Nick Clegg – Page 2 – thinking liberal

The European elections are a victory for proportional representation

They look like a colossal waste of effort. Elections to the European Parliament take place every five years, and turnout in Britain, as in much of the rest of Europe, is dismal. Few understand what the European Parliament is for. But last night’s debate between Liberal Democrat leader Nick Clegg and Ukip’s Nigel Farage shows that things are going in an interesting direction. These elections are contributing more and more to the wider process of politics in this country.

The most important thing about theses elections is that they are held using proportional representation (PR). Parties in practice need to get over 10% of the vote in a particular region to get represented – but that still gives parties with a broad but thinly spread appeal a much better chance than parliamentary and even local council elections. The vote share won by the two parties that dominate conventional elections, the Conservatives and Labour, is dismal. This is adding a new dimension to the political debate because it offers voters a greater choice.

The conventional way of politics in the UK is to tell the voters that the real choice is between just two parties. Which two varies depending on where the election is being held, but mostly it is between Labour and the Conservatives (though Scotland is a big outlier here). This serves to close down political debate to a few carefully chosen swing issues that appeal to marginal voters in marginal constituencies. Minority views are dismissed as being irrelevant. But this line of campaigning does not work with PR. And the European elections are the only ones held under PR for most English electors (Scottish, Welsh, Northern Ireland and London Parliament/Assembly elections are held under PR).

The most obvious beneficiaries of this have been to the Lib Dems, the Greens, and, above all, Ukip. Ukip is a right wing insurgent party that represent political views that are as far away from mine as you can get while still being a respectable political party (unlike the openly racist BNP, for example). But it speaks for an important minority of mainly English voters who feel oppressed by the current political system, and ignored by the main parties. The EU is an important focus of that discontent, as is what is seen as excessive immigration. As an aside it often draws its strongest support from areas that are relatively unaffected by immigration – but that does not stop it being a popular scapegoat. The issues are linked: free movement of people is a vital plank of the EU project.

The Conservative and Labour parties would rather these issues were suppressed. They represent inconvenient divisions within their own ranks and put their internal cohesion under stress. And that led to last night’s debate. Ukip and the Lib Dems take clear sides, and are quite happy to slug it out in public. And the public gets to hear a proper debate. That is a very important part of the democratic process. Floating voters may not have learnt much from the verbal slugging match, which I judged to be a score draw (with plenty to please both sides), but it at least would have drawn them into the issues.

Where is this heading? In the great scheme of things I don’t think the direct European Parliament elections are a great success in closing Europe’s democratic deficit. I think its original configuration as a forum for delegations from national parliaments was a better one. But for as long as it is the only national election held under PR, it is serving a useful purpose. The right answer is to use PR for national parliamentary elections, but alas that aim remains very distant. PR for local elections may be a more realistic intermediate step.

Meanwhile it will be very interesting to see if the interest stirred by these debates will affect turnout at the elections. But even if they do not (I will only believe it when I see it) they are doing something to close Britain’s democratic deficit.

Liberal Democrats: pragmatic policies – small steps to a liberal future

We ended the Liberal Democrat conference today on a high note. Nick Clegg gave one of his best conference speeches, in confident form. We are now learning what this “centre ground” strategy means in practice. Mr Clegg did not utter the dread words in his speech at all. Instead he talked freely about Britishness and liberal, inclusive values. He painted an optimistic, happy picture, to contrast with the sour, pessimistic one that dominates so much of politics now. This went down predictably well with the faithful, but it is a sensible strategy in the wider political debate too. It answers the question “What is the point of the Liberal Democrats”.

The centre ground bit came in the policy programme. In yesterday’s immigration debate, the party talked inclusive, but toned down official policy – for example dropping the idea of a path to legality for illegal immigrants. On the constitution we talked about the Single Transferable Vote, and job shares for MPs. Sweeping reform, including top-down devolution to the English regions, was dropped. The party no doubt still believes in the bigger ideas, but it realises they have to be achieved in small steps. We don’t call it centrist – we call it small steps to more liberal future. But centrist is what it actually is.

So the party’s rhetoric is firmly liberal and optimistic. It helps that Ukip has come on the scene to help define what the party is not. The idea that the real political battle in Britain (well, England) is between the liberal, optimistic Lib Dems and the fearful, pessimistic Ukip is, of course, fanciful – though not on the critical issue of Britain’s place in the wider world. But it helps give the party definition. The majority of Britons may not be liberals, but neither do they feel threatened by them; they are a good second choice. And since democratic politics is largely about compromise and coalition, second choice often comes out on top.

