Guest Post: What Next For Europe?

This is a response that Alex Sabell sent me to the last post. Since Alex genuinely knows this policy area very well, I thought it would be well worth sharing with you all. It has some worrying implications to say the least. Enjoy.

You speak of the current austerity conditions being imposed by the European elites and that they need to realise that this isn't going to wash with the electorate. The only problem is that I don't see the other solutions being any good either.

The likes of Greece, Spain etc... in general got quite a lot richer over the life of the Euro, and we can see now that this was mainly down to cheap credit being available under the assumption that Northern Europe (aka Germany) would pick up the tab if something went wrong. The Germans explicitly always said that they wouldn’t; so really nobody should have been lending on the assumption that Germany would actually stand behind the entire Euro venture.

The knock-on effect is that the banks of Europe do indeed need to take a hit on this (which they haven’t so far). But incidentally I think it would be a mistake to assume that pummelling ‘the banks’ and letting them take a hit, just affects rich people. ‘The banks’ essentially are all of our pension savings etc... or our ability to get a loan to start a business. They affect everyone. I don’t think the current Euro austerity ‘solution’ is just to benefit rich creditors.

Anyway I digress, my main point is that in hindsight its a bit mad that Greece, for instance, was able to borrow at the same interest rates as Germany. There were always some quite fundamental differences between the two countries, and I’m not just talking kebabs vs sausages. During this time wages and buying power went up a lot in most Mediterranean countries but stayed about the same in Germany, who were quietly becoming more efficient. (Germans exports were of course also benefiting from what was essentially, for Germans, an under-valued currency). Yet the stuff being produced in Mediterranean countries wasn't being made any more efficiently during this time of increasing wages. Those higher wages were effectively coming at the price of competitiveness. And cheap credit was papering over these widening cracks. Unit cost and various productivity/efficiency analyses seem to back this up. These countries were essentially living beyond their means – funded by credit.

So its not just the elites who would like to stay in the Euro now. Many people realise that going back to the old currencies would leave them quite a lot poorer. In effect it actually would mean going back to a relative level of income of the era before the Euro... Now, I realise that those politically connected, ‘the elites’, the financiers, the bankers, in these countries would have done best out of the Euro (and have all by now bought houses in London) and that those who suffer most are ‘the rest’, but the figures on wages and productivity do seem to suggest that most of the Mediterranean populations were considerably better off during the happy Euro years. People were paid more, they could buy more as their Euro currency was considered as good as anyone else’s, companies could borrow at more competitive rates and grow quicker than before etc... etc...

Sadly it was all a bit of an illusion.

The future for many Euro countries is a Euroland of either massive inter-country redistribution and losing control of your finances, in the style of a true political union, (which essentially means being told by Berlin and Frankfurt to be sensible or else) or falling out of the Euro, incurring a massive loss of wealth as your currency reverts to a more ‘natural’ level – a level of national wealth more like where you were before the Euro came along.

To me this implies that its not just a case of the elites imposing the wrong austerity solutions. They are rather stuck trying to manage a slightly unrealistic and ageing continent that’s got rather used to being comfortable and protected. The elites are effectively playing scrabble with a hand full of Zs, Xs and Js. And the rest of the letters are consonants. And they are nowhere near a triple word score.

I think its more a case of everyone in the Euro, the elites and ‘the rest’ alike, being trapped in a poorly designed (mainly when viewed in hindsight) currency union in which no future option looks particularly inviting. Somebody is going to have to pick up the tab for the Euro binge, probably the Germans, and they will forthwith ban all future parties. Or alternatively peripheral countries become poorer quite quickly, either through austerity or through falling out of the Euro. I can’t see a magic alternative policy that the elites can choose.

In effect, where I do agree with blaming the elites is that it was they who allowed their currency union to be designed by committee (apparently using sticky tape and party straws), but then European integration is a rather lovely idea – in principle – and I can see why lots of us went for it, elite or not.

Italians Possibly Not Irrational

I have a personal theory, which often upsets committed political activists, namely that electorates tend to choose the least bad option presented to them at an election. This is not to claim that voters are individually rational people, because they are not. People vote according to their own whims, a lack of information or a lack of comprehension, raw prejudice, family tradition or indeed any combination of thousands of other motivations. I am saying that in aggregate, if you ask enough people the same multiple choice question, they will generally choose the option which causes the least distress to the greatest number of them.

With this theory in mind, consider the result of the Italian elections. On the face of it, the Italians have chosen a government, or more accurately not chosen a government, which will result in legislative paralysis and economic chaos. One in four of them voted for a comedian (an actual comedian, this is not a metaphor) called Beppe Grillo, whose policies include the abolition of the tax collecting department. They have also granted control of one of the legislative houses to Silvio “Bunga Bunga” Berlusconi, a man who defies all attempts at satire, while the other is dominated by his left wing opponent Pier Luigi Bersani. This is a recipe for gridlock, and almost manages to make the US look like its government is functioning well (but not quite). My theory about the rationality of electorates is starting to look a bit shaky.

Now imagine that you are an Italian voter. The last few years have not been kind to you. The unemployment rate is over 11% and rising. It is over 36% for the under 25s. Savage austerity measures have significantly reduced your standard of living. All this has been deliberately imposed on you by a technocratic government installed by the EU in order to keep the country in the Eurozone. You were told that if you took this harsh medicine, economic growth would return. It hasn’t. If Italy carries on down the present policy course, all you have to look forward to is years of economic depression. Now, your job, your retirement and your children’s future may all be in doubt but, and this is the beauty of democracy, you have one thing left. You have a vote, and you use it to vote against the misery which has been imposed upon you. The Italian electorate voted against candidates backing austerity by a factor of three to two. Notice how Mario Monti, the technocratic leader who has imposed austerity on behalf of the EU, was sent packing at the polls? That was no accident.

