The Liberal Democrats need a new vision, not a new constitution

The British Liberal Democrats suffered a poor election result last December, and it will have to bear the consequences for up to four more years. The party has commissioned a review to ask what went wrong, and to help it set a new course, which was published recently. Now it needs to take on board the report’s recommendations, and the first one above all:

Based on the lives of ordinary people in the country today, create an inspiring, over-arching and compelling vision which can guide the entire Liberal Democrats organisation for the duration of a parliament, ideally longer

The review was chaired by Dorothy Thornhill, former mayor of Watford, and the party’s most successful and effective politician, now retired, alas. Her skills were much in evidence. It is a good read, and the complete report was sent to all members, rather than a select few, with an edited version released publicly much later, as has been the case before. It does not name names, neither does it try to second guess the decision to expedite the election in the first place, where the party played a critical role. And yet it doesn’t pull its punches, describing the election as a “high speed car crash”.

The biggest problem it identifies was a lack of coherence and realism about the party’s aims, and especially muddling whether the party was trying to stop Brexit or win the maximum number of seats. Instead of resolving this, the leadership became entranced by the idea that the party could massively increase its parliamentary representation, resulting in the severe wastage of effort and resources. This was because of some encouraging polling in the summer 2019, after its spectacular performance in elections to the European Parliament. In fact the party’s strategic position became very difficult as soon as Labour came down unequivocally for a Brexit referendum in the autumn. The review is clear that there were in fact only limited opportunities for the party to advance. Fifty or more seats was never on, but increasing representation to twenty seats from twelve maybe was; instead it ended up with just eleven.

Within the “car crash” a lot of organisational dysfunction was on display, of a type seen in the two previous elections in 2015 and 2017. Nobody was sure who was in charge and different parts of the party pushed in different directions, getting in the way of each other. This dysfunction is spelt out in quite a lot of detail in the second section of the report “Summary of Findings”, after initial “Review” section which sets out a clear narrative (the narrative style did upset some people, but it adds a lot to the report’s impact).

So what next? The review after the 2017 election said a lot of the same things, but was sidelined by organisational wrangles. This time it helps a lot that there is a new President (Mark Pack) and Chief Executive (Mike Dixon – an outsider to the party), while a new Leader will be elected with the review already published. The wrangles at the party’s Federal Board, its ruling council, do not seem to be being repeated this time.

Nevertheless there is a powerful temptation for the party use the organisational dysfunction as a jumping off point for a restructure, and in particular for changing the constitution. There have already been some calls for this. There are plenty of obvious targets: the absurd size of the Federal Board, the overlapping remits the various ruling committees, the Polyfilla construction that is the English Party, and so on. But Dorothy in person is very clear that it is the organisational culture that most needs changing, not the structure. People obsess with organisation structure as a displacement activity for dealing with harder problems; I know because I have made this mistake too often myself.

And the report gives pride of place to what that much harder problem is: developing the party’s vision so that it is grounded in the way non-political people live (I dislike the term “ordinary people”; there are no ordinary people in my book). The party talks to itself too much, and has used the idea of a “core vote” strategy to provide camouflage for this. The result has been that the party has limited appeal beyond well-off professionals, at a time when all the other significant parties (Conservatives, Labour and SNP) have succeeded in broadening their appeal across social class. Alongside a core vote strategy the party must develop a powerful appeal for more sceptical voters for on an election by election basis.

One prominent finding of the report is that the party failed to develop its appeal to ethnic minorities. This is true, but the New Statesman’s Stephen Bush makes a good point that the report oversimplifies this. There is no “BAME” community; there are many communities and the other parties have made progress by recognising this and developing appeals to particular minority communities. That is true, but in the case of the Lib Dems I think the BAME issue is part of a wider problem: its neglect of working class communities. Of course the persistent problems of unconscious bias mean that all parties must keep up scrutiny of their performance among BAME communities at all times – so it is right to give it prominence.

Vision is for the party leader to set, and I hope the candidates will duly focus on this, as it is not an easy problem to solve. It needs to combine a powerful appeal to members and core voters based on what the party stands for, and a more triangulated approach that will capitalise on gaps in the political market, which will involve compromises.

I don’t think the party is in too bad a shape on the first part of this. I can be hard to articulate it sometimes, but the common ground among the party’s core support is clear. The main challenge is to make it more inclusive. There is no reason that people from ethnic minorities or working classes shouldn’t feel welcome in this group: liberal values are transcendent. But what of the compromises required to broaden the party’s appeal beyond the core?

First we must talk about Europe. The party has bet so heavily on membership of the European Union that a U-turn would destroy it. It has to say that rejoining the union is an aspiration. But not now. People in the UK want to move on; so do people in the EU. The party needs to stand for a close trading relationship, even if it means compromising on “the level playing field”, though the party might want to take a tougher line on fisheries, with conservation in mind. The case for being closer to the EU needs to be based on the idea that the world is becoming an increasingly hostile place. The United States owes Britain no favours and will always extract a very high price for free trade; China is no less easy; both have developed a tendency to bully weaker powers. Elsewhere the opportunities for trading and political alliances are no less tricky.

Another tricky issue is law and order, human rights and privacy. The party has got up on its high horse about this in the past, but has often failed to make its case to “ordinary” people. The party needs to be more pragmatic, and focus on making sure that criminal justice institutions work effectively and fairly. “Fairness’ has a stronger appeal than “rights”. That leaves plenty of scope to critique the other parties.

But the party must also take risks. The Black Lives Matter campaign may be an example. While Labour under Keir Starmer triangulates fearing the white working class backlash, the Lib Dems can be a lot more robust. Ethnic minority working class people understand very well the need for multiculturalism, and are desperate for Britain’s institutions to be fairer; Lib Dems can be strong on both. I think the party needs to start a period of outreach to ethnic minority working class people; that will require financial incentives from the central party to local parties, who would otherwise gravitate to easier, more middle class places.

What of the conservative white working classes and rural middle classes? There is a big gap in political outlook, clearly, but the party must try avoid the gratuitous insults, which the anti-Brexit campaigning all too often led to.

Well these are some random thoughts. I haven’t offered anything coherent about what I think the new Lib Dem vision should be. Developing it will be hard, and I will keep coming back to the topic. But for now the key message for the party is that it must embrace the hard choices now, and avoid the temptation to spend too much energy on rearranging its internal affairs.

The post-growth economy has arrived. It’s time people accepted that

The idea that economic growth should be the top political priority, after keeping people safe, became established in the 1950s, and has become so imbedded in political thinking that it is now taken for granted. But it’s a bit like Wil E Coyote running over a cliff; we may not realise it yet, but the ground has disappeared from under this notion. We need to focus on different priorities, in rich countries anyway.

What is economic growth? It is the expansion of the money economy through the ever increasing consumption of volumes of paid-for goods and services. It focuses mainly on Gross Domestic Product (GDP), a measure of aggregate income, adjusted for inflation. This (and the related Gross National Product: GNP, more used in the earlier days) only started to be measured consistently in the 1950s. Prior to that economic policy focused more on things like unemployment and the balance of payments, with growth only being an implicit goal. Focus on growth led first to the widespread use of Keynesian demand management within a system of managed exchange rates and capital controls in the 1950s and 60s, and then on the management of interest rates within a world of free capital movements and floating exchange rates, since the 1980s. It is the one element of continuity between these two very different worlds.

