Ed Miliband – Page 3 – thinking liberal

That speech: just a ripple on the surface of British politics?

Last week I commented on David Cameron’s speech on Britain and the EU, where he promised an in-out referendum, following a “renegotiation” if the Conservatives win the next General Election in 2015. For some days after I though this was a decisive moment in British politics, in which Mr Cameron seized the initiative, and the Labour leader, Ed Miliband, lost his chance to win the next election. A week on, the dust has settled and the news is dominated by other stories. Was is such a decisive moment, or a mere ripple, a failing prime minister making a promise he can’t deliver?

The weekend polls show no decisive shift, with the coalition parties trending up a tad, but Labour still comfortably ahead, following a trend already evident before the speech. One poll seemed to show a big advance by the Conservatives at the expense of UKIP – but on further examination it looks as if this has more to do with polling methodology than people changing their voting preferences. Mr Miliband’s calculation appears to be that the main issue for British politics is the economy, and so the best thing to do is to change the subject back to this issue. His line that the speech hurts the economy because it creates uncertainty, that old argument against any form of decisive leadership, seems to be carrying weight with the British public, according to a further poll published by The Independent – though this also showed Tory support rising. And in the ephemeral world of British political commentary that should be enough to say that this is just a small tactical victory for Mr Cameron, making his party less vulnerable to UKIP, and not much more. But I think two big things have changed, and a big problem has opened up.

Firstly, Mr Miliband has made a serious strategic error, even if its significance will not show up much before 2015. His strategy should be to focus the political debate onto a small number of subjects and overwhelm the opposition there. This is a strategy I have called “the same, only different” following a 20th Century advertising campaign for a product I have long forgotten. It was used by Tony Blair’s New Labour to devastating effect in 1997. Basically you shadow your opponent’s policies in almost every detail except for a small number carefully chosen issues, plus a big investment in mood music to make your party appear more caring and more competent. I remember the exasperation of Tories; whenever they came up with a new policy to try and get an edge on Labour, Labour promptly adopted it as their own. It prevented the other side from changing the agenda. This seems to have been what Mr Miliband is trying to do, albeit without actually committing to any policies just yet (again following Mr Blair’s example). He is not creating sharp policy differences with the government, and making the main focus of his attack the economy. He is trying to create the right mood music by painting the government as by turns gratuitously nasty, and shambolic and incompetant. This strategy was slowly paying off.

But Mr Cameron has hit Labour below the waterline. He has created a clear area of policy difference, where he is probably more in tune with the British public than Mr Miliband, and one in which he can guarantee coverage from Britain’s still-important press. But also the issue makes Mr Miliband look weak, indecisive and un-prime ministerial. That could be fatal. What Mr Miliband actually should have done was welcomed Mr Cameron’s speech and adopted his policies as his own. That would have taken the wind totally out of the Tory sails.

The second way that Mr Cameron’s move may be decisive is that it may have turned the advancing tide of British Euroscepticism, while at the same time unifying his bitterly Eurosceptic party. I have read Mr Cameron’s speech, and the most striking thing about it is how Europhile it is. He has well understood the arguments for Britain staying in, and put them forward. Britons are a suspicious, conservative bunch as the 2011 AV referendum showed. Leaving the EU would be a big step into the unknown, and the more people think about it, the more nervous they are likely to become. And yet the sceptics are happy because they have their precious in-out referendum.

Mr Cameron’s speech was a genuine act of decisive political leadership. There are risks, but there always are. There is also a risk that the EU needs to take forward a treaty change that we are forced to put to a referendum that is then lost. This risk has now been sidestepped, because we now have the opportunity to package it up with more popular changes and put it too an in-out referendum.

But there is a big problem with Mr Cameron’s speech, which I did not pick up last week. Aside from its tactical genius, it is intellectually vacuous. Its economics is based on a fatuous understanding of international competition and the fear of Europe falling behind the developing economies. Its analysis of how the EU needs to be changed is hot air with no concrete proposals. A single market without harmonised rules may sound good, but what does it mean in practice? I really don’t understand how this wishful vision breaks down into nitty-gritty negotiating points. Mr Cameron badly need somebody with intellectual heft to lead the negotiation – the job the Lord Cockfield did for Mrs Thatcher in developing the original European Single Market in 1992. The risk is that he will make no headway in the negotiations, and waste an opportunity to improve both Britain’s role with the EU, and the stability of the EU itself. That’s the big problem the speech opens up.

