UK economic policy – Page 7

Britain’s politicians scrabble over a weak economy.

Yesterday was one of the great annual set-pieces of British politics: the Budget. The Chancellor of the Exchequer, George Osborne, set out his plans for government finances: taxes and spending. This year, behind the theatricality, it was a bit of a non-event. There were few changes to previously announced plans. Mr Osborne rowed back somewhat in his longer term plans to cut government spending. There were some cheap gimmicks. Political inactivity is not necessarily a bad thing. But what is most remarkable is that neither he, nor the Labour opposition, were prepared to talk about the British economy as it really is. Is it any wonder that politicians fail to be trusted?

Mr Osborne’s speech contained a quite astounding piece of hubris. He claimed that Britain was on the path to becoming the most prosperous country in the world – overtaking Germany in the process. But there is a big flaw in this notion. Britain’s output as a nation is lagging the impressive growth in the workforce. Britons are working harder but have little to show for it. Mr Osborne sneered about the French economy – and yet French workers are over 20% more productive. Further, Britain is running a substantial current account deficit – which means that, like its despised Labour predecessor, the economy continues to be built on debt supplied by foreigners (or, perhaps, running down the nation’s overseas assets).

Dwelling on this weakness would have made the political message too complicated. His mission was to point out that Labour’s dire forecasts for the economy had not come to pass. So we heard little of any ideas about how lift the economy from its evident mire. Some talk of making life easier for manufacturing. There was the core idea of economic liberalism (that the left calls “neoliberalism”) that a smaller government will allow the total economy to be more productive. Little was heard of the government’s most promising idea – greater devolution of power to regional centres.

Weak fare. But while Labour love to point out the economy’s weaknesses – especially the low wages of many workers – they haven’t any better ideas of their own. Indeed their thoughts on a more intrusive state clamping down on “predator” capitalism seems destined to make the economy smaller, if a little less unequal. Many of their supporters, including journalists at the Guardian, seem to rely on half-digested Keynesianism. Increased state spending (or less austerity as they prefer to put it) will raise demand in the economy which will then lead to growth. As a formula in 2010 or 2011 this might have had some merit. In the near full-employment world of 2015 it does not. Such policies are more likely to lead to an even worse current account deficit, and an economy even more dependent on debt, public or private. It does not address the productivity problem. To be fair, the Labour leadership seems to understand this – but they are still bereft of ideas to tackle it.

So the Tories say the economy is gathering strength fast, and Labour that it is still on its knees. There is a paradox though. The Conservative fiscal policies are appropriate to the idea of continued economic weakness, and Labour’s on confidence in the economy’s continued strength.

How so? If you think the economy is weak, you need to make sure that government expenditure is kept in check. There is nothing certain about future projections of economic growth – and with a weak economy there will be risks on the downside. With the European and world economies looking weak also, this is easy to appreciate. Fiscal restraint may not appear to be necessary based on forecasts, but it gives the government more options in an uncertain world. In contrast, if you think the economy will bounce back strongly, and that the productivity problem sort itself out, then Labour’s much more relaxed approach to government finances make much better sense.

The problem is, of course, that nobody understands why the British economy remains as weak as it does. Is it because deep structural problems, based on poor skills, changing industrial needs and changing consumer preferences (e.g. towards more work-life balance)? Could it be the progressive hollowing out of local economies outside the main economic centres? Is it because North Sea oil is running out, and the apparently highly productive finance sector just a chimera? Or is it just a temporary blip? Will businessmen respond to the right signals to launch an investment drive that builds economic strength? Perhaps labour shortages will force businesses to use their existing workers more efficiently and pay them better.

Regular readers of my blog will know I tend to the more pessimistic of these explanations – though this is based more on instinct than data. I believe it is perfectly possible to advance human wellbeing in spite of an economy that is weak in terms of income growth. But that does mean that we must break our addiction to debt, public and private. For that reason I like the right’s focus on government parsimony, and the left’s focus on inequality. Alas neither of our main political parties seem to grasp the real nature of our economic plight.

British economy: neither Tories nor Labour have the answers

The political parties are playing a blame game on the British economy. Yesterday another report by the Institute for Fiscal Studies (IFS) was the unedifying battleground. This debate is interesting but unresolvable. And what matters is what the parties might do now if they were in charge. And on that neither Labour nor the Conservatives are convincing.

The controversy starts with the financial crash which began in 2007, and let to wider economic collapse in 2008 and 2009. The crash was a huge surprise to most politicians, and their electors. Before this steady growth of about 2% a year seemed to be a force of nature. There were squabbles about how best the proceeds of growth should be used. The downturn was very sharp, statistically the worst recession since 1945; comparisons with the 1930s are made. But in human terms things were not so bad as , for example, the early 1980s; we are a wealthier country with more fat to draw on – and unemployment did not rise as fast as earlier downturns.

But two things stand out. Firstly, thanks to steady inflation and frozen levels of pay, real incomes have been squeezed since the crash. Previously those in work tended to do better, but there would be more unemployed. Secondly the recovery was very slow – and not the rapid bounce back typical of previous recessions. There is a very powerful graphic in the IFS report which shows how average household incomes changed, adjusted for cost of living, which illustrates both points:

This shows that household incomes were level at first and then dropped steadily for the 22-30 age group until a year ago and then rose. For the 31-59s the squeeze levelled off at the end of 2011 with a gradual rise since. The over 60s have not done so badly, depending on how you measure their cost of living. Individually many people may be better off (things have get better as we advance through the age brackets), but overall the country has not recovered its economic standard of living.

The Labour narrative runs something like this. The economy was hit by a global financial crisis while they were in power, but a rapid fiscal response limited the damage. Measures included a temporary cut to VAT, as well as maintaining benefit levels, and, of course, a big bailout of troubled banks. In 2010 the Coalition took power and cut back these fiscal measures prematurely and increased taxes, causing standards of living to plunge, with only an anaemic recover since. Labour spokesmen claim, and their more partisan supporters fervently believe, that the government’s austerity has been a disastrous policy mistake, especially for the worse off. There is also a claim that the rich have escaped the pain and inequality risen.