It is a long, long road to return to electoral success for the party. In May in reality it more a question of trying to stave off disaster. The party’s previous tendency to protest, and being all things to all people has lost it a lot of credibility, especially amongst working class voters. The media remains dominated by Labour and Conservative allies. But it is a start, and party activists left york in good heart.

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?

One cheer for Ed Miliband

The focus of British politics is now clear. The prospects of the different parties at the General Election due in May 2015 dominates everything. No doubt it is with relief that the political elite and their coterie of journalists and commentators focus on this question, rather than the much more difficult one of how to make this country a better place for its citizens. The defining event of this year’s conference season so far has been Labour leader Ed Miliband’s speech. For good or ill, he seems to have set the political agenda. But does this tell us anything about whether Labour really would do a good job of running the country?

To read the commentaries, Mr Miliband has made a decisive shift to the left. He did this by focusing his ire on big business, and threatening them with government action. There were two signature policies. One was forcing energy companies to freeze their prices while the government reconfigured the regulatory regime to squeeze them more permanently. The second was forcing private sector developers to “use or lose” their land banks to build houses. All this in an attempt to reverse the decline in living standards that the bulk of the population has suffered since the economic downturn started in 2008.

Commentators of the right and centre, such as the Economist’s Bagehot column, interpret this as Labour vacating the decisive “centre ground” of politics, where elections are won and lost. This is the ground which the Liberal Democrats’ Nick Clegg is trying to push his party into, in spite of grumbles by older activists. The Conservatives’ David Cameron is likely to stake his claim there too, and ignore the voices of his party urging him to adopt right wing populism to fend off the threat from Ukip. They will attack Labour’s policies as unworkable, and part of a failed socialist outlook. Mr Cameron will offer tax cuts as a surer route to improving living standards; Mr Clegg will offer tax cuts too, though rather narrower ones, and something about tackling barriers to social mobility (affordable child care, better schools, etc.).

Commentators of the left, like the Guardian’s Jonathan Freedland, do not deny Mr Miliband’s leftward lurch and seem quite content. His new policies are popular with the public, and have lifted Labour’s poll ratings; there may be many more populist left wing policies, bashing bankers and big business that will go down well electorally. With a large chunk of the previous Lib Dem vote going to Labour, and the Conservatives struggling with Ukip, the next election is Labour’s to lose.

But rather than evaluate these calculations at face value, let’s pause and step back for a minute. All this looks like the narcissism of small differences. All three parties remain firmly embedded in much same policy space. Mr Miliband would have made a decisive step to the left if he had outlined a policy of increased public spending, funded by extra taxes. In this way he might be able to halt and even reverse the relentless squeeze on benefits and public services. But he has decided not to; instead his party will have to make something in the region of £26 billion of cuts in the next parliament (a number I have culled from this perceptive article by the Resolution Foundation’s Gavin Kelly in the paywalled FT). He has said nothing about where these cuts, or increased taxes, will fall. The Conservatives would be making a radical shift to the right if they were proposing to make deeper cuts to the state, which they can only do if they cut the NHS (or rather make the public pay for more of its services) and old age pensions. There is no sign of that.

And there is something else. None of the parties is embracing more than gradual or token decentralisation of power from Westminster. Instead they argue over this, that or the other centralised tax, subsidy or regulatory regime. This can be seen in the season’s signature policy ideas. Mr Clegg has announced free school meals for English school infants; all of them, everywhere, because it looks like a clever idea based on a couple of pilot schemes. Mr Miliband wants to bash energy companies through central regulation: but how does this help solve the country’s slow path to reducing carbon emissions? And what on earth is the point of the Conservatives’ tax break for married couples?

But Mr Miliband deserves credit for one thing. He, alone amongst the three party leaders that I can see, has pointed out one of the two central challenges of the British political economy. That is that the benefits of economic growth are bypassing most people. This is nothing new, but economic stagnation is making it hard to gloss over. It arises primarily from technological change, and its effect on manufacturing industry and office work, helped along by the rise of globalisation. The problem isn’t that our tax and benefit system is failing to redistribute wealth, it is that increasingly wages are too low in the first place.

