Tag Archives: Conservatives

British politics is in stalemate

The British elections last Thursday were probably the most significant electoral test this parliament, with the Scottish and Welsh parliaments, the London Mayor, and many English councils up for grabs. Everybody had the chance to vote for something. The outcome was underwhelming. Where does that leave the political scene?

The analogy is overblown, but I am reminded of the war that ravaged Europe 100 years ago. In 1916 huge efforts by the major combatants yielded little return on the ground. While the military men looked for breakthrough tactics, these yielded limited results, and in the end it was a matter of stamina and fundamentals.

The results pose uncomfortable questions for all the political parties that took part, major and minor. Most of the attention has focused on Labour. They suffered a further catastrophe in Scotland, falling behind the Conservatives to third place. In England they mainly held their ground, with an impressive victory in London’s Mayoral election. Supporters of Labour leader Jeremy Corbyn hail this as vindication – but that only shows how low their expectations have sunk. There is no hint here of how the party can regain power in Westminster. The myth of a hidden bank of left wing voters waiting to be energised by Mr Corbyn has been shown to be just that. But neither is there a disaster enough to fuel Mr Corbyn’s opponents; the Scots meltdown predates his tenure and so had already been written off. The best guess is that the far left will continue to hollow the party out from within, but that the party’s outward status remains largely unchanged. Come the next general election the question is whether the party will implode or simply repeat its dismal performance last time. On this year’s evidence it will be the latter.

For the Conservatives the position looks considerably better. They drifted only gently backwards in English councils; their performance in London was reversion to type, after unexpected success under their Mayor Boris Johnson; and they achieved a remarkable breakthrough in Scotland. But to keep governing beyond 2020 they will need to deliver a killer blow to Labour, while containing any Lib Dem comeback. Can they do that when they are riven by divisions over Europe, will replace their leader with one who has much less public respect, and while their government programme keeps being derailed by backbench discontent? Meanwhile their tactics in London, where they tried to toxify Labour’s Sadiq Khan by associating him with Mr Corbyn and Muslim extremists, failed, and may have damaged the party’s brand.

The SNP maintained their grip on Scottish politics but lost their overall majority. They have completed an astonishing pivot to the left, allowing the Tories a bit more breathing space, and leaving Scots to wonder what the point of Labour is. It is hard to see how anybody is going to deliver a knockout blow, but more Scots will surely start to tire of them. The only way seems to be down.

Ukip cemented their status as a major UK party, with breakthroughs in the Welsh Parliament and London Assembly, and consolidation of their role as Labour’s main opposition in parts of the north of England. But they are a party of oddballs, and it is hard to see how they can maintain their coherence. As a party of local government in England, they won only 15% of the seats of the supposedly down and out Lib Dems; this is a weak grassroots base.

The Greens moved forwards in Scotland, and held their own in London, where they are established as the third party by popular vote. But in English council seats for every gained they lost a seat somewhere else, to end up with even fewer seats than Ukip. Their switch to the left, while downplaying their environmentalism, looks to have been a strategic error, with the wind taken out of their sails by the revival of the Labour left.

And my own Lib Dems? There were quite  a few successes; they gained more English council seats than any other party, and are approaching half the Conservative total. They comfortably retain their position as the third party of local government. There were striking constituency wins in Scotland and one in Wales. But all the Lib Dem successes boiled down to pockets of local strength, where they are deeply embedded into civic society. They have shown their ability to claw back ground from the Tories in particular, and even the SNP. But talk of a revival of fortunes belongs in the same category of optimism as the Labour left’s. The party was reduced to a single seat in both the Welsh parliament and London Assembly, and fell behind the Greens in Scotland. They struggle to reach 5% in proportionally elected contests, an irony for a party that is so in favour of this type of election. The party has not established clear political ground for itself and remains confused as to whether its coalition years were its finest hour or a terrible mistake. The party fights irrelevance in most of the land.

Plaid Cymru continued to move sideways. The politics of Wales remains quite different from that in Scotland, and the party seems quite unable to replicate the SNP’s success.

And nobody else made an impact. The Women’s Equality party was launched last year in a big media splash, and tried its luck in London, but got nowhere. The nativist Britain First is another new party, which has a big presence on social media, and it put in a performance that beat other competitors in its space (such as the British National Party), but still only managed a derisory result. For all the claimed discontent of the public with established politicians, there is not even a faint sign of an insurgency that could take off.

So British politics is in deadlock. The Conservatives have a narrow majority in the UK parliament but lack the discipline to govern decisively. There is no evidence as yet that they are going to break out of this. But neither is there any sign of a party or coalition of parties that can knock them off their perch.

There is a broad lesson here about British politics that is not given enough weight by most commentators. Political success requires a strong grassroots infrastructure and solid organisation, built up over many years, as well as being able to chime with some part of the zeitgeist.  Labour and the Conservatives have achieved this more or less across Britain, now that the former are rebuilding themselves in Scotland. Fear of losing this vital political infrastructure stops either party from breaking apart, in spite of huge political divisions. The SNP has this in Scotland and is consolidating. That the Lib Dems are in the fight at all after failing so spectacularly to hit the zeitgeist is testament to their pockets of grassroots strength and penetration of institutions like the House of Lords; they have something to work with. Ukip and the Greens have attempted to build their own infrastructure but are finding it desperately hard going. Nobody else stands a chance. There will be no unconventional uprising like Italy’s Five Star movement. It is also very hard for a nativist insurgency, such as that of Donald Trump in the US, or the Front National in France, to get traction – though Ukip has tried.

And so we are locked in stalemate. The biggest threat to this dynamic is if one or other of the major parties breaks up under the strain. The second possibility is that the Tories get their act together sufficiently to deliver a knock-out punch to a Labour Party that does not look interested in government. As yet there is no sign of either.

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To see the significance of IDS’s resignation we must look past the dead cat

My last post on the Budget took on the gorilla cliché. This time I want to talk about dead cats. What brings this on is the spectacular resignation of Iain Duncan Smith, popularly referred toas IDS, who had been the Work  and Pensions Secretary.

Is this a dead cat moment? The metaphor comes from election strategist Lynton Crosby, who guided the Conservatives to their spectacular election win last year. He suggested that if the news agenda goes awry, you should “throw a dead cat onto the table” to distract attention. The IDS episode has certainly done that. It has dominated the news for well over a day now, pushing out all other political stories from home and abroad.

