Tag Archives: Coalition

My Manifesto for Labour – Part One, the Economy

In this series of posts, I will lay out the headline vision I think Labour should adopt as its manifesto going forward. It is not a line by line spending strategy (which would be impossible to create from a home office in Wiltshire) but it will explain some fundamental themes the party should adopt to regain support, differentiate itself and gradually become a government in waiting. It is not intended to cover every aspect of every policy area, but instead to give some vital focus to the Labour approach.

Part One – The Economy, Business and Growth

The coalition plan isn’t working. The only rebalancing going on in the economy is the transfer of debt from the public sector into the private. Personal debt is predicted to rise by £566bn over the life of the parliament as the public deficit falls. This transfer will simply squeeze household spending and cause the economy to grind to a halt. Growth is flatlining, making it much harder to bring down the deficit, youth employment is running at 20% (again adding millions to government spending) and inflation is taking chunks out of the monthly income of workers whose pay is frozen. All this why executive pay rose 45% last year. Whatever the coalition may claim, we are clearly not “all in this together”.

Labour must address this. First, the reduction of the deficit must not come at the expense of jobs and personal debt. Growing our way out of the deficit is preferable to attempting to cut our way out of it. It’s a tested, logical and positive way to tackle our budget situation. To this end, Labour should support major infrastructure projects which will help bring us up to the levels of Europe and the US in terms of rail, road and broadband. It should also champion a huge housebuilding drive (more of which in a later post). In addition, the government should be investing in the development and implementation of green energy technologies. This spending, shared with private sector investors (not on a PFI basis), will help create jobs, apprenticeships and skills. These skills will then reside within the economy and can be exported – a genuine rebalancing can begin to take place. Without government support, the only shift towards manufacturing will be dependent on a weak pound and will be not driven by world-class skills and technology we need. The coalition plans for growth are feeble – expecting a corporation tax cut to filter down to more jobs and investment and hoping that low interest rates will encourage lending and investment, while in reality, none of this is happening.

In return for this government investment, industry must accept some fundamental changes to the way it supports its workers. A living wage should be introduced. Instead of providing tax cuts to large corporations, as the government is now doing, these will only be offered to organisations which accept the living wage strategy. The policy will then be rolled out on a mandatory basis. This allows Labour to support the enterprise culture the country needs while protecting workers from an increasingly insecure “flexible labour market”. The living wage will have additional benefits in reducing the need for tax credits, housing benefit and other “top-ups” to subsidise the poor salary levels offered by many employers, thus reducing the benefit bill and helping lower government spending. It is time that businesses took more responsibility for their workforce and relied less on government to keep them properly remunerated.

To better reflect workers contributions to businesses, every public company will be required to have worker representation on its remuneration committee and to adopt pay structures which ensure that if the CEO receives huge pay rises and bonuses, these are mirrored in the pay and bonuses of everyone throughout the business, at the appropriate level, of course. So board executives will only be able to grant themselves huge rises if they also allocate a similar proportion of profits to the people actually bringing in the revenue.

On tax, the burden needs to be shifted away from the poorest, but this means across the board, not simply through income tax. VAT is a regressive tax which hits the poor hardest. The balance of the coalition’s tax plans does not spread the burden equitably – despite its plans on raising income tax thresholds, the overall impact of tax credit and benefit cuts, plus VAT, leaves most families at the lower end worse off. The 50% rate should remain and serious investigation into the best way of implementing a wealth tax should be undertaken. It should be Labour’s stated aim to tax wealth while increasing the incentives for those at the bottom and the middle of society to improve their financial position. It is here that tax cuts should be targeted, instead of at the top 1% of earners. Rather than cutting HMRC staff, Labour should propose significant investment in tackling tax evasion (theft) and implement a thorough review into tax avoidance. These two areas cost the country a huge amount each year, vastly in excess of benefit fraud and should be prioritised as such.

