and the Greens, as the Conservatives seem to have given up on liberals. The second group are people who are drawn to non-liberal politics, being those of identity, individualistic self-interest, or a large centralised state, but might be convinced otherwise, perhaps as a second-best. A socialist may be convinced that liberalism is better than conservatism, if Labour are locally weak.

How did Mr Clegg and his party do? Better than before. Mr Clegg’s speech contained more about liberal values and why they make sense. He called for a “smart, liberal and enabling state”. The party made a clear stand against illiberal policies of their Conservative coalition partners. The signature policy Mr Clegg chose was parity for mental health with physical health in the NHS. If this is a bit tangential to liberalism (you don’t have to be liberal to support it), it will at least serve to draw attention. It showed the party capable of fresh thinking.

But it is only a start. I would like to hear more about the “smart, liberal and enabling state” – and in particular how it contrasts with Labour’s vision of the state. Indeed I think the party is being too soft on Labour, and needs to find some “wedge” issues that will pull liberals away from it. There is a bit of paradox in political presentation; you need to get over a strong positive message, but contrast is needed for visibility, which means that attacking other parties can be one of the most effective ways of defining your own. You need to say what you are not, and how you are different. The party is doing this with respect to the Tories, and the Tories themselves are lending a helping hand. But to a Labour sympathiser it opens the question of why the party is in coalition with the Tories, and thereby letting in a host of nasty Tory policies. It isn’t enough just say that the party stopped the worst ones, and put through one or two ideas of its own. The main reason the party ganged up with the Conservatives was the hopeless state of Labour – something that went further than their electoral failure.

Labour is a loose coalition of values and interests, albeit with a strong tribal solidarity. Liberals are an important part of this coalition, alongside public sector workers, state dependents, working class conservatives, left wing intellectuals and northern city council mafias. Lib Dems need to show that this Labour coalition is unable to produce coherent policies for government, still less implement serious liberal reforms. This means developing the vision of a “smart, liberal and agile” state, and showing how this is different from the Labour and Tory versions. At this conference the policy paper on public services presented some interesting new thinking on just that. That is only one piece of a jigsaw.

The Green Party is also worth a bit of attention in my view. It has moved on from a focus on environmental policies. In its current statement on values the first two of its three policy bullets are its opposition to austerity and to privatisation for public services – and only then does it cover climate change. This is no more coherent than Ukip’s policy stance. In Scotland the Greens supported independence in spite of the fact that the Yes campaign’s economic strategy depended on getting carbon out from under the sea and into the atmosphere as fast as physically possible. The party’s leader in England leader, Natalie Bennett, has also said that the party wants to avoid the responsibilities of government, and to limit any cooperation with a future government to case by case parliamentary support. All this is half-baked and could break up quite fast under scrutiny. Still I’m sure the professionals would urge that ignoring them is the best way of handling them. But they picked up a lot of liberal votes in my neighbourhood in the European elections this May.

But one thing is going for the Liberal Democrats. The main parties are concentrating on a core-vote strategy, leaving space on the centre ground. If the party can spell out its liberal vision more clearly, it can surely advance from the 7% support that it currently languishes at. It is gradually winning more respect, to judge by newspaper editorials. Its conference in Glasgow was a step forward.

 

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#ldconf day 3. Cable and Clegg defend the coalition record with confidence

imageDay three of the Lib Dem conference in Glasgow and this 50-something attendee is getting a bit tired. The mood continues to be good, but the controversies are rather minor. I will offer a few highlights.

There were two important set-pieces. Vince Cable’s speech and the leader’s Q & A. Mr Cable’s contribution was more assured than Danny Alexander’s yesterday. It was largely a defence of the party’s record in government. In policy terms he stuck to the same line as Mr Alexander. A strict policy on the deficit to be softened significantly for investment in infrastructure, including housing. He claimed that the Tories were dead against this. This is welcome, and backed up by a recent research paper from the IMF. He readily got his standing ovation.