In whose aid would the dead cat have been brought into play? That would have to be the Leave campaign in Britain’s EU referendum, and indeed much of the comment suggests that this issue lay behind the resignation. But Mr Duncan Smith says it is about the Budget, and how it juxtaposed tax for the wealthy with withdrawing allowances for the disabled.

But it is hard to see what the dead cat was meant to distract our attention from. The Budget was hardly a triumph, and was pretty neutral in the great EU debate. The Remain side wanted to claim a coup with regard to VAT on tampons, which has got tangled up in EU rules. But that’s small beer. Maybe the Remain campaign were plotting something. There is surely frustration about how easily the Leaves seem to be able to hijack the news agenda, but it was surely too early for a news coup. If it had been timed to coincide with President Obama’s future visit to the UK, then that would have been different.

Indeed Mr Duncan Smith is a particularly guileless politician. This lends him a certain charisma, which briefly took him to a disastrous period as Conservative leader, but his general lack of political and management skill is very evident.

Which leads me to think that he can be taken at face value this time, which is what Observer commentator Andrew Rawnsley suggests in what looks like an authoritative analysis. The referendum has created the general context of tension, but Mr Duncan Smith and George Osborne, the Chancellor, have been at loggerheads for many years. Mr Osborne tweaked his tail once too often.

Which means that much of the chatter about the episode being linked to the referendum is misplaced. It is very hard to know what its impact will be on that campaign. It’s effect on two other issues may be more significant.

The first is the fate of IDS’s pet project: Universal Credit (UC). This aims to replace a complex system of tax credits and benefits with a single scheme that is linked to income levels in such a way that incentives to work are not destroyed. This idea has wide political support, and it is the a centre piece of the government’s benefit reform narrative. But it is technically difficult to do because it depends on near real time data on income levels. This, incidentally, is the opposite approach to that taken by the Treasury, which prefers to focus its data gathering on a small number of better off people, rather than tangling with the sometimes chaotic lives of the less well off.

The technical challenges mean that the roll-out of UC is a long way behind schedule. It had really only been sustained by Mr Duncan Smith’s political capital. Now that is gone, surely the project will collapse? That will be a victory for the Treasury, but it will leave a hole in the heart of government policy. What will the government do next?

But there is a bigger issue for the government than even that. In my last post I pointed about how hard it will be for the government to force through further cuts in public spending, leaving the government’s financial plans dependent on a sudden, and unlikely, spurt of old-fashioned productivity (as opposed to the new-fangled sort that will leave tax revenues untouched). The government has a small majority. It needs political will, discipline and cohesion to push its fiscal plans through without breaking promises on tax. Mr Duncan Smith had shown that solidarity until now. The Conservatives will have to find a way to rebuild it after the referendum, probably under a new leader. That is now more difficult than ever.

Who might that new leader be. Mr Osborne looks to divisive. The London Mayor Boris Johnson probably lacks support within the parliamentary party, and has a credibility problem. He’ll lead the polls under the going gets serious. I would not rule out that dark horse: Theresa May.

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Core voters are always shafted. Politics is made in the centre. Bad news for Lib Dems

Democracy and idealism do not sit well together. Idealists have the motivation to form political parties and keep them going. But in order to win power the party must bring on board people and, policies, that the idealists disagree with, in order to win round those less committed to politics. And these floating voters come to matter more to the party’s managers than the the idealists. Because the idealists have nowhere else to go.

In Britain, the latest challenge to this process comes from Britain’s Labour Party; in America the Republicans seem to be doing something similar. This all seems to be part of the great cycle of politics. A party’s core supporters, those that are ideologically committed, get fed up with being taken for granted and rebel. They struggle to accept that a majority of voters disagree with them – following a natural human bias that most people think as we do. They may also be enticed by the idea that they can win by accident – through their opponents’ mistakes. Sometimes such ideological parties do win an election that way – it has just happened in Poland, for example. It rarely ends well.

I know more about the Labour phenomenon than the Republican one. Labour members elected the ideological Jeremy Corbyn after the party’s general election failure last year. These members remain as fervent as ever, and indeed new members have flocked in. This burst of enthusiasm has convinced them that they have started a new and better form of politics. As they see it, the compromises used to chase the centre ground, as uncommitted voters are usually referred to, have disillusioned people with politics. Now Labour will create a sharper narrative that will go down a storm with the electorate. They equate their own disillusionment with the compromises of their party with the widespread political apathy of the population at large.

But is this is an illusion. This week Britain’s polling organisations published a report into why they called the 2015 election wrongly. They overestimated Labour support and underestimated the Conservatives’. They found this was mainly because their samples were biased towards Labour. And that was because they were biased towards the politically committed, who were much easier to reach. This is a vulnerability of the quota sampling technique that the pollsters use. The less committed, or more apathetic, voters were much more likely to vote Tory.

This leaves more thoughtful Labourites with two headaches. The first is that current polls show the Labour vote holding up compared to  the general election – so that electing Mr Corbyn at least hasn’t made things worse. But if the polling bias remains (and it seems to be, based on how the samples remember they voted in 2015), then in fact the Tory lead has grown. The second headache is that the army of the apathetic non-voters is more sympathetic to the Tories than many suppose.

Which leads to an inevitable conclusion. In order for Labour to win an election they need to convert people who voted Conservative last time, or who did not vote, but lean to the Conservatives. In other words, Labour must appeal to the centre ground.

Such thoughts cut no ice with Labour’s new members. When pushed they even suggest that winning is not that important. That leaves Labour in a terrible position, and the Conservatives thinking that they have the next election in the bag. Some hope that the European referendum will split the Tories. But the prospect of whacking Labour really hard if they hold together is the best possible incentive to hold the party together.

Labour’s prospects against the SNP in Scotland are no better; the SNP have cornered the middle ground in Scotland as masterfully as the Conservatives in England, while still retaining  a substantial core vote. This conjuring trick will eventually come apart – but an ideological Labour Party will not be the instrument of the SNP’s demise.

Meanwhile, sitting on the sidelines are the Lib Dems. A number of people have suggested to me that Labour’s woes present the party with a golden opportunity. But the political dynamics or the core and centre are not working the party’s favour.