Labour’s message should be clear – Keep the economy moving, keep people in jobs, ensure people are fairly rewarded for the work they do, make the fundamental changes to business practice we need and invest to transform our economy. It is a hopeful message which will restore shattered consumer confidence, motivate businesses to invest, create jobs and bring down the deficit. It will also demonstrate that while Labour supports enterprise and hard work (in fact more emphatically than the coalition), it also recognises that we cannot continue to exacerbate the dividing lines between workers and executives, which drives social disharmony and creates huge resentment.

I will deal more specifically with public sector spending cuts and reform in an upcoming post, as well as housing and education which I touch on here. In the meantime, your comments on this are very welcome.

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The Long-Term Threat from “Govern Now, Think Later” Politics

For a party that’s had thirteen years to plan its next government (or nearer eighty, in the case of the Lib Dems), this Tory-led administration is incredibly short-sighted. It has rushed headlong into a mass of reorganisations and restructurings which look very badly planned and certainly lacking in democratic mandate. Take the School Sports Partnership, a way of allowing schools to co-operate in providing competitive and social sporting activities for their pupils. Scrap it, said Michael Gove, let Heads decide how to run sports. A stream of Tories lined up to praise this new approach – “free the schools!”, they cried in unison. However, people who actually understand school sports made it clear that without properly funded local organisation, school sport was under threat as Heads were forced to prioritise their spending at a time of limited resources. Which to scrap – the sports and games, of those extra computers or even a new teacher? It’s fairly obvious where the axe would fall.

So Gove relents and performs a u-turn which is indicative of this government’s short-sightedness. Hours of discussion about a new approach to school sports and then a hurried about-face. What a waste of time, effort and resources. A little more thought, a bit more planning and this could have been avoided. It’s vital that Labour portray this u-turn for what it is – poor government, hasty management and wasteful ineptitude.

If it was only school sports which suffered from this “govern first, think later” approach, we perhaps could excuse the coalition. They’re new, after all. However, across the board, the Tory government is rushing through decisions without proper consultation and often against the wishes of those impacted most.

In the NHS, a hugely costly reorganisation has the support of only a minority of GPs, who are now being handed £80bn of commissioning budget. The change will cost around £3bn at a time of falling revenue for the Health Service (ignore the “ring-fenced budget” claims – experts say the NHS needs 3% increases p.a. to simply stand still. It’s getting 0.1%). So why do it? The only groups clamouring for an overall like this are the private health companies who are lining up to provide the commissioning services GPs won’t be able to. Report after report has warned of the risks of the dramatic overhaul in the NHS, particularly when money is tight. But Cameron and Andrew Lansley don’t care. They’ve made a decision and evidence be damned. The difference between this and School Sports Partnerships is that while some kids might get fat with the one change, people might die under the other.

Of course the government don’t want people to die, but the stampede to be the most radical minister in an unelected government is leading to rash decisions which will unquestionably have serious effects on people’s lives. There is a lack of evidence that this is at the forefront of any minister’s mind as he or she lines up the next dramatic shake-up of public services.

Finally we come to the big one. The economy. It’s stalling as the effects of Labour’s stimulus packages wear off. Unemployment is rising and the private sector is failing miserably to fill the gap left by public sector lay-offs, precisely as most serious commentators expected. The only jobs being created are part-time, which provide no security to people and often mean families rely on benefits to achieve a living income. Everything is focused on the deficit. The price of Osborne and Cameron’s blinkered obsession with cutting the public sector to somehow restore economic balance is record-breaking youth and women’s unemployment and, perversely, negligible economic growth.

The short-termism is frightening. Even if the Tories manage to eliminate the deficit in an entirely arbitrary four-year period, what will the consequences of their approach be? We will have a generation of young people trapped in unemployment. A lack of stable communities as people are forced to move around hunting for work. Increasing resentment from those who lose out towards those who seem impervious to the deficit-cutting measures. In short, a much worse country to live in.

