It’s time for the Lib Dems to grow up

I had wanted to include the phrase “growing pains” in the title of this post, but growing is not what is happening to the Lib Dems at the moment.  Not in the sense of membership or votes, a small summer bounce in both notwithstanding.  It is about becoming a more mature political party – and becoming more mature is always painful.

I am going up to the party’s conference in Birmingham tomorrow; I don’t know what I’ll find.  Evidence of pain is everywhere.  There was a moment in April 2010, after the first party leaders’ debate when we dared to hope for something spectacular.  And this wasn’t just a  media frenzy – it was palpable on the doorstep and in the streets.  It has been downhill ever since, apart from the brief thrill of seeing the party enter government – though this left the voters unmoved, as opposed to party insiders.

Last May’s local election results were a massive trauma.  Many of the party’s activists were in the process of winning the country over “one ward at a time”.  They thought that by being relentlessly local, and doing a good job for their local voters, they would be insulated from the national tumult – something that has been by and large true in the past.  So it was a really rude shock.  Many blame the party’s MPs as shameless opportunitists who are out of touch with the voters and activists.  And of course, it showed the party that oblivion is just around the corner.

And there’s everything else.  Endless criticism on the papers; being the butt of comedians’ jokes (and worse) on the radio and TV.  Taking responsibility for unpopular reforms in the NHS and education.  I have an email today from a very long standing member who is about to resign because of the NHS bill.

And yet.  These are all vicissitudes that Britain’s two most successful political parties, Labour and the Conservatives, (leaving aside the SNP for now) have long learned to take in their stride.  It is part of being a grown up political party.  It is part of mattering.  At members’ meetings one of Nick Clegg’s favourite stories is what happened when the party went back to talk to the many voters that slipped out of the party’s grasp in last week of the General Election campaign.  It amounted to, “These are tough times, and we need a grown up political party.”  Enduring this type of pain is a necessary step to breaking through to the next stage of the party’s advance.

The trauma could kill the party, of course.  But if you are part of it you need to be positive, and ensure that it doesn’t.  The opportunity is palpable.  Neither Labour nor the Conservatives are flourishing.  If the party can hang on to something like its current number of seats, especially in a smaller parliament, then another hung parliament, and coalition opportunity, is odds on.  Who needs electoral reform?

And the whole nation is in trauma.  The good times just aren’t coming back.  The apparent economic achievements of the last decade are proving hollow.  Property prices will not rise endlessly to make everybody rich.  We haven’t got the money for the public services we used to have – just as the demographic challenge is about to get much worse.  Labour still haven’t come to terms with their failure, and seem to be stuck somewhere between anger and denial.  The Tories are riven by divisions between a rampant but lunatic right, and the leadership’s more paternalistic vision.

If the Liberal Democrats can get their story straight, there is all to play for.  There are signs that the party is slowly addressing this.  The conference motions don’t really do this, with the Facing the Future motion on strategy (with its 17 priorities) a particular disappointment.  The Quality of Life and Community Politics motions offer some light, though.  But behind the scenes there is a furious discussion over the party’s narrative.  Some good ideas are emerging.

Labour’s vision of a benign and overpowering government, aligned with rampant capitalism, has let the country down badly.  The Tories are chasing after a fantasy of a little England run by an unfettered middle class.  The Lib Dems can offer a sustainable future based on real empowerment of the people, in a proper international context.  Go for it!

British banks shoot themselves in the foot.

Oh dear!  The Vickers review on banking reform hasn’t been published yet, and the news is full of people taking positions and what it might or might not recommend.  I have a lot of sympathy with our Prime Minister, who wants the blessed thing to be published before we have a row about it.  What to make of it?

The reporting is a bit confusing.  The Independent has hyped the thing up to be a war between the Vince Cable and George Osborne, not so much about the proposed reforms, but how quickly they will be implemented.  Meanwhile somebody has briefed the FT that Cable has pretty much given way on timing so there is no real row at all.

