Socialising Risk

The principles which underpin Britain’s Welfare State are collectivist.  Society as a whole shoulders the burden of health costs so that no-one suffers by being unable to afford necessary treatment.  There is no reason why social care should be treated differently.  Everybody is at risk of needing social care, especially towards the end of their lives, and this can last for several years in some cases.

The Conservative Party manifesto for the 2017 general election contains proposals for covering the costs of social care which are individualist: the opposite of collectivist. Someone who needs a lot of care might pay most of the cost under these proposals – but those who die quickly wouldn’t have to pay tax to cover other people’s costs.

Ministers quite rightly point out that the total cost of social care is rising rapidly and it has to be funded somehow. Ever since Margaret Thatcher’s government, the party has followed individualist policies – so paying for one’s own care seems more attractive than asking everyone else to pay towards it.

The problem this time, though, is that wealthy people (who tend to support the party) stand to lose the most. They applaud low taxes, but they don’t like the risk that they are exposed to.  The outcry has already resulted in a government U-turn and Theresa May has, in a trice, lost her reputation for strong stable leadership.

If the party were true to Thatcherite principles, it would have held fast despite all the criticism.  Wealthy people could buy insurance to reduce the risk of being unable to pass their wealth to their children.  Even if such insurance policies are not yet available, financial services companies will quickly spot an opportunity to develop them.

Such a proposal would be very similar to the American Republican preferences on health costs: keep taxes low and let people choose whether to insure themselves against the risks.

British voters are presented with a clear choice between the principles of the welfare state or the individualist mantra of everyone being responsible for their own financial situation.

Britain’s Presidential Election

Britain’s general election, scheduled for 8 June 2017, is being conducted on presidential lines.  Theresa May is offering “strong stable leadership” and the Conservative Party’s publicity material is emphasising her personality rather than policy issues.  There are problems with this approach:

  1. She is exploiting a deep human instinct, in turbulent times, to look for a strong leader. She is offering authoritarian populism in the style of Donald Trump.  She presents herself as a strong negotiator, being confrontational, anti-immigrant, and making promises which will be hard to fulfil.
  2. Her desire to sweep aside opposition, and to dispense with the checks and balances of parliamentary scrutiny, is fundamentally undemocratic.
  3. Strong leaders tend to become hubristic, not taking advice and failing to harness the strengths of a cabinet team.
  4. The opposition in Britain is currently weak and divided. It does not have the appearance of being ‘a government in waiting’.  This makes it unelectable in Britain’s first-past-the-post electoral system.  The opposition might win some seats by co-operation in a ‘progressive alliance’, but there is a real danger that it will not be possible to hold the government to account and that this could result in harm to large parts of the population.

The signs are, from her early interactions with the EU, that she is being confrontational in Brexit negotiations.  This is precisely the wrong strategy.  Britain and the EU need to work together to solve the problems presented by the Brexit decision.  Co-operation would lead to a better outcome for all parties.

The UK Electoral System

Last night’s debate between Scottish political leaders revived interest in the question of which electoral system would best serve the interests of the British people; this will doubtless be discussed again after the General Election.

The case for retaining the first-past-the-post electoral system was clearly articulated by the Scottish Conservative leader, Ruth Davidson, who pointed out that all the MPs elected in Scotland should be representing Scotland’s interests irrespective of what party they belong to – even if some of them belonged to the Monster Raving Loony Party.  Although that point was intended to reassure listeners that nothing is wrong with the present electoral system, it ignores one of its major problems: if one party has an overall majority, as the Conservatives had in the Thatcher years for example, Scotland only has influence if there are sufficient Scottish MPs in the winning party to persuade the UK government to take Scotland’s needs into account.  Those Scottish MPs would also have to be brave enough to disagree with their party leader if necessary, even though dissent might limit their career prospects.  A dominant party in a UK government, whether Labour or Conservative, can safely ignore Scottish interests.

The Scottish Liberal Democrat leader, Willie Rennie, made another telling point: people are forced to vote tactically in a first-past-the-post system if they support one of the smaller parties; they recognise that simply to vote for their preferred party would result in a wasted vote so they vote for whichever of the other parties they least dislike.  Their interests would not be represented through the electoral system.

Unsurprisingly, UKIP’s Nigel Farage agrees.  Although he was not part of last night’s debate on Scotland, he made the point when interviewed by Andrew Marr yesterday.  Suppressing UKIP by retaining a first-past-the-post system is less satisfactory than allowing it to be proportionally represented; it is better to prevail by finding the winning argument than by suppressing proper representation.  Several Conservative MPs might join UKIP if they felt that there was a realistic chance of them being elected.

