Tag Archives: Jeremy Corbyn

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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Success in Oldham deepens denial among Labour left

Featured on Liberal Democrat Voice

Last week BBC Radio 4’s Thinking Aloud ran a piece on research showing how people assume that most other people think like them. This is, apparently, particularly strong at the political extremes. We don’t need academics to tell us this, of course – it explains many of history’s major political misjudgements.  Prime candidates at the moment are supporters of the Labour leader Jeremy Corbyn, who are in deep denial about how difficult it will be for their party to win elections. In this, if nothing else, they resemble the supporters of Donald Trump in the US.

Of course, being in denial is something that, as a Liberal Democrat supporter, I know something about. Throughout the Coalition years we were told that our party faced oblivion at the next election. We refused to accept this, but alas we were wrong. Denial is always easier to see in others. The main problem on the Labour left is that they assume that most Britons share their view that the Conservatives are out only to line the pockets of the rich, and that “austerity” is evil. Now I’ve written before that this outlook will doom the Labour Party to failure, and that one of the first tests of the Corbyn leadership would be the Oldham by election. Well that election was last week, and it was a triumph for Labour. They increased their percentage share of the vote, though with less votes overall. A challenge from Ukip failed to materialise: they increased their vote (by 3%), but by much less than the Conservative vote fell (over 9%). Is this vindication for the Corbynistas?

Up to a point it is. It shows that all the chatter that Labour’s lurch to the left has affected the party’s electoral standing is just that. There is little decent data on this result, analysing who did and didn’t support each party, so we can’t say for certain what happened. But as Alistair Meeks points out in politicalbetting,com, the result is completely consistent with previous by elections in the area. Nothing much has changed. There is much for Labour supporters to take heart from here.

The first point is that Ukip look like a busted flush.  The party was supposed to be picking up disillusioned white working class votes, and presenting a major threat to Labour in the north of England. They nearly won one of those previous nearby by elections. If Mr Corbyn did not play well on Oldham’s doorsteps, as the chatter suggested, Ukip’s Nigel Farage played no better. He used to be a media star, and regarded as “authentic”, but he seems to have lost his credibility. The Ukip result in the May General Election was disappointing, as they were mugged by the ruthless Tory election machine. Mr Farage’s shenanigans over whether he was resigning as leader may have had the same sort of effect on his public standing as Nick Clegg’s U-turn on university tuition fees. The party needs to dump him, but probably won’t. The transition from a Tory breakaway in the shires to being a party of working class protest is too much for it.

The second cheering point for Labour is that their challengers to the left are thoroughly neutralised. The Greens achieved barely 1% of the vote. The Lib Dems put in a major effort and still lost their deposit, and tried, unconvincingly, to draw comfort from the fact that their vote did not actually fall from a mere 3.7%. In this environment at least, these parties are treated as a complete irrelevance. In living memory the Lib Dems were capable of pulling off a stunning wins almost anywhere. There are some signs in local by elections of a Lib Dem bounce back, but it is highly localised and bypassed Oldham.

All this bodes well for Labour’s prospects in May 2016, the next big local polling date, when there are also elections to the Scots and Welsh parliaments, and London’s Mayor. Labour’s candidate for London Mayor, Sadiq Khan, has every chance of wresting the position back from the Conservatives. In Scotland, though, prospects look dire for Labour as the SNP machine looks dominant. It is even possible that the party will drop to third place behind the Conservatives. But London’s political class seems to have written Scotland off.

So why am I suggesting that Labour activists are in denial? Because May’s result in the General Election was terrible for them and there is not the faintest sign of it getting better – only that it is not getting worse. Their prospects in Scotland are not the sort of irrelevance that Londoners seem to assume. Scotland is one of the most important battlegrounds in British politics; it has been for at least five years. If Labour can’t engineer a recovery there, they will be locked out of politics in Westminster. Interestingly, the success of the SNP was a key piece of evidence for the Corbynista thesis – that the public was really angry about austerity, and Labour’s big mistake was not to be angry enough.  But Scots voters turned on Labour because they thought they were incompetent, and did not stick up for Scotland. Mr Corbyn’s election does not improve their standing on either count, to put it generously.

Labour may be standing up well enough in the north of England, in spite of a cheeky challenge by the Conservatives to win back support there, but there is no sign that Labour can win back those politically sceptical middle-England voters that they progressively lost after Tony Blair stepped down as party leader.  To do that Labour activists must break free of the notion that most people share their political outlook, deep down. Meanwhile a dangerous rift between the parliamentary party and the leadership reinforce a general air of incompetence, the most fatal thing in politics.

I have heard a number of people suggest that the real winners of Oldham are the Conservatives. It is hard to disagree.

 

 

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Osborne uses an accounting trick to implement People’s QE

When Jeremy Corbyn, was running his successful campaign for the leadership of Britain’s Labour Party, he floated the idea of “People’s QE”. “QE” stands for Quantitative Easing, the means by which central banks try to loosen monetary policy in an economy without reducing interest rates – handy when interest rates are near zero. It attracted quite a bit of attention from economists, much of it quite approving. That is because the idea touches on one of the most important aspects of modern economic policy: the suggestion that governments can sustain quite big deficits simply by “printing” money. In the end we find, not for the first time, that the current Conservative government acts much further to the political left than it talks, as did its Conservative-Liberal Democrat predecessor.

Back in the 1980s, when monetary policy first became the height of fashion, we had uncomplicated views about what it was about. Although most money was in bank accounts, economists painted a picture as though it was all in notes and coins, and the various actors behaved as if they were kids spending pocket money (and even then was probably too simplistic…). They talked of a “money supply”, which could be manipulated, and the size of which affected spending behaviour. We are older and wiser now, though many economists and journalists still talk about “printing money”, even though physical money has almost no role to play, and bank accounts are different in very important ways. Even trained economists who should know better sometimes trip themselves up in this way. For example there is much excited talk about how commercial banks create money rather than the central bank – which turns out to be a red herring on reflection [That link from Paul Krugman includes a broken link to a masterful essay from James Tobin in 1963, read it here]. It is better to look on monetary policy as a series of policy instruments under the control of the central bank, which have not entirely knowable effects on the economy at large.

The most important of these instruments is the short-term interest rate the central bank charges to commercial banks in their interactions with it. These ripple right through the economy. But when they are very low, as they are now in the UK, it is very hard to lower them further. Some European banks are using negative interest rates without the sky having fallen in, but these negative rates aren’t very high – fractions of a percentage point. So how to “loosen” policy – that is encourage a greater level of economic activity? Here the invention of QE comes in, pioneered, as so much of modern policy, by Japan in the 1990s and early 2000s. This is often talked of as if it means printing physical money and handing it out to the kids to spend on sweeties. What it actually means is that the central bank goes into the market and buys bonds, usually government bonds, like British gilts.

