Don’t underestimate Theresa May – but the Lib Dems will play a critical role in this election

Today Theresa May announced her intention to hold a General Election in Britain on 8 June. She is certain to get her way, notwithstanding the Fixed Term Parliament Act. Personally I’m not happy – this is an unwelcome distraction from other things I need to do – and my post on mental health has been swamped. Unable to concentrate on much else, I’m going to post again.

The first thing that strikes me is that British politics is littered with people that have underestimated our Prime Minister. This election was an almost total surprise. Rumours had circulated earlier in the year of a a General Election, but faded when it was clear it would not be on the first Thursday in May, which has now become the traditional date for elections in Britain. (A practice established by John Major in 1992, and only broken in 2001 because of an outbreak of foot and mouth disease. But before that Margaret Thatcher preferred June elections, a parallel that will no doubt please Mrs May). This surprise shows how tight a ship she runs compared to her ill-fated Labour predecessor Gordon Brown, whose career had otherwise had some striking parallels. Mr Brown’s reputation was destroyed because he let speculation about an early election get out of hand, and then lost his nerve.

The second striking thing is how unusual it is for us to have a snap election in the UK. Until now Prime Ministers have waited until the fourth or fifth year of parliament’s term. The date has been widely known well in advance (though in the case of the four year terms favoured by Tony Blair and Mrs Thatcher, not for certain), allowing for a lot of pre planning. We have to go back to 1974 for one like this one, unless you count 1979, when the Callaghan government was brought down by a vote of no confidence less than six months before its term had run. And even the 1974 parallels aren’t that strong. This is uncharted territory. The parties will be fighting with much less pre-planning. The campaign could be much more chaotic than the carefully choreographed ones we have been used to.

Politically the election is dominated by the weakness of the Labour Party. Already demolished by the SNP in Scotland, it shows no signs of recovery there, and looks very vulnerable everywhere else. Its opinion poll ratings are very low – about half the Conservative vote. I have not seen any analysis of what this means in terms of the party’s vulnerability in particular seats. It has a large number of very safe seats, so it might well hang on in lots of places, while doing catastrophically in Middle England.  The party has two huge problems. The first is that the political agenda is clearly on Brexit, where its message is weak – it will not be rewarded for reflecting the confusion that much of the voting public has on the topic. Much as it would like to move the debate on to austerity, where cuts are now looking quite alarming in places, this looks like a doomed enterprise. And that is because of their second major problem: a spectacularly inept leader in Jeremy Corbyn. By itself this ineptitude is not fatal – after all he has done well in Labour’s internal elections – but the public don’t see him as a prime minister in waiting. Time an again that has proved a fatal handicap at election time. Without that credibility Labour can’t change the agenda.

So the Conservatives are looking confident. It seems that their key electoral message is that Britain needs a strong government right now, regardless off what that government actually plans to do. But the messaging will not have been exhaustively tested, so we don’t know how this will actually play. It seems clear that they will be able to beat off any threat from Ukip, but they may find it harder to manage the Lib Dems.

The Lib Dems are in a very interesting position. Most people considered them wiped out after the last general election in 2015, when they were punished for having been in coalition with the Conservatives. But the Brexit referendum result has energised the party. It has now reliably retrieved third place in the opinion polls (though still only half of even Labour’s disastrous score), and its membership is booming. It has a clear position on Brexit. The Tory strategy in 2015 was mainly to destroy their coalition allies – on the principle that you should always go for the weakest opponent first. That meant they won many more seats from them than they did from Labour. But holding those seats could be tricky, since the messages that worked so well in 2015, which relied on a strong Labour threat, lack punch now -and the Tories are unlikely to have the same organisational strength, since this is a snap election.

So the Lib Dems could make a big comeback. Big enough to stop the Conservatives from getting a majority? Almost nobody would suggest that. The closer the party gets to achieving that aim, the more powerful the Conservative message about strong government will become. But after the last year we have started to expect the unexpected. The Tories will make little headway in Scotland (even though they now outpoll Labour there). They may find that taking many seats from Labour means going deep into their strongholds. Their high poll rating could simply mean piling up votes in seats they have already won.

So, much as I find this election personally unwelcome, it will be an interesting one to watch. My hunch is that the Conservatives will end the election in much the same place that they started it – but with fewer Labour seats and more Lib Dem ones on the opposition benches. But am I making the fatal sin of underestimating Theresa May?

Share

Mental health is about everybody

I want to agree with the Guardian’s Suzanne Moore in her recent article The lesson of Prince Harry’s grief? We need mental health services for all. And mostly I do. But I think she’s missed the most important thing about mental health.

The context of this article is in the headline. It Prince Harry’s recent interview in which he talked frankly about how he failed to deal with the grief caused by his mother’s death for a decade or more. He was bottling it all up with a stiff upper lip, with dire consequences for his life. He then sought help, and now feels able to talk about it. I applaud Prince Harry’s intervention. It is part of a general process of talking about mental health to make it less of a taboo topic. He is doing this in the best possible way: by sharing his experiences and not ramming any particular view down our throats. Mental health is one of the critical issues of our time and we need to talk about it more, and we need to be able to share more. But, alas, keeping the topic repressed for so long has left its legacy of muddled attitudes – even among the most liberal minded.

Ms Moore starts with a condemnation of the Royal Family’s lack of emotional intelligence at the time of Princess Diana’s death. In particular she feels that her two sons should not have been made to walk behind the coffin. She noticed that almost nobody showed personal warmth towards the pair during the service – so keen were they to show proper dignity and decorum. I think she’s only half right there. Some open warmth towards the boys during the service by their near relatives would certainly have been in order. But dignity and decorum have a useful purpose too. That long walk behind the coffin was not wrong in itself – it just needed to be balanced by something more intimate and informal.

