Politics UK – Page 25 – thinking liberal

TIm Farron aspires to lead the political left. This is optimistic

Tim Farron, the Lib Dem leader saved the best until last. His speech to close the party conference in Brighton yesterday was a barnstormer. He was interrupted by standing ovations several times. It was up to the standard set in Bournemouth last year. How much substance lies behind the expansive rhetoric?

The speech was ambitious. Tim set out make the Lib Dems the main opposition to the Conservative government, accusing Jeremy Corbyn’s Labour Party of abdicating the role. This is another example of the supreme, irrational optimism that, as former MP David Howarth pointed out in a fringe meeting, is the Lib Dems greatest strength and weakness.

Tim continues to use his big speeches to stake out the political ground for the party, on which we might hope for more substantial things to be built. The party’s policy motions at the conference failed to build anything much though. The many new members were no doubt delighted to meet up with so many like-minded people, and learn about how politics works – but would have struggled to understand what the policy debates were for.

Tim places the party is the unambiguously on the left (or among the “progressives” in the favoured, rather misleading word), by defining it in opposition to the Tories. With the Conservatives hitched to Brexit, this is safer than it has been – but not as safe as trying to get the party to define its own, distinctive place in politics. Interestingly he made an appeal for the Lib Dems to be the party of business and free enterprise, and urged businesses to switch allegiance – and this went down quite well amongst the members. This is not the first time he has planted such hints, but I’m still unclear of what it will mean. Where I want it to go is a model of regional economic development not dependent of central state largesse. We shall see.

But the main policy fields sketched out were on Europe, health and social care, and education. The party is unambiguously pro EU, wishing to draw in Remain supporters. Tim advocates a referendum on whatever alternative to the EU the government eventually reaches. This may be cunning positioning, but I struggle with the idea as serious policy. The “destination” as he calls it probably will not be clear until Article 50 has been invoked and the bridges burnt. Hopes for some sort of middle way between hard Brexit (being outside the single market or a customs union) and full membership are fading. Still this is changing terrain and a more coherent pro-EU position may emerge. Nothing came out of the conference on the party’s vision for the EU itself, even though the institution is clearly in crisis. Where Tim was much stronger was in acknowledging the concerns of working class Brexit voters, referring to his own Lancashire working class roots. He is not trying to blame the voters, but to build bridges. This must be right, if not entirely consistent with some ideas of a “core vote” strategy.

He is much braver on health and social care. Tim, and his former leadership rival Norman Lamb, have identified that health and social care are in crisis. Norman, who remains highly respected in the party, is putting together a commission of experts to develop new vision – and one that will probably involve higher taxes. This is promising – it entails some thought leadership on an issue the public really cares about. With Labour bogged down in union vested interests, and the Tories lacking convincing policy, this development starts to answer the question “why the Liberal Democrats?”.

Alas there was much less thought leadership on education. The party’s instincts are sound enough, but I don’t think Tim, or many in the party, have quite caught up with where schools really are, rather than some rather lurid caricatures. But with the Conservatives veering off to the blind alley of school selection, the political opportunity remains for the party. Yet it would be good if it could develop more ambition. There is a policy working group on education (I applied but was not included) – but these groups tend to square off the party’s internal pressure groups, rather than try to develop a wider public debate – which the health initiative is clearly intended to do.

Tim also developed a general direction of travel for economic policy. He wants more for the regions outside London and the southeast – led by infrastructure investment. He said that these areas had been let down by both the Thatcher and Brown/Blair governments, who were seduced by the bankers, and under-invested in infrastructure and skills. There is something in this. And he did not walk into the leftist trap of employing abstract villains, such as neoliberalism or austerity. This is all sound, but not very distinctive. He could have been much stronger on green investment, but I think the party has sound instincts on that.

But what of my question of last week, about how the party is developing a narrative on coalition? It still wants to play both sides on this, and Tim talks about it as little as possible. He neither sells the coalition’s achievements, nor condemns it as a mistake. I attended a very interesting fringe with former ministers David Laws and Chris Huhne on the coalition years. They acknowledged errors – on tuition fees, benefit reform and NHS reform in particualr, but still enthused on what the coalition had achieved. Fine, but the party still has to explain how it can be of the left and at the same time prop up a government of the right. “That was then, and this is now” is about as good as it gets. The truth is that it very hard for the party. Some members expressed frustration that it does not make more of its achievements – others find many of the things the coalition did (notably on benefits and legal aid) a betrayal of the party’s principles. Expect the muddle to continue for a while. Personally I want the party to rethink its exclusive identification with the left, while seeking to identify areas of agreement with it. The party will help the left by becoming semi-detached – but in the right circumstances it will work with the right too.

And that takes us to a further question. How will the party work with other parties to get things done? It is all very well for Tim Farron to condemn Mr Corbyn’s leadership of Labour as an abdication, but what if Labour, under Mr Corbyn or otherwise, gets its act together? Tim did not rule out working with other parties, and there was plenty of talk at the conference of working with Labour and the Greens. I have bought a book, The Alternative, which tries to develop this – and I will report back when I have read it. For now it is far too easy for us Lib Dems to simply rule out working with Labour and dream to replace them, rather than wake up to the cold, hard realities of how little party is trusted. Working with Labour is about the only way the party is going to achieve anything practical if it rules out working with the Conservatives again. It is fanciful to suggest that Labour will collapse and leave the field clear for the resurgence of the Lib Dems. But the party can still pick off Tory seats beyond Labour’s reach. Surely we are better off trying to get some form of constructive engagement?

What is clear to me is that the left needs to develop a new policy agenda which is capable of capturing the imagination of a sceptical public. The Lib Dems are engaging in this process. But, to put it at its kindest, it is far to early for the party to imagine that it can lead it.

To progress the Lib Dems must confront the coalition years

This weekend the British Liberal Democrats go to their main annual conference, in Brighton. They expect little media coverage, but buoyant membership should ensure a lively event. These members face a troubling question: how to rebuild the party’s electoral base. To do this they will have overcome its ambiguous feelings about its recent past.