How does that help? Well the people who held the bonds now hold cash instead, which they should spend on something else – which might include new capital investment, after it has changed hands a few times. And it might reduce bond yields, which will reduce long term interest rates right across the economy, and increase asset prices. This creates a “wealth effect” that might encourage the mass affluent to spend a bit more money on stuff that people make. Or all that could happen is that there is a merry-go-round of money chasing various flavours of pre-existing asset to create an asset price bubble. It’s not very clear what has happened to the Bank of England’s QE over the years. The bank produces various statistical associations as evidence that it has helped stimulate the wider economy. Others are sceptical.

Which is where People’s QE comes in. What if, instead of buying government bonds in the market, the money went into extra government spending, such as infrastructure investment, or even current spending. Because the Bank controls the currency in the UK, it can fund the government’s deficit without the need to borrow money from investors. It borrows money from itself. This amounts to supporting looser fiscal policy (i.e. government tax and spend), which should provide a more predictable stimulus to the wider economy.

Mr Corbyn’s advisers developed the idea with the suggestion of administrative structures to channel the extra money into infrastructural investment. This puzzled some economists. There is no need for such engineering. All the government has to do is spend the money, increasing its deficit, issue bonds as normal, which the Bank of England then buys in the existing QE programme. If the Bank is buying bonds, the government is less beholden to the bond markets. In Japan, which has been practising QE on a massive scale, the government now issues little net debt to the bond markets, making large deficits sustainable.

But how does this work? Surely it is something for nothing? The answer to that is that it only works if there is slack in the economy, and the government steps in to create demand because businesses are investing less than the public is saving, creating an imbalance. If this is not the case, you can get inflation, which is what happened to Germany and Austria in the 1920s, Zimbabwe more recently, and is happening in Argentina now. Alternatively you get a asset price bubble. Which in the modern, globalised financial and trading system is in fact more likely for developed economies – though this seems to be a blind spot for many economists, who think that asset markets are too efficient for that.

But in the developed economies, including the US, the Eurozone and Japan, as well as the UK, there does seem to be scope to do this kind of stimulus. There is a lack of business investment, while, it appears, too much money ends up in the hands of rich people, who don’t spend it. Nobody knows how long-term this problem is, but it does look as if large government deficits are much easier to sustain than before. If the bond markets refuse to fund all of the deficit, then central banks can simply “print the money” as the popularisers would put it. Prominent British economist (Lord) Adair Turner (whom I am something of a fan of) suggested that this could be a long term policy in a recent book.

In Britain there is an accounting wrinkle which is having an important impact. The Bank buys government bonds, but it holds them rather than cancelling them, so that it can sell them should it want to tighten policy. So the government still pays interest on the gilts the Bank holds, and this used to count towards the publicly declared deficit. But the Coalition government changed the rules, so that it does not count the interest on the Bank’s holdings against the deficit. That reduces the fiscal deficit and allows the government to spend money on other things instead. Also the effects of QE on longer term gilt yields reduces the deficit projected by the Office for Budget Responsibility (OBR), which plays such a pivotal role in longer term government spending plans. According to the FT’s Chris Giles £22.4bn of the £27bn that the Chancellor, George Osborne, “found” to allow him to loosen austerity measures in the Autumn Statement resulted from these accounting tricks. This boils down to People’s QE, and Mr Osborne used it to fund his U-turn on tax credit cuts, amongst other things.

The problem, as Mr Giles points out, is what happens when the Bank feels the need to tighten policy in, say, a year or two’s time? Then the whole thing goes into reverse. Politicians have seen gain in blurring the distinction between fiscal and monetary policy. That could return to haunt them, at both ends of the political spectrum.

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Jeremy Corbyn has been holed below the waterline

The metaphor of a ship holed below the waterline is an engaging one. Above the surface nothing much seems wrong – perhaps a minor list. But down below the water is pouring in; barring extreme good fortune the ship is doomed. I remember using it in 2007, when the world’s interbank markets froze over; the ensuing collapse of the banking system did not happen until over a year later, when Lehman Brothers failed, though a surprising number of people did not see it coming. I think the metaphor is just as appropriate for Labour’s new leader: Jeremy Corbyn.

Many wrote Mr Corbyn off from the start, as a far-leftist, backed by trade unions promoting fantasy economics. These were my instincts, but I tried to give him the benefit of the doubt. He sparked real enthusiasm amongst hundreds of thousands of activists. He came over as an engaging, anti-politician – a nice chap. With the public so tired of the usual type of politician, might he not spark enthusiasm amongst the wider public? Hearing him occasionally on the radio, he seemed to be talking a lot of sense. He had real momentum. You could put a positive spin on most of what he said.

Of course there were doubts. His Shadow Chancellor John McDonell’s inept handling of the government’s fiscal plans did not bode well. There is something chaotic about the party under his leadership, with no coherence across the Shadow Cabinet. But that sort of thing happened to Mrs Thatcher in her early days too – and look what happened to her. And I did not take much notice of those putting it about that next year’s elections, in Scotland, Wales, London and local councils, would be a critical test. Mr Corbyn was enjoying his new job, and his backers were determined to consolidate their hold on the party. I thought he could weather one set of bad results at least. Politicians are expert at finding somebody else to blame; no doubt the left would simply blame die-hards from the old order.

And then came the Paris attacks. The public regards these things as a critical test of political leadership. There is a lot of fear out there. Could something like that happen here? Can we not holiday in safety in European capital cities? We want leaders who can express our outrage, provide reassurance, and take charge of stopping the bad guys. The FT’s Janan Ganesh suggests that the public’s insecurity might make them seek older, more experienced politicians, especially ex-soldiers – in place of the callow think-tankers, PR types or charity workers that currently dominate the political ranks.

What they do not want are the intellectual prevarications we have had from Mr Corbyn in the last few days. He suggested that the killing of British terrorist Jihadi John by drone attack was not as good as bringing him to justice in a court. He failed to dissociate himself from Stop the War Coalition, which he used to chair, when it suggested the the French were reaping what they had sowed. He professed his nervousness about a police shoot-to-kill policy, when the public carried mental pictures of gunmen in suicide vests firing indescriminately. He seemed to rule out attacks on Islamic State in Syria (or Iraq come to that) by the British military.

The point isn’t that these views are without validity. Extra-judicial killing makes many feel queasy – and making martyrs, with all the risk of killing innocents alongside them, is no substitute for the grinding humiliation inflicted by judicial process and punishment. Our politicians have often suggested that the country’s interventions in the Middle East are designed to make our streets safer; that is open to challenge, to put it mildly. Trigger-happy police kill innocent civilians – as Londoners well know from 2005. It isn’t clear how bombing IS target in Syria will help.