The coalition counter-narrative is that the crisis in the first place was Labour’s fault, through profligate public expenditure and lax regulation of the banks. And the fiscal measures after the crash came at a staggering public cost, with a deficit of over 10% in 2010. This was unsustainable, and the current government’s austerity policies have saved the country from huge levels of debt and a huge future tax burden. If the recovery was anaemic, that was because of deeper weaknesses in the British, European and world economies. Now these weaknesses have been largely overcome, we are doing very nicely thank you. And a previous IFS study has shown that inequality has actually fallen, with the richest 10% paying a greatly increased fiscal burden – though admittedly things have been tough for the young and poor.

What to make of these competing narratives? I think the coalition argument is closer to the truth, even if they play up Labour’s mismanagement a bit more than is fair – not so much because there wasn’t severe mismanagement, but because that insight comes mainly from hindsight. But I’m biased and many learned people think that Labour’s narrative is in fact fairer. There is no decisive way of resolving the conflict, which requires the building of counterfactuals with economic models that are deeply flawed. But that’s the past and the important question is what is the best thing to do now.

And the answer to that question must start with this fact: the British economy is displaying a striking level of weakness. Three signs of this are worth drawing attention to. First is the lack of economic productivity growth. The IFS makes much of this. Employment levels are quite healthy, but this has not led to the levels of production that it should – which means there is no money to pay people more. Economists have been stressing about this for some years now, but they have not provided a clear analysis of what this is all about. Personally I think a lot of it comes about from the diminution of the finance and oil sectors. The former’s high level of productivity was in fact a mirage; the latter is trying to make the best of ageing oilfields. I also think there is a wider issue in all developed economies, as we transition to a world where improved wellbeing does not depend on higher levels of consumption – which used to be the motor of economic growth.

The second sign of weakness is more concrete. Our trade balance, which was strongly negative before the crisis, is not getting much better, in spite of a weaker pound sterling. This is strikingly different from the previous recovery from a recession, in 1992 – when a trade deficit was converted to a surplus quite quickly, and was the first part of a period of continuous growth that lasted until 2008. Martin Wolf, the FT economics commentator, has said that in the Euro zone an adverse trade balance was a surer sign of trouble than a fiscal deficit. He seems more relaxed in a UK context, but I think it is highly significant. The country is living beyond is means, and has not solved the problems that led to the 2008 crash.

The third sign is closely related – the other side of the same coin. The vaunted recovery is mainly led by increased consumer demand rather than increased investment. The public (as well as the government) is trying to borrow its way out of the crisis. A strong level of investment would lead us to be more relaxed about a trade deficit – but this is not the case. Investment is recovering, but not by enough. And levels of debt remain stubbornly high.

A lot of the problem is actually beyond the control of any government. It is down to the freely made choices of individuals and businesses, and changes in technology, not just here, but in the countries we trade with. But we do need our politicians to be on the case.

The Conservatives are unwilling to acknowledge the current level of economic weakness. They keep talking about their long-term plan for the economy, but this mainly boils down to further austerity, mainly cuts to expenditure, to bring government finances onto a more stable footing. They hope that private sector investment will pick up, and focus on things that will improve efficiency and wellbeing, rather than the merry-go-round of property prices. But further austerity will cause public investment in infrastructure to suffer, as well as education. Further, the party wants to “renegotiate” the country’s relationship with the European Union and put membership to a national referendum. The country’s international standing has already been a victim of this policy. Since so much of the country’s fate depends on the wider world, this is sheer folly.

Labour gloat about the current weakness of the economy, but have few answers. I have not heard a Labour spokesman willing to talk about increasing the economy’s productivity. They have ideas to tackle some of the symptoms, like raising the minimum wage to deal with low pay, but have no answers for the disease. And the party lacks a unity of purpose. Its left wants an end to austerity and attack on private business bosses; others talk of devolving power from the centre but have little understanding of what this really means. They do not look like a coherent government in waiting.

Meanwhile there are plenty of things we should be talking about. Encouraging weaker local economies to develop without permanent subsidy from the centre; choosing the right public infrastructure investments; developing a more complete and rounded education of our children and young people; working internationally through the EU and other institutions to tackle multinationals and tax evaders. But these do not reduce to bite-size policies and 140-character debates. So we will keep banging away at the unwinnable blame game.

Danny Alexander is the Lib Dems most successful minister. Why does he not get the credit?

The Liberal Democrat Treasury Secretary Danny Alexander’s place in history is assured. He is a member of the “quad” that sets the coalition government’s agenda, along with the Lib Dem Leader and Deputy Prime Minister Nick Clegg, the Prime Minister David Cameron and the Chancellor George Osborne (with whom he is pictured here). But recently there was a revealing kerfuffle, when the Lib Dems named their election “shadow cabinet” with him as the Treasury spokesman. Shouldn’t it be the more senior Vince Cable, people asked? Many Lib Dem activists fell for the bait and were suitably outraged. In fact this was a non-story – the shadow cabinet simply reflected current ministerial responsibilities with the gaps filled in. But if anybody had doubted Mr Alexander’s weak reputation, the response to the story proved it.

But more recently the highly respected Institute for Fiscal Studies (IFS) published a study of the effects of government policies on tax and benefits on people of different income bands. For the rare few voters who are interested in the facts of the coalition’s record this 30 page report is a fascinating read. The core of it is contained in this graphic:

What this shows is that the burden of the changes has fallen hardest on the top decile, but that every other decile has benefited from a reduced tax burden (i.e. the solid green bars), mainly the increase in income tax allowances. That, of course was the Lib Dem manifesto promise in a nutshell. Reductions in tax credits and benefits, however, have hit the poorer, so that as a proportion of income the overall effect on the bottom decile has been greater than the top (about 4% to 3%). The lucky 7th decile have suffered a net effect of nil. Further analysis shows that households with children have been hit the hardest, while even the poorest pensioner households have been protected:

This represents a reversal of generous policies for families from the last government. If you take the whole sweep of policy since 1997 you get the following change:

Now this shows that the treatment of families overall lines up with that of pensioners – but that working age people without children have ended up with little net benefit. This may feel a bit harsh, but politicians have never suggested that their policies would do anything else. Pensioner and child poverty were the stated priorities.

And in case you are swept on by leftist rhetoric that these changes will be swamped by changes in income inequality before tax, a separate IFS study suggests that pre-tax income inequality has actually narrowed over the period of coalition. Put the two together and you get the picture of a government with a clear agenda to redress income imbalances. All this follows the policies Liberal Democrats advocated before the election.

