As aqua fades, should the Lib Dems drop Helvetica?

Helvetica example

Today British political commentators are absorbed by the 2013 Budget. I don’t believe in the value instant comment, and my commentary on the 2012 Budget proved way off the mark anyway. So I will talk about graphic design instead.

In the run up to the 2010 the Liberal Democrats launched a new house style, featuring a new colour palette and a new font, Helvetica Neue, in three weights (light, medium and heavy) and with an “italic” (which sloped rather than really italic). This was all part of the party’s new, professional image. Getting a political party’s activists to stick to a house style is a pretty hopeless task, but this time the party did quite well. The central campaigns department stuck to the new principles, and centrally produced literature still does. The picture comes from the conference agenda for this March in Brighton.

The most conspicuous part of the new house style was extensive use of the colour aqua, a hue on the blue side of turquoise. At times this even seemed to replace the traditional gold (an orangey yellow) as the party’s main colour. This was certainly new, but not very popular with the activists: too similar to Tory blue. Conference sets have now returned to almost exclusive gold, with aqua relegated to contrast work, alongside a dark red.

What about the font? Political fonts are meant to be boring, and Helvetica certainly fulfils that objective. You see it about a lot (I’m looking at a set of Marks & Spencer vouchers printed in that font as I write this). Graphic design types don’t like it, but I think it works well enough if there isn’t too much text: on posters and title pages and so on. Having three weights makes it a bit more flexible than the very similar, and free, Arial which just comes in normal and bold – though I really don’t like the Helvetica heavy. In text blocks, though, it is much less happy. It reminds me of marketing brochures which are meant to be seen rather than read, and where anything interesting in the text has been edited away long ago as a hostage to fortune. Unlike marketing guff, political text should have content and it should be read.

There is another problem, which will bother only a few. It’s a cheap font without lower case numbers (or “old-style” numbers, contrasting with upper case or “titling” figures). This is a bit of problem because the style guide recommends avoiding the upper case where possible. You can see this in the date “saturday 9th march” in the picture. The number 9 sticks out horribly – compare it with the one in the text of this blog (where lower case numbers, unusually, are standard). Unfortunately being cheap is no doubt one of critical features for any Lib Dem standard font. Probably easier to drop the advice about avoiding upper case letters: the text above would look much better if day and month had the normal initial capitals.

An alternative to dropping Helvetica is adopting a text font to work alongside it, perhaps a serif one. There are many cheap ones available, though  the commonest, Times New Roman, is probably too over-exposed.

Will the Lib Dems adopt a new house style for the 2015 campaign, to reflect the fact that the political context has completely changed? A new image for an older and wiser party – and distancing itself from the rash pledges of 2010? Or will it want to emphasise continuity – like the keeping of the pledge on personal allowances. I would prefer the former. After all the centrally directed campaigns in 2010 did not work that well in the end: the party lost seats, especially where fresh candidates tried to get away with contentless campaigns with lots of house style. I’m not holding my breath though.

 

 

Does Britain need the City?

The British governing class has reacted furiously to the European Parliament’s attempt to limit bankers’ bonuses. Once again their central argument is that it is a threat the wholesale financial services businesses that are  based in the City of London, which they say is critical to the British economy as a whole. This is an argument that is regularly wheeled out by not just the establishment, but even by normally sensible commentators such as The Economist. The British public at large seems largely unmoved, however. This is a topic that could do with closer examination.

The City is an astonishingly successful business cluster, where I worked for 18 years up to 2005. The main controversy surrounds an very well-paid elite of traders, fund managers and investment bankers. These people, or the businesses they are part of, contribute disproportionately to national income – though exactly how much I am less clear about. Financial services consist of nearly 10% of the country’s GDP, but this includes a lot of businesses that are clearly not part of the City (retail bankers, estate agents, financial advisers, and so on), in spite of attempts by many commentators to conflate the two. But their high income reminds me of the joke about Bill Gates wandering into your local bar and the average income there soaring (this joke needs updating – Bill Gates’s income will have dropped alot in the last few years). If the City bankers leave, the country’s GDP may suffer, but that doesn’t been that everybody else is necessarily poorer.

But, the argument goes, these well-paid people spend their money here and create jobs. This argument is much weaker than it first appears. Rich people don’t spend all that much of their incomes on the sorts of things that create local jobs. A lot of their income is saved, with little of this saving going into productive investment in the UK economy. A more immediate problem is that a lot of their money is going into property, and other things where supply is limited (plumbers, school teachers at private schools, etc). All this does is bid up the price and put them out of reach of ordinary people. Still, if these businesses really are global, and having them on British soil contributes to the British trade balance, then some sort of net economic benefit is plausible.