There is nothing irrational about the Italians voting in this way, although it could have far reaching consequences. This vote is effectively a rejection of the failed EU wide policy of economic austerity without any concurrent growth plan, which has been the continental response to the Eurozone debt crisis. It cruelly exposes the fatal flaw in that plan-the political elite can impose years of depression on millions of people, but they cannot make those millions of people gladly accept it. Already, analysts are saying that this election heralds the return of the Euro crisis. What has really happened is that the total inadequacy of the previous “solution” has been exposed. Just think, if the Italians won’t put up with it, why would anybody else? The Eurozone looks pretty exposed right now, and deservedly so. Its leaders brought this on themselves.          

Kremlinology

I’ll make this quick, because it’s pure speculation. A misconception many people have about the British system of cabinet government is that the Prime Minister holds all the power. In reality the only power that comes with the office is the power of patronage-it is the Prime Minister who makes all the ministerial appointments. MP’s and ministers are loyal to a Prime Minister because his favour is the only way they can secure political advancement, or because the Prime Minister can sack them if they prove disloyal.

This produces an interesting dynamic, because the power of the Prime Minister to command loyalty from his MP’s and ministers is diminished if those MP’s and ministers think that said Prime Minister will not be in charge for much longer. If, for example, it looks like the governing party is going to lose an upcoming general election, then the Prime Minister no longer credibly holds the fate of his underling’s political careers in his hands. Those underlings will be looking to gain position in or under the next leadership of the party. I am well aware that this assumes that many politicians are ruthless careerists. History would indicate that there is some truth to this.

With this in mind there was a fascinating snippet in the Independent on Sunday this week. Back in 2010, when the coalition was freshly elected and the Prime Minister had five years worth of appointments to make, Michael Gove was prevented from having his choice of special advisor (SpAd), namely Dominic Cummings, because Mr Cummings was felt to be something of a loose cannon by the leadership. Later on in the Parliament Mr Gove had no problem employing Mr Cummings, despite the fact that if the present briefing is to be believed, the leadership still hold a dim view of this SpAd. Why does Mr Gove feel able to act against the wishes of the leadership (not for the first time) now? One possible answer is that Mr Gove is no longer in awe of the Prime Minister because it looks increasingly likely that the Conservatives will not win the next election outright, and that if a new coalition is formed it will be between the Lib Dems and Labour*. If this is the case then Mr Gove’s next career move will not depend on the favour of David Cameron. Indeed, it could be to replace him.

This analysis comes with plenty of health warnings. Michael Gove has gone on record as saying he is unfit to be Prime Minister. All of the briefing I referred to could have come from Department of Education officials who are in the middle of an acrimonious dispute with Mr Gove and his SpAds. Still, these rumours are cropping up in quite a few places. This might be a story to watch.

Can you tell I’ve been watching House of Cards this week?

*I personally am not yet convinced Labour can pull this off, but it looks more likely than it did this time last year, so who knows?     

Academy Schools

We often hear talk about the need for public sector reform, and indeed most governments pledge to deliver this in some form or another. I want to use this post to give you a real life example of the process in action, and to show you that even if there is a pressing need for it, successful change can take decades to come to fruition, and will be opposed at every step of the way. The case study I’m going to use is the British state secondary education system, which covers pupils ages 11-16. To explain the reforms, I have to explain the process which made them necessary in the first place, so I’m afraid this begins with a brief a history lesson.   

By the mid 1980’s it was clear that something had gone very wrong with the British comprehensive education system. Originally set up in the 1960’s, the idea behind it had been very noble. Up until 1965, children had been separated at the age of eleven into the one third who passed an exam and were sent to ‘grammar schools’, very high quality schools which prepared pupils for university and a life in the professions, and the rest, who were sent to ‘secondary moderns’, which essentially warehoused children until they were old enough to be sent off into low skilled jobs requiring few if any qualifications*. This system had the effect that most people’s life chances were decided at the age of eleven, and it failed to properly educate two thirds of the population. As a result the different types of school were merged, creating the new comprehensives which took pupils of all abilities from their local area.

The problem was that a very large number of the new comprehensive schools failed, becoming dire ‘sink schools’, which were effectively the same as the secondary moderns that had preceded them, only with no route of escape for bright children from modest backgrounds. Because wealthy parents could send their children to private schools, which actually became even better during this period because many of the old grammar schools went private rather than becoming comprehensives, the British state education system effectively became the teeth of the British class system. Social mobility froze up, because a high quality education was only available to the rich.

Faced with this problem, the politics of the period produced a dead end. The right favoured using state funds to pay for a small number of bright children to attend private schools, doing nothing for those left behind, while the left blocked any reform which they thought would lead to a return of a two tier system. Neither came up with an answer to the key question of how you could improve the quality of all state schools.

At this point, consider what it is that makes a good school. It is emphatically not the socio-economic background of the pupils. Rich kids can be deeply stupid (think Made in Chelsea), and if this is true then so to must be the reverse: poor kids are not necessarily thick. The good schools are the ones which insist on high standards of behaviour and achievement, and do not tolerate slippage in these areas. These standards are set and maintained by good quality leadership within the schools, which requires an excellent management team who have the power to implement their vision of a good school.

