Labour – Page 13 – thinking liberal

Would a Miliband victory be good for the Lib Dems?

Here’s a paradox. Britain’s political party leaders are the most mediocre, as a set, that I can remember. At least in 2010 we had Gordon Brown: a disastrous prime minister, but one who at least had the moral authority to help lead the world from economic disaster in 2009. But next year’s General Election looks to be the most interesting contest for a very long time. The shame for Liberal Democrats like myself is that we are bit part players, hoping to hang on to most of our parliamentary seats, but without playing much part in the national debate. But the rise of Ukip means that three-party dynamics remains potent. But perhaps the Lib Dems longer term prospects are better?

To start with, we have an unknown effect from the Scottish referendum later this month. Whatever the result, this will surely change dynamics north of the border in ways that it is difficult to predict. The Westminster elite hardly dare confront the possibility of a Yes vote, though the race is tightening and this is a real possibility. They have contented themselves with promising extra devolution for the Scots, without addressing the implications for England. If the Yes result comes, the Westminster politicians will have nobody but themselves to blame.

The constitution of the UK (note this not a “Scots question” – it affects us all) remains the most important issue hanging over our politics, including next year’s election. But for a moment I want to join the Westminster chatterers and put this to one side (the chatteres’ favourite website politicalbetting.com seems to think that the forthcoming Clacton by-election is more important than the referendum), and consider other dynamics.

Over the summer the Conservatives had looked quietly confident, and I shared that confidence on their behalf. They faced a strong challenge from Ukip, whose message appeals to many of their activists, but they seemed ready for that. David Cameron’s promise of a referendum on the EU is highly credible, and it is good bone to throw to potential Ukip defectors. Meanwhile they can promote scare stories about letting Labour in, and also blame the government’s more unpopular policies (to the right) on their coalition partners, the Lib Dems. The Euro election results in May seemed to support this confidence; Ukip were rampant, but Labour’s performance outside London looked lacklustre. Ukip were as much a problem for Labour as the Tories, and Labour’s message to Ukip supporters was (and remains) confused, unlike the Tory one.

Alas for the Conservatives their plan seems to be falling apart. The Tory MP for Clacton, Douglas Carswell, defected to Ukip, resigned his seat, and has caused a by election which he intends to contest under his new party’s banner. Clacton is a stronghold of the disaffected, white, aging, excluded working classes that is Ukip’s core constituency; a victory for Ukip looks certain. This gives Ukip real momentum. But, worse, it emphasises the divisions within Tory ranks between the more sensible moderate types represented by David Cameron, and what liberals regard as a lunatic fringe, whose strength has grown. This will encourage Tory voters to defect to Ukip, and discipline within the party to break down. That could scare off donors. Add this to the fact that the electoral system is weighted against the Conservatives, and they party’s challenge is looking steep indeed.

Which shifts the focus to Labour. That party has a clear hope that it will win the 2015 election by default. They have swept up a lot of former Lib Dem voters, and it seems certain that they will hang on to them. If the Tory vote sags because it is undermined by Ukip it looks good for the party. Labour faces its own challenge against Ukip, but generally in areas where they have very large majorities. There is an excellent article in today’s FT by Matthew Goodwin, who has been following Ukip’s rise closely. He may well be right that Ukip poses a severe long-term challenge to Labour in its northern heartlands, where its organisation is weak. But even he admits that this is more of a problem for 2020 than 2015.

So Ed Miliband’s Labour party could secure an outright majority after next election. And then his problems will really start. He is bound to disappoint his left wing supporters, including those Lib Dem defectors. The British economy remains fundamentally weak and unable to support the size of public sector that these supporters seem to feel is their birthright. There are no quick answers to this underlying weakness, and many of Mr Miliband’s ideas will make things worse, not better. Neither will he please the grumpy working class voters to whom Ukip is appealing. There will be a sense of betrayal among one group of their supporters, and panic amongst the Labour machine politicians in northern towns, who have taken their power base for granted. And the question of Scottish devolution’s affect on England will need to be faced, or, worse, the impact of Scottish independence. The party would surely be overwhelmed, rather like the Conservatives were after 1992.

But the Conservatives will not be much better off. They will remain divided between pragmatists, who lean towards EU membership, and idealists for whom the EU represents all that is bad. The party is likely either to lurch to the right or fall apart. Ukip, feeding off disillusioned Labour voters, will rise relentlessly.

You could hardly define more propitious circumstances for the Liberal Democrats, provided they stay away from any temptation to form a coalition with Labour. Labour will end up by prolonging many hated coalition policies, vindicating the party’s record in coalition. Meanwhile the rise of Ukip will create a strong anti-Ukip political backlash. As the Tories fail to contain their right, and Labour panics over its loss of working class votes to Ukip – this backlash will present a real opportunity for the Lib Dems, in a highly dynamic four-party play. This opportunity would be best exploited by a new leader. It would be ideal if this was a commonsense, well-grounded female – a Birgitte Nyborg. Alas I cannot see such a choice being available (my preference, Dorothy Thornhill, Mayor for Watford, is unlikely to be in contention). But the opportunity for a comeback is palpable.

What should the Lib Dems do now though? It has little choice but to stick to its guns in the coalition, and concentrate on winning any parliamentary seat where local strength is sufficient to make it winnable. This will mainly be about denying seats to the Conservatives. If things go very badly for the Tories, they may start to pick up some centrist voters from them generally – though that’s a long shot. But they must remember: the opportunities will be after 2015, they should do nothing that will make that comeback harder.

Interesting times indeed!

The search for a new Liberal narrative

There is a basic human need to understand the world in terms of simple stories. This is as true of politics as it is for other parts of life. Something that explains how we have got to where we are – and guides us towards what to do next. These are referred to as “narratives” in the jargon of political marketing. A narrative is a critical part of the political “brand”, another useful piece of political marketing jargon, which refers to what the public understands to be the core elements of a political party or movement. And liberals the world over, but especially here in Britain, are adrift. Here it is brought on by the spectacular collapse in support for the Liberal Democrats since they entered coalition government in 2010, and the way the other parties are veering away from liberal policies. In the European elections only about 2.5% of the British electorate voted for the only avowedly liberal party on offer.

I particularly like this article, The not so strange death of Liberal England, by Simon Radford in Left Foot Forward. I think he articulates very clearly what many liberals are currently thinking, especially those on in the Liberal Democrat and Labour parties. I will draw shamelessly from it as I develop my own narrative of how liberals and Liberals have reached the current dark patch.