The party thought that the usual rules of politics would apply to them when they went into coalition with the Conservatives in 2010. They shafted their core voters, but surely they had nowhere else to go? And meanwhile the party’s record in government would appeal to the centre ground. But a large part of what the Lib Dems thought was their core vote felt they did have an alternative: Labour. That weakened the party, and weakness is a big turn-off for centrist voters. The Conservative campaign exploited this ruthlessly, and the result was catastrophe, as the Lib Dem vote fell by two thirds, and their political clout even further.

So, somehow, the Lib Dems need to rebuild their core vote. The place to look is amongst Labour inclined voters who do not buy Labour’s new sense of direction. But the party also needs to win votes back centrist voters from the Conservatives if they are to win the all-important parliamentary seats. And that means the party must show distance from the Labour Party. So how does the party face the prospect of another coalition with the Conservatives? If they rule it out, they will lose the middle ground by giving tacit support to the ideological Labour Party. If they don’t, those Labour inclined “core” voters will think that the party has learned nothing from the coalition debacle, and leave the party alone.

This may not matter too much to the party at the next election, especially if it looks as if the Tories will win handsomely. There will be no danger of a coalition, so that awkward question can be ducked. The Lib Dems might be able to make a modest recovery based on local strength. But the strategic dilemma remains.

Probably the best thing for the party is to recognise that it is essentially of the left, and rule out any future coalition with the Conservatives. That will help the party rebuild its core. It then needs to apply thought to under what conditions it could work with Labour. But it will have to be a very different Labour Party from the one emerging under Mr Corbyn’s leadership.

Which would leave the middle ground in British politics to the Conservatives and the SNP. Which in turn means that political power will rest with them.  A grim prospect indeed.

 

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What will 2016 bring? Remain will win and the Tories will stay together

New year predictions are not something this blogger has indulged in before – but it seems to be a universal obligation for the first blog of the year. There is little to be said for it at face value: predictions are either banal continuations of current trends, or depend too heavily on events that are unpredictable. Still, they may reveal something interesting about the way the blogger sees the world- so here goes.

The most important event of 2016 in British politics (and that will be my main focus) will be a referendum on UK membership of the European Union. This is not certain for 2016, but nevertheless looks more than likely. I predict a comfortable majority (in the region 60-40) for the Remain campaign – I am not joining the crowd who suggest that it will be very close, or that Leave will win.

Unlike fellow Lib Dem blogger David Boyle, I don’t think the referendum campaign will be a repeat of Scotland’s independence campaign. Not because I think that the status quo supporters will be any more inspiring or less negative.  There are routine calls for Remain supporters not to repeat the “mistake” of Scotland’s No campaign, which failed to make a positive case for the Union. This rather overlooks the fact that No won in Scotland, in spite of a brilliant Yes campaign. There were signs of ineptitude on the No side – but that more applies to the minor tactics, which were dictated by a Scottish Labour Party whose lack of political skill was shown to all in this year’s General Election, when they were reduced to a single seat. I expect the Remain campaign will manage things better.

But the main reason why the EU referendum will not be like the Scottish one, is that their is no equivalent of the SNP-organised Yes campaign. They managed to motivate their supporters through a very positive, inclusive message, which appealed to young people. There are people in the Leave EU campaign that think that life outside the EU is a fantastic and positive opportunity for Britain, but they look very unlike the Scots Nationalists. For a start many of these are businessmen who think that leaving the EU means deregulation, so that they can screw their employees, customers and the environment even harder. They are fundamentally unconvincing when they suggest that this will make more than few people better off – there is no economic card equivalent to Scotland’s oil.

But a deeper problem for the Leave side is that most of their supporters are of the stop-the-world-I-want-to-get-off type. To them the EU represents the intrusion of the modern, globalising world, and leaving it will enable the country to put up stronger barriers to the world. Especially when it comes to the free movement of people. This is a striking contrast to the Scotland Yes campaign. The Leave campaign are (mostly) convinced that immigration is their trump card – and many Remain supporters agree, and are duly worried. Most people outside London are convinced that immigration is too high and one of the main problems that Britain faces. But I don’t think this will be as easy a card to play for Leave. First I doubt whether the public quite has the courage of its convictions on the issue – on the same principle that most voters talk about how much they distrust established politicians, but then keep electing them anyway. Second, the referendum will not change Britain’s political class, and the public doubts its will to deliver lower immigration, even outside the EU. Perhaps these two points two sides of the same coin.

So Remain will win. What will that do to British politics? The conventional wisdom, which I have supported, is that this will tear the Conservative Party apart. But I have changed my mind on this. Europe has been a defining issue for many Tory activists, and they will be upset that the referendum was lost. But we must remember two things about the Tories. First: their party is not “democratic”, by which I mean that its members don’t control things through electoral processes, as they do in the Lib Dems and Labour (sort of, in both cases). The controlling elite has huge power over party direction and can weather the odd storm. Second, the party has the prospect of political power before it. They are in power, and the opposition is weak; too many people, with too much money, will not want to throw away the opportunity to hang on to that power. The example of Ukip, now a chaotic, busted flush, is not encouraging to rebels. The main threat to the Tories comes from who they choose to succeed David Cameron as leader. But this is quite tightly controlled by the parliamentary party, who have an instinct for survival. No equivalent of Jeremy Corbyn is in the wings.

What other predictions? Jeremy Corbyn will remain leader of Labour, and consolidate his power. Labour’s Sadiq Khan will win London’s Mayoral election. Labour “moderates” will bide their time; setting up a rival party is unrealistic on so many levels. And the Lib Dems? They will achieve some local successes, which will be enough to convince insiders that they are making a comeback, but nobody else. The SNP dominance of Scotland will continue in the Scottish parliamentary elections, but I will be surprised if the Conservatives manage to overtake Labour.

And the economy? I think that trouble will strike before 2020; the economy looks too much like its old self in the days of Blair and Brown.  How will it come about? Britain is vulnerable to events elsewhere in the global economy. Perhaps foreigners will start pulling out of the London property market, causing developers to get into trouble, and then whoever is lending them money. This could spark off a long term decline on Britain’s property values, quite opposite to the conventional wisdom that prices are driven by excessive demand, rather than excessive finance. And yes, that process could start in 2016.

What about elsewhere in the world? Perhaps 2016 will produce an unexpected drama in the US elections, but I expect the winner to be a Democrat. Hillary Clinton looks a shoo-in, but could she be derailed by something in her back history?