This high quality leadership was exactly what was missing in the sink comprehensives. Responsibility was split between the head teacher, the board of governors and the local education authority (LEA), which is a part of the permanent bureaucracy of the local council. These LEA’s were particularly woeful, and often members did not even bother visiting the schools they were responsible for, let alone provide decent leadership for them. They tended to be very protective of their schools and were very resistant to closing them, even if these schools were failing the pupils who had no alternative but to attend them. The split responsibilities were a recipe for passing the buck between different layers of management, and when no-one took responsibility for a school, it sank.

Gradually, beginning with Kenneth Baker’s ‘City Technology Academies’ in 1988 and followed by New Labour’s ‘Academy Schools’, a new model of state secondary school began to emerge, which tackled the problem of failing LEA schools head on. These new schools had a private sponsor, often a successful local business person, who hired a management team which they knew would be effective. They received their funding directly from central government, bypassing the LEA’s altogether. Although they had to maintain high standards and pass OFSTED inspections, the new managers were free to run the school as they saw fit, without interference from the local council.

The results have been quite frankly stunning. Not only have standards within the schools which converted to academies risen, but academy schools have raised standards across the education system as a whole, because previously coasting LEA schools have to compete with them for pupils, and so they raise their game. To see how effective academies can be, take a single example. Hackney Downs was one of the worst of the LEA sink schools, in one of the most deprived areas of the country. It was so bad that it was closed by ministerial order in 1995. The attitude of the time was that “schools cannot compensate for the problems of society” (translation: poor kids are thick).  In 2004 it was re-opened as Mossbourne Academy. In 2009, the first year that it had 6^th form graduates, NINE of them gained a place at Cambridge. Who on earth could argue with results like this? Sadly, lots of people found a way.

The academy program generated a huge amount of resistance, both from the LEA bureaucracies themselves, and from the wider left, notably from within the Labour Party, who mistakenly thought it was introducing a two tier education system. I want to stress mistakenly here, because academy schools are bound by exactly the same selection rules as LEA schools**. It is just not true that they select their pupils. If they are good then parents will try very hard to get their children into them, but that was true of good LEA schools as well. Look at the high house prices around an LEA school with a good reputation and you will see selection in action, but it is selection by parental income rather than student ability. Academies took over the worst of the LEA schools and turned them into desirable establishments. They made the comprehensive dream of good schools available to all a reality. They should be New Labour’s proudest achievement, yet due to internal party resistance only 203 of these new schools were open by the time Labour left office in 2010.

The incoming Coalition government was not so inhibited. Education Secretary Michael Gove, knowing a good thing when he saw it, put rocket boosters under the program. There are now well over 2000 of these schools in Britain. That is over half of the total number of schools, and there are more to come. Gove is something of a hate figure on the left, so it is perhaps amusing to note that his most successful policy is simply to do what his Labour predecessors did but to do it more quickly. Those Labour predecessors were in turn building on the work which began under the Thatcher government, although they tend to keep that a bit quiet. That isn’t really the point though. Gove is simply continuing a much needed process of reform which began way back in the 1980’s. If real change is to happen, this is how long it takes. It is sometimes worth taking a step back from Westminster politics to think about that.   

 *The old selective system is maintained in a small number of counties, including Kent.

**UPDATE 14/02/2013: Please see comment one.

What's The Beef?

This weekend Britain is in the grip of a full on food scare. Horse meat has been discovered in several processed beef products, including Tesco burgers and Findus lasagne. We have no way of telling how wide the contagion is at this moment in time, and there are fears that it could be present in school dinners and hospital meals.

Horse meat is not dangerous to eat in and of itself, although it is not yet known if the meat used in the contaminated products contained the horse drug phenylbutazone, which can cause serious blood disorders in humans. The issue here is that we basically have no idea what is in the food that we eat, and therefore cannot be sure if it is safe or not. Although most people are actually OK with eating horse (sales of genuine horse meat have doubled since this scandal broke) imagine what would happen if something else was discovered in our food. Cat for example. I doubt people would be so sanguine then. As with all food scares, uncertainty about which products are trustworthy risks undermining confidence in the whole supply chain.

Faced with this situation Environment Secretary Owen Paterson has given us a master-class in how not to be a Minister. The scandal has been brewing for a couple of weeks now, during which time Mr Paterson was pretty much anonymous. Yesterday, as it became clear that the contagion was much wider than originally thought, questions were asked about the whereabouts of the Minister, and David Cameron expressed his “full confidence” in Mr Paterson, which could be interpreted as a less than gentle reminder that he was expected to deal with this. Whatever the intention, it certainly got the Ministers attention, and he immediately returned to the department, gave a series of TV interviews, and announced his plan of action. Fans of ‘In The Thick Of It’ will probably be able to anticipate the result of this form of crisis management.

Paterson has today held an emergency summit with food retailers and suppliers, and demanded that all processed meat products are tested and the results made available by next Friday. Given that the results of tests on school and hospital foods will not be available until the 8^th of April, this timetable looks optimistic to say the least. The Food Standards Agency does not actually have the legal power to force companies to do this, and even if it did experts say that there is not enough laboratory capacity to perform all these tests in one week. It will be very interesting to see what happens if they fail to meet the Ministers demands. My best guess is that by announcing what look like panic measures which are probably impossible to enact, Owen Paterson has just given the story more legs. He may come to regret that.   