But now was the wrong time to raise these concerns. They smack not just of qualified outrage, but of indecisive leadership that will be no match for the hard men (and women) that want to kill us. Unless Britain becomes an unexpectedly more secure and optimistic place, the vast majority of the British public will take fright at the idea that Mr Corbyn could be Prime Minister. The best that could be said of him is that he is too nice for the job. It was bad enough in May when Ed Miliband didn’t look Prime Ministerial enough; this is infinitely worse. In the full heat of a General Election campaign, Labour would be lucky to hold onto seats it had previously considered safe. What happened in Scotland could be repeated across England and Wales. The Conservatives, Ukip, or even the Liberal Democrats could clean up.

And yet SS Labour sails serenely on. Labour MPs know they are in trouble, but apart from an outburst at an MPs’ meeting on Monday they don’t feel they can do much about it- Mr Corbyn’s support amongst grassroots activists is too strong. Those activists are in denial, dismissing these difficulties as a bit of a wobble. They can’t possibly admit they have been so wrong only a month or two ago.

But the party is in serious trouble. I think there will be three key arenas in which this drama will play out: Scotland, London and the old industrial heartlands of England.

Labour must win back Scotland from the SNP in order to regain power in Westminster. Mr Corbyn’s supporters claimed that he was the right man to do this, interpreting the SNP’s rise as a backlash against austerity, rather than against rampant incompetence. But the SNP leader, Nicola Sturgeon’s handling of the Paris outrages has been assured, even promising an open mind on bombing Syria, in spite of her party’s conference resolution against it. Labour do not look like a serious government in waiting in Scotland, and they are sure to be routed in next May’s elections to the Scottish parliament. That will a a hard failure for the left to gloss over.

London holds its Mayoral and Assembly elections next May too. The interest here is that London is the biggest stronghold of Mr Corbyn’s activists. If there is to be a pro-Corbyn surge, it will start here. But Zack Goldsmith, the Conservative candidate for Mayor is well-funded, and has hired top-rate campaign advisers, fresh from the Tory General Election victory. He wants to win and will pull no punches – even if other Tories would happily give Labour a run here to keep Mr Corbyn in place. If Labour do badly it will be devastating for their future prospects – though Mr Goldsmith has weaknesses of his own, and it wouldn’t do write off Labour’s Sadiq Khan just yet. He certainly gets my second preference over Mr Goldsmith.

But perhaps the most interesting battleground will be in England’s northern and central heartlands: Manchester, Leeds, Birmingham and so on. Many of these cities are virtually Labour one-party states. But interestingly a number of local leaders are taking a pragmatic and enterprising line to power. They support local devolution and are prepared to work with the government on that basis. And yet Labour’s working class voters will be amongst the most distrustful of Mr Corbyn’s metropolitan ways – and outraged at his recent prevarications on security. An early test of their feelings will come in a by election in Oldham in December. Ukip, anxious to overcome their disappointments in May, scent blood. Even the Lib Dems, with their Lancastrian leader, Tim Farron, are putting in an effort. This will be an interesting election to watch. If Labour fare badly in these heartlands, an anti-Corbyn coup is surely only a matter of time.

And what will happen when the good ship Corbyn finally keels over and sinks? That’s another matter, but Labour’s problems would hardly end then.

 

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Corbyn’s moral crusade leaves too many questions unanswered

On Tuesday afternoon I did something for the first time ever. I watched a Labour leader’s conference speech. I had been encouraged by the advance billing that it would not be a long one. It lasted a full hour, so on that count I was disappointed. But what to make of it, and the revolution that has overwhelmed Britain’s Labour Party?

The first point to make is that its delivery was very low-key – which is entirely what we had been led to expect. Jeremy Corbyn wore a jacket and tie, but not a suit; and his tie wasn’t quite done up. His delivery was quite flat, and he often stumbled over his words. He was unable to deliver humour successfully. The speech itself rambled a bit – a bit of a struggle for me to concentrate completely at that time of the afternoon. But this is all very novel, and designed to show an unspun “authentic” politician, who is a nice man to boot. He had a rather lovely knowing look which he delivered from time to time in brief pauses. The contrast with Lib Dem leader Tim Farron’s speech last week, a much sharper and high octane affair, was very striking. Each is playing to their strengths, and not being rammed into uncomfortable poses by expert advisers.

A couple of things about its content are worth noting. He delivered a strong attack on the Conservative government’s economic policy, describing the shallowness of its supposed success. In this he was picking up from Shadow Chancellor John McDonnell’s speech the previous day. Labour is trying to establish a strong economic narrative to rival the government’s – and one that will garner support from respectable, mainstream economists. Unlike Mr McDonnell though, he said nothing about how Labour would deal with the country’s finances. This was all of a piece with his speech – rallying his supporters by stoking up moral outrage, but not trying to challenge them by hinting at hard choices ahead.

A second point is worth noting: he gave a lot of time to international affairs. I don’t think many previous leaders did this. This may be because he has a bit of form associating himself with international campaigns, not all of them entirely respectable. He made it plain he was for upholding human rights and against warmongering. He condemned Saudi Arabia in particular, and opposed military intervention in Syria. He did not, of course, attempt to tackle rather trickier issues, like Israel-Palestine or human rights in Venezuela, where he has a record of supporting its leftist regime. But this internationalist theme is a striking area of common ground with liberals.

For the Labour Party itself, Mr Corbyn said that he wanted to encourage internal debate, and not worry too much about how this is portrayed in hostile media. He made clear his opposition to the Trident nuclear weapons system, without seeking to impose it on the party as a whole. He also called for political debate to be carried out in in an open and civilised way, in a kinder more caring form of politics – not just within the party, but outside the party too. This gave rise to a standing ovation – though it is possible that this was because his audience mistook it for the end of the speech. Judging by a number of people sneaking out towards the end, the Labour delegates were as misled as I was about the length of the speech – and no doubt some had trains to catch. Those of us outside the party, who have witnessed the tribal abuse dealt out by Labour supporters, will believe any such change in style when we see it. One suspects that they can’t see the difference between plain speaking and throwing insults. Indeed the very next day Deputy Leader Tom Watson described the Liberal Democrats as a “useless bunch of lying sellouts”, among other things. So much for that then.