Why is there a focus on growth? I think there are two main groups of advocates. The first are public policy expansionists who wanted to secure growing amounts of tax revenues upon which to build the state system, as well as to reduce the need for welfare safety nets. It is probably fair to say that these dominated the earlier growth period.

The second are the rentiers. By rentiers I mean those seeking “economic rent”, or making money without making anything (such as renting out land). The more money there is sloshing around the more opportunities there are for rentiers. These include people with investments, workers and owners in monopolies that overcharge, many senior managers, and so on. These are much more than the top 1% of the wealthiest, and include people with a substantial stake in property (such as owning their own home) or other assets. In other words not just profiteers, but those who want and expect the value of their house to keep going up. The rentiers have been in the driving seat since the 1980s, since post-Keynesian (or Neo-Keynesian) economic policy became general. There is a bit of a paradox here: rentiers make growth harder to achieve, and in fact are one of the causes of slower growth, but they adore the policies designed to promote growth.

The first critics of growth were environmentalists. An early example was E.F. Schumacher in his book “Small is Beautiful”, which made a deep impression on the my parents in the 1970s. Environmentalists pointed out that growth implied the consumption of ever increasing amounts of natural resources, and damage to the environment, and that this was not sustainable. This was not entirely true, as economic activity became more efficient, reducing its impact on the environment. Many of Schumacher’s predictions turned out to be nonsense, and yet when I look back from now to the 1970s I am struct by how much we have destroyed; and then there is the rapidly emerging climate crisis.

A second group of critics might be called “lifestylers”. These people have rejected the need to work ever harder to consume ever larger amounts of stuff. At first these could be dismissed as eccentric hippies – but people who retire early come into this category, and that became a widespread life objective from early on. Since then the expression “work-life balance” has become popular among younger people. The interesting thing about lifestylers is that they don’t usually object to economic growth in principle (they may be rentiers after all), but their economic choices make achieving economic growth harder. They vote against economic growth with their feet.

The third important group of critics are conservatives: those that object to the changes that growth brings, such as the closure of old-fashioned businesses, outsourcing abroad or the growing use of immigrants. While some supporters of Brexit claimed to do so to improve Britain’s growth prospects, the Remainers cut little ice with their arguments that Brexit would slow growth down. Most Brexiteers simply thought that it was a price worth paying to send the immigrants home.

All three groups have been steadily gaining ground, and then into the mix has come the Coronavirus crisis. It is quite sobering to see how much economic activity people regard as “non-essential”, and how rapidly people are happy to reduce consumption when health and wellbeing are at stake. As we climb out of lockdown, we happily pile restriction upon restriction onto businesses to make them safer. There will be an inevitable cost to this, making it an impossibility to get back to the level of GPD prevailing before the crisis. Now even people who favour growth in theory will be unable to accept the price in practice. Furthermore, after the sobering experience of life being turned upside down in weeks, it is likely that people will save more and consume less to improve their financial resilience.

But abandoning growth as an objective means a profound change to the way our political class makes public policy choices. It is not surprising that so many of them are emulating Wil. E Coyote. What are the new priorities?

I put jobs first because that must be the focus of the recovery from the Coronavirus crisis, and it is urgent. It used to be argued that jobs had to follow growth. This isn’t nonsense: job creation schemes not based on sound economic principles will fail the end. But the link between jobs, and especially the sort of jobs that give people security and self-respect, and growth has become a lot weaker. Government interventions need to focus on jobs first, while still considering sustainability. The idea of a government-sponsored job-guarantee scheme is certainly worth a closer look. There are many potential pitfalls in such an idea, but for my money it is more promising than the much-touted idea of Universal Basic Income. It is important to make the point that an economy without growth is not an economy without jobs.

Second in my list is sustainability. This has both environmental and economic senses. Economic sustainability will need to be rethought, especially if people start to consume less and save more. This will mean that much higher levels of government debt will be sustainable. Environmental sustainability should be the main guide public investment. There is a lot of work to do to make our economy environmentally sustainable, but we should not delude ourselves that this will necessarily increase GDP.

Third is inequality. There is a lot of poverty in our society, and if the cake isn’t getting bigger then poverty will only be tackled by making somebody else poorer. This is a notoriously difficult problem, but some countries manage it much better than others. A job guarantee scheme could play an important role. Another important point is to tackle rentiers, through taxes and promoting competition.

And finally in my list (I could go on) is government effectiveness. In a low growth economy, the ability of governments to tax is limited, and a lot of resources will be consumed in addressing inequality. It follows that governments should use their resources more effectively. The public sector is rife with its own class of rentiers, from consultants offering to implement “world-beating” systems that don’t work, to defence contractors using national security to cover up waste, to excessive union power stopping managers from managing. We need to develop a culture of effective, delegated public sector management, accountable to a reworked political system.

Low growth has arrived, however much policymakers may dislike the notion. It is imperative that the political elites of rich countries reorient themselves to the new reality.

The Coalition at 10: keeping nationalism at bay

In hindsight the most important trend in politics over the last decade has been the rise of nationalism – and the backlash against internationalist liberals, inevitably styled an “elite”, as if all political movements were not led by elites. In Britain did the Coalition stood firmly against this trend.

In this third article of three reviewing the Coalition, I will look at its record on the business of politics itself. In the first article I looked at the record on the economy, in the second I looked at public service reform. In my choice of three topics I am leaving quite a lot out. On the environment and energy, the Coalition made a decisive move towards renewable energy, perhaps its biggest single achievement; on civil liberties it rolled back, slightly, the heavy-handed approach of its predecessor; a notable achievement was the implementation of gay marriage; in foreign affairs there was an intervention in Libya alongside the French which met its short-term aims but left a mess; apprenticeships were given a major lift, but further education colleges (i.e. not universities) suffered neglect. There was a rather pointless reform of policing, though whether this, and austerity measures, led, eventually, to a rise in crime is a moot point. I would rather blame the dismantling of so much civic infrastructure run by local authorities, which the Coalition started, but which its successor doubled down on. A rather mixed record then, but perhaps not too bad by the standards of five-year terms.

But what of political reform? How much were we aware in 2010 of the rising tide of populism and nationalism? In 2009 the political establishment was rocked by a scandal over MPs’ expenses. This distilled a growing disillusionment with the way politics was run, after the wave of enthusiasm that greeted the “New Labour” victory in 1997. Politics seemed to be run by an out-of-touch elite of professionals, whose competence was thrown into question by the global financial crisis, which struck Britain particularly hard, and whose rotten moral compass was now exposed.

But the new kids on the block thought they could get beyond that by deposing the old Labour regime and its nannying ways. Liberal Democrats were especially hopeful that the experience of coalition politics would demonstrate a new, more transparent politics, that would help build confidence. Politics was indeed more transparent, but nobody thanked them for it. Indeed the Lib Dems’ entry into government to most people showed the unaccountable elite at work; the Lib Dems seemed to be enjoying their time at the top table too much, feeding the narrative that they were putting their careers before the country. The ambiguities in the electoral coalition that brought the Lib Dems their substantial presence in parliament were exposed cruelly. The party’s popularity was in free fall before a spectacular U-turn on student tuition fees dealt the party a blow from which it still hasn’t recovered.