Notwithstanding increases in membership following the 2015 General Election and this year’s EU referendum, there can be no doubting the party’s dire straits. It lost the overwhelming majority of its elected representatives at all levels over the period 2010 to 2015, when it was in coalition with the Conservatives. It has just 8 MPs (down from 57). The party’s poll ratings bump along at about 8%, ahead of the Greens, but usually behind Ukip, and nowhere with sight of Labour, notwithstanding that party’s troubles, never mind the Tories. There have been gratifying local by election successes over the summer, but only where the party has sufficient ground strength to fight an intensive campaign; elsewhere the party’s vote is as like to shrink to 2-3% as to advance to the giddy heights of 10% or so. There is no sign of a substantive breakout.

To do this, as I have written before, the party is going to have to do two things, which are in tension. The first is to build up a loyal, core vote of people with open and liberal attitudes, that will stick with the party no matter what. The coalition years exposed the lack of such a core mercilessly. Even the 8% that party managed in 2015 can’t be classed as a core vote. And yet there are plenty of people out there who are potential core supporters, if the party can build trust. This is the pitch made by election expert Mark Pack and former Cambridge MP David Howarth. I broadly support this, but the second thing the party needs to do is win over floating voters at elections – people who don’t quite get the party’s core values, but who can be persuaded to support the party temporarily on, usually, quite narrow grounds.

This tension haunts all political parties, but Lib Dems need to understand it better. The problem is this: Mark and David have shown persuasively that potential core voters are left-leaning. But the most promising pool of floating voters are right-leaning. No other party is going after soft conservatives – and these could be decisive. The Lib Dems need to be a left-leaning party that can appeal to right-leaning voters.

There’s another dimension to the problem though. It is the general disengagement of the public from the ins and outs of politics. A friend, Douglas Oliver, made this point to me recently. He made the same point to columnist Matthew Parris in 2012. Mr Parris coined two laws; Oliver’s first law: “Memories dilute each other” and Oliver’s second law: “In the study of politics, close attention distorts judgement.” What Douglas is suggesting is that we who follow politics closely lose the wood for the trees. We are concerned with events and details that never receive the attention of the wider public. This has two consequences. The public will base their judgements on a much narrower range of facts and ideas than experts. And they have much longer political memories than experts, because events do not crowd out memories in the same way. It took over 20 years for Labour to exorcise the memories of their disastrous rule of the 1970s – and only then after their leader, Tony Blair, made that exorcism his prime focus – putting it ahead of party unity. Equally, Labour leader Ed Miliband’s failure to be clear about Mr Blair’s legacy fatally undermined the party at the 2015 election, leading to one of its worst results ever. The public weren’t impressed by lots of fancy new policies and warm words, and Miliband’s idea that the party should focus on the future, not the past. But the past is the main thing ordinary voters know about political parties.

That’s tough for the Lib Dems, because about the only thing the public really knows about the party is its record in coalition. All conversations by the party with ordinary voters will start with the coalition. The party might want to start somewhere else – Europe perhaps – but they are as unlikely to succeed as Mr Miliband was with energy prices, austerity or inequality. Which means that the party must decide what it thinks about its recent past.

There are two ways this can go. The first is to attempt what Tony Blair did with Labour. To exorcise the coalition years as a terrible mistake which the party will never repeat. This will need more than words. It will mean rebranding the party, perhaps even changing its name (though unfortunately there is another “Liberal Party” already registered – perhaps “the New Liberals”?), as well as relegating those closest to the coalition, such as former leader Nick Clegg, to the outer edges of darkness. If people leave the party, that only shows that it is serious. Confronting the past is more important than party unity, Tim Farron, the party’s leader, is sufficiently distant from the coalition to pull this off – though he would have to eat some words.

But it is risky. Because if you throw away the coalition, what are you left with? You have to build an alternative vision of what the party is about, and then then sell it to a public with a short attention-span. The vision needs to be different enough from the Green Party and Jeremy Corbyn’s Labour for ordinary people to care – and abstract dissertations about the nature of “liberalism” won’t do; there must be concrete contrasts on topics that matter. I hear quite a bit of use of the word “radical” from people of this general inclination, but very little about what they want to be radical about – apart from opposing any attempt to reform public services that does not involve a lot of extra taxpayers’ money. Which the Labour left already do. I’m being unfair, perhaps, but politics is a brutal business – and that’s how it looks.

Which leaves us with the second route: embracing the coalition years and claiming that time has vindicated them. At first blush this is just as hopeless. After all, if the public agreed with that idea, they would not have deserted it in droves. And there are aspects of the coalition years, especially the breach of the pledge on student tuition fees, that have taken on a high symbolic importance. Do the Lib Dems acknowledge mistakes, diluting the message, or brazen it out?

But there are advantages to embracing the coalition. It is a good starting point for a conversation with centre-right floating voters. Look at what happened when the Tories governed without a coalition: Brexit, grammar schools, tax breaks for the rich, etc. It is more challenging for the left-inclined potential core voters – but at least it drives a hard line between the party and the Greens and Labour. It shows that the party stands beyond tribalism for a new sort of politics; when needs must the party will deal with the Tories, provided that certain red lines aren’t crossed. That’s a tough message, but a distinctive one.

I am not a fan of internal party “democracy” (self-selecting groups like political parties are fundamentally undemocratic), but this is something that is best decided by party members. The most interesting thing about Brighton will be to see how that group of more motivated party supporters thinks about the coalition years. I doubt that they are yet ready to confront the party’s past in the way they need to, but there should be signs of which way the wind is blowing.

Theresa May’s policy on grammar schools is a new phase in the class war

Chatterers on the left had a clear narrative on the class tensions running through British politics. The Conservatives were led by toffs, who went to elite private schools, had no idea about how ordinary people live, and feathered the nests of their rich friends. They shrugged as they heartlessly condemned people to food banks. The appointment of Theresa May as Prime Minister does not fit that narrative, and that will make the left uncomfortable.

Mrs May is not one of the toffs. She went to a state school, and she has promoted others who were similarly state-educated, such as Justine Greening, the new Education Secretary. She has tossed out many of the toffish types, such as George Osborne, who had been Chancellor of the Exchequer and Oliver Letwin, in charge of the Cabinet Office. At first this drew some positive comments, to the effect that Mrs May was more “grounded”. That honeymoon is now over. Mrs May wants to bring back grammar schools.