And Syria? The civil war looks like a stalemate until Saudi Arabia and Iran decide that they need a rapprochement. Continued low oil prices could force that. A coup within Islamic State to produce a new regime that seeks alliances with other actors should not be ruled out. – and less sponsorship of outside terrorism. But terrorism will go on.

Of course the last three paragraphs have enough escape clauses to not count as serious predictions. But that will have to do for now!

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The tide is turning against Heathrow expansion

Last week the British government decided to defer its decision on whether to expand London’s Heathrow airport. This has been roundly condemned by people the media calls “business”,  referring to self-appointed lobby groups of large companies. But what is all this about? Now it could be what the lobbyists claim, which is weak government pure and simple. Or it could be a straw in the wind for a much more interesting change in attitudes in the political economy.

The story so far. Heathrow has long been operating at near capacity. London’s second airport, Gatwick, is approaching capacity too. If you believe that air travel must increase for a healthy economy, then something must be done to expand capacity. In the long view this conventional wisdom is open to question: but as a good liberal I must accept that the freely made choices of my fellow citizens point to further growth in air travel. The politics, however, are toxic. Airports in the prosperous south east of England are not popular with those that live nearby, whatever benefits they bring. Since Heathrow is quite close to the London conurbation, that adds up to an awful lot of people. Many of these people live in marginal constituencies.

Nevertheless the Labour government prior to 2010 supported an extra runway at Heathrow. But both the Conservatives and the Liberal Democrats, spying opportunities in these south west London seats, were vehemently opposed. The Conservative leader, David Cameron, went as far as to say: “No ifs, no buts, there will be no third runway at Heathrow” (or something like it). When these two parties turned Labour out in 2010 and formed a coalition, the existing expansion plan was thrown out. Instead the government set up an Airports Commission to evaluate the alternatives, to conveniently report after the next General Election, in 2015. It duly reported in the summer, recommending a new runway at Heathrow, in a different place to the previous plan. By then the Conservatives had crushed the Lib Dems and were in government on their own. It would have been a good moment to show decisive leadership and accept the Commission’s results. They would have been able to steamroller opposition from their London MPs.

But Mr Cameron didn’t. He dithered. Why? There seem to be two nakedly political factors. The first is that Zac Goldsmith, the Tory MP for Richmond Park, had threatened to resign and cause a by election if the government supported Heathrow expansion. That ordinarily would be a little local difficulty – but he is the Conservatives’ candidate for London Mayor in 2016. A split would be messy. The second is that Mr Cameron’s “No ifs, no buts” promise is weighing on him. He fears a “Nick Clegg moment”, referring to the collapse in the Lib Dem’s leader’s public standing when he decided to reverse a pledge on student tuition fees after 2010. And Mr Cameron needs all his political capital to carry through his referendum on the European Union. Perhaps this is enough to explain last week’s announcement to defer the final decision until next summer, after further reviews of the implications for air pollution. By then the Mayoral election will have happened, and so might the EU referendum.

But there may be something deeper. It could be that the tide of conventional wisdom is moving against Heathrow expansion, recognising that the terms of reference of the Airports Commission were flawed. If that is the case then the delay is a process of gathering more evidence against Heathrow, so that a decision to expand Gatwick instead will be better proofed against judicial review.

Why might the tide be turning? Well, the case for Heathrow is based on 20th Century economics. The idea is that to make a big airport even bigger is more efficient that building up smaller airports. Time was when the concept of economies of scale was so baked into the conventional wisdom that this logic would not have to be seriously examined. But for airports it does have to be questioned. For a start, any air traveller knows that larger airports are less efficient for point to point travel. Every stage of the process takes longer than for a smaller airport. I remember vividly that taxiing to the terminal after landing at Schiphol airport took as long as the flight itself.

But there is a clear benefit of a running a large airport: that of making connections. This is referred to as being a “hub”. There are two aspects to this. The first is that hub airports can consolidate short distance flights into long distance ones, in a configuration that allows demand for long haul journeys to be met more efficiently. The second is that the presence of a lot of people waiting around in hub airports is an economic opportunity for the host country: it can sell them things. It is on the benefits of the hub operation that the Airports Commission’s recommendation is based: expanding Heathrow will generate bigger benefits to the British economy as a whole than would expanding Gatwick. This can be challenged, however.

The first point of challenge is on the efficiency of the hub model as the best way of managing long haul traffic – or of a hub based in London. One argument is that technology is moving against this. Smaller, efficient long haul aircraft are being developed that allow the alternative, point to point model to be more viable. The second is that the Arabian Gulf is emerging as an alternative airport hub location, and one which has a clear comparative advantage, if not an out and out absolute advantage. Pumping up a London hub is fighting the laws of global economics.

The second point of challenge is on the business of running a hub: the shops and restaurants. The London economy is already overheated, as shown by very high property prices. There really is no need for the extra income. If the hub was in the north of England, that might be a very different matter. The fact that the airport is so unpopular locally gives a clue to this.

And on top of these direct challenges there is a strategic tide. Politicians and economists are worried that economic growth in developed countries like Britain is bypassing most people, and ending up in the pockets of large multinationals and a tiny elitesof people that run them and provide supporting services such as tax avoidance advice and banking. The penny is dropping that this may largely be down to the excessive market power of large businesses, extracting monopolistic profits. And yet the Heathrow business case seems to be a paean to this form of monopolistic capitalism. And those business lobbyists provide an unwitting confirmation of this.

Before the Commission reported, it was arguments such as these that induced me to predict that Gatwick would win over Heathrow. The Airports Commission was a blow; but I am holding to my prediction yet.

 

 

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The Autumn Statement shows the conflict of short and long term Tory priorities

George Osborne, Britain’s Chancellor of the Exchequer, delivered his Autumn Statement yesterday. This is a very British piece of political theatre, delivered by somebody with a very theatrically British job title, that adds up to “Finance Minister”. In the statement Mr Osborne announced financial plans for the next five years of the Conservative government. It is a set-piece event designed to score political points and attract good publicity. The dust has not had time to settle, but some important issues are clear.

The main headlines were these: the government dropped the central part of its plans to reduce tax credits to top up the incomes of people working on low pay. It also withdrew plans to cut police budgets. Various other goodies were doled out; schools had their budget protected in real rather than nominal terms; there was more money for the NHS, and various investment projects. This was all part of a familiar game of managing expectations, which Mr Osborne now handles with competence. The reversal on police cuts was particularly well managed. The short-term politics has worked very well for the government, helped by the Labour opposition spokesman John McDonnell’s misjudged stunt using Chairman Mao’s Red Book.