The weakness of the Lib Dems did for most of the constitutional reforms that the party had hoped to push through. A referendum on adopting the Alternative Vote for parliamentary elections was lost heavily as their Conservative coalition partners mobilised against it, doing long-term damage to the whole prospect of electoral reform. Reform of the House of Lords disappeared as the political establishment cold-shouldered it. The Lib Dems extracted limited revenge by stymying a Conservative project to equalise constituencies to their advantage. This left the Fixed Term Parliament Act, implemented mainly to stabilise the coalition, in which it was mainly successful. This legislation has few friends these days, but it is still there. It’s value was shown last year when it briefly empowered parliament against a mandate-less government.

More positively the Coalition progressed the development of City regions, taking on more devolved powers, and coordinating local councils. This project was led by Lib Dem leader Nick Clegg, and Conservative minister Greg Clark. This was a process started by Labour – but the government limited council’s ability to raise revenue or borrow, which are the key tests for meaningful devolution.

In broader politics Labour started its long journey down the far-left anti-austerity rabbit hole, leaving the field clear for the two most important developments: the rise of Scottish nationalism, and theBrexit movement, led by Ukip. Both would dominate politics for the rest of the decade. The Coalition found itself on the defensive on both counts, but kept both at bay.

In Scotland the Scottish Nationalist Party (SNP) surged to victory in the Scottish elections of 2011. The Coalition accepted this as a mandate for a referendum on Scottish independence. Was this a mistake? It did not help to heal the rift between Scotland and England. I suspect Coalition leaders accepted the SNP government’s moral case; neither party had any appetite for a prolonged battle over whether such a referendum should take place, and in the event the main victim was in fact Labour. The referendum took place in 2014, and the unionists won. But the battle energised the SNP, whose dominance of Scottish politics continues to this day. Many see Scottish independence as an inevitability. I am not so sure, but coherent opposition to the SNP seems to be a long way off.

In due course the battles over Scottish independence would be dwarfed by the Brexit movement. This movement successfully channelled dissatisfaction with the Coalition and its liberal leadership in a way Labour could not, as the previous Labour government was seen as part of the problem. The battle was fought on two fronts. First was within the Conservative Party. While its leader, the prime minister David Cameron, had a strong grip on the parliamentary party (helped by the presence of Lib Dems in coalition), the Brexit movement gathered strength at grassroots level. Second was the rise of Nigel Farage’s Ukip. This quickly replaced the Lib Dems as Britain’s third party in opinion polls, and gnawed away at the Conservatives’ local base. The only way that Mr Cameron had found to keep the movement in check was the promise of an EU referendum, knowing that he could rely on the Lib Dems to veto it. At the same time his chief electoral strategy was to destroy the Lib Dems at the next election. The 2016 referendum was where this strategy ended up.

Looked at with hindsight the Coalition’s battles with nationalism look like a moderately successful rearguard action. They succeeded in delaying their enemies but without any ideas on how to stop them. What if Mr Cameron had narrowly won that referendum in 2016? It is hard to think that British politics would be anything other than very ugly.

Liberals have now developed a much better understanding of the problem: the pressures on small towns and the countryside, of economic growth that bypasses most people. But answers? We have made little progress since Coalition days, having preferred to rally around opposing Brexit. With the nationalist takeover of the Tory party now floundering, and with the old-fashioned leftism of Jeremy Corbyn defeated, this is surely the moment to do better than that. But new liberals will not look back on the Coalition government of 2010 to 2015 as a template.

We need to escape 2m social distancing. We are going about it in the wrong way.

Joss Bay, Broadstairs, Kent 30 May 2020

The UK government, in its capacity as the English government, has been easing the Coronavirus lockdown steadily over the last couple of weeks. Generally the public has been one step ahead. The picture shows the scene yesterday at one our nearby beaches yesterday; you would be pushed to find any difference from a normal day half-term week in May. The public toilets were open (big queues, no social distancing), and you could hire a windbreaker, buy ice creams and no doubt many other things too. Is this all happening too quickly?

Meanwhile, the scientific advisers seem to be behaving more and more like economists, and not always in a good way. They are very attached to their models predicting how the out break will develop. Abstract aggregated measures, especially the Reproduction or R-rate, are treated as if the are real, tangible things, rather than statistical abstractions. In one way they don’t behave like economists, though. They accuse our leaders of taking political decisions because they go against their advice. On probing them, it turns out that what the scientists mean by this is that the politicians are weighing up factors like the economy and mental health. Stuff that is somebody else’s problem for the scientists. Economists need no excuse to barge into somebody else’s field.

But even taking a broader view, the scientists have a point. The prevalence of Covid-19 is greatly reduced, though it is very hard to get a decent fix on this, given the weaknesses in the testing regime. This means that the risk of catching the disease is now quite small, depending on where in the country you are (though apparently the regional variations aren’t that great). But this low risk is precisely what led to complacency at the start of the epidemic. The countries that locked down early (i.e. before they had a visible problem) are the ones that have suffered least; Britain has one of the worst Covid-19 death rates on any country in the world.

The problem is this: living with the virus is very hard if it means maintaining 2m social distancing. So many activities become impossible: restaurants and bars for example, unless customers can stay outside. Reducing this distance to 1m, as I heard former Chancellor Norman Lamont suggest, is a bit of a nonsense. If you are indoors and with somebody for more than 15 minutes, then the risks escalate. This is what bars and restaurants are for, and you can’t mitigate them by getting everybody to wear a mask, as you can on a bus or aeroplane. 2m is probably not enough in this environment. Which is very bad news not just for those us dying to eat out again, but for the huge numbers of people employed in hospitality. At the same time shops, factories and the businesses can’t maintain their previous productivity.

The aim has to be to not have social distancing rules at all. How do you achieve this? The first step is to get infections down to a very low level. Much lower than is prevalent in any part of the UK at the moment. Then you implement a rigorous track and trace system, to identify and isolate anybody who has the disease. Extra regulations are required where people congregate in an enclosed space period of time, so that everybody can be rapidly identified if one of them turns out to be infected. People coming into the country need to be tested on arrival, with results coming back in 24 hours while they wait somewhere safe. This is all well-trodden territory for countries like South Korea, for example. This is not life returning to normal by any means, but it is much better than trying keep everybody 2m apart.

The loosening of the lockdown being implemented in England (and at a slower pace in other parts of the UK) may well not lead to a rapid escalation, as many fear. There seems to be a lot less danger associated with being outdoors, especially if it is sunny (and also, for different reasons, I suspect, if it is wet). 2m social distancing may be impossible all the time on beaches like the one in my picture (the family groups sitting and sunbathing are OK – but the problems are when you are moving around), but the risk is probably very low. Shops and schools, now opening up, are probably not very risky either, with the mitigation measures in place – though we need to be careful about people that work there. But if there is no major escalation, it seems unlikely that the opposite will happen either: that we can get infections down to the level where social distancing can be dropped. The danger is that Britain will be stuck in a no-man’s land between emergency levels of the disease and being on top of it.

Alas Britain’s problems don’t end there. The government has still not mastered the logistics of mass testing, and of large-scale track and trace operations. The press is full of things going wrong, and especially of test results taking a very long time to come through, as well as difficulties in getting the tests to people that need them. To me it smells very strongly of an over-obsession with economies of scale – which lead to problems in linking the bits together. Much can be learned from the decentralised organisation of Germany, for example. Getting this infrastructure working properly is critical to moving beyond the world of social distancing. The bad news is that the people in charge don’t show any real grasp of what is causing the problems, and assume they can be solved by working a broken system harder.

