Lib Dem English Council: why didn’t the turkeys vote for Christmas?

Warning: this post is about the internal workings of the British Liberal Democrats. To anybody not a party member this will be of no interest, unless you want to draw some general ideas on how, or how not, to manage a political party.

Yesterday the Liberal Democrat English Council (EC) rejected a motion to implement a new constitution for the Liberal Democrats English Party, which, among other things, would have abolished the EC. I am a member of the EC and voted against the proposed new constitution. This deserves some explanation..

What is the EC? It is a group of representatives from across the party in England. Each regional party is entitled to a number of representatives based on the size of its membership. These are supposedly elected by the members of the regions, but in fact there a generally fewer volunteers than places, so it is mostly self-selected. The gathering amounts to fewer than 100 people (about 70 on this occasion), meeting twice a year in London (by the choice of its members a few years ago) for a 5 hour session. Its job is to take reports from, and put questions to, the officers of the English party, and to approve the administrative rules by which the party runs itself. It does not deal with matters of public policy because there is no English Parliament. Another party body, the overarching Federal Party, through various directly elected committees, a twice annual conference and an executive arm of paid employees, handles English policy issues.

Why have an English Party at all? The party has Scottish and Welsh “State” parties, following a long tradition in the party and its Liberal forerunner of supporting devolution to these nations (and before that to Ireland, a much more divisive issue in its time). When that devolution happened, with Scottish and Welsh parliaments, autonomous organisations in the two nations made even more sense – these entities could take on serious policy issues too.  But that left an England-shaped hole in the party’s set-up, just as it does in the British constitution. The party, when it put together its constitution in the late 1980s, filled it with two levels of organisation: regional parties and the English party. The regional boundaries largely followed the arbitrary administrative concoctions the UK government used, which also became constituencies in the European Parliament. These convene twice-yearly conferences and elect executive committees. There is little policy work to do; only in London is there any kind of regional devolution to bodies that follow these regional boundaries. New “city regions” are emerging, but not in the sort of tidy way that can be used to carve up the country as a whole. The regions are of equivalent population size to Wales and Scotland (with London region being bigger, though more compact, than Scotland).

So why not give these English regions to the status of State Parties? Firstly because the Scottish and Welsh parties take great offence to the idea that English regions might have a similar status to their nations. Also because the administrative infrastructure required to keep regions on top of their responsibilities would be quite high. The Lib Dems cannot afford much in the way of professional administration staff, while the regulatory burden, from the Electoral Commission and data protection in particular, gets ever greater. And so we have the English State Party, which does things like set rules for candidate selection and disciplinary processes, and represents the English organisation in Federal Committees alongside the Scottish and Welsh parties.

And so how to ensure appropriate scrutiny of English Party officers, and represent English regions and local parties in big decisions? The regions and the Federal Party were already holding conferences twice a year, and besides such conferences often do a poor job in that sort of technical function. What is needed is something more like a local government scrutiny committee. The EC was the solution hit upon.

This leaves the party with an administrative structure that few members understand. The English party structure (and the English regions) are useless as a vehicle for promoting a serious political career, and so are left to backroom types with skills in administration but not salesmanship and explaining themselves. Every so often these structures come under criticism for being opaque and unaccountable. Following the calamity of the 2015 General Election, it was decided to review the whole thing, following an extensive consultation exercise with members. This job fell on the usual worthy suspects who did their best.

What was the aim of the review? Beyond being an expression of angst, this was never very clear. We had the usual sweet nothings about having something simpler and clearer which would allow activists to spend more time on campaigning. The proposal was to abolish the EC and its executive and replace them with committees composed mainly of regional officers, and an annual or twice-annual annual conference open to all members lasting about an hour, held in close proximity to the Federal Conference. This amounted to a gutting of the English Party and its powers being taken over by the Federal Party and the regions.

How did this look to EC members like me? It looked as if its sole purpose was to abolish the EC as an end in itself rather than to achieve any wider goal. It was very hard to see how the regions would be empowered as a result, and easy to see how the officers of the Federal Party would be. The ability of the committees and the new conference to act as scrutineers looked laughable compared to the admittedly flawed EC. So lots of people spoke against the proposal; people from further-flung regional parties (in the north and west) sounded particularly aggrieved – even those who had been part of the consultation process. The new constitution’s supporters offered no serious arguments in support of it, beyond it being a bit embarrassing if the thing was voted down. The motion needed a two-thirds majority, and it failed even to get a majority. No effort had been made in advance to sell the new constitution, or wheel in respected names to support it, or indeed to provide any supporting speakers beyond the proposer and seconder. It was a study in political ineptitude.

In that it was pretty typical of the Lib Dem English party. Nobody important in the party takes it seriously, and so it is left to hard-working but worthy types, with limited political skill. This is surely an inevitability. I personally think that the current constitution is the least bad of the options in the circumstances, and that a proper case had not been made for the new one. With constitutions it is best to be conservative, and weight towards the status quo. If that leaves the structure messy and opaque, we might reflect that in politics only dictatorships are clear and tidy.

Which does not mean that things can’t be improved. The disciplinary processes in particular need some careful thought. The working of the party as a whole could do with rethinking. But I don’t think the intermediate structures are a major part of the problem. It is dealing with the weaknesses of many struggling local parties in an unforgiving regulatory environment; and it is trying to improve the accountability of the Federal Party, while still giving it some room for manoeuvre. The former problem is the more urgent. The Federal structures have been overhauled recently, and it is too early to write them off.

Meanwhile learn this. If you want the turkeys to vote for Christmas, you had best give them a good reason.

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Brexit: is Mrs May winning the end game?

Featured on Liberal Democrat Voice

There are less than nine months to go before the United Kingdom is scheduled to leave the European Union on 29 March 2019. For many Britons this is a welcome step in the fight back against liberal elites. Others, like me, feel sick at the thought of it. In the middle of all this is the UK Conservative government led by Theresa May. How is she coping? Better than most people give her credit for.

Mrs May is not the ablest among our political leaders, who are not an especially able bunch. The so-called Windrush scandal shows this, when perfectly legal and established residents of this country were harassed and even deported because of gaps in their paperwork. This has her fingerprints all over it, from her time as Home Secretary. She failed to see that this was where her policy of a “hostile environment” for illegal immigrants would lead, in spite of being warned. Without an established system for proving identity, rejected as an intrusion of Anglo-Saxon traditions, proving that you are legally here, and thus whether or not the authorities should be hostile to you, was always going to be the problem.