A sounder argument can be made through taxes. City businesses and their employees pay a lot of tax under Britain’s progressive tax system (mostly income tax and national insurance on those bonuses – global businesses are very slippery on the matter of corporate taxes). How much? I don’t know: but it could amount to 1-2% of GDP (that’s guesswork working from the 10% of GDP for financial services income as a whole). There is an irony here. Very often we hear that our high taxes are damaging the City – but if they didn’t pay tax there would be little point in having it.

But behind this there is a deeper question. Are the services the City provides socially useful? In principle they should be. Our complex economy depends on finance to link those with surplus money with those who have productive investment projects to get off the ground. It’s what pays most people’s pensions. In principle fund managers, even those in hedge funds and private equity, should be helping this along. But a great deal of scepticism is in order. Too much energy is wasted in various intermediate devices – such as derivatives – whose value is difficult to see. Too much money is lost between one end of the process and the other. High profits, an economist will tell you, are a sign of economic inefficiency. It is the industry operators that are getting rich, not their clients. The aim of public policy should be to bear down on the industry to make it much less profitable, while maintaining its socially useful purpose.

But if it a global industry, can’t the British economy rake in the benefits of this inefficiency at the expense of the rest of the world? There are problems. First is that as global governments get to grips with the dysfunctional wholesale finance industry, it will gradually become less profitable, and the benefit reduces. The EU tussle on bonuses is but one part of this process, even if it is badly directed. The second problem is that the British taxpayer can become more embroiled in the industry than it should be. The bailout of British banks in 2009 surely wiped out many years of tax revenues derived from them. In any case income from financial services tends to be volatile, and so less useful – it disappears when you need it most. A further problem is that high City pay diverts the brightest local people away from more socially useful work.

So overall I find the case for special treatment for the City to be unpersuasive. What we actually want is for London to be a global hub for a smaller, less profitable and more functional financial services industry. The government is doing some quite sensible things: raising capital requirements, and separating investment from retail banking. This should limit the government’s exposure to bailouts, and reduce the level of finance (“leverage” in the jargon) available for trading operations, which believe is the critical issue. Other actions are more ambiguous: tougher regulation sounds fine, but it is in danger of harming decent retail banking businesses and reducing the level of competition as a by-product.

And as for the EU bonus regulations: I don’t think they will help much. They do not tackle the central issue, which is why banks are making so much money in the first place, and able to pay such large bonuses. But neither do I think they will do any real harm. Lower variable pay, and hence higher fixed pay, for banks may sound as if it increases risk, but it will force managers to ask more searching questions about what they are doing. And if more whiz-kids go to Singapore, so be it.

 

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 public’s foul politcal mood: symptom or disease?

Is depression an illness? It can be. Many people suffer depression that is so severe that it overwhelms them. They need help and we categorise it as mental illness: a condition with a life of its own, where medical intervention is recommended.

But for most of us, most of the time depression is just part of the ordinary fabric of living. It is a necessary step in the way the mind adapts to new realities in the world around it, especially changes that are unexpected or unwelcome. We don’t understand why the human mind has evolved in this way, but it clearly is not a malfunction. We must accept it and work through it. This common wisdom is summarised in popular models such as the Kübler Ross model of the five stages of grief (denial, anger, bargaining, depression, acceptance).

We can compare this personal mental phenomenon to current public attitudes to politics, especially here in Britain, but elsewhere too. This is partly a simple metaphor; but also some of the same psychological forces are at work. The public mood with politics is foul. Is this a disease, or merely a symptom of an inevitable change that is taking place in our society, that we simply have to come to terms with? And how should politicians respond?

The latest evidence for the public’s mood comes from the recent Eastleigh by-election. The main established parties locally, the Liberal Democrats and the Conservatives, both lost votes, and much of their support was grudging, based on keeping somebody else out. The grumpy anti-establishment protest party Ukip jumped from nowhere into second place. The official opposition, Labour, made no headway. And, in more classic depressive behaviour, turnout fell significantly from the General Election in spite of an extremely intense campaign, where voters were getting daily leaflet drops and their phones did not stop ringing.