Still, that isn’t the main problem I have with the article. This came as I read this:

Harry has rightly been praised for talking personally and thus destigmatising mental health issues. This is no doubt excellent. The normalising of mental health problems, which it is estimated will affect a quarter of us at one time or another, is necessary, but so too is funding. Mental health services are in a very poor state and it is almost impossible to get help. Many people in Harry’s situation would not get access to counselling and would be offered antidepressants and possibly a short course of cognitive behavioural therapy, as this is considered most cost-effective. In acute cases, people in a state of severe breakdown are now forced to go to hospitals far from their homes because there are no beds to be found nearby. This is a real crisis, and it is more visible by the day on our streets.

Yes, mental health services are neglected and need to be given a higher priority. But this will not work unless we start to think about mental health differently. Ms Moore’s article perpetuates the idea that dealing with mental health is about dealing with mental illness – depression, anxiety and so forth, and that this illnesses only affect a minority of us (even if it is as high as one in four). But mental health “problems” affect everybody. If you don’t suffer from depression and anxiety in some form regularly you are not healthy at all. It is how you manage it that is the thing – and it is something we all need to learn. And as we learn how to manage our emotions and anxieties better – and learn how to help our friends, relatives and neighbours, then fewer people will be left with the unmanageable symptoms that we call “mental illness”. And when we do suffer from those symptoms, society as a whole will be better able to deal with it.

And here’s the thing: the real problem is pretending that everything is OK when it is not – and this comes through from Prince Harry’s interview. We all know that a bit of anguish is normal. We also know, intuitively, that continually talking about our own emotions is self-indulgent and can undermine relationships with others. We also know that seeking professional help is a drastic step that you only take after other avenues have been exhausted – and is as likely to be a method for avoiding deeper issues as it is for confronting them. So it is the most natural thing in the world to weather our own problems, and then to assume that we are coping with them rather than bottling them up. But equally thinking that all you need to do when you feel down is to pop a pill to make you happy, then you are in even more trouble.

It is actually very hard. So the temptation is to try make the whole thing the exclusive domain of experts, whom we consult as required. And by trying to divert Prince Harry’s intervention into a call for more funding for experts, Ms Moore falls straight into this trap. But mental health isn’t just for experts, it is for everybody. We all need to be able to sense issues in those around us, and have an idea of what is going to help – and, of course, learn how to be more honest with ourselves, and have ideas about how we handle our own problems, beyond externalising it to a professional.

Which is why the first response to the issues raised by Prince Harry is not to rush out and boost mental health services – it is to tackle school curriculums. Above all it is at school that we learn excessive stiff upper lip (incidentally I feel strongly that stiff upper lips have their place – but that is another story). Great advances have been made here, but often in spite of government initiatives instead of because of them. The government’s recent recognition of personal, social and health education (PSHE ) is a welcome change from the bizarre antics of the previous Education Secretary Michael Gove – who dismissed such stuff as a distraction form proper academic education. This incidentally recognises something very important – that there is a strong social dimension to managing mental health.

Mental health is a positive and it is for everybody. By talking about it only when it goes wrong, and talking about the negative, we can make things worse, not better. That is what I take away from Prince Harry’s welcome intervention.

Share

Where is the light for towns like Wakefield?

Last week I spent a few days in Wakefield, a small city to the east of Leeds in West Yorkshire. The economic fortunes of such small towns in Britain is one of the big issues in British public policy. I am still searching for the answers.

Wakefield goes back at least to that era which Britons refer to as the Dark Ages – after the Romans left and England was subject to invasion successively by Anglo-Saxons and Danes. The Normans proceeded to raze it to the ground in the Harrying of the North, after William the Conqueror took over in 1066. But its geographical location, at an important crossing of the River Calder, a navigable waterway, ensured its future. The Normans built two castles there. It prospered as a port serving the wool and tanning trades. This economic success continued into the industrial revolution, when its river connections were boosted by canals. It flourished as an agricultural trading centre. It diversified into textiles, coal (mined nearby) and glass, and became an important administrative centre. Its grand church (the tallest spire in Yorkshire) became a cathedral with its own bishop in 1888, and City status soon followed.

Alas this has fallen apart. The coal, glass and textiles industries were wiped out in the 1980s, usually blamed on the policies of Margaret Thatcher, but in fact the result of changes to technology, assisted by globalisation. It lost its bishop in 2014. The town looks rather sad today. There are plentiful vacant spaces used as car parks. Empty shops scar its streets. Benefits are claimed by about 18% of the population, compared to the English average of 13.5%. Unemployment is higher than average, though, according to the claimant count (4.3%), far from catastrophic. There are few immigrants living there – a sure sign of a weak economy (though our hotel cleaners were east European). We could buy about ten houses of the same size from the current value of our London home. Let’s not overdo this. It it did not appear to be a disaster area. It was easy to find nice places to eat in the town centre. But our hotel (part of a characterless budget chain) was the only central one we could find. There were other hotels on the outskirts: a bleak land of dual carriageways, roundabouts, retail parks and industrial estates, dominated by national chains, doing things as cheaply as possible, and sending the surplus elsewhere.

Quite a bit has been spent on redevelopment. The town centre has a smart shopping mall (albeit with quite a few empty shops), and the central square looks newly revamped. The cathedral has been very tastefully restored and modernised, with some lovely new furnishings, and is an uplifting space. Above all there is the Hepworth, which was why we visited. This is a modern gallery that celebrates Barbara Hepworth, the sculptor and artist, who was born and brought up in Wakefield. This is a lovely building on the town’s otherwise derelict riverside – and a world-class gallery, taking advantage of many years of collecting by its unprepossessing but imaginative predecessor, the Wakefield Art Gallery (converted from terraced houses) – and the generosity of local artists like Hepworth and Henry Moore, who was born and brought up in nearby Castleford. The dedication to art does not end there. A few miles from the town there is the Yorkshire Sculpture Park (YSP) – an outstanding collection of sculpture and other art, in the setting of an old country park – and another reason for our visit.