But let’s step back a bit.  The first point to make is that this exercise is one of completely false precision. The justification for a greatly reduced level of cuts to departmental spending (according to the FT’s Martin Wolf, from £41.9bn in pre-election March, to £15.6bn in post-election July to £7bn now) was a £27bn reduction in 2020’s projected borrowing. This £27bn figure is widely reported in the media, but it is nearly meaningless. It is based on economic forecasts which have almost no chance of being fulfilled – though at least they are produced independently by the Office for Budget Responsibility. That £27bn can appear out of nowhere in four months simply reflects this imprecision; it can disappear just as quickly. Personally I feel that the projection of a steady 2% plus of GDP growth, which underlies this forecast, is most unlikely to be fulfilled; it is an artefact of a deeply flawed process of economic modelling that still has a grip on conventional economics, because nobody has found a substitute.

So this needs to be taken in a broader strategic context. The government has two stated economic aims for the medium term. The first is that the state should run a surplus in the middle of the business cycle; the second is that overall government spending should be cut to about 37% of national income- low by postwar standards. Both are entirely arbitrary. There is a good case for a government deficit to fund investment, especially if the private sector is reluctant to invest its profits, which has been the story of the 21st Century so far. There is no convincing evidence that I know of to suggest that a lower level of government expenditure is more economically efficient.

But all this makes more sense if you think about the politics rather than the economics. And here the Statement was balancing long and short term aims. The long term aim is to crush an ecosystem of political bureaucrats in central and local government, and a range of agencies, consultancies and NGOs that hover around them. This is the principal power base of the Labour Party, and flourished mightily under the patronage of Mr Osborne’s predecessor but one, Gordon Brown. What is set to replace it is series of soulless, hollowed out agencies that are as easy to deal with as modern big businesses like phone companies (BT, TalkTalk, Virgin Media, etc) that are unable to manage complexity, so try to deny that it exists. The government’s new Universal Credit system is shaping up to be just such a nightmare. I see both sides of the argument here. I hate the old Labour bureaucracy and its hangers on with a passion, and I am not sorry to see it being dismantled (though a lot of excellent professional services are going too). But its hollowed out replacement lacks credibility, and at will be a partial solution at best.

The difficulties with this Conservative dystopia are apparent in the short-term politics. Welfare, security, health, education and social care are proving politically highly resistant, and hence the retreats evident in Mr Osborne’s statement. The Conservative fight to crush the opposition Labour and Lib Dems is going very well. But this is in large part due to Labour’s ineptitude. What if it woke up and led a serious fightback?.

The Conservatives’ drive to cut government budgets leaves them politically exposed. They stand a real chance of shutting Labour out of power for generations, but only if they secure the votes the working class and and the less secure middle classes. The changes to tax credits would have made these voters very angry. Mr Osborne’s U-turn is unsurprising – but leaves the question of how he managed to get into the mess in the first place. Meanwhile added demands of an ageing population on health and social care services is a challenge that will not go away. The extra funds found for these are unlikely to be equal to the challenge.  And the problem of an economy polarising between low and high wages, while housing costs are escalating, is placing huge stress on welfare.

The hollowing out of the state at both national and local levels will continue apace. But a weaker than expected economy, and mounting pressure on health and social care services are likely to break Mr Osborne’s plans eventually. Whether the political opposition, outside Scotland, will be in any shape to exploit this situation remains open to doubt, however.

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The real meaning of the controversy over the House of Lords

This week Britain’s House of Lords voted to delay the reduction of tax credits for Britain’s poorest working families. Parliamentarians from the ruling Conservative Party are apoplectic at what they say is constitutional outrage – an unelected chamber challenging an elected one. There is an important constitutional issue here, but as usual the Conservatives are pointing to the trees so that we miss the wood. The key issue is not whether the upper chamber is elected; it is how the executive power of the British government should be held accountable, and prevented from excess.

Britain does not have a written constitution. There is no charter of sacred principles which sets out the rights and responsibilities of each part of government and of its citizens. What we have is the result of a very messy process of evolution. It is the result of a struggle between those who want unlimited executive power, and those who want to limit it. We can date this struggle back to King John in 1215 at least. Some may push this back to the time of King Alfred the Great in the late 800s.

Initially the kings claimed their authority from the Divine. They competed for power with their nobles and with the Church. Things have moved on. The power of the Church was crushed by Henry VIII, and the hold of the Divine withered. The House of Lords retains, nominally, the last vestiges of the rights of the nobles. Instead both the divine and the nobility have been replaced by an idea of the Will of the People. But that is just as slippery an idea as that of the Divine.

To most politicians in both Britain’s main ruling parties, the Conservatives and Labour, the Will of the People is represented by a majority in the House of Commons, elected every five years using single member constituencies under the First Past the Post (FPTP) electoral system. In their eyes theses elections confer rights on the House of Commons akin to the old doctrine of the Divine Right of Kings, or the Chinese one of the Mandate of Heaven. This doctrine is often referred to as the Sovereignty of Parliament. The usual practice is that the Commons is controlled my a majority of members from one party, who approve an executive and are expected to support it all of the time. Checks on the executive are regarded as both inefficient and undemocratic. Checks by the judiciary are tolerated (less so if they are at the European level), since most accept that the rule of law is essential to an orderly democratic state. But even that has its limits; the executive chafes at laws that confer rights on ordinary citizens, especially human rights and rights to information. Other checks on power are not accepted. The House of Lords is more there for decoration than anything: a useful political tool to reward politicians for good behaviour, or political donors. There may also be value in the minor revisions to legislation that it proposes from time to time. Hence the anger at this week’s challenge.

And yet many observers feel that this leaves an inadequate check on the executive. There is an argument that unlimited executive power is dangerous rather than efficient, and should be subject to checks and balances. The most famous example of this, of course, is the constitution of the United States of America. The political system there often seems stuck in gridlock, and yet we can hardly call that country a failure, or less democratic than ours. There are three classic ways in which executive power might be limited. A written constitution allowing government actions to be challenged in the courts; a federal constitution that distributes powers between federal and state levels; or an “upper” chamber of the legislature to form a check on the main, popularly elected one. Britain has elements of all three, but they are all weak. The Conservatives want to keep it that way, and weaken the second chamber further.