So for something of the complexity of Brexit, Mrs May does not look well equipped. Her start showed the same sort of lack of imagination that led to the Windrush scandal. She set three clear parameters, “red lines”, for Brexit. Control of immigration; no payments into the EU budget; no jurisdiction of the European court. That seemed quite common-sense, given that all three issues played a prominent part in the referendum campaign. But the whole system of seamless trading with the EU depends on arbitration by the European Court; the EU (as do many countries, in particular India) sees immigration and trade as being closely linked; and the lubrication to make complex deals work is money. Mrs May’s red lines were leading to a very hard Brexit, whereby the UK’s relationship with its main trading partners would be put on the same level as, for example, the United States.

For many supporters of Brexit, especially among the political and business elite, that was the whole point of it. For them the EU is a completely misconceived exercise, and by placing it at arms length it would give the country greater freedom to engage with the rest of the world. But there are at least two major problems. The first is just how disruptive such a change would be. There is not just the question of tariffs being imposed on goods that passed over the border, but regulatory compliance, country of origin rules, and value added tax would all have to be administered there, until some sort of alternative infrastructure, not subject to the European Court, was devised. Without it a massive snarl-up would develop at borders, with motorways clogged by waiting traffic, quickly leading to supply shortages, empty shop shelves and job lay-offs. Of course this would all resolve itself in time. But the disruption could go on for a long time and wreak damage that would take years to fix. And, a bit like the financial crash of 2008, it could be very hard to get back to where the country was before.

The second major problem is Northern Ireland. The Good Friday agreement that established relations between the province’s two main communities depended on quite a bit of fudge based on the fact that both the UK and Ireland are EU members. The most powerful symbol of this is an open border. The Irish government, and the Catholic community in the North, insist that this open border should continue after the break. How on Earth is that compatible with a hard Brexit? That this should be such a big issue drives Brexiteers mad: it looks completely disproportionate. But that Ireland should loom so large in British politics, and cause such inconvenient disruption, will surprise nobody familiar with the last five centuries of British history. After deeply flawed attempts by the British to control and colonise Ireland, the island has repeatedly come back to haunt British politics. If the Irish Brexit problem isn’t solved properly there is a big risk of communal violence of some sort. Much as most Britons would like to abandon Northern Ireland, that just can’t be done.

Mrs May takes both problems seriously. They are, of course, being used by Remainers to undermine confidence in the whole project. But that doesn’t stop them being real. Her strategy has been to keep talking hard Brexit, while gradually softening her stance. That means some form of regulatory alignment and coordination of customs arrangements, adding up to some form of customs union, together with compromises on the European Court and the mutual rights of citizens. It is easy to despise this as “kicking the can down the road”, but she is slowly outmanoeuvring both advocates of a hard Brexit, and closet Remainers who want to collapse the whole project.

The latter group, the Remainers, are now pretty much beaten. Though the idea of a further referendum (not a repeat one, you understand) is gaining hold among the public at large, together with doubts about Brexit itself, it is in Parliament that things matter. But the Remain side need enough Conservative rebels to stand their ground. They haven’t. The government scored a decisive victory in recent votes which attempted to give parliament more of a say over the process. One problem is that most of these rebels need to stay in the closet, and not admit that they want to destroy Brexit. A second is that they do not wish to force a chaotic election which might let the Labour Party into power. Meanwhile, the Labour leadership will not press the government to the point of a further referendum, still less breaking off Brexit.

Mrs May’s next problem will be to face down hardline Brexiteers who reject her compromises. There are at least fifty Conservative MPs who fall into this camp. But this group is being steadily outmanoeuvred. Passionate as they are, they have been unable to offer any practical solutions to the issues of transitional disruption of the economy, nor of Ireland. This group has always been backseat drivers, full of lots of clever theories about why things will be all OK, or somebody else’s fault, and who think you negotiate complex intergovernmental deals in the same way that you negotiate a house purchase. There is no convincing rival plan. They seem to want to storm out of negotiations with the EU, daring them to let a “no-deal” happen, but without a viable alternative deal in mind. This lack of practicality means that they are becoming politically isolated. Dare Mrs May face them down?

What can the Conservative hardliners do? The have enough MPs to force a confidence vote in Mrs May, which would then trigger a leadership election. But surely Mrs May has the grudging support of enough MPs to win any such vote if it was called – which would then protect her from further challenges for 12 months. They could resign the Conservative whip, depriving the government of its majority. But if Labour then put forward a vote of no confidence in the government, would the rebels let Mrs May’s government fall? That would either provoke a chaotic General Election, or some kind of transitional accommodation between Labour and the Conservatives to get through the last months of the Brexit negotiations. It is hard to see how either would be to the hardliners’ advantage.

So, a bit like the closet Remainers, I think the attempted rebellion by the hardline Brexiteers will fizzle. That will leave Mrs May to strike the sort of fudged and muddled deal with the EU, arrived at in the last minute, which is what most international negotiation usually ends up with. There will surely be some nasty disruption as Britain’s exit comes about, but not as bad as it might have been. Which would be quite a result for Theresa May.

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Tax or efficiency: making sense of the politics of the NHS

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Radio 4’s Moral Maze on the NHS yesterday didn’t start well. The first witness raged at the institution’s inefficiency and how people were using its supposed moral integrity to justify it. Tens of thousands were dying as a result, he said. His interlocutors provided no real challenge. I switched off. This is symptomatic of the very poor quality of political debate about the NHS here in Britain. I don’t suppose debate in other countries about healthcare is any better.

There are two things that are not well understood about the NHS. People on the right fail to appreciate that the NHS’s inefficiency is a function of the complexity of healthcare, and not its “socialised” funding model. People on the left fail appreciate that the effective state monopoly of healthcare means that we get less of it than people really want.

It was the first point that the Moral Maze‘s witness was running foul of. The only evidence he quoted was that private hospitals in the UK spend much less on administration and management than NHS ones. But these private hospitals only offer a narrow range of services to a select few clients, and so are much simpler to run. International surveys consistently show that the NHS is less wasteful of funding than pretty much any other nations’ system. These systems have the complexity of operating insurance records and administering claims; they do not prevent expenditure on ineffective treatments or wasteful breakdowns of communication between different parts of the system.

I know something about how this happens. Apart from being an accountant, the core of my professional career has been as a general manager whose mission was been to manage systems as efficiently as possible. In that role I have been responsible for some pretty dramatic improvements in productivity. At one point I even looked for a career in the NHS, though nobody in the service was prepared to take the risk of taking on somebody without a track record in health services, or at any rate not without the kind of hard-nosed bullying persona that many in the NHS seem to think is what effective management is about. I have thought quite a bit about how you might make the service more efficient.

That there is monstrous waste is not in doubt. As a patient you spend a lot of your time waiting around, and then repeating yourself to the myriad different people you are handed on to. A lot of the NHS is in fact very efficient; the problem is fitting the various bits together so that the right treatment is delivered to the patient at the right time. And that’s before the question of how to ensure that less people need healthcare services in the first place.

