Lib Dems – Page 14 – thinking liberal

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 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.

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?

Occupy: a difficult bandwagon to ride

There was a strained moment at last night’s dinner at the National Liberal Club for the London Liberal Democrats, when the party was challenged by a member over the Occupy protests at the City of London. Both the guest speaker, Paddy Ashdown, and the Mayoral candidate, Brian Paddick, said that the act of protesting was a wonderful, liberal thing to do, and that the party should engage with the protesters (and indeed has), but that there was too little in the way of constructive proposals for the party to take on. Given that the anger that drives the protests is shared widely across the population, this seems a rather inadequate response. But politicians of all stripes struggle to say much more.

The Labour leader, Ed Miliband, has tried to ride the bandwagon. It chimes well with his appeal for greater morality in commercial life. This line seems to play quite well with policy wonks and political professionals, but just seems to underline Mr Miliband’s lack of grounding in the gritty “real” world – a lack which, of course, he shares with most politicians of all parties. His ideas share with David Cameron’s “Big Society” a complete inadequacy when faced with the big issues highlighted by the protesters.

It is easy enough to accept the core of what the protests are about. There has been a lot of irresponsible behaviour in world finance which has helped bring about the current economic crisis; these financiers still seem to be attracting outrageous levels of pay; and taxpayers still underwrite the whole show. After this, however, practical politicians have to deal with four difficult facts in the search for policies.

First: world finance may have failed, but capitalism hasn’t. To many of the protesters world finance is simply the purest form of capitalism and its failure represents the failure of the whole capitalist system. Well greed and profit seeking, familiar parts of the capitalist way, had a lot to do with it – but as much of the problem was uncapitalist politics. Governments borrowing too much money to develop public services; interfering with the market to extend home ownership (especially in the US); China’s distinctly uncapitalist but de-stabilising trade policies, to name but three factors. The real problem was politicians trying to tilt capitalism to their own ends, even if these ends were quite laudable. There is in fact no substitute for capitalism if we are to maintain the living standards in the developed world, and to roll back poverty in the devloping world. Interfering with the workings of free markets is likely to make matters worse, not better.

Mention of politicians brings in the second awkward fact. The public (especially in the developed world) is at least as much to blame for the economic crisis as the bankers. Excessive borrowing was widespread, as was pressure on politicians to ride the boom and expand government. It wasn’t only the bankers that were being greedy. It is natural enough to blame the bankers, saying like children, “It wasn’t my fault, he made me do it!” – but this isn’t very helpful in the search for solutions.

And a third awkward fact is that banking and finance, apart from the greed and the excess, carry out a vital world function. The process of linking savers to borrowers, which is essentially what finance does, is vital for economies to develop and poverty to be fought. It is absolutely no coincidence that the growth in world finance in the last couple of decades happened at the same time as the biggest progress against world poverty that we have ever seen. And the beneficial effects of world trade that finance facilitated completely dwarf the well well-intentioned works of government aid and charities. The problem is that the bankers simply creamed off too much of the benefit for themselves.

Which leads naturally to the fourth, and awkwardest fact of all: the bankers are holding a lot of hostages. We need bank lending to keep productive industries going. Governments needs finance to keep public services going. In the UK, and especially London, world finance includes many perfectly productive jobs which we can ill afford to lose. Vindictive policies will hurt us all.

But finance does need to be tamed. But doing so is a slow process which requires a great deal of patience. There are two key sets of reforms, neither of which are quick:

Separate investment banking from utility banking. There are many abuses in utility banking, but the really dangerous stuff is in investment banking, and allowing investment bankers to run utility banks is a recipe for total disaster. The Vickers Commission’s reforms are an excellent start here – and seem to be leading the way globally. The investment bankers are patiently trying to undermine them – but politicians and the public need to stay on their case.
Make investment banking much less profitable. It is the profits that drive the excessive pay – and policy needs to focus on the causes of the disease rather than wasting time on the symptoms. There are two main causes of excess profits: lack of competition and the failure of organisations to bear public costs (for example of the public’s underwriting of the banking system). In investment banking, it is the second of these that is the most important (in retail banking it is the first…), and the most effective way forward is raising capital requirements. This is being done, and banking profits are duly under a lot of pressure. At first it will be the shareholders who feel the pain – but in due course it will be bankers pay, as shareholders get fed up with their overpaid servants.