But there Mr Miliband’s insight seems to end. He seems content to blame big “predator” corporations, and offer the hope that better regulation will help. He didn’t even mention the second great challenge, which is that real terms funding for public services and benefits will fall rather than rise in the years ahead. He offers palliatives rather than solutions. Britain’s right and centre are no better.

What is the solution? In my view there are three interrelated elements. Improve the education system so that skills better balance where the jobs are in future. Redesign public services and benefits so that they can be tailored to individual and community needs. Strengthen local networks to counterbalance the effect of the rise of centralised, winner takes all networks. These three require a radical decentralisation of power. How long will it take before our political classes start to realise this?

The battle for Britain’s political centre

The idea of a centre ground in politics, where elections are won and lost, is a persistent one, especially here in Britain (and England in particular) and in the United States. Winning politicians are said to “triangulate” a political position in this centre ground; notable exemplars of this idea were Bill Clinton and Tony Blair. David Cameron is supposed to have rescued the Conservative Party from oblivion using this strategy in 2010 to turning it into the UK’s largest party, if not outright victory. Now, in Britain, there is a lot of talk about it, and what political strategy each of the three established main parties (Conservative, Labour and Liberal Democrat) should be; take this article, Both the Tory and Labour leaders need lessons in politcal geometry by Andrew Rawnsley. What to make of this?

This all starts with the idea that political views can be placed on a spectrum with the left at one end, the right at the other, and ground, the centre or middle, in between. Over the years I have repeatedly heard people claim that this idea is no longer a helpful analysis of modern politics. But it is remarkably persistent, and it appears to have been helpful to Messrs Clinton, Blair and Cameron. What seems to define the left-right spectrum is attitudes to social solidarity and the state. On the right there is a strong view that individuals are responsible for their own wellbeing, and that the state should do the minimum to help them, because such help is counterproductive. This view unites social conservatives, distrusting socialist values, and economic liberals. On the left there is a feeling that most people have little influence on their social outcomes, especially poorer people, and that they should band together, organised by the state to tilt the odds back in their favour.

And for all the talk about the differences between the political parties disappearing, it is very easy to see this fault-line separating the core followers and activists in the Conservative and Labour parties. Think of the last Labour government’s attempt to get state supervision, through Primary Care Trusts, local authorities and other agencies to take a broader role in achieving social outcomes, like reducing “health inequalities”. Compare this to Tory ministers who delight in dismantling this infrastructure in the name of austerity.

But elections are clearly won and lost by floating voters, who aren’t convinced by the true believers of either party. Appealing to these voters makes the two main parties look very similar in terms of their election promises at least. Strange then that both parties seem currently more concerned to shore up their core votes and activists, rather than make a play for the centre. By this stage before Mr Blair’s victory in 1997, he and Gordon Brown were challenging the party’s core supporters by, for example, signing up to the Conservative austerity policies and promising not to raise income tax. Similarly Mr Cameron was doing photo ops in the Arctic with huskies to show his concern for global warming well before the 2010 election.

But the political priorities have changed. Neither party has made its activists so desperate for power by being out of office for a decade that they will sign up for anything. Labour needs to nurture the anger felt its supporter by the current government’s austerity policies, especially amongst those claiming benefits and those employed, or formerly employed, in the public sector. The Conservatives are shaken by the rise of the distinctly right wing Ukip, who are stealing away its core activists, even if they are also pulling in actual votes from elsewhere too. Both parties will need its foot-soldiers when the next general election arises in 2015.

But there may also be a bit of a problem for those chasing votes in the centre: the centre itself is fragmenting. This is suggested by some survey work reported in The Economist a couple of weeks ago, here. On the one side are those whose living standards are being squeezed (one definition of the “squeezed middle” of which much has been talked). These people are not just those in the direct line of fire of cuts, but those who were not particularly well off, and are now finding that their income is frozen while prices keep going up. These voters are open to Labour’s rhetoric about the government’s failed economic policies, and ideas for kick-starting it with things such as a temporary cut in VAT. A second group of centrist voters are not badly affected in their personal living standards, and are much more convinced by the government’s line that austerity is a necessary evil, following the irresponsible profligacy (by both government and individuals) that occurred under the last government. Each side seems to be doing a reasonable job of appealing to one of these two groups, but not headway in appealing to both. This does not add up to a winning majority for either party.