If this is an inevitable response a changed reality, we don’t have to look very far for a culprit. In the 15 years from 1992 to 2007 Britain has enjoyed steady economic growth. If the benefits of this growth have gone disproportionately to the rich, they have neverthless been spread widely. Pay-rises regularly beat inflation. The benign effects were reinforced by easy money which supported both consumption and rising property values. This didn’t seem like a golden age at the time (though there was a brief note of euphoria at the turn of the Millennium), but it served to set some fairly stable and benign expectations. Politicians squabbled of the extra things they could do with “the proceeds of growth”.

But this collapsed in 2007, when the financial crisis started, with a sharp economic contraction in 2008-09. Worse, in 2013 there seems no sign of things getting any better. While politicians on the left and right argue that growth can be restored, the public remains entirely unconvinced. You have to be a real optimist to think that Keynesian stimulus would offer more than temporary alleviation; and it could make things worse in the long run by taking the national debt sky high. The right wing’s supply side revolution would make things worse for most people in the short term, and probably only better for the already wealthy after that. Monetary loosening seems to involve sucking life out of the Pound, and so making things like energy, cars and foreign holidays yet more expensive – probably with only share and bond prices showing any benefit.

What on earth has happened? The public suspects that something has changed about the economy and society which means that the benign years before 2007 will not return. This builds on the natural human tendency to project current circumstances into the future. It so happens that I feel that this public instinct is well grounded. Slow growth is here to stay. Much of the growth before 2007 was a mirage.

This need not be a bad thing in itself. There is plenty enough resources to ensure a decent standard of living for everybody. But the political priorities in a low growth world are very different from what they used to be. Distribution of wealth becomes a top political issue. Government must learn to be frugal. We must focus on improving wellbeing rather than monetary wealth. But these changed priorities require a big psychological adjustment, so it is no wonder that there is anger, frustration and depression amongst the public.

If that is all, then the bad mood is simply a symptom of the changing times, and politicians should see through it to focus on the changed priorities. Politicians need to show empathy with the public, but not be panicked into populist policies. Aided and abetted by an unhelpful press, much public anger is directed at such things as immigration, the European Union, health and safety legislation, and human rights. But politicians should not be fooled by this anger; the public is in fact deeply ambiguous about all of these things. Deep down they sense they are necessary to the way we want to live our lives, the odd silly excess notwithstanding. Instead politicians should focus on reform to the tax and benefits system, improving public services, developing a housing strategy, securing energy supplies and fixing the still-broken financial system.

But many thoughtful observers, Paddy Ashdown for example, are convinced that the bad public mood is much deeper than this. Its beginnings predate the financial crisis of 2007 after all. There is a deeper feeling of disenfranchisement that will not go away. This needs more direct intervention. While I am not apocalyptic as Lord Ashdown, I think he has a point. British politics is not corrupt, but it is conducted by an elite class that does all it can to avoid being held to account. Reforming this will be hard work though. Devolving more power to local level is surely part of it – though fraught with danger. Whether the current government’s localism reforms have achieved anything useful is open to doubt – though the growing number of City Deals are more promising. Taxation powers are the critical issue, and nobody shows signs of grasping this particular nettle. The opportunities to re-enfranchise voters are surely mainly at the local level – but that means the delegation real power, and responsibility for real trade-offs – rather than the one-sided lobbying of the centre that currently dominates local politics.

The public mood is both a symptom of change that is running through our economic system, and also a deeper problem in its own right. Both call for honest liberal reforms, and not the sour populism that it immediately encourages. Let us hope that the public, through its anger and frustration, recognises this. They often do, if any politician has the courage put the case to them.

 

Eastleigh: a blow for the Westminster bubble

My first reaction to the overnight result of the Eastleigh parliamentary by election was, as a loyal Lib Dem, relief. For once the party isn’t having to explain away a lost deposit. A more considered reaction is that it shows just how out of touch with ordinary people the Westminster bubble is – I nearly wrote “has become”, but I think it has always been thus. Will they will be chastened by the experience? Alas, there is no chance of that.

By “the Westminster bubble” I mean that community of London-based politicians, journalists, lobbyists and their hangers-on, who control the main levers of political power, but who talk chiefly amongst themselves. There are plenty of enthusiastic Lib Dem bubble-types, but the Lib Dems are better grounded than most. They mainly responded to the Eastleigh challenge by actually going there and talking to the voters, rather than just trying to influence the media coverage in classic bubble fashion. The by election has been a sobering experience for the party, along with the joy of victory. First the Lib Dem vote share fell sharply, and the voters showed no great enthusiasm for the party. Second, the experience has shown just how much the party is disliked by most inhabitants of the bubble. This is hardly a surprise when it comes to Labour and Conservative politicians – but that it includes most supposedly objective news journalists, including at the BBC, is a little disappointing.

