Category: Politics UK

Reflections on general political developments and ideas in the UK

What can Lib Dems learn from the NHS debacle?

The NHS is proving a political nightmare for the Lib Dems.  This reflects a failure to develop a clear vision for the service before the election.

The NHS is now a toxic issue for the Lib Dems.  This is not because the voters are turning against the party on the issue, as they did for student loans.  In the overheated rhetoric surrounding the issue there have been many claims that the public will abandon the party over this latest betrayal.  But the public judges parties on what actually happens to the NHS, not on the speculations of excited activists and commentators.  And so far as front line services are concerned, nothing much has changed, and probably not a huge amount will as a result of the reforms… a major difference with the student fees issue.

No, the damage is being wrought within the party’s activists and members, as this summary of blogs after the Gateshead Conference shows.  Many feel an acute sense of betrayal by the leadership, and a number have left the party; more may follow.  This weakness is being cleverly exploited by Labour; but they didn’t start it.  Lib Dem activists themselves have not required outside assistance.

The party is all over the place.  The outcome of the Gateshead conference last weekend (which I was unable to attend) merely added to the confusion.  The emergency motion to abandon the Bill was not called, the representatives voting for a compromise motion supported by Shirley Williams – but a key paragraph was taken out of this motion by a narrow vote, leaving it saying not much at all.  This has given rebels in parliament cover to break the whip, but not placed serious pressure on the leadership and those not inclined to rebel, who do not see it as a worthwhile expenditure of political capital in the coalition, compared to tax policy, say.

This confusion has deep roots.  What on earth do the Lib Dems want with the NHS?  There is no clarity whatsoever.  I can count four distinct factions.  Currently most the most vocal strand are social democrats (like Shirley Williams, a living saint to many members) – who want a strong, nationally controlled monopoly service, which is able to provide a uniform standard right through the country (England in this case – Scotland, Wales and Northern Ireland have been allowed to get away).  They are relaxed about centralisation, and indeed all the amendments made to the bill over the last year at their behest point to a highly centralised provision.  Next come the economic liberals, with whom the party leadership tend to sympathise.  While this group has not developed any clear vision, they like the idea of what economist John Kay calls “disciplined pluralism” – in other words preserving a choice of providers wherever possible, so long as they are properly accountable.  These people are very relaxed about whether the NHS uses direct employees, third sector organisations, or, indeed, private companies to deliver its service.  A third group consists of NHS insiders – who basically resist any change in practice if not in theory, and who mainly argue for allocating more taxpayer funding through existing structures, whatever they happen to be at the time.  This group was led by Dr Graham Winyard of Winchester (and a former NHS high-up), who has now left the party.  And lastly (because this group is now largely drowned out), we have community politicians.  These want to see much more devolution to local politicians, and a bigger role for local authorities in particular; this group is relaxed about the  “postcode lottery”, so long as it is balanced by postcode accountability.  This group is close to the heart of traditional post-War Liberalism, and closest to my personal views (in spite of my Social Democrat provenance).

The original Bill was essentially a product of the economic liberals and community politicians (amongst whom we should count Paul Burstow, the Lib Dem health minister) within the party, working with Tory Health Secretary Andrew Lansley, whose attitude is quite close to Lib Dem economic liberals.  The resistance was started up by NHS insiders like Graham Winyard, and quickly swept in social democrats.  This alliance overwhelmed the party leadership at last March’s Sheffield conference.  There followed the “pause” in the reforms, and a raft of amendments that took the reforms in a highly social democratic direction, leaving economic liberals and community politicians disenchanted but hoping something could be retrieved from the wreckage.  But then the NHS insiders dug their heels in, as one professional body after another advised killing the whole reform.  This fractured the whole process and left the party with a set of reforms that nobody is very keen on, and to which many are vehemently opposed.

The wider membership, and most activists, are pragmatists, who can’t be pigeon-holed into any of the four groups that have shaped the debate.  Their confusion and general scepticism is understandable .  But this reflects a vacuum at the party’s idealogical heart.  We can agree on liberal social values, internationalism and inclusiveness – but the party seems to have no settled views on how to run the state.

