Tag: UK politics

One cheer for Ed Miliband

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

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

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

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

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

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

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

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

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

Rebuilding local networks: it has to hurt

Last week I came across this interesting article in The Economist on Business Improvement Districts (BIDs), which are having some success in reviving local economies. It prompts several thoughts about how to rebuild local communities. And, as I advocated in my recent blog on the poverty of ideas on the British Left (The unbearable lightness of British politics) , I think this offers the key to future progress in our society. But some ways of attempting this are more helpful than others.

Here’s what I think the problem is. Over the last generation our social, business and political networks have been reconfigured. Local connections have been downgraded and replaced by national and international ones. In Britain (England and Wales anyway) this has given rise to a strong geographical focus on London. If you want anything done, chances are that at some point you will have to talk to somebody in London, or within its commuting orbit. It makes sense for most people to invest time in their London networks in place of local ones, a process that feeds on itself. This is part of a general process usually referred to as “globalisation”, with London serving as a global hub. There have been plenty of benefits to this: the country as a whole is economically much more efficient. But it brings with it two problems.

First is that the main beneficiaries of greater economic efficiency are a globally well connected elite. To make it, as a sports star, an artist or as a banker or business executive you need to be world class. The marzipan layer or national or, still less, regional stars are also-rans who, in some fields at least, find it difficult to even make a living. You can’t make much money out of the British “First” Division of the football league, because it is in the shadow of the Premier League. In the developed world at least, the economy does not work well for most people. The most successful developed world economies (in terms of widespread distribution) tend to be smaller – think of Denmark or Sweden.

The second is that in larger countries like Britain many local economies are struggling as the decent opportunities are elsewhere. Britain’s highly centralised political system exacerbates this. There is a growing gap between London and the South East and the rest – though Scotland may be starting to buck that trend. The poverty of local networks is surely part of the problem. The London centred networks are in control.

But we can’t turn the clock back. It isn’t just that a centralised political system has impoverished peripheral communities in a simple grab for power. Changes in technology made much of the old way of doing things obsolete. If the next step in our political evolution is to rebuild local networks, it must be done in such a way that economic efficiency is enhanced. That is where a lot of ideas for rebuilding local communities fail.

This is one of the things that make BIDs interesting. BIDs are an American idea (I think the Canadians may have started them); businesses in a locality organise themselves, and if a critical mass support the idea they can compel all businesses to take part, including contributing to the scheme’s funding. This raises money to make small improvements to local infrastructure which then have more widespread benefits. And the process of doing so revives local networks. As councils retreat, as central government funding is cut, the importance of BIDs rises. This prompts a couple of further thoughts.

First is the local councils, though obviously part of the solution, may also be part of the problem. In order for local networks to revive, local accountability is critical. If the trail of responsibility simply ends up in an office somewhere in London then it is compromised from the start. This is what undermined many of the last Labour government’s attempts to delegate power locally, such as through NHS Primary Care Trusts (PCTs). Local councils are electorally accountable locally, but get most of their funding centrally and are heavily constrained on what they can do without asking some national body for permission. And they often try to monopolise local power and smother initiatives that they did not invent. A diversity of locally accountable power centres is surely helpful. “Locally accountable” does not necessarily mean “controlled by the local council”. We must hope that the coalition government’s invention of Clinical Commissioning Groups (CCGs) in the NHS become genuine local power centres, not the playthings of the central bureaucracy, as the PCTs were. The jury is out on that one.

The second point is that it is about money. The BIDs’ power and influence derives from the money they levy from their members, which in turn can unlock funding from other sources, such as the National Lottery. As I have already noted, one of the weaknesses of local councils is that their local taxation powers are so limited. They have the Council Tax, a sort of residential property tax, and the Business Rate – both of which are highly constrained by central regulations. These taxation powers will have to be extended.

Which is a third point. The design of BIDs overcomes the “free-rider” problem, which is the bane of many local initiatives. There is a strong tendency for most people to sit back and let somebody else do the work. That makes legal powers to raise money – taxation in other words – a central requirement.

At the moment the London government is playing with localism. It is letting a number of ideas go forward if they promote better local management at no serious cost to the power of the centre. At some point progress will require reforms that will hurt the centre. So our political leaders, all of whmo have played with the idea of localism, need commit serious political capital to it. Unfortunately neither David Cameron (after the flop of the “Big Society”), nor Nick Clegg (in spite of the Lib Dems’ theoretical commitment to the idea), nor Ed Miliband show any real sign of taking the revolution out of Westminster’s comfort zone.