At face value, this is a throwback to the 1950s. The brightest children were selected by exam (the 11 plus) and sent to grammar schools, while the rest were sent to secondary moderns. The grammar schools were treated as the elite of the state system, and got the best teachers, and were run with an ethos close to private schools, for whom selection was at the core of their being. The grammars were the route to advancement for many a working class or lower middle class boy or girl – thanks in large part to the vast expansion of middle class jobs in the era. They were sold as an engine of social mobility, and quite popular right across the class spectrum, though the toffs trended to sneer at them. Secondary moderns, by contrast, were neglected. The powers that be did not consider that most people needed a good education – there were plenty of lower-skilled working class jobs to go round, and even the more skilled ones did not require much formal education.

There were plenty of weaknesses in this system, which was especially hard on late-developing children. The secondary moderns were inadequate for the way in which society was developing – which required ever increasing levels literacy and numeracy, to say nothing of other disciplines. In the 1960s the Labour government drove through a move to merge the two types of school into comprehensive schools. This had broad, cross-party support. Grammars were not so popular with those that did not get into them. But people taught at grammar schools retained a soft spot for them, and they remained popular with what might be called the aspirant classes. The system lived on in a number of areas, such as Kent. The middle classes, however, increasingly understood how to game the system, so that the remaining grammars lost any aspirant working class character they might have had, and became a sort of state substitute for private schools.

Conservatives did not reverse the Labour move away from grammars, though they did experiment with selective admissions for some schools. But the grammar school system retained support amongst middle-class families who disapproved of comprehensive schools, and those who were nostalgic for the 1950s. A recent poll showed that more of the public favour more grammar schools than those who either want the system to stay the same, or who want to abolish all grammar schools. It did not help that the country’s school leaders and teachers were ill-prepared for the move to comprehensives, and, in general, made a hash of it. A new ethos is required to make a non-selective schools work. British educationalists have only learnt slowly how to do this – though by and large they are doing a good job now. But public memories are seldom up to date. And in any case the suburban middle classes are very wary of social mixing.

And into this situation has stepped Mrs May, whose secondary school was a grammar that converted to a comprehensive while she was there. She has picked up on the popularity of grammars across swathes of the middle class and now wants to increase their number, to the horror of the educational establishment. She does this amid much rhetoric about meritocracy, and insisting that, somehow, all schools will be good. As a (Labour) friend of mine recently remarked, this is a bit like Jeremy Corbyn saying that he is going to pay for his extravagant spending plans by making the economy grow faster. The fine words cover emptiness.

As a policy idea, grammars make no sense to me – I agree with Michael Wilshaw, the government’s outgoing Chief Inspector of Schools on this. But the politics is interesting. We find the politicians characterised by the left as “toffs” were quite close to the metropolitan middle classes that are the backbone of the left – some of whom have rather toffish backgrounds themselves (disclosure: I went tot he same school as Mr Osborne, though not at the same time). Mrs May is speaking for what I will call the suburban middle class, who are much more conservative. If the toffs are The Times and the metropolitan middle class are The Guardian, Mrs May is speaking for The Daily Mail. Her gender merely reinforces the stereotype: the Mail has a strong female readership.

This is going to harder for the left. The toffs were a small minority, and the left could pile on the sneers with little cost. Alas the suburban middle classes are a wholly different matter. They are numerous, and they are often close in attitudes to aspirant or better-off working classes. The sneers will come at a political cost.

Indeed this group of middle class and working class voters are critical electorally. Whichever political party secures their loyalty is practically guaranteed a close grip on power. Margaret Thatcher made them her own in the 1980s for the Tories. So did Tony Blair for Labour in 1997. The desertion of these voters in Lib Dem seats in the 2015 election proved catastrophic for the party.

So this looks like sound political strategy by Mrs May. The left – Labour and the Lib Dems -will have to work out how to craft an appeal to these voters. Opposition to grammars, which both parties must sustain. won’t help, though some lines of attack are better than others. They need to find ways of pointing out that they could damage many existing schools, knocking onto property prices and causing an influx of less desirable children…

Mrs May will be more worried about opposition from the metropolitan middle classes in her own party than anything from the left. Class could yet fracture the Tories.

Where do Remainers go from here?

Last Saturday I joined the March for Europe in London. These are the hard core of people who voted Remain in June’s EU referendum. By my estimate between 10 and 20 thousand marched from Hyde Park to Parliament Square, with Liberal Democrats prominent among them. The anger of these marchers was evident. Where to go next politically was not.

It is worth considering what the feelings of the protesters is, as media types and professional politicians attempt to move on. These people feel that a part of their birthright has been taken away – that the result is an assault on their very identity. They were not pro-EU because, as the Remain campaign emphasised, they thought they would be a bit better off economically. They feel part of a bigger Europe. And if there is one single thing they feel most acutely about, it is freedom of movement, because those rights to move and work around the Union are the most tangible and beneficial to them. Some were citizens of other EU countries who have settled here, having felt secure in rights to do so. Many more were British but want the right to move around the rest of Europe – or more strongly, they want that right for their children. It was an Australian, with a British daughter, that made that point most forcibly to us; Ozzies are acutely aware of the difference that an EU passport makes in freedom to move around, and they prize that freedom.

This is significant because British politicians have rightly identified that the issue that bothers Brexit voters the most is precisely freedom of movement – or fear of immigration from other EU members, especially the less developed countries or the less skilled workers. Many are searching for a compromise whereby much of the single market is preserved, but freedom of movement is restricted. This would cut no ice with most of the protestors, though the umbrella Remain organisation, Stronger IN, has hinted at compromise, while renaming itself Open Britain.

It is easy to understand the politics of the compromisers. The Brexit majority was small, and within that 52% there was a clear divide, between those who reject globalisation and want to adopt protectionist policies (echoing Japan perhaps), and those who chafed at the EU’s slow engagement with the rest of the world, and want Britain to embrace free trade (echoing Singapore). If you detach the latter group, and attach it to the Remain 48, you might get a majority behind a “Swiss” solution, with one foot in the EU, but nevertheless outside. Except it would not be like Switzerland, because the UK would need to be able to restrict immigration from EU countries, perhaps severely.

This would not satisfy the hard core Remainers. So what do they want? They want to stay in the EU, and to ignore or reverse the referendum result. A number of arguments are made. The Referendum was merely advisory: parliament can take a different view. Only 38% voted to leave the EU (even if 36% voted to stay) and therefore isn’t a strong enough mandate for such a drastic change. The Leave campaign was deliberately misleading. They might give credence to reports of buyer’s remorse immediately after the result. Alas these arguments carry little weight in the current political landscape. Most (estimated at 421) English and Welsh MPs will have found that their constituencies voted Leave. Under a first past the post constituency vote there would be a majority to leave of getting on for 220. That strengthens the mandate. The aftermath of the vote has turned to anticlimax, allowing Brexiteers to say that the economic costs of the vote were highly exaggerated by Remain supporters, neutralising the “lies” argument somewhat. There is little hard evidence to show that buyer’s remorse adds up to anything substantial. There is no basis to call a repeat referendum.