The party should not get too worked up about this of itself.  It shares this confusion with the other main political parties (just try to make sense of the Labour position), and I’m sure the minor parties too if they could ever be forced into making a stand.  All successful political parties are coalitions of one kind or another.  But the party failed to hammer out its own internal compromise before the election, in the way that Vince Cable managed to for tax policy.  Formation of policy at conference was too much a matter of seeking consensus.  There were some quite radical elements of official, conference approved policy (like abolishing Strategic Health Authorities), but little awareness amongst members of the implications of official policy.  The original Bill was probably quite a well crafted compromise between our official policy and Andrew Lansley’s ideas (Paul Burstow certainly thought so).  But as soon as the heat was applied, official Lib Dem policy counted for nothing – it had not been engrained on members’ and activists’ consciences.

So where next?  The first point is that Liberal Democrats must realise that they either hang together with the Tories, or else the two parties will be hung separately on the NHS.  The Tories will curb their privatising zeal; the Lib Dems need to stop being so destructive.  There is no future in the parties scoring points off each other on this issue -they both need to show that all the apocalyptic talk is hot air.  I expect this means that we’ll have to find some extra funding before 2015.

And Liberal Democrats need to forge their own vision for the NHS, hopefully in time for 2015.  In doing so each of the various interest groups will have to compromise.  The best way of doing this is to have some controversial debates and votes at conference – like we did with tax policy.  Much better to have the arguments before the policy is agreed than after we try to implement it.

The mysterious ways of God and the Catholic Church

The Catholic Church’s untenable stand on gay marriage  undermines its entire corpus of moral teaching.

So what are we to make of Cardinal Keith O’Brien’s outburst, We cannot afford to indulge this madness, in the Telegraph over the weekend against the government’s proposals to open civil marriage to gay couples?  After the outrage has subsided I am left with a feeling of plain bafflement.

The implication of the Cardinal’s words is that traditional values in British society are Christian ones, and that it is the duty of Christians to defend them against more modern modern attitudes.  One of the early critics of the Cardinal’s article argued that he was crying wolf; since he had similarly objected to civil partnerships for gays, and as this had not led to the predicted collapse in civilisation, we should ignore his objections this time.  But Cardinal O’Brien takes this episode as part of his justification: he had warned that civil partnerships were just the thin end of the wedge – and, just as he predicted, the debate has now moved on to the sacred ground of marriage.  Where will it all end?  He suggested such outrages as marriage covering more than two people, as a sort of reductio ad absurdam.

But such thinking just shows how much he is out of touch with most of the general public.  Two things have changed.  First people have come to accept that there is nothing harmful in gay relationships, and that such relationships stem primarily from how people are made, and not from their perverted choices.  This change is particularly striking amongst the young, as this Economist article shows.  The second change is that people no longer think that marriage is primarily about having children: it is about lifelong partnership and companionship, driven by love rather than the need to keep the population going.  Put these two things together and objections to gay marriage melt away.

And it’s not as if these issues challenge any fundamental Christian principles.  It is true that the Old Testament comes out pretty strongly against gay relationships, though their prohibition doesn’t merit inclusion in the Ten Commandments.  But Christians, from Jesus Christ onwards, have always taken a flexible attitude to Old Testament teachings.  If Christians may eat bacon, why can’t they have gay relationships?  we nust fall back on higher principles than simply referring to ancient texts.

And on the question of sex, marriage and the family, the Church’s past flexibility is striking.   In New Testament times the primary focus of Christians was the urgency of the Second Coming.  Sexual relationships of any kind were regarded as a distraction.  In the gospels where Jesus makes it plain that the Christian calling may well conflict with family ties, and where this happened family comes second – as he himself had shown through his difficult relationship with his mother.  But now compatibility with family values are a central claim of practically all Christian denominations, with the implication that no conflict exists between family and Christianity.

And the Catholic Church has been here before.  Their stand against contraception is widely ignored in even fervently Catholic countries like Poland.  Opposition to gay relationships and gay marriage is headed in the same direction.