Mid Staffs

Some things matter more than party politics and today’s report into the horrific events at Stafford Hospital is one of them. Between 400 and 1200 people died unnecessarily, and many hundreds more received treatment so appalling that it will haunt them for the rest of their lives. The managers in charge of the hospital did not address the failings, but instead attempted to cover up them up, showing a shocking lack of human empathy for the people in their care.

Between 2005 and 2009 patients in the hospital were left literally starving, unwashed for up to a month and reduced to drinking water from flower vases, because staff members were unable or unwilling to care for them. Patients were assessed by receptionists, and many people were killed after receiving either the wrong medication or none at all.

Disturbingly, none of this was picked up by NHS quality control procedures, and only came to light when the daughter of an elderly patient who had died after being refused life saving medicine, having suffered terribly for weeks, wrote to the local paper and asked if anyone else had had a similar experience. It is perhaps instructive to note that this bereaved whistleblower received hate mail for her troubles.

The picture that has emerged from multiple enquires into the hospital is deeply disturbing. What appears to have happened is that the hospital managers, the Mid Staffordshire NHS Trust, cut staffing levels in an already understaffed hospital in order to meet government targets which would allow them to gain the coveted “Foundation Trust” status. The Trust's focus was entirely on bureaucratic targets and not on patient care, which seems to have been forgotten altogether. When concerns were raised about the hospitals high death rate in 2008 the Trust did not act on them, but instead dismissed them as “coding errors”. Remember that at this point in time, people were needlessly suffering and dying on a shocking scale. Statistics mattered, people did not.

This is not a story about cuts or austerity. This happened at a time when the NHS was better funded than at any point in its history. It is a story about the total failure of NHS management procedures and indeed the whole culture of the NHS to ensure that users of the service received even a basic standard of care, dignity or empathy. The management structure and culture that failed so disastrously at Stafford Hospital is the same management structure and culture which governs the rest of the NHS. If it has been shown to fail this badly then it must be reformed. That is beyond question. However devoted you are to “defending our NHS”, it must be clear that this is not what Nye Bevan had in mind when he set it up. Make no mistake, this is a dark day for the health service.

Gay Marriage

As I write this the Commons is debating legalising gay marriage, and it will vote on the subject at around seven o’clock tonight. There is absolutely no question that the measure will pass, however large the Conservative backbench opposition to it eventually turns out to be, for the simple reason that the vast majority (although not all) of Labour MP’s are voting in favour. I’m guessing that none of you will be surprised to find out that I think this is fantastic news, and I would add that frankly I find the arguments against the measure so feeble, not to mention bigoted, that I’m not even going to dignify them with a response.

I would make the observation that the fact that this is happening today is a testament to how quickly social attitudes towards homosexuality have changed in recent years. While I was at school I remember seeing the front page of The Sun newspaper screaming “Is Britain run by a gay mafia?”, then ‘outing’ several gay men in the British government, as if their sexuality had some bearing on their ability to govern. That was only fifteen years ago, yet in that time such naked bigotry has become a total anachronism. The fact that as a society we have moved on from that and are now legislating to ensure that there are no areas of British life that gay people are excluded from is something we can be justifiably proud of.

Since all that is so predictably socially liberal of me, I’d like to make one final point. All the opposition on the Conservative backbenches is obscuring the fact that this legislation has been put forward by the Conservative leadership. This highly commendable policy is going to be a part of David Cameron’s political legacy, and I think it is something that he will look back on with pride. It is also notable that several Conservatives who have never previously shown modernising tendencies, including Chris Grayling and Bernard Jenkin, have come out in favour of this Bill. These people deserve credit for doing this, and it would be churlish not to give it. This is going to be remembered as one of Parliaments better days.             

Cameron's Party Problems

Way back when I first started this blog, I said that David Cameron was having difficulty persuading his own party that he was taking the country in the right direction, and that if he failed to address this then his party would be in real trouble. Since I wrote that, the situation has got much worse for him and there is now a real possibility that the Conservatives could start tearing themselves apart again, just like they did in the 1990’s.

So that you understand how bad things have got, consider this. In 2004, when Michael Howard was the Conservative leader, he considered offering the voters a referendum on a renegotiated relationship with the EU, or giving them the option of leaving it if they so wished. His advisor, David Cameron, pleaded (successfully) with Howard not to do this because he thought it was an unnecessary distraction from what mattered to voters, and was basically just pandering to the Conservative right wing.

Last week, faced with that same increasingly rebellious right wing, David Cameron was forced to make exactly that pledge. His often expressed hope to lead a party which was not obsessed with the European issue is well and truly dashed. You would think that his party would at least be grateful for the concession, yet within a week we hear that some of them are plotting ways to remove both the Prime Minister and his close ally George Osborne.

In the short term this is highly unlikely to happen. The only way Conservative MPs can remove Cameron is by holding a vote of no confidence in him. Although it only takes 46 of them to call this vote, it would take 152 of them to win it (there are 303 Conservative MPs in this Parliament), although if a significant number did vote against him his position would probably be untenable. The rebels have not yet even mustered enough support for the confidence vote, although they are trying.

In the meantime this leaves Cameron in a near impossible position. He cannot shift his policies to the right because his Lib Dem coalition partners will vote against him, as they did with the recent boundary review. He cannot shift to the left because his own backbenchers will vote against him, as they did with his attempt to reform the House of Lords. He will lead a government that cannot actually govern. You will see the effect of this on Tuesday, when Parliament votes on gay marriage. Cameron has put forward this legislation, but in all likelihood he will rely on the votes of Labour MPs to pass it. It’s not a good sign when the government requires the support of the opposition to get its business through.