In the Q & A Mr Clegg showed off his grasp of detail. He criticised the Conservative and Labour parties for being uninterested in political reform beyond short term tactics. He may right. The question is whether they can be manoeuvred into something more fundamental by their promises to Scotland. I am not optimistic except that after the next election both parties may fall apart, opening up British politics.

Policy did not get my full attention. There was a motion on building more houses, which was worthy enough. At a fringe group Generation Rent and Crisis, housing pressure groups, urged us to present a more coherent strategy on housing and the rented sector in particular. They are right.

In the evening I attended a fringe on teaching science and maths, sponsored by the Royal Society. I spoke up to support the key role of primary schools. Interestingly a business lobbyist said that employers needed skills rather than knowledge. This is the opposite to what seems fashionable in Westminster, where they attack “soft” skills-based teaching in favour “hard” facts. Well maybe some teaching of skills is a bit soft, but this is ultimately what education is for. I was always taught that education was to teach you to think, not recite facts.

On Sunday evening, at a fringe on Liberal thinkers, veteran Scottish MP Malcolm Bruce said that he joined the party at one of its low points. It was the only way in which he could promote his liberal values. He was being urged that he had to take sides between the Tories and Labour- but he rejected this notion. Something like this idea drives the party now. It is deeply unfashionable. Many cannot forgive it for dealing with the devil in the current coalition. But these are the same old people who feel that there are only two important movements in politics and that ultimately you choose. But both the socialists and the conservatives are fundamentally wrong, and any deal with either is a matter of temporary pragmatism.

 

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#ldconf Day 2. Lib Dems steadily move to the left

In an election year you can’t expect too much excitement at a party conference. Not if things are going well. And day two of the Lib Dem conference was not terribly exciting. But for those who want to read between the lines there was plenty of interest.

The big item in the morning was a motion on welfare. The progenitors of the motion were from the left of the party, or at any rate those who have been resisting the party’s flirtation with “neoliberalism”, as many on the left like to call it. I missed the debate, but apparently it faced no serious resistance. This no doubt partly reflects careful wording by the movers, but one of them told me that two years ago the leadership would have resisted a motion like this.

The morning session (technically afternoon) ended with a speech from Steve Webb, the Pensions minister, and one of the most successful ministerial appointments from any party in this government. It wasn’t very exciting and the reception was a bit muted. This was a bit of an achievement in a way. Mr Webb doesn’t do political grandstanding and the reforms he has pushed through are both radical and liberal, and yet have somehow achieved something close to political consensus. Which makes it difficult to make political capital. But it’s liberal politics at its best. It Is achievements like this that make Lib Dems feel that they handle government well – and are so much more than the chaotic protest party that it used to be portrayed as.

After lunch came the Treasury Secretary Danny Alexander, who had played a big role in the Scottish referendum campaign. He dressed casually and seemed tired. He delivered his lines flatly, failing to pause properly for dramatic effect. And yet his speech had stature. First he kept faith with his Scots co-nationals, and was determined to build on the referendum campaign, and not quietly bury it, as one suspects that many English politicians want to do. On Treasury matters he had quite a simple message. The deficit needed to be reduced to zero, importantly excluding investment. The overall national debt must be brought down. But this must be done with a “fair” sharing of the burden. By this he meant that the tax and benefit system had to retain its strongly redistributive character. In stark contrast to Conservative proposals. I agree though my reasoning may be a bit different from his. I think the days of steady economic growth may be over. In which case deficits and debt will not be as sustainable as previously assumed. But borrowing for investment is an important exception, and I hope he sticks to that in the face of Treasury scepticism. And redistribution is economically efficient in an age where the winners seem to be taking everything. Mr Alexander got a standing ovation that the speech itself probably did not deserve.