Is this a bad thing? Conservatives would argue that a strong executive offers decisive government, that is able to develop the economy and protect its citizens better. In particular it is better placed to push through hard but necessary reforms. These reforms may not have been explicit at the time of the government was elected (one of the key arguments against the tax credit proposals), but there is also a sense that the next election casts a verdict on the past government, as well as electing the new one – so there is accountability in the end. Labour politicians are sympathetic to that line of argument, since they want the minimum limits on power when it is their turn.

Liberals oppose this on the basis that it is undemocratic, too beholden to vested interests, and centralises too much power at the national level. These are familiar arguments that I will not try to develop today.

Liberals do have a problem when it comes to the House of Lords though. It is manifestly undemocratic, but simply replacing it with an elected upper chamber with similar powers looks a bit of a nonsense. How would the new upper chamber’s mandate differ from that of the Commons? it could set itself up an an alternative “Will of the People” and simply create deadlock. Wouldn’t it be better to have a single chamber and make that work more effectively? Many liberals might accept that argument in theory, but fear in practice that abolition would not be linked to reforms of the Commons, for example to be elected on a proportional voting system. That fear is well-founded, but it leaves them arguing for something that looks inadequate.

A better way out is surely to come at the problem form a new angle: that of federalism. The new upper chamber might represent the interests of elected governments below the top level. There are many ways that this can be approached, and it would serve a wider purpose. The would help secure a better distribution of power within the country by strengthening local and regional levels of government (I dislike calling this idea “devolution” because it suggests a top-down process). It may also present a more robust solution for Scots’ demands for more self-rule than the unbalanced solutions now on offer. And it is the urgency of the Scotland problem that might give the idea political traction, alongside the widespread recognition that government in England is over-centralised.

That will require some form of constitutional convention to resolve. That is what liberals should be calling for -a not an elected upper chamber by itself.

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Saving tax credits means raising taxes. I’m OK about that.

The current political storm over the British government’s proposed scaling back of tax credits is not showing politics at its best. On one side a cynical Conservative government is pushing through changes will make the poor poorer and reduce social mobility. On the other we have opposition grandstanding that has no interest in suggesting alternatives. I despair.

First of all, what is the fuss about? Tax credits were introduced by the Labour government in 2003. They are a way of providing means tested benefits to those already in work, but on low incomes, and especially those with children. They are designed to taper off as income grows, so that claimants will always benefit from any increase in earned income. They are copied from a US idea, but they have been Britannicised so that they can operate within the country’s system of taxation at source, PAYE. In America claims are made at the end of the tax year when tax returns are filed; the UK use a monthly system.

Originally the problem with tax credits was the operation of the monthly calculations. Inevitably the information they used was often out of date, and so many claimants were faced with clawback claims, for which they were not prepared. We hear much less of this these days. Nowadays the problem is the cost. Claims about this vary, but it was always expensive, and, with low paid jobs multiplying, it has grown sharply. And yet they are well targeted to those most in need, especially families. They do not penalise work, so many means-tested benefits do, while costing much less than universal benefits.

During the coalition years of 2010 to 2015 the government trimmed back tax credits, in particular they tapered off the withdrawal more sharply. Previously incomes up to around £40,000 (from memory – this figure may well be incorrect) could claim something, but this has been reduced. Now the government proposes to reduce tax credits even more harshly, and especially for larger families. It estimates that the savings will be between £4bn and £5bn. That will cause real hardship for many families that include working people. In fact, the very “hard-working families” that we got so sick of hearing about from politicians at this May’s election. The cuts will also be a setback for attempts to give children from poor families a better start, and so reduce inequality.

For all that there is a certain honesty about the plan from the Conservative Chancellor George Osborne. The government’s financial deficit is running at about 5%, far higher than it should at this stage in the economic cycle. During the election the Conservatives made it very clear that they wanted to balance the budget. They also made it clear that they would do so by making cuts to benefits. They were very coy about where these cuts would fall, and even suggested that child tax credits might not be affected – but there really is no other way to make their plans work. This is what politicians do in a democracy: vaguely promise “tough” measures before an election; implement them soon after, and hope the fuss has blown over by the time the next election comes around. A lot of publicity has been attracted by a Conservative voter saying that she felt very let down – but I’m afraid that’s political naivety. If the issue was that important to her, she should have voted for somebody else.

The government are honest, by the standards we have to apply to politicians (no truly honest politician would get elected), but misguided. But a lot of the opposition is a nonsense. It amounts to no more than a collective yelp of pain, and wishes for the government to “reconsider” without offering any kind of escape route. This is particularly annoying from Conservative MPs. They offer no alternative. The various mitigations proposed, such as raising the minimum wage, or tax thresholds, are badly targeted and won’t help much. Tax credits are the most efficient way of doing what they do. Any change is going to make things worse. There is no clever wheeze that will make the problem go away.

The opposition parties: Labour, the SNP and the Lib Dems are at least a little more honest than the Tory moaners. Labour initially got itself into a tangle, but soon put that right. I personally dislike the way these parties (and especially Labour) treat the status quo as a sacred thing to be “defended”, and any change that makes people worse off as tantamount to robbery. It’s still somebody else’s money. If systems of benefits, or public services, aren’t doing what they are supposed to, they should be changed, even it makes some people worse off. Still, that’s what politicians do. And in this case I think they are right. There is so much evidence that poverty in early life ruins chances later, which is why benefits focusing on families are a good idea. The system could be improved, no doubt, but not in a way that makes it any less expensive.

But these parties still should be clearer on what they think the government should do instead. All three of those parties have said they want the fiscal deficit reduced. They make an exception for capital spending – but tax credits is patently not that. Neither are they advocating cuts anywhere else (with exception of nuclear weapons systems, in some cases, but they usually want to increase spending on conventional forces instead).

Neither is it realistic to appeal to economic growth. This is not something that can be turned on and off like a tap by politicians. If it was the Conservatives would have that tap in the “on ” position already. Keynesian stimulus, which may have been relevant in 2010-2012, does not apply at this point in the economic cycle.