The Labour challenge gathers pace, but the ghost of 1992 still haunts

What to make of Ed Miliband’s speech to the Labour Conference yesterday? I did not see it. On reading that it lasted 65 minutes I’m afraid I ducked out of watching it or reading transcript. So what I am relying on is a very indirect impression – much as the rest of the public gets. One thing is clear: it was a big success. This shows that Mr Miliband is a leader who learns from his mistakes, and is consistently raising his game. In my view Labour are now odds-on to win the next General Election with a full majority. What happens after that is another matter.

One way of gauging the speech’s success is silence from the usual suspects. The Lib Dem early morning briefing for activists decided not to mention it. Even more egregiously the right-wing think tank Reform’s daily press summary contained only a tangential reference. Contrast this with the hay that the usual critics were making last year. The most important thing about this is that it confers on Mr Miliband and air of competence – something that is absolutely vital in modern politics. As an aside, I think that the real reason why Republican presidential candidate Mitt Romney is in trouble is not the substance of his so-called gaffes, but that these make his campaign look incompetent.

As to content, this is harder to gauge. Some commentators hail his appeal to the “One Nation” theme of 19th Century Tory Prime Minister Benjamin Disraeli as a stroke of genius. Maybe you had to be there – but this looks like a speech writing gimmick. On the whole the speech seems to have been pitched at the so-called “centre ground”, apparently vacated by the Conservatives in spite of David Cameron, and also eagerly being eyed up by Nick Clegg and his advisers. Vocational qualifications; apprenticeships; housing; not promising to reinstate all the current Government’s cuts. Lib Dems complain that many of these things just exactly what they are already doing in government. That’s politics: the Lib Dem message is being drowned out by the Tories. Interestingly there were some sops to big business on encouraging long-term investment – rather spoiled from their point of view by his attack on the current government’s cut to the top rate of income tax – “writing a cheque of £40,000 to every millionaire in the country” – something that is palpably not true (many, even most, millionaires did not pay the 50p tax rate and are unaffected; quite a few non-millionaires did; almost none will actually get a cheque)…an ill-judged sound bight in the battle for donations, if not conference applause.

This is quite well judged overall, though. Even better, the whole party seems to be singing from more or less the same hymn sheet. This is so unlike the Tories after they were turned out of power in 1997. With this discipline and intelligent messaging, they look set to retain the votes they took back from the Lib Dems, and pick up a few more – while the Tories look out of touch and incompetent.

What can go wrong? All successful political movements require a balancing act, and Labour is no exception. Labour need to harness the anger of public sector employees at government cuts and reforms to give them the ground troops to counter Tory money, and not a few votes too. But, unlike Nick Clegg and his student fees pledge, they plan to win and be in a position to fulfill their promises, so that they can win again. They need to commit to a set of policies that are reasonably workable. It is here that trouble is building for the party.

First is the obvious point that government cutbacks are not just an ideological Tory attack on the state. The size of the state in 2010 was systematically too big, and the country may never return to a state on this scale. Many Labour activists misunderstand Keynesian criticism of the government’s economic strategy into thinking that more state spending will generate lots of growth forever and a day, rather than simply being about the tactics of how a shrinkage is best managed. Mr Miliband is trying to manage these Labour activists’, and especially trade-unionists’, expectations on this front, and it featured in his speech. But most of his ideas still seem to involve more state spending. Expand apprenticeships? That will require state subsidies. The same can be said of turbo-charging housebuilding, now part of the centrist consensus. Upgrading vocational qualifications? This has been a state policy goal for as long as I can remember. The problem is not lack of intentions – it is the prioritisation of resources. Money is by no means the only problem with vocational education – but it is surely part of the solution.

And there is a further difficulty. If Labour can’t promise their activists and union donors extra state spending, then they have to give them something else. And that something else is an attack on privatising public services – especially in the NHS, and in policing too. This will hobble attempts to make state services more efficient and make the problem of dealing with limited budgets that much harder. This is a nakedly ideological policy, when they are trying paint the Conservatives as the rabid ideologues.

A spectre haunts Ed Miliband and the Labour Party: Neil Kinnock’s campaign against John Major’s Conservative government in 1992. Mr Major’s government make the current government’s inept communications look slick. In 1992 Mr Kinnock had them on the ropes; it looked as if the Tories did not even want to win. And then Labour blew it. A strong change of message by the Tories on Labour in the final week concetnrated on allegedly unfunded spending commitments under the title “Labour’s tax bombshell”. Their newspaper allies relentlessly played on the idea that Mr Kinnock was not Prime Ministerial. And Labour lost. There are a lot of differences between then and now, but if I was in the Tory election planing department, I would be gathering evidence for another “Labour tax bombshell” campaign. Labour are providing them with too much tempting material.