Mr Radford suggests that Liberalism (as I will call the political movement which started with the Liberal Party) started in the 19th Century when the key political battle was between landowners and tenants. The state was tilted heavily in favour of the landowners, both terms of trade (particularly the lack of free trade of food) and taxation (little or no income tax). Liberalism was the movement that took the side of the tenants, and free trade was its central organising principle. To this were added the ideas of social insurance, and the birth of the welfare state. It was a long struggle, but the Liberals won, led by Asquith, Lloyd-George and Churchill, before war struck in 1914.

But the game had already moved on. The central drama was now the battle between the capitalists and workers. Liberal policies of free trade did not address this conflict. Instead the Labour movement arose, based on organising workers and forcing capitalists to give up a more equal share of the wealth – through better wages, workers’ rights, taxation and an expanded welfare state. The Liberals faded into irrelevance between the two wars.

Then came what many mistakenly regard as a golden age, after the Second World War. The forces of technology and demographics combined to give steady growth in which the wealth of all advanced. Social democracy was the prevailing wisdom, with a large role given to labour unions. Labour had a strong enough hand to ensure that they a decent share of the gains went to the workers. Liberalism had little to add, although liberal instincts accorded well the optimistic and more tolerant ethos of the times. Many in the Conservative and Labour parties described themselves as liberals.

Then came the 1980s, when capitalists advanced and labour retreated. Some on the left see this as the result of a sinister coup, masterminded by politicians such as Margaret Thatcher, to corrupt a system that was already working well. But the social democratic system was by then collapsing under its own weight, and it did not need much of a push to send it crashing to the ground. The old liberal ideas of free markets and trade came to the fore, and brought forward economic growth, but the process was not led by liberals; state services were neglected and taxes cut. By the 1990s new technology and globalisation were adding to the mix. The hope was that the benefits of growth would spread to all.

But the public weren’t happy with the political leadership. Labour were not trusted because they were associated with the collapse of the social democratic system, in welter of industrial disputes and stymied productivity, in the 1970s. And yet they disliked Mrs Thatcher’s Conservatives, and their rejection of social solidarity and neglect of public services. Liberalism started to revive. It offered a kinder version of the capitalist system. Tony Blair’s Labour Party managed to capture much of this liberal enthusiasm (calling his ideas a “Third Way”), which, allied with traditional Labour supporters gave him a ruling coalition which lasted from 1997 to 2010 (though he himself had been turned out by then). Although Mr Blair’s “New Labour” was the main beneficiary, the Liberal Democrats prospered too, establishing themselves as a credible third force, in a way that would have seemed unimaginable in the 1950s, 60s or 70s. And it seemed to work; the country enjoyed steady economic growth, the benefits of which were distributed widely – inequality of income may not have been reduced, but it didn’t increased either.

But then came the bust of 20008-2009. It turned out that the growth enjoyed in the Labour years was built on air. They had expanded government ahead of what the economy could sustain, and much of its new infrastructure had to be dismantled. Living standards fell, hurting especially for those on low or middle incomes, while those on very high incomes still seemed to prosper. Worse, the quality of work seemed to fall for the majority, especially for most young people entering the job market. Steady, if mindless, factory jobs were swapped for rootless service ones, often badly paid. Meanwhile the low interest rates required by the sagging economy hit the country’s growing army of pensioners, as bank deposits yielded less and annuities became more expensive. A sour political mood has resulted.

Populist, conservative narratives are taking hold. Globalisation is seen as the problem, and especially two obvious elements: immigration and the country’s membership of the European Union, which is blamed for loss of control over immigration, bad laws and regulations, and excessive subsidies to foreigners. This narrative is incoherent, but it is not my purpose to pick it apart. The problem is that liberals have lost confidence in their own narrative.

Capitalism is not working for all. A minority is raking off profits and amassing wealth, while most of the rest are having to put up with increasing insecurity. But how to replace capitalism, since the usual alternative, state ownership and direction, has proved such a spectacular failure under Communism? The left say that increased state power is the answer. The Labour party has come up with various ideas for forcing capitalist enterprises to behave better. But these are hardly liberal. Liberals dislike the idea of putting peoples’ fates in the hands of wise bureaucrats. And also Labour’s ideas are pessimistic. It’s all about stopping people from inflicting harm, and little about allowing people to better themselves (as this week’s Economist Bagehot column points out).

Liberals are optimistic about human nature. They want to help people to help themselves, and allow them to make their own choices. I think there is an optimistic narrative to be found. It is about taking on both big government and big corporations. Working internationally to curb multinational businesses. Developing more sustainable lifestyles which are more locally based. It means ditching an obsession with economic growth for a broader understanding of well-being.

I aim to develop these ideas further. But it is clear that such a narrative implies some hard choices. It may mean that liberals are unable to accept the compromises entailed in coalition government. But if there are no hard choices there is no credibility.

Why you should vote Liberal Democrat on 22 May

Britain, along with the rest of the EU, faces a very interesting set of elections this week, for the European Parliament. Our polling day is Thursday 22 May, when there are also local elections in many parts of the country, including London, where I live. I am not an impartial observer of these elections, but I do try to express my views dispassionately, and set aside the pure propaganda. Here is what I think of the various contenders.

Let’s clear the decks a bit. I am thinking mainly about England; my knowledge of the politics of other parts of the UK is better than that of most English people, but that is a low bar indeed. In Northern Ireland I have a strong inclination towards the Alliance Party, because of its non-sectarian ethos. I dislike the Scottish Nationalist Party (SNP) mainly because I am a unionist. But I will say for its politicians that they put Scottish politics above Westminster politics; SNP politicians do not aspire to a place in the British cabinet. Still, this is less relevant to the European Parliament than elsewhere. I have rather more sympathy with Welsh Plaid Cymru, who tend to set out a clear social democratic, reformist agenda. But Welsh politics is messy, and I don’t feel confident talking about it.

And neither will I talk about the local elections. These should be determined by local issue and the local politicians’ records – and not the subject of a sweeping blog post like this one.

In England there are five contenders for your vote: the Conservatives, Labour, Ukip, the Greens and the Liberal Democrats. Voting for any other party is a wasted vote, even under our proportional system – since there is no system of transferable votes outside Northern Ireland. There are many other parties contesting these elections, but they simply don’t have enough traction to get up to the level needed win a seat. This is to be welcomed in the case of the BNP, who did manage to win a couple of seats last time, in 2009.