The proximate cause of this flurry is a lobbying campaign by the banks.  This campaign will do nothing to redress their general aura of incompetence.  They are basically saying the reforms should be kicked into the long grass because they will interfere with their lending to British businesses, which is critical if business investment is going pull us out of the economic doldrums, as most people hope.  There is some merit in this, because some of the reforms (on capital requirements and liquidity) could have just that effect.  But the ineptitude of their stance is staggering.

Politics is built on simple messages, and the banks are offering the Liberal Democrats a very tempting proposition.  This is a wonderful opportunity for them to show what they are doing in government by showing that they are resisting pressure from the banks.  As the banks themselves continue to insist on paying large bonuses for reckless trading activities, this is a popular stand.  Ed Miliband and Labour have not been slow to take up the anti-banker sentiment.  The Tories, meanwhile, don’t seem to know what’s hit them, and none of their side are sticking their necks out on the banks’ behalf.  Meanwhile John Cridland, the CBI director general, has weighed in on the banks’ behalf calling a rapid implementation of the reforms “barking mad”.  It is difficult to understand what he thought he was doing; the CBI’s credibility has been badly damaged as a result.

There may not even have been much of a row in the coalition in the first place.  There is consensus on the general thrust of the reforms; no doubt Vince Cable was quite flexible on the timings of some aspects, provided others proceed fairly quickly.  Now it is important to him and the Lib Dem part of the coalition that they are seen to get results.  A public row makes things worse for the banks.  If ever there was a time for quiet lobbying based on dry details, this was it.  Using the megaphone is totally counterproductive.

Not that I have much sympathy with the banks.  They are making too much money, and any sensible reform would reduce their profits, both by taking away the implicit government subsidy and by increasing competition.  It’s bound to hurt.  If the banks want to take some of their activities, and even their HQs, elsewhere, then so be it.  I’m not actually sure where they would go though.  Switzerland has dramatically increased its capital requirements for banks, and the stratospheric Swiss franc doesn’t make operating there cheap.  If they don’t have the implicit backing of a big government then their business model breaks down anyway – ruling out places like Ireland and Bermuda.  Going into the Eurozone when its own banking system is under incredible stress hardly looks a good idea either.  In America they have a habit of sending bankers to prison.

The central reform is to separate banks’ trading activities from their “ordinary” ones of taking deposits and lending to the public and non-financial businesses.  This was quite contentious in the commentariat when it was first mooted a year or so ago.  But there seems to be a much greater consensus behind it now.  Who would have guessed it?  A lot of people assumed the bankers would get away with it while politicians tried to make up their minds, and the disaster of 2007/08 faded into the memory.  Not so.  The banks’ inept PR machinery can take some of the credit.

 

Affording the NHS

The British government has been talking darkly about the exploding demands on the National Health Service, which will rapidly make it unaffordable if it is not reformed.  This has recently been challenged by Professor John Appleby, at the health think tank King’s Fund.  This was in a recent article in the British Medical Journal, behind a paywall, but summarised by the BBC here.  This question goes to the heart of health policy in the UK, but politicians dare not discuss it – because it puts the very principles of the sacred NHS in question.  But the problem will not go away.

According to some figures on Wikipedia Britian spent an unremarkable 8% of its national income on health, compared to over 16% in the US, before the financial crisis struck.  Those figures will be higher now, since our income has shrunk, but the relativities will be much the same.  The comparison between the two countries is usually held up to show how ineffective US health spending is, since health outcomes look generally pretty poor there.  But the comparison can be looked at the other way.  The US can afford to spend more than 16% of its national income on health and still remain one of the most prosperous countries on the planet.  There is nothing mysterious about this.  Developed countries are long past the level where basic human needs of food and shelter are met; how we choose to spend the surplus is up to us, and there is no reason why we can’t choose health care over cars, designer clothes or big holidays.  It’s not as if it requires massive imports to sustain it.

You can take this line of reasoning further.  The basic proposition of health care is to reduce pain and prolong life; these are consumer propositions to, well, die for.  Suppose we lived in the economist’s free market utopia, where health spending was a matter of individual choice in a perfectly competitive free market with no information asymmetries.   There is no reason to think that health expenditure would not be higher than the 8% or so we currently spend in Britain, or indeed as high the US figure.  We can perfectly easily afford it.