Which means that the UK’s dismal record on tackling the Coronavirus is likely to continue. Well at least we aren’t Brazil.

The Cummings Affair exposes the shallowness of the Johnson project

I have often come across the idea of the strategic manager. He (and the gender stereotype is appropriate here) thinks that it is his job to look at the big picture, and leave the detail to his underlings. Indeed, too much detail could cloud judgement, as could working too hard. More than one of my bosses in my professional career had this idea. It always ended in tears. And so it is in politics and in military affairs too. The British Prime Minister, Boris Johnson, turns out to be the latest victim.

Mr Johnson was a particularly prominent exponent of this idea, though, typically, he has so far as I know not expressed it himself, leaving that to his acolytes. They have described how he entrusts detailed tasks to advisers, and then makes decisions based on a solid strategic understanding. He is said to have had a successful 8-year stint as London Mayor on this basis. But only supporters judge Mr Johnson’s two terms as mayor as more than an electoral success. It is devoid of substantive achievement, while marked by ill-advised vanity projects, from the new Routemaster buses (in action but late and over budget because of the unnecessary design requirements imposed on it), water cannon for the police, the infamous Garden Bridge, and so on. The one major success of his term was the London Olympics of 2012, but his personal role was minimal; the real hard work of winning the right to hold them having been done by his predecessor. Meanwhile Mr Johnson kept as low a profile as possible as Mayor, not wanting to he held to account. The job is not nearly as big as it looks, as the government has not devolved much power to the Mayor, and it does not seem a hard job to hold down without doing serious political damage to oneself. Which cannot be said of the role of being UK Prime Minister, which is genuinely one of the toughest jobs in British politics.

The problem with the notion of strategic leadership is that events are driven by detail. Big events are the summation of of lots of small ones. Strategic decisions must be executed at tactical level, and strategic choices are best based on a firm grasp of the detail. More important still is that evidence of whether a policy is working depends on understanding of detailed evidence. You can wait for big picture evidence to emerge, but by the time it does so, it is usually too late. It follows that a strategic leader is very dependent on other members of a leadership team to both provide a tactical understanding, and to filter and feed back information from the front line. This can be done in one of two ways: “Big Beasts” or “Trusted Adviser”. Leaders usually opt for a combination of the two.

The Big Beasts approach requires an alliance with another figure who has substantial political clout in their own right: another politician. The most recent successful example of this was David Cameron’s alliance with his Chancellor George Osborne. Mr Cameron, like Mr Johnson, was a light touch leader, though not to the same extreme. His career ended in ignominy when he led the losing side of the Brexit referendum, but he lasted six years, including a notable general election victory. But Mr Osborne, by no means light-touch himself, did a lot of the work, and indeed often seemed overstretched. Mr Osborne clearly had ambitions to succeed Mr Cameron, but in the end Mr Cameron’s failure finished his political career. But that relationship stands out because it was so successful. More typically such relationships become rivalries, which in turn leads to disfunction. Such was the fate of Labour prime minster Tony Blair’s relationship with Gordon Brown, also Chancellor. Mr Blair’s leadership style alternated from strategic to getting into the detail if required, and his partnership with Mr Brown was at first highly successful. But Mr Brown became jealous, and things started to break down. Given that successful politicians are driven people, this is the normal fate of reliance on Big Beasts. The best leaders use alliances with several allied politicians and don’t become dependent – but that is very hard work, and cannot be equated to the sort of strategic leadership to which Mr Johnson aspires. Mr Johnson instead has taken the opposite tack of keeping any potential rival at a safe distance. His cabinet has nobody close to being a political rival. Only two members stand out as having any political weight. One is Matt Hancock, the health secretary, who is progressively being eaten up by the crisis and will surely be politically destroyed by it. The other is the Chancellor Rishi Sunak, who has had a good crisis, but is so new to senior politics that he cannot be seen as a serious rival yet.

Instead Mr Johnson has gone entirely for the Trusted Adviser approach. In this the leader appoints a team of advisers entirely beholden to him, and selected on ability and trustworthiness. This team keeps a low profile and carries out the detailed work, including the digestion of information coming in from the front line. Such a team usually has a leader. All British prime ministers have used some variation of this strategy. Few have had the implied power of Mr Johnson’s chief adviser, Dominic Cummings. The biggest danger of the Trusted Adviser approach is sycophancy: the tendency to filter out the bad news before it reaches the centre. There is an inevitability to this, and wise leaders learn to adjust for this and try to triangulate with other sources of information. But again that is hard work. Mr Johnson has done something a bit more interesting, by appointing a maverick who is less inclined to be sycophantic.

But there is a cost. With political rivals cleared away, with Mr Johnson’s preference for a low personal profile, and with Mr Cummings’s maverick style, public attention naturally gravitates to the adviser, who becomes seen as the real power, and one that is not politically accountable. And that has now been exposed to breaking point with Mr Cummings’s rather loose interpretation of the lockdown rules so far as his family is concerned. In ordinary circumstances he would have gone, but Mr Johnson’s refusal to sack him confirms to everybody how dependent he has become on his adviser. Mr Johnson himself seems to be at sea, with only the vaguest grasp of details. His recent illness with Covid-19 seems to have taken its toll.

Personally I have some sympathy with Mr Cummings’s predicament in the episode that is at the heart of this affair: the decisions he took back in March when his wife started to show symptoms. My view about rules is that the intent is more important than the letter, and my instinct is to interpret them flexibly, or with “common sense”. That doesn’t let him off the hook entirely. He moved his family from an area of high Covid incidence to one that was at the time a low one (a situation that has since reversed); did he really not expose others to risk during his journey or while he was there?

But the problem for Mr Johnson is a much bigger one. I am in a minority when it comes to my attitude to rules. Most people prefer for rules to be set and obeyed to the letter, as then everybody knows where they are. And people have been sticking to the rules at huge personal cost. Mr Cummings’s behaviour reignites a belief that there is a ruling elite that doesn’t really care about the trials and tribulations of “ordinary people”.(an expression I dislike, but I digress). This is particularly difficult for both Mr Johnson and Mr Cummings because they have built their careers on being champions of “ordinary people” against arrogant elites. This is now exposed as being the fraud it always was.

But even if this affair hadn’t blown up, Mr Johnson would be in trouble. His model of leadership places too much pressure on too few people. It is vastly over-centralised, and it is faced by two huge challenges. The first is managing the next phase of the Coronavirus crisis, which is the loosening of the lockdown, the search for a new normal, and the alleviation of widespread hardship. Second there is Brexit. The transition period is set to end on 31 December, and the government has no intention of extending it. And yet there is an impasse with the EU as what is to replace it. This is not necessarily an impossible challenge. The government can compromise on EU demands (which are after all based on the political declaration that was part of the Brexit deal) and declare victory. But that will take brains and leadership, which are now otherwise occupied, on both sides of the Channel. The government may be successful in passing the blame on to the EU side, with Remainers still in deep depression and wary of stoking up old divisions. But it will look chaotic and add to the general impression of haplessness which is becoming the current government’s hallmark.