And what would a second referendum be about? A popular proposal is to have one on whatever new deal for exit is eventually struck. The trouble is that we will only know what that is long after Article 50 of the EU treaties has been invoked, by which time the situation will be nearly irretrievable. The UK would in effect have to re-enter the EU: but on what terms? The danger is that we have yet another referendum whereby a loss by the government will create uncertainty and chaos.

Still, the political situation may change. A backlash by Brexit supporters against the claims made by leave campaigners would start to build the case for a reversal. The trouble is that even if they wake up in time, they are likely to blame the Remain politicians anyway. This is clearly the narrative that Brexit politicians are now trying to build. The government should have prepared the ground for Brexit better, they say. The politics of anger and resentment is like that. Admitting you are wrong is as hard for voters as it is for politicians.

So do we hardcore Remains give up and shout abuse from the sidelines? Not yet. The government’s majority is small; it will find it hard to form a consensus around a new vision for Britain. A constitutional deadlock could yet unfold. In that situation things could change.

That is a small hope at the moment. Otherwise we must await a generational shift of voters’ attitudes. Brexit is almost bound to disappoint a large number of its supporters, if only because they want so many different and incompatible things . Younger people are more international and open in their outlook; their views will increasingly become mainstream. Re-entry to the EU, or perhaps a reformed successor is still something to hope for. But this time the case needs to be made on identity and emotion, and not by pretending that such things don’t count.

Academies and charter schools show the flaws in modern policymaking

Last week’s Economist carried a remarkable article about education policy. It looked at the idea of allowing independently managed but state-funded schools, called charter schools in the United States and academies here in Britain, an idea the newspaper has long supported. It reveals weaknesses in the policy. These weaknesses are very revealing.

Independent management of schools has always been more popular with policy wonks than with educationalists. Nevertheless studies were commissioned to show that charter schools and academies performed better than ordinary state-managed schools, usually based on exam results. This is referred to evidence-based policymaking. And it drives me mad. The effectiveness of such an approach depends on the questions you ask the evidence to answer – a process that always entails risks. Schools policy shows two major ones: looking at the wrong question, and making success criteria too narrow.

What’s the problem? Research is now showing that, now that the policy is becoming more mainstream, these independent schools generally perform no better, and often worse, than state managed schools, especially in middle-ranking schools. Worse, there is some evidence from the US that where improved exam results have been achieved, they have not actually improved the life-chances of the pupils. This turn of events was entirely predictable. But whereas the Economist innocently suggests that the policy needs to be tweaked to address these weaknesses, the rest of us must ask whether it was ever a good idea to make the policy mainstream, rather than just applied to a few schools to ginger up innovation.

The first problem is that the policy, and the evidence used to support it, was addressing the wrong thing. Changing management arrangements does not change the way schools are actually run. You can set your school up as an academy and carry on just the same way as before. And indeed many schools in England have done just that, so it hardly surprising that their performance is unchanged. The government’s current drive to make all schools into academies falls precisely into this trap.; schools do the minimum to comply, and so change nothing important. So what was the point?

And it is no secret what really does make a difference in schools, based on countless studies, often reported by the Economist. That is the quality of school leadership and the quality of teaching. This trumps, money, quality of facilities, and even class sizes. To be fair, policymakers advocate independent management because they think it is the quickest way to fix leadership and teaching (where it challenges the stranglehold of teachers’ unions). But they won’t necessarily do anything of the kind, and it is possible to replicate their changes to leadership and teaching in state-managed schools, once politicians understand what is to be done. This is what happened London, for example, before the academies programme got going. I could show you some truly wonderfully state-run schools near where I live – and others who are on their way there. It is really hard to see how turning them into academies is going to help.

The problem is that political structures are something that politicians and policy wonks find it easy to talk about and comfortable to fiddle with. I have seen something similar in business management – senior managers playing with organisation structures before they have really understood what the real issues are and how they are best to be fixed. So school independence has now become the chief aim of political policy in English education, and the subject of huge amounts of political effort, which will have little direct effect on the quality of education – and could even harm it.

And public policy journalists, including those at the Economist, have egged the politicians on. They often wrote approvingly of Michael Gove, the British Education Secretary (whose remit is actually just England) from 2010 to 2014, who led the recent drive to academies obsessively, in spite of plenty of evidence that he was barking up the wrong tree. Economist articles are anonymous, but I am sure that Anne McElvoy is at the root of this. She seems to care more about her public media profile than the quality of her journalism.

The second issue I pointed to was that of narrow performance measures. This is secondary in the Economist article, but it has been a huge problem in education policy, and in many other areas too. In education the issue is a focus on test and exam results. The article reports concerns that better results achieved in charter schools do not feed through into the employment market (for example in how much pupils are paid in employment). Their focus has become too narrow on improving the scores, at the expense of life-skills. It is even reported that charter school advocates do not send their own children there. The same weakness has been alleged for English academies, though I am not sure how true this is. The system of Ofsted inspections makes England less vulnerable – the inspectors look at broader issues, especially when conferring the coveted “Outstanding” label. Now a broad education, done well, is not incompatible with excellent test results – the pupils use their improved life skills to improve their learning, and in a highly sustainable way – but it takes top-quality leadership to appreciate this and weather the short-term costs. It remains tempting to short cut this hard road by narrowing the focus.

In fact policymakers should be thinking much harder about the best way of preparing young people for later life, and of recruiting and training top quality teachers and school leaders. And not engage in silly think-tanker debates, for example as to whether schools focus too much on teaching skills rather than knowledge, as Mr Gove was prone to engage in.

And as for school management, no doubt the old ways of state direction of state-funded schools will re-emerge in a new guise. But will politicians and their advisers ever learn the lessons for policymaking, evidence-based or otherwise? Aim directly at the key drivers of success, not just the management structures. And use numerical measures with extreme caution.