Come the next election, things just get worse. If the Conservative right forces Cameron to run on a hard right policy platform, the chances are that they will lose, just like they did in 1997, 2001 and 2005. The British public just won’t vote for a party that right wing, provided of course that there is a credible alternative. That’s still a long way off, and there is plenty of time for Cameron to turn this around, but he’s going to have to start soon if he is to achieve this, otherwise it’s all downhill from here.    

Blue Labour

It’s fair to say that this blog has, on occasion, suggested that there is a leadership vacuum at the top of the Labour Party, and that it has no clear idea why it is seeking office. The reasoning is that while Ed Miliband has put a lot of work in to coming up with a sort of sociological critique of modern Britain, this critique does not yet translate into a program of government, or even a strategy for winning an election. Having said that, I do think that it deserves some scrutiny, so that is what I’m going to try here.

Coming as he does from an academic background, it is perhaps unsurprising that Mr Miliband turned to the academy when he was seeking the raison d’être of his leadership, in particular to an academic called Maurice Glasman. Professor Glasman has come up with an idea he calls “Blue Labour”, which argues that the financial crash of 2008 was the result of a flawed method of organising our society, particularly our economy, and that we must now find a different, more effective way of arranging our affairs.

The argument runs that before 2008, Britain responded to globalisation by creating a workforce where everybody tried to have as many transferable skills as they could so that they could go and work in whatever industry made the most money (obviously I’m paraphrasing very crudely here). A legal and social framework was set up to ensure that money and talent were funnelled to wherever they could generate the greatest return. The result was that by 2008 Britain’s productive energies were dangerously focused on the financial services industry, which was based pretty much exclusively in London. When that crashed there was nothing else to take its place, thus the mess we are in today.

Glasman’s response is that we need to remake the very structure of British society. He wants to see workers, or more accurately unions, take a role in making executive decisions in companies, with up to a third of the seats on the board, and to give local communities a say as well, although he is very unclear on how he would do this. Furthermore, he says that we need to create a regional banking structure, so that investment is directed at places outside of London. The basic idea is to organise our economy around the common good of our communities, rather than have it chase high returns and leave most places (and people) behind.

This is real big picture thinking, and I don’t think it will quite translate into a political project for Mr Miliband. To begin with it requires changes which are not within the gift of a government to make. Glasman himself admits that if unions are to take a major role in company decision making then they will have to change their culture to something more cooperative with management, and managers will have to learn to cooperate with unions. Germany has this type of tradition, but it is not clear how such a culture change could be brought about here. As for a regional banking structure, how will that be created? Will the government own these banks? Setting up banks is very expensive, not to mention risky. I fail to see how the government could legally separate existing banks, which are global in size and owned by shareholders all over the world, into what Glasman seems to want.

These are, if you like, technical objections, in that they ask if the project is possible. My real philosophical objection is towards the bit about the common good of the community. Community means different things to different people. It can be anything from the people at a golf club to a religious identity, but Glasman seems to mean it to be the area in which you live. Frankly I find the idea of community based on location a bit medieval. The people of Britain haven’t actually been tied to a certain location since the invention of the railway, and that’s no bad thing. The underlying assumption of Blue Labour thinking is that a sort of inward looking local identity can be imposed on a society which is increasingly diverse and mobile. I don’t really see why Mr Miliband would want to try and turn this into his great political goal, even if it were possible, which it is not.   

Banging On About Europe

After months of prevarication and press speculation, the moment finally arrived at just after eight o’clock this morning. David Cameron gave his big speech on Europe, the one that sets out once and for all Britain’s most significant area of foreign policy, and coincidentally the one that has the most potential to wreck his premiership.

Credit where credit is due (an idea normally against the editorial policy of this blog), unlike some other recent speeches, this one had some real substance. The Prime Minister argued that the current direction of Europe, treaty bound towards “ever closer union”, is wrong, and that the EU should be a loose confederation of states based around the single market.

With this in mind, Cameron intends to re-negotiate key European treaties and ask the British people if they agree with the results of his re-negotiation or if they would prefer to leave the EU all together, in a referendum to be held in 2018. He says that he intends to vote in favour of Britain’s continued EU membership in this referendum. The date is significant, because it falls the other side of the next general election. The way Cameron phrased it, you will only get a referendum on Europe if there is a majority Conservative government after 2015. I personally do not think that Labour, or even the Liberal Democrats, will be able to go into the next election on a platform of denying the public a say, so I suspect that they will match the pledge. Predictions make fools of us all, but I expect this referendum will go ahead whatever the result of the election.

As a rule, referendums tend to back the status quo option, as demonstrated by the AV vote in 2011. As things stand, when this Europe referendum takes place, on the ‘yes’ side will be all three major political parties and most of British business, arguing that leaving the single market will cost millions of jobs. On the ‘no’ side will be Nigel Farage and Bill Cash, looking like golf club bores. It should be an easy win for the yes team, and the Prime Minister will be factoring this in to his calculations.

I want to highlight a huge area of what you might charitably describe as creative ambiguity in the Prime Ministers approach. It is entirely dependent on him being able to successfully re-negotiate the founding treaties of the European Union. I have not come across any evidence which suggests that the other 26 members desire this, and he will need their support if he is to succeed. According to the argument he advanced today, the current terms of EU membership are unacceptable. If he is unable to get new ones, will it still be Conservative policy to vote yes? He very obviously ducked this question when asked it after the speech. It is possible that he is withholding an answer in order to give himself a better negotiating position with the other European leaders, or alternatively he just doesn’t know himself. I can only speculate.