Exhibit A in this case is the Chris Rennard sexual harassment scandal. Almost all the news media have been giving huge prominence to some rather old accusations about sexual harassment by the former Lib Dem chief executive. I can do no better than refer readers to the Guardian’s fair-minded Michael White on this. The media coverage has everything to do with trying to influence the Eastleigh result against the Lib Dems, and little to do with the merits of the story. I will give a partial exemption to the BBC’s Martha Kearney on the World at One on this. She has given the story very heavy coverage – but does seem to have been genuinely interested in exploring the social issues the story raises about the behaviour of men to women. For all its flaws it sounded like good journalism to me. But the glee shown by BBC’s Today presenters about the possible effect of the story on the election was entirely another matter. The BBC should be ashamed of itself.

But the voters of Eastleigh just weren’t interested. Mild and old accusations of sexual harassment against somebody that has never held elected office was not the same thing as MPs overclaiming expenses. Neither did the other Lib Dem scandal, that of Chris Huhne’s confession of getting his wife to take his speeding points, seem to have played all that heavily. That issue was at least a legitimate issue for the by election, since Mr Huhne had been their MP, and his resignation is what triggered it. The Westminster bubble’s inhabitants seem incapable of understanding the voters’ lack of interest.

Meanwhile the bubble seems equally incapable of comprehending the extraordinary performance of Ukip, who stormed from nowhere into second place, and came  close to winning the seat. This seems to vindicate the stand of some right-wing bubblies, exemplified by Daily Mail journalists, on Europe and other issues, but Ukip themselves are complete outsiders – more so than even the Lib Dems. They have been trying to link the party’s rise to Westminster’s own obsession with the country’s relationship to the EU, and whether or not to hold a referendum. But it seems highly implausible that this had much to do with it. It seems much more likely their rise is a reflection of an anti-politics mood: a bit like the success of Beppo Grillo in Italy. Of course the journalists in the bubble are doing much to stoke the anti-politics mood, in order to help their own standing within the bubble. But this is turning out to be a highly destructive game. No doubt the journalists calculate that what they have built up, in the rise of Ukip, they can just as easily destroy when it presents a real threat. But politics as a whole is being degraded.

Instead of reflecting on this, the bubble journalists are emphasising the humiliation to the Conservative and Labour parties and their respective leaders. But for these parties the election should be seen as a useful reality check, and no more.

My politically objective advice to David Cameron is: don’t panic. The election says nothing about his recent policy move on an EU renegotiation and referendum. I think this is a brilliant move: but it is part of the groundwork for the 2015 General Election, and will show few benefits before then. The election also shows that the Lib Dems will be no pushover, even though many bubblies think the party will vanish without trace in 2015. Ukip are a challenge, but their weaknesses are poor organisation and lack of media friends. There is plenty of time for them to burn out, and the time for pricking their bubble is after the 2014 European Parliament elections, and not before. Tories might reflect that if the by election had been held under the Alternative Vote (the system that they so vehemently rejected in 2011), they they might well have won. Though, to be fair, Ukip would have been more likely victors on this occasion.

For Labour, the result is pretty unsurprising, but it may help their more enthusiastic supporters to confront reality. The public does not share their view of the economy: that austerity policies are laying criminal waste to the British economy. And it will be hard work for them to make progress outside their diminishing working class heartlands. The leadership probably realise this already, even if Polly Toynbee followers don’t. But the time to fix this is not necessarily now.

And for the Lib Dems? It’s difficult not to see this as a small, but positive step forward. The party is earning a place as part of the political establishment: a party that is capable of progressing even when the media is against it. The party can’t pretend, as it liked to, that they are super-clean, and new kids on the block. The public see all the human frailties they see in other parties. But Labour and the Conservatives have succeeded in spite this. In the end people like to vote for respectable, establishment parties when the stakes are high. Instead of trying to promote themselves as a new kind of political force, they need to focus on promoting policies and competence. For all the noise, that is happening.

 

 

Britain’s economy: is the right right?