The post-Brexit phoney war on the economy

Two months after Britain’s shock referendum result, and what has happened? Not a lot. Though you wouldn’t think it from reading the running commentary. So was Project Fear the hoax that the Leave campaigners always said? Probably not.

The few days after the result seemed to fulfil Project Fear more quickly than even Remain campaigners suggested. The pound fell sharply and many stock indices tumbled too. There was much talk of this or that investment being stopped, or this or that institution or business being under threat. Remain supporters have kept up the pace of alarmist talk ever since, to judge by my Facebook feed.

But Brexit campaigners have a point when they poke fun at this. When it comes to cold, hard economic statistics it is very hard to see much, or any, adverse impact. The stock markets have fully recovered. Retail sales, employment and prices all looked pretty healthy in July. The government still finds it laughably easy to raise money on the bond markets; the Bank of England’s currency reserves went up. Only that fall in the currency has persisted. And no doubt that reflects weaknesses in the economy before the vote – given the scale of the ongoing current account deficit. The various indicators that have taken a plunge represent sentiment rather than hard fact, and may have been contaminated by the sheer shock of it all, as might the gloomy reports from the Bank of England and the Institute for Fiscal Studies.

On only one thing can Brexiteers be disappointed. The remaining EU has sailed on just as smoothly as the UK, with the Euro strengthening significantly against the pound. This defies predictions of imminent panic and collapse gleefully made by (some) Brexit campaigners. No other country seems at all inclined to follow Britain’s lead to the exit. Even as the emerging kerfuffle on Italian banks is as good evidence as you might ask for about problems with EU rules and democratic mandates.

There is, of course, one possible explanation for this insouciance: denial. Maybe people think that exit is so hard, and will have such obviously dire consequences, that it will never happen. Speculation about the invocation of Clause 50 for formal exit pushes it further and further into the future. If so it shows remarkably little insight amongst the market makers. Any process by which the referendum result is reversed will be very messy, and entail a lot of collateral damage.

Personally I think people are putting too much faith in the markets’ ability to see trouble ahead. The signs that the 2008 crash was in the works were obvious more than a year beforehand, when the interbank markets froze. Strong enough, as I don’t tire to point out, for me to move my pension portfolio from shares into index-linked gilts and cash. The more perceptive would have seen the trouble coming a year before even that, when US property prices started to slide, threatening the foundations of the whole financial edifice. And yet the markets did not reflect the mounting danger at all.

And at the other end of the scale, when it comes to the multitude of small decisions taken by consumers and businesses that drive the short term statistics, there is also a sort of built-in inertia. Short term decisions quickly overwhelm intangible longer term worries. People don’t know what to do, so they carry on as normal.

There are two ways in which the Project Fear may yet turn out to be on the money. One is a slow decline that accumulates: slower growth turns to a shallow recession that persists. That would be perfectly consistent with current statistics. The other way would be like the 2008 crash: a delayed reaction leading to a sudden crash. Both of these follow my metaphor of the economy being holed below the waterline in my post in the week after the result. The ship is in mortal danger despite no damage visible above water.

Why might trouble happen? It comes back to the basic weakness of the British economy (which, it must be said, EU membership was doing little to help) – a substantial trade and current account deficit. Britons as a whole are spending more than they are earning, and have been for many years. That has been OK because plenty of foreigners have been prepared to lend us money, or to invest in British businesses or property. Also British multinationals may be selling off foreign assets and bringing the proceeds home. Brexit is putting that investment flow at risk.

What happens if the country can’t get enough currency to pay for imports? Demand for Sterling falls, and the currency sinks. That might attract investors (British assets look a bargain) or scare them (with the risk of further depreciation). Currency reserves, private and national, start to be drawn down. That will affect living standards. Then either the trade balance corrects (buy fewer imports and sell more exports), or things start getting nasty with a financial crisis as the stability of banks and the entire payments system comes into question – which is what happened in 2008, for different reasons. These changes tend not to happen smoothly.

The problem is that the financial system is very complex, with all sorts of buffers and hidden dependencies, which makes it non-linear. Responses are not proportionate to the changes to the system. Past performance is a poor guide to future dangers. There might be a lot of short-term factors stabilising things, but that could be undermining resilience. The country could be building up vulnerability to the next financial crisis, just as the Labour government of the naughties created vulnerability to the banking crisis of 2008.

Or perhaps the Brexiteers are right. The financial system will adapt to the new realities calmly and the British economy is fundamentally stronger than the pessimists say. The economy will sail serenely on and gather strength to boot.

The thing is that it is just too early to tell. It could be many months, or even years, before any crisis caused by Brexit emerges. I will be watching for signs of trouble. But, to be honest, I haven’t seen them yet. It’s all a phoney war.

The Lib Dems mission must be to pick up disillusioned Tory voters

Not so long ago the idea of a “progressive majority” was popular amongst leftish intellectuals. They noted that if you added together the poll ratings, and even general election votes, of Labour, the Lib Dems, the Greens and (for some people) the Scots and Welsh Nationalists, there was a clear majority of the electorate, outnumbering the hated Conservatives and Ukip. This majority was regarded as a state of nature, and so, it was argued, proportional representation would lock it into the political system for good.

It was always optimistic. Both Labour and the Lib Dems drew voters who would happily support parties that were not “progressive”. This word is left’s own favoured description for itself. Since, in practice, most “progressives” oppose any kind of reform to make the state or the economy more efficient, I really can’t bear not to place it in quotation marks when it is used to represent the broad left, rather than those who genuinely favour ideas that stand for the positive progress of society..

The flaw in the progressive majority idea is now open for all to see. In the 2015 General Election the Conservatives and Ukip outpolled the “progressive” parties. And that is before any disqualification of the Lib Dems after they entered coalition with the Conservatives. And if that wasn’t enough, the clear majority for Brexit, not supported by the “progressive” parties, confirmed it. Most parliamentary seats for “progressive” parties voted to leave the EU.

This is a fact that the far left (I almost used the word “radical”, but once more the word would be seriously misplaced for a bunch that includes so many people nostalgic for the 1970s). Many are convinced that Labour did so badly in 2015 because it was not left wing enough, with its half-hearted embrace of austerity. Challenged, they suggest that there is an army of disillusioned non-voters who could be drawn into voting for a party of the true left. Certainly there are a number of under-30s that could fit that description, but not enough. In fact most people who explore the polling data suggest people who do not vote are often less-educated and supportive of populist right wing policies. The Brexit referendum was relatively successful in bringing these non-voters out, and they did not vote Remain.