The Treasury is also held responsible for managing the government’s overall finances, and Mr Alexander had a critical role in managing government expenditure. In 2010 the Conservatives promised to eliminate the structural government deficit in 5 years. Labour and the Liberal Democrats converged on about 8 years. Guess what? Though the coalition initially talked about the former target, it moderated when the economy struggled, and it is on course to follow the original Lib Dem (and Labour) target. Overall economic growth projections have disappointed the politicians, of course. But what, in Labour’s alternative strategy, could have led to a better overall outcome? They called for a softening of austerity and that’s exactly what the coalition did. Beyond some sound and fury over Keynesian stimulus, now irrelevant, Labour has had nothing to say about redressing weak productivity, the real reason for the lack of economic growth and real incomes. The scale of the deficit was such that it was always going to be hard going.

So Mr Alexander has, in spite of his position as junior to one of the most powerful men in the Conservative party, delivered a government record that is much more similar to what the Lib Dems had planned than the Tories had (they had planned to be much easier on the rich). Quite a record.

How does that compare with other Lib Dems? Poor old Mr Clegg’s political reforms have largely sunk without trace, and he also failed to spot the problematic NHS reforms quickly enough (as did Mr Cameron). Vince Cable was responsible for the reversal of Lib Dem policy on tuition fees, as well as the PR disaster of the Royal Mail flotation. Chris Huhne and Ed Davey battled valiantly at Energy but have had to give ground on nuclear power and fracking. Michael Moore and Alistair Carmichael at the Scottish Office have supervised a calamitous straining of the Union. All of these men, it should be added, have a string of positive achievements too, but they’ve been forced to compromise more than Mr Alexander has. There have been some impressive performers in the junior ranks (Steve Webb and Norman Lamb in particular), but their scope is inevitably narrow. Surely Mr Alexander is top of the heap?

So why are Lib Dem members reluctant to give him credit. First is a rather indifferent record on media interviews. He lacks a sense of ease and the ability to move away from pre-prepared sound-bites, unlike his Lib Dem cabinet colleagues. He doesn’t sound as if he is in command. He manages the detail rather than the big picture. And he sounds a bit Tory sometimes in the messages he gives.

But I don’t think that’s all. I don’t think that many Lib Dem members are at ease with the government’s record on tax and benefits. Those graphs in the IFS report show that the effects of increased tax allowances have not really helped the poorest, and that cuts to benefits and tax credits, especially to those with children, have squeezed the bottom half of the wealth distribution. There has been no offsetting increase in real incomes before tax. Labour have been energetically pointing all this out.

But given Lib Dem promises on tax allowances, on cutting the deficit, and on reforming pensions, cuts to benefits and tax credits were absolutely inevitable. The government has already gone after the richest 10% heavily, in increased taxes and, especially, a clampdown on tax avoidance (something with Mr Alexander has particularly championed). The only major budgets that haven’t been heavily squeezed are those for education and the NHS (foreign aid does not count as major), something Lib Dem members would support. Benefit cuts may not have been in flashing lights in the Lib Dems’ manifesto for 2010, but they might as well have been.

And this leads to a question that many Lib Dems would rather not think about. Just how much is it the state’s duty to top up low incomes with automatic entitlements to state benefits? And how much do such entitlements create dependency and a sense of victimhood from rich and poor alike? The great Liberal designer of the the welfare state, William Beveridge, was very worried about creating unconditional entitlements. Just what he would have made of the blank-cheque of the old Housing benefit we can only imagine. But modern leftist thinking takes such entitlements for granted, forever trying to raise the bar. But most of the public regards the idea of topping up incomes with taxpayers’ money with suspicion. It stinks of a freedom with other peoples’ money.

Personally, I think the expansion of automatic benefit entitlements is a blind alley. Instead we need much more intelligent and directed interventions to help people cope with poverty, and manage their way out of it, if they want to. This needs to be done in a person-centred way that to tackles the underlying problems (housing, mental health, addiction and so on) head on, instead of paying people money to go away and keep quiet.

But that’s just my view. Meanwhile Mr Alexander has implemented a liberal agenda at the Treasury and deserves more credit than he gets.

Polly Toynbee is right – we need more honest debate on tax and spend

I don’t approve of Polly Toynbee. She’s so deep in the Guardian bunker that she rarely has anything useful to say. She writes polemic that will entertain the left, but not persuade anybody else . So I wasn’t expecting much from her article last week Economic dishonesty is the deadliest deficit of all. I was expecting her to repeat the Labour myth that the economic crisis was somebody else’s fault, and that austerity policies have strangled the British economy. But she was making a point of value. It was that the Conservatives and Labour have very different views of the future government finance – but they were both concealing their differences. The Conservatives do not want to spell out the implications on services and benefits; Labour do not want to look irresponsible, or to be painted as the party of high taxes.

She wrote her article before the Autumn Statement delivered by the Tory Chancellor of the Exchequer, George Osborne. Ms Toynbee should be pleasantly surprised at how things turned out, though I doubt that she is. The British government’s future policies on taxation and public expenditure have taken centre stage, and important differences have emerged between the political parties.

It started with some rather excitable coverage on the BBC Radio Today programme, which pointed out that Tory party plans for future spending would take it back to being the lowest proportion of national income since the 1930s. The bare statistics were factual (inasmuch as future projections can be described as factual) – but a comparison with the 1930s is farcical. National income is incomparably bigger than then – so a similar ratio of spending to income will not produce destitution that is in any way comparable. For similar reasons, the economic crash of 2008-09 is no way comparable to that of the 1930s, in spite of some of the ratios to national income being similar. Mr Osborne rather publicly objected to the coverage, drawing attention to the whole issue. Up to that point Ms Toynbee’s forecast seemed to be coming true.

In turns out that though Labour and the Conservatives are aiming at the same date to eliminate the structural deficit in British spending (i.e. cyclically adjusted spending less taxes), beyond that the difference between Labour’s spending plans and the Conservatives’ is as high as £27bn per annum. Differences on this scale are significant.

The next act in this drama was an attack by Mr Osborne on his Liberal Democrat coalition partners that they had lost the plot on economic policy because their plans were closer to Labour’s than the Conservatives. Danny Alexander, the Lib Dem Treasury minister, made a robust response about the impossibility of Conservative spending plans. Ms Toynbee, in typical Guardian bunker style, had painted the Lib Dems as indistinguishable from the Tories, so she would have been less than pleased about this – but not too upset since she no doubt thinks that the Lib Dems are a political irrelevance these days.