 

The unbearable lightness of British politics

The economic crisis in the developed world drags on, posing fundamental political and economic questions. And yet politicians here in Britain argue about not very much. The Labour leader, Ed Miliband, is currently attracting a lot of criticism for his lack of progress. But the real problem is that the political left has run out of ideas, while the Right complacently defends the status quo. This state of affairs will continue until we learn to look at our problems in a radically different way.

Nobody should doubt that capitalism is still in crisis. We have been cheered in Britain by some better economic statistics. But average wages remain stagnant, and are not keeping up with inflation. Some people are successfully adjusting to a reduced standard of living; others are running down savings or borrowing money. Private and public investment remains weak, and any benefits of a slightly stronger economy mainly accrue to a small minority of the better off, or to anybody that owns land and buildings, along with a trickle of unemployed people who are now finding rather poor quality work. Other developed economies, from the US to Europe to Japan seem locked into variations of the same dilemma: either the economy is stagnant, or it grows to the benefit of only a few people.

It is not difficult to see what the underlying problem is. Globalisation and the advance of technology are killing off industries that used to be the backbone of developed world employment, destroying lots of middle income jobs. We hear a lot about manufacturing industry, but the same dynamic applies to office jobs. There is not the same need for secretaries and administrators, with jobs tending to be either highly skilled (managers, technicians and so on) or else in soulless call centres; and some of those call centre jobs are being automated out of existence. There is a desperate hunt for the better paid careers, and many people have to settle for poorer quality jobs. In Marxist terms, the balance of power has shifted decisively towards capital and against labour. The process started as far back as the 1980s, with only temporary relief provided by the generosity of the Chinese who sold the developed world lots goods for less than they were really worth. Changing demographics adds to the difficulties of managing this problem.

Meanwhile a growing elite of capitalists and professionals are doing very well, but are under spending their incomes. More is being saved than invested, creating downward pressure on the economy as a whole. This is more or less how Marx predicted the end of capitalism. So if the traditional left-wing critique of capitalism is proving better grounded than many thought, why isn’t the Left benefiting?

The answer is that the Left have no convincing alternative to the capitalist model which does not destroy living standards. Marx could believe that common ownership of the means of production would do the trick, but we now understand that this is killing the goose that lays the golden egg. The turning point for China economically was its recognition that it needed a rampant capitalist economy to drive it forward, even if they also see the virtues of a massive state sector coexisting with it. Modern people love the benefits of capitalism, and in particular its constantly advancing technology, and constantly changing fashion – even as they struggle with capitalism’s consequences.

So what to do? There are still many on the Left, especially trade unionists, who think that the answer lies in a big public sector. This can be constructed to provide lots of well paid middle ranking jobs and, it is hoped, put market pressure on the private sector to treat their workers better. This strategy may be called “Sweden in the 1960s”, since that was when and where it worked best. But most appreciate that it is unviable. Sweden’s economy collapsed into a nasty mess after the 1960s. The state sector has no incentive to be efficient, and drags everybody’s standard of living down with it. It creates unbearable pressure on the private sector as they try to compete in world markets.  Constant devaluation of the currency might provide some relief, but in the end this leads to hyperinflation and total seizure (think of various South American economies over the years). In Britain the state sector is too large for the current tax burden, so to sustain it requires putting up taxes. This does not look a realistic political prospect.

So what’s left for the Left? Mr Miliband shows a good grasp of the basic problem but has found only lightweight solutions, such as putting moral pressure on big business to behave a bit better. And without any big ideas we end up arguing about not very much. Is the government’s austerity policy slightly too severe? Should we add a little bit of regulation to this or that industry? Or else do we just moan about various symptoms of the malaise, from immigration to the misery inflected on many who rely on state benefits, without offering any constructive alternative?

It’s much easier for the Right at one level. Their sponsors are doing quite well, so they can try to create smokescreens to pretend the problem doesn’t really exist. Some go further to try and suggest that we should place even less restrictions on the capitalist economy – though that line of argument is as discredited as Sweden in the 1960s. But ultimately they will have to confront the same problem: the economy doesn’t work well enough for most of the people most of the time.