That’s not the problem.  The problem is paying for it almost entirely through unspecific taxes, the core design principle of the NHS.  And here the government is on much stronger ground.  There is an upper limit to how much tax we can raise for health care.  Up to a certain point, of course, the NHS model works perfectly well.  Look on the taxes as an insurance premium and it helps spread risk in a way that people like.  But the more you spend, the more the weaknesses of the model are exposed.

  • There is no direct line of sight between what you pay and what you get.  How on earth are you supposed to decide whether you are getting value for money?
  • You have no choice in the level of service you get.  One size fits all.
  • People who are better off may feel that they are paying too much relative to what they get.  This may not be quite as strong an argument as it first appears, since the less well off pay a lot of tax through cigarettes, alcohol, petrol and VAT – but the perception is still a problem.
  • Taxes create a drag on the rest of the economy, reducing incentives to work and therefore shrinking the resources available.

America is able to get away with much higher levels of health expenditure because so much of it comes from private insurance premiums and direct private payments for treatment.  But even there a battle royal is developing over how to balance taxes and government support.

Of course, to some putting up taxes is the right way to go.  France and Sweden get away with higher tax burdens than the UK after all.  But this is very fraught.  Some think you can go after big companies and very rich people and leave everybody else.  This is not as easy as it sounds though, since this wealth is very mobile.  Property is not mobile, of course, but raising taxes on property is probably as politically toxic in Britain as taxing fuel is in the US.  There is also a problem if too much tax revenue comes from the very rich or corporations – these start to acquire more political weight.  Which leaves the not-so-rich.  But these people are under pressure and feel over-taxed – Ed Miliband’s “squeezed middle”.

So I think the government is right.  We have hit the limit of what the country can afford for tax-funded free-at-the-point-of-use health system.  But we have not hit the limit of what people are prepared to spend if it’s their own money and for their own benefit.  The risk to the NHS is that the more affluent middle classes start to opt out of NHS services, depriving them of critical mass and undermining the principle of social solidarity.  This has already happened to NHS dentistry.

Nasty.  In the last years of the previous government the issue of co-payments was quite high up the political agenda: the possibility of NHS patients topping up their treatments with their own money to get things not on the basic menu.  This had become politically charged because of the costs of some rather questionable cancer treatments which the NHS were denying but which people were prepared to pay for.  The Conservatives clearly considered the topic politically toxic, since they have fudged the issue of cancer treatments with a bit of extra funding.  Labour and the Lib Dems were inching towards accepting co-payments, though I expect both parties are now bouncing back.

But in my view co-payments is the best way to relieve the pressure.  The NHS should define a basic menu of treatments that everybody is entitled to, but accept payments for anything outside this.  This undermines one of the sacred founding ideas of the NHS, that everybody gets the same, no matter how wealthy.  But it is better than the alternatives.  It’s the debate we should be having.

How would AV change UK politics?

In my post last week I explained why I am supporting the Alternative Vote (AV) in the forthcoming UK referendum.  This case was based on principle.  We have a system of single member constituencies.  First past the post (FPTP) carries a high risk of unrepresentative candidates being elected.  Of the various systems in use around the world to counter the weaknesses of FPTP (primary elections in the US, run-off elections in France, AV in Australia), AV seems to fit the British situation best.  I avoided asking what the impact of any change would be: just that the system is more democratic.  But there are pragmatic types out there for whom the likely impact of the changes is more important than first principles.  Today’s post is for them.  It will help show them why it is best to think about principles.

The trouble with most analysis of this in the UK is that it is based on looking at past FPTP results, supported by some opinion polls on second preferences, and then predicting how the outcome would have been with AV.  This runs into two problems.  First is that the next election is going to be quite unlike the last few, if for no other reason than that the current government is a coalition.  The next problem is that AV will change voting behaviours, and the campaign pitches of the political parties.  The usual conclusion is that the Lib Dems will benefit quite a bit, Labour marginally, and the Conservatives would lose out.  None of these effects would have been enough to change the outcome of elections except maybe the last one.  Extra seats for Lib Dems and Labour might have made the current coalition impossible, and even a Labour-Lib Dem one on the cards.  That’s enough for most Conservatives.  If we had had AV last time, Gordon Brown might still be PM.