The next act was a long motion on reforming public services, following a policy paper. The scope of this may have been too ambitious, and yet the thinking behind it was at the same time radical and pragmatic. We have to move on from an over centralised and compartmentalised approach to public services. We need to solve problems rather than manage throughput. This means more devolution and local problem solving. This was the thinking behind the motion, though it was easy to be lost in the detail. A wholesale rejection of the purchaser provider split in the NHS was rejected, but an amendment that facilitated radical changes at local level was allowed. While the right continues to believe in more throughput management using private sector outsourcers, the Lib Dems are moving in a different direction.

Apart from a rather stricter view of government borrowing than many on the left think is appropriate, this all amounts to a shift leftward for the party. The social liberals are slowly winning the argument. And, as somebody who has tended to side with the right in the past, I have to admit that this looks the right way to go.

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#ldconf Day one: clear vision and constitional confusion

The Liberal Democrats gather in Glasgow again for their annual conference, as we did in2013. This is not as interesting as it might have been if Scotland had voted Yes in the referendum. But Glasgow is a city that I like, for all that healthy eating seems a bit of a mystery to the locals. On the first day we were treated with a clear mission and a muddle.

The clear mission came through at the conference rally in the evening. It was greatly aided by the Conservative party’s lurch to the right, with its promise of unfunded tax cuts and attacks on human rights laws. They are avoiding a centre ground strategy, and instead they are looking for “wedge” issues that will peal away Labour’s more conservative supporters and push back Ukip at the same time. With Labour unwilling to stake out a clear ideological vision, Lib Dem activists can readily believe that their country needs them. There is clear ideological space for a liberal party. The process of rallying supporters is therefore straightforward. Whether this is enough to overcome the public’s scepticism of the party remains to be seen.

The muddle came from an attempt to reform the party’s internal voting system so that all members have a right to vote at conference and on internal committees, rather that representatives coming through a supposed election process from local parties. This was styled as “one member one vote”. This is rather overdoing it. To vote you still have to turn up at conference. It is a sensible idea because, with the weak state of local party organisation, the selection of representatives is chaotic, and largely boils down to self selection and luck. It is a far cry from democracy. The proposed system is more practical In principle. Also there is a misunderstanding about the role conference plays in the policy process. It isn’t a deliberative parliament designed carefully represent the membership, but a test run for new policies on people sympathetic to the party’s principles. Exactly who the people are in the conference hall isn’t so important. No doubt the new system will bring problems in its wake, but it is hard to believe that they will be worse than the present arrangements.

So what’s the muddle? The principle is simple but its implementation is complex. The proposed amendment was drafted in too much of a hurry and left many gaps. So we ended up approving a rather confusing motion whose impact is unclear. It’s going to take quite a it of sorting out – not ideal in a big election year. Perhaps it is a fitting verdict on modern politics. Lots of vision and sharp communication, but short of the patient detail needed to make anything actually work.

Still, with a clear mission spirits are high.

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Ed Miliband is Labour’s John Major. Short term success presages long term disaster

Britain’s two big party conferences are over, setting out the battle lines for next year’s general election. I keep seeing parallels with the 1992 election, which the Conservatives won unexpectedly. In the past I have drawn direct parallels between the two main parties then and now. But in interesting ways the Labour party resembles the Conservatives in 1992: pulling off an unexpected victory, leading five years later to its worst ever defeat.

The Labour conference was shocking. This was supposed to be a party with its blood up, ready for a battle to crush those hated Tories and despised Lib Dems. Instead we witnessed a subdued Labour Party, simply hoping that the other side would lose. The plan is to win the General Election in May 2015 by default. There are three elements to this plan. First hang on to the hard core of voters that were loyal at their low point at the last election in 2010. Second, snaffle up an extra 5-10% of voters who voted Lib Dem last time and are fed up with that party. Third: allow Ukip to eat into the Tory vote. Labour strategists think that these three things will be enough to give Labour an overall majority. The party does not have to spell out a clear policy vision, just create some mood music by talking tough about the nation’s finances, and “saving” the NHS.