And what is the answer to the problems of capitalism? Clearly this isn’t easy. I think we have start looking at our situation in a completely different way. We are stuck on grand policies that can be implemented by governments in London, accruing lots of prestige to national politicians. But this is just sucking power into an elite based in the country’s southeast. Is it an accident that Scotland is now doing relatively better as real power was devolved to Edinburgh? We cannot continue to destroy local networks and hope that people will be better off as a result. This is completely beyond the grasp of our political elite, left or right. But until politicians start to understand that they are part of the problem, not its solution, we are condemned to an unbearable lightness in our political debate.

The pensions blind spot

“All in it together? MPs WILL get a payrise worth up to 12%” thunders this morning’s Independent newspaper. While I’m not a big fan of our MPs, this headline has persuaded me that they deserve the payrise that apparently will be proposed by the independent body given the task of setting their pay. If even a supposedly more mature and considered newspaper like the Independent indulges in this kind of vindictive, misleading headlining, then something is clearly wrong.

This headline is revealing about how information is communicated in our society. First of all, no formal announcement has actually been made. The headline is based on a leak, which only reveals a partial picture. And yet by the time the full news is released, it will be old news. Speed trumps accuracy in the world of news media. The 12% figure is also misleading. It compares the proposed salary to be implemented in two years’ time to the current one. 9% is a more accurate number, and indeed this is what other organisations are reporting. Such considerations do not weigh heavily with headline writers.

But there is a further distortion. Apparently the proposal will be to reduce MPs’ pension entitlements at the same time – though the details don’t seem to have been leaked. So the total package will not be as generous as the headline writers make it sound. But here the journalists seem to be at one with the general public: treating pension entitlements as being of little real value, and failing to realise the implications of changes to it. Over the past couple of decades companies have been squeezing their employees’ pension plans hard, so that overall pension provision is now pretty meagre, when it used to be generous. This has barely reached the popular consciousness. Only public sector trade unionists have grasped that this is an fact a steady reduction in what people are paid.

There are in fact sound economic reasons for changes to pension arrangements. The proportion of pensioners to the working population is rising, and this makes pensions less affordable. Unfortunately high rates of pension saving don’t help change this dynamic much: this is one of those things that may work for individuals, but not for society as a whole. Pensions have to become less generous overall, and the collapse of private sector occupational pension plans is just part of that process.

But there is a big problem at the heart of it. Employers are in headlong retreat from pension provision, but individuals are not stepping forward into the breach to save more into personal pension plans. Even where they do, and they are being “nudged” into doing so by opt-out pension schemes, the amount being saved will go nowhere near providing for the scale of pensions the previous generation had been entitled to. This is sometimes offered as an example of irrational economic behaviour. But it isn’t. The transaction costs of saving weigh heavily on all but the very rich, and investment returns are dismal – even without the current regime of very low interest rates. Personal saving is a very inefficient way of delivering a pension for the majority.

It is better if the state steps in. A state-managed pay as you go scheme has comparatively low transaction costs, as well as reducing the risk to individual savers. Reforming the state pension is one of the more impressive achievements of the current Coalition government. It has been led by Lib Dem pensions minister Steve Webb, but it has not been politically contentious – the Conservatives deserve credit for letting him get on with the job – and Labour have not got in the way. Previous governments have changed their pensions ministers every year or so before any reform effort could get going. The focus has been on establishing a good basic pension to which everybody is entitled, which people can then top up through personal savings. Previous state schemes have tried to concentrate entitlement on the most needy, destroying the incentive to save, or to create complex entitlements based on income and contributions, which few understand because of the need not avoid double counting with subsidised private savings.

But the cost of this pension commitment will grow, and this is causing many sage heads to worry. Personally, I think we have to grin and bear it. If it looks as if it will run ahead of the ability to raise taxes, then we have to push the age entitlement back. But this is one of the critical strategic issues that our political leaders must grasp as our demography changes. Paying for the NHS is another.

These are weighty and important matters, which deserve much more attention than they get. They are much more important in the scheme of things than how much our MPs are paid. The country needs more MPs like Steve Webb, with both the intellectual and political skills to push forward difficult reforms like the one on pensions. We have a long way to go on that score.