The party everybody is talking about is Ukip. The main reason offered by people for voting for them is that they are political outsiders, and that supporting them will give Britain’s established political elite a well deserved black eye. This is about the only good reason for voting for the party. They are chaotic and ill-disciplined, and they don’t take the work of the European Parliament seriously, and so their presence will damages the national interest. Inasmuch as you can detect clear views, they tend to be illiberal. If you are a Eurosceptic, there are other parties you can vote for who will do a better job of representing you and the country in this forum, which has significant political power, whether or not you accept that is a good thing.

But do our political elite deserve such a kicking? Many of the voters I have met on the streets think so; they feel let down. This is not just our newspapers stoking things up, with the rest of our media in tow. Politics has become too professional, and not enough politicians genuinely engage with voters. Focus groups and polling might be quite useful for informing politicians about what people are thinking, but they don’t help people feel involved. But will the shock of voters defecting to Ukip, or not voting at all, make them change their behaviour? There is little sign of this. I am not sure the problem is entirely soluble in a modern, developed society. But to make things better we need political reforms, not protests. These reforms need to make politicians more responsive to voters. This means changing our electoral system, and it means devolving more power to local levels where it is much easier to involve people in decisions.

The trouble is that Ukip stands for a sort of conservatism. They want political reforms, but focusing on the European level, not at the national level, where they are most needed. This sort of conservatism tends to reject useful reforms, as we saw in the debate on the Alternative Vote system (which would have been a small step in the right direction), and the soft spot so many people seem to have for our appointed House of Lords. It’s not the right kind of kicking, and it is the wrong election to do the kicking at.

Most Eurosceptics would be better served by the Conservative Party. The Conservatives have a clear view on Europe: renegotiation and a referendum. This is surely the most sensible way forward if you believe that being part if the EU is bad for the country. The European Parliament cannot deliver on this agenda – but Conservative MEPs will be taken much more seriously in Brussels than Ukip ones, and will thus do a better job of representing the country – though they would have had much more influence if they had not left the parliament’s Christian Democrat grouping.

But is a referendum right for the country? Like many supporters of the European project I dither on this. I don’t think it is a good idea for the UK to leave the EU. This is mainly because emotionally I feel a strong European identity (maybe because I have lived a short while outside Europe). But more practically, our obligations within the Union are forced on us by our economic circumstances, and leaving it would make little difference. It would be a colossal waste of political effort that should be devoted to other issues. Meanwhile the uncertainty it would create, as so many things of commercial importance are renegotiated, would blight the country exactly where it can least afford it. Many of the same arguments apply to just having a referendum on the issue – never mind actually leaving. The main argument for a referendum is that it would lance the boil and let the country move forward. I would sooner wait until the EU is forced to undertake more significant structural reform that anything the UK can force on its own.

And so to the Labour Party. Their campaign for the European Parliament is focused on the “cost of living crisis”. Regardless of the merits of this, it is exactly the sort of irrelevant focus-group based politics that has given politicians such a bad name. Their election literature mentions practically nothing about Europe or the European Parliament. This kind of cynical campaigning should be rejected. Politicians should be courageous; currently Labour only want to play safe. I can respect David Cameron for his referendum strategy on Europe, which required quite a bit of courage. Labour are running from the fight.

And the Greens? They deserve respect: their literature (at least here in London) at least talks about what they would do in the European Parliament. They don’t talk about Britain in Europe, but about the sort of Europe they want. That is what these elections should be about. I am just less than convinced about their vision. For me it is too anti-business. Good intent is no substitute for knowhow. We should be pushing Europe towards an environmentally sustainable future – but we have to take the public with us. We have to challenge big business vested interests – but also allow big business to keep people in jobs, and provide that element of economic stability people crave. I don’t think the Greens have a clear idea of how to get that balance right.

Which leaves the Liberal Democrats. The Lib Dems are the most Europhile of the parties (though quite a few Europhiles inhabit the Labour Party and the Greens). This has one particular advantage: it means that they part in the European Parliament’s processes with more enthusiasm, and so are much more influential than they would be otherwise. Liberal Democrats have held some very influential positions (such as Sharon Bowles’s chairing of the Economic & Monetary Affairs Committee). In this work they do a good job of standing up for British interests – and can actually talk about their track record in the Parliament with pride. They have also shown a lot more courage in standing up for a pro EU position – unlike the Labour Party – and unlike the party has done in previous elections to the European Parliament. You may not think all of their pro EU arguments are convincing (though the same can be said of most of the anti EU arguments), but they have done the campaign a service by talking about it.

Right through the country’s history Britain, and England before it, has never been sure about the role it should take in Europe. There have been times when the country has successfully pursued a global agenda while retaining minimal involvement in European affairs, such as in the mid to later 18th and 19th Centuries. At other times the country has been a fully fledged player, such as Waterloo in 1815 and the First and Second World Wars in the 20th Century. Right now the country’s dependence on trade leaves it no option but to be heavily involved in its European connections, whether or not the country stays in the EU. I believe that means that the country’s leaders should try to shape the EU from within. Others feel that by leaving the EU, it will be easier for the country to find the best path in the world. If you share my view, then the Liberal Democrats are the party for you. If you don’t, then you might still consider voting for the party as highly effective operators in the parliament. Otherwise think of voting Conservative or Green. Don’t vote for Labour or Ukip, whose campaigns are taking British politics in entirely opposite but wrong directions.

Politics is not about policies. Why the politicians are failing.

Today the FT’s excellent Janan Ganesh writes on how the British Conservatives are failing to get the ethnic minority vote (£). Also this morning two opinion polls showed that the Labour Party had lost its poll lead to the Conservatives. We can add the Liberal Democrats and the Greens to the list of underperforming political parties in Britain, leaving the field clear for the insurgent Ukip. Mr Ganesh points to a reason for the Conservatives’ failure, that applies just as much to others (except the Greens perhaps).

Mr Ganesh says that the problem is that politicians “…think politics is about policy.” And yet voters hardly know what policies the particular parties stand for. The Conservatives note that conservative values and fear of immigration are at least as prevalent in ethnic minorities as elsewhere. So they freely talk about immigration being excessive and about the need for stronger controls. And yet all this heightens voters’ suspicions that the party is not inclusive. The Conservatives have been here before. In the 2001 election they went down to a catastrophic defeat after pushing policies (on Europe in particular, as well as immigration) that seemed to play well with voters, and yet heightened their reputation as the most toxic brand in politics. They fared little better in 2005, when they tried similar “dog whistle” tactics. Their fortunes only changed when David Cameron went to prodigious efforts to de-toxify the Tory brand by advocating policies (environmentalism, gay marriage, and so on) that could distinguish the party from their former selves. Unfortunately for them, this change did not go deep enough into the party’s inner being, and it is wearing thin.