This failure to get things to fit together is a familiar problem. Understanding this was at the very heart of what I tried to do as a manager. My technique was quite simple in principle: to make processes as simple as possible, and focus them on what the customer needs. A simple idea that was quite revolutionary in the 1990s, when it was usually labelled as “business process re-engineering” (or BPR).  It went against a production line approach borrowed from manufacturing, where workers would specialise in a single task. The technique required fewer specialists and more generalists. Or, to put it another way, it required workers to specialise on the customer that they were serving, and not in a particular functional skill.This usually entailed not just the retraining of workers, but a redesign of information technology.

BPR is now largely played out in the world of commercial services, with automation and artificial intelligence taking over. But the BPR revolution never really got going in healthcare. No doubt this was partly down to the vested interests of those that worked there. But I have to realise that there is a much deeper reason. The complexity of health services requires the use of specialists to a much greater degree than in pretty much any other activity that I can think of (another notoriously inefficient sector, defence systems, is comparable). Healthcare is crying out for patient-centred treatments, and yet this is very hard to do efficiently because you need to involve so many specialists. The field is riddled with what economists call “information asymmetries” which undermine all attempts to put consumers in charge using market mechanisms.

Which is why nobody does it well. And why trying to restructure the NHS to make it more efficient is always likely to fail. The Coalition government’s attempt to do so by putting general practitioners in charge is generally regarded as a costly failure. The current trend in the NHS towards “integration” is a bit more promising, but pitfalls abound. Trying to bring market mechanisms into play helps solve some problems but creates others.

But if this line of criticism of the NHS – that it is inefficient because it lacks market mechanisms – is misplaced, it obscures a more valid critique. It is that the NHS restrains the level of health spending, meaning that people get less healthcare than they want. If you could wave away the information asymmetries with a magic wand, and find a way of allowing poorer people to meet their basic needs, how much healthcare would we buy in a market ststem? Lots. Healthcare promises longer life and less pain. It is an unmatched consumer proposition. Everybody wants more of it. Britain tends to spend less on healthcare as a proportion of its income than other high income countries. And much less than the most unrestrained healthcare market: the United States.

One example gives a good illustration. A number of very expensive tailored cancer treatments have been developed by pharmaceutical companies. These don’t prolong life by very much, or at any rate there is no convincing base of evidence base of this. So the NHS often bans them; the money will secure greater benefits if it is spent on other people. But if you are the cancer sufferer that could benefit, and you have the money, you might want to have it anyway. The NHS does not allow you to pay extra (co-payments in the jargon), because it is deemed morally wrong that a patient “in the next bed” with the same condition does not have the same treatment. In principle you could transfer to a non-NHS facility in the UK or elsewhere. But this is usually impractical, and brings with it additional costs. This is such a difficult problem that politicians try to camouflage it with special slush funds. But this is just an extreme example of a more general problem. Lots of us would happily pay a bit extra to get better treatment.

The obvious solution is to ramp up overall spending on the NHS to the sort of level that a perfect market system would lead to. But that means much higher taxes, and the evidence that people are willing to pay that much is weak, to say the least. Most people say they are happy to pay a bit more tax for a better NHS, but this willingness melts away when you start raising the amount. The problem is that there is  no personal link between the taxes you pay and what you get. It always seems as if the money is benefiting somebody else.

This, of course, is precisely the dilemma that the current government is stuck in. It has announced plans to increase NHS funding but it is unclear about how it is to be paid for. The Labour Party are little better. They hope a lot more tax revenue will be available from rich companies and businesses; but they also want to end “austerity” in many other parts of public services, limiting the amount available for health.

What’s the solution? I think taxes should go up. I also think we need to find acceptable ways of allowing people to spend more of their own money on healthcare within the NHS system. And we shouldn’t just give up on the idea that healthcare should be delivered much more efficiently. As regular readers of this blog will know, I think that means more localised management and more integration with other public services, and a stronger focus on the needs of users. Alas I hear very little of such ideas in the cacophony that is the political debate on the NHS.

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Secular stagnation: the curse that still haunts developed economies

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The financial crash of ten years ago was something of a paradox for conventional economists. It took most of them by surprise, and dented their reputation. And yet economists became more important than ever to the running of our world. But now, to listen to most of them, the equivocation is over. We’re back to normal, as the global economy looks in much better shape. This looks complacent.

The crash was a double shock to economists. The first was how it happened at all, when most economies seemed to be purring on at a relatively steady rate of growth (often referred to as the trend rate), which seemed to relate to growing productivity, and which most economists, driving through the rear-view mirror, assumed to be a law of nature. The second shock was that developed world economies, especially the British one, were so slow to recover. Economists  simply assumed that with a bit of stimulus, economies would not just return to trend growth, but make up for lost ground too. I don’t think any advanced economy has done this – and in Britain we lag far behind. In the years after the crash an expression was coined, or rather resurrected, to describe this second problem: secular stagnation.

The person whose name is most attached to this is Lawrence Summers, who had been prominent in the Clinton administration. By it he meant that economies could only achieve growth by extraordinary and unsustainable efforts to stimulate it. And, as Mr Summers recently pointed out in the FT, you cannot say that it has disappeared. Growth has returned, but the measures required to produce it are unsustainable. What he is referring to is the extraordinarily low interest rates prevailing in the developed world.

This has been going on for so long that we have become accustomed to it. But what do negative real interest rates mean? They mean that in order to use up available savings we have to create investments that have little or no financial return. Now that is at the margin, not on average, but even so it does not suggest an economy that is at all healthy. If investments don’t produce a return, productivity will not advance, and growth will not be sustained. And in particular we will accumulate debt that cannot be paid off. Or not without inflation which destroys the accumulated wealth of the middle classes. And sure enough, many economists are warning us about mounting debt levels. In due course this will lead to a financial crisis.

Why are we in this situation? And what can we do? There are many speculations as to why, and most commentators, including me, tend to gravitate towards the one that suits their overarching narrative. Many blame a skewed distribution of income for creating a surplus of savings that cannot be used properly. Others say that modern businesses don’t need so much traditional capital (Google doesn’t need to issue debt or share capital to keep its investments going). Then there is the gradual ageing of the population reducing the size of the workforce. Others blame the wrong sort of stimulus – if only government spending hadn’t been cut back (“austerity”), we’d have bounced back in no time. My favourite is the Baumol effect which suggests that we are in a transition towards industries, like healthcare, that are less financially productive, though still improve human wellbeing. Whatever it is (and it could be all at once) it’s a problem because it is dragging down the potential growth rate.

And what can we do? People often talk of unconventional policies, but what are they? The most interesting idea is  to run up bigger government budget deficits. Piling up government debt is much safer than piling up private debt, as we are doing now. Why? Because governments can finance that debt by a process that is usually referred to as creating money, and the burden can be shared more equitably.