And yet calls for a progressive alliance persist. The Labour left is sceptical, to be sure – to them Labour alone should be the progressive alliance. But many Greens and Lib Dems would contemplate ganging up with other parties in order to push forward progressive reforms. These include constitutional and electoral reform, sustainable economics, and stronger environmental protection. In principle I would support such an alliance, but only with a Labour Party genuinely committed to political pluralism – which rules out the current leadership.

And yet, even if Labour could be brought into the picture, the numbers don’t add up, even if the SNP could be brought into it. An alliance would need to present a serious challenge to the Conservatives in English constituencies. Labour and Green support might help the Lib Dems recover some of their lost seats; the Greens might pick up one or two seats. But it is very hard to see how Green and Lib Dem support would give enough help to Labour. Instead it is more likely that the Tories would successfully exploit Labour muddle to destroy the whole alliance.

So, is it game over for progressive politics? Not quite. Brexit may have won the referendum, but Remain still managed 48% of the vote. But that 48% includes a lot of people who normally vote Conservative. If a way can be found to peel these voters away into a progressive alliance, then it could be back in business.

And it isn’t hard to see what might do this. The Prime Minister Theresa May is enjoying a political honeymoon, but her party is at sixes and sevens over Brexit. It is not at all clear what shape a post Brexit Britain will take because her party is hopelessly divided on it. The moderates want to create a cosy relationship with the EU, in order to protect investment and the economy. But the Eurosceptics that make up so much of the party will not stomach the compromises that entails. Meanwhile, if the British economy goes into recession, as many fear, the pressure on government finances will drive further division. It is not beyond imagination that the only way out will involve a second referendum.

The Conservatives might split under the strain. That is unlikely. As Labour will find out as its MPs contemplate their position, the pressures for the large parties to stay in one unit under Britain’s electoral system are huge. There are no safe seats for breakaway parties, and safe seats are most MPs have no real idea of how to fight a hard seat or the stomach to do it. But the splits will undermine the Tory credibility, giving the chance for other parties to take their votes.

And surely this is the historic mission for the recovering Liberal Democrats. Labour has lost interest in anybody that has contemplated voting Conservative (as both leadership contenders vie to prove how left-wing they are), and the Greens have never had it. There is nobody else to fill the vacant space. For once the coalition experience may prove a positive. That might then revive the idea of a progressive alliance, though the credibility of the Labour Party would be a major obstacle. It remains the best chance for progressive politics.

The Lib Dems are understandably focusing on their core vote, and not on scooping up flighty floating voters. But in order to achieve anything the party will have to return to appealing to these voters in due course. Disillusioned Labour voters will not be enough. The party will have to detach centre-right voters too. That should be food for thought for the party as it tries to redefine itself in British voters’ minds.

Was the coalition’s austerity policy a colossal mistake?

Politics is dominated by historical myths, about which the different political camps disagree. Examining these myths critically is one way that societies can find reconciliation. While “austerity”, the favoured shorthand for government cutbacks, is fast sinking as an issue in British politics, long since overtaken by Brexit, its mythology remains a defining issue. This mythology has right and left versions. I want to look at the mythology of the left.

Few in the Labour Party would disagree with Oxford Economist Simon Wren-Lewis in a recent article that austerity “will go down in history as probably the most costly macroeconomic policy mistake since the 1930s, causing a great deal of misery to many people’s lives.” We in the Lib Dems are implicated in this criticism, as part of the coalition government of 2010-2015 that implemented austerity. It is exhibit B in the Labour case that the Lib Dems should cease to exist as a political party, and that all “progressives” should simply join their party (exhibit A being the tuition fees fiasco). So what are we to make of it?

Mr Wren-Lewis sets out this narrative very clearly in his article. He is an open Labour supporter, so his comments come with a political slant – but he is a proper economist and the case he makes is a substantial one.

This narrative runs something like this: in 2008-2009 Britain followed the world into a severe recession, brought about by a global banking crisis. This inevitably created a government deficit, of which he says: “We experienced record deficits in 2010 simply because the recession was unusually severe.” The Labour government used fiscal stimulus to moderate the effects of the recession, but the Conservative-Liberal Democrat coalition that came to power in 2010 rejected this approach and focused obsessively (so the story goes) with reducing the deficit, using austerity policies – cutting government spending severely. He claims that this focus on austerity had no economic merit, and is best understood as a political exercise to reduce the size of government, with misery as its by-product.

Mr Wren-Lewis says that the government defended its policy with three arguments: that innovative monetary policy would provide the necessary stimulus; that improved business and consumer confidence would do the trick; and that financial markets would not finance the national debt unless action was taken. He demolishes each of these arguments, and I would not disagree with him, though there is an element of hindsight and the first two ideas came good in the end. As a result, he says, the British recovery was extremely slow, costing the average household £4,000 a year – coincidentally about the same as the Treasury’s estimate of the costs of Brexit.

But Mr Wren-Lewis is being disingenuous. There was a fourth argument for austerity. And that was that most of the deficit in in 2010 was “structural” – in other words had a deeper cause the recession. If I remember correctly, the Office of Budget Responsibility estimated that about 8% or so of the 11% deficit was structural. In other words a lot of the pre-crash tax revenues were gone for good, and would require more than short term demand management to bring them back.There is plenty of scope for disagreement amongst professional economists here – but it does suggest an alternative narrative, to which I personally subscribe.

This narrative posits that the British economy was not in a stable position when recession struck. It had already been pumped up by excess fiscal stimulus; there was too much private sector debt; and there was an unhealthy dependence on international finance and, to a lesser degree, North Sea oil. The evidence for this is not just the precipitate nature of the crash – bigger in Britain than in other developed nations – but the large current account deficit before, during and after the crash, and the high level of Sterling beforehand, and its abrupt fall. It is true that the public deficit did not look outsized by international standards before the crash, but, as my macroeconomics lecturer pointed out at the time, the overall economic context had classic signs unsustainable fiscal stimulus. The crash was more than an ordinary business-cycle downturn, it was Britain’s financial chickens coming home to roost.