Take away Dominic Cummings and what is left? There is no vision of what this country is supposed to become. Successful political leadership is a “both and” business. Both strategic understanding and command of detail. Both an effective core of advisers and cooperation with other substantial political figures. And it is very hard work. With Mr Johnson at the helm Britain is drifting. Can it really last another four years/

What if we treated the science of the pandemic like economics?

Very early in the Covid crisis a wise journalist at the FT (I forget which one) said that scientists were going to learn to behave like economists. Slowly we are learning the truth of that. Almost everybody knows that economists deal with the unpredictable, and treat their advice accordingly, alongside other political arguments. So little is known about Covid-19 and the virus that causes it that we should treat scientists’ advice in much the same way, except when it comes to such important issues as vaccines and treatments.

I have long used this blog to argue that science has severe limitations and does not justify the faith that some put in it. The discipline has, or should have, rigorous processes by which it can express opinions (or hypotheses if you prefer) with increasing degrees of certainty. But only relatively simple propositions can be tested in this way. And the conclusions drawn from the evidence are usually only generalities. Many areas of knowledge are beyond the reach of such rigour. Economics is one example, management and organisational practice is another.

Science remains vital, of course. The search for a vaccine for Covid-19 is an example. It plays to science’s strengths. The proposition that a particular vaccine works a relatively simple one to test, and a general conclusion, rather than one that applies to all people all the time, is what we are looking for. It isn’t worth investing in a vaccine that hasn’t proved itself in the rigours of scientific process.

An example of something where science is of less use, look at facemasks. How effective these are in preventing the spread of the disease turns out to be a very difficult thing to test. There are so many variables. Does that mean we should recommend their general use by the public? British scientists seem be suggesting that the answer is no, though they generally try to avoid saying anything at all. Interestingly, in Asia the view seems to be that they should be worn; doubtless they would say that scientific evidence does not show them to be ineffective either. And the Asians do seem to be doing a much better job of managing the disease.

This is the null hypothesis problem. What do you believe, absent proof? Some scientists like to say “nothing”, as if that was a neutral answer. But there is no neutral answer if choices depend on it. This sort of muddle seems to have been behind Britain’s late lockdown, which has been so disastrous. The government says it was following scientific advice, and there is no reason to doubt their word. It was very early days in our understanding of the virus and the disease, so the scientific advice was not clear – though some claim it was. In Britain the null hypothesis was that a lockdown would be ineffective, so action was delayed. Elsewhere (Asia again ahead, but places like New Zealand too), the null hypothesis was that a lockdown would be helpful, until shown to be otherwise. This was a variation of the precautionary principle.

Now we are in a much trickier situation with regard to how quickly to ease the lockdown. The precautionary principle is a lot less use here, as there are harms on both sides. I have a lot more sympathy with the government this time, and I think they are right to be pushing the envelope, which in turn is opening debate. But they can’t appeal to science if they are looking for definite guidance.

So, if we start to look at the science more like economics, what might we suggest? What follows is based on evidence, but the hypotheses developed have not been tested to anything like a scientific standard. But no sensible public policy is going to be.

What we are learning about the disease is that it is not as contagious as feared at first, but that in some situations it is still highly contagious. Early in the crisis some people suggested that the overall infection rate was very high (over 50%), but that this was not showing up as most people were asymptomatic. In fact, mostly, infection rates have been pretty low (below 10%), where general populations have been tested. But there have been some pretty spectacular exceptions, where a single individual has spread the disease to many. A conference in Singapore was an early example; there was a ski resort in Austria too, and recently a nightclub in Korea; care homes have been a major trouble spot. This suggests to me that enclosed spaces with many people in them are the main danger, as well as residential environments with a lot of people mixing. Further evidence seems to show that hospitals, and perhaps care homes, can be made safe by the use of personal protective equipment (PPE). Hospital workers don’t seem to be suffering more than the population at large.

So if I’m right about that, we need to keep pubs, restaurants and nightclubs closed, except where they can serve customers outdoors. Outdoor activity generally is probably relatively safe, and the 2m social distancing advice here in Britain is probably overdoing it unless you are stopping to talk to somebody. Alas trying to change that advice is probably too much of a communication challenge. Intermediate environments, such as shops and schools, are much harder. Steps need to be taken to keep densities of people low, and my feeling is that facemasks should be mandatory (though that is probably impractical in schools). One particularly important question is air travel. On the face of it an aeroplane is a particularly dangerous environment. But if everybody wears masks? We need more evidence.

Meanwhile testing infrastructure needs to be improved so that we can test more people and get the results quicker. Something seems to be going badly wrong in Britain. Paradoxically I suspect that an obsession with ramping up scale hasn’t helped. Building large scale facilities first to gather samples and then separate facilities to complete the tests looks to me like a process flow nightmare. More testing will give us much more information and if it is combined with effective tracking we can understand better how the disease is passed from person to person.

A further idea worth exploring is that of “red” and “green” zones, with tighter restrictions in the former. The problem of course is of people moving from red to green. Perhaps you could allow restaurants to open in green zones, if all customers are made to leave name, address and phone details (with those living or working in red zones not allowed to go there). You could use a smartphone app to help enforce much of this, though that may be too Chinese for Britain.

Using such policies we can haltingly work our way to a new normal, until the scientists and technologists give us a vaccine or cure. Economics is no science, but it is not useless either. Just as politicians are used to dealing with economic problems, so too they help reduce the damage that this pandemic is doing to our society by using what evidence we have.

The Coalition at 10: the wrong turning on public services

Ten years ago, when the Conservative and Liberal Democrats entered coalition, there was a certain energy about the way the new government wanted to approach public services. Gone would be the lumbering, heavy-handed nanny-state of “New” Labour. In would come something more focused, less costly and with a greater community involvement. The Economist enthused about the coalition’s apparent radicalism. In 2020, almost nobody remembers this energy. If the verdict is not entirely negative, the Coalition’s record on public services was more failure than success. It is as well we try to understand why that was.

The energy came from a meeting of minds between the Conservative modernisers led by the Prime Minister, David Cameron, and the “economic liberals” from the Lib Dems, led by his deputy, Nick Clegg (often referred to as “Yellow Bookers”). Neither faction had a secure grip on their own party, but there seemed to a meeting of minds across the coalition’s leaders. Alas neither leader had a strong grasp on how to manage public services, and most Conservative ministers had their own take on how things should be done. The left has made its principal line off attack on “austerity”, and blamed lack of funding for the coalition’s failures. But problems went much deeper than this.

At the start, though, it is clear that something needed to be done. After 13 years Labour’s public service policy was both bogged down and bloated. Labour’s strategy had been borne out of a tension between Tony Blair, who favoured business-friendly and market-oriented approaches, and Gordon Brown, who favoured top-down discipline and expanded budgets. Mr Brown won, mostly. The result was mountains of guidance coming down from on high, a highly complex system of numerical targets, and in the case of the NHS, a massively over-engineered commissioning system (“world-class commissioning”) supported by the biggest and most complex transfer-charging system in the world (“payment by results”). It was a job-creation scheme for management consultants, whose output was blather designed to incorporate as many as possible of the favoured buzz-words, and a slow atrophy of decision-making. Labour had achieved a lot in their 13 years, raising health spending and driving up standards in schools, but by 2010 the whole system was looking more than tired.