Britain’s economic performance since the Coalition government took over in 2010 has been as dismal as today’s cold, damp and grey London weather. Negligible economic growth; government finances that stubbornly refuse to improve, even as services and benefits are cut; and although unemployment is trending down, this is at the cost of pay and hours being squeezed. In political and media circles most of the debate about this state of affairs is around managing total economic demand: the “Keynesian” critique (quotation marks since using a dead economist as a source of authority does not do justice to the critique). Much less prominent is a right-wing critique. Yesterday Allistair Heath, Editor of City AM produced a 10-point plan in The Telegraph online, which neatly summarises this perspective. It is worth thinking about this a bit.

Mr Heath’s 10 points, in his “Supply-Side Manifesto” are as follows:

1. Cut corporation tax to 11pc; abolish capital gains tax

2. Cut current government spending by 2pc this year

3. Wage war on zombie firms

4. Reform the labour market

5. Allow private sector to finance big transport projects

6. Build 300,000 homes a year

7. Scrap renewable energy targets

8. Create mini-jobs for welfare recipients

9. Allow for-profit firms to run schools

10. Make it easier for consumers to switch suppliers

The basic premise of this is that it is what Britain needs is a supply-side revolution to get going. In other words it must be made easier for businesses to grow, and there must be greater incentives for private sector investment. There is something to this. Britain’s economy before the crisis struck in 2007 was unsustainable, and much of the growth in the preceding half-dozen years was a mirage. The most convincing evidence of this is the country’s current account deficit – consistently 2-3% of the economy (and the trade deficit much worse). This seemed to be the result of an inflated exchange rate. As the crisis struck, the pound duly depreciated. And yet, as the Economist pointed out a couple of weeks ago, the current account deficit has not recovered (unlike after 1992, when the pound fell out of the ERM). This bespeaks a deep malaise in the economy. This is much more that a dip in the business cycle that can be cured with fiscal stimulus and/or loose monetary policy. Indeed both such policies could make things worse by pushing out needed investment.

It is common wisdom that the British economy needs to be “rebalanced”: but this seems to be happening only very slowly. Reduced dependence on financial services and public expenditure are clearly both part of any such rebalancing, and we do seem to be making some headway here. But what is to take their place? Thinking about the “supply-side”, or how the economy actually delivers the goods and services it needs, is a welcome relief from banging on about aggregate demand, and its assumption that all this can be left until later. But it is here that I mostly part company commentators such as Mr Heath. Let’s have a quick look at the ten points.

  1. Cut capital taxes to encourage investment. This idea has a respectable intellectual history, but there is a problem. It tends to encourage wealth creation by the rich without much impact on the rest of society. And as the rich tend to save rather than spend their incomes, this doesn’t do much to fix the wider malaise. I’m not so sure that attracting footloose international capital will help much in an economy of our size anyway, (unlike Ireland).
  2. More cuts to government spending: no ring-fences. I do agree that government has to be smaller and more efficient – but the country is very dependent on government sponsored services, such as education and health. We are up against what economists call “Baumol’s Disease”, as well as demographics; there is a limit to amount we can expect from efficiency savings. There is plenty to discuss about how these services are to be funded and structured, but crude cuts are a blind alley.
  3. Allow more companies to go bust. I have more sympathy with this one, though I am not convinced that this is really what is blocking investment.
  4. Labour market reform: reduce job protection. I am more ambiguous on this than most liberals, perhaps hardened by my experience as a middle manager. Improvements can be made, but the evidence that this is what is holding us back is weak.
  5. Big transport projects financed by private sectors (tolls, etc). Easier said than done. The cost of big capital projects is escalating, and returns less certain. I think the current government is pushing ahead with this as fast as politics will allow.
  6. Housebuilding. Here the right wants to unleash the private sector by overcoming planning constraints. Mr Heath is being a bit disingenuous here: he means plastering the green-belts with cheap and shoddy new housing estates. But there is a housing shortage; and we do need to compromise on the green belt. But we need good quality homes and more social housing, with development gains being used to finance social infrastructure, such as schools.
  7. Junk renewables for coal and gas. I’m not sure that an economy built on cheap, carbon intensive energy is the right way to go. I expect that Mr Heath does not believe in climate-change. Moving away from cheap energy dependence is one of the pieces of rebalancing that has to be achieved. Green energy should be part of any growth strategy.
  8. 9., & 10. These are throwaway ideas given a sentence each. I don’t necessarily disagree, even with for-profit state schools, but I don’t think they will help the supply side by much.

