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.