Unfortunately the Coalition found that sweeping out the nonsense was easier than replacing it with something better. The first thing to fall by the wayside was any idea of community engagement. Mr Cameron had promoted this through his idea of a “Big Society” which overlapped to a degree with the Lib Dem idea of community politics developed in local government. But Whitehall, both politicians and civil servants, jealously guard their power and nobody wanted to make concessions to interests not represented in Westminster’s lobbying industry. I had a sharp experience of this when local parents in Wandsworth tried to set up one of the government’s new “Free Schools”. This fitted the template of bottom up initiative promoted by Conservatives before the election, but the local, cross-party activists were quickly bundled out of the way, and the contract for the new school given to one of the well-connected academy-school groups. The Big Society was very quickly forgotten.

The next mistake was an obsession with structure over substance. The most costly mistake was a massive reorganisation of the NHS, which destroyed morale, but, to my knowledge, had very little benefit to show for itself. The minister in charge, Andrew Lansley, was given a free hand, and then sacked. Much of the new structure has shown itself to be useless or worse in the face of the pandemic, though that may have been as much to do with policies implemented after 2015 (such as cutting resources for public health), and hospitals have shown themselves to be in good shape organisationally. Another clear mistake was the energy put into the “acadamisation” of schools to take them out of local authority control. This proved to be a succession of costly errors. First managers of the new academies started overpaying themselves, then ministers found that academy chains were making the same mistakes that local authorities did. A huge amount of energy was wasted, and yet the country still suffers from the phenomenon of “coasting schools”. In both health and education the government would have been better off trying to make Labour’s structures work better.

A further mistake arose from a wrong-headed approach to outsourcing. There were two big problems. The first was a policy of divide-and-de-skill borrowed from the private sector. The idea was to divide services into separate functions, define their objectives, and then seek to meet these using as many untrained and inexperienced staff as possible. This may look fine on paper, but it is a complete misunderstanding of what public services are. Public services should be about solving problems, and especially the more complex ones, which will otherwise keep coming back at you. The private sector is not interested in solving people’s problems: it just wants people to keep coming back for more. Solvi8ng problems requires different services to be integrated, not carved up, and it requires highly skilled professionals to craft solutions around services users’ needs. The disaster that deskilling entailed is especially evident in social services and criminal justice.

There was one case where the government wanted to solve complex problems, using a people-centred approach implemented by skilled professionals. This was the troubled-families programme, which was to focus on 100 families that generated a totally disproportionate amount of impact on public services. Alas this fell foul of the second big problem: the idea of “payment by results” – the same words as Labour’s NHS transfer-charging system but with an entirely different use. The idea was to pay organisations more if they achieved measured results. Unfortunately, in the case of troubled-families, there was no good numerical basis of measuring success on the sort of timescale needed, so it simply led to the usual perverse incentives. Furthermore this type of remuneration ruled out smaller social enterprises that were unable to manage this type of financial risk, but which were more likely to embody the kind of public service ethos needed.

The coalition’s record was not all bad. The reform of university funding stood outside other reforms and was based on the recommendations of a commission appointed by the previous government, not to mention being led by two of the government’s more intelligent ministers – Vince Cable and David Willets. It secured additional resources for universities, allowing them to expand their intakes, including to more disadvantaged students. It compares favourably with the zero-fees approach used by the Scottish government, which forced universities to restrict access to the disadvantaged. Gradually people understand that the loan finance system works like a graduate tax, though the more recent imposition of high interest charges undermines this. That leaves plenty of problems with universities their financing, but it was a major step forwards.

Other bright spots on public services included improving school provision for disadvantaged pupils, through the pupil premium and better accountability, and a much stronger focus on mental health. But many big problems, like social care, were left unsolved.

After the coalition ended in 2015, the Conservatives doubled down on all the worst aspects of the coalition’s policies, with an almost vindictive cutting of public money. This came just as the longer-term problems stored up by earlier policies started to come back, with an increased crime rate, for example. In 2016 the new prime minister, Theresa May, tried to reverse this, but was quickly overwhelmed by the Brexit nightmare.

Labour’s top-down approach had got stuck, but the Coalition and the then the Conservatives on their own, looked for the answers in the wrong places. Readers of this blog will know what I think. Public services must become people-centred, allowing complex problems to be solved by crafting solutions across the boundaries of existing agencies. That cannot be achieved using a structure answerable to Westminster, or even at regional level (Scotland and Wales have just as many problems), but by devolution of power and accountability to a much more local level. This should be standard Lib Dem policy, though was not pushed in coalition; a few more Labour people talk about it nowadays, though it looks far from the way current Tories approach things. I would like to think it could be the basis of a Lib Dem-Labour-Green coalition, but I’m dreaming.

The Coalition’s failure shows just how hard our political system makes the effective management of public services.

Boris Johnson should be very worried by Keir Starmer

In the middle of a pandemic, Sir Keir Starmer’s start as leader of the British Labour Party has been inevitably muted. The news is dominated by the epidemic and the government’s response. There isn’t much time for any opposition party. But in these early days the portents look very good for Labour. Its members have made a very good choice.

Most of the attention has been drawn to Sir Keir’s performance at the weekly ritual of Prime Minister’s Questions (PMQs). In the first two weeks the Prime Minister, Boris Johnson, was ill and could not attend. But instead of handing over to his deputy, as previous leaders have done, Sir Kier took it on himself. This was an interesting side-stepping of the usual parliamentary protocol games. And then when Mr Johnson did become available, he easily overwhelmed the prime minister. His style was quiet but focused. “Forensic” was the description universally used, referencing Sir Keir’s former job as QC and Director of Public Prosecutions. It is a style to which a bluffer like Mr Johnson partially ill-matched.

How much does PMQs matter in the great scheme of things? The public barely notices. But it damages the morale of Conservative backbenchers, and the pressure on an immature government team could lead to it to make silly errors. The idea floated by the government that all MPs should return to Westminster, so that the boisterous atmosphere of PMQs might be restored, and so make things look a bit less bad, looks to be just such a silly error.

A second portent comes from Sir Keir’s cleaning out of the front bench team. His predecessor, Jeremy Corbyn, valued loyalty over competence and the front bench was full of weak performers. Sir Keir’s team looks much stronger, though the parliamentary Labour Party is not as strong as it once was, so choice is constrained. But Mr Johnson is also a loyalty over competence operator, and his own front bench looks particularly weak. Which for a “no-details” style of leadership is a big problem. Sir Keir’s aim is to challenge the government’s competence by contrasting it with his own.

A third, and highly significant portent comes from Sir Keir’s refusal to challenge the government on the Brexit transition. Many are saying that the transition period should be extended, not least because of the virus, as there is not enough time to negotiate a trade deal by the end of the year. It’s a fair line of attack, but Sir Keir’s failure to take it up shows that he is the first Labour leader since Tony Blair to have a clear sense of political strategy.

As opposition leader, Mr Blair was very careful to pick his fights with John Major’s Conservative government only on a very limited range of issues. His aim was to take the fight to the Conservatives and win over their former supporters. To that end he projected similar policies but superiority in style and competence. The next Labour opposition leaders were Ed Miliband and Mr Corbyn. Neither were prepared to take the challenge to the Tories. Instead they hoped to win by rounding up a “progressive majority” from Lib Dem and Green voters, and from people who had previously not voted. Anybody who supported the Tories was suspect, and the party did not want to make the compromises needed to win them over. Instead they challenged the government on a very broad front, portraying them as something close to evil. This motivated the activists. They succeeded in winning over many Lib Dems and Greens, and even (especially in 2017) bringing out previous non voters. But these were neutralised by people put off by their perceived extremism, who moved over to the Tories.