Finally, there is a school of thought, particularly within the Conservative Party, that the referendum pledge set out today is an election winner. I bet it’s not. Europe obsesses right wing politicians like no other subject, but the great British public can hardly contain their indifference. Elections are decided primarily on the economy, immigration and heath, not Europe. As I have pointed out above, the fact that one party promises a referendum makes it highly likely that there will be one whoever wins the general election, so I can’t see the Conservatives winning that election on the back of this pledge alone, although the longer Labour say they will deny the public a vote the more ridiculous they will look. Still, this is the most significant development in British European policy since the Maarsricht Treaty in 1992, and it could theoretically even result in us leaving the EU. It's a big day.   

Military Overstretch in the Maghreb

A good definition of strategy is that it is the calculated relationship between ends and means. This definition implies then when you are making long term decisions, you need to consider the questions ‘can we’ and ‘should we’ simultaneously, because the answer to each is dependent on the answer to the other. I want to flag this up because when we discuss foreign policy, particularly defence policy, it tends to be forgotten.

The terrible events in Algeria have focused British attention to the threat of islamist groups operating in the Maghreb. In response, David Cameron has announced what looks very much like an open ended commitment to meeting this threat using all available means, including military. Referring back to the definition of strategy I gave at the beginning, he has very carefully answered the ‘should we’ question with yes. I want to draw your attention to the ‘can we’ question, because the government’s own planning documents indicate that there is a problem here.

When the coalition came to power in 2010 it made the decision that serious long term spending cuts were required in all government departments because of the public deficit they inherited. With this in mind they commissioned the Strategic Defence and Security Review, which is the plan setting out what would be cut at the Ministry of Defence and how Britain’s military objectives would be secured with fewer resources. If you follow the link and go to pages 18-19 of the review you will find the assumptions on which it is based. Summarised, the review states that after the cuts British armed forces will be capable of one Afghanistan sized deployment and two smaller six month deployments simultaneously, and no more.

When the Prime Minister announces the beginning of a ‘generational struggle’ in North Africa, to be conducted at the same time as the ongoing campaign in Afghanistan, he is disregarding his own strategic plan, and making a commitment that runs the risk of seriously overstretching British forces. It is important to note that the defence cuts outlined in the review are still taking place, and only today we learn of yet more redundancy notices being handed out to British soldiers. The government is ignoring the ‘can we’ question I asked at the beginning of the post.  

This could have very alarming consequences. If you cut the local government budget and expect it to continue as normal, the worst that will happen is that the rubbish doesn’t get collected. If you do this to the military then soldiers get killed, and that’s without thinking about the damage to Britain’s interests abroad which result from mission failures. When we have a strategic defence review we should take it seriously, and make sure that we match our desired ends with the available means. It really is a matter of life and death. 

38 Degrees Of What, Exactly?

There is a body of opinion which suggests that people are increasingly disengaged by conventional politics, and that old style political parties are dying out.  According to this school of thought, the future of politics is to be found in single issue movements which mobilise large networks of individuals to further a specific cause then disband once their objective is achieved.

The evidence which is usually cited to support this claim is the decline in the membership of traditional political parties, combined with a rise in support of smaller, single issue parties such as the Green Party or UKIP. This school of thought has led to the rise of networked campaign organisations like 38 Degrees, who organise campaigns which aim to influence specific policy issues. This is sometimes seen as the future of democratic engagement in Britain.

I want to make two observations about this type of political organisation. Firstly, they provide only a superficial level of engagement with the issues of the day, and secondly they have the effect of making real political power more remote from the people who are affected by it.

To see what I mean, take a closer look at that 38 Degrees website. The campaigns they run are things like “Get tough on banks”, or “Rethink the badger cull”. These examples illustrate the problems of this type of politics. What exactly does getting tough on banks mean? Implement Glass-Steagal legislation? I wonder how many of the campaigners know what that means (it’s the separation of retail and investment banking FYI. There are arguments both ways). Get tough on banks is a platitude, not a policy platform, because it can mean many different things. Rethinking the badger cull is a more clear-cut policy, but it is very small scale. It seems highly unlikely that there will be a public campaign to significantly alter the strategic direction of government agricultural policy, because this will involve lots of serious long term decisions (e.g. what type of farm or produce is favoured and why?) which don’t fit well into a slogan. Single issue campaigns tend to be expressions of received wisdom rather than well thought out policies.

The fact that these campaigns tend lack any real sense of strategic direction is not their biggest problem. Their real weakness is the assumption that the way for people to bring about change is to try and influence those who are in positions of power, as if we are to be reduced to petitioning a medieval king for his favour. When enough signatures are gathered, when enough rallies have been attended and when suitable celebrity endorsements have been secured, who do you think makes the decision about the policy change? An oracle? No, it’s a Government Minister. This Minister is put in place by virtue of being in the political party which managed to garner the most votes in the previous general election. The Minister exercises real power, both on minor issues and major strategic choices. Single issue campaigns totally ignore the fact that the best way to ensure that the government does what you want is to choose the government. By ignoring this, single issue campaigns confuse the servants with the masters, and that’s not healthy.

I’d like to end this post on an optimistic note, so consider this. If people are more and more disengaged with traditional politics, why has voter turnout at general elections been rising exponentially for ten years? Perhaps people have more faith in British democracy than is sometimes assumed, or at least a better understanding of where the real power is. This is a good thing, because I promise you, single issue campaigns are a distraction from democracy, not a substitute.       