Labour will subscribe to Tory cuts: the battle for the next General Election warms up

Nobody should underestimate the Labour leadership’s will to win the next British General Election, which should be in May 2015. I have been away for a couple of weeks. Before I left I was wondering what Labour’s response would be to the current government’s public spending review for 2015/2016, which will be announced later this week. It has been clear and unequivocal: they will sign up to the deep cuts in public spending that this review is designed to produce. This is breath-taking. What does it mean for British politics?

The spending review looked like a trap being set by the Conservative and Liberal Democrat coalition for Labour. Ambitious targets for savings were set: but Labour would be left with an awkward choice. Up until now Labour has been quite happy to ride the anti-cuts anger. Public sector workers, and many people relying on benefits, and others in the general ecosystem which they inhabit, are livid. Many workers with young families and mortgages are losing their jobs and facing steep cuts in pay. This anger has been fuelled by a myth: that cutbacks in public expenditure were unnecessary and motivated by Tory ideology, with the treacherous Lib Dems meekly giving in so that they can play with the toys that being in government gives them. This myth seemed to be supported by a whole army of economists saying that the pace of the governments austerity policies was undermining growth and making things worse. The Labour leader Ed Miliband and the Shadow Chancellor Ed Balls did not quite subscribe to this view if you read their words carefully. But they dog-whistled full support. Every cut was opposed angrily; they used the slogan “too far, too fast”, and mercilessly criticised the government for the negligible rate of growth in the economy, which they put down to its austerity policies. There was a studied vagueness about what they would actually do themselves.

But the 2015/16 expenditure review presented a challenge. According to the anti-cuts movement, the best thing would be to reject it out of hand, promise to reverse the cuts in large measure, so as to stimulate the economy and set off a virtuous circle of growth that would restore government finances and get the economy back to where it was in 2008, before the bankers’ sabotage act and global crisis got started. But if Labour did this, or even if they continued with the ducking and weaving, they would be open to a counterattack: Labour will put up your taxes. And the signs are that most people do not accept the anti-cuts narrative, and are hard-pressed financially – so not in generous mood when it comes to tax rises. No doubt the memory of 1992 haunts Labour’s leaders, when Labour lost a very winnable election after the Tories attacked them in the last week with a campaign based on “Labour’s tax bombshell” by hyping up the vaguenesses in Labour’s plans. But signing up to the coalition’s cuts would be hard too. It makes the manufactured anger about their impact difficult to sustain. Many of their supporters will feel betrayed.

But sign up to the coalition’s plans, with a bit of trimming here and there, is exactly what Labour have done. First in a speech by Mr Balls, and then this weekend by Mr Miliband himself. The message in the media has been very clear. I don’t know how it is going down in Labour’s activist base. Polly Toynbee, who often rallies to the anti-cuts cause, seems be showing resigned acceptance, while hoping than the party will come up with other ideas that will motivate the left. It isn’t exactly a U-turn. The narrative is that the economy, after the coalition’s poor management, is now so weak it cannot support more spending. This is weak fare indeed, and only shows that Labour had in reality accepted the bulk of the coalition’s austerity plans, subject to really very minor variations (like a temporary VAT cut).

The political calculation is clear. The angry brigade have nowhere else to go than Labour. Lib Dems may feel vindicated by Labour’s stance, but their previous public sector supporters will still not forgive them, except maybe in hard-fought marginal seats where they are up against the Tories. Britain’s two party electoral system means that elections are won by wooing floating voters. And these seem convinced by the case for austerity, even if, like Ms Toynbee, you blame this on the relentless right-wing press and the TV coverage that tamely follows in its wake.

The battle ground for the 2015 election is getting clearer. It won’t be about whether there should be cuts, but on where they should fall. For somebody like this blogger who accepts the basic logic of austerity economics in the UK, that should take the political debate into interesting and constructive territory. But others will feel disenfranchised and betrayed. Things are warming up.

The Woolwich murder: time for solidarity not demonisation

A week ago a British soldier, Lee Rigby, was murdered in Woolwich, in southeast London. His murderers (subject to due process of law…) were two British black Muslim converts, who had taken up Jihadist views. Their methods were as low tech as possible, and they were happy to be caught, though they may have wanted to be killed by police snipers. For them the point was publicity. In this they have succeeded beyond their wildest dreams. The story was promoted massively by all media outlets, and it is still getting a lot of coverage – quite out of proportion to other deaths, of civilians in London, or of soldiers on active service. The whole episode has stirred passions, and the results are disturbing.