Actually progress is rather good. We don’t need gimmicks like the “Tobin Tax”. we need vigilance and patience. I am proud of the way the Liberal Democrat ministers have been keeping the pressure up (Vince Cable is the star, but Nick Clegg is clearly on side). The bankers are waiting for the Occupy bandwagon to move on. It will, but I hope and trust that the Liberal Democrats will still be on their case.

Lib Dems and the Quality of Life

One of the more entertaining episodes of the last Lib Dem conference was the debate on the party’s new Quality of Life policy paper. This paper had wended a long but largely uncontroversial path through the policy formation process, including extensive consultation, before reaching the conference – and I was a member of the working group – interest declared. And generally policy that has followed this path gets more or less nodded through. Not this time. The motion and paper got the backs up of many representatives, and there were a number of well-delivered and entertaining speeches against. For a flavour of this ire see Alex Wilcock’s blog – scroll down past the Dr Who stuff to 20 September. If you click through to the comments page, you will find Alex describing yours truly as “not so much a thinking liberal as a sneering one”! The paper was passed, but the margin was quite narrow by the usual standards of these things.

And that’s a bit of a problem. This is policy that stands behind other policy – important not so much for its direct recommendations as its influence on subsequent policy. I hesitate to call it philosophical – since it does not attempt to develop the core values of the party, but rather to apply them in a new way. But if it is considered contentious, it may get ignored. And for all that it is official policy, this would be quite easy.

What’s the fuss about? The starting point of the paper is that public policy is too dependent on “hard” economic statistics, such as income and economic growth, to measure success. But these are only intermediate measures – in other words we like them because they lead to good things, rather than being good of themselves. That is because of the difficulty of measuring success in itself – the hitherto rather woolly concepts of wellbeing and quality of life. But social science has been advancing rapidly and it is now possible to measure wellbeing in a rigorous way – mainly through asking people to make subjective judgements on their state of mind.

What the paper recommends is to make wellbeing an explicit policy goal, alongside the traditional economic measures. To ensure this is done rigorously, it recommended that a National Institute of Wellbeing is established to promote standards. Various other devices (a cabinet champion, for example) were recommended to get it embedded into the business of government.

So far, so good, perhaps – but for liberals some loud alarm bells should be ringing by now. This could be a charter for highly paternalistic government. And especially when you come up against the evidence that many people seem to have a poor understanding of what is good for their wellbeing. So the beating heart of this policy paper is the insight that individual autonomy (“agency” in wonks’ jargon) is central to wellbeing. The idea is to help people help themselves, and not bullying and cajoling them into making better choices.

Education is central. And, to make a small digression, this takes you in a very interesting direction. A lot more is understood about life skills – emotional intelligence, resilience, and such – and the wellbeing insight gives these a much higher priority at all levels of education.

Fortunately there is a wealth of evidence to support the liberal view. There one further thing – the measurement mechanism of choice for social sciencists, self-reported wellbeing, is a thoroughly liberal idea. Wellbeing is what the population says it is, and not an arbitrary idea imposed by policymakers. It’s like voting.

What were people objecting to? One faction distrusted anything with so little in the way of concrete recommendations – especially when those few recommendations sounded like more bureaucracy and a new quango. At best they interpreted it as harmless, and so a cost-free policy to rebel against; at worst they thought it was opening the party up to being criticised for being irrelevant in times of widespread economic hardship. Others, Alex was amongst these though he was not called to speak, understood how dangerous the the quality of life idea could be in the wrong hands, and felt that it was too toxic to touch. Or, possibly, that the detail of the policy paper did not live up to its liberal intent. At any rate that is my reading of what they were saying.

All this put the promoters of the motion in a bit of a difficulty – it is really quite difficult to push abstract ideas in this kind of debate. In a short speech you don’t really have much opportunity to say more than “I think this is a good idea” rather than why you think it is good – at least not in a way that will connect to more than a minority of the audience.