The Death of the Property Owning Democracy

Every family should have a stake in society and the privilege of a family home should not be restricted to the few. 

Margaret Thatcher, 17 October 1981.

The huge social and political revolution of 20^th century Britain was the development of the property owning democracy. This is the idea that social harmony and progress are best achieved if everyone has an economic stake in society, an idea sometimes called ‘popular capitalism’. It has come to be associated primarily with home ownership, although originally it was a much wider concept.

Whether you agree with the idea or not, the property owning democracy has basically been the organising principle of British society since the Second World War, and even more so since the 1980’s. The idea is that if you use your income to purchase a home instead of rent someone else’s you end up with an asset which can fund your retirement or be used as an inheritance to give your children the best possible start in life. It is a socially desirable form of forced saving, and the economic underpinning of the family. It broadly worked because the vast majority of people had an interest in it sustaining itself, so that they could reap the benefits.

An unplanned consequence of the New Labour era is that this socio-economic model is dead. The graph below shows why:

That graph shows you how house prices have risen, adjusted for the rise in wages, to the point where it is impossible for the average first time buyer to get on the property ladder at all without assistance. I shall leave it to economists to argue about why this is, but for the moment I want to concentrate of the real life effects of this change.

It is no longer the case that everybody’s economic interests are in alignment. Once again I shall illustrate the point with a graph (click on the graph to enlarge it):

That graph shows the inflation adjusted fall in house prices since the credit crunch. There are two possible reactions to it, but they are dependent on your housing situation:

1. That’s fantastic! Housing is becoming affordable again. One day, maybe I’ll be able to live in my own home and use it to provide for me in my old age, maybe even pass it on to my children. There is actually hope for the future, but the trend must continue.
2. Disaster! I’ve worked all these years to service my enormous mortgage, making so many sacrifices to ensure that I have an asset to rely on in old age, and it’s just decreased in value by 20%. My entire life’s work depends on this trend being reversed.

That, my friends, is what an enormous political problem looks like. Society is divided by housing tenure, and one group is going to lose out, and lose out badly. When they lose, they won’t forgive the government whose policies they blame. Remember, serious political strategists spend their time looking at issues like this, not reading abstract philosophy. This is what decides elections, because this is what really matters to people. But then since it affects you, you probably knew that already. 

To Strive Always to Walk in the Shoes of Others.

That particular rhetorical excretion is taken from a speech given by Ed Miliband this morning, which aimed to tell us what his “One Nation” idea was all about. I feel the need to make some brief observations.

Firstly, Miliband’s explanation of the meaning of ‘One Nation’, when seen in writing, is interchangeable with David Cameron’s ‘Big Society’ speeches. That is to say that both consist of a series of non-committal platitudes about the community spirit of the British people, and about how this must be harnessed for the greater good. The Big Society is no longer mentioned by Conservatives, mostly because nobody ever worked out what it was or how it related to government. It is hard to see why One Nation will fare any differently.

Secondly, there was very little that was new in the speech. He claimed to have ‘broken with New Labour’, but he’s claimed to do this before. Here for example. It didn’t achieve anything, because outside the Westminster bubble that is pretty much a meaningless phrase. It simply begs the question; so what are you? As I’ve said before, ‘One Nation’ is a slogan, not a program for government. There were some hints at possible policies, for example Miliband called for better regulation of private landlords to protect long term tenants. This is an old policy from Labour's last election manifesto (author, one Mr Ed Miliband), not a radical new way of thinking. It’s almost as if someone thought up the slogan and they are now trying to make up a philosophy to fit around it. Perish the thought.

You might be getting the impression that I don’t think much of this type of opposition leader’s speech, and there is some truth to that. However, you can use it to discern roughly how Labour intends to fight the next election. This year for example Nick Boles, the Conservative planning minister, is making a huge effort to get more houses built in order to lower the price and allow more people to buy their own home. Ed Miliband has signalled he intends to make it safer to rent. That is a political difference worth thinking about. Remember how popular Mrs Thatcher’s ‘right to buy’ scheme was? Mr Miliband apparently doesn’t. He is gambling that people have other concerns now, and that they will vote accordingly. It sounds like a pretty big gamble to me.

Having said all that, he must be doing something right; Ladbrokes have Labour at 4/9 to win most seats at the next election, and Miliband at 4/5 to be the next Prime Minister. Perhaps this says more about the bookie's opinion of the coalition than the inspirational nature of Mr Milibands leadership. 

Strivers Vs Skivers

George Osborne, a man who sometimes struggles with his public image, thinks he’s found a way to strike a chord with the British people. His public pronouncements suggest that he thinks that there is a minority of people, those who claim social security benefits, who are parasitically living off the employed population. He asks us; "where is the fairness, we ask, for the shift-worker, leaving home in the dark hours of the early morning, who looks up at the closed blinds of their next-door neighbour sleeping off a life on benefits".

Leave aside for a moment the fact that since the financial crash most unemployment has not been voluntary, and that most welfare spending actually goes to people in work in the form of tax credits. There is a very significant section of the population who do agree with Mr Osborne’s analysis, and it certainly is galling to feel that you work hard to support those who do not bother. Most people think they are a striver, while very few would honestly see themselves as a skiver.