The big unknown is how the economy will be faring in 2015, as this could influence the balance between these groups. The Conservatives hope that the current fragile recovery continues, inflation falls and people feel that things are getting better; they will then be less willing to risk any change in economic policy. If economic stagnation predominates, Labour narrative might get stronger, though. No doubt both parties are keeping their powder dry to see how things shape up. The Conservative fall back will probably be to persuade the squeezed middle that Labour’s policies will mean higher taxes for them. Labour might do a Blair and say that they will adopt the government’s current spending plans except for some carefully chosen minor exceptions, and so reassure the better off middle. Of these I think the Conservatives will be the more credible, and combined with Mr Cameron’s politically well crafted policy on Europe, the party will do much better than people currently expect.

And what of the Liberal Democrats? They do not have a heartland in either left or right, but it is wrong to suggest, as Nick Clegg is prone to, that it has an ideological affinity to centrist voters, as the centre is not a coherent ideological group. The big problem for them is that they are very much on the government side of the economic debate, and will struggle to appeal to the squeezed middle, though banging on about raised income tax thresholds is meant to neutralise this. But the collateral damage that the Labour and Conservative party’s do to each other in the campaign could help them. They can try to develop the idea that centre voters are better off backing a centre party, which moderates the left or right through coalition, rather than trusting the main party ideologues to stick to their manifestos. So far though, that line of argument seems to be getting little traction.

Lib Dems hope for a turning point

The Lib Dem conference at Brighton last weekend was a low key affair. There was enough space in the Metropole hotel to hold the whole thing, including the very limited fringe. All this is in contrast to the last spring conference I attended in 2011 in Sheffield, amid a huge police presence and shouting demonstrators. In 2011 the party was already over the edge of an abyss, though it took that year’s disastrous local elections for many to realise it. This year conference goers thought the outlook was better.

The immediate cause is not hard to see: the party’s victory in the Eastleigh by-election. Most of those there had helped in this election one way or another. The win may not look all that convincing to an outsider, but activists talked it up, as if it was a landslide. This was a reflection of solidarity under assault, from not just the usual suspects, but from the liberal media too, including the BBC. To have overcome those odds, people felt, was a triumph. Also it was a reflection that the campaign was impressively organised, and did not shy away from the party’s role in government, or Nick Clegg’s leadership – issues that many considered to be toxic.

Rather bizarrely the BBC, in its coverage on Friday and on Saturday morning, expected the activists to be a bit grumpy, full of questions about who knew what and when in the Rennard and Huhne affairs. But it didn’t take a genius to figure out that Eastleigh would overshadow all. In fact a nasty row over secret courts was the second story of the conference: the parliamentary party had backed the government’s plans, in spite of a passionate debate and motion against them at the Autumn conference. There were resignations. But this is not the sort of row the media feel comfortable about reporting, so it didn’t get much coverage. Huhne and Rennard hardly featured, though there were a regular compliments to Mr Huhne’s work on policy and as a minister, and not all from men (Shirley Williams started it). The party leadership chose to confront the Rennard affair frontally at a women’s day rally on Friday evening: and that was all that most people wanted to hear on that topic. There was a second row about government economic policy: an emergency motion on the topic wasn’t taken, as the result of a manoeuvre that most representatives thought was a bit dubious. But cabinet minister Vince Cable’s stirrings on the economy were some compensation: he gave a speech at one of the fringe meetings. The official business was low key. Uncontroversial motions and speeches by junior ministers. An emergency motion on secret courts was a bit of an exception.

The main point of the conference, if there was one, was to lay groundwork for the 2015 General Election. There was a stirring speech by Paddy Ashdown, who is chairing the campaign, as well as Mr Clegg’s leadership speech. There was also a rather low key consultative session on the manifesto. In each these, and on other occasions, the party aired its campaign theme: “Stronger Economy, Fairer Society” (“enabling everyone to get on in life” if you have space to pad it out a bit). The plan is to keep repeating this line ad nauseam for the next two and a bit years.

The slogan has its critics. Its direct message is not distinctive: every other political party stands for the same things, even if they define the terms a bit differently. It makes no reference to liberal values. Both criticisms miss the point. The party must win by attracting mainstream voters, who are not particularly liberal, though not anti-liberal either. The slogan is meant to draw people in to two further messages: you can’t trust the Conservatives on “fairness”, and you can’t trust Labour on the economy. The calculation is that each of the two main parties has a severe weakness which the party can exploit, as the only sensible, mainstream party left standing.