For anyone searching for an alternative, look to the post-war period. Despite a deficit and debt which puts the current one in the shade, various post-war administrations managed to invest in huge housing and infrastructure projects and of course, the NHS. Boldness brought great rewards. It’s time for further boldness now. Government should be looking to the horizon and to our future, rather than the present. Of course we must increase efficiency wherever possible and provide the absolute best value for money in our public services, but relentless cuts will hollow out the foundations on which they rely. Once lost, local services will never be recovered.

We should be investing in a genuine green investment bank, with the power to raise funds and independently invest in new technology. Instead we have a fund of £1bn, considered entirely useless by all serious commentators. This country has a proud tradition of pioneering innovation, but short-sightedness from the Treasury is standing in the way of a potentially lucrative new industrial sector. If we don’t seize the initiative, others countries will. We need an active and engaged industrial policy which supports industry, encourages businesses to build links with communities through specialist skills and secure employment and sooner rather than later, the Treasury coffers will feel the benefit.

As for our young people, much better to invest in genuine work placements (such as offered by the now-scrapped Future Jobs Fund) than simply hand out benefits then kick people for not finding jobs which don’t exist. When recovery final does come, how does the country benefit from underskilled and unemployed people, out of touch with work? Pay for jobs and training now and reap the benefits in the future.

The thinking required is joined up. Connect each stage of people’s lives to the next. Attacking Sure Start and removing the element of universality will remove the community cohesion these centres currently provide. I have seen first hand how bringing families from across the community together improves the local area as people recognise they have more in common than they imagined. Turn our schools into a market place of special interest groups and the “sharp-elbowed middle class” and watch as these divisions widen further. I would scrap charitable status for private schools, ease the administrative burden on Heads and work towards a truly comprehensive system where every student has a fair chance, not just those in a position to exploit their time and influence.

Support the Educational Maintenance Allowance which keeps pupils in education and allows them the best chance to achieve. Fund universities properly – we will never be the factory of the world, but we could be its R&D department – in culture, academia and humanities as well as engineering and science. Offer proper alternatives to university too. We should support apprenticeships and training schemes which provide paid employment to young people embarking on a career.

And finally, recognise the importance of a life outside work. Community stability, confidence in the next pay packet, a feeling that work and community are not always separate can rebuild society where too often, poorly paid and part-time jobs for multinational companies leave people feeling undervalued. We shouldn’t be demonising those unable to work, but creating an environment where work is available, properly paid and secure. Then we can tackle the tiny minority who are over reliant on the state.

This comes from a recognition that a divided society is an unhappy society. As bankers waltz on, bonuses in hand, ordinary workers are suffering. A paltry, watered-down bank levy does nothing to ease the sense of unfairness that the economic crisis created. The country cannot tolerate further division between the haves and have-nots. We can’t return to the way things were before. Labour gambled on an asset boom and a drip-down from the financial sector. While the revenue this created rescued our public services, the wider picture was ignored. But what this means is more government spending, not less. But this time, we need to spend to invest in the long-term. Only then will we see a rebalanced economy with stable, fulfilling jobs for everyone. This will bring the deficit down as genuine, secure growth returns to our country. It creates a future full of hope for our children, rather than debt and despair and it shows that while innovation is to be rewarded, greed never should be.

This government shows no signs of looking to the future, only a panicky rush to make changes before public will make it impossible. They may be building for their own futures, but for the rest of us, the outlook is bleak.

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A Brief Comment on the “Bonfire of the Quangos”

Quangos have a bad reputation, something which I think is due, to a large extent, on the name, which sounds woolly and bureaucratic before anyone actually considers what they do. I don’t want to launch into a full-scale defence of quangos – I don’t know enough about them individually to comment. This is the inherent problem here. One quango runs British Waterways, the network of canals across the country, while another monitors the use of legal aid. To bundle them together is utterly meaningless.