So what does that mean? It means that fiscal stimulus as a response to the recession would have only a limited impact, and would not have restored the economy to its previous health, and in particular it would not have solved the government’s deficit problem. Before long the additional demand generated would have led to inflation (in fact unlikely outside economics textbooks) or (much more likely) a worsening current account deficit, i.e. stimulating other countries’ economies rather than ours. That put the British government in a bind. There was a case for stimulating demand through fiscal policy, and yet government expenditure had to be cut back towards something sustainable in the medium term. The government in fact plotted a middle way and, far from obsessively focusing on deficit reduction, moderated the cuts when the recovery proved slower than they expected. The trajectory of deficit reduction was close to that projected by the outgoing Labour government in 2010.

But many distinguished economists were and remain highly critical of the coalition’s austerity policies. Labour supporters can quote any number of famous names. But you need to read what these distinguished people actually said, rather than the mood music they fed into. In fact they hedged their bets. They focused criticism on the lack of public investment, and not across the board austerity. Investment, in theory anyway, is a magic bullet in this context. It generates future productivity growth, so helps to put the economy on a more sustainable future path, while at the same time providing short-term demand. This is a perfectly valid criticism of the coalition record, shared by many Lib Dems who were part of the government. But it does not suggest that the majority of austerity policies were wrong in principle. Taxes and spending were badly out of line and something had to be done to return them to balance. All I can say in the government’s defence is that public investment is much harder to do in practice than in theory – so often the money ends up in wasteful white elephant projects. But it would have relatively easy to allow the building of more council homes, for example.

Where I agree with Mr Wren-Lewis (though he does not explicitly say it) is that the macro-economic policy presented by Labour at the General Election in 2015, under Ed Balls and Ed Miliband, was much more sensible than the one presented for the Conservatives by George Osborne. Mr Osborne proposed a charge towards fiscal surplus that made little economic sense – and one year on it is being buried by his successor. The Labour strategy would have knocked some of the hard edges off austerity, while promoting a higher level of investment. The left is right to call to call it “austerity-lite”, but wrong to suggest that this was a bad thing.

So criticism of austerity is warranted, but this does not amount to what the left wants it to do: to prove that cuts to government spending and benefits were unnecessary, and still less that they can be reversed. Extra spending will require higher taxes. Economists may feel that austerity policies are self-defeating in many instances, such as in some of the Eurozone adjustment programmes. But there is also growing recognition of a deeper weakness in many advanced economies, including Britain’s, signified by the stagnation of productivity. That is limiting tax revenues and what governments can afford to do. That weakness should be the central topic of political debate.

How should Lib Dems embrace economic policy?

The British Liberal Democrats are setting up a policy working group on the “21st Century Economy”. I was among over 200 people to volunteer to take part, but sadly I was not picked. Those that have been picked will face truly daunting quantities of advice and reading material, but nevertheless but doesn’t stop me from offering my thoughts today. This time I won’ focus on the hard content of any new policy, but on its all-important political framing.

So far as content is concerned, regular readers will have got the hang of it. I blogged about it last year as part of another Lib Dem initiative, recommending Four Themes. These themes are green growth, small is beautiful, humane public services and redistribution of imbalances.

This line of thinking is very compatible with Lib Dem values and should go down well with the membership. But it presents a political problem. It means overturning several beliefs that the British public policy establishment holds dear. These include that higher volumes of consumption of things are essential to economic health (and may even be a measure of it), and that large, centrally controlled systems and organisations are the most efficient. It amounts to a policy revolution. And revolutions make people uncomfortable.

It is essential for future political success for the Lib Dems to have one foot in the political mainstream – so that they are regarded as being basically a sensible party. If they aren’t they will be condemned to the margins of politics like the Greens. It is the same dilemma faced by Labour supporters as they challenge capitalist ways. You do not secure lasting political progress in a democracy from the extremes.

The Lib Dems should therefore present a radical policy agenda in an un-radical way. It must be evolutionary, not revolutionary. The party needs to specify small steps forward, each of which is able to achieve demonstrable improvements, that will over time change the conventional wisdom.

This is why I particularly like the idea of Green Growth. it contains a highly constructive ambiguity. On the one hand it suggests that the party favours economic growth in the conventional sense, which the public has come to associate with better employment conditions and higher pay. But it does not quite say what is actually meant by growth – it could mean general wellbeing and quality of life rather than volume of consumption. Meanwhile the phrase unambiguously points to environmental sustainability. I strongly suggest that the Lib Dems make the phrase central to their proposition, or come up with something that does the job even better.

That’s my first piece of advice. My next advice is that they need to tread very carefully around two hot political topics: free trade and macro-economic management (aka “austerity”). These may well be excluded from the policy group’s formal scope, but the party’s wider narrative cannot avoid tackling them.

Free trade is a totemic issue for the Liberal Democrats. It was the one of the key organising themes of its predecessor: the Liberal Party. That was in a different time and context, of course. The Liberals then saw free trade as a way of breaking the hold of the landowning classes, who sought to protect their business interests (especially agricultural) at the expense of high prices for the masses. But even now, it is clear that freedom of trade, and competition, is a good way of keeping consumer prices down and freedom of choice up. By and large the general framework of world trade is something that Lib Dems will be quite happy with.

But something has changed in the power balance. Free trade helps keeps prices down, but it also seems to be doing the same with wages, until you reach a globally mobile elite of senior managers and other professionals. And worse, the instruments of free trade can allow globally powerful businesses to legally challenge public policy. There are some particularly odious examples from the tobacco industry as they have successfully slowed down, though not defeated, the introduction of plain packaging of cigarettes. Intellectual property is another issue that needs to be examined with a sceptical attitude. It is promoted by many businesses as being akin to any other form of property right and fundamental to civilised existence, but it is often used to stifle freedom and innovation, rather than encourage it. It is a favourite means for the manipulation of profits to low tax regimes by multinationals.

And trade agreements make this a hot topic. Brexit adds to the relevance. There were already cogent arguments that the EU was using its free trade rules to block general public policy (such as restricting state subsidies to the steel industry – though liberals should see two sides to that argument). Brexit does let Britain off the hook for the proposed EU-US trade pact – TTIP – which is causing a lot liberal angst. But the country must decide what sort of trading relationships it wants, and how far to go – including whether to join multilateral pacts such as the nascent one in the Pacific, TPP, which the country could join if it left the EU (or so I read). I have to say that I am agnostic on this question. My faith in free trade pacts has been shaken, but not destroyed. But the issue is becoming a political touchstone, and the Lib Dems would do well to apply some serious thought to this area, rather than recycling old slogans.