Will this work? It might. The Conservatives really do seem to have a problem. David Cameron was never able to mould his party in the way that Tony Blair moulded Labour. Many of the party’s MPs are right wing fanatics, as are their grass roots supporters. Such people are convinced that they have caught the public mood, because their views are reflected in much of the press. But most voters are put off. Mr Cameron has a good instinct for the “centre ground”, or the public mainstream – but his party looks divided. The very bendable word “fairness” is a good as any word bring attention to this Conservative weakness. In policy terms it is cover for taxing the rich and preserving social insurance, such as social security and the health service.

And Labour has a problem too. Their situation is not unlike the one that they faced in the early 1990s under Neil Kinnock, which led them to lose the 1992 election against a lacklustre Conservative government under John Major. They were riding high in the opinion polls, and the economy was in a mess. But they were inclined to make promises to spend more public funds, and their leader wasn’t trusted. Right now Labour are drawing a lot of energy from activists (many of them public sector workers) who feel that government cuts are motivated by ideology rather than economics. They grasp at a Keynesian critique of current government policy to think that sorting the economy out is as easy as boosting public spending, which will sort the public finances out through the multiplier effect. But polling shows that the public does not share this view: they feel that public expenditure should be cut back. That leaves Ed Miliband with an unenviable choice. If he pushes ahead with a publicly credible economic policy, and says he will match the government’s public expenditure plans, subject one of two populist tweaks, he will anger his activists and trade union donors. If he fudges, his campaign is likely to break apart under pressure, as Neil Kinnock’s did in 1992. It doesn’t help that his economic spokesman, Ed Balls, is closely associated with Gordon Brown’s economic policies, which are widely viewed as disastrous. Mr Miliband’s own public standing is weak, as was Mr Kinnock’s, though for different reasons.

This could give the Lib Dems an opening, especially in seats where the party has plenty of activists to deliver the message, tack in local issues, and get out the vote. With fifty or so seats the party may be able to win a place in another coalition government. Buoyed up by Eastleigh, Lib Dem activists think they can do it, and that an important turning point has been reached.

The Liberal Democrat conference: life outside the bubble

The “Westminster bubble” is a useful expression. It refers to an ecosystem of politicians, journalists, think tankers and numerous hangers on based Westminster who have there own version of reality. The Liberal Democrat conference in Brighton, which ended yesterday was firmly outside that bubble. Lib Dem conferences tend to inhabit their own bubble, of course. But after two years of appalling local election results, the complacency that characterises that bubble world was largely absent. Liberal Democrats are coming to terms pragmatically with a very uncomfortable reality.

Westminster bubble types expected the party to be obsessed, as they are, with the leadership, and mobilising to ditch Nick Clegg, whose personal ratings with the public at large are miserable. But that was not so; the party maintained admirable cohesion on the matter. It’s not that members don’t think that Mr Clegg’s standing is problem, but they recognise that there are no easy solutions and that public agitation would be unhelpful. The whole issue has in effect been outsourced to the parliamentary party, who were making no attempt to stir things up.

For me that party’s mood is best caught by three debates. On Tuesday on local pay in the public sector and the Justice and Security Bill, and yesterday on housing. On local pay (sometimes wrongly referred to as regional pay, which would be a non-starter as we do not have recognisable regional economies) the party resisted attempts by the Chancellor, George Osborne, to abolish national pay agreements and let local bodies, including hospitals, schools and local governments, to set their own pay rates. The interesting thing about this is that localism, delegating responsibility to local authority level, at least, is supposed to be a key part of the party’s ideology. But the party’s politicians and activists are acutely aware of the fear felt by many in their communities that this would simply mean lower pay, which would not be compensated for by a private sector revival. Local pay does not have to mean lower pay, and often doesn’t – but it is an understandable fear, since, after all, that is why Mr Osborne supports it. For me though, principle trumped pragmatism and I was one of a small number of people who voted for the motion. I hold the deeply unfashionable view that the purpose of national pay agreements is for the Treasury to hold public sector pay down, not keep it at artificially high levels, and that unions only go along with it because it gives their national leaders a raison d’etre. And as for national pay being simpler, any idea of that has been shaken by the encyclopedic size and complexity of the national agreement on teachers’ pay that occasionally lands on my desk. Still, the party’s mood was a reflection of the feelings in their communities, and not the theoretical arguments so characteristic of the Westminster bubble. The concluding speech by John Pugh, Southport’s MP, was a ruthless and effective hatchet job, in which people like me were characterised as having a fetish for markets against all evidence and reason. I am trying to work out how to get revenge.