My concern about the report today which abolishes a large number of quangos is that the government has failed to properly make the distinction either. The argument used by Francis Maude for the scrapping of 192 quangos is that they are not properly accountable.

The problem with this “accountability” line is that it is essentially nonsense. If a quango’s functions are rolled into a ministerial department, how does that make it more accountable to individuals? Are the people who live in that minister’s constituency going to say “Well, the work done by the Renewable Fuels Agency, under his department, hasn’t been up to much, I think I’ll vote Green”. We certainly can’t get a situation where the heads of these bodies are directly elected, since most functions of quangos are essentially non-political.

I am actually all in favour of expert bodies, outside government, being responsible for specific areas of activity where appropriate. As long as the work is important, I’d much rather it was done by people who know what they are doing than being notionally “accountable”.

Scrap useless bodies of course, but bringing things under ministerial control and basing this review on “accountability” is ridiculous. Michael Gove can’t get a list of schools right, why on earth would we want additional important responsibilities falling to him?

I think the accountability approach is most likely a cover for more ideological cuts to services which people already think are wasteful, despite not really understanding what they are. It’s an easy target and like most easy targets, there are usually much more difficult consequences not far behind.

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Coalition of the Incompetent Will Regret its Haste

Imagine the scene. Labour has just about managed to form a government with the Lib Dems, after missing the widest electoral open goal in the history of modern politics. Despite the lack of a clear mandate, the party is paranoid about missing its chance and embarks on a series of upheavals, routinely labelled “the biggest shake-up since 1945”. Building enormous, wide-ranging policy blocks on a flimsy pillar of “it’s all the last lot’s fault”, the new government launches into the following initiatives in its first five months:

1) Cancels Building Schools for the Future, a vital source of income and employment for the private construction sector. In the process of this hurried cancellation, list after list of the schools affected is issued and reissued and within weeks, protesters are marching on Westminister, led by the government’s own MPs.

2) Uses parliamentary protocols usually reserved for emergency terror legislation to rush through a dramatic centralisation of power in education. New “Free Schools” can be established with no local authority control, no requirement to co-operate with existing schools and the ability to implicitly select pupils (through religion or catchment area). So popular are these new schools, accountable only to the Education Secretary, despite being paid for by the tax payer, that the grand total of 16 are approved.

3) Embarks upon the biggest ever top-down reorganisation of the NHS, despite explicitly stating that the new government would not embark on any top-down reorganisations of the NHS. The new policy, which opens the way to a private healthcare system, was not in any manifesto, will cost over £2bn to implement, is attacked by healthcare professionals, industry experts and patients groups as risky, expensive and badly thought-out.

4) Cites Ireland as a shining example of how to tackle a deficit, with savage spending cuts praised as “brave and necessary” by the IMF. This shining light is quickly extinguished, however, when the government notices that because of the excessive austerity measures, Ireland has fallen into a double-dip recession, its deficit remains high, thousands of people are suffering and those gods of the markets, the ratings agencies (“triple A” for a junk US mortgage CDO, anyone?) have downgraded Ireland’s government bonds because of the cuts and the complete lack of growth in the economy.

5) Announces at its annual conference that in order to tackle the deficit, Child Benefit for high earners is to be scrapped. In the haste to launch this policy, no-one considers the blindingly obvious problem of the considerable unfairness of hitting higher paid single earner families with a stay at home parent, versus two working parents on a much higher combined salary.

6) Following uproar amongst its own supporters, the government desperately tries to cover its tracks on Child Benefit by announcing a tax break for married couples, thus completely destroying the argument that the benefit cut was made in order to address the deficit. People search the conference hall for the fag packet on which the policy was devised and senior ministers admit they had no idea the policy was due to be announced.

7) The new PM apologises for not including the Child Benefit cut in its manifesto, but goes ahead and does it anyway. He cites something about new politics and parades his new baby in front of the cameras in a bid to ease the pressure on him and his government.