But how far can you regenerate a town on art? There did not appear to be many jobs in it. No flourishing urban environment has developed around the Hepworth in the manner of London’s South Bank, in spite of its riverside location. The same can be said for the YSP, which barely keeps a couple of snack bars going, in spite of its many visitors – though a posh hotel and conference centre is under development. The nearby motorway service area on the M1 motorway may do more business than both of these facilities put together.

So Wakefield has achieved a sort of economic mediocrity. There are jobs, and not just in the usual services, but it is not prospering. One clear weakness is the lack of a university (unlike nearby Leeds, and even Huddersfield, another smaller town nearby). Education should be at the heart of a modern economy. There is a decent further education college – but this is a neglected sector in Britain’s education system, starved by government austerity even as schools and universities have prospered.

The town must aspire to better. The weakness of such towns drives much of the foul political mood in not just Britain. People there feel left behind and neglected by metropolitan types who promise much and deliver little (or so it appears to their residents). New jobs tend to be poor quality; capital sends its rewards to the big metropolises or to offshore tax havens. Surely there is untapped human capital here? How can local networks be revived to counter the giant national and global networks that will otherwise suck these places dry? Too many economists are sinking into pessimism. A recent article in the Economist compared the fate of less-skilled humans to that of horses, which became obsolete a century ago. Is the weakness of such centres an inevitable consequence of the march of automation and an obsession with productivity?

I’m not convinced. I see too many jobs that need doing that are being neglected – in education, health, social care and local services generally – and in the world’s large but hollow corporations and state agencies, who pass the buck rather than solve problems. The liberal market economy, so favoured by the conventional wisdom of the 1990s and 2000s is failing – just as the publicly directed command economy has failed before it. But what to do? Local currencies perhaps? This approach is favoured by new economy thinkers like David Boyle – and regular commenter to this blog Peter Martin. Perhaps it is worth a try, but I suspect that political power structures must be altered first. It is no accident that countries with a highly devolved political culture, like Switzerland and Germany, are faring better than centralised polities like Britain and France. Though that is not enough – as the fortunes of the highly devolved United States shows. You need a strong social safety net too.

If I was trying to make something of Wakefield, I would start with its further education college. It has failed in a bid to acquire university status – but Britain needs world-class technical training for less academic young people and adults. Surely building on neglected human capital must be a large part of any solution? But that needs a strong state to provide up front payment and carry risk – and the state is weakening.

So a larger state, but not one dominated by giant agencies with Key Performance Indicators and lacklustre management; local democracy that does not turn into cronyism and mediocrity; thriving businesses that recycle their surpluses locally rather than send them elsewhere. A big challenge, but the future of  liberalism depends on it.

 

Share

Productivity statistics expose deep weaknesses in theoretical economics

I hadn’t intended to post for another couple of weeks, but this article in the Financial Times is too good to miss. It tackles one of the central issues in modern economic debate: why productivity growth is so slow. Productivity lies at the heart of the conventional view of public policy – and yet it is very poorly understood. This article sheds light on what is happening in the UK – and it should give politicians and economists pause.

Productivity is in principle a very simple idea. It is the amount produced by a unit of labour in a unit of time – the number of widgets per person per hour, for example. This immediately conjures up a clear mental picture of a factory producing cars, say. Count the number of cars produced, and the number of hours of labour required and it is easy-peasy, surely? Alas in a modern economy  it is a much more difficult idea. What if your car factory is producing both Ford Fiestas and Mondeos, and switches to the smaller car? Has productivity gone up if more are produced? And how do you distinguish product enhancement from inflation?  And then there are problems treating capital outputs and inputs, research and development, and so on. In the end the productivity measured across an economy is a bit of a balancing figure, as we accountants would call it – or a bit of a dustbin – what’s left when you’ve taken everything else out. It is just a number relationship without a coherent meaning in its own right. It is not like the concepts that physical scientists are used to dealing with – such as the temperature and pressure of a gas. Macroeconomics is heterogeneous, to say nothing of being subject to capricious social forces that tend to corrupt all attempts at measurement.

Now, what is the productivity puzzle? It is that productivity growth, as measured by macroeconomic statisticians, has slowed markedly since 2008, when the financial crash caused a dislocation in measured income. This applies to all developed economies, but to the British economy most of all – UK productivity growth, according to the article, fell from 1.6% per annum before 2008 to just 0.3% after. This has profound implications, since in the long term productivity growth is what drives income per head, alongside the average hours people work (influenced strongly by workforce participation – such as how many women are in paid employment). And this drives tax revenues, from which public services are funded. Since we assume that quality of life is mainly driven by income, and that public services can constantly be enhanced by extra spending (apart from occasional periods of “austerity”), this has profound implications. Prior to 2008 most economists assumed that productivity growth of 1-2% pa was a law of nature and  main driver of “trend growth”, which could be baked into economic models. The corollary was that weak growth since 2008, and the failure of GDP to catch up with the pre 2008 trend-line, was a failure in macroeconomic policy.

But given the dustbin nature of the productivity statistics, it is very hard to drill down into them to find out just where the problem is – though that there is a problem of some sort is clear. This is licence for all manner of people to project their speculations into a fact-free zone. Mostly these are based on the intuitively obvious idea that the changes to the productivity figures represent trends in the efficiency of workers. Recently Bank of England bigwig Andrew Haldane moaned that the problem was that efficiency was stuck in a rut, especially in a swathe of mediocre firms. He based this on sectoral analysis which showed that the productivity had stagnated across all sectors – with economic growth mainly attributed to rises in employment, not efficiency.

The FT article, authored by Chris Giles and Gemma Tetlow, challenge that. A close examination of the numbers shows that the crash in productivity growth arises from changes in a small number of economic sectors, accounting for just 11% of income. These are banking, telecoms, electricity and gas, management consultancy, and legal and accounting services. Actually Mr Haldane’s and Mr Giles/Ms Tetlow’s analysis can be reconciled. Mr Haldane was taking a general view across the economy since 2008, where productivity growth is now very limited. The FT writers are looking at the transition from before and after 2008. The curious point is why productivity growth was so high in that small number of industries before 2008 – and the realisation that this is what was driving so much of the figures for productivity growth before that date.