The Scottish National Party (SNP) leader Nicola Sturgeon argued for proportional representation, even though she acknowledged that it might give her fewer seats according to the current opinion polls.  She described her own experience of how a government can work if it has no overall majority: it has to adapt its policies on an issue-by-issue basis to reach a satisfactory compromise.  She pointed out, for example, that if necessary she would vote against cuts in disability benefits even if that meant delaying the agreement of a UK national budget.  This gave the impression, as was doubtless intended, that Scottish voters who vote for the SNP would enable it to influence a future Labour government – not necessarily in a formal coalition which, we are told, would not be offered anyway.  Many Scots now feel able to vote for the SNP without the risk of leaving the UK.

Negotiation on individual issues would enable disparate voices to be heard.  It is in the Scottish interest not to have one party with a strong overall majority to form a UK government, and a similar logic applies to other regional parties.  Proportional representation, and the resulting need for negotiation between parties, would reduce the risk of having a UK government which doesn’t listen to disparate views and it would eliminate the need for tactical voting.  There would be much less need for the Scots to leave the UK if it had such a system.

There are three risks with proportional representation: that it might be difficult to reach any agreement on important issues, that individual MPs would be less accountable to their constituents, and that small parties might end up with disproportionate influence (as has been the case in Israel, for example).  These problems can be largely solved by tailoring the design of the system, for example with the Single Transferable Vote (STV) system favoured by the Electoral Reform Society (although “ballot papers can get rather big and confusing”).  In contrast, the current first-past-the-post system can make a single party too powerful, allows it to make bad decisions on the whim of a strong leader, and enables it to ignore large areas of the country.

Suitably-designed devolution might meet Scotland’s needs, but many other people are effectively silenced by living in a constituency which is dominated by one party; recent low turn-outs at General Elections may be more due to frustration and disenfranchisement than apathy.  The striking increase in support for small political parties reveals a healthy interest in British politics.  It is time to readdress the question of what would be the best electoral system for the UK, as well as finding a robust form of devolution.

Political Cynicism

The New Statesman this week noted that the major political parties are in a “conspiracy of silence”: failing to describe the impact of their proposed policies.  Cynical politicians know that many people will vote without clearly understanding what is on offer.  They also know that voters have short memories and that pre-election promises can be broken without apparent damage to their parties.  Democracy, though, suffers as people become disillusioned with politics and many, if they vote at all, use their votes to protest – for example by voting for UKIP.

George Osborne’s Autumn Statement offered to cut taxes, whilst nevertheless promising to close the deficit.  That is dishonest unless he explains where the corresponding cuts in expenditure would fall.  Neither has Ed Balls clearly described what alternative he could offer.  Detailed election manifestoes need to be available very soon, so that the Office for Budget Responsibility can cost them before May 2015.

Politicians are clearly nervous about going into an election campaign with promises of more austerity, but there are alternatives to further cuts:

Several economists, including the IMF’s chief economist and Oxford’s Simon Wren-Lewis, have pointed out that austerity programs increase deficits and reduce economic growth.

Others have pointed out the benefits of ‘middle-out economics’: the economy would grow faster, and the deficit would shrink more quickly, if people on lower incomes were to earn more.  Tax receipts would be higher, benefit payments would be lower and the aggregate demand in the economy would be higher.

And wealthy pensioners could afford to pay more, as pointed out by The Economist: “Britain’s fiscal problems are partly the result of over-generous spending on the old. They should pay off some of the debts instead of passing them all on to the young.”

The creation of the OBR was potentially of great benefit to British democracy.  Politicians have a duty to voters to paint a clear picture of the future they are offering before the election, and that includes allowing the OBR to project the economic impact of each election manifesto.  It would be very cynical to go into next May’s election without being honest with the public.

Party Positioning

Tactical Policy-Making: – As reported in The Guardian, “Ed Miliband has promised an immigration reform bill in the first few weeks of a new Labour government as he challenged the “false promises” of Ukip and the Conservatives on the campaign trail in Rochester and Strood.”

This is clearly a tactical attempt to gain political traction in a by-election and it doesn’t help to explain what Labour as a party stands for.  Voters need to know how to vote, both now and at the next General Election.

The Impact of Coalition Politics: – It appears that British politics is entering a period of uncertainty, and no party can guarantee to deliver its manifesto policies in a coalition.  Negotiation between the coalition partners will result in some compromises and some election ‘pledges’ will fall by the wayside.  Nick Clegg was forced to apologise for the Liberal Democrats’ ‘U-turn’ on university tuition fees, which was very costly in terms of the party’s political credibility and popularity, yet such occurrences will become more common if coalition politics becomes the norm.