Labour seem to be in a similar fix. They have used a lot of clever researchers to fix on a series of populist policies. These include fixing energy prices and controlling private rents. All these policies, apparently, play well with focus groups. Also they have chosen “the cost of living crisis” as their overarching theme – since many voters feel hard done by in the aftermath of the recent economic crisis. And yet their poll ratings are fading. The policies are popular but they are damaging the Labour brand – or at least doing nothing to strengthen it.

The Lib Dems find themselves in a not dissimilar predicament. Most people seem to think that their influence on the coalition government is for the good. They are associated with some popular policies, such as raising tax thresholds. And yet their poll ratings languish around the 10% mark. They are perceived as politicians no different from the others in moral fibre, who enjoy being in power a bit too much.

The paradox is that British politics has never had more sophisticated advice. Each party leader is surrounded by clever people with access to the latest evidence-based theories. and yet they are all failing – and the height of ambition seems to be to fail at a slower pace than the others. What is needed is a bit more old-fashioned nous.

The last really successful party leader in this country was Labour’s Tony Blair. He employed a lot of sophistication as well, but the secret of his success was that he understood political brand building. The rise of Labour in the 1990s under his leadership was nearly a policy-free zone. So much so that when he won in 1997, his government lacked momentum because it did not have a clear idea about what to do.

What Mr Blair realised is that to build voters’ trust you have to do things that are hard. In Mr Blair’s case, he took on the Labour left, overturning all their sacred policy shibboleths, and changing Clause 4 of the party’s constitution. It was a process of destroying polices, rather than making them. To be fair on Mr Cameron, his rebuilding of the Tory brand involved some hard things – but he chose not to be quite as radical, and left the conservatives in his party silent but undefeated.

For the Liberal Democrats, their time in government might in time come to be seen as courageous rather than self-indulgent. Their leader Nick Clegg’s firm stand on Europe is a clear step in the right direction – though as yet there is no sign of a poll boost. Petulant rows within the coalition, such as this weekend’s on schools, are probably not helpful though. Proper rebuilding of their party’s brand will have come after next year’s General Election.

That applies to Labour too. It is too late for Ed Miliband to resolve the tensions within his party, and so give voters a clear picture of what the party stands for, beyond its headline grabbling policies and slogans. For all party’s difficulties with ethnic minorities, it is perhaps the Conservatives that have least reason for discomfort, once the European elections next week are out of the way. They are failing more slowly than the others, and if they don’t panic they will recover a lot of the ground they have lost to Ukip, unlike Labour. It probably won’t be enough to win them a majority, because they failed to reform the electoral system in their favour, in spite of clear opportunity having been presented – through a combination of the Alternative Vote and boundary changes.

So here’s what I predict for 2015. The Conservatives gain some seats but fall short of a majority. The Lib Dems lose 10-20 seats, but still leaving a substantial voting block in Parliament. Labour make few advances. Ukip will pile up 10% or more of the vote, perhaps surpassing the Lib Dems,but get one seat at most – they will take most of their votes from Labour. The Conservatives will attempt a minority government.

Why Labour are losing the election in 2015

According to press chatter, there is mounting worry amongst those that surround Ed Miliband, the leader of Britain’s Labour Party. I don’t know anybody in this elite circle, and I can’t offer an opinion on whether this is true. What I can say is that it should be. After ducking hard choices when the going was good, he is now in real trouble.

The immediate cause of the Labour wobble, if that is what it was, was the poll bounce for the Conservatives after the recent Budget by the Chancellor, George Osborne. The previously secure Labour lead simply vanished. This poll bounce disappeared as quickly as it came. Clever charts showing that it was part of a longer-term trend look premature. But it did show that Labour support is not solid, and that the Tories are not quite as terminally unpopular as many suggested.

But what really convinces me that Labour are in deep trouble is this exclusive piece in yesterday’s Independent, highlighting an article Mr Miliband had written for the paper. Here’s the first paragraph:

Ed Miliband has promised to rescue Britain’s struggling middle classes by boosting their living standards as he warns that the “cost-of-living crisis” will last for at least another five years.

This seems to be part of a bid by Mr Miliband to rebuild his electoral standing; today he is launching a policy about devolving more power to “super-City” regions, building on a policy developed by the Liberal Democrat leader Nick Clegg, as he will not say.

This political drive builds on two themes that Mr Miliband has been developing. The first is “the squeezed middle” – a deliberately vague reference to people who feel they are neither favoured by government handouts, nor part of the rich elite. It is interesting that this seems to have migrated to “the struggling middle classes”, when it might just as easily refer to working classes (if you get beyond the bureaucrats’ tendency to use the term “working class” to refer to people who are not working, and entitled to state support, as an alternative to the word “poor”). The second idea is “the cost of living crisis”, referring to the fact that for most people incomes have not increased as fast as prices over the course of the last government.

No doubt Labour’s polling shows that these ideas cover a large swathe of generally unhappy people, who might therefore be sceptical of the government’s record. The problem is how to appeal to them. Almost by definition, these people are out of the scope of state benefits. In fact they tend to resent the size of the state benefits bill, apart from the old age pension, whose cost they tend to underestimate. They are not employees of the state, a separate and distinct constituency, even if they share some of the same problems). So how to address their standard of living? There are two ways: tax cuts and a stronger private sector economy. On both counts Labour’s credibility is behind that of the Coalition.

The best sort of tax cut to reach the squeezed middle is a cut to personal allowances, i.e. the point at which people start to pay tax (including its National Insurance equivalent, something all parties seem happy to ignore). But the Coalition has already been increasing this quite aggressively, mainly at the expense of higher rate tax payers, some of whom are now claiming to be part of the squeezed middle too. Worse, it is one of the few policies that is closely identified by the public with the Liberal Democrat part of the coalition, which Labour is extremely keen to denigrate – they have picked up a lot of ex Lib Dem voters. They have floated the idea of a 10% tax band, which is just a less efficient way of delivering the same policy – and has uncomfortable echoes with one of the last Labour government’s policy mistakes.

There is an even bigger problem with taxes. Labour has to convince voters that it will not put taxes up to pay for an expanded state. That means signing up to a series of things, like a cap on benefits expenditure, that will be unpopular with core Labour voters, and not even particularly sensible from the point of view of economic management.