And that leaves this blogger asking whether that pre-crash productivity growth – and by implication the pre-crash trend rate of overall economic growth – was in any sense real, other than statistically. In banking we know that in 2008 massive state resources were required to keep the industry alive, and that since then the industry has been much better controlled. This suggests that “productivity” would more correctly be described as “recklessness”. And in each of the other industries you can point to factors that demonstrate that growth was not simply incremental improvements in efficiency. For example in electricity and gas productivity was based on high inputs of fossil fuels and nuclear energy – and the switch away from these destructive sources of power has caused a decline in measured productivity. And how on earth do you assess the output of management consultancy, and accountancy and legal services? The transition may simply be from high margins in boom economy conditions to higher scrutiny when times were harder – or to put it another way, what was supposedly economic growth prior to 2008 was in fact concealed inflation.

All this supports the narrative that I have been promoting for quite a few years about the transition from growth to austerity. This is that the supposed growth of the economy of the early to mid noughties in the UK was down to excess demand, of which reckless fiscal policy was a part  – though you might alternatively argue that it was reckless borrowing by the private sector that the government turned a blind eye to. It also suggests that the lacklustre economic performance of the UK economy since 2008 reflects a lot more than just weak demand management: it is chickens coming home to roost.

This takes me to two very important conclusions. The first is that we have to be very careful about the recommendations of macroeconomists – and the eco-system of commentators and policy types that use macroeconomics as their starting point. The bandying about of aggregate statistics is all very well – but the aggregates hide as well as reveal – and we need to base economic prescriptions on the complexities of the real economy. That is hard, but necessary.

The second point is that overall productivity is indeed stuck in a rut, and has been since well before 2008. It must reflect structural issues in real economy – and not simply laziness amongst mediocre firms or poor macroeconomic management. There is no shortage of potential culprits: demographics; the nature of modern technology; the temporary nature of gains from trade with Asian economies. The world may still be becoming a better place – but because of things that are not captured in GDP, and hence productivity statistics. The problem for public policy is that tax revenues are largely driven by GDP (which is why it is an important statistic) – so we can’t expect an ever increasing flow of tax revenue to fund public services. In the long run we must either reduce the demand for public services (healthier people, fewer crimes, less skewed income distribution, etc.), raise taxes, or compromise what level of services and benefits we think that a civilised state should provide.

And that is a completely new way of thinking about public policy. The political right have grasped this (for the wrong reasons, perhaps) – but the left has not.

Share

The Lib Dems hope that Britain goes Dutch

After a couple of days sightseeing in York, one of England’s most spectacular cities, I want to report back on the Liberal Democrats’ conference held there over the weekend. It ended with the traditional rallying cry from the party leader Tim Farron. He spelled out a bold strategy for the party: to replace Labour as the principal opposition, and then to take on the Conservatives for government. Well that’s not the first time I’ve heard such ideas from a Lib Dem leader’s speech – and the only result has been that the party’s wings melted like those of Icarus when it got too close to the heat of power. Could this time be different?

The Lib Dems are particularly taken by the result of the recent General Election in the Netherlands, and their hopes rest on similar trends being repeated in Britain. Now if your knowledge of the Dutch election was based reporting by the BBC News, and other mainstream news outlets, you might be a little surprised. The BBC pitched the contest as between the party of the Prime Minister, Mark Rutte, the VVD, and the populist-right PVV, a one-man vehicle for its leader Geert Wilders, and his extreme views against immigration, the EU and Islam. The BBC hunted out Dutch working class voters for its vox pops,  giving us the impression of a surge of support, in the manner of that that swept Donald Trump to power in the USA. The VVD meanwhile, though nominally a liberal party, seemed beholden to the PVV agenda, and anxious to sound tough on immigration, engineering a spat with the Turkish government to prove their point. When the VVD ended up with 33 seats, in the highly proportional Dutch electoral system, to the PVV’s 20, the BBC proclaimed the VVD as the winner, and quickly moved on.

But there a 150 seats in the Netherlands parliament, so the VVD and the PVV covered barely a third between them. Elsewhere something much more interesting was happening, which puts the whole picture in a different perspective. There were in fact two main losers in the election: the VVD, which lost 8 seats, though remained the largest party, and, most spectacularly, the Labour Party (the PvdA), which was reduced from 38 seats to just 9. The PVV advanced by 5 seats, but there were bigger winners. D66, the liberal left party most similar in outlook to the British Lib Dems, advanced 7 seats to 19; the Christian Democrats (the CDA), a party not unlike Britain’s Conservatives as they are being refashioned by Theresa May, also took 19 seats, gaining 6; and the biggest winner was the GreenLeft, which advanced 10 seats to 14.

What to make of this? Well it is fair to suggest that Mr Wilders and his PVV has set the political agenda. The CDA did well by coopting some of its ideas, and the VVD managed to hang on with similar tactics. But the two parties that where most vocal in promoting the opposite agenda, of voicing a sense of Dutch identity based on tolerance and being part of Europe, picked up 17 seats and have real momentum. The traditional Labour party was unable to hold together its coalition and collapsed.

And so the implications for British politics are clear. Mrs May’s strategy for the Conservatives, with a lurch to right on identity and social issues, and to the left on economic ones, looks sound enough. The polls show it has a commanding lead, crushing the populist Ukip, and even doing respectably in Scotland. Labour, meanwhile, are floundering – unable to find a formula that holds together its coalition of traditional working class, new working class (including ethnic minority workers) and liberal public sector workers. Its problems are compounded by spectacularly weak leadership, and a sense of political entitlement amongst its membership that makes them focus inwardly, rather than develop an effective political presence in the country at large. And the success of D66 and the GreenLeft shows the possibilities for the Lib Dems, by wearing its liberal and pro-European heart on its sleeve. There should be an opportunity for Britain’s Greens too, but they seem to have lost critical mass. Their move to being a party of the socialist left before the 2015 general election, including the adoption of Universal Income, was probably a major strategic error – and anyway the party seems allergic to clear leadership.