But piling up debt and creating money often ends in tears. The best current example of that is Argentina, with rampant inflation and impatient foreign creditors. The problem for Argentina is that its monetary system has been mismanaged for so long that much borrowing, public and private, has to be in foreign currency, which the central bank cannot create. But there is an opposite example. Japan has been piling up public debt for decades, and the central bank has been buying up debt, with few apparent ill-effects.

So how do you know whether you are Japan or Argentina (and no doubt Argentina looked like Japan once)? The first, obvious, difference is that Argentina has had a current account deficit for some time, while Japan has generally been in surplus. That means that Argentina is importing more than it exports and requires financing by foreigners – who are less likely to be happy to take payment in domestic currency. Current account deficits usually flow from budget deficits – though not always, as the recent crisis in Spain showed. That would be a bad sign for countries like Britain that also have a current account deficit. But Britain’s standing in international markets looks a lot more like Japan’s than Argentina’s. The government has no trouble in borrowing in sterling, and the same goes for most British businesses.

So why are we in Britain so worried about budget deficits and debt? One explanation is that we have been persuaded into this view by malign political forces who use the analogy of household financial management to make their case. But there are deeper worries. The first is how do you tell when you have gone far enough with budget deficits and need to stop? The traditional economists’ answer is when inflation starts to take hold. But it might be too late by then, and anyway it is not so clear that in a modern, globalised economy inflation works in quite the way economists think. You know it is too latewhen there is a rush of people trying to change domestic currency into foreign, creating a panic and to people, including the government, having to borrow in foreign currency. That can happen without inflation.

The problem behind that is the politics of it. Opening up the possibility of more government spending is a huge boost to the power of central government politicians, who do not have strong incentives to apply the brakes when they need to – any more than those bankers did before the crash of 2008. It is too easy to believe your own hubris. I think this happened to the Labour government in the mid 2000s when the government should have started to tighten spending but decided not to. This didn’t cause the financial crisis, but made it harder than it should have been to manage. Even now, though, it is impossible to get anybody on the political left to accept that. It’s the one thing that unites Jeremy Corbyn with Tony Blair.

Still, we should be able to find ways increasing government borrowing that helps stimulate demand more sustainably. Building public housing is one idea. Other infrastructure policies should help (but not all of them). There’s also a case for taking a longer view on some public spending, like education , community policing, mental health services and public health that heads off future trouble. But not building more navy frigates or, even, hospitals. We might need these, but they need to be securely funded by current taxes. The trick politically is to create a system of checks and balances that lets you invest productively and not let central government managers run away unchecked.

Behind this lies an important but rarely acknowledged idea. It is that, in the 2010s and onwards, public investment is often more productive than private investment. And that, I think, is one of the causes of secular stagnation. So in the developed world we need more public investment, and that we can afford to borrow much more to pay for it than most people think. And we need less private investment, much of which is wasted on asset recycling schemes that will end in tears. It may well take another financial crisis before we start to realise this.

 

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Life in the tunnel. Being a Liberal Democrat

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I just want to ask: when will the party face up to the fact that whatever it is doing isn’t working even in the slightest?

This was from Lib Dem blogger Nick Tyrone before the recent local elections, after a London opinion poll showed weak figures for the Liberal Democrats. The party’s appeal to Remain voters had pretty much failed, he thought, with the party lagging even the Conservatives in this group, never mind Labour.

Then came last week’s local election results. If you are going to take a cold, hard look at them in the round, they were nothing to shout about. They were perfectly consistent with that poll. In equivalent vote share they even marked a slight fall from the rather dismal 2017. And yet. Look at the London results (as a Londoner, I have an excuse for being London-centred – though my story works just as well outside it). The two most spectacular results for any party on the night were the Lib Dem gain of 25 seats from in Richmond, and 21 seats in Kingston, mostly at the expense of a Tory party that collapsed to a rump in both boroughs. And at last the party started to win seats from Labour, gaining seven in Haringey, for example. And the party had its Wandsworth moment too, fending off a sustained and confident campaign by Conservatives in the one borough it controlled in Sutton. Minds aren’t swayed by dry statistics but by stories – stories that show what is possible. In London, and across the country, the Lib Dems had plenty of good stories to encourage them. That made them a much better set of results than the party has had for a long time, even in 2017 when the equivalent poll share was higher.

Not that you would have guessed this from the media coverage. Even in its later coverage (when the Kingston result was known, giving resonance to the Richmond story) the BBC chose to highlight the relative failure of Labour in Wandsworth to the spectacular écrasement of the Conservatives in two neighbouring boroughs, which went unmentioned. Why were the non-events in Wandsworth and Westminster more important? Because, apparently, they are a “flagship” boroughs. Actually I think the Wandsworth result is an important story, but this prioritisation is an interesting window into the current journalist mindset, even at the politically balanced BBC. This may not be bias; it may just be a bid to cover up the humiliation of the editorial team of not getting the story right in advance, and sending its big guns to the wrong places. News is made on expectations, not real events.

Which, I think, is the issue at the heart of Nick Tyrone’s critique. Whatever the party does, nobody in the media, mainstream or otherwise, is listening. The only stories that are of interest are the sorts of stories that Ukip still manages to pick up: ones that point to the parties final, humiliating death spiral. I don’t think it is fair to blame that on the party’s leadership or messaging.

Life as a Liberal Democrat supporter is like being in a long, dark tunnel. Things are miserable; nobody can see you; and too often any small flickers of light vanish, rather than grow into that light at the end. But last week’s small chink of light just could be what we hope it is.

The point is this: the problem isn’t the message, it is getting people to listen to it in the first place. It is nearly hopeless achieving this through the media. It is just possible that a moment of genius or massive good luck suddenly does the job. But waiting for such a moment does not amount to a strategy. The other way to get noticed is to go out and talk to people directly – through door-to-door canvassing and attractive literature pushed through letterboxes, and with videos promoted through paid-for advertising. This is inevitably very localised, and it tends to happen in the run-up to elections, when people have a good reason to take notice. The good news is that when the party was able to do this, it, by and large, raised its share of the vote. And sometime spectacularly – in Remain-voting Richmond and South Cambs, in Leave-voting Kingston-upon-Hull, and in the somewhere-in-between Kingston-upon-Thames. That suggests that Nick Tyrone is wrong. What the party is doing is working at least a bit more than the slightest.

And the hope is that if the party keeps going, the general public, and the media that follows it, will start to notice. Even now, the BBC must start to question its policy of giving the party so little coverage compared to Ukip, which has now virtually ceased to exist.