All this comes before the new government has got round to announcing the biggest cuts in public spending in living memory, while the economy remains desperately fragile and there are five people applying for every job. They have been repeatedly leaking rumours of cuts to the press though – £4bn of cuts to welfare here, a devastation of the armed forces there.

Now imagine, if you will, the press reaction to the Labour government’s actions. The newspapers are frothing at the mouth in anger. “We didn’t vote for this coalition of the incompetent!”, they cry. “Is this the worst start to a government in history?” questions The Times editorial. Sky News is running a clock estimating how long it will be before the government is forced to go back to the country. The Lib Dems are annihilated as a party, support slipping to a historic low.

Have you spotted those headlines (apart from the last one, that one’s true)? No? Funny that, isn’t it.

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Understanding the Electorate is Key to Lib Dem Survival

Just to be clear upfront, I don’t very much care what happens to the Liberal Democrat party. I’d like to think I have a good personal relationship with our local MP, who I got to know well during the election, but the future of his party doesn’t really concern me. What does matter to me, however, is the future direction of this country and in considering this, it is impossible to ignore the impact of the Liberal Democrats.

I have been taken aback in the past three months just how quickly and easily the Lib Dems have absorbed the Tory rhetoric, in particular on the economy. The message they now jointly disseminate, in complete contrast to pre-election promises, is that dramatic deficit reduction through savage spending cuts is critical to the future of our nation. Ignoring the economic illiteracy this displays (in a low demand economy, excessive austerity fuels unemployment, attacks confidence and stifles growth), as a message, it has bound the Lib Dems tightly to the Conservative ship.

The problem for the Liberal Democrats as a party, and something the leadership seems to be ignoring, is that regardless of how popular or unpopular the coalition is, the junior partners will suffer. Success (in the eyes of the electorate) will be confirmation that the Tories are fit for power and in that case, why choose the pale blue imitation? Failure of the government will produce a backlash and the Lib Dems have lost their claim to be a valid opposition. Here, Labour wins. I would congratulate David Cameron on this brilliant piece of Machiavellian politics, but I don’t credit him with that degree of foresight. He was forced to act as he did and it’s turned out better than he can have hoped.

When the Lib Dem MPs line up at the next election and ask to be reselected, what will they stand for? Their candidates will often have positioned themselves as social liberals, an alternative to Labour and a block to the Tories. They will be asked why they said one thing and did another last time around. This is the reality of the situation. The electorate doesn’t vote for a government – it can’t choose a “coalition”, even if a large proportion of individuals would want it. Can you imagine the tactical guesswork required by an individual voter who wanted just enough Lib Dems MPs in government? It’s not realistic.

So, the Lib Dems are relying on local loyalty, on being strong in the constituency and perhaps some tactical support from the Tories, to avoid a crushing defeat next time around. Expect to see your local Lib Dem MP at the opening of an envelope in the next five years – it could be their only chance of rescuing the party.

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Some Quick Maths for Lib Dems

There’s a common argument made by Lib Dem supporters of the coalition. It’s repeated in this week’s New Statesman’s Letters and it goes like this: “The coalition is good for us, because getting 10% (or 15%, or whatever) of what you want is better than getting nothing. It’s worth propping up the Tories because we’re getting things that otherwise we never would.”

There is a fatal and fairly obvious flaw in this argument. It assumes that the other 90% (or 85% or, for the optimists, 70%) is neutral. That whatever you get is a bonus that wouldn’t have happened without the coalition and so makes the decision to support the Tories, and allow them to push through less “liberal” legislation, worthwhile.

This is clearly ridiculous. To better illustrate the point, let’s create a little points table and allocate each of the coalition policies identified as “Lib Dem” a score. Ten points for a policy from the Lib Dem manifesto fully implemented and a sliding scale down from there. We need to use the manifesto, because this is the document which people voted for. I am picking on policies which wouldn’t have been implemented by the Tories anyway (e.g. scrapping ID cards, because there’s no Lib Dem input in a coalition required to achieve this).