Political parties must explain how they intend to negotiate: defining policies for the key issues that are perceived as important by the electorate, and listing their priorities for a prospective coalition agreement.  A recent YouGov / Prospect survey lists voter priorities, and some of these are itemised below.  After the election, coalition partners must be prepared to explain the outcome of the negotiations – listing the policies which had been sacrificed and those that survived.

Since no party will be able to deliver all its manifesto policies, voters will have to look towards what the party stands for.  None of Britain’s political parties (with the possible exception of the Green Party) has stated its core values and key policies in clear and concise terms.  The larger parties need to rectify this shortfall in their manifestos and election literature.

Core Values: – Most people don’t read election manifestos, but they are more likely to glance at single-page election leaflets – so parties should be able to describe their ideologies simply and concisely.  A good example comes from the Communist Manifesto:

“The immediate aim of the Communist is the same as that of all the other proletarian parties: formation of the proletariat into a class, overthrow of the bourgeois supremacy, conquest of political power by the proletariat.”

This extract is admirably clear (although it is buried at the start of section II in a 20-page document), whatever one might think of its desirability as a political credo.  The major parties in today’s Britain do not currently show the same clarity.

Economic Policies: – Policies on tax and public spending should be spelt out in sufficient detail for the Office of Budget Responsibility to cost them, so that politicians don’t mislead the electorate about their impact on the deficit.

It would also be helpful if parties spelt out their philosophies on the following questions:

Who should bear the biggest burden of taxation in a time of austerity?

What are the policy objectives in setting the levels of benefits, and what criteria must claimants meet?

What are the party’s attitudes towards inequality and what its policies about redistribution of wealth?

How is economic growth to be delivered? What are party attitudes towards ‘middle-out’ versus ‘trickle-down’ policies (i.e. stimulating demand by ensuring that middle-income people have money in their pockets, as compared to a policy of letting the rich get richer in the belief that some of the benefits would trickle down to the rest of the economy)?

What is to be done to ensure the stability of banks and financial services?

Immigration: – This was rated as the most important issue for the voters who were polled in the survey.  Policies should be spelt out, along with clear statements about whether these are compatible with current EU rules.  This issue includes border controls, access to benefits, housing and employment for immigrants.

National Health Service: – Parties should include proposed levels of NHS spending in their economic proposals.  They should also state their attitudes towards providing customer choice and localisation of some services.

Energy Prices: – As this is an item of considerable concern to voters, parties should outline their proposals (if any).

Minimum Wage: – An increase in the minimum wage has the effect of reducing government spend on benefits but might have an impact on economic growth.  The Low Pay Commission is responsible for recommending minimum wage levels, so parties need to specify how and why they would deviate from its recommendations.  The Office of Budget Responsibility should calculate the net effect on the budget deficit.

Devolution: – Although some decisions will be taken before the next General Election, much will remain to be done after it. The survey showed that voters don’t regard it as a priority issue, and it appears that people prioritise equality of treatment over local autonomy for health and education, but devolution will profoundly affect the next government.  Parties should articulate their positions on the questions raised.

Separatist Politicians

Voters in the forthcoming Scottish referendum on Thursday should reflect upon the divergence of interests between politicians and the people they serve.  David Cameron might feel that, without Scotland, he would have a substantial democratic majority in the remnants of the UK (RUK); on the basis of current voting patterns, he would no longer have to compromise with Liberals; the Labour Party would have little chance of forming a government; UKIP would be the only remaining threat to his dominance of RUK politics.

This is a depressing picture for anyone in England who believes that government is more likely to act in the interests of the people if there is a chance of replacing it when necessary.  But it should also worry Scots who will continue to be affected by the UK economy and would, if independent, have no influence upon it.

It is easy to see why politicians might want to wield unchallenged power.  That is the impulse which persuades them to argue for separatism.  There are many in the Conservative party who want to be free of any need to defer to the European Court of Human Rights; Nigel Farage would prefer to be completely separate from the EU; Alex Salmond would wield more power in an independent Scotland.

The interests of the people, though, are better served by staying together.  Scottish views currently have to be taken into account in UK Parliamentary arithmetic, so Scots wield real influence over their larger neighbours.  Scots benefit from taxes raised in wealthier parts of the UK and they benefit from the resilience of a larger economy.  Similarly, the British people currently have influence in Europe; if Britain were to leave the EU, it would continue to be much affected by it but would cease to have influence over it.

Politicians like to be independent and unchallenged, and they can make themselves look big by being confrontational.  For the people, though, it is better that politicians are accountable and not too secure.  For businesses it is beneficial to be in cooperative relationships with one’s trading partners.  Life is better if you get on well with your neighbours.