But why soldier on in the cold, dark place, where hope is but fleeting? Because we believe in our liberal message. That humanity is more important than the nations and religions that divide it. That all humankind benefits when we listen to different points of view with respect. And that we should look at facts and evidence rather than let our prejudices run riot. No other party is doing that as much as the Liberal Democrats in British politics. It is worth pushing on through the tunnel.

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Complacency undoes Labour in Wandsworth

The Conservatives in Wandsworth know the price of everything and the value of nothing.

That isn’t a quote from this year’s council elections in Wandsworth, where Labour gained 7 seats, but fell 5 short of what they needed to take control of the council. It comes from Labour’s final week literature in their campaign in 1990, when they also expected to take control. To me it sums up Labour’s complacency in both failed campaigns. Elections are won with grit, no waffly ideals.

Labour’s spin machine are desperately back-peddling, to say that they never really expected to win control this time, and that the advance shows that things are slowly moving their way. That is nonsense. They had the Conservatives on the ropes and, to mix metaphors, they threw them a lifeline. The results were very close in a number of wards. A more effective campaign would have secured control for Labour. And what a victory that would have been! The Tories, weakened by Brexit in a strong Remain borough, could have imploded without the business of running the council to hold them together. Resourceful and resilient, they may well punish Labour, who have their own internal issues, when the next meeting with the voters happens.

This year I often thought back to 1990, which was a few years after I moved back into the borough of my birth. Then Labour only needed a net gain of one seat after making gains in the previous elections in 1986. The Conservatives were doing badly in national polls. It should have been easy. But reading that leaflet I immediately understood that Labour wasn’t up to the job. And so it proved: the result was a catastrophic loss of 17 seats, including that of their leader. This was a massive propaganda victory for the Conservatives, who used it to deflect attention from bad results elsewhere in the country. Old Labour hands have not forgotten this; winning back the council this year would have been a powerful signal of Labour’s rise.

And there was every reason to think that it was possible. Labour did very well in the borough in last year’s general election, without even trying very hard. They picked up Battersea, and came close to picking up Putney too, to add to Tooting which they already held. Recent council by-elections, in which Labour did well, confirmed this trend. In 2014, the previous elections, Labour had shocked the Conservatives by making strong advances. The EU referendum then dealt a body-blow to the local Conservatives which give Labour the chance to do something special.

What made the Tories so resilient in 1990 and able to hold off the challenge this time? In 1990 the party was in peak form, with a number of very capable and clever leaders, who had seized control of the borough from Labour in 1978. They adopted strong financial management, when most local Labour politicians didn’t think this mattered, while being remarkably alive to middle class sensitivities on things like recycling. They oozed competence where Labour resorted to waffle. An efficient, but low profile, local propaganda machine got this gritty message out to voters, many of whom had benefited under the then Conservative government’s right-to-buy legislation for council housing. This year things were much more propitious for Labour. The Conservatives have lost their shine; they are often complacent and out of touch; their new leaders are not of the calibre of the old ones. They have lost a lot of members. Meanwhile Labour (thanks to Gordon Brown) have addressed some of their reputation for financial incompetence, and they had more help from members than they knew what to do with.

So what happened? The Tories stuck to the same old gritty message about competence. No matter that this is less true than it has ever been – local Labour are firmly in the Sadiq Khan, centrist, competent wing of the party. And the council’s once-vaunted efficiency is now nothing special. Changes to the law under which council tax operates means that differences between boroughs are completely down to decades-old historical legacy, and tell you nothing about how things are likely to change in the future. But the Tories were able to plant doubts about Labour to which Labour had no convincing answer.

But Labour could surely have won. After their success in 2014, I remember thinking that the party needed to focus hard on what it needed to do to take control in 2018. The five wards they already held looked secure. They needed to win the five seats they didn’t have in the three split wards, and seven more seats from other wards. That meant a minimum of three more wards, four to be on the safe side. That was a big ask, but the reward was surely big enough to warrant a serious effort, starting in 2014. This should have meant identifying which four wards they needed to target straightaway.

But there was nothing. Residents of wards which the party eventually targeted heard practically nothing from the party until this year. Candidates weren’t in place before this. When it came, the campaign was almost completely generic, with nothing more than a few photos geared to the locality in which they fighting. Candidates did not have time to meet enough of the electorate and build trust – and didn’t really try. To them it seemed that controlling the council as a whole was what mattered, not looking after their ward. A personal vote of one or two hundred built up over two years or more would have made all the difference. and it would have been the best possible counter to the doubts that the Conservatives were trying to spread.

A lot of the same criticisms can be levelled at my own party, the Liberal Democrats. The party was too late to put in place its candidates and get out and about meeting the electorate. Too much of the literature was generic, making too much of issues like Brexit which, in the end, did not motivate voters much. We had an excuse. Though the party was in quite good shape in 2010, the coalition trough nearly destroyed it. The party made a dramatic recovery following the 2015 election and especially after the 2016 referendum, but trying to turn this new energy into an effective political force proved too much. The party made a lot of progress in the campaign, but too late have much impact.

All of which points to a disturbing aspect of modern politics. The parties are too interested in talking to themselves about their own political concerns, and not enough in meeting voters and solving their problems. There seems to be an idea that politics is about condemning abstract nouns like “austerity”, and putting “radical” ideas in front of the electorate and being swept to power in a tide of enthusiasm. Labour has succumbed to this. The Lib Dems are not immune.

But the Wandsworth election contained one shining rebuke to this politics of the abstract. The highest number of votes won by any candidate was by the independent Malcolm Grimston. Back in the 1980s I remember Mr Grimston as an obnoxious, fat young Tory (though the fatness should not be held against him, it was very much part of his persona). I have watched as he turned into somebody else entirely. He lost weight and became a gracious, polite politician who listened to people. We worked hard for his local electors, who came to know and respect him. After the 2014 elections he became so fed up with the arrogant Tory regime in Wandsworth that he defected. And he triumphed. Meanwhile another Tory councillor defected at about the same time. But he was much more of an abstract modern politician; he chose to adopt the label of the new Renew Party. But vacuous promises were no substitute for the graft of getting to know and help your local area. He had the ignominy of being beaten by a Lib Dem who did not campaign at all in the ward.

There is a lesson there that I hope local Lib Dems can learn. I suspect the current Labour Party would find it all too difficult. I wouldn’t have minded if Labour had won in Wandsworth, but they did not deserve to.

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Don’t let the BBC and Brexiteers confuse you: Norway and Turkey aren’t the same

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This blog’s track record on Brexit remains solid. A while ago I predicted that the UK would opt to stay in the (or a) customs union with the EU. That hasn’t happened yet, but the tectonic plates are slowly but surely moving that way. Meanwhile opponents of the idea are trying to undermine it by confusing people about what it amounts to, and the media, even the BBC, aren’t helping.