According to its leaders, one of the main attractions of the Catholic Church is its clear laying down of moral principles, in a world where values are undermined by relativism.  And indeed there are important moral weaknesses in the world at large – such as when individuals come up against the state or anonymous organisations (looters and benefit cheats at one end of the social scale, company directors avoiding tax and voting themselves unwarranted salaries at the other).  It’s not that the Church avoids these moral issues, it’s that its untenable stand on issues such as contraception and gay relationships encourages a pick’n mix approach to its teachings even amongst its loyal followers.  And its credibility in the wider world is shot through.  And that’s even before we have talked about the moral failings of certain Catholic priests and the Church hierarchy’s first response when it found out.

It is safe to assume that the Cardinal is a man of faith, and feels that his actions are guided through prayer and are the will of God.  He must follow his calling, and political calculation and what the majority think do not come into it.  So why is God sending him and his Church up such a blind alley?  The ways of God are indeed mysterious.

Is cutting Corporation Tax good for growth?

Everybody agrees that the UK economy needs more growth, like pretty much every other developed economy.  On the right it seems to be taken for granted that cutting corporate taxes will help.  This view deserves to be challenged.

An example of the argument for lower tax rates is this one from Tim Knox on the LSE website, promoted by the conservative think tank CPS.  Mr Knox suggests cutting the main rate from 28% to 20%, while simplifying a lot of the deductions.  The logic is simple.  The economy needs businesses to invest and expand.  A high corporate rate of tax is a disincentive to do so; a cut in rates would give businesses a shot of confidence that would get them moving.

This line of reasoning is not nonsense – and his ideas for simplifying the system on capital allowances and capital gains may make sense, though would be fiercely contested by lobbyists.  There is a lot nonsense talked about corporate taxes.  Companies aren’t people, and the payments companies make to people are taxed as employment or investment income.  There is quite a cogent argument (a classic essay topic for undergraduate economics students) that companies shouldn’t be taxed at all – though this would certainly open up opportunities for tax avoidance.

But a different way of looking at the predicament of the UK economy comes from Martin Wolf in the FT (paywall, I’m afraid).  He points out that one of the macroeconomic problems with the UK economy is the large value of the corporate surplus – in other words businesses are making too much profit and not spending enough.  He agrees with Andrew Smithers of Smithers and Co who published  a report entitled “UK: Narrower Profit Margins and Weaker Sterling Needed”.  Mr Wolf does not advocate raising corporate taxes, but he nevertheless poses an awkward question for those who advocate a cut.  The basic macroeconomic problem for the UK is that the government deficit is too high and its mirror image is a corporate surplus that is also too high.  Going back to Year 1 Economics, you can’t cut one without cutting the other (not entirely true, but the alternatives involve private individuals getting even more indebted, or an unrealistic export surplus).  How on earth does cutting corporate taxes help, without using voodoo concepts like the Laffer Curve?

In fact economically corporate tax is one of the more efficient ones in microeconomic terms – it does not distort incentives as much most other taxes, because it is based on profits, not inputs or outputs.  It amounts to a tax on capital – but capital is already having it very easy in the world economy, one of the drivers of increased inequality within nations (as opposed to between them…).

Strategically we should be thinking of more ways of taxing companies, on the basis of “use it or lose it” – it isn’t healthy for companies to sit on surplus profits.  A logical way would be to raise the tax rate but make dividends deductible – but this is probably a nightmare in practice.  Another idea is to cut the tax relief for debt interest – which would help restore the balance between debt and equity funding.  In the long term this would no doubt be very healthy and discourage companies from becoming over-indebted; in the short run it would be a bit like bayoneting the wounded after the battle, so implementation would need a great deal of care.

But even if either of these ideas look impractical, the argument for cutting the tax rate looks distinctly weak.

The battle for ideas in the Liberal Democrats

The launch of two new policy focused groups within the Lib Dems in the last couple of weeks has drawn a bit of comment in the party.  But the striking thing to me is what all this says about how the party has evolved since it was formed by a merger between the Liberal Party and the SDP.

The first new group, and the one that has drawn most comment, is the Liberal Left.  This group’s raison d’etre is opposition to the coalition with the Tories, now or ever.  It is social democratic in policy instinct, and sceptical of economic austerity policies; it rails against that convenient abstract noun “neoliberalism”.  The second group is Liberal Reform.  I am rather less clear what this one is really about; it says it is about promoting “four cornered freedom – personal, political, social and economic liberalism”.  I think it for people who think in an economically liberal way, and are inclined to support the coalition and the general thrust of government economic policy, but also have strong social liberal instincts – people like me, in fact.