The Lib Dems should benefit.  About time many will say – since the party is badly under-represented in parliament.  More pragmatic types worry that this would give a smaller party too much influence in the choice of coalition partners.  But the Lib Dems do face a problem.  In order to benefit their first preference votes need to get past either the Labour or Conservative candidates (in England – it’s more complicated in Scotland and Wales).  They might then attract second preference votes from whichever of these parties gets knocked out.  And yet the classic Lib Dem campaign technique is to persuade voters to vote for them because one or other of the major parties doesn’t stand a chance; this argument has much less resonance under AV.  Voters will say that they will simply give the Lib Dems a second preference, and give their first preference to their most preferred party.  As a result Conservative or Labour candidates currently in third place might sneak into second, knocking the Lib Dems out.  The Littleborough & Saddleworth seat at the last election was a Labour seat that people count as vulnerable to the Lib Dems under AV; but the Conservative vote was strong and under AV they might well have pushed past the Lib Dems into second place, which would, in fact, have made the seat safer for Labour.  This could be a big help to the Labour Party in the South West.  In Australia the two party system is entrenched (one of the “parties” being a coalition in an electoral pact).  The Lib Dems will be desperate for first preference votes under AV, and in the long term it cannot be taken for granted that the party would flourish.

Labour has less to fear.  It might help them pick up in areas where they are in third place – now great swathes of England.  They may not do so well from picking up second preferences from Lib Dem voters next time – but only because they will have done such a good job of persuading them to vote Labour as first preference.  They get some insurance against those voters drifting back.  It is a moment of truth for Labour supporters who believe that there is a “progressive majority” – a majority of voters for whom the Conservative Party is toxic.  If so the system ensures that the Conservatives never get a majority.

And that is the challenge for the Conservatives.  It will be much more difficult for them to sneak in a majority government against the votes of the a majority of the electorate.  But many Conservatives believe in something like a “silent majority” – the opposite of the progressive majority.  There are lot of people sympathetic to their policies that do not say so, and will not give them a first preference vote.  If so, they may pick up a lot of second preferences.  This could be particularly helpful to them at the next election, when both UKIP and the Lib Dems will be trying to pick off their voters.  If Labour succeeds in pulling past the Lib Dems in South Western seats, then this will make a few seats a bit safer for them, since they will get more second preferences from Lib Dem voters than Labour ones.

For the smaller parties AV is ambiguous.  It is difficult to see that extremist parties, like the BNP, will make any headway, since other voters will gang up against them.  Their best hope of an MP is under FPTP in a split seat.  But UKIP and the Greens may well think they can pick up a majority in favoured seats by scooping up enough second preference votes.  In the UKIP case they need to push past the Conservatives, either in what would now be very safe Conservative seats, or in Lib Dem held seats where they can hope to scoop up some Labour voters too.  For the Greens the game is to push past the Lib Dems, and scoop up enough of their votes to push past Labour (or the other way round), to mount a challenge on the Tories.  In both cases these are long shots, but you need a deal of optimism in politics.

In sum, the impact of AV is very uncertain in the UK.  The Lib Dems could assert themselves with a permanently larger block of seats, alongside a scattering of seats for the greens and perhaps UKIP.  Or the two party system could reassert itself, with the other parties finding it more difficult to pick up enough first preference votes.  But the outcome is uncertain for a good reason: electoral politics will be more competitive.  Who knows what voters would do?

 

 

Losing voters we never won

Any Liberal Democrat activist will have been nearly buried by comments from people saying that they will never vote for the party again.  Mostly these are genuine, and polling shows that the party has lost half its support.  But I have long had a feeling that many of these complainants never voted for the party in the first place.  Nice to get some evidence of this from this post in politicalbetting.com .  It seems that in at least one poll, more people said they voted Lib Dem at the last election than voted Labour!  So many people want to join the betrayal bandwagon that they have actually forgotten they did not vote for us.  No doubt they thought about it, and the sense of betrayal comes from even thinking of voting Lib Dem!