So there’s me being very negative about a whole series of practical ideas. So what do I think? First point is that we need to accept that, for a whole variety of reasons, growth in most developed countries will be very slow for the foreseeable future. We need to adapt our expectations to this, and think more clearly on how to deliver improved human wellbeing without it. Second, we need to think hard about under-used human resources: that means mainly people living outside the English South-East and a few other hot-spots. Simply building more houses across London’s greenbelt and moving people there does not feel right. There are no big ideas here, but lots of little ones. Dumping big government agencies in these places is not one of them, though. Third we have to rethink public services. The reforms need to focus on improved commissioning and getting results. But we also need to think about such politically toxic issues as co-payment – since taxes will not be enough to fund the nation’s needs. Plenty of ideas for future blogs, but that’s enough for now.

So the left bangs on about Keynesian demand management, in the hope that longer-term problems can be solved later; the right chases a fantasy of growing businesses unleashed by smaller government. The public seems sceptical of both. Rightly so.

London’s schools: awkward facts for both left and right

Last Friday I attended and seminar for school headteachers and chairs of governors addressed by Sir Michael Wilshaw, head of Ofsted, the body that inspects English schools. It was convened by the London Borough of Lambeth, for whom I am a primary school chair of governors, and where Sir Michael himself spent much of his school career (at least that is what he implied – though the secondary school he described sounded as if it was just over the border in Wandsworth, and very near where I live). He used the occasion to heap praise on the acheivements of Lambeth’s schools, and schools elsewhere in London too. He made his point by drawing a comparison to England’s second city, Birmingham, whose results, he implied, were mediocre. The progress that London’s state schools have made in the last decade is one of the most important facts about public services in Britain. But it is little talked about because it poses awkward questions for both left and right.

First the facts. My main source is a pamphlet produced by CentreForum in late 2011. The data may therefore be a little old, but the story hasn’t changed in the period since. London’s state school results, at both primary and secondary levels, are close to the English average. But the proportion of pupils attending school from the lowest income groups is much higher than in any other English region. About 70% (I’m a bit vague because I’m having to read off a graph without the exact numbers being in the text) of its pupils are in the lowest two income quintiles, compared to under 50% for most other regions (a bit over 50% for the North East). A lot of higher income parents send their children to private schools, especially in London, and this no doubt accounts for a lot of the skew to lower income levels. So London’s schools are achieving these results in spite of much higher levels of deprivation. The more you dig into the data, the more impressive this achievement looks. But London’s schools used to be awful.

When I have mentioned this achievement in various policy forums I get some rather strange reactions. People quickly dive in with data-less explanations which leave their basic world view intact. One economic liberal type started to lecture me on how much more aspirational London parents were. A more left-leaning type (with direct experience of London schools) attributed it to an influx of African immigrants displacing poorer performing white and Afro-Caribbean ethnic groups. Others have complained about preferential funding for London’s schools. But the data shows that, let us say, none of these explanations is anything like sufficient. But they did educate me in how selective many policy commentators are in their insistence on the use of proper evidence.

How have these results been attained? This is a lot less clear. No doubt the capital does have some inherent advantages in aspirational families and a better pool of potential teachers – which had not previously been exploited. But the main explanation seems to be strong political leadership. The boroughs led the way, but central government (under Labour) was bearing down on them, with initiatives such as the London Challenge (started in 2003, focusing on secondary schools). For Sir Michael, who was very much in the middle of it, the main point was that heads and governors were made more accountable for their results. Failure to achieve good results resulted in schools being hauled over the coals. The “Satisfactory” rating for an Ofsted inspection was in fact regarded as “Unsatisfactory”; Sir Michael has since changed that nomenclature. I have certainly seen how school leadership teams have focused more clearly on how to reach out to families from poorer backgrounds, with extended school facilities (handy for working parents) and family learning, as well as individually tailored interventions.

Why is this so awkward for mainstream politicos? The left, drawing support from the trade union movement, do not want to put schools and their staff under too much pressure. They would rather promote the fiction that England’s schools are generally good, but that they cannot overcome the social issues created by poverty – which need to be tackled through anti-poverty measures. And yet it seems that if you chivvy (and even bully) schools hard enough you can dramatically improve the results of pupils even from very challenging backgrounds. There is a very uncomfortable paradox here: leftist political activists get very worked up about deprivation, but this translates into low expectations of what deprived families can achieve, which in turn becomes a self-fulfilling prophesy.