Ballsed up – Labour’s economic narrative implodes

Labour’s economic narrative was always a bit of a balancing act, and now it is coming apart. It is tempting to blame the messengers (Ed Balls and Ed Miliband), but its own contradictions are the real problem.

But what is this narrative? It is rarely reported sympathetically, so confusion is widespread. This is how I understand it:

The Labour government’s careful middle way between free markets and social democratic intervention rewarded Britain with a prolonged period of economic growth, and growth too in public services. Contrary to what political opponents and a hostile media claim, this was perfectly sustainable. Indeed by 2007 Labour had won over most of its critics and the Tories were saying that they would do much the same.
But in 2008 it collided with a global economic storm, originating in foolish economic policies elsewhere in the world, and misguided financial management, mainly in America. Since full participation in globalisation was part of Labour’s economic policy, and had delivered enormous benefits, Britain could not but be affected. After the first shock, sensible economic policies under Gordon Brown were delivering a sustained recovery. These policies were based on maintaining aggregate demand in the economy, in particular by sustaining government expenditure, with only a gradual, carefully measured slow down.
This was all undone by the coming to power of the Coalition in 2010. They panicked (or else were driven by a malign wish to undo Labour’s good works) and cut back too far, too soon. This has set off the classic Keynesian doom loop, where reduced government expenditure reduces private demand, causing further hardship. There are any number of distinguished economists who point out the folly of excessive austerity (Paul Krugman being a favourite).
The Coalition policy is failing, as growth has tailed off and government forecast after forecast is being missed. This is doing long-term and lasting damage to the economy.
Because of this long term damage, by the time we reach 2015 it will not be so easy to pump things back up again to where they were before. As a result, Labour cannot promise to restore the cuts – even as we now declare they are foolish.

It is not my point today to pick holes in the economic logic of this. Both Mr Balls and Mr Miliband are economically literate, and we have every reason to believe that they believe what they are saying. It is not falling apart in terms of economic logic – and the likely future turn of events is not likely to undermine it. The only thing that would be a problem for them is if the economy should start to pick up some serious speed. Nobody believes that it will.

The problem is the politics. Labour have been trying to achieve a tricky balancing act here. The dismantling of so much of Labour’s legacy by the Coalition has sent their supporters into a frenzy of anger. Labour needs to harness this anger to sustain its political “ground war” – the hard graft of daily political advance, for the most part achieved by unpaid volunteers, even if the wider public seems more sceptical. This angry brigade has not accepted that any cuts are necessary, and grasp at the writings of Krugman et al, adding a little A-level economics, to sustain the idea that all the economy needs is more government expenditure to reflate its way back all the way to 2008. They think that the Coalition is waging economic warfare on the poor, as one commenter on this blog put it, with the naive Lib Dems being taken for a ride, along with a large part of the public.

The angry brigade hears what it wants to from the “too far, too fast” mantra and thinks that the Labour front bench is on its side. But the Labour leaders also know that the economy has shrunk so much that many, indeed, most, of the cuts will have to be made eventually. Labour’s plans to cut the deficit before they left office weren’t so very different to the current government’s, and very little at all compared the surprisingly slow pace at which the deficit has actually been cut. Their plan is actually to win back and exercise power again, rather than simply have fun as an opposition party. They know they need to present credible policies for when they are in power again – after all, look what happened to the Lib Dems when they promised that they could cut university tuition fees to harness student anger for their own ground war. And a close reading of what Mr Balls and Mr Miliband have been saying is not nearly as reckless as the mood music of anger.

But Labour have encountered a wider political problem. The passion and anger of their activists burns as bright ever, but the public are simply not convinced. Why? It is tempting to blame economic naivety, which allows the government and its supporters to present the government’s finances as if they were a household budget. Actually I think the feeling runs deep that the economic prosperity of the late Labour years was unsustainable. There is no naivety about that standpoint. Government debt catches the blame – but in fact it was private sector debt that was more to blame. And for those that did not have a government job, the suspicion the state was too big and benefits too generous ran deep. In my description of the narrative most people can’t get past the first paragraph.

And so the two Eds have started to reach out to the sceptics by emphasising paragraph 5 – that the cuts will have to stay. The hope is that this will then give them an opportunity to get a hearing for whatever else they have to say, on corporate greed, the NHS reforms and so on. But the activists are apoplectic. The Guardian‘s weekend article has attracted a whole host of disbelieving and hostile comments from a group of people that is now feeling disenfranchised.

But the narrative is too complex to be accepted by the sceptics either. Only a confession that the economy before 2008 and unsustainable, even without a financial crisis, will do that. Alas the two Ed’s don’t think they can say that. And so politically the narrative falls apart. I would be surprised if Ed Miliband lasts the year. He has had some bright ideas, and has begun to take Labour out of its denial phase. But as denial moves into anger, he will surely be a victim.