The whole thing made a lot more sense to me after reading Peter Kellner’s article in the New Statesman, actually written before the speech. In it he points out that by tradition Labour presents its cause as a moral crusade (or jihad if you are a Muslim, though I doubt that Labour politician has been brave enough to use that word!) – and not as a class struggle against capitalism. This helps mask the party’s attitudes to capitalism, which vary from outright hostility, through grudging tolerance, to positive enthusiasm. Mr Corbyn’s speech was firmly in this tradition – morality ran right through it. And it did not take a stand against capitalism – indeed he suggested that small and medium sized businesses should have better access to credit, albeit through a nationalised bank.

And it has to be said that the new Labour party does not seem to be playing to the hard left traditions that many of us were familiar with in the 1980s. The emphasis is on members setting policy in a bottom-up, “democratic” process. I put “democratic” in quotation marks, because a self-selected minority using voting procedures to determine their direction is a far cry from democracy – but Lib Dems adopt the same conceit. Nevertheless this is a long way from party activists acting as a revolutionary vanguard, and setting policy as generals choose lines of attack in real wars. I am told this is “democratic socialism”. Of course, this sort of inclusiveness is quite characteristic of the early stages of leftist revolutions – but I think Mr Corbyn genuinely means it. Some of his supporters may not.

The trouble for the rest of us is this. The shopfront may be a moral crusade that is quite attractive, and behind it may be inclusive and open party processes. But so far all this has produced is a blank slate. And with blank slates there is a tendency to project your wishes onto it. Old-left anti-capitalists think the party stands for nationalised industries and intrusive political leadership. Some of the younger recruits surely think it stands for something more liberal. But outsiders do not know what, in actual, concrete terms, the party stands for.

And based on what Mr Corbyn has said of his own beliefs, and what many of his trade union backers have also said – and what both of these have not said – there is every reason to think that what Labour will eventually come to stand for will not be at all liberal. They do not seem to believe in free markets; they are suspicious of the devolution of power; they do not appear to believe in electoral systems that foster plurality rather than polarisation.

And if the moral crusade turns out not to be based on liberal principles, it will merely consolidate power amongst a different, and likely even narrower, political elite. Until Labour moves off its moral high horse and gets its hands dirty, I will withhold judgement, even if I afford them some benefit of the doubt. Meanwhile I am not tempted to move away from a political party whose liberal principles are not up for debate.

 

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Labour changes the meaning of austerity

So far, so good. That’s my verdict of the remaking of Labour under its new leader, Jeremy Corbyn. I’ll say more about the big picture later in the week, after Mr Corbyn’s speech later today. This time I want to focus on economics and the performance of the Shadow Chancellor, John McDonnell, who spoke yesterday.

Like Mr Corbyn, Mr McDonnell is a serial rebel and a political outsider – and he is very much Mr Corbyn’s right hand man. That is why he was given the job of Shadow Chancellor over the much more politically correct Angela Eagle. Both Mr McDonnell and economics are central to the Corbyn project.

The first thing to note is the new regime’s ambition in taking on economics. The previous leader, Ed Miliband, was a bit embarrassed to talk about economic policy. He did not try to defend the previous Labour government’s economic policies, nor seriously criticise them for matter, in spite of the opprobrium being dumped on them by the coalition parties. He was late in developing his own economic proposals, and when these came out, they appeared to be “austerity-lite”, and not seriously challenging the government’s narrative.

Mr McDonnell, on the other hand, wants to take control of the economic narrative. He is enlisting the help of heavyweight economists to both support his own plans, and to undermine the government’s version of events. In this he is capitalising on a remarkable fact. Academic economists have been very critical of government policies and “austerity” generally. Indeed government policy seems to be more based on 200 years of Treasury orthodoxy than modern economic insight. This is an opportunity to undermine the government’s reputation for competence, and make it look ideological.

Labour is still left with the two paradoxes of anti-austerity economics that I referred to in a previous post.  The first is that by opposing austerity Labour will have to make its peace with the global financial markets that it so despises. Mr McDonnell tackled this head-on in his speech, and in an interview with the Guardian newspaper last weekend. He has nominally adopted the government’s trajectory for reducing the UK’s fiscal deficit, with its aim of bringing it into surplus by 2020. With a huge rider: he will exclude borrowing to fund capital investment. Depending on how loosely “investment” is defined, this is perfectly sensible public policy, and not, in fact, very different from Mr Miliband’s. It reduces dependence on international finance – remembering that the Bank of England’s Quantitative Easing policies may come to the government’s aid if the economy takes a turn for the worse.

There is, of course, a problem. It means signing up to austerity as most people understand it. And yet opposition to austerity remains his rallying cry. One of the many weaknesses of the left is its love of abstract nouns, especially as things to oppose – austerity, neoliberalism, inequality, and so on. Ordinary working people don’t understand what they are on about, but the activists work themselves up obsessively – and at the moment austerity is public enemy number one. But Mr McDonnell and Mr Corbyn have an ingenious answer to this: just change the meaning of “austerity”.

To them, the word now applies not to tightening the government’s finances overall, but to cuts and tax rises that might affect low and middle income workers. There will be cuts, said Mr McDonnell, but not to the numbers of policemen, nurses or teachers. Instead the cuts would be to “corporate welfare” – tax breaks to businesses, as well as raising taxes on the rich. He was careful not to be too specific about all this.

There are some pretty solid grounds for scepticism here. Mr Corbyn has brandished the figure of £93 billion for corporate welfare, a figure conjured up by the Guardian. Mostly these are allowances or direct support for investment, exports and research and development – all things Labour will want to encourage. And the small print of the Guardian’s report suggests not that this is low hanging fruit waiting to be plucked, but that it is, to switch metaphors, a rather overgrown hedge that can be trimmed a little. There is reason to doubt how easy it will be to target other measures to raise taxes, or clamp down on avoidance, without collateral damage to the small and medium sized businesses that the economy so needs. This is what undid Francois Hollande’s Socialist government’s attempt to do much the same thing.

But it isn’t nonsense either. Big business, and the pampered elites that run them, are not a benign force these days. They contribute to the hollowing out of much of the economy by destroying middle ranking jobs and sucking the soul out of towns and villages away from the main commercial centres. They also siphon profits out of the economy rather than reinvest them. Labour will do well to be wary of big business, unlike the earlier regimes of Tony Blair and Gordon Brown. But finding policies that will tilt things against big business without damaging the wider economy will not be easy. I think that tax treatments for intellectual property and debt interest are a better place to look than the Guardian’s corporate welfare list. And international cooperation on corporate tax avoidance will help (especially if we can move to unitary taxes, such as the US states apply among themselves).  But such policies will take time.