The Lib Dems will also find a minefield confronting them on macroeconomic management. The left have decided to make opposition to “austerity” one of its organising principles. I suspect that is because they draw so much strength from public sector employees and people from places such as universities and charities that depend heavily on public largesse in some shape or form. But anti-austerity does not resonate amongst the general public, who generally get the impression (justified or not) that public spending benefits other people. Since the Greens and Labour have drawn away the more trenchant political voices on the left, the Lib Dems have the opportunity to strike a more nuanced tone. Austerity is an elastic idea, so it is quite possible to say that you are against it, but the party should not apply “homeopathic policy” – mouthing anti austerity rhetoric while diluting the substance – as this did not work well for the previous Labour leadership.

My advice is for the Lib Dems is to stay clear as they can from the word “austerity”, and to strongly advocate higher levels of public investment in education (not just schools, incidentally) and green growth. Public services, though, must deliver value for money, and will need continued reform – though not the brainless outsourcing and “payment by results” favoured by the Conservative government.

So there are some hard questions and tricky politics. But as I said last week, the left has to develop a new economic narrative. Given the staleness of the economic discourse on the far left, the Lib Dems have real opportunity to take up thought leadership. There is a real prize to be taken here.

Economics is at the heart of the left’s weakness

In my last post I said that the lack of a convincing economic vision was at the heart of the British Labour Party’s difficulties, and a problem for the left generally. It is worth unpacking that a bit and sketching the direction that any new thinking should take.

The central political problem for the left is the disaffection of so many working class and lower middle class voters, particularly ethnically native people. They are becoming increasingly voting for right wing populist parties and causes. This was a dominant factor in the vote for Brexit in Britain, and the rise of Donald Trump in the US and Marine Le Pen in France, to name just a few examples. These voters had been part of a left wing coalition, but leftist parties moved up market to attract liberal middle class voters, especially those employed by the public sector, and also pitched for ethnic minorities.

Meanwhile problems for the traditional working classes go beyond political neglect. They are overwhelming the losers from the advances in technology and globalisation which have destroyed the relatively stable and well-paid jobs on which they used to depend. Whole swathes of Britain are stuck in a post-industrial doldrums, especially in smaller towns in England and Wales. The left needs to win back these voters if it is to challenge the populists and the centre right. They have little clue as to how to do this, and distract themselves with other issues. Labour indulges in internecine strife. The Lib Dems are concentrating on rebuilding their core vote – i.e. focusing on the middle class vote.

But the cluelessness of the left in Britain struck me most forcibly from a comment made by the Green MP Caroline Lucas. She blamed the Brexit vote on austerity – government cutbacks since 2010 following the financial crisis. And yet the bulk of the disaffected voters were never very dependent on government jobs and handouts, and are often quite supportive of austerity policies, as they felt they hit the undeserving – immigrants and layabouts – rather then themselves. Indeed, they benefited probably more than most from government generosity on raising tax allowances. It’s not austerity, it is the lack of decent jobs that is the problem. And government handouts are not the answer because these foster dependency and undermine people’s sense of self-worth.

The left starts with a cultural problem. They are by and large liberal, inclusive and cosmopolitan in outlook. This helps in coalition building generally, and especially in outreach to ethnic minorities, but it creates immediate distrust from native working classes. In order to overcome this the left needs to offer hard benefits – and that involves two things. Good quality jobs and decent public services. The left loves good public services too, of course – they provide lots of employment opportunities for their core supporters – though they are less certain how to pay for them as an aging population pushes up demand. But on jobs they have almost nothing to say.

Such talk as there is concerns macroeconomics. The left favours stimulating demand through generous fiscal policy to create jobs in the economy as a whole. Jeremy Corbyn, the Labour leader, talks of investing in infrastructure. This may be a good idea in itself, but by and large these policies create the wrong jobs in the wrong places. New housing, for example, needs to be built in the prosperous south east, where the shortage is greatest, and firms often have to import the workers from abroad because local ones lack the skills. Some infrastructure projects should help the economies of the more run-down regions, it is true, but these need to be part of a more coherent strategy of regeneration. Meanwhile the centre-right has cottoned on the ideas of infrastructure and regional redevelopment as well.

What to do? The first thing is accept that the problems of the disaffected working classes are more than a little local difficulty with conventional economic policy. It is an aspect of a broader crisis brought about by globalisation and technology change, and a blind spot in conventional economic thinking, with its emphasis on aggregated statistics like GDP, and one dimensional concepts of efficiency and productivity. It needs fresh thinking of a type that will be heavily criticised by the conventional public policy establishment. As fellow blogger David Boyle has pointed out, this is not necessarily a problem with economists, but with public servants tied to the old conventional wisdom.

The problem is that conventional policies are tied to highly centralised political structures and tend to concentrate the benefits of economic growth at the centres of power, while hollowing out the rest. While promising efficiency, it is in fact wasteful because it leaves so much human capital under-used. So political decentralisation is a large part of the solution. This is very hard for Britons to grasp, since we have been centralising since William the Conqueror in 1066. But countries with a more distributed history of political power, like Germany, Scandinavia and Switzerland, perform much better while having very similar cultural conditions.

But if political decentralisation is part of the answer, it is incomplete. The USA is politically highly decentralised and yet suffers similar problems of alienation. There localised political units have not been able to challenge the power of big corporate interests, who collect large monopoly profits and suck them out of the local economies in the name of economic efficiency. Wider national and international political structures need to keep these corporations in check, and yet too often they are captured by them. This is an unresolved battle in the European Union, incidentally, and the best reason to be sceptical of the EU project – though the EU also does much to counter global corporate power.

Meanwhile we need to stack the economic odds in favour of local entrepreneurship and innovation, and celebrate localised, human and integrated services that tailor service solutions to individuals. Much more public money needs to be channelled into rebuilding skills in de-industrialised regions – something Britain is woefully bad at by international standards (consider this interesting article in the Economist).

Some on the left are starting to get this. American Democrats are waking up to the evils of large corporate oligopolies. British Lib Dems are sympathetic to the decentralisation agenda. A number of Labour city leaders also grasp it. But it is complex and difficult area. It needs both grand visions to change mindsets and capture the imagination, and small, practical steps that will achieve the goals in an evolutionary way that convinces sceptics.

I will try to use this blog to help develop the new economic thinking in my very small way.