Occupy: a difficult bandwagon to ride

There was a strained moment at last night’s dinner at the National Liberal Club for the London Liberal Democrats, when the party was challenged by a member over the Occupy protests at the City of London. Both the guest speaker, Paddy Ashdown, and the Mayoral candidate, Brian Paddick, said that the act of protesting was a wonderful, liberal thing to do, and that the party should engage with the protesters (and indeed has), but that there was too little in the way of constructive proposals for the party to take on. Given that the anger that drives the protests is shared widely across the population, this seems a rather inadequate response. But politicians of all stripes struggle to say much more.

The Labour leader, Ed Miliband, has tried to ride the bandwagon. It chimes well with his appeal for greater morality in commercial life. This line seems to play quite well with policy wonks and political professionals, but just seems to underline Mr Miliband’s lack of grounding in the gritty “real” world – a lack which, of course, he shares with most politicians of all parties. His ideas share with David Cameron’s “Big Society” a complete inadequacy when faced with the big issues highlighted by the protesters.

It is easy enough to accept the core of what the protests are about. There has been a lot of irresponsible behaviour in world finance which has helped bring about the current economic crisis; these financiers still seem to be attracting outrageous levels of pay; and taxpayers still underwrite the whole show. After this, however, practical politicians have to deal with four difficult facts in the search for policies.

First: world finance may have failed, but capitalism hasn’t. To many of the protesters world finance is simply the purest form of capitalism and its failure represents the failure of the whole capitalist system. Well greed and profit seeking, familiar parts of the capitalist way, had a lot to do with it – but as much of the problem was uncapitalist politics. Governments borrowing too much money to develop public services; interfering with the market to extend home ownership (especially in the US); China’s distinctly uncapitalist but de-stabilising trade policies, to name but three factors. The real problem was politicians trying to tilt capitalism to their own ends, even if these ends were quite laudable. There is in fact no substitute for capitalism if we are to maintain the living standards in the developed world, and to roll back poverty in the devloping world. Interfering with the workings of free markets is likely to make matters worse, not better.

Mention of politicians brings in the second awkward fact. The public (especially in the developed world) is at least as much to blame for the economic crisis as the bankers. Excessive borrowing was widespread, as was pressure on politicians to ride the boom and expand government. It wasn’t only the bankers that were being greedy. It is natural enough to blame the bankers, saying like children, “It wasn’t my fault, he made me do it!” – but this isn’t very helpful in the search for solutions.

And a third awkward fact is that banking and finance, apart from the greed and the excess, carry out a vital world function. The process of linking savers to borrowers, which is essentially what finance does, is vital for economies to develop and poverty to be fought. It is absolutely no coincidence that the growth in world finance in the last couple of decades happened at the same time as the biggest progress against world poverty that we have ever seen. And the beneficial effects of world trade that finance facilitated completely dwarf the well well-intentioned works of government aid and charities. The problem is that the bankers simply creamed off too much of the benefit for themselves.

Which leads naturally to the fourth, and awkwardest fact of all: the bankers are holding a lot of hostages. We need bank lending to keep productive industries going. Governments needs finance to keep public services going. In the UK, and especially London, world finance includes many perfectly productive jobs which we can ill afford to lose. Vindictive policies will hurt us all.

But finance does need to be tamed. But doing so is a slow process which requires a great deal of patience. There are two key sets of reforms, neither of which are quick:

Separate investment banking from utility banking. There are many abuses in utility banking, but the really dangerous stuff is in investment banking, and allowing investment bankers to run utility banks is a recipe for total disaster. The Vickers Commission’s reforms are an excellent start here – and seem to be leading the way globally. The investment bankers are patiently trying to undermine them – but politicians and the public need to stay on their case.
Make investment banking much less profitable. It is the profits that drive the excessive pay – and policy needs to focus on the causes of the disease rather than wasting time on the symptoms. There are two main causes of excess profits: lack of competition and the failure of organisations to bear public costs (for example of the public’s underwriting of the banking system). In investment banking, it is the second of these that is the most important (in retail banking it is the first…), and the most effective way forward is raising capital requirements. This is being done, and banking profits are duly under a lot of pressure. At first it will be the shareholders who feel the pain – but in due course it will be bankers pay, as shareholders get fed up with their overpaid servants.

Actually progress is rather good. We don’t need gimmicks like the “Tobin Tax”. we need vigilance and patience. I am proud of the way the Liberal Democrat ministers have been keeping the pressure up (Vince Cable is the star, but Nick Clegg is clearly on side). The bankers are waiting for the Occupy bandwagon to move on. It will, but I hope and trust that the Liberal Democrats will still be on their case.