All this takes us into the territory of my second paradox for anti-austerity economic policy. It calls for more economic growth, and yet bears down on much of the private business that will be needed to generate it. This will be the next challenge for Mr McDonnell and his colleagues. It is fair enough to bear down on many businesses, especially the giants. But Labour also needs to show encouragement and support for more positive businesses, through investing in support infrastructure, improving access to credit for genuine investment, improving public procurement, and through reducing the burden of petty regulation. As yet I see no sign of this – but it is early days.

I remain highly sceptical of the new Labour project. But its leaders have made a competent start, and there is undoubted fresh air. The floor is still theirs.

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Political reform is the acid test for Corbyn’s Labour

Jeremy_CorbynBritish politics has suffered a massive earthquake with the election of Jeremy Corbyn as Labour leader. There is a lot of dust; there will be aftershocks. But what can liberals say at this point?

Let us for now take this development at face value. There is an upsurge of public support for Mr Corbyn amongst people desperate an alternative narrative to “austerity”, and for a political party with real left-wing values. Let us say that the half a million or so people who took part in the party’s election process are not mainly London clictivists, but will join Labour’s campaigning by making phone calls, knocking on doors and donating money, from London to Leeds and from Bristol to Glasgow. Let us also say that Labour will not be riven my infighting but will mobilise behind a concerted attack on government policies.

If this happens there will be real momentum  behind Labour. It will take the wind from the sails of the Green Party; Tim Farron, the Liberal Democrats’ new leader will find it very difficult to attract people to his party through returning to left-wing campaigning. Many working class Ukip voters will consider returning to Labour, now that it has rejected the establishment consensus. Labour will start winning by elections against all comers.

All this would throw down the gauntlet to liberals who reject the government’s creed of economic liberalism. If it looks as if this reinvigorated Labour party might make headway against the Conservatives, do liberals support them in the hope that a transfer of power will be good for the country? Or do they think this new movement is fundamentally wrong, and has to be stopped at all costs? There seem to be three groups of issues that could decide this.

The first is Britain’s place in the wider world and defence. At this point it is very unclear what Labour’s new stance will be. Mr Corbyn himself has been associated with some very extreme views, such as that Britain should leave NATO. It’s pretty safe to say, though, that Labour’s policy line will be more moderate than this.  But surely it will oppose just about any foreign military intervention, and the the odds are it will come out against renewal of Britain’s Trident nuclear weapons systems. Not so long ago these views would have been considered so extreme that no respectable politician should entertain them. But now there is a good case to be made. There seems to be little point in such  heavy-duty and expensive nuclear armaments, which will be dependent on US support. There is a respectable case for more limited nuclear weapons, or even complete nuclear disarmament. Likewise foreign military intervention doesn’t seem to be making the world a safer place. They provide no answers to filling the political vacuums that are the real threat to stability. If Labour starts to support leftist regimes that do not support political pluralism, such as those in Cuba or Venezuela, then that will be another matter. But I don’t think Mr Corbyn will be able to take his party to those positions. So liberals may not be given enough reason here to oppose the movement.

The second groups of issues is economics. This is central to Labour’s new appeal, as cn be seen by Mr Corbyn’s appointment of left-winger John McDonnell to the role of Shadow Chancellor. It will define itself through a bitter a bitter opposition to “austerity”. It will oppose this they mean cutbacks to benefits or public services, or raising taxes on anybody but a rich elite. They are also opposed to any serious reform of public services, apart from moves to a model of state-owned command and control organisations, staffed by union members on permanent contracts. Two ideas are offered to make this economically viable. The first is a sort of semi-digested Keynesianism, which suggests that their policies will stimulate demand and so economic growth and, through this, extra tax revenues. The second is that there are vast amounts of extra tax available from taxing the rich more, clamping down on tax avoidance and evasion, and attacking “corporate welfare” – tax breaks and subsidies for businesses.

I have commented on these ideas before. For now all I need to say is that there are two paradoxes at the heart of this economic programme. The first is that, almost by definition, rowing back on austerity means a greater dependence on global financial markets to provide funding – printing money is not a long term strategy. And yet these markets are treated with contempt. The second paradox is that their policies depend on a healthy private sector economy to deliver economic growth and tax revenues, and yet they also want to make life more difficult for the private sector, and encourage businesses to take their investment elsewhere. No left wing government, from Francois Hollande’s Socialists in France to Alexis Tsipras’s Syriza in Greece, has found an answer to these paradoxes. The anti-austerity programmes of the former were sunk by the need to attract private sector investment, and the latter by the need to keep borrowing money from abroad without a clear prospectus for paying that money back.

But, if in the end governments will be forced to their senses by the dictates of markets, perhaps we can tolerate a little short-term economic chaos? We can, after all, be sympathetic with the idea of using the tax system to effect redistribution of wealth. That depends on the third group of issues: political reform.

The Conservatives now control the government because the current political system is weighted in their favour. Liberals favour a more pluralistic system, with greater checks and balances. To achieve this we need political reform in a number of areas. Will Mr Corbyn’s Labour Party support these, or simply offer vague platitudes like his predecessor, Tony Blair? That will be, or should be, the defining issue for liberals. What are these areas?

  1. The first is political finance and the reach of big money. The UK is not anything like as bad as the US – but that country points to the dangers. Laws start to be dictated by corporate vested interests – a particular problem in public services outsourcing, and intellectual property. Mr Corbyn’s Labour Party will surely be much more serious about this than its predecessors.
  2. Next is devolution. This means not just protecting the settlements in Scotland and Wales, but promoting further devolution to English regions and councils – including revenue raising powers, and the coordination of public services. There is reason to be suspicious of Labour intentions here – though since Labour also control England’s major cities, there might be some constructive tension. I have not forgiven Andy Burnham’s scepticism of the devolution of health services to greater Manchester.
  3. Then there is the House of Lords. Will Labour support complete abolition, or replacement by an upper chamber with real powers? Personally I think a new upper chamber should be part of a new constitutional settlement for the UK, taking it to a more federal structure. But a proportionally elected revising chamber would be acceptable. Which brings us to:
  4. Electoral reform. This really is the only way of promoting political pluralism in the long run. We need a system based on some form of proportionality, such as the Single Transferable Vote (used in Northern Ireland, and indeed the Irish Republic) or the Alternative Member system (used for the Scottish and Welsh Parliaments and the London Assembly). We have to be careful here; there is real public scepticism about this. And moving to PR at national elections is a big step. But a firm commitment to PR for local elections is an essential accompaniment to serious progress on devolution.

Will Labour deliver on these? I would be most surprised if we get anything more than a few warm but vague words. For the hard left consolidating political power is the whole point and purpose of politics, and they want to monopolise it. They don’t accept pluralism except as a way of identifying enemies. The can’t accept that empowering the people can mean anything other than conferring the mandate of heaven to their own political elite. There are pluralists in Labour, but on political matters the Blairites and the hard left are remarkably close together. If Jeremy Corbyn strikes out on a different line, then the movement he has started may yet be a worthy revolution.