The thing is, in cash terms, most of the working population fails to pay their way. The unemployed pay tax in the form of VAT, but it doesn’t cover the cost of their state support. That’s what annoys the working “strivers”. The same charge could be made of most of the working population. Over the course of our lifetimes, we take a huge amount of state support. We are born in an NHS hospital, we spend years in the state education system, we ride state subsidised railways or drive on state built roads, we are protected by state funded police and armed forces, we retire and claim a state pension, then enjoy state funded medical attention until we pass on. Do you think you pay enough tax to cover all this? I’m afraid that’s unlikely, as we shall see.

According to these admittedly crude calculations from the Taxpayers Alliance (a right wing pressure group), you have to be in the top four fifths of earners to pay more tax than you use in services. That’s top four fifths by income, not population size. Did you know that according to the impartial Institute for Fiscal Studies the top 10% of earners pay over half of all the income tax collected? When you think about it, they pay much more in other forms of tax as well. You pay more VAT on a Bentley than on a moped. Yes, they have better accountants, but the crude fact is that a small percentage of high earners is actually providing the public spending which the rest of the working population relies on. Imagine you are one of these high earning individuals. Who is the ‘skiver’ now? You are supporting the average worker as well as those who have no job.

I’m very much in favour of this progressive taxation system.  I think it is morally justified that the rich should pay a greater share of their income for the common good. But I also feel that this reality needs to be understood by everyone in the system. The uncomfortable fact is that George Osborne’s hypothetical shift worker is also taking more from the state than they contribute, they just don’t realise it. This must change if there is to be an honest debate about public spending. 

The End of Relational Policy Making

A great myth has built up regarding what academics call “neo-liberalism”, and what proper people call “the last thirty years”, namely that it has been the era of small government and shrinking the state. Although the government no longer runs businesses or attempts to maintain full employment, throughout this period the state spent more and more of the national income on other activities. Over time this has moulded our perception of what governments should do and how they should do it. In this post I’m going to show you how the financial crash of 2008 changed the game in ways that we have not yet grasped.

First up, some facts. Look at page 3 of this Institute for Fiscal Studies report. That graph at the bottom shows you the dirty secret of Thatcherism. In nine out of the eleven years she was in power she increased public spending faster than the rate of inflation. The state was far bigger when she left office than when she began. John Major increased it by even more, only managing a cut in one of his seven years. And of course, as you would expect, in the Blair years you can see year on year increases that are simply astronomical. I would guess that very few (if any) readers of this blog have a political memory of a time when public spending was consistently falling.

The extra spending has been used on public services, primarily health and education, and on social security, which includes state pensions, income support (tax credits) and benefits. We have become used to discussing policy in these areas in relational terms, by which I mean we think about which groups of people do better than others as a result of a policy change. When policy is made, it is designed to make these relational changes ‘fair’*.

To understand what I mean, consider Gordon Brown’s 10p tax fiasco. The original policy was a cut in the basic rate of income tax from 22% to 20%, which was paid for by abolishing a lower rate of 10% that was charged on the first proportion of a person’s income (follow this link for more details). The effect was a tax rise on those with low incomes and a tax cut on those with average earnings. It caused political uproar, as Gordon Brown’s own party lined up to condemn what they saw as an attack on the poor.

The significance of this example is in the eventual solution. Instead of reversing the policy, a huge amount of extra money was found to compensate those who lost out as a result of it. It is a classic example of how political problems which are the result of seeing policy in relational terms were solved by increasing public spending. The political pressure was to ensure nobody lost out, not to balance the books. I would argue that this is typical of the thinking of the last thirty years, the introduction and abolition of the poll tax being another good example.

The astute amongst you will see the problem. After the 2008 crash there is no money left to continue in this fashion. Policy changes will now create uncompensated losers. The recent removal of child benefit from high earners is a good example. A family with one earner who takes home £60,000 gets nothing, while a family with two earners, each taking home £49,000 get the full benefit, despite having a much higher household income. The single earner families will not have this unfairness made up to them. All things considered that is a pretty minor injustice, as they are the richest in society, and they can cope. As austerity begins to really bite, there will be examples like this which are far more painful. Imagine if the government was faced with a re-run of the poll tax riots, but did not have the money to reverse the policy. The age of relational policy making is over, and I’m not convinced that we the public are ready for this new reality. 

*Update: When George Osborne says "we're all in this together", he is trying to convince you that he is meeting this relational definition of fairness in policy making. I'm arguing that this will prove difficult if not impossible.  

GOP Smackdown

Below is a clip that shows highlights of a speech that the Republican Governor of New Jersey, Chris Christie, gave last night. Don’t let the fact that he looks and sounds like a character from The Sopranos fool you, this is powerful stuff.

As the tense negotiations surrounding the ‘fiscal cliff’ came to a conclusion at the new year, Republican house speaker John Boehner (the guy in charge of Congress, the only Republican controlled bit of the US government) realised that he had already pushed his hard right party as far as it would go on passing measures that would increase government spending, and decided he could not ask them to vote on a bill which would have approved federal government relief for the victims of Hurricane Sandy. Yes, really. Elected Republicans would actually vote against disaster relief for their own people.

Chris Christie is the governor of one of the States most affected by the storm. He is understandably furious that his own party would treat his people in this way. I expect that fury is shared by a great many Americans. I should also mention that Governor Christie is a very serious politician, one of the few in the Republican ranks who could plausibly reach out across the partisan divide and make a presidential run. Indeed, many serious Republicans, including Henry Kissinger if I remember rightly, were urging him to do so last time round. Watch this guy. If there is going to be some sort of Republican revival in the future, it will be based around someone like him.