Does it matter? The problem is that the wellbeing agenda is slowly but surely infiltrating itself into the public policy process already. The word (or “well-being”, the spell-check compliant variant which I don’t like) and quality of life come up with increasing frequency in all kinds of public policy contexts, and especially in health. The concepts, if not the measurements, lay behind so much of the last government’s meddling in people’s lives. And David Cameron is an enthusiast too, though with an entirely different agenda -but no doubt paternalist in a different way. Liberals need to get into this debate and push back hard against paternalism – but using the language of wellbeing, and not just pronouncing the plague on all its works.

And there is something else, even more important in my view, which the paper doesn’t really touch. And this is the usefulness of the idea in promoting a more environmentally sustainable economy. It is important to break through the tyranny of current economic measurements to show that a more sustainable way of life does not equate to poverty – and indeed that it can be better for everybody. This is why the New Economics Foundation is so interested in wellbeing. I particularly like their paper on Measuring our Progress.

So we need to keep pushing. As one of the motion’s supporters said to me afterwards “Who remembers how close Nick Clegg’s margin of victory was for the party leadership?”. Still, we that understand and support the policy have a selling job on our hands.

Time the British woke up to the crisis in Europe

It is a commonplace for Britain’s politicos to sadly shake their heads and complain that the Euro crisis demonstrates a woeful lack of political leadership. Regardless of the fairness of this charge in respect of Angela Merkel, say, it clearly has resonance for Britain’s own leaders. There seem to be two camps: ravingly impractical Eurosceptics, and sheer paralysis from everybody else. The mood amongst Europhiles (as I witnessed at fringe meeting at the Lib Dem conference) is akin to deep depression. It is time for this to change.

To be fair some key players have been showing something less than paralysis – George Osborne and Nick Clegg have both been conspicuous in raising the seriousness of the situation with their international colleagues – but their pronouncements are hardly more helpful than anybody else’s. They aren’t bringing anything to the party and they aren’t trying bring our own public alongside.

The first point is that the Euro crisis has serious implications for Britain, much though most people seem to think it is happening to somebody else. This is for two main reasons. First is that this country would be caught up in any financial disaster. Our oversized banks are deep in the mess; Euro zone countries are vital trading partners for a country very dependent on trade – especially given that international financial services are so important to us. Our fragile attempts at recovery risk being completely blown off course. Forget Plan B if this lot breaks.

The second reason it matters to Britain is that resolution of the crisis could take the European Union in a direction that is against our interests. Britain leads the single market wing of the union: the chief Euro zone countries are more protectionist in their instincts. We risk being shut out of the design of critical architecture – much as the Common Agriculture Policy was put together in our absence.

How to proceed? We need to tackle the dark spectre head on: the best resolution of the crisis involves changes to the European treaties. To change the treaties will require a referendum here (let’s not weasel out of it this time). If we face up to that challenge now, it will show real courage, and help get things moving.

But, of course, we would need to see something in return. Changes to the treaties that would further our interests. These need to be to promote the single market, to protect London (and Edinburgh) as centres for financial infrastructure, and to reduce unsightly bureaucracy and/or operating costs of the Union (the siting of the European Parliamnet at Strasbourg needs to go on the table, at least). Given our understanding of finance, we might well have useful things to say on the Eurozone architecture too – even though we clearly can’t be part of it.

To do this our leaders (the Prime Minister and the Deputy Prime Minister in the lead) need to build two sets of alliances. The first is within the British body politic, so that the referendum can be won. This needs to cover Tory pragmatists (David Cameron, George Osborne and William Hague), the Labour leadership and, preferably, the SNP. The Lib Dems have an important role in making this hold together since, by and large, they understand the Union the best. Mr Clegg’s experience of deal-making in the European parliament counts for a lot. The next set of alliances is within the Union itself, to create a Single Market bloc. The obvious candidates are the Nordic countries, Ireland and the Netherlands, together with many of the newer members in central and eastern Europe.

This will be very difficult. That’s the point, almost. The reward is a stabler EU, constructed more to our taste, even if we must concede some powers to an inner core of Euro area countries. Everybody wins. And by taking on the wilder Eurosceptic fringe, including their newspaper backers, it will cheer all right-thinking people up. It’s time we stopped being paralysed by fear and came out fighting.