It is to be hoped that these spats are the beginning of a serious political debate. Up until now we have experienced manufactured political rows over the immigration, the European Union and the NHS. Admittedly the Tory preparedness to take big risks with Britain’s membership of the EU is a serious political issue – but the row is more about tactics and competence than strategy. On the other issues the politicians have very little of practical value to say. But the gap between left and right on state spending (I refuse to call it “economic policy” as most commentators do) foreshadows very different visions for how the British state should work.

The right has an economically liberal view of the state, with both state services and benefits being pared back, leaving more space for private enterprise and consumer choice. The left does not seem to have such a clear vision – much of its energy is being devoted to keeping public services and benefits as they are and avoiding serious questions about the future. That is a pity, because shifts in both demographics and the distribution of economic power point to a larger role for the state.

The problem with the debate, though, is that none of the political parties is being clear about what they want to do. It is good that we are talking about broad numbers on the size of the state – but this needs to be brought down to specifics. The Conservatives need to be clearer about what they plan to cut, and how they want to reshape benefits. Labour and the Liberal Democrats need to do this too – because their plans also involve big cuts. But they also need to talk about taxes. The Tories are quite right that the only tax raising idea that they will talk about, the Mansion Tax, is small beer.

Britain, along with most of the developed world, needs to rethink tax, state benefits and public services. I do not believe that they can be shrunk in the way the right suggests. But neither are they sustainable in their current form, as the left seems to think. That, not immigration, exactly who delivers health services, or even membership of the EU, is one of the critical issues of our time.

The more politicians debate these issues, the better. But if they obfuscate, then Polly Toynbee’s angry rhetoric will for once be justified.

Labour should be taking credit for the coalition’s economic policy, not whingeing about it

“Too far, too fast.” Remember that criticism of the British coalition government’s economic policies? It was repeated incessantly by Labour politicians in the first years of the government. And, it appears, the government was listening. The actual trajectory of progress on the country’s massive fiscal deficit is close to what Labour were recommending. And economic growth has returned. So what are Labour saying now? They are vilifying the government for going not going far enough and doing it too slowly!

It is, in fact, quite hard to understand Labour’s political strategy on the economy right now. The party lacks credibility, according to opinion polls. It is natural for them to try and change the subject, to more comfortable topics like public services, but foolish to think that they can avoid talking about it. Following yesterday’s Autumn Statement by George Osborne, the Chancellor of the Exchequer, the biggest noise from the party was about the coalition’s broken promises. And indeed, back in 2010 the coalition’s plan was to eliminate the structural deficit by 2015; instead, it seems to be generally agreed, they will only be half way there. Progress is, in fact, more or less what was envisaged by Labour’s alternative plan. This sounds like criticising the government for following Labour policy.

It’s not a first. Labour were equally scathing about the government’s record on immigration, after its pledge to reduce net immigration to under 100,000 was spectacularly missed. And yet Labour was not advocating any policies that would have made this promise more achievable. Indeed it is not at all clear whether Labour would have done much different.

And there is a ready explanation for why both the government’s promises were not met. World events. Economic growth in the rest of the world, and especially elsewhere in Europe, has been below expectations. You can get only so far by rowing against the tide – and if you do on the economy, net migration goes against you. Of course neither promise should have been made (if indeed the deficit reduction plan can even be called a promise). They were dependent on matters outside the government’s control. This is obvious, and it is to grossly underestimate public intelligence to suggest that the anybody thought that the numbers were written in stone. What matters to the public is what the government should have been doing differently. And here there is no clear message coming from Labour benches.

What we get instead is a flood of expressions of discontent. Pay has not kept up with inflation (“the cost of living crisis”); the rich have been let off; we don’t like the public service and benefit cuts. It’s all like the children’s complaint “it’s not fair!”. And the weary response of the public to this complaining is surely that of the child’s parent. It’s a difficult world. Could you manage any better?

What is the purpose of Labour’s relentless negativity? It is a poor way to attract votes to itself. Perhaps they just want to reduce turnout, or encourage Conservative voters to support Ukip? Perhaps they plan to flourish Labour’s vision of hope a bit closer to next year’s election? But the last time Labour won from opposition, in 1997, the message of optimism was clearly apparent by this stage. Labour seems to have an ambition to win a majority in Parliament with the smallest ever number of votes, by splitting opposition votes and persuading people to stay at home. What sort of a vision is that?

But I don’t Labour’s negative and confusing rhetoric is part of a cunning plan. It is a reflection of confusion that goes deep into Labour thinking, especially about the economy. The party has not admitted that it made major mistakes in handling the economy in the years up to 2007, at which point the economy collapsed. They mumble something about being a bit to easy on bankers. They also say that they should have been tougher on immigration, though exactly how, and whether this would have helped the British economy, is very unclear. Instead, in private, they complain that the criticism of their record is unfair, and that the public is wrong to blame them. It was the world banking crisis that did for them; and the government was not as profligate as it is made out.

There is an element of truth to these complaints. Few criticised the government’s record at the time, after all. But the party has to confront some difficult facts. First is that the party was clearly guilty of hubris before 2007. There most memorable slogan was “no more boom and bust”, which they shouted out at the height of a boom, and just before one of the most spectacular busts in British economic history. Shrugging it off and saying it was somebody else’s fault does not pass muster. And second is that the level of government services and benefits that prevailed at 2007 was unsustainable. It may have looked OK according to the size of the economy at the time (though that is debatable), but a lot of that economy was built on air.

What Labour needed to say back on 2010 and 2011, after having chosen their new leader, Ed Miliband, was that Labour had messed things up badly. They were honest mistakes, made from the best of intentions, and following the best advice, perhaps. But they were mistakes and the party must learn from them. But instead Mr Miliband fudged the issue, preferring not to provoke a big argument in his own ranks. At the time he wished to ride a wave of anger at austerity, and it was necessary to leave unchallenged the fiction that public service cuts were unnecessary.

It is too late for that confession now. But it can be no wonder than the party’s credibility on the economy is so weak. As one columnist said in this morning’s FT, you can think that the coalition economic policy is disappointing, a mess even, and still think that Labour would be even worse.

Why has the public bought the Tory narrative on the economy? Labour hubris

Opinion polls show that the Conservatives are the most trusted party on the economy. This gives them a big advantage over the Labour opposition, which they are trying to exploit by promising reckless tax cuts. The Tories say that the crisis was caused by the recklessness of the previous Labour government, which necessitated firm austerity policies, which in turn have led to a strong recovery. Labour supporters are sore about this, but their party leaders seem forced to meekly accept the Conservative economic narrative – and promise strict fiscal discipline. And yet economics writer Ha-Joon Chang writes in the Guardian that the Tory narrative is a fairy tale. Why aren’t the political class trying to challenge the narrative?