And so the Lib Dems at York went big for being pro-European, promoting a second referendum with a way back into the EU – and promoting the rights of EU citizens living in Britain. Political realists may dismiss this as being silly, but it lights fires. The populist surge, promoted by a hateful press, and supporting a hard Brexit, is generating a backlash, and the Lib Dems mean to exploit it.

But Mr Farron, and the party at large, are starting to look beyond that. That was evidenced by one fudge and one new idea. The fudge was on nuclear weapons. The party’s liberal principles point to unilateral nuclear disarmament, eloquently argued for by many activists. But members at large sensed danger and adopted a fudged policy that will go nowhere. As David Grace, one of those advocating the unilateralist position, rightly pointed out – the party was not afraid of the Russians so much as of the Daily Mail. While intellectually persuaded of the unilateralist line, I personally lacked the courage to support it. It would put off too many floating voters.

The new idea was put forward by Tim Farron in his speech: an economic commission of independent experts to develop new ideas on economic policy. This follows a similar idea on health and social care. This is a step that the Labour leader Jeremy Corbyn started to take and then dropped – no doubt because he feared it would be a hostage to fortune. The time is ripe for new thinking on economic policy, and the Conservative government is heading for some deep trouble, with its over-commitment to austerity and low taxes, not to mention hard Brexit. Tim’s commission cuts across the brief of an internal policy group (on the “21st Century Economy”), which I am planning to contribute to, but this looks like a sound move by him. The party can’t carry a new economic policy by itself.

Tim’s strategy is clear. Develop a core vote based on European identity and a liberal understanding of British values. And then pitch for floating voters, including those that voted for Brexit, based on economics and public services. Could it work? Labour could yet scupper it by dropping Mr Corbyn and going for the right replacement leader. Their German counterparts seem to be having some success with such a strategy. The most convincing alternative leaders are probably David Miliband or Ed Balls – but both are out parliament. Meanwhile the threat of complete collapse remains – the Dutch Labour Party is only the latest in a line of spectacular political failures by traditional socialist parties in Europe. The Lib Dems will still need a lot of luck – but this looks like their best chance.

I do not warm to Tim Farron personally. I am too cynical for his grand rhetoric, and bored of his jokes. But he is proving to be a very capable political strategist – much better than his predecessor. This will be interesting to watch.

 

Share

Labour shows the problem with a core vote strategy

Featured on Liberal Democrat Voice

Last week’s British by-elections prompt me to make one of my occasional posts. It is about the bizarre predicament of Britain’s Labour Party and the wider question this poses for the British left.

The first thing to say about Labour is that I am not a neutral observer. As a supporter of the Liberal Democrats I have endured near continuous vitriol from Labour supporters, especially since the coalition government of 2010. It doesn’t help that these Labourites were right to predict disaster for my party – against my constant efforts to look on the bright side. So I take some satisfaction in being right this time. I cannot deny a sense of schadenfreude. Perhaps it takes a victim of delusion to recognise the phenomenon in others – though to be fair quite a few Labourites are in despair rather than delusion.

The immediate fuss is over Labour’s loss to the Conservatives of the Copeland by-election. For an opposition party to lose a seat in these circumstances is nearly unprecedented. Labour did see off a challenge from Ukip in the Stoke by-election on the same day – but they cannot take much comfort from that. Their vote fell, and they only retained the seat because Ukip and the Tories split the anti-Labour vote between them. It was a bit like the Lib Dem by election win in Eastleigh during the coalition, though the margin was much better.

But this fuss is a bit overdone. The main news politically is that Ukip is on the back foot, and the Conservatives seem to be picking up much of their vote. That’s still a big problem for Labour, though: while seeing off a threat from Ukip, the threat from the Tories has become much deadlier.

But the by-elections are only the start of it. It is Labour’s complete lack of political effectiveness since Jeremy Corbyn took over that is behind the criticism. Labour are totally unable to exploit the government’s difficulties over Brexit – a political gift that most opposition parties can only dream of. Just compare the party’s performance to that under John Smith and Tony Blair as the Conservative government pushed through the Maastricht treaty in the 1990s. Labour was then able to put aside its own differences and ambiguities over Europe to harry the Conservatives to near political death. This was an object the lesson in how to be on both sides of the argument at once – one of the chief skills in politics. Labour could unite pro and anti Brexit forces by rallying round a form of soft Brexit – and using every opportunity in Parliament to make the government’s life difficult. Instead Labour’s opposition sounds like whingeing Islington dinner table chat.

And what about opposition to austerity? The government is pressing ahead with cuts, and seems unable to handle a crisis in the NHS and social care. Schools are now under threat. Austerity was supposed to be the rallying cry for Labour under Mr Corbyn, and the basis of a popular revolt – with determined resistance both inside and outside parliament. Labour was going to employ high quality economic minds to develop an alternative narrative. Instead, Labour contents itself with more quiet whingeing, and austerity has dropped way down the list of politically current issues. The economic thinkers who had been commissioned to help the party have been sent on their way.

And Scotland? There was supposed to be a fightback here – but instead the party has fallen back to third place. At his speech to the Scottish Labour conference this weekend Mr Corbyn undermined the Labour’s Scottish leader, Kezia Dugdale, who is attempting to recapture the political initiative from the SNP with a call for a UK wide constitutional convention. Unable to come up with strong political initiatives himself, Mr Corbyn undermines any attempts to do so from anybody else. Politically Labour has stalled.

But a recent poll revealed something quite interesting. It confirmed Labour’s poor standing amongst the country at large, and the lack of confidence in Mr Corbyn, which is felt by over three quarters of the electorate, with remarkably few don’t knows. But among Labour’s remaining supporters, Mr Corbyn has majority support. His position looks secure.