  • So, for a referendum on the “miserable compromise” of AV, let’s say 6 points (where PR would be 10 points)
  • The £1,000 increase in the personal allowance – 4 points (a long way to go to £10,000)
  • The increase in CGT to 28% – 3 points (this is nothing like equalisation with Income Tax)

I am not sure there has been much more in the way of coalition announcements which we can say reflect Lib Dem pre-election policy for now. But I am not doing the full scorecard here, so it doesn’t really matter. At the moment, the Lib Dems are 13 points up. Well done. What a lot of Lib Dems do is stroll off into the sunset at this point, whistling merrily about how coalition is all about compromise and yes, we only got part-way to our targets on each of these, but we would never have achieved any of it without the coalition.

But remember, on our generous measure, these policies only account for 10%-20% of the coalition’s overall policy output. So, we need to score the other policies on the same scale, only negative. And on this side, we’ve got some policies which are also being implemented by Lib Dems as part of the coalition:

  • A complete top-down reorganisation of the NHS with no elected PCT boards, less local accountability and more private involvement – 7 (this is the beginning of the end of a national health service and in breach even of the coalition agreement)
  • Free schools paid for while redevelopment of existing schools scrapped – 5 (let’s be generous)
  • VAT  – 10 (clearly. Remember the billboard?)

So, picking up on three coalition policies (with many, many more left unconsidered – benefit cuts, Trident, nuclear power, impending tuition fee rises or a graduate tax, savage spending cuts this year), we’ve reached 22 (completely subjective) points. Sadly, this leaves the Lib Dems down 9. Of course, there’s a percentage of government policy which falls in the middle and wouldn’t achieve much of a score either way, but with massive, ideologically-driven cuts to come in the autumn, the chances of the Lib Dems securing much more from their manifesto is not looking great.

Many Lib Dems will now become quite defensive and say that compromise was vital and the country needs stable government. There is merit to this approach, but also enormous danger. Voters will remember the arguments put forward at the election and the way the Lib Dems positioned themselves. As Labour knows to its cost, broken promises can cost you very dear at the ballot box. The electorate will look at the surplus and deficit column of the coalition spreadsheet and when they produce their scorecard, it will be a judgment on the Tories and Lib Dems together. This is the nature of coalition, we are learning.

Therefore, I suggest that Lib Dems stop using the “15% argument” now. By all means trumpet your successes, but until you are willing to complete the full equation, your maths won’t even begin to add up.

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Open, Transparent but Easily Manipulated

I am very pleased that the government has opened up its database of spending. We need more transparency in where taxpayer money goes, but we also need the full picture, and categorically, today’s release of the COINS database is far from that. The problem with this release, and the reason it’s been done now (ahead of the budget and spending review) is that is all about spending and nothing about returns. See a line of spending and say “that’s a ridiculous amount to spend on x” and not only does it completely ignore the impact of that spending, but gives the government an easy excuse to make cuts.

The Guardian headline of £1.8bn of consultancy spending means absolutely nothing out of context. It may be that consultants were used because previously people were employed in-house, but that was inefficient and consultants were used on a project basis. Now if that work was finding the best value supplier of equipment to hospitals, then it was probably a very efficient way of spending money.

Now, however, the Tories can sit back and claim that too much was spent on x or y, and cut it, without ever needing to explain the impact of the cut. It will help them enormously in PR-ing the massive reductions in public spending coming our way. Expect a barrage of headlines criticising spending on all manner of products and services, which will pave the way for cuts in these areas.

This data must be supplemented with something that contextualises it and gives an indication of how efficient the spending was in delivering whatever it was supposed to. Only then will we have the first clue as to what is too much. I doubt very much we’ll ever see this (it’s incredibly complicated to analyse and would probably need some consultants to do it) and certainly not before the spending review.

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