I am tempted to pick apart Mr Chang’s own narrative. He denies that the record of the previous Labour government was irresponsible, with the crisis in public finances simply inflicted by changes to the world economy. He further suggests that the coalition’s austerity policies to meet the crisis were misguided, and that the current recovery is not as good as it is made out to be. A lot of his claims are tendentious, and there is some sleight of hand with the numbers. But it is perfectly literate in an economic sense, and there is deal of truth in his claims, alongside the disingenuousness. This sort of argument tends to a turn-off for many of my readers. I would like to address the question he raises more directly: “Why did Britain’s political class buy the Tories’ economic fairytale?”

The first point is that we should remember the sense of shock that both the public and the political class felt as the scale of the economic crisis became plain in 2008 and 2009. This followed nearly 15 years of continuous growth in Britain. The political class felt that the economic problem had been cracked by Labour’s policymakers (though the first part of the growth period was under the Tory John Major). Gordon Brown, the Labour Chancellor in their part of the growth period, declared “no more boom and bust”. That caught the zeitgeist. Political thinktankers argued over how to distribute the proceeds of growth, which was assumed to be in the region of 2-3% for the foreseeable future. Mr Brown believed his claim; he was inclined to lecture political leaders from other countries (especially other European countries) on how wonderful his economic leadership was. And so when the economic performance proved to be so vulnerable, even if we accept that the shocks came from outside Britain, it was more than shocking. Our whole outlook on the British economy collapsed. And it must be pointed out that the scale of the economic crash in Britain was worse than in any other major developed economy. Labour’s claims were based on hubris. Any narrative that does not acknowledge this hubris (and Mr Chang’s does not, in this article at least) will not be politically credible. This trumps the fact that Tory claims about Labour’s recklessness are overdone or misplaced (e.g. because they criticise welfare policy rather than cutting income tax rates).

And that leads to a critical question. Why was the British economy so vulnerable? Was is really just a slightly bigger blip on a standard economic cycle, or were there elements to the pre-crash economy that were unsustainable? There are plenty of reasons to think it might be the latter. Inflation had been kept in check by cheap imports and a high pound, and yet there was a large trade deficit. The tax system had been tilted towards property transactions and capital gains, and away from ordinary income tax – which meant that the bust hit revenues very hard, and were difficult to revive in the recession that followed. The economy as a whole depended heavily on bubbly international finance and oil (whose price had just rocketed); amongst other things this gave a false perspective on productivity. Productivity based on fake profits in finance is not the same as the majority of workers steadily increasing their output. If you believe that there were substantial unsustainable elements to the economy, then you also believe that simple Keynesian stimulus would not be a path out of the crisis – this would be flogging a dead horse. That still leaves room for a respectable Keynesian critique of coalition government policy (especially if stimulus is concentrated on investments), but it also points to austerity policies being inevitable at some point.

And then there are the secular trends. There are the technology changes that, for now at least, seem to push economic rewards into minorities who either have the right skills or who own capital. That is a global trend. There are demographic changes; it is a boon that people are living longer – but that does imply structural changes to the way society works, and especially the tax and benefits system. And there is the growing up of the developing world economies, especially in China, which are no longer a source of ever cheaper imports. With such trends – and I could go on – is it any wonder that economic performance has been weak?

And so it should become clear why the Tory narrative is left to hold the field. An alternative narrative is very difficult to construct. To be credible such an alternative must contain challenging elements – that we can’t just bounce back to 2% growth by reversing cuts to public expenditure, as some on the left appear to believe. It has to acknowledge failings in the pre-crash British economy, and that strong well-distributed growth will be difficult to obtain in the future. Labour do not want to develop such a clear narrative, because they are reluctant to face up to their own hubris. In fact, as I have argued, Labour’s need to hold together its fragile coalition means that it does not want to develop a clear economic narrative at all.

And if Labour won’t produce the alternative narrative, who will? The Lib Dems are part of the coalition, and as such are happy to go along with most of the Tory version. They would emphasise that the austerity policies were not as austere as billed, and that borrowing for investment would be a good idea – but they do not challenge the main thrust. Ukip have decided to base their narrative on opposition to the EU and immigration – and as a result their economic policies have no coherence – they do not want to upset their own coalition of the angry. The Greens have decided to be the “Ukip of the left”, and blame all our troubles on failed neo-liberalism. They are against austerity policies, and yet want to rebalance the economy towards green growth, which surely implies a leaner public sector. This is a have-your-cake-and-eat-it stance, which will not stand up to close public scrutiny.

A credible alternative to the Tory narrative is hard to construct, and no political party wants to take the job on, because it would undermine their own wider political strategy. Mr Chang himself seems to acknowledge the problem in his rousing penultimate paragraph:

The country is in desperate need of a counter narrative that shifts the terms of debate. A government budget should be understood not just in terms of bookkeeping but also of demand management, national cohesion and productivity growth. Jobs and wages should not be seen simply as a matter of people being “worth” (or not) what they get, but of better utilising human potential and of providing decent and dignified livelihoods. Ways have to be found to generate economic growth based on rising productivity rather than the continuous blowing of asset bubbles.

Amen to that. But what chance do our humble politicians have of constructing such a wonderful narrative, when this poses so many unanswered questions? Might I suggest that Mr Chang spend more time suggesting “ways… to generate growth based on rising productivity” and not just joining the whinge-fest about our inadequate politicians?

Is austerity an economic failure or a fact of life?

The British Labour Party conference proved a bit of an anti-climax. After the excitement of the last week’s Scottish referendum this was probably inevitable. All the more so since the Labour leadership did not want to talk about the important issues that referendum has raised on for the British constitution. But this conference marked in important stage in the evolution of the Labour leadership’s policy platform. They have finally, publicly and unequivocally accepted austerity as the centrepiece of their economic policy. This is rather muted, of course. The right wing press, who still set the country’s news agenda, do not want to give Labour any credit for this. Labour’s left wing supporters still think that austerity is a failed economic strategy, promoted by a “neoliberal” elite as a means of shrinking the power of government. These supporters do not want to be too vocal this close to a General Election; besides they were soothed by some diversionary promises regarding Britain’s National Health Service (NHS) and the minimum wage. But this left wing critique of austerity bears further examination.