 

 

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Learning from the rise of Mrs Thatcher

Mrs ThatcherI have recently finished reading Charles Moore’s excellent first volume of the authorized biography of Margaret Thatcher.  I wanted to read this as I inhabit a bit of a left wing bubble, politically anyway. We project cardboard fantasies onto Tories, as selfish, rich cynics. But we need to understand their true humanity and complexity – and Mrs Thatcher is such an important figure,that she is a good place to start. It is proving timely since some supporters of Labour leadership contender Jeremy Corbyn are suggesting that she offers an interesting precedent. Somebody who achieved power and dominance in spite of despising the political middle ground.

It is, of course, easy to dismiss the comparison of an ambitious and conventional careerist like Mrs Thatcher with the maverick Mr Corbyn, who has discovered serious political ambition late in life.  She had at least had been a cabinet minister, and had some kind of relationship with most of the important people in her party before her bid for power in 1974. Still, she succeeded in spite of rejecting consensus, and in the face of massive scepticism, while having solid grassroots support.

The book covers Mrs Thatcher’s early life up to the conclusion of the Falklands War in 1982, at which point she truly started to dominate politics. It is a fascinating story. Let me offer a few observations.

The first is not relevant to Mr Corbyn’s situation. It is that there was something quite liberal, and indeed Liberal about Mrs Thatcher’s political outlook. Her father had been a Liberal, and a senior local politician. If you had to pick one word that summarised her outlook it was Freedom. She did not believe in a ruling class that was born to rule. She wanted everybody to be able to access what society had to offer – though she assumed that they would have to work for it, rather than let things be handed to them on a plate. She hated trade unions because they underwrote a system that stifled freedom: but she admired the way that they stood up for the weak and voiceless. You just have to remember how stultifying the political consensus of the 1950s, 60s and 70s had become, not to mention the ever present Cold War mentality, to understand how liberal beliefs might drive you to the right rather than the left in those days.

In only two serious ways can I think that Mrs Thatcher’s beliefs conflict which core liberalism as I understand it. One was that she was fiercely nationalistic – although that may be more of a failure of imagination than principle. She swallowed whole a traditional view of English history – which she saw no need to question. Secondly she believed profoundly that people should strive to better the lot of their children – to the point that inheritance of your parents’ assets was a fundamental right. Modern liberals want people to strive for their children, of course, but think of legacies of property and money as a barrier to freedom of opportunity.

It need hardly be said that Mrs Thatcher had no time for the Liberal Party itself – who were often here main opponents in her local seat in Finchley. To her (and her father) Liberals had betrayed Liberalism.

A second point is that her advance from Leader of the Opposition to Prime Minister was precarious. She nearly lost the election in 1979. Her most reliable ally was a deep public distrust of Labour, following years of economic failure – high unemployment, inflation, and awful government finances. Trade union power, showing contempt for elected politicians and the rule of law, was a further cause of public disgust. But she did not have any convincing economic narrative with which to to oppose Labour, and that undermined her public appeal as the election drew close. The previous Conservative government, in which she had served, was widely regarded as a disaster. Her own economic policies were unclear, and to the extent they were formed, were doubted by most of her party.

This, of course, may be one thing giving Corbynistas hope: that Mrs Thatcher won in spite of lacking a clear economic narrative. It runs counter to the Labour centrist narrative that the party will only be electable if it follows the conventional economic wisdom, and much of the Tory economic narrative. But Mrs Thatcher’s lack of economic narrative nearly undid her. And for it to work the Tories will have to look a lot more financially incompetent than they do now. As I have written before, the British economy could certainly go off the rails in the next four years. Growth could fail; another banking crisis could strike. But the problem for the left is that any such new crisis might make the anti-austerity narrative look less credible rather than more so. Indeed, the best argument that can be made for the government’s excessive plans to reduce government expenditure is that they will be a better place to start if the economy at large disappoints.

And the third observation is how long it took for Thatcherism to emerge after she became Prime Minister in 1979. In her initial Cabinet she was outnumbered by sceptics (“the Wets”). The government had to deal with a raging economic crisis – and that absorbed its full attention. Her strategy was what today would be called austerity – cuts in government spending, and some tax rises, to try and bring government finances under control. It was all she could do to keep her Cabinet more or less behind her. This has echoes of the first Coalition years after 2010 – with an important difference: interest rates were sky high in the early 1980s in order to deal with rampant inflation. (And, I would add, the Coalition  Cabinet was considerably more united). At the time this was not a particularly ideological struggle; much of the impetus came from her Chancellor, Sir Geoffrey Howe, who was of the political centre, and with whom she did not see eye to eye. It was more a matter of asserting political control, based on age-old Treasury orthodoxy. And it is striking just how much of the problem of economic management derived from nationalised industries – which included steel, cars and coal – as well as energy and the railways. State control had allowed awful management to take hold, abetted by trade unions who had no conception that economic efficiency should be a political priority.

There is a tendency in the left to look back on the Keynesian consensus years from the 1950s to the 1970s as a bit of a golden age (though I would suspect that Maynard Keynes would turn in his grave to have his name attached to those policies!). The consensus favoured a highly active government, that tended to nationalise large industrial concerns when they got into trouble. But the country stumbled from one economic crisis to another from the 1960s onwards, and after the oil crisis of 1974 economic collapse (hyperinflation as the government was unable to pay its debts) beckoned. If Mrs Thatcher had failed, and been replaced by a government that was less determined to tackle government finances, in the name of Keynesian demand management, then economic collapse of some sort was surely the most likely outcome.

The emerging economic problems of the 2010s and 2020s take an entirely different form. Its symptoms are slow economic growth, an uncontrollable business elite accruing much of the wealth to itself, and the disappearance of stable, middle order jobs. These are trends brought about by changes in technology, the world economy, and demographics. The political right does not have the answers. But neither does the left… though they are both right about some things.

Mrs Thatcher is a hate figure on the left, but it is not an exaggeration to say that she saved Britain from economic collapse, with a lot of the hard work being done in those first, precarious years of power. What emerged was a less equal and less secure society, but one that was overall much more prosperous. And it functioned in a way that the previous one had become unable to – consumption and production were reconciled. This achievement required a combination of steely determination, the support of an inner coterie of determined supporters, and political skill in bringing along people who did not really believe in what she was doing.

And Jeremy Corbyn? There are similarities, but it’s more than hard to see Mr Corbyn and being a Mrs Thatcher of the Left.