It could work. This kind of strategy reminds me a lot of John Major’s strategy for the Conservative Party that he led from 1990 to 1997: visionless, and relying on its opponents’ weaknesses. This led Mr Major to that spectacular and unexpected victory in the 1992 election, followed by the Tory party’s worst ever defeat in 1997. Something like the same fate awaits Ed Miliband’s Labour Party. At Labour’s conference he failed to address doubts about his leadership. His speech was a disaster. It was an overlong, rambling, whinge-fest, full of speechmaking clichés. His act of not using a script and teleprompt drew much praise the last time he tried it. This time it meant that he forgot to include some vital messages on the deficit and immigration, passages that it is hardly surprising his subconscious suppressed.

Over the four years or so of Mr Miliband’s leadership, the Labour Party has proved remarkably united, and in London at least, its local organisation looks in good shape. After three terms in power, this is a remarkable achievement, considering what happened to the Tories after they finally ended 18 years of power in 1997. But this achievement looks more like Mr Major’s clinging on to power after Margaret Thatcher was ousted in 1990. It comes at cost of not resolving conflicts within the party. In particular much, if not most, of the party’s grassroots thinks that austerity is the malicious pursuit of class warfare by the rich, and that capitalism is an utter failure. They are egged on by a collection of intellectuals untroubled by the responsibilities of ever having run anything. But the party’s leaders, who have genuine ambitions to govern, realise that this is mainly nonsense. Though they have been clear about this in their speeches (when they remember to mention it), there is no sign that their followers have actually taken it on board, such is their detestation of the current government.

And that’s not Labour’s only faultline. Labour are under attack in their working class strongholds. Ukip are taking votes from the party in northern towns, where the party is not used to being challenged. The SNP made a very successful appeal to the working class voters in Labour’s stronghold in Glasgow in Scotland’s referendum. Labour’s leaders are being urged to respond to this by sounding “tougher” on such touchstone issues as immigration and human rights, which is taken as meaning undeserved privileges to migrants, terrorists and criminals. Labour have made some mealy mouthed concessions, especially on immigration. In particular they suggest that the Labour government was mistaken in allowing free immigration of east European migrants after their countries entered the EU. This is very muddled. The tension between liberals and working class conservatives is palpable.

For now Labour are papering over the cracks. Even if they hold together until the election, there is sure to be an explosion after it. If they win, a Labour government will be utterly unable to reconcile the conflicting ideas of their supporters. They will simply pick up where the last, deeply unpopular, Labour government left off. If they lose, their supporters will be unable to understand why, given what they see as the self-evident failures of the coalition years. And if the party is forced into a coalition with the Lib Dems (if that party does better than expected), or a grand coalition with the Conservatives, the reactions of Labour’s supporters can only be guessed at.

Meanwhile the Conservatives are sharpening their knives. This party’s divisions are even greater than those that Labour is troubled with. But their leader, David Cameron, delivered a strong conference speech, setting out a very clear strategy for undermining Labour’s passive electoral hopes. This is the familiar “two-horse race” theme, so that Mr Cameron’s leadership skills can be compared favourably with Mr Miliband’s. And then there is tax. Labour’s ambivalence over reforming the public sector and benefits can be linked to the prospect of higher taxes for the majority.  Interestingly the Conservatives are making no attempt to woo middle of the road liberals, attacking the Lib Dems for stopping their illiberal ideas on civil liberties. This is no doubt part of their strategy to woo back Ukip defectors. But they may also calculate that raising the liberal credentials of their coalition partners may help the Lib Dems win back some of their defectors to Labour. This vigorous Conservative attack on Labour will put the latter under severe strain – though it is difficult to see how the Tories can win outright.

The outlook looks dire for Labour. Things are no better for the Tories. It is difficult not to think that Britain’s traditional two party politics is on its last legs.