It is expounded with some clarity in today’s Guardian by the journalist Seumus Milne: Austerity has failed, and it isn’t only Labour’s core voters who want change. To start with Mr Milne points out that Labour’s core voters, working class people, are unhappy and Labour can’t take them for granted. In Scotland they defected en masse to the SNP’s Yes campaign – and its claim that Scottish independence meant that they could roll back austerity. In England Ukip is making inroads into Labour’s core vote. Labour can’t simply take these voters for granted and then go after the “centre ground” voters who are liable to be swayed by the right wing press. This is perfectly true, of course, but not very helpful in its own right.

He then goes on to the familiar critique of austerity (cutting back public expenditure), which is that it has failed both in Britain and elsewhere in Europe. In Britain, growth is based on shallow foundations: unfunded consumer expenditure; average living standards are still sinking and many poorer people are suffering real hardship. In other European countries, notably France, there is no growth at all. This critique builds on that of Keynesian economists. In the earlier years of the government’s austerity programme they suggested that by cutting demand, or refusing to stimulate it, austerity simply created a doom-loop of shrinkage – or failed to ignite a virtuous circle of positive demand. The cuts were simply too early. This critique was eagerly seized on by the left. The trouble is that in Britain it has been overtaken by events. Growth has returned, mainly as the result of increased consumer borrowing, but also through higher business investment. There is not need to use public money to stimulate the economy further. Now is the “later” that the Keynesians were talking about when they said the cuts should be made later. It is does not matter that the initial spurt of growth was based on shallow foundations, as Keynesian fiscal stimulus is open to exactly the same criticism.

In fact the government’s application of austerity never lived up to the rhetoric. The cuts have been relatively modest, and as a result the deficit (excess of government expenditure over taxes and other income) has not been reduced by anything like as much as the original plans. The government finances still look very shaky and unsustainable. To a large extent things have been propped up by the Bank of England buying up government debt (“Quantitative Easing”, or “printing money” as some economists would have it). This only works when inflation is not a serious threat, and the Bank has indicated that continued purchases are no longer sustainable.

Things get worse when you look at the details more closely. The Economist points out that the country’s tax revenues are not keeping up with the country’s growth rate, making the deficit harder to cut. The reasons are not entirely clear, but two contributory factors should cause those on the left to worry. The first is that the government has been rapidly advancing tax free allowances, a flagship policy of the Liberal Democrats. This has helped relieve the economic pressure on the oft-forgotten marzipan layer of Britain’s poor. Those who are working and do not qualify for state benefits. But it also means that if wages are stagnant the government sees little benefit from growth. The second, related, factor is that Britain’s tax take is heavily dependent on the very rich. The Economist says that the top 1% of earners are thought to contribute 28% of income tax receipts. The position of other taxes may not be so very different. That means that pressure on the very rich, and notably the banking sector, is choking off tax receipts. All this suggests that raising taxes without hurting the ordinary working classes will be very difficult to achieve.

The serious economic case against austerity is not quite dead, though. The FT’s Martin Wolf, for example, suggests that prolonged fiscal (and trade) deficits may be required to counterbalance the insistence of some countries, notably China, to run export surpluses, and so create a surplus of savings. But his suggestion is that state funded investment is the best way of achieving this, not the continued propping up of the benefits system and a high volume of public services. That still leaves the most painful aspects of austerity intact.

The fact is that some very powerful forces, global and local, are bearing down on economic growth. These include demographics, the evolution of the Chinese economy (reducing the supply of cheap exported manufactured goods – so important to developed world living standards in the 1990s and 2000s) and (perhaps) by a focus amongst the slightly better-off on quality of life rather than income maximisation. It was once thought that any well-functioning developed economy could grow at 2% a year. That now looks infeasible. Which makes the management of government debt (and private debt for that matter) a serious long-term problem. It gets worse, as to achieve any sort of growth requires the economy to become more efficient, not least in public services. This involves the sort disruptive changes that the left’s core supporters hate most of all.

To be fair on the left, though, one of the causes of low growth is the excessive accumulation of wealth by the very rich – and this can only be tackled using an agenda that looks leftwards. But chasing down this wealth is increasingly a global problem, that needs global solutions, and not socialism in one country. This is ironic, as one of the symptoms of working class disillusion is a rejection of internationalism. It is no coincidence that the right wing press is happy to undermine international institutions, though.

Mr Milne calls for some kind of post capitalist economic reform, with increased state intervention. It is hugely unclear what this reform agenda would comprise, and whether it could work. The last country to vocally reject capitalism was Venezuela, whose oil wealth allowed it to cock a snook at the capitalist world. That is ending in utter economic and social disaster. Starvation and oppression in North Korea, and terminal economic stagnation in Cuba offer no better way forward.

The world is changing, and many Britons hate it. But with large trade and fiscal deficits Britain must embrace change or face economic catastrophe. That is the truth that Labour’s leaders are facing up to – and it is not a spineless surrender to the forces of big business.

The revenge of the 50-somethings. Is this why productivity is sinking?

Last weekend I met up with a number of other 50-somethings. Only one of us was still working. The universal advice to her was that she should stop as soon as she could. It wasn’t worth it. Anecdote is no substitute for serious analysis, but it can offer some interesting insights. Economists usually ignore the idea of satiation – that enough is enough – because this wrecks their mathematical models. But it is a growing fact of life in the developed world, and one reason why it is unrealistic to expect everlasting economic growth.

Of course, many 50-somethings are not as lucky as me and my friends. They have inadequate pensions and other savings; they are forced to keep working, and may well have to do so long after their state pension kicks in at 65 to 67. There were two common factors to our group: no children and property ownership – though by no means all of us had had well-paid jobs. There are plenty of others in the same boat, even if we are a minority.

What was striking was how we had found that work had become demoralising, across a spectrum that covered high-flying project management through to ordinary clerical. And looking for new jobs is even worse. The youngsters are pushing ahead, with all their politics and superficiality. Competence and people skills are devalued compared to bluff and fast-talking. Age prejudice is rife in recruitment markets, but impossible to prove case by case. Such sentiments are largely “grumpy old man” (though most of us were female…), rather than substantive; no doubt our predecessors felt the same about us. But work used to be the centre of our lives, providing us with purpose, a social life and the wherewithal to consume.