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A Corbyn win would pose searching questions for the Lib Dems

Clearly the prospect that Jeremy Corbyn might win the Labour leadership election is the most exciting thing in British politics right now. So I will blog about it for the third successive post. This time I want to look at what all this means for the Lib Dems.

According to the rather lazy analysis you often see out there, such a development would be a bonanza for the party. Labour grandee Jack Straw has suggested as much, in a desperate attempt to persuade Labour activists to vote for somebody else. The logic goes something like this. If Mr Corbyn wins, centrist Labour types will be without a political home. They will not be able to bear the leftward lurch implied by an influx of new activists, and, perhaps more sinisterly, the growing influence of trade unions. So, the Lib Dems, being a left of centre party under its new leader, Tim Farron, is natural place to go. It is now exorcised of coalition with the hated Tories – and even that coalition might be seen in a kinder light, now the Tories are unrestrained in government. And this will create an appealing alternative to the Conservatives that would draw floating voters in.

So what would be the political scene if Mr Corbyn won? The left would be cock-a-hoop, and they would have that much-prized thing: momentum. Many people have doubts about the current conventional wisdoms about economic policy – so they might give this new Labour a hearing. This would be bad for the Lib Dems in the short term, as the party would be overshadowed. Disillusioned Labourites are not going to flock to the Lib Dems in the short term either; they will still be in grief for their own party, and may hope that Mr Corbyn can be ousted.

But could that momentum be maintained? The British press, which still sets the media agenda, would be fiercely critical, and it would not take them long to find policy issues that put the new Labour leadership in a bad light. Mr Corbyn has spent his entire political life in the fringes of politics, where saying silly things is rewarded rather than punished. That gives the press plenty of material to work with. Furthermore, there would be a certain amount of chaos in the Labour party, as it argues over a whole range of issues. There are bound to be many disgruntled MPs. Voters may or may not disagree with the party’s new policies, but the real danger is that it starts to look incoherent and incompetent. These voters will not be part of the internet echo-chamber where left-wing activists will convince themselves that they are riding a popular wave – and they may not see the danger until too late.

The Lib Dems would be quite well placed to exploit this, in principle. The Greens’ thunder will have been stolen by Labour’s new direction; Labour will have taken over most of the Greens’ populist agenda. Ukip have lost momentum, with their rather chaotic General Election performance.

But the Lib Dems have two big problems of their own. First the party is very weak. Second it remains divided over its recent history.

The most conspicuous sign of weakness for the Lib Dems is its mere eight MPs, the lowest number for generations. This does not get better on closer examination. There were very few second places in May’s general election, and many lost deposits. The local councillor base has been hollowed out. Ruthless targeting over many years (and from well before the 2010 General Election from when the serious trouble started) has hollowed the party out in the majority of the country. This weakness makes it much harder to exploit any bounce in the party’s wider support. It also undermines the party’s basic credibility. Disillusioned Labourites may be tempted to set up their own party rather than join a weak and flailing one.

This is compounded by the party’s confusion over what it stands for. Its core values are firm enough, but the party’s interpretation of recent history is not. Was Nick Clegg’s leadership, and coalition with the Conservatives, a betrayal of the party’s values that should be expunged, with a suitable purge of those responsible? Just read a few articles in Liberator magazine, or read online comments, and you will see that this is a popular view amongst many in the party, and those who have left the party and could rejoin. Or is that coalition the proudest moment in the party’s recent history, when the party put the country before its own interests, and marred only by a few tactical errors? This view too is widespread, especially amongst those that stuck with the party, and many who have recently joined it. Some kind of reconciliation between these opposing views (that I will call the rejectionists and the coalitionists as a convenient shorthand) has to be engineered or the party will look just as fractious as its Labour competitor.

Interestingly, the outcome of the Labour leadership contest does have some bearing on this contest. However much Lib Dem activists want the party to plough its own furrow, it inevitably moves into the cracks left by the others. A victory for Mr Corbyn would be bad for the rejectionists. It would steal their thunder, and undermine their efforts to turn the Lib Dems into a party of the radical left. To be sure there are big differences between the Lib Dem rejectionists and the Corbynistas. The former are much more wary of state power, and emphasise political reform, especially electoral reform to a much greater extent, rather than the political control of the levers of power. And yet they are both competitors for those who are impatient for change. Meanwhile, of course, a Corbyn victory would give a ready new audience for the coalitionists – for people who are more patient, pragmatic and common sensical about the progress.

On the other hand a victory for for Andy Burnham or Yvette Cooper would be a boost for the rejectionist Lib Dems. They would appeal to disillusioned Labour leftists outside the hard core, while more moderate Labourites would continue to place their hopes in Labour,rather than turning to the Lib Dems. Should a Corbyn leadership collapse, and be replaced by something more mainstream (Chukka Umunna is sometimes mentioned) then this dynamic might also come forward. On the other hand a Corbyn collapse followed by a charismatic new Labour leader (whether or not Mr Umunna fits that bill is debatable) could be the worst outcome for the Lib Dems of both camps.

The Lib Dem leader is treading a careful path between the rejectionists and the coalitionists. And many Lib Dems were perhaps hoping for a period below the media radar when the party could gather itself together and consolidate its identity. In the jargon, the party would rebuild its core, rather than bid for the political centre (i.e. floating voters). Too rapid a collapse of the Labour Party could place unbearable strains on the Lib Dems, both in terms of organisation and the party’s coherence.

But a slow motion Labour collapse could be an opportunity for the Lib Dems. Even so, it will be a major challenge for this badly wounded party to do it justice.

 

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Corbynomics: hope, fantasy and shaky foundations

Jeremy Corbyn, the front runner in Labour’s leadership race, is clearly somebody that mainstream politicians and media types underestimate. The standard criticism of him is that he a blast form the past – somebody that wants to take the country back to the failed solutions of the 1970s. No doubt that’s how it looks if you just examine the various things the man has said down the years. But many of his supporters are young and are projecting something quite different onto him.  He has crafted his message to appeal to this group, to look like something much more modern. Today I want to take look at his economic ideas.

These have been set out in greatest detail in his paper The Economy in 2020, published on 22 July. It isn’t hard to see why he is enjoying so much support. He offers the hope of something fresh. He starts by attacking the government’s economic policies, which he characterises as “austerity” in the now familiar language of the left. Thankfully he has shown more sense than to use the word “neoliberal”, putting him ahead of the Green leader, Natalie Bennett, who put forward a strikingly similar prospectus in the May General Election.

