Rethinking Liberalism 6: reinventing the state

So far in my series of essays my conclusions have been quite conventional, if a little left of centre. We need to keep capitalism in a mixed economy; the state will need to get bigger to cope with the demographic challenge; we will have to tax the rich more as middle incomes are squeezed. There’s nothing here that would upset the denizens of Whitehall unduly, notwithstanding the economic liberal tendencies of some. But I think we are badly let down by our system of government. It will have to change radically – and yet the complacency of the Westminster elite is overwhelming. Liberals must rally to challenge it.

Unfortunately one of the best examples of this establishment complacency comes from our own Liberal Democrats. Back in the 1990s I was inspired by anti-establishment rhetoric from our then leader, Paddy Ashdown. The whole system was rotten, he said; we were the outsiders and only we could change it. Then, in 1997 the party arrived as a serious force in Westminster politics.  But, somehow, under the leaderships of Charles Kennedy and Nick Clegg (or the brief leadership of Ming Campbell, come to that) this radicalism came to be toned down. In spite of some radical language from both of these leaders, policy was more about trimming the Westminster policy agenda here and there without counting too much controversy. Ideas, such as a local income tax, which might have meant a decisive break from the Westminster-centred way of the world, were quietly buried. By the time Lib Dems took up cabinet jobs in the current coalition, they looked very comfortable in their new Westminster ministries, with the possible exception of Vince cable, the industry minister.

And the public could sense this. My heating engineer, classic old-school lower middle-class, told me that the Lib Dems had sacrificed their principles to get their hands on the prestige of power. Mr Clegg looked as if he was enjoying themselves too much. This feels very unfair, of course. There was a national crisis in 2010, and the compromises of coalition were needed for the country’s sake. And the Liberal Democrats have stopped the Conservatives doing a lot of silly things, like cutting Inheritance Tax. But there’s a grain of truth in the accusation; what about the promise to really shake-up British politics? It’s not clear that senior Lib Dems ever wanted to do more than change the standard Westminster priorities a bit, by pushing education and redistribution up the agenda and making the odd stand on behalf of civil liberties, unless real heat got applied. If there has been any reinventing of government, it is mainly Tory ideas that are driving it. And they are about keeping the basic Westminster architecture in place, but diversifying the delivery (more private contractors and Quangos in place of top-down state hierarchies). The attempt to devolve more power to democratically accountable local bodies has been a particular disappointment. Each step forward is accompanied by at least one step back. The malign orthodoxy of the Treasury, with its insistence on a highly centralised model of power, remains unchallenged by key Liberal Democrats – or so it appears.

Why does this matter? Firstly because the pressures caused by the demographic shift have only started. I have already written about pensions. Health costs will rise too as the ratio of older people increases. And then economic growth will continue to stagnate, for a variety of reasons, including the increasing number of people entering retirement, but for other reasons too. Meanwhile the twin (and related) economic deficits of government finances and trade are unsustainable in the long run. The government has to tax more and spend less. It has to become much more efficient and effective.

The country’s direction of travel is not encouraging. Government cuts have been very painful, and the public is tiring of them. Endless privatisations are affecting the quality of service. The fiscal deficit creeps down, but it is still very large, and he trade deficit is getting worse. This shows that the underlying economy remains weak, and that growth is hardly more sustainable than it was under the last Labour government. No sooner does the economy grow, than does Sterling appreciate to undermine all the rebalancing. Meanwhile the country is sleepwalking into the breakup of the United Kingdom (even if Scotland votes No in September) and exit from the European Union, as political dissatisfaction with the status quo grows. Pulling all the usual levers of power in Westminster seems to be doing not much good.

What have liberals to say about this advancing gloom? The first point is that we want people to have as much power as possible over their own lives. That means we dislike people being dependent on the state. It is here that we differ from the socialist left, who don’t mind if the public has a permanent client relationship to state agencies, as this creates a political constituency both amongst the dependents and the employees who serve them. Liberals should recognise that in a modern society the state must play a very big role – but we also need to push back on dependency. The state should fix problems so that demand for state services reduces.

The second point is that we believe that as far as possible state structures should be fully and democratically accountable to the people they serve. The state does not devolve power to citizens, but citizens delegate power to the various levels of government. This too is difficult in the modern world. Many problems are complex and must be solved at a national and international level – and the further up power is delegated, the weaker accountability becomes.

Have we delegated too much power to transnational bodies like the European Union and the World Trade Organisation – with the threat of more as part of a transatlantic trade deal? I don’t think so – these structures merely recognise the transnational nature of problems and the need to agree international standards and laws. Countries that opt out of these structures don’t seem conspicuously better off as a result. Is Australia, for example, really a better and happier place than Britain? Its recent economic success is as much down to the luck of geography and natural resources as anything else. Does having to dig up vast amounts of prime farmland to get at the coal beneath, while poisoning the great natural wonder of the Barrier Reef, really look like freedom?

No. I think the main problem is that we have delegated too much power to Westminster, and that the Westminster elite is protecting itself rather than solving the countries’ problems. It has created a series of administrative silos that perpetuate problems rather than solving them. To tackle this we need to do three things.

  1. Establish a federal system for United Kingdom, by creating a new English parliament and English government, based outside London, and taking to itself the same set of administrative responsibilities as the Scottish government has.
  2. Radically reform the way public services are commissioned to ensure that solving problems for their clients becomes their prime driving force. This will entail a radically increased role for locally accountable agencies.
  3. Reform the country’s tax system to follow this radical redistribution of responsibilities so that every level of government controls more of its own revenues – alongside a system of transfers to ensure a fair distribution of resources.

Each of these three depends on the others. Federalism is required to break up Westminster complacency; public services will only be properly remodelled if it is not controlled from Westminster; power cannot be decentralised unless tax is decentralised too. I will pick up each of these themes in future essays.

 

 

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