But now we’d rather move on. Even if that means constraining our consumption somewhat – though our generation are the ones sitting on high value property, which helps quite a bit. We will retire early if we can. Many of us are winding down, into part-time work, often thinly disguised as self-employment. This pattern of reduced work level can continue until well into the 60s and even beyond.

Is this showing up in the economic statistics? This is difficult to say. Overall workforce participation is increasing, including the older age groups. This suggests that the number of people who have dropped right out of the workforce is less than those who struggle on after retirement. But the number of self-employed has been rising sharply, and we have what economists call the productivity puzzle. Labour productivity is not rising in the way technological progress suggests it should. Perhaps the winding-down of the 50-somethings is part this.

Economists stress about this. They had assumed that steady economic growth, arising from improved productivity, was simply a law of nature. When growth fails to materialise, they condemn this as a policy failure, looking to fiscal or monetary policy to correct it. But when low growth arises from free choices made by the public to produce and consume less, this is not a policy failure. But it does create policy problems – especially over the affordability of debt. It would be better for all if economists would stop whinging and help us to understand and address these policy challenges. Low growth future is here to stay. Because that’s what people want.

Why Labour are losing the election in 2015

According to press chatter, there is mounting worry amongst those that surround Ed Miliband, the leader of Britain’s Labour Party. I don’t know anybody in this elite circle, and I can’t offer an opinion on whether this is true. What I can say is that it should be. After ducking hard choices when the going was good, he is now in real trouble.

The immediate cause of the Labour wobble, if that is what it was, was the poll bounce for the Conservatives after the recent Budget by the Chancellor, George Osborne. The previously secure Labour lead simply vanished. This poll bounce disappeared as quickly as it came. Clever charts showing that it was part of a longer-term trend look premature. But it did show that Labour support is not solid, and that the Tories are not quite as terminally unpopular as many suggested.

But what really convinces me that Labour are in deep trouble is this exclusive piece in yesterday’s Independent, highlighting an article Mr Miliband had written for the paper. Here’s the first paragraph:

Ed Miliband has promised to rescue Britain’s struggling middle classes by boosting their living standards as he warns that the “cost-of-living crisis” will last for at least another five years.

This seems to be part of a bid by Mr Miliband to rebuild his electoral standing; today he is launching a policy about devolving more power to “super-City” regions, building on a policy developed by the Liberal Democrat leader Nick Clegg, as he will not say.

This political drive builds on two themes that Mr Miliband has been developing. The first is “the squeezed middle” – a deliberately vague reference to people who feel they are neither favoured by government handouts, nor part of the rich elite. It is interesting that this seems to have migrated to “the struggling middle classes”, when it might just as easily refer to working classes (if you get beyond the bureaucrats’ tendency to use the term “working class” to refer to people who are not working, and entitled to state support, as an alternative to the word “poor”). The second idea is “the cost of living crisis”, referring to the fact that for most people incomes have not increased as fast as prices over the course of the last government.

No doubt Labour’s polling shows that these ideas cover a large swathe of generally unhappy people, who might therefore be sceptical of the government’s record. The problem is how to appeal to them. Almost by definition, these people are out of the scope of state benefits. In fact they tend to resent the size of the state benefits bill, apart from the old age pension, whose cost they tend to underestimate. They are not employees of the state, a separate and distinct constituency, even if they share some of the same problems). So how to address their standard of living? There are two ways: tax cuts and a stronger private sector economy. On both counts Labour’s credibility is behind that of the Coalition.

The best sort of tax cut to reach the squeezed middle is a cut to personal allowances, i.e. the point at which people start to pay tax (including its National Insurance equivalent, something all parties seem happy to ignore). But the Coalition has already been increasing this quite aggressively, mainly at the expense of higher rate tax payers, some of whom are now claiming to be part of the squeezed middle too. Worse, it is one of the few policies that is closely identified by the public with the Liberal Democrat part of the coalition, which Labour is extremely keen to denigrate – they have picked up a lot of ex Lib Dem voters. They have floated the idea of a 10% tax band, which is just a less efficient way of delivering the same policy – and has uncomfortable echoes with one of the last Labour government’s policy mistakes.

There is an even bigger problem with taxes. Labour has to convince voters that it will not put taxes up to pay for an expanded state. That means signing up to a series of things, like a cap on benefits expenditure, that will be unpopular with core Labour voters, and not even particularly sensible from the point of view of economic management.

But tax cuts are a fairly minor palliative. What would really cheer voters up is the prospect of incomes rising in the private sector. The trouble is that Labour has done nothing to dispel its reputation for being anti-business. Quite the opposite. Mr Miliband’s view is that there are good businesses (“producers”) and bad ones (“predators”). Wages are being squeezed by the predators to benefit their top managers and shareholders. So his anti-business policies are directed at these predators (banks and energy companies to the fore), while helping the producers. This argument is not entirely without merit, but it is a tough sell. And in practice it is pretty much impossible to create policies that discriminate successfully between the two classes of business, and all those that inhabit the grey zones in between. The result is that Labour’s policies designed to address this problem, such as the devolution to the cities, don’t look as if they will deliver much of a boost to wages in the short term – even if they are perfectly sensible. And sensible policies are liable to get matched or pinched by the coalition parties anyway.

The Conservative counterattack to Labour will point to the fragility of the current economic recovery, and say “Don’t put all this at risk”. Of course one thing that could put the fragile recovery at risk is the Conservative plan for a referendum on the EU. But does Labour want to go out with all guns blazing on that issue? Perhaps I underestimate Mr Miliband, and that is his plan. But so far he is happy for Mr Clegg to take the lead on the issue. In fact you could not inaccurately describe Labour’s emerging strategy as “I agree with Nick”. A liberal, centre-ground stance that wants more devolution from Westminster, but with a strong attachment to the EU.

So Labour is embarking on an impossible task to convince the electorate that it can out-do the coalition parties at their own policies. This won’t work. But what it will do is to de-motivate their core constituencies of public sector workers and the squeezed bottom, as I might call the voters suffering from benefits cuts.