First: what is the difference between soft and hard Brexit? A hard Brexit means a complete break with EU institutions and trading with the EU either on World Trade Organisation (WTO) terms or through a tailored trade deal, such as the one the EU has negotiated with Canada. You might call these the Japan and Canada options respectively. A soft Brexit means remaining part of some EU institutions, without being a full member. It boils down to two main options: the Norway option or the Turkey option. There is technically a third: the Swiss option, but EU officials regard this approach as a failure, and are likely to prefer a hard Brexit.

The Norway option is given support by this week’s Economist. It means being part of the the Single Market, but not the customs union. This Norway does though membership of the European Free Trade Association (EFTA), which includes Iceland and Lichtenstein as well. This excludes agriculture and fisheries. It means accepting EU directives as far as most trade goes, and the “four freedoms” – goods, services, capital and labour. It has been given a bad press by both sides of the EU debate. Brexiteers say that it turns the country into a vassal state because it has to accept regulations without a right of veto, and only limited consultation. Remainers say much to the same thing, so why leave? The Economist valiantly makes the case nevertheless. It would be the least disruptive approach for British business, while giving the country significant new rights not available to EU members. Apart from agriculture and fisheries policy, this includes doing trade deals with other countries; Iceland has made a deal with China, for example.

Norway does pay significant sums into the EU budget, though – a bit of a flash-point for Britons. But this is not as bad as it looks: it is mostly aid to Eastern European countries, which is separate from other EU aid, and Norway has a lot of say over where it goes.  So it is actually politically quite useful.

So might this be the elegant compromise that brings the two sides together without entirely satisfying them? There are two big problems. The first is border controls. Not being in the EU customs union means that goods have to be checked as they cross the border, as happens between Norway and Sweden. Since one of the UK’s aims is a frictionless border in Ireland in particular (helpful in Gibraltar too), the Norway option would fail. This is one of the toughest issues emerging in the whole process (as predicted from the start by this blog). Brexiteers, who tend to deal in broad visions and not detail, can’t stand this instance of the tail wagging the dog. They hope that if Britain says that there will be no checks on goods coming into Northern Ireland, it will force the EU to reciprocate. But that turns out to be more difficult than it sounds – unilaterally waiving tariffs creates issue under WTO rules – as well as being reckless with the Irish peace process.

But there is an even bigger problem with the Norway option: the four freedoms. Or rather one of them: labour. Claims by Brexiteers that more than a minority of their voters wanted a total break with the EU are hard to sustain: the Leave campaign deliberately obfuscated the issue by using Norway as an example of what Brexit might mean. But a claim that those voters wanted complete control over the movement of labour into the country is perfectly credible. The Economist argues that there is more Britain can do to manage incoming EU workers more strictly within the Single Market. I don’t think that washes.

The Turkey option addresses both these problems. There are no customs checks at the border, and there is no free movement of labour. The lack of customs checks means that most of those complex supply chains that cross the border between the UK and the rest of the EU should suffer reduced, and manageable, disruption. Agriculture and fisheries can be excluded (as are services, most likely – but this is where the Single Market works less well anyway). What’s not to like? It means that doing trade deals with non EU countries can only happen for those goods excluded from the customs union (agriculture and services most likely). The more extreme, neoliberal branch of the Brexit movement, well represented in the Conservative Party, has set great store by doing such deals. And yet to most critics of Brexit this has always looked to be the weakest part of the Brexit case. These other countries are far away, drive hard bargains, and Britain’s negotiating position is weak. There is little evidence that the voters are that bothered. Nobody could accuse Turkey of being a vassal state to the EU, so why should they be?

And so the Turkey option looks the most viable form of soft Brexit. In a speech today the Labour leader is taking a step towards it by advocating a customs union with the EU. However he is blurring the issue by suggesting that he wants to be part of the Single Market too. And yet he wants exemptions to suit his agenda, especially on state aid and free movement. The EU will never wear that because of the political difficulties it would create within the union. I would go as far as to say that it is dishonest of Mr Corbyn even to suggest it. It would be much clearer to go straight for a variation of the Turkey option. Still it has served to put the customs union idea on the agenda, and presents the possibility of linking up  Tory soft-Brexit advocates, who have a much clearer grip of the key issues.

And what of the government? It has rejected the idea of a customs union out of hand. But this is just words, meant to placate hard-Brexit advocates within Tory ranks. What the government says it wants is what it has called “Canada plus plus plus”. That is almost as dishonest as Mr Corbyn’s Single Market minus. The government wants to stay integrated in some sectors but not others. This looks like the sort of cherry-picking the EU so dislikes. But it could be an intermediate negotiating step towards a Turkey-like solution, even if they try to avoid the words “customs union”. I believe this may be the game plan of Theresa May, the prime minster, and David Davis, her pragmatic Brexit Secretary. Whether they have the political skills to pull that off is open to question, though.

Meanwhile supporters of hard Brexit are trying to turn the public against the Turkey solution by conflating it with the Norway one. This includes Australia’s undiplomatic ambassador, Alexander Downer, to his great discredit, on the radio last night. This allows them to suggest it means accepting free movement of labour, for example. They also suggest that it means that the UK cannot do trade deals with other countries: that is not true either, though the scope of those deals would be restrained. Britain could import US chlorinated chicken and Australian wheat tariff-free if it wants to, as agriculture is not in scope.

For now the politicians are exercised about a potential vote in parliament over the customs union. Expect the government to defer this until the actual shape of its deal with the EU becomes clear. Something like a customs union with the EU is on its way. It is exactly the sort of compromise the country should be aiming at.

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Do not underestimate the Labour Party

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Britain’s Labour Party is neck-and-neck with the Conservatives in opinion polls. Surely, many claim, this means that Labour are in trouble, and its leadership is woefully complacent? The Tories are in an utter mess, the argument goes, so if Labour aren’t streets ahead now they never will be. I’m not so sure.

The first part of that argument is surely correct. The Conservatives are caught in a conflict between Brexit fundamentalism and reality. Such conflicts, when you are the governing party, bode ill. Government pronouncements are almost comic. Today, for example, David Davis, the Brexit Secretary, raised the prospect of a Mad Max dystopia after Brexit, which we can happily avoid, he suggests, by staying in the EU in all but name. Well that’s how it sounds. But worse, Theresa May is a lacklustre leader, neither able to present an inspiring vision, nor to handle the everyday give and take of networking and negotiation the role requires. The party is shrinking, and it is failing to capture the interest of younger voters, by which I mean under-50s. Its chosen core support base is literally dying. The party is being hollowed out in a way reminiscent of the not dissimilar situation it faced in the mid-1990s under John Major.