These are distinct from two other groups: the very successful Social Liberal Forum, set up to counterbalance some of the economically liberal conventional wisdom amongst Lib Dem ministers and their entourages – it has struck a chord with the grumbles of many activists.  Then there is Liberal Vision, much more of a minority interest, economically liberal and seemingly a fellow traveller with Germany’s Free Democrats, distinctly to the right of that country’s political spectrum.  All these group build, perhaps, on the trail blazed by the Green Liberal Democrats, from whom one hears rather little these days…but which in its day was prominent in the promotion of environmentalism.

One Lib Dem on Twitter is dismayed.  He left the Labour party because of its factionalism, and now look what happening to the Lib Dems!  Political factionalism is very much a personal rivalry game.  The different factions are relatively tight networks of individuals with patronage powers, who partly define themselves by loathing of rival groups.  I don’t quite detect that with these groups, which tend to overlap with each other.  This, at least to this outsider, looks more like a battle of ideas, and is not unhealthy.  I worry that the Liberal Left (and the SLF) are more against things than they are for them, but that’s probably unfair.  And there have been a few insults traded across the social media, e.g. suggesting that the Liberal Left are just unreconstructed oppositionalists.  Plus the all those references to “neoliberalism” from the other side. That is just a dimension of debate, though – there’s a lot more reasonable discussion going on too.

But taking a step back, there are some rather striking things about the phenomenon.  First is the emergence of the word “Liberal” to describe the party and what it stands for.  The “Democrat” bit, a token gesture to the old SDP as it merged with the Liberal Party in 1987, is slowly dying out.  But old Liberals can’t take any comfort from this, since the defining features of the 1980s Liberals, community politics and environmentalism, get very little mention.  Instead we have various visions of social democracy (a strong state standing for fairness) and economic liberalism (a greater faith in appropriately regulated market solutions), both more characteristic of the old SDP.

Community politics is increasingly forgotten.  What was it?  It was politicians getting things done by taking a leadership role in their local communities – talking, listening, cajoling, organising to make things better, while still standing firm on core liberal values.  To the modern politico this is so yesterday.  Much more fun to discuss grand policies, new laws, political strategies, market positioning and so forth.  Perhaps this is an inevitable result in the decline of local communities, especially in poorer areas – part of the alienation of the modern quest for efficiency.  Pockets of community politics persist (the highly successful Sutton Lib Dems for example) and hopefully will keep the flame burning.  But while most activists will pay token homage to the idea, it isn’t what keeps them awake at night.

Since the merger (disclosure – I was a founder member of the SDP), genuine liberalism (an emphasis on personal freedom and internationalism) has come to define the party much more clearly than it ever did in the old SDP.  But other than that I have to say that the new party is growing more like the old SDP than the old Liberals.  I’m not sure if that’s a good thing.  The old Liberal ways had grown on me.

The friendless NHS reforms

The savages are circling around Andrew Lansley and his NHS reforms.  Or translated into something more politically correct,  the indigenous tribes have cornered the contemptuous invader, and are closing in for the kill.

Stories have been floating in the press that David Cameron is about to sack Mr Lansley and give way on most of his reforms, and particularly those that need legislative approval.  Mr Cameron’s expressions of “full confidence” cuts little ice in this football-mad country, where club chairman habitually express full confidence in managers the day before sacking them. Mr Lansley and the reforms appear friendless.  The various medical lobbies are building up against them; every few days another comes out against.  The Tory press is hostile to indifferent.  Lib Dem colleagues are urging me to sign a petition against the Health & Social Care Bill which is at their centre.

I can’t quite bring myself to sign, as somebody that basically supports reform.  But I now think that they were a political mistake not really worth fighting for.  And that may well be Mr Cameron’s view too.  The risks of persisting with it are rising.  There seems little chance of things settling down in time for the 2015 election, by which time chaos in the NHS could well be a top political issue.  When the Coalition took over, the NHS had recovered its previously poor political standing.  So far as the public was concerned, it wasn’t broke so didn’t need fixing.  On the other hand if the government U-turns now, there is quite a good chance that the matter will blow over.  Financial crises and hospital closures are bound to continue, but the whole thing will be rendered less toxic without these reforms to blame for everything.  The political calculation seems quite clear, which is why a growing number of Tories are pushing for Lansley to go.