By showing restraint in his attacks on the Conservatives, on Brexit, and indeed on the Coronavirus crisis, Sir Keir shows that he has grasped this. The priority is to win power, and this can only be done by persuading former Conservative voters to come over. And it is particularly important not to put off people who support Brexit.

Let’s look ahead to see how this strategy might play out. The most likely scenario is that Mr Johnson’s government will muddle through the crisis, and intervene enough to limit the damage to the economy. In this event Sir Keir’s message will be “the same, only different”. He will pursue the government on issues of competence rather than policy. Mr Johnson looks very vulnerable here, and with a little luck his government could go into free fall like Mr Major’s, and never recover.

A second possibility is that the Conservatives will lurch to the right. After a hard Brexit, the government tries to roll back the extension to government seen as the crisis has developed, in the hope of creative destruction from which a leaner, healthier economy emerges in time for the next election. There are undoubtedly some Conservatives who want to go down this route. But it would be highly unpopular in the country at large. If this develops, then Sir Keir will broaden his attack to favour stronger public services as well as competence.

A third possibility is that the stress of the Coronavirus crisis causes the government to completely unravel, leading to a Conservative rebellion which results in a National Unity government involving Labour. This is after all what happened in both the world wars in the last century, when the prime minister (Asquith then Chamberlain) was perceived to be out of his depth. There is no Lloyd George or Churchill in the wings, though, so this does look rather unlikely. If this happens it will provide Sir Keir an opportunity to demonstrate fitness for government, while doubtless the Conservatives would tear themselves apart.

Should Labour leftists feel betrayal? Certainly they will see their wilder causes sidelined or squashed. Sir Keir has signalled a tough line on antisemitism; this covers those who criticise Israel obsessively while taking an indulgent approach to countries like Russia and Venezuela. But they should stay calm. Once in power it will be quite easy to tilt policy in a socialist direction in the aftermath of this crisis. Getting power is the main thing, and then consolidating it. Mr Blair and Gordon Brown showed the way. It is not widely appreciated on the left just how far Mr Brown in particular advanced the boundaries of the state and the cause of practical socialism.

How should Lib Dems react? it is commonplace to hear the thought that the party flourishes if Labour leadership is moderate, after the party failed to make much impression when Mr Corbyn was in charge. This is clutching at straws. If Sir Kei8r’s leadership develops as I expect, the Lib Dems’ only chance is if Sir Keir is indulgent towards the party because he thinks it could be useful. He might if he thinks that it could keep the Conservatives out of 20 or more seats that Labour would struggle to win themselves. He would certainly much rather deal with the party in a hung parliament than the Scottish Nationalists. The Lib Dems might get some political space around immigration, since Sir Keir will not want to open up too big a gap the Tories there. Brexit will be a more troublesome issue for the Lib Dems. Otherwise there will be little open space.

What you will not see is Sir Keir taking up electoral reform. He might duck and weave, as Mr Blair did, or he might rule it out. He will not want to distract attention from his core message that the Tories are not fit to govern.

Of course, in the early days of a new leader it is very easy to project your expectations onto him or her. Perhaps that is what I am doing here. But this is my working hypothesis, and Mr Johnson should be very afraid.

How do the achievements of the Coalition look ten years on?

Ten years ago, in May 2010, a new government was formed from a coalition of the Conservatives and the Liberal Democrats. It lasted the full five year term, but it is usually regarded as a political failure, especially for its junior partner, who have been marginalised ever since. If coalitions don’t work for all parties than they are unlikely to be repeated. I don’t want to go over that well-trodden ground, though, but to ask whether the coalition served the country well. Its leaders thought that however unpopular they were at the time, they would be vindicated by history. How is that working out?

I had envisaged doing that in a single post, but on reflection I could not do the topic justice. I will attempt it in three. In this post I will look at the Coalition’s handling of the economy, and in particular the controversy around austerity. In the second I will look at the attempt to reform public services. And finally I will look at its record on the country’s governance, where the most important event was the referendum on Scottish independence in 2014.

The Coalition’s record on the economy usually gets a bad press, except from confirmed Conservative supporters. The government inherited the aftermath of the Great Financial Crisis, and in particular a budget deficit of an eye-watering 11% (though we may soon learn to regard this as being a bit tame). All parties in the 2010 election promised to eliminate this deficit to bring the national finances back to order. The trajectory offered by the Conservatives was the steepest, and this was the target adopted by the coalition. It involved some tax rises (especially raising VAT), but most of the strain was taken through expenditure cuts. The scale of such cuts was spectacular. Only the NHS and education were spared, and, with demand on the NHS rising through an ageing population, even the NHS budget amounted to a real-terms cut. The cuts were less spectacular in execution than planned, and the government’s targets for the deficit were missed repeatedly. The actual outturn was strikingly similar to that promised by both Labour and the Lib Dems in the election.

These cuts provoked a massive depth of anger from the left. “Austerity” has been turned into a totem of hate, alongside the nebulous idea of “neoliberalism”. For all this anger, or perhaps because of it, it is hard to take this seriously. Rational debate has become impossible. All cuts are always evil, in this way of looking at life. There is no such thing as wasted public spending (though some might debate spending on weaponry, trade union allies quickly close that thought down). In the country at large this is a minority view though. One of the critical truths grasped by Gordon Brown and Tony Blair before their victory of 1997 was that until Labour showed that it could embrace austerity if necessary, not enough people would ever believe that the party was fit for government. That is probably still true.

But the criticism of the Coalition’s austerity policies goes much wider than the angry left. Most neutral economists join in. In fact I don’t think I know of a respectable academic economist who has been prepared to defend it. The argument here is that as the country was in recession, there was massive spare capacity, and the country needed fiscal stimulus to put this capacity back into use, and reduce long-term damage. Instead government cuts prolonged the recession and stunted the subsequent recovery. Few defenders of austerity bother to respond to this criticism. Instead they suggest that national debt was out of control and it was vital to bring it down to calm financial markets so that the government could finance itself. This thought was clearly on the minds of coalition ministers in 2010. It was the time of the Greek debt crisis, and nerves were jangled. The Treasury undoubtedly played the risks up – fiscal conservatism is in their DNA. The academics respond that as the UK had its own currency, the government could always pay its debts; anyway interest rates on government debt did not suggest market panic.

This is an interesting line of debate. The complication in the case of the UK is that it has a large and persistent current account deficit, and so is dependent on foreign finance, unlike Japan, another major economy with a floating currency and big debts. There is strength on both sides of the argument here. Ten years on the academics look closer to the mark than the Treasury types. But there is some strong hindsight there.

I am much more interested in taking on the academics’ core case against austerity though, which is that there was a lot of spare capacity in the economy in 2010. This view arises from an idea that economies have a natural rate of growth, arising from steady productivity growth, in turn arising from improved technology and more sophisticated management methods. In the 2000s they thought this rate for developed economies was about 2% a year. If GDP fell below the level suggested by this “trend rate” than that suggested spare capacity. This meant not only that the gap was bigger than it first appeared in 2010, but that with the slow rate of growth once the economy started to recover, that gap was never closed.