Funnily enough, though, on the Justice and Security Bill it was the pragmatists that were drowned out. At issue was the possibility of allowing secret evidence in cases of national security, where, for example, intelligence sources might be compromised. No matter the impressive unity of parliamentarians to support this idea, the party emphatically rejected this attack on natural justice. There were a number of stirring speeches including many from people like London’s MEP Sarah Ludford, who are usually rather disappointing public speakers. On an issue that is not widely talked about on doorsteps, the party allowed itself the luxury of the moral high ground.

And then there was housing. There is a clear feeling in the party that housing should be a top priority. More homes should be built; developers resisting the supply of affordable homes, while sitting on “land banks” of property with planning permission, should be faced up to; private sector lettings should be regulated more strongly. Once again the debate was characterised stories from the front line; this was one topic in which the principled and pragmatic converged – but the voice of local communities came through the loudest. Simon Hughes, deputy leader of the parliamentary party, another speaker who usually disappoints, delivered a barnstormer in favour of the motion.

The strongest set-piece speech that I saw came from Sharon Bowles, an MEP who delivered a powerful attack on critics of the EU and business leaders who were keeping quiet instead of speaking out. She got a standing ovation. So did new minister Jo Swinson, though her speech was nothing very special – it was the person they were applauding (mind you she delivered an excellent speech in the conference rally on Saturday night).

I missed Mr Clegg’s speech – though I’m not really a fan of the leader’s speech since Paddy Ashdown. From reports it sounded as if he struck more or less the right tone. I don’t think his attempt to portray the party as a natural one of government was all that wise. There is a tendency for Westminster bubble types to assume that things will carry on as they are – but it is most unlikely that the Lib Dems will be in government after the next general election. It all gives the impression that he enjoys being in government too much. Still, he is right that government is what the party should aspire to, rather than being a constant party of protest. And if the party can survive the next few years, then a return to government is very much on the cards.

Lords reform: the real loser is David Cameron’s project

Today Nick Clegg, Deputy Prime Minister and leader of the Liberal Democrats, announced that Britain’s Coalition government would end its attempt to make the country’s upper house, The House of Lords, mostly elected. It is a bitter blow for Lib Dems, but not unexpected. What does this say about the state of British politics?

The problem was that the plans did not command sufficient support on the Conservative benches. There were 90 or so rebels at an earlier vote, and this is enough to kill the bill if Labour oppose it. Labour had supported the reforms in principle, but said that, as a constitutional measure, it needed more time for debate in the Commons, so opposed the critical timetable motion. This argument is entirely specious. Debate on the floor of the Commons is an exercise in farce; it has to be time-limited or else it degenerates into filibuster. The cynicism of Labour’s position is made plain by the fact that they would not be drawn on the amount of time they thought the bill actually needed. But there was in any case a more substantive argument from the Labour side: in their manifesto they had said that reform should be made subject to a referendum, which the government side did not want to do. We can argue about the logic of Labour’s position on the referendum, but a manifesto is a manifesto.

So Mr Clegg was quite right to abandon his attempt at reform. There was very little credit in the wider world to be had for a fight to the death on this issue. While the public is broadly sympathetic to the idea, they don’t care very much about it. Mos readily agree to the trump card argument of British constitutional conservatives: that there are more important things to be doing.

Just about the only way of getting the reform through would have been to accept a referendum. Although the current polls are favourable, it would be a difficult referendum to win – a bit like Australia becoming a republic. Australians favour a republic in principle, but the never the particular structure of republic that is on offer. It was easy to pick holes in the specifics of the proposals – but that would be true of any proposal born of attempts to create consensus. The risk/reward ratio just didn’t stack.