But tax cuts are a fairly minor palliative. What would really cheer voters up is the prospect of incomes rising in the private sector. The trouble is that Labour has done nothing to dispel its reputation for being anti-business. Quite the opposite. Mr Miliband’s view is that there are good businesses (“producers”) and bad ones (“predators”). Wages are being squeezed by the predators to benefit their top managers and shareholders. So his anti-business policies are directed at these predators (banks and energy companies to the fore), while helping the producers. This argument is not entirely without merit, but it is a tough sell. And in practice it is pretty much impossible to create policies that discriminate successfully between the two classes of business, and all those that inhabit the grey zones in between. The result is that Labour’s policies designed to address this problem, such as the devolution to the cities, don’t look as if they will deliver much of a boost to wages in the short term – even if they are perfectly sensible. And sensible policies are liable to get matched or pinched by the coalition parties anyway.

The Conservative counterattack to Labour will point to the fragility of the current economic recovery, and say “Don’t put all this at risk”. Of course one thing that could put the fragile recovery at risk is the Conservative plan for a referendum on the EU. But does Labour want to go out with all guns blazing on that issue? Perhaps I underestimate Mr Miliband, and that is his plan. But so far he is happy for Mr Clegg to take the lead on the issue. In fact you could not inaccurately describe Labour’s emerging strategy as “I agree with Nick”. A liberal, centre-ground stance that wants more devolution from Westminster, but with a strong attachment to the EU.

So Labour is embarking on an impossible task to convince the electorate that it can out-do the coalition parties at their own policies. This won’t work. But what it will do is to de-motivate their core constituencies of public sector workers and the squeezed bottom, as I might call the voters suffering from benefits cuts.

The trouble is that Labour hoped to get the best of both worlds after Mr Miliband was elected. That they could adopt a “Blair-lite” strategy that allowed an appeal to the centre ground, while at the same time harnessing the wave of anger from their core voters at the government’s austerity policies, which, incidentally, allowed them to harvest a lot of Lib Dem voters. But Blair-lite lacked credibility as soon as the economy started to revive. There was a choice to be made for either Blair II, an unashamed dash for the middle ground, including an apology for the record of the last government’s economic policies (though that would have been too much for Mr Blair himself). Or they could have gone for unashamed social democracy, making a case for higher taxes, a bigger state, and less aggression on cutting the deficit (isn’t going for a balanced budget just willy-waving after all?). The first of these two choices might well have destroyed the party, given the depth of anger over “The Cuts” – but the second choice was never properly debated or confronted. It would have been perfectly respectable and courageous – even if expanding the state back to the size it was in 2008, or even 2010, would have taken a very long time.

The Conservative General Election campaign has not got started yet. They will allow Ukip their moment of glory in this year’s Euro elections, then quietly mug their voters by stoking up fears of Labour. Labour’s credibility will fall apart, and they will have increasing trouble fending off Tory attacks and keeping their core supporters loyal.

If I was advising Ed Miliband, I would be worried.

The remarkable politcal success of Michael Gove

Shortly before the British General Election in 2010 a headteacher at a local school told me: “Well, however is the new Education Secretary cannot be worse then Ed Balls.” Mr Balls, now Shadow Chancellor, was then Labour’s Education Secretary. He had built up a reputation for political posturing and bullying, while presiding over new Labour’s muddled education policies. I have not asked that headteacher how she thinks the new education Secretary, Michael Gove, compares to Mr Balls. I don’t have to; her prediction was spectacularly wrong. Mr Gove is even more loathed by education professionals than was Mr Balls. But Mr Gove, unlike Mr Balls, counts as a political success.

Mr Gove has been in the news recently. Yesterday he gave a speech spelling out his vision for state schools; over the weekend there was a fuss over his failure to reappoint the Chair of Ofsted, the schools’ inspectorate. His spin doctors have been pushing out a story of his reforming zeal against an educational establishment referred to as “the Blob” after a 1950s sci-fi movie. This has received a lot favourable coverage in the right-wing press. More neutral observers, such as the FT as well as the BBC, seem content to faithfully report Mr Gove’s spin while not openly taking sides.

All this is in stark contrast to the government’s attempts to reform the NHS, led by former Health Secretary Andrew Lansley. The government side of this argument hardly got a look in, as the picture of chaotic reforms took hold. This negative coverage stiffened opposition to the reforms, muddling them further, so that they have ended up being the biggest blot on the Coalition government’s record – though some good may yet come out of them. There has been little public support for opponents to Mr Gove’s education reforms, however. Mr Gove, an ex-journalist, is clearly a better communicator than Mr Lansley, an ex-doctor. The education system is also much simpler than the health service. But the political skills of Mr Gove’s “Blob” are totally lacking, unlike those of the doctors and nurses opposing Mr Lansley. The teaching unions have long been a bit of a comedy act, resisting basic workforce reforms, like performance appraisal, that non-teaching professionals have long since got themselves used to. Other educational professionals rarely raise themselves beyond the minutiae to give politicians and the public a clear vision of what they are trying to achieve.

Are and were British schools in a mess? Yes and no. International comparisons show a mixture of good and bad news. Overall performance is unspectacular but not awful. We have a long “tail” of under-achieving pupils that schools give up on too quickly. There is a lot of mediocrity, especially amongst rural schools, who “coast” by getting average performance from pupils capable of much more. But over the last two decades, the Blob has pulled off one of the most spectacular episodes in school improvement in the world: the transformation of London schools. This has given the lie to the standard line of the Left that the educational prospects of poor pupils will only be transformed once other social problems, like jobs and housing, have been fixed. The Borough of Tower Hamlets, one of the country’s poorest, regularly outperforms much wealthier districts outside London.

The transformation of London’s schools remains one of the last Labour government’s greatest achievements. But politically, it is problematic. It owes nothing to the various policies pushed by politicians and think tanks, such as creating semi-independent Academies. It was largely down to good old fashioned management: officials at national and council level holding school managements to account, and replacing heads of mediocre schools. As a result politicians are strangely reluctant to take the credit.

What of Mr Gove’s reforms? They are a mix of good, bad and ugly. On the good side, Ofsted’s remit has been sharpened up a lot. Previously it had expanded into such areas as “community cohesion”, which are highly sensitive to context, and inspectors did not show any great aptitude. Now they focus much more sharply on the quality of teaching. This gets to the core of what drives school performance. Some older teachers hate this – but it really isn’t any different to the pressures that accountants and lawyers find themselves under. Younger teachers seem accept the much greater level of accountability that is expected – and respond well to it. (My evidence on this is rather anecdotal though – based on my experience as a school governor in a London primary school).