The only way to convincingly square the circle is to raise taxes. Of course the far left think they have the answer here: to crack down on tax avoidance and evasion, and to reform corporate taxes. Closer examination reveals these ideas to be chimerical. That still leaves the idea of taxing the rich harder. But the rich are slippery. There are still some things that can be done: taxing land, in particular, and tightening inheritance tax, rather than loosening it, as the Conservatives are doing. I wouldn’t bet on these ideas yielding much new money quickly though.

To have real credibility in “defending” tax credits, the NHS, local government spending, the police, or any other aspect of expenditure, politicians will not carry conviction unless they are prepared to raise one or more of the big three taxes: Income Tax, National Insurance, or VAT. Alas on this all parties are silent.

But such is the importance of tax credits to me, that I would indeed support the raising of one of the big three to keep them in being at current levels. I just wish the governments’ critics would say so too, and so start some real debate about the country’s fiscal priorities.

 

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David Cameron: master of the middle ground

After diverting my readers with the fringe entertainment of the Labour Party, and the even more eccentric fringe of the Liberal Democrats, it’s time to look at the politics that really matters: Britain’s Conservative Party. They had their annual conference last week, and this gives us some idea of what to expect in the next five years.

The speed with which the Tories, led by David Cameron, have assumed the ascendency in British politics is astonishing. Not six months ago I, along with many others, thought that they would be unable to win the General Election in May, and that they were so toxic to the other parties that they would have difficulty in forming a new government. But they succeeded in securing a narrow but decisive victory. I had failed to understand how England’s centrist voters regarded the political scene, and how cleverly the Conservatives were able to exploit those voters’ anxieties.

And as if that result wasn’t good enough for the Tories, the subsequent left-wing takeover of the Labour Party has removed the principal opposition party from the field for the time being. The Labour leadership’s priority seems to be to consolidate the left’s power in the party, rather than take on the Tories.  Meanwhile the Liberal Democrats have been crushed, and even Ukip, the Tory’s rivals to the right, look like a busted flush. Only the SNP look in fighting form, and they are confined to Scotland, which is of minimal electoral importance to the Tories. The next General Election is due in 2020, and at present nobody can see that it can produce anything other than another Tory victory, and quite possibly a landslide.

How the Conservatives take things from here is therefore the most important question in British politics. The first thing to note is that the position of its leader, David Cameron, looks secure. The vultures were circling for his expected failure in May, so his triumph is a very personal one. And he has earned his strong position. He has a powerful instinct for the middle ground in English politics (which extends to much of Wales too, though he seems to have little grasp of Scotland’s politics). What he understood in a way Labour politicians did not is that this middle ground, the floating voters who decide elections, had not moved to the left, as it was fashionable to suggest. These voters accept much of the economic conventional wisdom that the left dismisses as “neoliberal”. They do not want higher taxes; they think that the previous Labour government spent too much on benefits and public services; and above all they fear the loss of private sector jobs that might arise from a new economic crisis. These are concerns that Labour failed to address, because, as we now see, much of its core support disagreed. Middle ground voters in England became so afraid of the consequences of a Labour government (and especially one dependent on the SNP), that they happily ditched the Lib Dems, who were also trying to pitch for their votes.

But Mr Cameron understands other things about these middle ground voters, which make both Labour and Lib Dem politicians uncomfortable. They are suspicious of the European Union, but open to pragmatic arguments for staying in. They are nervous about immigration, especially (whisper it) of those from Islamic countries. But they also don’t want to be racist. Mr Cameron treads this ground with skill.

What the conference made clear was Mr Cameron’s strategy for his party, shared by his chief ally, the Chancellor George Osborne. He plans to set up a fortress in the centre ground, much as the Labour leader Tony Blair did for his party, to secure its hegemony over British politics. He will continue to push through his largely neoliberal economic policy, and in particular a dramatic rolling back of tax credits. They hope to reduce the overall cost of the state to a historically low level, by making further cuts – though trying to preserve the beloved National Health Service. Within this overall framework Mr Cameron and Mr Osborne want to tackle three important issues: the European Union; the economic weakness of northern England; and the country’s overheated housing market.

On the EU, Mr Cameron aims to “renegotiate” Britain’s terms, and then present the country with an in-out referendum. This is a bold enterprise, not least because his party cares deeply about it, and mainly disagrees with him. It could profoundly change the party he leads; it could even destroy it. Losing the referendum (i.e. taking the country out of the EU) would cause his whole project to unravel.

On the north, the duo’s approach is to devolve and invest. This will be very interesting to observe – their approach is surely sounder than previous attempts to address the issue. They hope that it will revive the party’s fortunes in the north, much as Mr Blair revived Labour’s in the south (ground that Labour has now lost).

On housing Mr Cameron seems to be surrendering to the conventional economic wisdom – that is a simple game of numbers, and that setting targets for new homes, and taking a firm hand on planning delays, will help ease the crisis and make home ownership more widely available. Social housing plays no role in their thinking; neither is there a recognition of the pernicious role of cheap finance. Few feel that their strategy has sound foundations. Housing looks like something of a Tory blind spot – they draw too much support from owners of homes who enjoy the sky-high prices. They may yet surprise us though.

The biggest problem with Mr Cameron’s plan to establish Tory hegemony is his wish to step down as party leader and Prime Minister before the close of the parliament. None of his possible successors has his touch. Mr Osborne is a better strategist, but the public will find it harder to trust him. Theresa May, the Home Secretary, is playing to the party’s right, endangering her centre-ground credentials as she does so. Boris Johnson, the London Mayor, has flair but lacks depth. A messy transfer of power could easily upset the project.

Two other hazards await, just to deal with the known unknowns. The first is Scotland. The SNP’s dominance remains unchallenged. Mr Cameron has not played his cards well here, with a particularly foolish bid for “English votes for English Laws” made too hastily of last year’s independence referendum.  He does not like to fiddle with the British constitution, and yet some kind of federal settlement, involving much such fiddling, looks to be the only way to seize the initiative. If the SNP were to secure a second referendum and win it, it would be catastrophic for the Tories – who set much prestige on the union, even though it actually makes life harder for them politcally. Just fighting them off could be a massive distraction.

The second hazard is the economy. All looks well for now, and yet the growing problems in “emerging” economies threaten the developed world’s financial system. This could cause a new financial blow-up just as the US sub-prime market did in 2007 and 2008. That could dent the government’s reputation for economic competence, which is core to its appeal.

But such is the weakness of Britain’s opposition parties, that it is hard to believe that even these troubles could stop the Tories. But things can change quickly in politics.