And this reveals a problem for Labour, and the political left generally, that goes beyond Mr Corbyn’s profound lack of political competence. It is the temptation to retreat into your own comfort zone. For Labour, this process started under Ed Miliband, Mr Corbyn’s predecessor. It took the form of the so-called 35% strategy – whereby Labour was supposed to secure power by consolidating its position amongst left-leaning voters, especially those that had supported the Lib Dems, without having to persuade voters that had voted Conservative. They were relying on the idea that the right of centre vote would be split between the Tories, Ukip and coalition-supporting Lib Dems – and hoping that non-voters would rally to the party too. It left them helpless against a surging SNP in Scotland, and an entirely predictable and ruthless Tory campaign to pressure Lib Dem and Ukip voters in marginal seats.

But the idea of staying within your political comfort zone is enticing. The Liberal Democrats are now taking this up under the guise of a “core vote strategy”. This is designed to attract loyal supporters rather than marginal votes. This is more rational for the Lib Dems than it is for Labour, given how low the party’s fortunes have sunk. But neither party will pose a serious challenge to the Tories unless it works out how to appeal to marginal voters too. And neither will they be able to achieve this by forming some form of “progressive” alliance between themselves, with or without the Greens and the SNP.

And that will mean taking core supporters out of their comfort zone. Just where is open for debate. Conventional wisdom has it that this must mean embracing elements of what the left calls “neo-liberalism” – such as marketising public services and holding taxes and public spending down. This isn’t necessarily the case – but the electorate will not be convinced by the traditional left wing idea of accruing power to the centre and declaring “trust us: we are the people.” Political power is not trusted enough for that.

Personally I think Labour needs to embrace devolution of real political power to regions, municipalities and even neighbourhoods, even when it means passing it to opposition parties. This should involve a new constitutional settlement (just as Ms Dugdale advocates). And it includes breaking up central control of such hallowed institutions as the NHS and national public sector deals with trade unions. For Lib Dems I suspect it means developing a new narrative on rights – and the idea that key economic rights (as opposed to basic human rights) must be earned by contribution and residency, rather than being open to all comers. Also the parry’s doctrinaire line on the right to privacy needs to be rethought for the modern age – it feels too much like yesterday’s battle. Both parties needs to break out of the strait-jacket of political correctness and victim culture – while continuing to promote inclusion. And both parties need to think about a future Europe, rather than retreat into its past.

But once the left moves out of its comfort zone, power is there for the taking. The conservative coalition is not robust, and demographics are against it. Brexit will place huge strains on it. Populism will fail. But, alas, there are few signs that the left yet understands what it needs to do.  It may take another disaster.

Share

Why I’m pausing for reflection

Featured on Liberal Democrat Voice

I have been trying to post articles twice a week. In the last few weeks that has slowed down. This week I have struggled to post anything at all.  On reflection I think it’s time to pause for a while, and reduce postings to a trickle.

Why? Partly it is plain depression – though the non-political side of my life is going well enough. After multiple shocks to the political system, that is not be surprising. I still struggle to accept that Britain is leaving the European Union, that Donald Trump is the US president, and that liberal attitudes are being thrown out in favour of nothing very coherent.

But I think it is deeper than an emotional reaction – I’m afraid I’m an Enlightenment spirit that believes that reason should rule emotion. The world has changed, and the balance of political forces has altered in ways that I have not yet understood. It is tempting to impose oversimplified models on this. For example, it is commonplace to ascribe changes to a reaction of the white working classes. But that can only be a partial explanation – there just aren’t enough white working class people for it to be more than that. All successful political movements are coalitions – and it is the unnoticed elements of that coalition that may hold the key. Guilt by liberals over the struggles of many white working class people is being used as a cover for more sinister forces – and some not so sinister ones too.

And if I don’t understand what is driving this change, the consequences of change are also obscure. Many bad things are happening as a result of the Trump presidency and Brexit – but some good things might happen too through the law of unintended consequences. Breaking up the old complacent order will force many things to be rethought – and it will not just be liberals who are discombobulated. For example, Mr Trump’s recent questioning of the two-state approach to peace in Israel may be no bad thing -as it will force Israel’s politicians to be clearer about what it is they actually want – rather than just getting in the way of US policy. In another example, Russia’s propaganda narrative about confronting western liberalism loses its power if western liberalism is in retreat. The Russians are having to be careful about what they wish for. And is it too much to hope that ethnic minority campaigners, so long dependent on a narrative of victimhood and guilt, might freshen up their story when the main competing narrative is also one of victimhood and guilt? Perhaps they might spend more time campaigning on problems that they share, rather than on what sets them apart?

And so my reaction to unfolding events is, so often, “wait and see”.  The interesting stuff has yet to emerge. Here I am departing from many other liberal observers – who are content to vent a very understandable anger. I cling to an optimism. Liberalism is experiencing a backlash that is similar in some ways to that endured in the later 19th Century. That led to calamity – a nationalist blind alley that only ended in 1945 after countless millions were killed. This time I think it is different. There are many more liberals now; our values are more deeply embedded. The forces of darkness are weaker than they look. We will turn the tide. But how, and where? That remains unclear. It will require new ideas – and a new coalition.

And so I want to spend more time reflecting, and less time simply reacting to events. I will post, but less frequently.

I started this blog almost exactly six years ago. Looking back at it, that has been six years of political retreat. The crushing loss of the British referendum on changing the electoral system in 2011 now looks like a portent. I need to need to rearm and rethink to get ahead of the game.

Share

Liberal protestors are not the elite; they are ordinary, frightened people

Last week I wrote about my fears that liberals are being too moral and ideological in their protests over President Trump’s regime. This will simply alienate voters who might otherwise be persuaded – and distracts attention from the regime’s weakest spot – incompetence. But at the same time the populist narrative must be fought – or else untruths are in danger of being accepted as facts.