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Real devolution is about taxes

The Scottish referendum was supposed to change everything. It was supposed to have created a constitutional crisis that Westminster politicians could not ignore. Well, the Labour and Conservative party conferences have been doing their very best to resurrect a different narrative, with a rapid return to the usual political nonsense. But before long the House of Commons will have to consider further devolution to Scotland, which will bring matters back into focus. It is still worth thinking about the practical issues of devolution. And the biggest issue that needs clearer thinking is tax.

Politics is not just about creating, changing or abolishing laws. It is about balancing revenues and expenditures. In fact, in modern politics, this latter is probably the most important job of politics. How much to tax? Where to spend the money? Unfortunately, the British model of devolution shies away from the taxation side of things. Central government passes on cash grants to the devolved authorities, who have very limited tax-raising powers of their own. Devolution is about spending priorities, not about how much to spend overall. To get more money, a devolved authority has to apply political pressure to the central government, who may or may not grant it. This creates a very unhealthy tension between the various levels of government. Or, to put it another way, if the devolved government finds itself short of funding, it can just blame the central government.

And the Scottish National Party (SNP) has been skilfully exploiting this tension to undermine the union. Scotland does have a rather fudged right to vary the rate of income tax – but is has never used it. Instead, it is blaming the UK government, and hence the union itself, for imposing “neoliberal” policies on Scotland. In the referendum there was a highly mendacious, but effective, claim that the NHS would be safer in an independent Scotland – in spite of the fact that the local NHS is already run by the Scottish government.

But the ability to raise taxes is one of the essential things that defines what a government is. Meaningful devolution, whether to the British nations, regions or local authorities, must involve the freedom to tax. There are many ways in which this is done in the various systems across the world. The most extreme is in the United States, where the states have almost unlimited freedom to tax, and where local taxes are clearly separate from federal taxes. That latter point is very important to achieve democratic accountability. In other countries the freedoms of devolved authorities is much more tightly defined. It is well worth thinking about what sorts of tax it is practical to devolve.

The classic economic answer to this is that the more geographically tied a tax is, the easier it is to devolve. So taxes on property are good to devolve; taxes on financial investments and capital are not. Let’s look at the British tax system in this light.

There are four main types of property tax. Council Tax, Business rates, Stamp Duty and Capital Gains Tax (CGT). The revenue from Council Tax already goes to local authorities, but its structure is set at national level, and powers to vary it are heavily constrained (though the Scottish government has fewer restrictions). Business rates were highly centralised, but this is being released back to local authorities in the typical sort of fudged British way that makes accountability unclear. Stamp Duty and CGT are tangled up with the same taxes on highly mobile assets, and are centralised. It would be quite easy to disentangle Stamp Duty on property transactions and devolve them – but much more difficult for CGT. But we have to be careful; financial engineers can blur the distinction between property and financial investment (the property can be held by an investment trust, for example), so anti-avoidance provisions would need to be designed.

At the other extreme we have capital taxes. These are Income Tax on the income derived, Stamp Duty and CGT again, and Corporation Tax. I will come back to Income Tax. Corporation Tax is the most contentious issue. Both the Scottish and Northern Irish governments want to be able to set their own rates. But this is usually dismissed as being impractical, or leading to tax avoidance in a sort of negative-sum game. Nothing is more mobile than capital, after all, and Corporation Tax is a quintessential tax on capital. This line of argument is overdone. One idea might be to determine profits at a UK level, but allocate using some variation of the “Massachusetts formula” using property, employment and sales as the basis of regional allocation. This works well enough in the USA, and I have long advocated its use internationally too. If all a company has in Scotland is a brass plate on a registered office, the Scottish Government would not be able to tax it.