“Austerity” is used as a general shorthand for economic liberalism, and in particular the attempt to keep government expenditure and taxation in check – which at present means reducing the scale of government expenditure. It also refers to attempts to reform public services through such policies as privatisation. Instead Mr Corbyn calls for investment to rebalance the economy towards higher paying jobs, though not ones in financial services. He has time for some supportive words for private industry – recognising that private enterprise will have to be part of the growth and investment process. It reads as constructive and hopeful.

This overarching narrative has some macroeconomic credibility. The current British economy is nothing like as strong as the government claims, and many of his criticisms are on the mark. Alas it falls apart on closer scrutiny. I want to quickly look at three aspects in particular: the so-called tax gap of £120bn, corporate subsidies of £93bn, and the idea of “people’s QE”.

But first I must mention a name that keeps popping up, and who ideas seem to be behind much of the document: Richard Murphy, an activist associated with the Tax Justice Movement. There are some striking parallels between Mr Murphy and me: he was born in 1958, he took an economics degree, and he is a Chartered Accountant. The main difference was that his Economics degree was joint Economics and Accountancy (at Southampton) in the 1970s, and mine was full Economics (at UCL) in the 2000s. It is one of the rare occasions when my formal qualifications in economics outrank that of a public policy wonk.

The Tax Gap estimate comes from this paper commissioned by the Public and Commercial Services Union and written by Richard Murphy in 2014. Mr Murphy (like me born in 1958 and a Chartered Accountant) is a prominent campaigner for Tax Justice. I first came across this document when it featured in a 38 Degrees campaign (“it isn’t rocket science”, which suggested that collecting more tax was basically quite easy), and I think its claims are firmly embedded in the hard left mythology. It suggests that the Revenue & Customs vastly underestimates the amount of tax lost through avoidance, evasion and the like – and that the real gap is £120bn and not £35bn (and falling). This is important because it suggests that a huge amount of extra tax could be collected if only politicians were less indulgent of wealthy taxpayers. To give some context, the Lib Dems were criticised in the General election for being speculative when they suggested that £10bn cold be gained by tackling the tax gap (more than the other parties, except the Greens, of course). Mr Corbyn has his eyes on something much grander – and thus funding extra government spending without raising taxes on ordinary working people.

The biggest part of this gap is the untaxed shadow economy, which Mr Murphy says is much bigger than official estimates. I can’t offer an opinion on whether this is true – but I can suggest that this is hardly low hanging fruit, and is by no means confined to fat cats (think small building jobs, domestic cleaners, to say nothing of drug dealers and the smuggling of booze and fags). This does explain a rather tangential reference to cracking down on small business tax evasion though in Mr Corbyn’s document.  It is hard to see how any government could do much more than make a marginal difference without a draconian clampdown on the black and grey economies which would carry a lot of uncomfortable implications right across our society.

Another number that gets an airing is the idea the government subsidises business to the tune of £93bn. The source of that seems to be the Guardian newspaper, and its correspondent Adtiya Chakrabortty (“The 93bn handshake” is their headline). This is unbelievably flaky. The biggest single item is £44bn of corporate tax benefits. This is mainly credits for investment expenditure. Calling this a subsidy is more than a stretch – it is simply putting capital expenditure on a level playing field with revenue expenditure by, in effect, making depreciation tax-deductible on some types of investment. I’m not clear whether the figure includes tax releif for research and development, but that would be entirely consistent with the logic. If Labour is serious about helping manufacturing industry, it will need more of this sort of thing, not less. Another thing thrown into the pot is export credits, which allow British exporters to compete on a level playing field. If George Osborne abolished this the noise from Labour benches would be deafening. Cleaning up old nuclear power stations is in there too. There is something not a little bizarre in on the one hand suggesting that the government should promote investment, and on the other hand attacking all attempts by government to promote private sector investment as corporate welfare that should be stopped.

Next comes the idea that the Bank of England’s Quantitative Easing (QE) programme should focus on public investment in housing and infrastructure and the like – “People’s QE” – rather than buying government and other bonds. This is promoted by Mr Murphy again (his ideas pop up several times – and not all of them are bad), in spite of his lack of economic qualifications. Quite apart form the fact that the Bank of England has ended QE because the monetary conditions no longer apply, it gets the Bank into the unenviable position of evaluating public investment projects.  Getting unelected technocrats to do this sort of thing rather than government ministers (funded by gilts subject to QE) is hardly democratic either. To be fair, Mr Corbyn just says that the idea should be looked at, not that he would do it. But it betrays a very weak understanding of economics. He seems unaware that the Keynesian critique of austerity is weakening all the time, especially now that real wage increases are growing, suggesting that economic slack has been taken up. The Keynesian critique may have had authority in 2010, but 2015 is another matter.

The truth about the modern economy is this: the world has moved on from the easy textbook world of the 1960s, and even the 1990s. Technology has made manufacturing so efficient that there are few jobs in it any more; most white collar jobs have likewise been automated away; we are left with a lot of important jobs (carers, nurses, cleaners, etc.) that cannot be made more productive (and so better paid) through investment programmes. Some things can and should be done: investing in public housing, rail infrastructure and building up renewable energy, for example. But these will not yield the hordes of well-paid jobs that politicians left and right so badly want. Productivity improvement has moved from the workplace to our private lives (think smartphones and search engines). And you can’t tax that. Meanwhile demographic change is adding a further brake to the formal economy. This is the real reason why the economy under the Conservatives is not doing well, not “austerity”. Mr Corbyn is offering 20th Century solutions to a 21st Century problem (as is George Osborne, the Conservative Chancellor, I must add).

Slower growth means that it will be a struggle to raise much more in taxes, and certainly not without increasing taxes on middle income people. That is a hard political sell that Mr Corbyn only hints at (“there will be hard choices” he manages at one point). And it means that the government can’t just keep adding things to public expenditure without public services being unable to keep up with demand. That’s why abolishing student tuition fees is such a bad idea, for example – you only have to look at Scotland, where the state pays for university education, to see that. The universities can’t keep pace with demand, and fewer people from poorer backgrounds go to university than in England as a result.

I believe that there is a way forward from here. It does not come from the current government’s economic liberalism. It comes from strengthening local communities and the small businesses that serve them. It will not necessarily produce lots of conventional economic growth, and it will not produce masses of new tax. But it might produce public services that don’t keep failing; it would stop national and multinational chains sucking the life out of local economies; it would harness the potential of the underemployed.

Some of the ideas Mr Corbyn is promoting might help; he seems to suggest devolution of power to centres away from London. But too many look like national solutions that draw power back to London; others look like a path towards mass surveillance in order to collect more tax. I cannot see that it is any better than what the Tories are doing – and frankly I fear it would be worse.

Mr Corbyn promises hope, but his ideas are built partly on fantasy and definitely on shaky foundations. And that is even before he attempts to convince the public at large.

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