At first I tried to retain a sense of proportion on the affair. It was pretty horrid, but more a random act of violence than a systemic threat to our way of life. But I seem to have missed something; the episode has hit Britain’s pressured working classes in a sore spot. For reasons that future historians will debate, soldiers have become a working class icon here in Britain (and perhaps the US as well). Their travails in Iraq and Afghanistan seem to symbolise the general pressures that working class people face: sent to fight wars nobody understands, and generally let down by the elites that sent them there. They are referred to as heroes.

This seems very different to the ways soldiers used to be regarded. The heroism is based on the dangers that the soldiers face and the endurance they show, not on the number of enemy that they kill. There was a bit of embarrassment when Prince Harry, after serving in Afghanistan, confessed that his actions would have killed people. Soldiering is about meting out violence; but we don’t really talk about that aspect of their work. There are occasional efforts to demonise the enemy, but it all turns out to be a bit complicated when many of your local allies appear little better. It is perhaps interesting that I don’t remember anything like this public regard for British soldiers serving in Northern Ireland, though I do remember having those feelings myself. The violence they inflicted on people that looked very like us, with some inevitable innocents, was altogether more visible, and made people feel uncomfortable.

Be that as it may, the target of last week’s attack could not have symbolised the working class icon better. And the reaction has been anger. The nasty islamophobic English defence League (EDL) has seen its popularity rocket. Attacks and threats on Muslims have soared. This seems to be a mainly working class phenomenon, though middle class prejudices are perfectly visible too, judging by the odd Facebook comment.

This is very depressing. The demonisation of Muslims and the Islamic religion is grossly unjust. All it can do is push more young British Muslims, suffering similar working class pressures, into extreme views. But demonising the EDL’s supporter doesn’t help either, and quickly takes on an air of class prejudice.

The fact is that most of British working classes, of all colours and races, are under pressure. Technology is killing traditional working class jobs and pressuring wages; housing costs, at least in places where there are jobs, are steadily rising. Benefit and public service cuts add to the pressure: though their effect on the working classes as a whole is complex – resentment at people living on benefit runs high amongst working class people. The education system often lets them down.

There are no easy answers. Stoking up a sense of victimhood, and throwing in the odd benefit or tax credit entitlement, is a road to nowhere, though advocated by many Labour politicians. By and large we need people to take more control of their lives and education, not blame everybody else when things go sour. The education system is slowly being fixed, though not all the government’s ideas are helpful. We need more social housing in the southeast, building on greenbelts if necessary. That’s hard and the government is doing much too little, though I don’t hear much convincing or constructive coming out of the Labour side either.

But it helps to understand and to listen. About the only shaft of light to emerge over the last week was an act of reconciliation made by a mosque in York to EDL protestors. Tea and biscuits made the headlines, but the real progress was made when the two sides got into dialogue and discovered their shared interests. Too many people advocate intolerance and confrontation (“standing up for what you believe in”), which only promotes misunderstanding and division. What is needed is true working class solidarity across race and religion to press for changes that will improve life in all our pressured communities.

Time to think of England

This week it was St George’s Day, a time when we in England reflect on what it is to be English – a few of us do anyway, especially when St George himself was so un-English. There was also a small flair in the ongoing campaigning over Scottish independence, when the British government poured cold water on the idea of a currency union between an independent Scotland and the what is left of the UK (which would no longer be a united kingdom…). As I have written before, it is a conceit that there is a Scottish problem for the UK. The issue with Scotland is just an aspect of the English problem. England so dominates the union that governance of England and governance of the UK get confused. We need to look at remaking the constitutional arrangements for the whole UK if Scotland, as expected, decides to stay in the union at their referendum next year. But how?

At this point it is all to easy to craft elegant new constitutional solutions to solve the problem. Alas, that is not how the British constitution works. We are deeply conservative. Any proposed change throws up a series of opponents, who are able to stoke up fear of change. The AV referendum in 2011 was a very painful experience for people who thought that sensible constitutional reform, or even sensible debate about reform, was an easy matter. So where does that get us?