The trouble is that Labour hoped to get the best of both worlds after Mr Miliband was elected. That they could adopt a “Blair-lite” strategy that allowed an appeal to the centre ground, while at the same time harnessing the wave of anger from their core voters at the government’s austerity policies, which, incidentally, allowed them to harvest a lot of Lib Dem voters. But Blair-lite lacked credibility as soon as the economy started to revive. There was a choice to be made for either Blair II, an unashamed dash for the middle ground, including an apology for the record of the last government’s economic policies (though that would have been too much for Mr Blair himself). Or they could have gone for unashamed social democracy, making a case for higher taxes, a bigger state, and less aggression on cutting the deficit (isn’t going for a balanced budget just willy-waving after all?). The first of these two choices might well have destroyed the party, given the depth of anger over “The Cuts” – but the second choice was never properly debated or confronted. It would have been perfectly respectable and courageous – even if expanding the state back to the size it was in 2008, or even 2010, would have taken a very long time.

The Conservative General Election campaign has not got started yet. They will allow Ukip their moment of glory in this year’s Euro elections, then quietly mug their voters by stoking up fears of Labour. Labour’s credibility will fall apart, and they will have increasing trouble fending off Tory attacks and keeping their core supporters loyal.

If I was advising Ed Miliband, I would be worried.

Pensions, savings: sensible steps forward

This week’s UK Budget has revealed the usual muddle amongst politicians, journalists and the public over the whole issue of pensions and savings – with opinion strongly favouring several flavours of having your cake and eating it. This masks some profound and sensible reforms carried out by the coalition government.

First version of the cake. We like people to save. But we want them to spend to promote economic growth. We worry that a large part of the population will become dependent on the state and taxes because they save too little. But when they do, as in the early part of the 2008/09 crisis, we bemoan that fact that people aren’t spending and so causing economic slump. So interest rates crash to the floor in an attempt to reduce savings and increase consumption (alongside the vain hope that companies will be encouraged to invest more).

Next version. We want people to save more to not be dependent on the taxpayer, but we also want target state spending on the less well off, and tax the rich to pay for it. So we encourage people to save, and then confiscate the proceeds.

Another version of this is that we love the idea of exempting pension saving from tax but think that people who have accumulated sufficient savings for a reasonable pension (a million pounds for a pension of £35,000, for example) are part of a rich elite whose broad backs should carry the largest burden.

There is a genuine dilemma at the heart of this of course. For that reason a lot of hope resides in get-out-of- jail-free cards. One of these is strong economic growth. But that requires lots of people to work – which means retiring later and allowing immigration. We are clearly entering an era of low growth, thanks to demographics, personal preferences (i.e. people choosing unpaid leisure over work) and the changing nature of technological advance and the global economy. Remarkably few people have tried facing up to the consequences of this. Even some intelligent economists think that “trend growth” is a law of nature. Another get-out-of-jail-free card is that rising property values will compensate for lack of saving. Collectively this cannot make sense, but it has worked for many individuals, who therefore don’t engage with wider worries about the future.

Now let’s consider some difficult facts. I have already mentioned that economic growth is likely to be much lower in future. The next difficult fact is that private pension saving has collapsed in the last 25 years. Generous final salary schemes have been replaced by inadequate money-purchase schemes. It is now use just blaming Gordon Brown’s tax raid on pension schemes in the later 1990s for this (or Mrs Thatcher’s ill advised liberalisation of pension selling before that) and some are prone to do when you mention this. This at worst mildly accelerated a growing trend. The economics of businesses supporting these pension schemes became toxic even without the tax changes. This means that, as a generality, most people will not now have adequate private sector pensions. Instead as they approach retirement they will have accumulated a few tens of thousands of pounds in probably several schemes.

The next difficult fact is that the economics of long-term saving are toxic for all but the very well off (liquid assets of over £0.5m, say). The poor face the prospect of losing entitlements to state benefits if they accumulate wealth. Everybody will see any savings eaten away by costs which, even without a host of rip-offs, will always weigh most heavily on those with smaller savings. It becomes perfectly rational for a lot of people to not to bother with pensions savings – unless you count trying to own your own home.

When you consider all this, the attraction of tax funded state pensions become clear. That is why the current government has been right to make it reasonably generous, notwithstanding criticism form the right that we can’t afford it. It was also right to make this pension independent of private saving.

Now, what about the tax treatment of savings? To simplify, there are three groups of tax privileged savings. The first is domestic property. To buy your own home you pay out of taxed income and stamp duty on the purchase price, but the gain is exempt from tax. The second is Individual Savings Accounts (ISAs), which, like property, are paid for out of taxed funds (subject to an annual limit) but income and capital gains are tax free. And third are pension plans, for which contributions are exempt from income tax, but it is taxable on drawdown.

The first and last of these are problematic. Domestic property because its tax exempt status has made it a highly attractive investment – but instead of this fuelling much in the way of building new, efficient property, it has simply driven prices up, making ownership out of reach for many younger people and driving a wedge between families with property and those without. Pensions are a problem because that particular route for providing tax exemption makes for maximum complexity. In fact they have become so hedged about in rules that most people don’t understand them.

ISAs, on the other hand, have an elegant administrative design which makes them easier to own than even taxed assets. They also have more chance of channelling investment into more productive parts of the economy.

Here’s why this week’s proposed reforms make sense. Currently money purchase pensions are forced to buy annuities, except in some carefully crafted circumstances, which tend only to apply to the better off savers. The original fear behind this annuity rule was the worry than pensioners would blow their savings quickly and then throw themselves into the arms of the state. But the state of private pensions is such that most people will rely on the state anyway, and most pension pots are so small that the amount of income that would be derived from an annuity would be derisory (and, presumably, a lot of value would be lost in administration costs). And those with larger pots are likely to be prudent with their wealth. If done properly, this will simplify the pension system, and make private pensions more attractive.

Extending the ISA allowance is more controversial. Many simply view this as benefiting the wealthy, as nobody else can save up to the £15,000 a year limit. There is some truth to this, but it will help level the playing field between financial investments and owning your own property. Since it is unthinkable to tax capital gains on homes, it may help to make other assets comparable in their tax status.

A lot of nonsense has been uttered as commentary: fears over people blowing money on cruises and fast cars – or rushing into buying property. My main worry is that the reforms will make it easier for better off people to save for their children, to pass on at death. This could reinforce the effect of inherited wealth, which is already growing. There may be mounting pressure to reduce Inheritance Tax.

But overall this looks a sensible step forward – and actually quite brave. It is surely no accident that unlike its predecessors the current government’s Pensions Minister, Steve Webb, really knows his stuff, and has been kept in post for the whole period. Liberal Democrats can take pride that he is one of theirs. There is strong political consensus in his reforms, and no party political benefit. But it is nice to feel that our party has contributed something useful to the process of government.