But then a relaunched Labour Party under Tony Blair established a massive poll lead and then crushed the Conservatives in the election of 1997. So why isn’t today’s Labour Party doing much better than it is? It is reported that the Labour leadership feel confident that they can repeat their performance in last year’s election of a poll surge during the campaign itself. And yet surely the Tories will not run such a dire campaign? They may be running out of activists but they have no shortage of donors. A halfway decent manifesto should mobilise the oldies better, and in a second attempt they can surely create doubts about Labour under Jeremy Corbyn’s leadership. And the voting system is tilted in their favour.

What the Conservatives have to play with is Labour’s lurch to the left under Mr Corbyn, and the rapidly growing hold of his supporters, organised by the Momentum movement, over the party. This has awoken traditional fears of Labour – and this seems to be propping up the party’s poll rating, as well as motivating wealthy donors. In the 1990s Mr Blair tacked his party to the centre and wooed Tory backers. He left his opponents with no oxygen; how different is Labour’s strategy now.

But I have underestimated Labour’s leadership once (last year), and I don’t want to do it again. Labour retains some key strengths, and the Tories some concealed weaknesses. This will not guarantee Labour victory in the next election, but it will give them a base from which to make a serious challenge.

Labour’s first strength is that they are building a solid political coalition of core support. Last week I described an idea that I called “Brixton liberalism”, and how it gave me hope about the future of liberal values. Labour has a stranglehold on Brixton liberals, notwithstanding the party’s distinctly un-liberal instincts. They have seen off two challenges: from the Liberal Democrats, following the period of coalition in 2010 to 2015, and the Greens. The Lib Dems, my party, seem to have retreated to the professional middle classes; they are hoping to win liberal voters from Labour through anti-Brexit feeling. This shows no sign of making headway. The Greens have been almost completely crushed; Labour’s intent to maintain their stranglehold was recently shown by their airing of policies on animal welfare. They are presenting themselves as the Green Party by other means.

The Brixton liberal coalition comprises many younger professionals, especially those linked to the public sector, and the new working classes, who are often members of ethnic minorities. A common theme is that these people have been priced out of owning their own property, and have no prospect of secure social housing. It is particularly strong in London. To these can be added trade unionists, who see real hope of extending their influence, through job protection, nationalisation and subsidies for declining industries. How will Labour fare amongst traditional, white working classes, especially outside the cities? These are the Labour heartlands that Mrs May hoped to capture last year, and came closer than many credit to succeeding. But the Tory appeal to this group may have peaked. It is very conservative, and Mrs May was a good standard bearer for that type of conservatism – she might have succeeded if she had offered more to older voters. But her reputation for competence has taken a knock, and any successor is likely to a sharper, more liberal type who will be distrusted by working class voters. We can expect Labour to continue their studied ambiguity on Brexit and immigration, so as not to scare off this group.

The second thing going for Labour is that they are doing careful work on their policies. Their critics dismiss Labour’s policies as a throwback to the failed policies of the 1970s. Public ownership of utilities, the roll-back of public-private partnerships of all kinds, free university education, and so on all seem to play to that narrative. But Labour are quietly giving a modern gloss to these policies. They will argue that they developing new models of managing the public sector, and not going back to the bad old days. No doubt they plan to have it both ways – invoking nostalgia for the old days alongside enthusing newer voters. Besides, some of those old ideas don’t look that bad in hindsight: council housing for example. By contrast any new ideas the Conservatives come up with are likely to be more neoliberal fare that will themselves look dated. While South America shows that we should not write off neoliberalsim, it is only likely to make a comeback after voters have experienced a long period of badly implemented socialist policy.

And the third thing in Labour’s favour is the diminishing hold of traditional media, which have acted as the Conservatives’ attack dogs for generations. Last year’s election was something of a watershed there. Jeremy Corbyn was their dream target, but they could make no traction. Their current campaign that Mr Corbyn was a cold war spy show that they still haven’t got it. Who cares?

And the Conservatives hidden weakness? They are not preparing for the next election in the way that Labour is, or the way that David Cameron did before 2015. Last year’s snap election showed how important such preparation is. Mrs May turned out to be flying blind, without any of the usual preparatory groundwork. Two things are spoiling the outlook for the Conservatives. First is Brexit – it so hard to see how it will play out over the next few years, and therefore what message will work best for the government. Could it be a big anticlimax, defying the Remoaner critics? Could there even be some quick wins, allowing a pro-Brexit counterattack?Or will there be early victims, forcing the Tories to find appropriate scapegoats? And an even bigger problem is the leadership. Mrs May showed herself up as inept in national campaigning, and if anything she has deteriorated since. And yet her party dare not replace her, as each of her rivals shows even deeper flaws. If a new, more dynamic leader should emerge later in the parliament, as many Tories hope, he or she will not have long to pull together an effective campaign, which can take years.

And so if the Labour leadership look quietly confident, they have every right to be.

 

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If Brexiteers want to reassure Remainers they will have to start talking specifics

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There was a certain inevitability about the Foreign Secretary Boris Johnson’s speech yesterday. It was meant to reach out to Remainers by presenting a liberal case for Brexit, but instead it drew raspberries. Britain’s polity is bitterly divided. It was always going to take more than a few speeches to change that.

Is there anything useful to be learned from this episode? One of the central themes of the speech was perfectly sound, if unwelcome to Remainers. The result of the referendum cannot be reversed, and Brexit is going to happen in some shape or form. The reason for that is basic politics. The leadership of the Conservative and Labour parties have both signed up to it. The Tories can rely on Democratic Unionist support. We’ve already had a general election following the referendum. There simply isn’t the political support to reverse Brexit.

And as for another referendum, Mr Johnson made a perfectly sound point. Another period of political battle between the two camps will only make things worse. There is no sign of a major shift in opinion in either direction. Remainers are clutching at straws when they look at polls suggesting opinion has shifted. It was looking at the polls that got is into the mess in the first place.

That makes the case for Remainers to try and get used to the reality. But those facts don’t make the pill any easier to swallow. What Mr Johnson tried to do on top of that was persuade Remain supporters that Brexit will not be as bad as they fear. And here the speech was a complete failure. He came out the same old platitudes and generalities that have been a feature of the Brexit campaign from the start. There have always been two prongs to the Brexit case. One is an appeal to conservative voters who oppose immigration and feel strongly that national sovereignty is a birthright that trumps any freedoms in the world beyond the country’s borders. The second is an appeal to liberal types with the idea that post-Brexit the country can be a liberal haven, free from the restraints of EU obligations. The problem is that these two lines look dissonant. It is easy enough for Brexit supporters to concentrate on their preferred line of argument and ignore the others. For sceptics it is that very dissonance that worries them.