First there must be a crisis. Most people must think that the current situation is intolerable. The crisis is presented by the Scots. Of course, if they vote to stay in the union, most English politicians will want to think that it is an end to matter, and we can go on as before. I don’t think many Scots think this, though. Even holding the referendum is a shocking event, showing that consent for the current British constitution is breaking down. Most think that if they lose the referendum, the Scottish National Party (SNP) will respond by pressing for “Devo-Max”, which will then look like a sensible middle way. Devo-Max implies a much greater level of devolution to the Scottish Parliament, leaving the UK responsible for just defence and foreign affairs in some readings, like Gibraltar, perhaps. Why, then should Scottish MPs have so much say in who governs England? This question is an irritant now, but it would become a much bigger deal. We need to head this problem off with a new constitutional settlement for the whole of the UK.

Second, messing with the sacred sovereignty of the House of Commons is to be avoided. To some people, including me, this is pompous twaddle. A parliament’s fitness for purpose is not derived from history, but from what it actually does. The people should be sovereign. But the sheer weight of traditions and interests that centre on the Commons is not to be trifled with. This body needs to rule all of the UK. Restricting its scope to England, for example, and having a new Federal Assembly is going to get nowhere.  And after the AV fiasco, changing the electoral system is off the agenda too.

And thirdly, there needs to be something for everybody in any new settlement. Each of the three main British political parties, and their backers should see at least some benefits, to weigh against inevitable threats. There will not be a consensus, but any new proposal must have broad support from a cross a wide spectrum.

And so to the English problem. In order to balance out devolution to Scotland (and to Wales and Northern Ireland) there must be an equivalent devolution to England. To many the sensible thing to do would be to establish English regional governments, of the same sort of size as Scotland, to give an overall shape resembling Spain or Germany. Elegant an idea as this may look, though, it has no legs. Local traditions in England have been so hollowed out over the centuries, unlike in Germany or Spain, that there is little in the way of tradition to build on. The English administrative regions, used for things like elections to the European Parliament are mostly named after points of the compass. London and Yorkshire, may be viable, but it ends there. Either identities are too diverse (the Celtic Cornwall compared to the Saxon Devon, for example) or else there is very little identity at all (where does Northampton belong to?). Constitutional change is hard: this is too hard.

Which leaves us with an English Assembly. I used to dismiss this as a nonsense, but it is growing on me. This should have equivalent power to the Scottish Parliament, whatever those are. That means an English First Minister and cabinet, control of education and the NHS, and, surely, over large chunks of tax. The bold, but necessary, step is to say that the capital of England should not be in London. Having it in the same city as the UK capital will make its identity and authority harder to establish, especially since London has its own mayor, making the  layer of government very crowded. Moving the UK Parliament and the paraphernalia of government out of London is too much as well. Besides there is a real grievance in much of England that too much of the establishment is based in London. Where? Geography points to Birmingham or Coventry; others may have better ideas. An old and grand but under-utilised Victorian classical building would be good to use as a base. Building a brand new building is asking for trouble. Like the Scottish Parliament and Welsh Assembly, it should be elected under proportional representation (PR).

So what would be left in London? The House of Commons would stay, but needs to be shrunk. It probably doesn’t need more than a couple of hundred MPs, but no doubt a compromise of 400 or so would have to be settled on. It is difficult to get turkeys to vote for Christmas. The House of Lords should be reformed too, though it is tempting to let it collapse under its own absurdity after last year’s reform fiasco. The UK cabinet would be shrunk. The Treasury, Foreign Office and Defence would stay much as is, as would much of the Department of Energy and Climate Change. But others would need to be shrunk down.

So how to sell it? To those in the north of England or Midlands, breaking the Whitehall stranglehold would be an advantage. Frankly this is a big attraction to me, even in London. Even under PR, the Conservatives would have a good stab at dominating the English government. Both they and Labour would benefit from PR giving them a political base in large swathes of the country where they are in danger of extinction – as PR has saved the Tories in Scotland and Wales. The Lib Dems would benefit from PR too, though they might lose out badly in the bigger and redrawn constituencies for the House of Commons. This losing out of the Lib Dems might be an attraction to both Labour and Conservatives, though – they might feel that they have a better shot at an overall majority for the UK if minor parties would struggle in the larger constituencies. Such are the sorts of calculations upon which British politics turn.

Food for thought, anyway. The next step, though, is to start talking up the idea of a UK Constitutional Convention if the Scots vote to stay in the union. The idea of an English assembly does have opinion poll support, though no doubt iti s very soft. But in small steps the idea can grow momentum.