Things are just as bad on the right. They say that the problem is that parents lack choice, and that the state runs schools badly. So the focus is to reduce state control by converting schools to semi-independent Academies, and letting interest groups set up brand new schools. Choice and competition will drive up standards. And yet the London results show that this is at best irrelevant. The results have been achieved with existing political structures.

If London’s schools show anything, it is the effectiveness of the last Labour government’s methods – Tony Blair’s Third Way. And yet this has become deeply unfashionable in political circles. In fact there was plenty wrong in Labour’s education policies, including a very wasteful school building programme, which converted necessary school upgrades into prestige architectural projects. But the basic idea was sound: good old fashioned political leadership and accountability can transform public services – provided you are prepared to take on the vested interests of those working within it.

Or to put it another way, and to bring it into one of the main themes of this blog: effective commissioning is the secret to better public services, both at the level of whole communities and at the level of individual users. London got a lot better at both.

Britain’s ungovernable Conservatives

I can remember when Britain’s Conservative Party was thought to be the country’s natural party of government. This feeling reached a peak after John Major’s shock win in 1992, when the party looked all but unelectable. The journalist Will Hutton wrote a best-seller “The State We’re In” which explained why. The party was deeply embedded into the country’s establishment. The discipline of its membership was legendary. Its hunger for power also made it adept at judicious compromise. It was a well oiled machine to keep an elite in power. The brief intervals of post-war Labour government in 1945, 1964 and 1974 seemed like awkward aberrations. Now, as the party wrestles with today’s vote on same-sex marriage, many observers of the British political scene wonder whether the party will ever secure a majority in the House of Commons after that win in 1992. What went wrong?

The party’s troubles are clearly deep. When David Cameron took over, after the party’s third successive defeat in 2005 it was clear that the party’s image with the public was toxic. Polling showed, the story went, that if the party came out in favour of a particular policy then that was reason enough to turn people against the policy. Mr Cameron’s mission was to re-brand and de-toxify the party, much as Tony Blair did with the Labour Party after that defeat in 1992. It seemed to be working. Mr Cameron embraced liberal causes like environmentalism and the inclusion of gays, while putting the party’s obsessions with Europe into the background. In doing so Mr Cameron put the party’s official position in a place where most Britons would not disagree with it. The party’s enthusiasm for the privatisation of public services was, and is, the only major exception.

He failed to win a majority in 2010, but by embracing coalition with the Liberal Democrats, he seemed burnish the party’s liberal credentials. While the Lib Dems were thrown into existential crisis, it seemed that the Tories were on a stepping stone towards power in their own right. But then people started to discover what the new Conservatives were really like. The problem wasn’t so much the Coalition’s programme of austerity and public service reform – “The Cuts”. These have produced a deafening whining sound from the left of the political spectrum. But these mainly originate from a complacent Labour establishment who had got used to a way of doing things, and it is not resonating with a majority of the British public. It is more of a problem for the Lib Dem element of the coalition than the Conservatives, though the NHS reforms remain a danger to both parties.

The real problem for the Tories comes on just those symbolic issues where Mr Cameron had tried to change the mood music. An obsession with the European Union and calls for a referendum on it have come to the fore. Reform to the House of Lords was firmly squashed, notwithstanding a seeming commitment to it in the party’s 2010 election manifesto. And now same-sex marriage (“equal marriage” to its supporters, “redefinition of marriage” to its opponents, “gay marriage” to the BBC). I must admit that this is an issue I struggle to get worked up about. But most of my friends are for it (though at least one is a passionate opponent), and it fits with my generally progressive outlook on life. Our understanding of what marriage is has changed over the years. But to many people in the country the reform is the last straw in a constant process of the undermining of traditional values. Such people feel that the political system tramples over them regardless, and their frustration makes them angry. They are in a minority, but not a voiceless one. They are particulalry well represented in the ranks of the Conservative Party, and many Tory MPs are taking up their cause.

This leaves three problems for Mr Cameron and his modernising allies. First is that it exposes divisions in his party, and that makes it look less credible as a governing party. Second it shows that whatever Mr Cameron may promise, even if it is in the election manifesto (same-sex marriage wasn’t in the main manifesto, it has to be said, but in separate party publications for the gay community), he cannot deliver on liberal, reforming policies that do not involve privatisation. Third is that there is a risk of defection from the traditional wing of his party in protest, reducing the party’s potential in the electoral ground war, and potentially helping UKIP, which is positioning itself as a vehicle for just such traditionalists. Under the country’s electoral system it is tough enough for the Tories to win outright. Surely it is now impossible?