Memo to Miliband: break some eggs

As a political insider it’s very easy to be carried away by partisan emotions, but very dangerous. Thus I have been watching (not literally) the Labour conference with a great deal of caution. I want to scoff, but my better self tells me to be more careful. And that applied especially the Labour leader Ed Miliband’s speech delivered yesterday. After reading the commentary in the papers I decided that I had to read the text of it too.

Let’s start with the good bits. It set out a clear narrative for the past present and future. His starting point was Mrs Thatcher and the 1980s. Some good reforms but she started a culture of heedless self-advancement. New Labour was a step forward because it invested heavily in public services and in tackling poverty – but it didn’t do enough (anything?) to change a reckless business culture, and this brought the whole system down in the financial crash of 2008-09. After the crash the current government is doing nothing to address this underlying sickness, and its austerity policies are choking off growth and making things worse. For the future, Mr Miliband wants to transform society by making government more moral, and finally taming the monster that Mrs Thatcher unleashed.

Mr Miliband’s core constituency, the “squeezed middle”, remained firmly at the centre of his narrative – although he wisely did not use that phrase. These are people who are neither rich nor poor, and whose living standards are being steadily squeezed, as government largesse is focused on those who are poorer. Mr Miliband identified this key group at the start of his leadership, and he is maintaining his aim. He is clearly more successful in this than the Liberal Democrat leader Nick Clegg, who has identified the same group as decisive (using the phrase “Alarm Clock Britain” to describe them, to general derision), but has struggled to hit the right note.

It is easy to pick holes in the narrative, but that would only hint at its main weaknesses. Firstly that to most people it will sound abstract and irrelevant, and second that he failed to tackle the hard choices that would show he meant business.

Irrelevance? Britain stands in the middle of a global financial crisis, lurching towards another episode on a par with the crisis of 2008. The Euro zone is at the heart of this crisis, and thus the European Union, this country’s main diplomatic and economic partner, is facing the biggest challenge in its history. And Mr Miliband’s answer to this global challenge? To fiddle with VAT rates and implement the government’s cuts a bit slower. The world situation got hardly a mention. No doubt the idea is to set a time-bomb for the government, so that as the economy fails to approve he can say “told you so”. But since Labour’s explanation of the 2008 crisis was the world economic situation, what answer do they have if this government says the same thing? As George Osborne and David Cameron scurry round the globe trying to stave off disaster, Labour stays at home and whinges about VAT. This doesn’t look very convincing.

And he did not have much else to say that would help his squeezed middle voters in the pocket, rather than replicating their complaints about benefit cheats and fatcats. In fact he did not have much to say on specific policies at all. He wants to cut university tuition fees (which would in fact help the better off more than anybody) and that’s about it.

The problem is this: change hurts. People know that instinctively, so that to convince them that you are serious you have to do painful things. Tony Blair did so by taking on a number of Labour shibboleths: Clause 4 of the party constitution, not raising income taxes and (as few now remember) sticking to the then Tory government’s austerity plans to tackle the deficit. David Cameron did similar things on socially liberal issues, while eschewing tax cuts. What will Mr Miliband do to show that he is serious about his mission to transform Britain, and win back trust?

Here are some things he might do:

Accept more publicly the logic of the Government’s austerity policies in order to create the funds for tax cuts to the squeezed middle as the economy improves. We did get statements that they could not reinstate all the government’s cuts, but the delivery of these was so muffled that I don’t think most Labour activists noticed them, still less become angry.
Call for reform of the European Union so as to address the unfolding financial crisis, throwing down the gauntlet to Tory Eurosceptics.
Pick a serious fight with the trade unions about public sector strikes and participation in Labour politics.
Call on the government to get serious about coasting schools and sub-standard health services by in the first case getting tougher on teachers and the second closing sub-critical hospitals and putting serious heat onto GPs.
Challenging ordinary voters by pointing out that they also contributed to the crisis by living off credit cards and going for ever bigger mortgages.