This message came home to me after reading this article in the Guardian (a British liberal newspaper): Trump is no fascist. He is a champion for the forgotten millions. It is by John Daniel Davidson, a writer for The Federalist, a conservative US online journal. For once the article’s title is a fair summary of its content. In it he develops the pro-Trump narrative. He says that Mr Trump is a voice for many not-so-well-off Americans who feel completely let down by the presidencies of both Barack Obama and George W Bush.  He says:

America is deeply divided, but it’s not divided between fascists and Democrats. It’s more accurate to say that America is divided between the elites and everybody else, and Trump’s election was a rejection of the elites.

Now most of this article is a worthwhile read. It explains why so many Americans, perhaps even a majority, think that Mr Trump is onto something, and are unmoved by the protests. We do not need to invoke racism and misogyny to explain support for Mr Trump, however much we think these forces are lurking in the background. But two important points are lost in this, and each is central to the anti-Trump narrative.

The first point is this: who says that fascists have to be unpopular? Successful fascists (like Mussolini and Hitler) are expert at exploiting the anxieties of the “forgotten millions”, and presenting themselves as the alternative to a complacent elite. That is precisely why they are such a threat. They then use this sense of legitimacy to destroy the rule of law and constitutional checks; they turn on minorities; they try to subvert fair or truthful reporting; they have a penchant for violence and the suppression of opposition. How much Mr Trump really is all these things in his heart is an interesting question; but it is clear that his chief adviser, Steve Bannon, fits the fascist description quite closely, and he seems to be making the running. That does not make all Mr Trump’s supporters and allies fascists, or even most them. But the fear that they are being taken down a slippery slope is legitimate. That Trump supporters have genuine grievances is beside the point.

The second point is that the anti-Trumpers are people too. They haven’t necessarily done any better out of the system than the pro-Trumpers (whatever the latter think). Worse, many people feel as if they are being singled out as targets for discrimination, and even violence. We should not dismiss them, as this article does, as mere cyphers or dupes of a shadowy elite. There is real, genuine fear behind those protests, as well as quite genuine moral outrage. And these anti-Trumpers are not an insignificant minority, as implied by the term “elite”. Hillary Clinton polled more votes than Mr Trump (though this not quite the knock-down argument it might seem at first – if the election had been based on popular vote, Mr Trump’s strategy would have been different – he might have polled better in California, for example). This is not the forgotten millions versus the elite. It is a clash between two groups of forgotten millions, each of which feel marginalised for different reasons. The elites themselves, meanwhile, are mostly keeping their heads down; many are even making overtures to the Trump regime.

So two pillars of the liberal position should be this: first is that we are people too, and we have legitimate fears; second: undermining the rule of law, the constitution and the voice of opposition is attacking democracy itself. Add to this a third pillar: the Trump regime is not helping the people it is claiming to represent; it is simply creating a new set of fat cats.

But is there a crucial fourth pillar? Will liberals find have an alternative set of new policies that will do a better job of addressing the marginalised, and unravelling the coalition that brought Mr Trump to power? Alas I see no signs of that. And without that fourth pillar, the situation remains very dangerous.

So liberals must search for that policy platform that will present a real challenge to the populists. Meanwhile, though, we must not let the conservatives hijack the narrative by suggesting that liberals are a tiny elite, and that subversion of legal and constitutional processes, and journalistic objectivity, is somehow a legitimate part of the democratic process.

Share

Moral outrage against Trump is distracting people from his incompetence

Featured on Liberal Democrat Voice

Donald Trump has made a whirlwind start to his presidency, acting much as he did on campaign. This has provoked predictable moral outrage from liberals across the globe. This leaves me with foreboding. It will not stop Mr Trump, or the political movement he represents.

As a Briton I feel a sense of deja-vu. It reminds me of 2010 when the Coalition government took power and launched an aggressive austerity programme, cutting many public sector jobs, benefits and grants to NGOs. There was moral outrage on the left. I remember screaming protestors at the Liberal Democrat conferences in Liverpool and Sheffield in the year that followed. The Lib Dems were particular victims: they were nearly wiped out at the subsequent General Election, and are only just starting to recover, thanks to the distraction of Brexit.

But all that fury came to nothing. The beneficiaries of the Lib Dem meltdown were their Conservative coalition partners, who gained a parliamentary majority as a result. This led to redoubled austerity and Brexit. The left’s response was then to move into even more extreme outrage, by selecting Jeremy Corbyn as Labour’s leader. This has only made the Tories look even more entrenched. For all its outrage the left has lost the argument amongst floating voters.

The left was convinced that the people were behind them in their anger. And, critically, they thought that they did not have to win over conservative floating voters. They dreamt of two things: attracting disillusioned Lib Dem voters; and getting people out to vote who had not voted before. Both strategies failed. Labour did manage to convert large numbers of Lib Dem voters – but in the process they weakened the party so much that many Lib Dem voters switched to the Tories to keep Labour out. And, anyway, since most Lib Dem seats were Conservative facing, weakening the party tended to benefit the Tories. And inasmuch as new voters were found, it was not Labour that benefited. Instead many disaffected voters turned out for the populism of Ukip, and then to vote for Brexit in the 2016 referendum. There is no army of left-wing non-voters waiting to be mobilised.

The hard lesson from this is that in politics passion cannot substitute for savvy. And it is no use just talking to people who agree with you already. That may boost your own feelings of self-confidence, but it will not help persuade the people who need persuading. Interestingly, this is not symmetric. The populist right have succeeded by stoking up anger, and loathing for “liberal elites” – and not attempting to persuade liberals. Such tactics in reverse are ineffective on the left.

I fear liberals in America are making the same mistake with Trump as the left did with the Coalition. Their outrage at Mr Trump’s actions is certainly justified. But to Mr Trump’s voters, many of them former Democrats, what he is doing must look like a breath of fresh air. A politician fulfilling campaign promises! Urgent action on trade and immigration! That there is a lot of outrage and not a little confusion will not concern them. On campaign Mr Trump was repeatedly outrageous, and that harmed his standing not at all. It doesn’t matter if liberals hate him.