What would happen if Lansley went and the Bill was dropped?  The new health secretary would be left with an enormous amount of executive power to continue a reform process – after all that is why the administrative reforms have made so much progress without the Bill becoming law.  Ironically a lot of the Bill was about curbing this executive power and making it more accountable.  But the focus of reform would be explicitly to make the service more efficient as demographic changes place it under ever more pressure.  This would be a lot more difficult for Labour to attack, since that was what they were saying when in power.

It hasn’t happened yet, of course.  I feel a bit disappointed that things have come to this.  I dislike much of the criticism that the reforms have attracted, and especially to the resistance to the use of private sector providers, and the sharing of facilities with fee paying patients.  The current NHS comprises a lot of good services swimming in a sea of mediocrity, and it has reached the limit of what can be provided if funded only from taxation.  The GP side in particular is inefficient and lacks accountability.  Beneficial changes require extraordinary amounts of effort to implement.  There was a lot of nonsense and gobbledegook in the PCT-led commissioning introduced by the last government, largely designed by management consultants.

Still the reform process was too broad and too fast, and became ever more muddled as the process encountered resistance.  I won’t mourn its passing.

 

Why the Coalition should not last beyond 2015

Some Tories are talking up the idea that the Coalition between their party and the Lib Dems should continue for a second term.  This doesn’t sound realistic.  And I think it would be a bad idea too.

Some pundits have claimed that Britain’s major parties (aside – I am thinking particularly of the three UK parties here, but there are similar dynamics with the SNP too) have become more alike and simply compete on competence (I often tread this in the Economist, for example).  This may be true so far as they way that they each reach out to a group of critical floating voters, but in fact each has a very different view of the world.  And it makes a difference which one of them is in government.

That was why it was such a surprise that the Liberal Democrats went into Coalition with the Conservatives in 2010, and why it has been, and remains, so painful for them.  To the Lib Dems, the Tories are on the wrong side of a great historical struggle that still shapes our politics.  The Tories stand for the rich, cleverly roping in those who aspire to be rich, and social conservatives and nationalists in a coalition of nastiness. The stakes in this battle are rising, since, for whatever reason, the rich have been doing very well over the last couple of decades, and have a lot to protect.  Redistribution, in some shape or form, should be high on the political agenda.

The Lib Dems are essentially liberal; they have some fellow feeling with the aspirant well off (or should do), but have historically been the other side of the rich-poor divide – and find social conservatives and nationalists anathema.

But in 2010 the party had little choice.  In its own way Labour was on the wrong side of history too.  Labour is the party of big government, and its core constituency is public sector managers and workers, the quangocracy and the many organisations that feed off tax funding.  The unions are heavily associated with these same interest groups, so its historical alliance with them does not cause undue strain.  And just as the Tories marshal social conservatives to keep the show on the road, so Labour marshal those who depend on state handouts, without any real interest in curing them of their dependency.

The first decade of this century proved a happy time for Labour.  The economy grew steadily, increasing the tax take, allowing the government payroll, direct and indirect, to expand, as well as the net for all sorts of benefits.  To many within the party it must have seemed that they were on an unstoppable march to solving the country’s problems through government action.

But it was a castle being built on sand.  Economic growth was not built on substantial advances in productivity, but on a combination of debt and good luck.  We should note that most of the debt in question was in the private sector, but it is also true that government debt expanded more than was prudent.  The good luck (consciously exploited Labour’s leaders) was the expansion of China and India, and the gains from trade that followed as costs of manufactured goods in particular advanced at well below the general inflation rate.  In addition immigration from Poland and other central and east European countries stopped the British labour market from breaking down, and expanded the overall tax take, if not income per head (a matter of some controversy).  All this has come to an abrupt halt, so that we are being forced to unpick many of Labour’s advances.