In between capital and property we have people – or more properly income earned through employment, whether directly or deferred, though pensions. These are taxed through Income Tax and National Insurance. Income Tax is the most politically accountable of all taxes, and so it is quite natural that most debate centres around how this might be delegated. But this is very messy. It is also levied on investment income, and then you have the complexities associated with rate bands and tax free allowances. It would be much better to devolve National Insurance, either just that paid by employers, or including the Employee tax too. It could be renamed “Local Income Tax”. The tax was originally set up to fund social benefits such as pensions and unemployment benefit – but the Treasury has long since broken that link. There is one important issue with it though: it is not levied on pensions. But pensions should be a UK issue that is not devolved. Regions with a high density of pensioners would suffer from a low tax base: but this can be equalised – and I don’t think it is unhealthy for regions and localities to have an incentive to encourage employment, rather than just property ownership.

Two other areas of taxation are important. First is VAT (and theoretically, any sales tax). This could be localised, but there are two difficulties. First is that with the development of online sales, it is increasingly difficult to locate a sales geographically – something that has become a big problem in the US. The second is that VAT is tangled up in European Union treaties and law. It is best left alone. The other area of taxation is natural resources, and especially oil and gas. This can be geographically isolated, though most oil extracted in English waters is landed in Scotland. This is the biggest bone of contention between Scotland and Westminster. But I would be tempted to call the Scots bluff and devolve it. After all most of the issues of infrastructure that go with resource extraction fall on the Scots government.

So what is my straw man for Scotland, or any other devolved region? First, I think a diversity of sources of revenue is a big help.  I would create a new Local Income Tax in place of or alongside National Insurance, that would initially be structured in the same way. Next I would allow Corporation Tax to be split according to the Massachusetts formula, with variable rates. I would give devolved authorities more powers over Council Tax and Business Rates. I would devolve oil taxation. I would consider establishing a new property gains tax in place of CGT on property.

A fantasy I am afraid. The UK Treasury remains the most powerful force in British government. It has no intention of conceding any of this – and would feel the state would be fatally undermined if it did. It would rather fudge something around Income Tax – the one tax that I think should be entirely “Federal”.

 

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Is austerity an economic failure or a fact of life?

The British Labour Party conference proved a bit of an anti-climax. After the excitement of the last week’s Scottish referendum this was probably inevitable. All the more so since the Labour leadership did not want to talk about the important issues that referendum has raised on for the British constitution. But this conference marked in important stage in the evolution of the Labour leadership’s policy platform. They have finally, publicly and unequivocally accepted austerity as the centrepiece of their economic policy. This is rather muted, of course. The right wing press, who still set the country’s news agenda, do not want to give Labour any credit for this. Labour’s left wing supporters still think that austerity is a failed economic strategy, promoted by a “neoliberal” elite as a means of shrinking the power of government. These supporters do not want to be too vocal this close to a General Election; besides they were soothed by some diversionary promises regarding Britain’s National Health Service (NHS) and the minimum wage. But this left wing critique of austerity bears further examination.

It is expounded with some clarity in today’s Guardian by the journalist Seumus Milne: Austerity has failed, and it isn’t only Labour’s core voters who want change. To start with Mr Milne points out that Labour’s core voters, working class people, are unhappy and Labour can’t take them for granted. In Scotland they defected en masse to the SNP’s Yes campaign – and its claim that Scottish independence meant that they could roll back austerity. In England Ukip is making inroads into Labour’s core vote. Labour can’t simply take these voters for granted and then go after the “centre ground” voters who are liable to be swayed by the right wing press. This is perfectly true, of course, but not very helpful in its own right.