Another good thing, though largely unremarked, is that Mr Gove’s Academy programme is putting private schools under real pressure. Many private schools outside the South East are now signing up to be state schools, run as academies. My local Free School is recruiting many middle class youngsters that would formerly have gone private. No doubt some on the left see this as a sinister subsidy to the middle classes – but a much higher level of social mixing occurs at these new state schools than would have occurred at private schools. And social mixing at schools helps the poorer children achieve more. It is worth noting that this policy works as well as it does thanks to two measures insisted on by the Liberal Democrats: a “pupil premium” giving extra funding for poorer pupils, and insisting on non-academic selection. Many Conservatives want to recreate academically selective Grammar Schools. These may once have been engines of social mobility, but now academic selection is simply used as a way of weeding out pupils from poorer backgrounds and reducing mixing.

The bad: there is a lot of wasted energy on changing things that don’t need changing. That particularly applies to changes to the curriculum. Mr Gove and his supporters seem to have an old-fashioned view on what should be taught in schools, to reflect a 1960s private education. Now it is true that the Blob has developed a lot of woolly curriculum ideas that don’t seem to be of lasting educational benefit (especially in “applied” qualifications), but they were gradually sorting out this mess by themselves. Mr Gove seems to have little idea as to what modern universities and employers actually want the product of a secondary education to be. A lot of the drive to turn state schools into academies seems a bit pointless, and will probably create problems of accountability in later years. It has a sinister aspect too: the Academy chains who are the main beneficiaries are politically well connected – and it is their political connections that seem to be critical in their success.

The ugly. We are getting more religiously founded state schools. Given religiously founded schools’ role in cementing toxic community relations between Catholics and Protestants in Northern Ireland and Scotland, I am very nervous about this. But it could be that making these newer schools conform to modern educational norms, and forcing them to engage with a wider civil society, will bring benefits. But I really would prefer it if our children went to schools attended by children of many faiths and none. But the alienation of some religious communities is such that they would not engage in such arrangements, and for them a state religious school is a second-best.

My verdict on Mr Gove is that he is not quite as evil as he cracked up to be. But he is wasting a lot of time and energy. What should be absorbing energy is teaching standards, establishing a broad curriculum appropriate to modern life, and establishing better systems of accountability which don’t tempt schools to game the system by neglecting “hopeless” cases. Fix these and Britain’s state schools would be world class. But alas, we are distracted by political gimmickry.

Labour are in serious trouble

Not long ago Labour supporters seemed very confident. Their lead in the polls pointed to a comfortable majority; the electoral system was loaded against the Conservatives; they (in their own minds) had won the argument on austerity. It was a good moment to move to the political left and drop the Blairite obsession with the political centre. But now Labour’s poll ratings are sinking, and the Tories catching up. The 2015 election increasingly looks like a stalemate or worse for Labour. What can they do?

And it is not difficult to see the source of Labour’s problems: Britain’s reviving economy, and rapidly falling unemployment. This is not running to the Labour script – which was that austerity policies doomed the British economy to stagnation and misery. It used to be that Labour’s Shadow Chancellor, Ed Balls, sounded easily the most economically literate of the front-bench spokesman of either side (challenged only by the Lib Dem Business Secretary, Vince Cable). Now he sounds panicky and flustered. His arguments, that the recovery is shallow because it is based on consumption rather investment and exports, is technically correct but irrelevant. Labour’s alternative policies of fiscal stimulus were promoting an equally shallow recovery. Labour has no serious ideas on how to promote investment and exports. Meanwhile, the rising economy is giving government spokesmen more confidence: Lib Dem Treasury Secretary Danny Alexander sounded more in control of the economic arguments than he has ever been on the radio this week, managing to pick apart arguments presented by the FT’s Martin Wolf. The Tory Chancellor George Osborne, always more interested in politics than economics, is not wasting any opportunity to skewer Labour using much less sophisticated arguments.

Labour started their damage limitation strategy last Autumn by their leader, Ed Miliband: to try and change the subject. First there was the “cost of living crisis”, focusing on the failure of pay to keep up with prices. Now it is the top rate of tax, where they want to restore the 50% rate rashly reduced to 45% by the Coalition in 2012. Labour’s policy is popular, and the criticism coming in from business groups is unconvincing. These lobbyists say that reducing taxes, especially on the better off, is what is need to awaken dormant business investment. And the government has duly cut taxes (that top rate, and also the rate of company tax) without investment budging. The trouble is that Labour’s policies sound unfriendly to businesses, and therefore likely to stall growth and cause general taxes to rise.

It gets worse for Labour. The energy that drives their activists comes from opposition to austerity: fighting cuts which are seen as mean-minded and ideological. The theory was that the fighting the huge government deficit should be left until later, when the economy was growing. That “later” has now arrived. So how will Labour cut the deficit? Being specific about this, as they will have to be by 2015, will cause huge angst and disillusionment amongst their core supporters.

And in any case Britain’s electoral system is not so weighted in favour of Labour as some supposed. There is a pro-Labour bias in the distribution of seats it is true, but there is also a pronounced benefit to incumbency. When it comes to asking which seats the party will have to capture to win an outright majority it looks hard going. Battersea, the seat where I live, is a case in point. The Conservatives took it off Labour in 2010, but it looks very difficult for them to win back. In the last 3 years I have heard nothing from Labour, but regularly from the Tories; residents aren’t being given the impression that Labour are in contention. The hard fact is that modern politics, with fewer volunteer workers and high postal costs, is an expensive business. Labour surely do not have the money to capture enough marginal through trench warfare tactics in the marginals. They need a national landslide effect, such as they achieved in 1997 under the hated Tony Blair.

So what to do? A change in leadership is out of the question, especially as the most popular alternative, David Miliband, Ed’s brother, is out of contention. A ruthless reshuffle of the front bench might help, but only if it went alongside a wider change of strategy. I think promising more money for the NHS, struggling to keep up with demand, would play to their strengths. But they would have to have credible tax policies to back it up. Taxing just the very rich won’t quite cut it. But taxing a wider body of people would totally undermine their rhetoric on the cost of living. They have dug themselves into a real hole.

Their best bet may just be to keep calm and hope the Tories self-destruct. They show every sign of wanting to do so over the toxic issues of Europe and immigration. Labour’s best chance of benefiting from this tendency to suicide is to appear moderate and centrist. Not a good moment to lurch to the left.

And what of the Liberal Democrats? About half their voters at the 2010 election deserted them for Labour. The polls that show Labour sinking do not show any real benefit for the Lib Dems. But if the contradictions of Labour’s criticism become exposed in the next year or so, then they may get their opportunity. The centre ground, though treated with justifiable suspicion by many of their activists, is a sound place for them to stick to for now.