And it will be hard for liberals to win the propaganda war.  There will be successes for Trump. Look at how the motor companies are changing their tune about jobs in the US; and NATO countries are talking more about their defence budgets; the economy looks just fine. And failures can readily be blamed on the usual suspects. Likewise some distinctly questionable handling of conflicts of interest will arouse shrugs: people sort of knew that would happen when they voted for him.

The smart people in all this are the mainstream Republicans, who control both houses of Congress. They are keeping their heads down and taking the credit as much as they can. It is by no means clear that Mr Trump will last the course. He is old for a first-term president; he is not grounded in the ups and downs of politics; an implosion of some sort cannot be ruled out. But the Republicans, and especially with Vice President Mike Pence, will be there to pick up the pieces, and create a more sustainable version of the Mr Trump’s politics that will lock the liberals out of power.

You can’t, and shouldn’t, stop people being angry of course. But opposition also needs to do two things. First is to avoid personal attacks, on Mr Trump or his supporters. Jokes about the size of Mr trump’s hands, or accusations that those that voted for him were bigots or idiots, need to be toned down and reserved for private conversation. Second, which follows, is that the conversation needs to be about competence rather than morals. The Trump administration (unlike the Coalition, by and large) is astonishingly incompetent at actual policy, as opposed to messaging.  To give this criticism credibility it means acknowledging the government’s successes when they occur.

Remember George W Bush. He was the target of a torrent of sneering attacks from liberals – but his power only grew. But when he appeared utterly incompetent in the face of Hurricane Katrina, and then Iraq,that’s when his popularity fell off a cliff. And yet his incompetence had been evident for years before that. I have read a similar account of Italy’s Silvio Berlusconi. Personal attacks did not harm him; scrutiny of his policies did.

So far, opposition to Mr Trump has failed these tests. The president’s executive orders have been badly drafted and are leading to muddle and injustice. But he is able to shrug all this off while liberals indulge in ill-directed anger. While liberals congratulate themselves on the size and noise of their protest marches, Mr Trump’s relationship with his base is intact.

What the left lacks is leadership, both here in Britain and in America. A liberal fightback can be successful. Demographics are in their favour. But they must rally around a clear and competent alternative. Alas none is in sight.

Share

The US Republican company tax reform might be a good idea

I like to see the bright side. With the accession of Donald Trump as US President, alongside the Republicans controlling both houses of Congress, that is hard. Mostly, I simply hope that the process of challenge will make liberals stronger and harder. There is too much complacency in liberal thinking. And there is more cosying up to vested interests than we might like to think.

And among the flood of bad ideas coming out ot the new administration, there may be the odd good one. Reforming company tax might be one of them.

What I am thinking of are the plans proposed by Paul Ryan, the Speaker of the House of Representatives.  Liberals should support it, though alas many won’t because of who is proposing it, rather than its merits.  One part of the plan is to cut the rate of company tax to 20%, but reduce the number of deductions. This is an old debate. I am sympathetic to lower marginal rates and fewer deductions, though 20% is aggressive. I do not share the view that company profits should not be taxed, and that the burden of taxation should entirely be on distribution of profit instead.

There’s another old idea in the mix too: 100% write off of capital investments in the year the money is spent. Older British accountants like me will remember that we had that system here in the 1980s – called 100% capital allowances. It was the basis of many a tax avoidance scheme, and perhaps tilted the balance too much in favour of investing in plant rather than people. But there is some merit to it.

But the really interesting idea is the so-called “border adjustment”. This exempts from tax sales outside the US, and disallows as deductions spending on imports. This can be painted in different ways. To nativists this sounds like encouraging exports and discouraging imports. Alternatively it can be presented as a sort of value-added tax, which is well-established here in Europe. Neither presentation does it justice. It is not VAT, not least because the costs paying people is within its scope. And its effect on corporate incentives can be beneficial to the world economy rather than detrimental. It amounts to a constructive proposal to deal with a major problem: the taxation of transnational businesses.

At the moment companies are taxed by the location of profits, apportioned “fairly” using general accounting principles. This falls foul of manipulation through transfer pricing – what country-level subsidiaries within a transnational business charge each other. Thus when a multinational sells you something in Britain, it may treat as part of its costs the use of intellectual property based in a low tax regime, such as the Netherlands or Luxembourg. National tax authorities have been fighting a losing battle against abuse. The G20 recently adopted some new rules to reduce abuse, but this is sticking plaster to repair a fracture. It is best seen as an attempt by corporate lobbyists to stave off more radical approaches.

One such radical approach to reform corporate tax is unitary taxation. This method means that tax authorities assess a business’s global profit, and then allocate it to country based on the location of some combination of sales, employment or property. This is how US states tax the profits of US businesses, mostly allocating them using the Massachusetts formula. I have been advocating this for years internationally, but I have unable to persuade even the Liberal Democrats to pursue the idea.

Mr Ryan’s border adjustments are an alternative idea, and look simpler. In essence corporate taxes would be based on the location of revenues – something that would not be easy to distort. So, applied in the UK, Amazon or Starbucks would not be able to use spurious intellectual property charges to relocate profits to tax havens. Overall the scheme favours countries that have trade deficits (like the UK or US) rather than surpluses (like Germany or China), but that is no bad thing.

And probably unilateral action by the US is the only way much is going to happen. Multinational forums like the G20, and even the European Union, have completely failed to deal with this problem. Only the US has the power for unilateral implementation. Where it leads, others will be forced to follow. And post-Brexit Britain should be able to follow quickly.

Alas the power of corporate lobbyists in our democracies remains massive. They are masters of quietly undermining radical ideas and promoting “compromises” that have only superficial effects. Mr Trump is a sceptic, and that’s a very bad start. The hope must be that Mr Ryan will get his way in the inevitable horse-trading between the presidency and congress. Mr Trump may be sceptical, but he is not strongly against it either.

But even if this reform attempt fails, I hope that liberals everywhere will take on the challenge of corporate tax evasion with a radical approach, such as border adjustment or unitary tax. Alas I am not optimistic.

Share

Matthew Green's blog