Lib Dems are very bitter, since they see this as a breach of faith, as Andrew Rawnsley has explained in the Observer. They have knuckled down to vote for a number of proposals that they really hated, such as tuition fees for universities (though to be fair some high-up Lib Dems secretly liked the idea), and elected police commissioners, as well as immigration limits. Of course Tories have voted for Lib Dem policies too, but these are mostly quite popular in the country at large, such as raising tax thresholds. Although the Tories let them have a referendum on AV, their campaign to oppose this modest and sensible reform was so vitriolic and irrational as to come over as a breach of faith, especially when they attacked Mr Clegg personally on the basis that you couldn’t trust him because he entered into coalition with them!

But the public indifference left Mr Clegg with a problem. Why bring the government down over this, and not tuition fees, or many other things which are currently unpopular with the public at large? So the breach is not enough to end the Coalition. Instead Mr Clegg has decided to withdraw the party’s support to boundary changes to Westminster constituencies. This reform would equalise their size, to the benefit, so the conventional wisdom goes, of the Tories.

Here it is Mr Clegg’s turn to be politically calculating. I have heard his supporters make the argument that since there will be no elected upper chamber, we need to retain a bigger Commons – an argument that I struggle to understand. To be fair Mr Clegg does not use this argument in his email to members – where it comes over as a more straightforward tit-for-tat. The Tory sophists argue that the Coalition agreement did not actually say that they would vote for the Lords reforms – just to bring forward proposals. But the same can be said of the boundary changes.

And as things have turned out, the boundary changes are a real problem for the Lib Dems. In ordinary times they would have been much more relaxed, as they have shown an ability to move out of their strongholds in held seats to win over adjacent areas. The London MP Sarah Teather won her seat in 2010 in spite of major changes to the boundaries. But the Lib Dem activist base has suffered with the coalition, and the campaigning environment is much tougher. They have shown an ability to hold on where the party and its candidates are locally well know, but not elsewhere. There are no reserves with which to flood new areas. The boundary changes are a major headache. Neither are the changes partilcualry popular amongst the general public, whatever the intellectual case. To get equally sized seats they have run roughshod over traditional local sensibilities. In Wales the impact is particularly severe. Even may Tory MPs will be relieved if the reforms died a death.

But it will create an awkward moment in 2013 when the vote is due to take place, unless the proposal is abandoned. To defeat the changes Lib Dem government ministers would have to vote against or abstain – this would be new territory for the government and could easily bring it down.

So who gains from this sorry saga? The first winners are Labour, where their cynical manoeuvring have bought rich rewards. First they have made the Coalition look weak and incompetent. But best of all they should now be able to defeat the boundary changes, which they hate. Ed Milliband’s leadership can chalk up another success after his inauspicious start.

The second winners are the grumpy Tory backbenchers. They genuinely hated the Lords reform, and will be glad to kill it. They are also pretty relaxed about idea of the coalition failing. And as individuals the defeat of the boundary changes makes their lives easier.

For the Lib Dems the outcome is mixed. It’s a policy failure but it is very clear who is to blame: the Tory backbenchers and the scheming Labour politicians – unlike the AV referendum. This fiasco is out of the way a long time before the next election is due – and defeating the boundary changes will give their campaigners the best possible chance of hanging on to the 40-50 seats needed for the party to survive as a political force.

The big loser is the Tory leader and Prime Minister David Cameron, and his project of turning his party into a credible one of government. For all the soft soap he puts into the Party’s manifesto, it is clear that he can’t carry his party with him. He took on his backbenchers and came out second. His party can unite around a right-wing Eurosceptic platform, but winning a General Election, especially on the old boundaries, looks impossible. A centrist Tory manifesto will not be credible. His plan to use the coalition with the Lib Dems to de-toxifiy the Tory brand has come completely unstuck.

And the country remains stuck with an antiquated system of government that increasingly loses the respect of both the public and the world at large. The public is paying a big price for its indifference.

The budget – the coalition at its best

George Osborne is gradually cementing a reputation as an effective Chancellor of the Exchequer and skilful politician. He certainly understands coalition politics and how to play for the longer term. Yesterday’s was a very interesting budget.

There a two schools of thought about coalition governments. One may be characterised as “lowest common denominator”: all the bold ideas are knocked out and we are left with a few messy compromises that lack any kind of coherence. The second is the “natural selection of ideas” in which the ideas of the various parties have to compete on their merits and the weak ones don’t survive, the sum being better than any party would produce individually. Britain’s first post-War coalition, formed by politicians unfamiliar with how coalitions work, has seen both types of policy formation at work.