That line of reasoning suggests that all was well with the British economy in 2008 when it was hit by the financial crash. But that was far from true. A closer inspection of the country’s productivity growth in the years before the crisis shows that it was entirely based on two sectors: finance and business services. The crash proved that in the case of finance this growth was a work of fiction – a product of stoking up risk and optimistic accounting. It was scarcely better in business services, which was riding the bubble. There are plenty of good reasons for thinking that the idea of a natural rate of growth is out of date – this is a favourite topic in this blog. The truth is that growth in the UK since 2000 was driven by the expansion of a financial bubble, the import of cheap products and services from Asia, and massive immigration from Central and Eastern Europe, all fuelled by fiscal and monetary policy that was surely too loose. By 2010 the financial bubble had burst, cheap Asian imports had run their course, and although immigration was continuing, it had slowed and the general view was that it was causing excessive social strains. It was not a question of quickly trying to recreate the pre-crash economy, but the much slower job of building a more sustainable replacement. Fiscal stimulus would simply have led to a flood of imports, not new and better jobs.

In fact “rebalancing” was widely spoken of as a necessary thing at the time, though most people fondly thought of this as a return of old-fashioned manufacturing. Looked at it a bit more closely, and much of the academic criticism of the coalition actually reflects this. They bemoan not the cuts to services and benefits that so angered the left, but the lack of public investment. There is some justice to this, but investing public money wisely is much harder than it looks. Usually the money ends up wasted in vanity projects. Some of the suggested ideas, such as the expansion of Heathrow airport don’t look so good in hindsight. Others: better interconnecting rail links between northern cities, look a better idea, and the coalition could have done much better there. A failure to support green energy projects was a constant complaint by some Lib Dem ministers.

As it happened, the economy did rebalance, and quite quickly. Unemployment was never as serious as the GDP figures suggested it should be, and the employment statistics became very healthy. The problem was that this rebalancing was towards a new and rather ugly economic model, with insecure gig workers at its base. Inequality did not get worse in the Coalition years, but it didn’t improve by much either. The generation gap, with younger people in insecure jobs and rented homes, their elders with nice pensions and property wealth, has got worse. The coalition did little for regional inequalities either. And yet none of these problems was easy to solve, and the government’s main priority was to dig its way out of the financial crisis.

Overall my verdict on the Coalition economic record is good, but not that good. Damning with faint praise, perhaps. But the country was in the grip of wider economic forces: catch up by China reducing the flow of cheap goods; the spread of the gig economy; the saturation of the “stuff” economy. The glib criticism of macroeconomists does not do justice to these forces.

Lib Dems will always argue that the worst aspects of austerity on public services came in the following Conservative majority government, which doubled down on the cuts. There is some justice to this, but we can’t let the party off that easily. The Coalition’s record on public services is about more than austerity, as I will discuss next time.

Universal Basic Income – why it doesn’t deserve the hype

To judge from my Facebook news feed and Twitter updates, the idea of Universal Basic Income (UBI) is gaining traction on the political left and centre-left. The extraordinary measures being undertaken by governments to prop up economies hit by Coronavirus and associated lockdowns somehow make it look less outlandish. In Britain the idea is getting closer and closer to being official policy for both Labour and the Liberal Democrats; it is already there for the Greens. I have always been a sceptic, and I still am.

The attraction is easy to see, and the crisis has highlighted its virtues. It is one answer to the massive information gap that lies between governments and the citizens they serve. This makes it impossible to target aid accurately to those in need. Government schemes like the furlough scheme leave many gaps, are subject to administration delays or injustices, and doubtless pay lots of money to those who don’t really need it, including fraudsters. On the other hand, attempts to target better involve humiliating procedures to verify need, which are often administered by officials that seem to take pleasure in the exercise of petty power for its own sake – and who are not empowered with discretion to use common sense nor accountable for the human results of their work.

This information gap has two main causes. The first is privacy, whereby we deliberately limit the information we make available to the authorities, or anybody else. The is one of the core aspects of what we understand by freedom, and all psychological benefits that come with empowerment and autonomy. But there is also the sheer scale and complexity of the information problem. Even in countries unworried by the idea of privacy, like China, face colossal problems trying to understand individual people’s needs, and often resort to arbitrary rules.

UBI is income that everybody is entitled to, on the minimum possible qualifications (such as nationality; there would likely be some form of age-based entitlement too). This would eliminate the need to provide targeted help in most cases, its advocates argue. In particular it would not depend on whether the citizen is working, and could replace unemployment benefit, or, in the UK, Universal Credit. There is no need for the state to gather data on income and work status in order to check entitlement.

Some support for this idea has recently come from Finland, where a randomised trial was carried out between UBI and unemployment pay. It was found that UBI did not reduce the incentive to look for work, while significantly improving the wellbeing of those receiving it. One worry about UBI, especially if it is substantial enough to replace entitlements to benefits, is that a significant number of people would give up the search for work, because they would not need it. But advocates point out that the incentive to work is improved because people keep all the extra earnings (subject to taxes), rather than having benefits withdrawn. The Finnish study provides some interesting evidence here.

But if the incentives argument falls away, there remains the question of how the state manages to pay for it. There is a dilemma here. The higher the rate of UBI, the more it can replace other benefits, and so deliver the advantages advocates want to see. In the UK Universal Credit is an obvious target, and so is the basic state pension. And yet as soon as it reaches this sort of level, the state outlays required to cover it become massive. Of course there are savings. Since the state pension is already a more or less universal entitlement, there may not be much extra outlay. Tax free allowances on pay could be withdrawn. But the gap remains massive.

Some on the left wave all this away, based on the insights offered by Modern Monetary Theory (MMT), which basically suggests that budget deficits can be funded by borrowing or printing money, and so traditional ideas of balancing budgets are old hat. Now I’m not as rude about MMT as most conventional economists seem to be, but it does seem to have encouraged the sort of magical thinking I last remember being widespread at the time of the tech boom in the late 1990s (“losses are the new profits”). The problem is that UBI would potentially unleash a wave of extra consumer demand across the economy, which could lead it to overheat and break down, through inflation or a debt crisis (because of the need to borrow foreign currency to buy imports sucked in by the excess demands). That is unless demand could be dampened down in some way, i.e. taxes raised. This is not a question of just taxing wealth, and top pay either. This may be a good idea anyway, but it is not likely to have a big enough impact on demand to head off trouble. Some combination of increases in basic income tax, national insurance and VAT will be needed too. This needs to be discussed more openly by the idea’s advocates.

But my reservation goes deeper. To me UBI seems to be trying to shortcut the sort of interventions that our society needs. It is an attempt to give people money in the hope that their problems will go away. That may work for a lot of people, but we will still be left with a vast residue of people with more complex needs, which a basic UBI does not begin to solve. I prefer solutions based on a highly devolved interventions by empowered professionals, able to tailor solutions across the whole range of public services from health, to housing, to law enforcement. The way to bridge the information gap is through people intelligently examining individual needs and crafting complex solutions. This will entail a judicious mixture of conditional and unconditional benefits. Our public services have been going in the opposite direction for two decades or more, as successive governments have sought to take the humanity out of public services and replace it with targets that turn out to be meaningless. By focusing so much on UBI, we are distracting attention away from the real crisis in public services.

The craze over UBI illustrates one of the biggest failings in a our politics. The search for simple, if radical, ideas instead of trying to understand the humanity of our society, and going about the messy and painful business of adjusting to this reality.