The Politics of Immigration

The political posturing on immigration in Britain isn’t based upon detailed analysis of what would be best for the population.  It is an example of the impact of pressure on politicians (6.4.6), which in this case can be summarised as balancing their need for popular support against the needs of business, with the media adding more heat than light to the discussion.

Impending elections are focussing politicians’ minds on their need for popular support – but what is popular seems to be more influenced by media reporting than by research findings.  A recent survey showed that 77% of the population want immigration to be reduced and that 47% believe that it is bad for the economy, reflecting the impact of popular newspapers which selectively report stories which put some immigrants in a bad light.  Stirring up popular indignation, against immigrants claiming benefits or committing crimes, sells newspapers – but it leaves a misleading impression that can wrongly be applied to all immigrants.  Academic research suggests that immigrants have benefited the economy – they contribute to economic growth and are less likely to claim benefits than are British citizens.

The government is delaying the publication of information which is favourable to immigrants.  It isn’t showing leadership.  It should explain the valuable contribution made by many immigrants, such as students who pay high tuition fees and the seasonal influx of people who pick fruit.  Targets for net immigration are mere posturing; they are unworkable.  Britain needs policies that allow beneficial immigration but prevent abuses.

The Conservative party is trying to match UKIP’s rhetoric because it fears losing support in the upcoming European elections in May.  It is more worried about keeping its own right wing satisfied than attending to what is best for the British people.

There are legitimate concerns about accommodating an increase in population – and there is already a need for more housing, irrespective of immigration.  It would be possible to reduce immigration, but the Office of Budget Responsibility (as quoted in The Economist) has forecast that the national debt would almost double over the next few decades if Britain shuts its doors.  In the words of The Economist:

“The country truly faces a fundamental choice. In the next few years it could lapse into isolation, or it could succeed in combining a smaller, more efficient state with a more open attitude to the rest of the world. So, Britain, which is it to be?”

Answering that question requires thorough analysis and mature political debate, not pre-electoral posturing.

Populism to Win an Election?

PatternsofPower.org raises concerns when politicians act against the best interests of the populations they serve – and in democratic countries politicians make populist proposals in order to win forthcoming elections, even if those proposals might harm people at a later date or in a non-obvious way. One common pattern is for politicians to misuse the economic powers with which they are entrusted, relying upon people not to understand, or to forget, what has been done.  There are two recent examples of this happening in Britain: the posturing over energy prices, and the reckless relaxing of credit for house-purchase.

Opposition leader Ed Miliband made an eye-catching and popular proposal to impose a freeze on energy prices if he were elected to form a Labour government.  This angered the energy companies, who have predictably reacted by increasing their prices this year ahead of a possible 20-month price freeze if Labour were elected in May 2015.  Four companies have now announced increases that average 9.1%, even though “wholesale electricity and gas together have risen by just 1.7% over the last year”.  Perhaps consumers were expected to be angry with the energy companies rather than blame the price rises on Labour.

The Conservative Chancellor, George Osborne’s “Help to Buy” scheme was also proposed as a popular measure to help first-time buyers to join the housing market.  The “Help to Buy equity loans”, on 20% of a house’s value, were introduced in April 2013 and they are confined to new houses – so builders are encouraged to increase the rate of house-building and that helps to correct an underlying shortage of housing supply.  The “Help to Buy mortgage guarantees”, which have only just been put into operation, allow people to buy any house with a deposit of only 5% – giving a government guarantee to the mortgage-lenders to protect them from losses in case of defaults.  These new mortgage guarantees will increase the demand for houses without any compensating pressure to increase the housing supply so, as The Independent put it, “we ain’t seen nothing yet” – but already there are signs of a housing price-bubble in areas like London, where the demand for housing exceeds supply; one report cites a house-price rise of 60% since last year in one London district.  Many first-time buyers will not in practice be helped by the scheme, because (a) they will be affected by the short-term rise in house prices and (b) they might be left with negative equity when the price-bubble bursts.  A fall in house-prices would probably, though, be after the next election and people would not remember this government’s contribution to the price-bubble.

These two examples of short-term populism appear to be tactical moves ahead of a general election which is more than 18 months away.  Voters should not reward a Labour Party which has almost certainly caused energy prices to spike in the short term, or a Conservative Party which is feeding a new housing price-bubble while everyone is still feeling the pain of bailing out bankers who lost money when the previous bubble burst.  Most voters are likely to support one of these two parties anyway, but those who are well informed might reflect that British politics would be much improved if politicians behaved responsibly.