Britain’s improved growth points to more government austerity

The UK economy has improved dramatically in the last six months. This is one of the most important developments in British politics. This week’s good news on employment is just part of a wide spectrum of measures showing the economy’s improving health. Economic commentary, with its narcissistic obsession with monetary policy, has concentrated on the implications for interest rates. But a more important question I whether the economy’s recovery is sustainable. And the answer to that seems to be… not yet. And while it isn’t government austerity has to be the priority.

The political debate around the economy has focused on the wisdom or otherwise of the government’s austerity policies, designed to fix the country’s massive gap between public expenditure and tax. The Labour opposition suggested that there should be less austerity, and even some temporary tax cuts to try and push the economy into a virtuous circle of growth. But the country is now embarked on just such a virtuous circle without the need for any fiscal stimulus. Additional private consumption is the main cause of this stimulus, according to the latest bulletin from the Office of National Statistics (ONS). This shows that the Labour policy might well have worked (i.e. that a bit of stimulus could set off a virtuous circle), though in the event proved unnecessary.

So intellectually developments have far from proved Labour wrong. But they are the big political losers. Labour’s policy might have been sensible in the circumstances, but they also suggested that the Coalition’s policies were doomed to failure, which has proved not to be the case. It gets worse for them. This level of growth undermines the case for any reduction in austerity polices – which could cause inflation. And yet their hard-core supporters have been rallying to the idea that the cuts in government services and benefits are ideological and unnecessary. Labour have switched their attack to the cost of living, which is still running ahead of personal incomes, but this too runs the risk of being undone by events. Politics is a momentum business, and all it would take is a general improvement in wage levels before the election in 2015 to sink their propaganda offensive. Their poll lead has already shrunk.

Meanwhile press attention has switched to the Bank of England, which has embarrassingly been taken by surprise by the growth spurt. It is not long ago that it suggested that unemployment would not fall to 7% until 2016 – we are nearly there now. I find the focus on monetary policy very irksome though. It allows commentators to pontificate well inside their comfort zone, and talk about short-term developments in financial markets. But, as longer term followers of my blog will appreciate, I think that the usefulness of monetary policy is exaggerated, and the theory behind it has been comprehensively shredded.

Instead the big question should be sustainability. Mainstream economic commentators don’t seem to be that concerned by this. Their analysis is based on the idea that sustainable growth depends on whether or not growth exceeds the trend rate. This trend rate, about 2% per annum, is the average rate of growth since the 1950s, and is primarily driven by a steady increase in productivity. Up to 2007 the UK economy was neatly conforming to this trend. Then the recession hit, putting it well behind the trend rate, with a lot of catching up to do. This sort of commentator often mentions a large gap between the current size of the economy, and what it would have been if it had stuck to the trend – with the implication that this gap is a matter of policy failure. Chief amongst these commentators in my eyes is the FT’s Martin Wolf. In a recent article he dismissed the idea that growth up to 2007 was unsustainable.

This is macro blindness: a failure to question the neat patterns created by aggregate economic statistics. In my view the UK economy cannot sustain a growth rate as high as 2% in the long term, hasn’t been able to do so since perhaps 2000. The reasons are demographics, the changing impact of technology, and a reversal of the gains from trade achieved with the rise of China and India. The main evidence, not mentioned by Mr Wolf in his article, was provided for me in a lecture in 2007 by Professor Wendy Carlin, my economics tutor at UCL. It is the combination of an appreciating real exchange rate and a wide trade deficit. This provides an illusion of growth, but it is not supported by the advances in productivity that are required to sustain growth in the longer term. It was not fashionable to say this at the time, but it proved prophetic. Productivity, incidentally, is an almost impossible factor to measure satisfactorily, and can only really be inferred indirectly. It is my feeling, not sustained by hard analysis, that a lot this growth illusion was from the reduced costs an increasing amount of goods, and some services, bought from China and India, and an important element of that trade deficit. This boost to the economy had “temporary” and “reversible” written all over it.

And the bad news is that the current spate of growth has suspiciously similar symptoms. The trade balance reported by the ONS deteriorated from under negative 2% of the economy in mid 2013 to over negative 3% in November (the latest data). I don’t have direct figures for real exchange rate (a rather tricky calculation), but sterling has appreciated since a low in about March. There seems to be no offsetting productivity gain, since employment figures have been very positive (a very good thing, in spite of some economists moaning about productivity). So we’ve just reverted to the unsustainable growth patterns of the early 2000s, without the benefit of cheaper imports to sustain living standards.

What, of course, we need to see is a rebalancing of the economy to something more sustainable. This will show through in increased levels of investment (still low) and a stronger trade balance. The confidence engendered by the recent spurt of growth may help with this. Meanwhile the government’s austerity policies need to be strengthened, if anything – otherwise the economy will be even less sustainable. Grim news for politicians of all persuasions.

Nick Clegg is right to aim for the centre ground

This morning I got a grumpy email from the Social Liberal Forum, a left-inclined pressure group within the Liberal Democrats. It complained about the apparent support the party is giving to the Conservative policy of aiming for a balanced budget, and so a continuing diet of austerity. It criticised this idea for being economically illiterate. It went on that the policy was

Cold comfort … to the people having to choose between heating their homes and eating this Winter, to those forced to go to foodbanks to feed themselves and their children, to families struggling with the cost of living crisis

They also criticised the party leadership aiming at a “mythical place known as “the Centre ground””, and of being closer to the Conservatives than Labour.

All this illustrates the disarray on the British left on economic policy following the unexpected turn for the better the economy has taken. Previously the left could unite around the proposition that the government’s austerity policy was “too far, too fast”, causing hardship amongst society’s least well off. They took immense comfort from the support of many Keynesian economic heavyweights, who said that, in the absence of growth, the state should disregard the government deficit and stimulate the economy to get it moving – or at least stop making the situation worse through cuts. Hence the government’s supporters being “economically illiterate”. Yes they said, the government should tackle the deficit, but not until growth has been restored.

Though some might not realise it, that fox has been shot by the economic upturn. It isn’t that those economists were wrong, or that “too far, too fast” did not have economic validity at the time; it is that circumstances have changed. If the economy is growing, it is not a good idea to add further stimulus to it. And the “later” when the government should start to tackle the deficit issue has started to arrive. The awkward question that much government expenditure before the crisis was unsustainable, and would have to be cut in due course, cannot now be dodged.