The coalition started well. The initial policy programme was full of bold ideas, while dotty ones (cutting inheritance tax for example) did not make the grade. But things soon degenerated, as activists on both sides sensed betrayal. This was especially evident on the NHS, where we are left with a messy compromise that is almost certainly worse than either party would have produced on its own. But the 2012 budget shows a reversion to the “natural selection” model, for which credit must go to both George Osborne and the Lib Dem leader Nick Clegg.

One of the interesting features of the budget has been the disappearance of budget “purdah” – the absolute secrecy surrounding budget proposals. Mr Clegg made the early running in the media game with his bid for an acceleration of increases to personal allowances. But Mr Osborne clearly understood this to be an opportunity rather than a threat – in this case to reverse the top rate of income tax of 50%, which until a month or so ago looked to be entirely off the agenda. A few years ago the Lib Dems had a big conference battle over this top rate (before Labour introduced it, as it happens) and rejected the 50% – so there was evidently some Lib Dem ambiguity over the tax, which Mr Osborne was able to exploit. And indeed world thinking has long since turned against such high marginal rates, even for the very rich.

Meanwhile, weaker Lib Dem ideas about how to tax the rich more efficiently did not make the cut. This applied to the Mansion Tax on high valued property. Such an idea (though based on land rather than total property value) appeals to theoretical economists, but has two major practical problems. First is that property is not the same as cash, and that owners of such valuable properties may struggle to pay, and hence create a fuss. The wider the scope of tax, the more of a problem this is. The second problem is that it has to be based on a theoretical valuation rather than hard and fast fact. This is one of those things that becomes more of a problem the more that you think about it. Property (or anything else) is worth what you persuade somebody else to pay for it, which depends on many factors unique to the individuals taking part in the transaction and the time they make it. A host of practical issues follow. The eventual compromise of an increase in stamp duty for properties over £2 million, combined with a clampdown on stamp duty avoidance, looks like a much better idea to me.

The idea of limiting allowances to higher income people so that effective tax is no less than 25%, the “Tycoon Tax” – attributed to Mr Clegg in the proposal process, though not coming out of any Lib Dem official policy – also looks like a very sensible proposal – and this made the cut.

Mr Osborne was also able to push through further cuts to the main Corporation Tax rate. I have some reservations about this: companies are sitting on too much cash – if they don’t invest it, then the best way of getting this wealth back into the economy is to tax it. But there is logic to it to help retain footloose international capital, something that the country has been quite good at, but needs to stay in the game. And it’s not as generous as it looks, since allowances have been kept in check. In fact the big thing UK companies have been asking for is more generous capital allowances – but the footloose companies aren’t so bothered about this, and the Chancellor did not budge. I’m not sure that capital allowances have been set at the most efficient level – but I do know that business leaders always ask for too much, and the game is often more about tax avoidance than real investment.

One idea was not leaked in advance. This was the phasing out of the age-related personal allowances. This “granny tax” has attracted most of the press attention this morning, with howls of protest that the Labour opposition are seeking to exploit. Yet the reasoning behind this change is solid enough. Pensioners have done pretty well under the reforms already implemented by the government, and this is a nasty, complicated piece of work. Although it is true that many pensioners have been punished by the general reduction in the value of savings since the crisis began, this allowance is a bad way to deal with the problem. What is actually needed is for the economy to return to health, so that we can get back to a real interest rate of about 2% or so from its current negative value. It was brave to take on the pensioner lobbies like this, and Messrs Osborne and Clegg (to say nothing of the PM David Cameron) deserve credit. Critics suggest it may go down as a fiasco like Gordon Brown’s cut of the 10% tax band, or the negligible increase to state pensions the last government implemented when inflation appeared to be very low. Both were politically very damaging, to Mr Brown and to Tony Blair respectively. But this policy does not create cash losers (denying benefits to those who haven’t got them yet – rather than taking them away from those that have). It may even mark a turning point in the battle of the generations, as younger voters start to appreciate just how generous the state is to pensioners, and shift their ire away from the much less costly immigrants and benefit claimants.

The budget does nothing for macro-economists. There is no bold, imperial stimulus to “get the economy moving”. But nobody was expecting that. Overall this budget is a credit to the Coalition government.