The strange cohesion of the Liberal Democrats

I was at the Liberal Democrat conference in Sheffield last weekend.  The most striking thing about it was how upbeat it was.  Disagreements were downplayed; discussion was civilised; people didn’t seem to be spooked by the polls, still less the demonstrators outside the conference hall.  And yet the party has lost half its popular support, performed atrociously at the Barnsley by-election, and comes under daily attack for supporting what are seen as vicious Tory policies. “You’re shafted,” a (perfectly friendly) local member of the public told me when I was walking between venues.  What’s all this about?

The obvious explanations don’t seem to be strong enough.  The novelty of being in government has certainly not worn off; and attack, especially of the vitriolic sort we saw on display by the demonstrators, tends to induce solidarity.  But a lot of members and activists are genuinely unhappy about the policies of the coalition government; it is often said that policy has been captured by an unrepresentative rightwing clique surrounding Nick Clegg.

The party’s democratic constitution helps.  To many political pros no doubt these processes look like weakness, conceded to encourage people to join and stay as members.  But they give countless opportunities for members and activists to feel consulted and involved.

The party’s leadership deserves some real credit here.  The party’s internal machinery for policy making has been generally respected, in contrast to Paddy Ashdown’s leadership in the 1990s.  Many critics have been co-opted in the policy formation process.  Predictions that party conference would quickly be made irrelevant have proved unfounded (I remember Mark Littlewood, former director of communications, almost gloating about this in the coalition’s early days).

The leadership’s sensitivity to criticism, and wish to avoid needless confrontation from within the party was on display at Sheffield.  The biggest issue faced by the conference was the NHS reforms.  These are radical, controversial, and seem to go well beyond the coalition agreement.  A rather defensive motion was put before the conference by the leadership, and an amendment submitted that was highly critical of the direction of government policy.  The leadership quickly conceded defeat.  Previously Paul Burstow, the health minister, who proposed the main motion, had been highly supportive of coalition policy.  But he quickly said that he was in listening mode and accepted the amendment.  At an earlier consultative session, Norman Lamb, part of Nick Clegg’s inner circle, appeared to admit that mistakes had been made over health policy, among other things.  What the consequences of all this are for coalition policy in health and elsewhere is unclear, but we are expecting changes.

The leadership’s basic narrative is not seriously contested.  The Liberal Democrats had no alternative to the coalition that would not have done even more damage.  If they had declined the opportunity, the party would have “bottled it” and suffered disastrously at a rapidly called second election that the Tories would have won outright.  And the Lib Dems have won a lot of concessions, and are managing to turn a lot of party policy into law.  You only have to look at what the Tory right is saying.  All this is difficult to translate into a clear message for the public, but it helps instill a degree of confidence among activists.  The feeling is palpable that things will turn the party’s way in due course, and party’s critics will be confounded.  Again.

The real meaning of the Barnsley result

The BBC and the Today programme could barely conceal their delight about the Barnsley Central by election result,  gloating over the drop in the Lib Dem vote from 2nd to 6th place.  On this their coverage did not differ much from the rest of the media.  Indeed this was spectacular.  But it wasn’t the only spectacular thing about the result.  For the first time ever in a parliamentary election UKIP claimed second place, as the Tory vote plummeted.

This should give us pause.  It means that the Tories are leaking votes to the right, with UKIP, not the Greens, standing a real chance of being the leading protest party.  Come the General Election, the Tories should have little difficulty in clawing the votes back.  But that won’t stop their activists from panicking in the meantime.  That puts David Cameron in a tricky position.  His newly-acquired left-leaning voters offer the Lib Dems their best chance of clawing back lost ground; any moves to appease the UKIP tendency will simply drive these voters into their waiting arms.  Couldn’t happen to a nicer bloke.

There is a second pause for thought.  If the Tories leak votes to the Lib Dems on the left and UKIP on the right, they will benefit much more from AV than conventional wisdom has it.  Unfortunately their supporters are probably too thick to understand this, on past performance, and so they will continue to campaign vigorously for a No vote.  Mr Cameron is clever enough to appreciate this, no doubt adding to his dilemma.