Of course Mr Blair faced major challenges from Labour traditionalists, but still forged a highly effective political machine that still looks in good shape, even after its heavy defeat in 2010. But Mr Cameron does not command anything like the same loyalty amongst party apparatchics, and above all MPs, that Mr Blair commanded at the equivalent stage in his government. Mr Cameron never attempted Mr Blair’s “Clause 4 moment”, of a deliberately engineered confrontation with his critics to show he was boss.

Is it all lost for Mr Cameron? Not quite. There is always the example of 1992. Then the Tories were able to demonise the Labour Party and its leader sufficiently to scare first the press, and then voters into voting for it in large numbers. Ed Miliband, like Neil Kinnock, Labour’s leader in 1992, does not cut a particularly prime ministerial figure. There may well be an opportunity to stoke fears about tax rises under Labour too. As the General Election approaches Mr Cameron could rally the dissidents. He can still call on rich donors and much of the press will still rally to their cause.

But the Conservatives are no longer the party of the establishment. Their hidden advantages, so strong in the 20th Century, are eroding away. The 2015 election looks like another stalemate.

Abenomics: why it doesn’t look good for Japan’s economic experiment

A few years ago, as the Greek crisis unfolded, an Economist blogger suggested that its austerity programme would be an interesting experiment. Did the then fashionable idea of austerity growth have any validity? The answer to that experiment seems to be a clear no, though now doubt there are get out clauses. Now a very different economic experiment is taking place in Japan, after the election of Shinzo Abe and the Liberal Democrat Party last December. It is popularly referred to as “Abenomics”.

Abenomics, described by the Economist here,  has three elements: increased infrastructure expenditure, looser monetary policy (through focus on a higher inflation target), and “supply-side” structural reform. This coordinated nature of the policy is one of its most important aspects. Here in Europe we are used to fiscal policy pulling one way, while monetary policy and structural reform pulls in the other. All this has “Keynesian” economists like Paul Krugman in raptures (I used the inverted commas because no self-respecting economist accepts that label, it’s just common sense after all, though their political supporters love it). Japan has been stuck in the economic doldrums for two decades, and these economists feel that at long last the country might be digging its way out. Better still, success in Japan will show that these policies can be applied in other developed economies. But this analysis is deeply flawed – a case of macroeconomic blindness, a sort of failure to see the trees for the wood.

Look again at Japan. Its unemployment rate is currently a shade over 4%, having fallen from a peak of 5.5% in 2009. Compare that to the UK’s rate, which has hovered around the 8% mark since 2009, compared to about 5% before the crisis. This does not suggest a huge amount of slack in Japan, even allowing for distortions in the way it measures its unemployment. Growth will have to come about either through productivity growth or new people entering the workforce (e.g. through immigration). There is plenty of scope for both. Japan may have some of the world’s most efficient companies, but these dominate its export economy only; there is a lot of inefficiency in domestic markets. Japan has long eschewed immigration as placing an unacceptable strain on its social infrastructure. All this depends on the third prong of Abenomics, structural reform. And yet the government already seems to be going slow on this, afraid that the public will disapprove, with bad consequences for upper house elections due later this year.

In fact what Abenomics really seems to be about is to make government debt more affordable through setting off inflation (specifically of incomes, and hence tax revenues). Japan’s inflation has been very low, and negative for much of the stagnant period. Even this may not work – economists understand little about how inflation actually comes about, assuming that it is some kind of endogenous variable in that depends on such things as aggregate demand and money supply. Instead the policy may simply lead to state bankruptcy – though that is no doubt a long way off.

What are the implications for the rest of us? The justification for “Keynesian” policies in most developed economies, including th UK, remains intact because our high unemployment shows that there is quite a bit of slack, though we don’t actually know how much (the 1970s stagflation crisis arose because economists too readily assumed that unemployment meant economic slack). But they are not the answer to raising long term growth rates. And Japan’s agonies with inflation and government debt may well foreshadow future dilemmas our own governments will face.

What arrogant economic commentators, like Professor Krugman, need to accept is that economies are the sum of freely made choices of individual citizens, excercised through both markets and the ballot box, as they try to shape the world they live in. They are not the creation of governments and policy makers playing with their economic toolkits to win prize for the biggest d**k growth rate. Japan’s stagnation is the result of choices that Japanese people are making about the sort of place they want to live in, one which consideres wider factors than monetary income. Get over it.