The shock to Labour supporters of finding that their dreams were built on air has been enormous.  In 2012 they still mostly don’t really seem to believe it; in 2010 they  were in such deep denial they were absolutely unfit to be in government, even in coalition.  There was no basis to work with the Lib Dems, whose general world view is somewhat closer to them than the Tories.  Given the financial crisis, a coalition with the Tories was easily the best option available to the Lib Dems, with the added benefit of the party learning how to take part in government.

How will things look in 2015, when the next General Election is due?  It is still a long way off, but another hung parliament looks quite likely.  Labour’s problem is not just that they are on the wrong side of history, it’s that most of the electorate realise it.  They instinctively know that Labour’s aspirations cannot be afforded, and that they have no real idea how genuine economic growth can be found, so their support is stuck.  But they should still advance from their lows in 2010, making a Tory outright win very difficult to pull off.

And what of the Lib Dems?  The general betting is that the party will fall back.  A near wipe-out is certainly within the range of possibility, but more likely is a significant loss of seats to, say, 30 or so (from the current 57).  The situation in Scotland, source of many Lib Dem seats, looks dire.  The consequence of this is that being part of a coalition is very difficult to make work.  It’s difficult enough with the current balance between the parties.  Could you really have a Deputy PM with just 30 seats? Offered a coalition by the Tories, the party would be wise to turn it down and let them make their way as best they could as a minority.  The financial crisis should not be anything like as severe as in 2010, so this will look a more realistic prospect.  Coalition with the Tories, especially with reduced moral and actual authority arising from a loss of parliamentary seats, is simply too toxic to continue.

And coalition with Labour?  It’s difficult to see how that would work in 2015 too.  There would need to be a change in party leader, and not just because he is a hate figure in Labour circles.  To the public changing sides without changing leader would stink to much of ducking and weaving just to maintain office; he would need to have pulled off a really good election result to be able to stay.  Changing leader is best done while not in government.  And the problem of not having enough MPs would still hold.

But what if the Lib Dems should do unexpectedly well in the 2015 election, maintaining or even increasing their representation?  This would certainly give the party a new moral authority after all they have been through.  But the toxicity of the Tories remains; they are simply on the wrong side of history.  With an increased representation, the party may well have the choice of partners, and if so, it should try to strike a deal with Labour, and one that gives the party increased overall clout in government.

But if Labour had done so badly that a coalition with them is not feasible?  This would be the Lib Dem opportunity to show that they are the true opposition to the Tories.  The party should offer the Tories terms that they are unlikely to accept, and then let them stagger on as a minority.  A tricky stunt to pull off, but surely better than five more years in government with the Tories, giving Labour yet another opportunity to recover?

 

The English problem

The Scottish SNP government’s pursuit of a referendum on independence has created a constitutional crisis for the UK.  But the real problem is England, not Scotland.

I don’t walk the corridors of power in Westminster, or mix with the great and the good who take in hand the the country’s affairs as an oblivious public goes about its daily life.  But I imagine that something close to panic is taking hold there.  Scotland is moving inexorably towards independence from the UK, while compromise proposals seem to raise more awkward questions than they answer.

The humiliation that beckons for these people – senior civil servants and senior Conservative and Labour party types that I will now refer to as “the British establishment”- can scarcely be imagined.  We get a flavour of it from some of the awkward questions that would be posed by Scotland’s exit from the union.  From the seemingly trivial – like what do we call the country that is left behind?  “Britain” won’t work any more, since this geographical term refers to the whole island; the “United Kingdom” will no longer be true (neither Wales nor Northern Ireland are kingdoms, unlike Scotland) and has no adjective to describe its citizens; “England” does not cover Wales and Northern Ireland.  And then there are more serious questions, like what future does the country’s nuclear deterrent have?

Scotland is a core part of the country’s historical identity.  How on Earth to explain its departure?  There is no precedent, outside the break up of colonial empires and or the demise of the multinational Habsburg and Soviet empires.  What do the British establishment tell their opposite numbers in Germany, Spain, Canada, and so on, countries that have all managed a diversity of identity within their borders of greater historical significance?  The loss of international prestige would be enormous; instead of being up there with Germany and France, the country will be jostling with Spain and Poland.  All this humiliation will be felt most acutely by the Conservatives, who have a romantic attachment to the country’s past greatness.  Where will it fit in Michael Gove’s new history curriculum? David Cameron will not want to go down in history as the Prime Minister who lost Scotland.