In response the Labour party has changed the subject. Instead it is focusing on a “cost of living crisis” which they blame on badly behaving businesses, from energy companies to house builders. They are proposing a series of populist but economically naïve policies to change these companies’ behaviour. They appear to have no macroeconomic strategy, and the Shadow Chancellor, Ed Balls, is conspicuously floundering.

Politically, Labour’s strategy is interesting. Instead of following political conventional wisdom by chasing voters who float between the main parties (which is what is meant by the “Centre ground”) they seem to be chasing left-inclined or working class voters who will never vote Conservative, but who do not currently vote at all. Centrist voters are worried about the management of the economy, and seem to think that the Conservatives have the stronger case on that front. Instead of trying to reassure these voters by making it clear that they would continue with austerity policies to bring the deficit under control, they are chasing other voters.

What is even more interesting is that the Conservatives are also showing little interest in the Centre. Centre voters are worried about “fairness”, and the state of public services, where they trust Labour more. But instead of doing much to reassure voters here, they are stirring up headlines on immigration and the European Union, where they are proposing policies that are just as economically naïve as Labour’s. Again, quite apart from fighting off the populist challenge presented by Ukip, they seem so be after right inclined people who are not voting, but would never vote Labour if they did.

So if there is no serious contest for the Centre, and if both of the two bigger main parties are pursuing populist but foolish policies, there is surely an opportunity for the Liberal Democrats. Nick Clegg, their leader, is right to make a bid for this, which his party is doing with its “Stronger Economy, Fairer Society” slogan, which epitomises the centre ground. The critics within the party of this strategy are right to point out that this is not ideological secure space, and will do little to built the party’s weak core vote. But if the party is to hang on to its representation in Parliament it will need the support of floating voters.

And so to economic policy. George Osborne, the Conservative Chancellor, is wrong to make a fetish of budget balance – and perhaps deserves to be called economically illiterate to do so. But it is economically sensible to manage the public’s expectations on what the state can afford. It may be that some economists are right, and that a “trend rate” of economic growth of 2-3% per annum is there for the taking in the medium to long term, as everybody seemed to think before 2007. But there are good reasons to suppose that they are wrong, and that much slower growth is “the new normal”, once a bit of catch-up growth is over. If so we will have to get used to a much smaller state and a less generous benefit system. Floating voters sense this, and will not vote for the Liberal Democrats if they think that they might help the Labour party take risks by reversing austerity. Nick Clegg may or may not be economically illiterate, but he is surely right on that one.

Labour can win in 2015. A disaster beckons in 2020.

Is it just me, or can I see a certain spring in the step of Britain’s national politicians? Ever since the party conference season last September they have been focusing on one thing above all: winning the General Election due in May 2015. The perplexing state of the country is now simply a source of ammunition to batter the other side. Actually solving the problems can be left until afterwards. What a relief!

The Labour leader, Ed Miliband, is having the better of it, if the relentlessly superficial media chatter is to be believed. This is quite a turnaround, since the same chatterers had him as toast as late as August. He has abandoned his party’s “too far, too fast” criticism of the government’s austerity policies, which helped rally the faithful (and rattle Lib Dem activists) but cut little ice with the country at large. The recovery of the country’s economic statistics has not invalidated their argument, but it has made it far too complex a proposition to argue, especially since their rhetoric had placed far too much reliance on these “flatlining” statistics in the first place. Instead they are focusing on living standards, and things, like fuel bills, which affect them.

From a campaigning perspective, this change of tack is astute on at least two counts. First, it appeals to direct personal experience, rather than the ephemeral world of economic statistics, to which the country’s GDP growth statistics belong. Second, it is such an intractable problem that the government is unlikely to be able to neutralise it. All that remains is to find some eye-catching policies to embarrass the government and keep the political debate on their ground. The centrepiece of this is the pledge to freeze energy prices for two years if Labour takes power, while they put in place a longer term fix to limit the damage inflicted by the greedy energy businesses they blame for the problem. A second push has been to enforce a “living wage” significantly higher than the legal minimum wage, through government procurement, and a tax break for employers who raise their wages.

In this line of attack Mr Miliband is the first of our national politicians to make political capital out of one of the most important developments in the British economy, along with many other developed economies, notably America’s. For the majority of people, wages are not keeping up with growth in the wider economy. In Britain this trend was clearly established, I read in this piece by Chris Giles in the FT, 2003/04; since 2010 (i.e. when the current government took over) wages have not even kept up with average prices. The benefits of growth are going to mainly to a privileged elite, while government interventions tend to be focused on the other end of the spectrum: the very poor. While the main economic issue is slow growth of pay, the main flashpoints are in taxes (especially for things like fuel) and energy costs.

There is, however, a snag. How on earth to actually fix it? This does not seem to bother Mr Miliband too much. His policy proposals are at best ineffectual, and at worst will actually make things worse. In the field of energy Britain is being overtaken by a crisis, as old nuclear and coal-fired power stations are shut down, and replaced by renewable energy sources that place wholly different strains on infrastructure. What the country badly needs is investment, in new capacity, and, especially, in distribution infrastructure (e.g. moves towards a “smart grid”). Just how Labour’s attack on the energy companies is going to solve this problem is, to say the least, unclear. And, if some of what I read is true, the pressure will break out into real problems in two or three years time. Labour’s living wage policies are no better thought through. Using government procurement to do heavy lifting in this area, along with many others, risks weighing it down with compliance costs – a process that tends to push out smaller businesses, as well as inviting scandal and fraud. The tax break looks totally unsustainable and an invitation to unscrupulous companies to manipulate the system.

The Conservatives are planning their counterattack. There is growing talk of 1992 (which this blog has long been banging on about), when a well-funded late campaign destroyed what had seemed to be an inevitable Labour victory. They will focus, probably, on frightening voters about the economy and taxes; their newspaper allies will concentrate on personal attacks on Mr Miliband to undermine his credibility as a prime minister. The Lib Dems are crafting a “centre ground” campaign, no doubt hoping to benefit from the damage the big parties will do to each other.

I have urged my readers not to underestimate the Conservatives. That advice still applies. But my current instinct is the Labour will weather the storm enough to form a minority government. That is when Mr Miliband’s problems will start. The country will face electricity shortages; clever schemes to enforce the living wage will unravel; living standards for the majority will stay under pressure; Labour activists and trade unionists will be on the government’s case to raise benefits and expenditure. The calamity that has struck Nick Clegg and the Lib Dems will visit Labour, for very similar reasons. I understand Labour’s strategy for winning in 2015; how on earth are they going to win in 2020?