Each of these would require a lot of courage – but that’s the point; he must make a lot of people in his party angry. Instead we get some rather bland ideas about favouring “good” rather than “bad” businesses. But these sound rather like things that the coalition is already putting forward on banking reform and reshaping the economy towards manufacturing and green businesses – Mr Miliband even quoted Lib Dem Business Secretary Vince Cable in his support on the radio this morning. Other ideas sound like more bureaucracy.

To make an omelette, they say, you have to break some eggs. Until Mr Miliband starts breaking eggs nobody will take him seriously.

The strange cheerfulness of the Liberal Democrats

I returned from the Liberal Democrat conference in Birmingham yesterday. After the March conference, when things were already looking bad, I blogged under the title of “The Strange Cohesion of the Liberal Democrats”. The cohesion is still there, but to that was added widespread cheerfulness. This was not expected, but widely commented on .

This is strange for a number of reasons. The party’s situation remains dire. The Independent’s cartoonist depicts the party’s bird logo as a dodo. Though I naturally believe the opinion polls showing the party at 17%, this still isn’t that much better than what was achieved at the calamitous local elections last May. And plenty of polls show a much lower rating, down to 10%. Some party leaders (notably Paddy Ashdown) made much of some improved results in local by elections; but these are nearly meaningless, a fortunate confluence of favourable local factors.

And there’s plenty of anger about too, especially over NHS and education reforms, which worry many activists a lot. And not everybody buys the leadership line that there is no alternative to the government’s austerity policy. As Steve Richards of the Independent points out, the second conference after a general election should be when it is safest to display dissent in public; so why was it so muted?

Party conferences are always bubbles where attendees can cheer each other up without too much intrusion from the outside world. And there was undoubtedly an element of this. One reason for both the cohesion and the at times positively aggressive cheerfulness was a response to adversity. As a party that is just one step away from oblivion, people did not have the confidence to display of too much disagreement; we are much more vulnerable than the Labour or Conservative parties when in similar straits. This is not a bad sign; it shows a degree of maturity and survival instinct – in contrast to the response of the SDP in particular to the 1987 election, which resulted the party’s poll ratings dropping into the margin of error of nothing.

Party outsiders will not be convinced that the party’s fortunes are on the mend. But for insiders there are some reasons for cheer. First, of course, the thrill of being in government remains strong. For so long the only hope of getting pet policies into action was that other parties might steal them. Direct access to the levers of power is the ultimate reward for any serious political party. It still feels good; almost nobody says that going into coalition with the Tories was a bad idea.

Further, the threat from the other parties does seem to have receded somewhat. The Left’s rampant anger at the cuts and Lib Dem “betrayal” seems to be burning out. Compared to Sheffield the demos outside the conference were pathetic. And Labour’s poll rating are stuck in a rut. And as for the Conservatives, only last May it looked as if their “human shield” strategy was working to a tee. Our presence in the government was supposed to help de-toxify the Tory brand, while we took the full brunt of the anger at government policies. Since then the party has managed its PR better, so that the opposite seems to be the case: that the Lib Dems get credit for anything progressive that the government does. For example quite a lot was made of the government’s commitment to increasing foreign aid; and yet David Cameron gave this policy much more prominence than we did before the election. In this, ironically, the party has been greatly helped by the Tory right, and their friends in the press. The more they complain about Lib Dem influence, the easier it is for the Lib Dems to take credit for the nice bits.

All this gives credence to Nick Clegg’s “centre ground” strategy, first unveiled in March (I think) to widespread scepticism. That means the party defines itself by what others do, the complaint ran. But neither of the other parties can win a majority without the centre, so denying it to them improves the chances of a hung parliament. And there may just be enough votes there so that the party can hang onto enough seats to be a real influence in the subsequent bargaining. And who knows, if the party stays the course they may even get a little grudging respect from the electorate that so despises it now.

And of course, there is the attention. The party have never had this degree of scrutiny before, leading to the widespread complaint that nobody knew what the party stood for. They still don’t, by and large, but as the party learns how to present its distinctive profile in government this is changing. But will the public like what they see? Or is liberalism just a middle class hobby? Getting people to understand what liberalism is, and persuading them that it is good for them is the real challenge ahead.

It’s time for the Lib Dems to grow up

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

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

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

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

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

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

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

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

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

British banks shoot themselves in the foot.

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

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

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

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

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

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

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