But such a prospect is real enough.  The usual levers of power seem to be ineffective.  With the AV referendum – the most recent perceived threat to the British establishment – the establishment could rustle up strong support from Tory grassroots and donors, plus a more or less united press, while neutralising the Labour Party.  None of this will work north of the border, where the British establishment has been comprehensively outmanoeuvred.

To make matters worse, there seems to be no, establishment friendly middle way.  There is the idea of “Devo-max” – where Scotland would take to itself full taxation powers, leaving defence and foreign affairs to London…a bit like Gibraltar.  Except that the Scots will want a say in who the British Prime Minster, Foreign Secretary and Defence Secretary are and the policies they follow.  But surely it is unacceptable that Scottish MPs could still retain their say over English domestic policy?  This problem has troubled constitutional experts since Irish Home Rule was mooted in the 19th century, and no acceptable solution has been found.

The British constitution is failing, with generations of complacency from the British establishment at last taking its toll.  The problem is England.  The logical, time-tested, way for the country to deal with the Scots desire for more autonomy is through a federation.  There would be a constitutionally constrained federal government, with highly autonomous states operating as a tier beneath.  But in the UK England is just too big to be treated as a single state in a structure like this.  Either it is so powerful that it can force through whatever ever it likes on the other countries, so no real advance; or the tiddler states of Scotland, Wales and Northern Ireland are given such powers over the whole that the English will resent their right of veto.  I can’t think of any successful federation that is so lopsided.  Russia and the Soviet Union had a similar problem, which could not be resolved democratically.

So what about breaking up England into a series of regional states?  But this reverses hundreds of years of systematic centralisation.  Coherent regional identities either don’t cover swathes of the country (where does Northampton fit?), or are too small (Cornwall).  London, Yorkshire and East Anglia may fit the bill – but it gets much more difficult after that.  Worse than that is the total disdain with with British institutions treat the idea of English regionalism, from the Westminster establishment to the popular media.  The English public is indifferent to hostile.  John Prescott’s attempt to push regionalism in the last government was crushed when a referendum to set up an elected assembly in the North was voted down even more overwhelmingly in a referendum than was the Alternative Vote.

And yet the United Kingdom is crying out for a rebalancing of powers between different levels of government, including English regions – and such a rebalancing, across the whole country, is the only way to deal securely with the Scottish demand for autonomy.  It would benefit England too, but most English won’t have it, and that is the real problem.  The British establishment has suppressed sensible debate about the topic for so long that it seems too late to start it now.  The Scots are miles ahead.

The best way of dealing with the SNP’s drive for independence would be to offer a constitutional convention across the whole of the UK, and to ask the Scots to wait for its results before having their referendum.  This would at last allow the unionist side to take the initiative.  This would be a good idea for the Liberal Democrats to take up – since it closely follows the party’s existing policy.  But I can’t see the Conservatives biting.  The English simply aren’t ready for a mature constitutional debate.

If the British establishment are humiliated, as increasingly seems likely, they will only have themselves to blame.

Ballsed up – Labour’s economic narrative implodes

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

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

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

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

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

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

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

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

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

 

Time to wake up to the de-industrialisation of advanced economies

Trying to understand the global economic crisis?  This article from Joe Stiglitz is required reading.

I have flagged it already on Facebook and Twitter, but without much in the way of reflection. In fact it has produced an epiphany moment for me.  I have maligned Professor Stiglitz in a past blog as producing only superficial commentary on the crisis, alongside his fellow Nobel laureate Paul Krugman.  This was based on one or two shorter articles in the FT and some snatches on the radio; I wasn’t reading or listening carefully enough.  Professor Stiglitz is one of the foremost economists on the current scene.  He used to be part of the Clinton administration, and worked at the World Bank in the 1990s, but his views proved politically unacceptable.  He also wrote the standard text book on public economics, which I used in my not so recent degree course.