He then goes on to the familiar critique of austerity (cutting back public expenditure), which is that it has failed both in Britain and elsewhere in Europe. In Britain, growth is based on shallow foundations: unfunded consumer expenditure; average living standards are still sinking and many poorer people are suffering real hardship. In other European countries, notably France, there is no growth at all. This critique builds on that of Keynesian economists. In the earlier years of the government’s austerity programme they suggested that by cutting demand, or refusing to stimulate it, austerity simply created a doom-loop of shrinkage – or failed to ignite a virtuous circle of positive demand. The cuts were simply too early. This critique was eagerly seized on by the left. The trouble is that in Britain it has been overtaken by events. Growth has returned, mainly as the result of increased consumer borrowing, but also through higher business investment. There is not need to use public money to stimulate the economy further. Now is the “later” that the Keynesians were talking about when they said the cuts should be made later. It is does not matter that the initial spurt of growth was based on shallow foundations, as Keynesian fiscal stimulus is open to exactly the same criticism.

In fact the government’s application of austerity never lived up to the rhetoric. The cuts have been relatively modest, and as a result the deficit (excess of government expenditure over taxes and other income) has not been reduced by anything like as much as the original plans. The government finances still look very shaky and unsustainable. To a large extent things have been propped up by the Bank of England buying up government debt (“Quantitative Easing”, or “printing money” as some economists would have it). This only works when inflation is not a serious threat, and the Bank has indicated that continued purchases are no longer sustainable.

Things get worse when you look at the details more closely. The Economist points out that the country’s tax revenues are not keeping up with the country’s growth rate, making the deficit harder to cut. The reasons are not entirely clear, but two contributory factors should cause those on the left to worry. The first is that the government has been rapidly advancing tax free allowances, a flagship policy of the Liberal Democrats. This has helped relieve the economic pressure on the oft-forgotten marzipan layer of Britain’s poor. Those who are working and do not qualify for state benefits. But it also means that if wages are stagnant the government sees little benefit from growth. The second, related, factor is that Britain’s tax take is heavily dependent on the very rich. The Economist says that the top 1% of earners are thought to contribute 28% of income tax receipts. The position of other taxes may not be so very different. That means that pressure on the very rich, and notably the banking sector, is choking off tax receipts. All this suggests that raising taxes without hurting the ordinary working classes will be very difficult to achieve.

The serious economic case against austerity is not quite dead, though. The FT’s Martin Wolf, for example, suggests that prolonged fiscal (and trade) deficits may be required to counterbalance the insistence of some countries, notably China, to run export surpluses, and so create a surplus of savings. But his suggestion is that state funded investment is the best way of achieving this, not the continued propping up of the benefits system and a high volume of public services. That still leaves the most painful aspects of austerity intact.

The fact is that some very powerful forces, global and local, are bearing down on economic growth. These include demographics, the evolution of the Chinese economy (reducing the supply of cheap exported manufactured goods – so important to developed world living standards in the 1990s and 2000s) and (perhaps) by a focus amongst the slightly better-off on quality of life rather than income maximisation. It was once thought that any well-functioning developed economy could grow at 2% a year. That now looks infeasible. Which makes the management of government debt (and private debt for that matter) a serious long-term problem. It gets worse, as to achieve any sort of growth requires the economy to become more efficient, not least in public services. This involves the sort disruptive changes that the left’s core supporters hate most of all.

To be fair on the left, though, one of the causes of low growth is the excessive accumulation of wealth by the very rich – and this can only be tackled using an agenda that looks leftwards. But chasing down this wealth is increasingly a global problem, that needs global solutions, and not socialism in one country. This is ironic, as one of the symptoms of working class disillusion is a rejection of internationalism. It is no coincidence that the right wing press is happy to undermine international institutions, though.

Mr Milne calls for some kind of post capitalist economic reform, with increased state intervention. It is hugely unclear what this reform agenda would comprise, and whether it could work. The last country to vocally reject capitalism was Venezuela, whose oil wealth allowed it to cock a snook at the capitalist world. That is ending in utter economic and social disaster. Starvation and oppression in North Korea, and terminal economic stagnation in Cuba offer no better way forward.

The world is changing, and many Britons hate it. But with large trade and fiscal deficits Britain must embrace change or face economic catastrophe. That is the truth that Labour’s leaders are facing up to – and it is not a spineless surrender to the forces of big business.

 

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