And this demonstrates a political truth that all should ponder. Political success requires both a strong core vote and an appeal to middle ground voters. It is a hard conjuring trick. Labour failed to, or were unable to, understand and appeal to the middle ground. The Lib Dems failed to develop and retain a core vote. Mr Cameron has pulled off this trick for the Tories. He successor may fail. And that would make British politics very turbulent indeed.

 

 

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Immigration remains the top issue in British politics

As the left chatters away about the Labour leadership contest, and the economic and diplomatic implications of a Jeremy Corbyn leadership, the real stuff of politics in Britain goes on. And there is no doubting the top issue: immigration.

Immigration has, as in many developed countries, become a lightning-rod issue for general discontent. Grumpy conservatives, especially those of lower middle class and working class standing and white origin, have decided that it is at the seat of most ills. They see a world changing around them, with middle ranking jobs disappearing, house prices and rents escalating beyond reach,  public services under stress, and strange terrorist threats at home and on holiday beaches. The racist attitudes that could be taken for granted in my youth linger too, albeit in “I’m not racist but…” form. “We’re full up” is what people tell each other, and this all seems to be plain common sense. That immigration continues is simply evidence that Britain’s ruling elite is not up to the job.

Meanwhile a refugee crisis strikes Europe. The utter collapse of once-stable Syria is the most important cause. But the dire situation in Libya, Somalia, Eritrea and even Nigeria all contribute to numbers of escapees who are prepared to risk their lives in pursuit of something better. This keeps the flow of desperate people in the news, and stokes up a sense of threat. Sadly, instead of, or perhaps alongside, compassion, many people seem to think “I don’t want these people turning up in my street”. And now net migration to the UK is at record – something that has little to do with the refugee crisis, and much more to do with the relative success of the British economy. A number of right-wing newspapers are happy to keep the pot boiling, drawing connections where there aren’t any and generally playing on a sense of crisis and discontent. It is difficult not to see this as a malign intervention by media oligarchs with an agenda of their own: but this stuff clearly sells newspapers.

Mainstream politicians know full well that how firmly held these views are amongst the public at large, and feel obliged by the process of democracy to do some something. The trouble is that doing anything substantive is likely to damage other things that the public hold dear – such as the economy or public services.

Ordinarily a bit tokenism, followed by some ducking an weaving would be all that is called for. A prosperous growing economy would help distract people, and, in the classic public way, many people don’t really want to go further than have a good whinge.

But behind all this is an issue of real importance: Britain’s membership of the European Union. And behind that lurks another issue: whether or not the United Kingdom survives, or whether the kingdoms of England and Scotland go their separate ways. The government is committed to a referendum on Britain’s membership of the EU in 2016 or 2017. Superficially things are going quite well for those that want Britain to stay in the EU. The polls that once showed solid majorities for exit have now switched the other way.

But Britain’s exit campaigners are a determined bunch. For many it is the most important issue in current politics; for them there is no ill that does not have Britain’s membership of the EU at its heart. It plays the same role as Communism did in my youth: something that provides unity and coherence to an otherwise disparate movement. Large parts of the Conservative Party think this way, perhaps most of its grassroots membership; and they are being harried by the insurgent Ukip. They know that support for the EU is lukewarm, and there is one issue that could turn it: immigration.

Free movement of people lies at the heart of the EU treaties, something that many Britons have taken advantage of with alacrity. Not that that affects the public debate: Britons abroad are benign “expats”, while those coming to this country from other places are malign “migrants”. Many other EU citizens are as sceptical about free movement as Britons are, but securing a treaty change, even if desirable, is not feasible in the next two years. Treaty changes require ratification by all member states, a process that often requires a referendum. Each treaty change has become more difficult than the last; there is now no prospect of securing this. And without treaty change the main features of free movement will remain in place – something that is thoroughly good for the EU economies, including Britain’s, but of no help to those who want to present a “reformed” EU to the electorate.

And so the antis are keeping immigration up on the agenda. The refugee crisis helps: even though this has no bearing on Britain’s membership question, it serves to raise public unease. And slowly but surely the anti-EU campaigners are drawing a connection between EU membership and high immigration. The most conspicuous recent example came from the Home Secretary, Theresa May, no less. She suggested that EU migration be limited to those already with jobs to move too. This is half-baked, but that’s not the point. It is something an EU renegotiation cannot deliver, and this will help stoke discontent.

But leaving the EU would be a disaster for Britain. It would mire the country’s political leadership in many years of painful negotiation, and would give the Scottish independence movement a sound reason to rerun the independence referendum, and an excellent reason for Scots voters to vote for independence. Regardless of whether the Britain would be better off or not outside the EU in the long run, years of negotiation and uncertainty will damage investment, and no doubt slow down other areas of economic and political reform.

So what to do? Moderate Conservatives, led by the Prime Minister David Cameron, are trying to accommodate the anti-immigration movement, both in tightening rules, and in negotiations with the EU. This simply looks ineffectual – as well as damaging as the country’s demographic crisis slowly begins to bight, as well as the need for the country’s education sector to bring in foreign, fee-paying customers.

Labour have tried to find a middle ground too; this is an issue that bothers its working class core vote, now being picked off by Ukip. It has declared that its laissez-faire approach in the 2000s was a mistake. But it wasn’t, and this is intellectually dishonest. Amid such contortions it is difficult to sound convincing.

Nick Clegg, former leader of the Liberal Democrats, also tried to stake a middle ground. He wanted to combine clear and well-enforced rules on migration with a generally liberal attitude. The public wasn’t listening, though, and it sounded too much like liberal fence-sitting.

Which leaves liberals, left and right, in a bit of a bind. For now standing up for the principles of free movement and diversity is the only honest thing to do. But alongside the fictional problems that flow from this are quite a few genuine ones, that need real solutions. And anti-immigrant feeling is a sign of a deeper discontent, which liberals must address.

I think it has a lot to do with the hollowing out of society, as big institutions, from public ones like the NHS, to national commercial chains, take control. This provides the sort of rootless milieu in which outsiders seem much more of a threat to people’s security. It allows organisations that thrive on cheap, disempowered labour, often recruited abroad, to thrive.

But reversing that trend is a huge task. it means looking again at the standard language of economic growth and productivity. It is a cause that this blogger is increasingly devoting himself to.

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