Memo to Miliband: break some eggs

As a political insider it’s very easy to be carried away by partisan emotions, but very dangerous. Thus I have been watching (not literally) the Labour conference with a great deal of caution. I want to scoff, but my better self tells me to be more careful. And that applied especially the Labour leader Ed Miliband’s speech delivered yesterday. After reading the commentary in the papers I decided that I had to read the text of it too.

Let’s start with the good bits. It set out a clear narrative for the past present and future. His starting point was Mrs Thatcher and the 1980s. Some good reforms but she started a culture of heedless self-advancement. New Labour was a step forward because it invested heavily in public services and in tackling poverty – but it didn’t do enough (anything?) to change a reckless business culture, and this brought the whole system down in the financial crash of 2008-09. After the crash the current government is doing nothing to address this underlying sickness, and its austerity policies are choking off growth and making things worse. For the future, Mr Miliband wants to transform society by making government more moral, and finally taming the monster that Mrs Thatcher unleashed.

Mr Miliband’s core constituency, the “squeezed middle”, remained firmly at the centre of his narrative – although he wisely did not use that phrase. These are people who are neither rich nor poor, and whose living standards are being steadily squeezed, as government largesse is focused on those who are poorer. Mr Miliband identified this key group at the start of his leadership, and he is maintaining his aim. He is clearly more successful in this than the Liberal Democrat leader Nick Clegg, who has identified the same group as decisive (using the phrase “Alarm Clock Britain” to describe them, to general derision), but has struggled to hit the right note.

It is easy to pick holes in the narrative, but that would only hint at its main weaknesses. Firstly that to most people it will sound abstract and irrelevant, and second that he failed to tackle the hard choices that would show he meant business.

Irrelevance? Britain stands in the middle of a global financial crisis, lurching towards another episode on a par with the crisis of 2008. The Euro zone is at the heart of this crisis, and thus the European Union, this country’s main diplomatic and economic partner, is facing the biggest challenge in its history. And Mr Miliband’s answer to this global challenge? To fiddle with VAT rates and implement the government’s cuts a bit slower. The world situation got hardly a mention. No doubt the idea is to set a time-bomb for the government, so that as the economy fails to approve he can say “told you so”. But since Labour’s explanation of the 2008 crisis was the world economic situation, what answer do they have if this government says the same thing? As George Osborne and David Cameron scurry round the globe trying to stave off disaster, Labour stays at home and whinges about VAT. This doesn’t look very convincing.

And he did not have much else to say that would help his squeezed middle voters in the pocket, rather than replicating their complaints about benefit cheats and fatcats. In fact he did not have much to say on specific policies at all. He wants to cut university tuition fees (which would in fact help the better off more than anybody) and that’s about it.

The problem is this: change hurts. People know that instinctively, so that to convince them that you are serious you have to do painful things. Tony Blair did so by taking on a number of Labour shibboleths: Clause 4 of the party constitution, not raising income taxes and (as few now remember) sticking to the then Tory government’s austerity plans to tackle the deficit. David Cameron did similar things on socially liberal issues, while eschewing tax cuts. What will Mr Miliband do to show that he is serious about his mission to transform Britain, and win back trust?

Here are some things he might do:

Accept more publicly the logic of the Government’s austerity policies in order to create the funds for tax cuts to the squeezed middle as the economy improves. We did get statements that they could not reinstate all the government’s cuts, but the delivery of these was so muffled that I don’t think most Labour activists noticed them, still less become angry.
Call for reform of the European Union so as to address the unfolding financial crisis, throwing down the gauntlet to Tory Eurosceptics.
Pick a serious fight with the trade unions about public sector strikes and participation in Labour politics.
Call on the government to get serious about coasting schools and sub-standard health services by in the first case getting tougher on teachers and the second closing sub-critical hospitals and putting serious heat onto GPs.
Challenging ordinary voters by pointing out that they also contributed to the crisis by living off credit cards and going for ever bigger mortgages.

Each of these would require a lot of courage – but that’s the point; he must make a lot of people in his party angry. Instead we get some rather bland ideas about favouring “good” rather than “bad” businesses. But these sound rather like things that the coalition is already putting forward on banking reform and reshaping the economy towards manufacturing and green businesses – Mr Miliband even quoted Lib Dem Business Secretary Vince Cable in his support on the radio this morning. Other ideas sound like more bureaucracy.

To make an omelette, they say, you have to break some eggs. Until Mr Miliband starts breaking eggs nobody will take him seriously.