The article is wonderful on many levels, but the epiphany moment for me came with his observation that, underlying the current crisis, is a long-term decline of manufacturing employment in the US, and by implication, other advanced economies too.  He draws an interesting parallel with the Great Depression, which was caused, he claims, by a comparable shift from agricultural employment – again in the US; I think that such a shift was less marked in Britain, but the depression was also less severe.  This decline in employment brought about a doom-loop of declining demand across the economy as a whole – which was only reversed by World War 2.  The war effort caused a boom in manufacturing industry which was readily redeployed into the postwar economy.  This view of the Great Depression rises above the fierce controversies over fiscal and monetary policy, and places them in a proper context.

We have been witnessing the decline in manufacturing employment for some years, and grappling with its social consequences.  The important point is that it is mainly irreversible. It has been brought about by technological change, which has improved productivity.  There is a limit to the number of manufacturing products that we can consume – just as there is a limit to the food we can consume, and we are at that limit.  So the number of jobs declines.

Of course the picture is complicated by the rise of manufacturing in the developing world, and especially China, and their exports to the developed world.  In the US I am sure, and certainly in the UK, more manufacturing output is now imported than exported, causing a further loss of jobs.  This is reversible, though, and in due course will reverse, as the developing world advances and loses its temporary competitive edge.  But this won’t be enough to reverse the overall trend of rising productivity.

But advancing productivity should be good news in the long run.  It releases the workforce to do other things, or, if people prefer, to increase leisure time.  So what replaces the manufacturing jobs, in the way that manufacturing took over from agriculture?  Services, of course.  What is, or should be, the product of these services?  Improved wellbeing.

Services have rather a poor reputation in our society.  Traditionalists see them as ephemeral, compared to the real business of making things – a bit like Soviet planners were obsessed with producing steel rather than consumer goods.  More thoughtful people associate them with poor quality jobs in fast food restaurants or call centres.  But it doesn’t have to be this way.

We need to develop clearer ideas of what tomorrow’s service-based economy will look like. That’s important because the way out of the current crisis is through investments that will take us closer to this goal, just as war led to investment in manufacturing in the 1940s (and earlier in Europe).

And the key to this is thinking about wellbeing.  This is important because one of the answers could be an increase in leisure, hobbies and voluntary activities – which is not normally regarded as economic activity at all.  Reflecting on this, I think are two areas whose significance will grow and where investment should be made, both of which raise awkward political problems – health and housing.

It is easy to understand that health and social care will take up a higher proportion of a future economy than they do now, and not just because of demographic changes.  These services are vital to wellbeing.  But we are repeatedly told that we can’t afford to expand them.  And that is because we are reaching the limits of what state-supplied, taxpayer funded services can deliver in the UK. (In the US it’s another story for another day).  The health economy of tomorrow will have a larger private sector component, whether integrated with the NHS or parallel to it.  But what should our priorities now be, while this private sector is on the back foot?  It seems sensible to make the NHS more efficient and effective, but foolish to cut jobs.  We should be building the skill base alongside the reform programme.  The chief critics of the government’s NHS plans (including the Labour front bench) are that NHS reforms should be stopped so that they can focus on the critical business of raising efficiency.  But maybe it should be the other way round – we should be pushing ahead with reform, but relaxing the efficiency targets and letting the costs rise a bit until the economy starts showing greater signs of life. then, as any cuts are made the private health sector can take up the slack.

Perhaps housing is pushing at the boundaries of what “services” are.  We traditionally view this as a capital investment.  But what I mean is providing more and better places for people to live in, whether they own them or not.  Most of the country is quite well off here, but poor housing is probably what divides rich from poor more than anything else – and more investment in the right places (decently sized social housing) could rebalance things nicely and dramatically improve wellbeing.

But beyond this we badly need to get out of a manufacturing mindset, both in the private and public sectors.  We should not view division of labour and specialisation as the ideal form of organisation (massive call centres, and so on), and we should value listening skills much more – I nearly wrote “communication skills” but most people understand this about getting over what you want to say, not understanding what your customer or service user actually needs.  This is happening only very slowly.

So I would add a third priority: education.  We need to greatly expand the teaching of life skills at school and elsewhere.  This would not only help build the skills that tomorrow’s economy needs.  It would help people make better choices in a changing world.