And to overcome that fear it will be necessary to address that dissonance. How? By moving on to the specifics. Which regulations do you want to dismantle to make us free? How will you satisfy the need for regulatory alignment promised to the Irish without becoming a vassal state of the EU like Norway? And how will the rights of young people to travel and work in Europe be secured? And so on. Mr Johnson did not begin to do this.

Only one government minister seems to have understood what needs to be done: Michael Gove, the Environment Secretary. He is trying to show us in concrete terms what opportunities leaving the EU might bring – for example in making the EU’s clumsy system of farm subsidies much more focused.

In the absence of such substantive proposals the government gives the impression that it has not made up its mind and is putting off hard decisions. We are instead told that such detail might harm the country’s negotiating position. But most of us suspect it is because of deep disagreements in the government, and not just between Brexiteers and closet Remainers, but between the Brexit liberals and their illiberal supporters.

It is a situation that is crying out for strong political leadership from somebody that has both vision and a grasp of detail, and from somebody that knows how to build and maintain political coalitions. That person is not our Prime Minister, Theresa May, nor is it the Labour leader Jeremy Corbyn. And yesterday’s speech showed us that it is not Boris Johnson either.

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British regional policy needs more government

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I found this week’s Bagehot column in the Economist interesting. It complains that Westminster is brain-dead, but that elsewhere there are signs of innovative thinking. This helps to raise the question of how to address the imbalance of Britain’s (and especially England’s) imbalance towards London. But it betrays some rather stale thinking.

The article itself is lightweight. It shows enthusiasm after a visit to the University of Warwick, and witnessing its projects promoting industrial innovation, and in particular the efforts of Kumar Bhattacharyya to push back against the idea that Britain’s future lies in financial services and not manufacturing. It contains no hard analysis. This is less disappointing for a political column that it was for an article a few months ago about what to do about the developed world’s “left behind places”. Towns and rural areas left behind by changes to the industrial economy. In spite of the promise of its headline, this article had very little to say about solutions. It instead seemed to encourage the further expansion of already thriving urban centres, on the grounds that this would clearly be good for productivity. This was another symptom of the the stale, conventional thinking that dominates the Economist’s journalism.

But the issue is an important one. The gap between London and England’s southeast, and other regions of England, Wales and Northern Ireland is problem for everybody. It is an obvious problem for the struggling regions, from Cornwall to Tyneside. It is also a problem in the prosperous regions, where the cost of housing is exacerbating social divisions. If economic prosperity could be distributed more evenly geographically, then it would be easier to distribute it more evenly between the classes and generations. Scotland, incidentally, is something of an exception, and a revealing one.

This has been obvious for a long time, but efforts by governments to do something about it have at best been only partially successful. Two things have been tried: money, and relocation of government agencies. There have been various initiatives to pump money into the poorer regions, a number of which are under the banner of EU aid. These clearly help, but the beneficiaries too often seem to be large corporations headquartered elsewhere, who simply manage to funnel the money back again. So many English regional towns are dominated by national and international brands at the expense of more local ones. The relocation of government agencies manage to disrupt local labour markets (the jobs tend to be quite well paid and put local businesses under pressure), but a bigger problem is that they fall victim to government efficiency drives which shrink them.

Where the Bagehot article is clearly right is that there needs to be more going on locally in these regions that central largesse. Centres like the Warwick Manufacturing Group clearly help. At the centre of thriving modern economies is brainpower. Universities and research are clearly part of this – as experience in other countries shows. But two points need to be made: political structures are vital, and we need to think about tomorrow’s economy rather than today’s or yesterday’s.

The lack of interest in political structures was a big disappointment in the Economist’s analysis. Political structures clearly affect the way economics is distributed geographically. Countries that are both quite large and politically centralised, like Britain and France, have more uneven economic geography than those that don’t – like Germany and Scandinavia. I think this is for two reasons. One comes from network theory, which I have advanced before. Humans can manage only a couple of hundred connections with other humans efficiently, so at the heart of any organisation, however large, there is a small network of people within it, and people that the organisation does business with. Large organisations simplify management to reflect this, which means concentrating power geographically. When government power concentrates, corporate power tends to concentrate with it, as government has such an important effect of modern business. Superficially this looks efficient – the trap that the Economist falls into, because the concentrated power centres are efficient in themselves – but that is at the cost of hollowing out elsewhere. Scandinavia may not have a centre that compares with London or Paris, but you can hardly say it is not prosperous.

The second, and overlapping, reason that centralisation of government is bad for outlying regions is the sheer dead weight of government decision making. In England most decisions involving significant money find their way back to the Treasury in London. Decisions get stuck in queues, and when they come to be taken, risk aversion prevails unless huge political capital is expended. Human progress generally demands risk-taking. The fairly obvious idea that rail links between northern British towns should be drastically improved is bogged down in Westminster politics. If the north of England was an independent country it would already be finished.

So it is not surprising to see that developed countries with devolved political structures usually have better distributed wealth than ones that don’t. Switzerland, a small country with highly devolved politics reeks comfort and prosperity almost wherever you go. As I have already alluded, it is no accident that Scotland, with its advanced level of political devolution, is the one British region that has been able to push back against the gravitational pull of the southeast. It doesn’t always work. Political devolution allows regional governments to choose incompetence; Welsh devolution has an unconvincing track record. And what of distribution of wealth within regions?

The idea that political devolution needs to be part of any solution is very gradually taking hold in Britain. Most politicians play lip service to it. But there is long way to go to change the political culture. But we also need to think about how the economy is to develop. This is the biggest gap in the Bagehot article. It bangs on about manufacturing. Manufacturing still dominates the way most economists and policy makers think about economics. But we need to move on. Manufacturing is going the way of agriculture. There is only so much stuff we can consume, just as there is only so much food we can eat – and in both cases you can argue that we consume too much already. Consuming more stuff is not what will make our lives better (though it will for an important minority of us). The more productive manufacturing becomes, the less important it will be to the economy as a whole – the paradox outlined by the economist William Baumol.

Before I develop that argument further I must qualify it. Manufacturing is still important. It is changing radically in ways that mean that we should produce more locally, and rely less on global trade. This is partly technological, and partly because the economics of importing from less developed countries changes as they, and especially China, develop. There is plenty of scope for innovation and Britain needs to keep up it. Manufacturing innovation based in Warwick, Sheffield and other places needs to be kept going. But it won’t be enough.

What we need to think about is services. The health economy will grow in relative terms, and not just because of demographics – prolonging life and reducing pain is what people want to spend money on when they get more of it. Public services such from social work to law enforcement also need to grow – or get radically better at solving problems rather than pushing them around the system. And there is care for the elderly. We shouldn’t just be sponsoring research into manufacturing into the regions, but into all these other things and more.

And it will not be lost on my readers that this means more government and not less, which has been the prevailing wisdom of most of the last 40 years. But it needs to devolved and better at its job.

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