The NHS: how the accountants are hiding dubious policies

The NHS is quite high up the news agenda these days. From the media there seem to be two big issues: culture and privatisation. The mainly right-wing press say that much of the NHS lacks a caring culture and this often leads to a breakdown of service. Left-wingers, and NHS insiders, worry about the new commissioning rules, and whether unscrupulous private companies will bid their way into contracts that destroy what is good about the service. These are both valid concerns, but a third issue should be causing more controversy than it does: funding. Not so much the NHS’s overall budget, though that too is worthy of debate, but how it allocates what it has. Recently the Health Service Journal has highlighted no less than three quite distinct issues on the topic. Politicians should be paying attention.

The first was an opinion article on 14th February by Robert Royce, a visiting fellow at the King’s Fund, the health think tank. His subject was the Mid Staffordshire Foundation Trust: but not the Francis report, but the preceding report by Monitor, its regulator. This report questioned the trust’s financial viability, suggesting that the hospital lacked scale. Hospitals like Mid Staffs are funded mainly through something referred to as “the tariff”, and which used to be called by Orwellian name “Payment by Results”, which was put in place by the New Labour government. This puts a price on every service episode the hospital performs: payment by activity, rather than by results. This system is often portrayed as being a commercial, market type discipline, but the tariff looks like no market tariff that I have ever seen. It is massively complicated, requiring big information systems resources to work.

What the tariff does remind me of is a transfer pricing system to allocate costs internally between two fractious units of the same organisation, who hope that by referring the problem to management accountants they can find an objective resolution. As the accountants grapple with the complexity of the problem they add layer upon layer of detail, in a hopeless quest to replicate the infinite complexities of real life, resulting in something which is nearly useless for management purposes. The system is designed for a political rather than a commercial environment, with the aim of pretending that strategic value judgements are mere technical problems. In the NHS almost all commentators go along with this pretence.

Mr Royce points to one pernicious value judgement in the tariff. It is that emergency services are bad, and elective services are good. Mid Staffs is perfectly viable financially on its elective services, but is being dragged down by losses on its emergency services. What if the tariff were raised for emergency services and lowered for elective, to genuinely reflect the underlying costs? The the hospital’s viability might look altogether different.

The second article was in the magazine’s “Resource Centre” section on 14th March, and is entitled The real reason for “failing” hospitals. It is by Sheena Asthana and Alex Gibson from Plymouth University. This is dressed up a piece of academic data analysis, but it is politically pointed. The authors look at the funding formula for Primary Care Trusts (PCTs: the bodies that fund the hospitals, at least until 31 March), and tries to correlate troubled hospitals and underlying population characteristics. They find that there is a strong correlation between hospital stress and a high proportion of older people in their catchment area. Their claim is that the funding formula is diverting financial resources away from these areas of greater need towards areas that are less wealthy – and this is the fundamental reason why so many hospitals are failing.

The last government was obsessed with addressing “health inequalities”, an expression that I hate because it implies that the solution is making things worse for the better off, rather then improving the lot of the worse off. And if Ms Asthana’s and Mr Gibson’s study is to be taken at face value, that is exactly what is happening. The present government show no sign that they want to address this awkward issue, and, according to the authors, much the same allocation is being ported into the new system.

The third article was another opinion article, this time by accountant (sorry, independent consultant and former NHS finance director) Noel Plumridge on 21st March. This looks at something that has been bothering me. If the NHS budget is protected, and increasing at a rate faster than most people’s pay is rising (2.6% as against 1%), how come so many NHS organisations are under such financial pressure? He finds the figures for next year’s budget less than transparent but concludes that there are no plans to spend a large chunk of the money at all: they are destined for unspent surpluses or contingency funds to “mitigate risk”. These surpluses are a point of difficulty: the individual trusts that make a surplus are supposedly allowed to reinvest them in future years. But under Treasury rules the NHS as a whole must hand the funds back to the Treasury for good. Is this just a backhand way of breaching the promise to ringfence NHS funding?

I only subscribe to the HSJ because I forgot to cancel it after my attempt to find a job in the NHS ended in failure – now I find interesting articles nearly every week. What these three articles show is that there aren’t enough accountants in politics. NHS leaders are being allowed to get away with some highly contentious political policies by dressing them up in complicated accountancy.

Lib Dems hope for a turning point

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

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

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

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

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

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

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

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

The public’s foul politcal mood: symptom or disease?

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

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

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

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

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

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

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

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

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

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

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