Peter Riddell slams Labour and Tory “peripheral initiatives” on economy

Peter Riddell is the doyen of Times columnists and his insights into politics are usually pretty spot-on. It was therefore gratifying to see him arguing in yesterday’s column that the “irrelevant initiatives and hectic trips around the country” of Gordon Brown and David Cameron are merely a substitute for action, and that their many and varied proposals are economically flawed and designed to buy-off political constituencies rather than achieve macro-economic recovery.

Brown's pledge to create 100,000 jobs and Mr Cameron's new savings package do not address the cause of the deepening recession: the lack of credit. Everything else is secondary… [T]he job and savings initiatives are distractions. They address symptoms not causes…

Both the Brown and Cameron initiatives are about political positioning: to demonstrate their concern about the recession and to show they are doing something. The most damaging charge now is of inaction. The plans are also aimed at potential supporters, with Mr Cameron generating a positive response from Tory websites and activists seeking tax cuts, even though he has been criticised by independent commentators.”

Riddell is entirely correct. The only way this recession will end is if the equilibrium between borrowing and lending is established, and preferably at a level that sees interest rates reflecting real time preferences, rather than being massaged down by governments in an effort to stimulate short-lived but vote-winning “booms” (today rebadged as “soft-landings” and even “recoveries”).

I am not entirely sure I agree with his thrust that this should be achieved by the Government pumping vast sums of extra money in to the banking sector: today’s Times headline brings tears to the eye. Excess credit expansion is what brought us to this sorry state and further credit expansion is only going to bring us her again in the future (‘If you are in a hole, the first thing to do is stop digging’). However, whether one accepts that the economy needs to go through a period of readjustment or you believe that masses of liquidity needs to be pumped into the banking sector to stop an outright collapse, the fact remains that bail-outs for car companies, government make-work schemes and financial gestures are not only going to fail in their objectives, but will in the process make the situation a lot worse.

Riddell is not nearly firm enough in this, however, and occasionally lapses into Keynesian fantasy. “Bringing forward capital projects makes sense,” he claims, before admitting that it “is unlikely to have more than a marginal impact.” Similarly, he thinks that “There is a case for boosting saving in the long term, but not in the short term when the need is to raise spending,” ignoring the fact that money saved equals money spent: banks can’t hang onto money for long, and sooner or later it has to be invested in businesses or – as the result of more misguided government intervention – used to buy government bonds, which means that either way it ends up in the “real economy”. One man’s saving is another man’s (or company’s) borrowing and spending.

He also gives his blessing to the idea of extended state guarantee for loans that has been proposed by both the government and the Tories. But this is an extremely dangerous proposal for two reasons. Firstly, businesses are currently going bust because lenders are not willing to extend credit to them for fear that they will go bust anyway and thus default. If government guarantees these loans, banks will have no reason to exercise one of their primary roles – as arbiters of who is credit-worthy and who is not – and will be inclined to loan money to all and sundry, knowing that the bank is shielded from loss. The result will be that the government will end up with huge numbers of loan defaults to cover.

And that creates the second problem, which is the moral hazard facing the government as a result of these loans. According to Riddell, “The answer is not unconditional bailouts, as in the 1970s, but some way of breaking the credit logjam”. But once a firm that has outstanding loans backed by government guarantee is faced with bankruptcy, it will have a far more powerful hold over government when it seeks a bail-out. The argument that a subsidy of a few million will avert a collapse and default that saddles the taxpayer with a debt of tens of millions will be hard for government to resist. Conversely, the flood-gates of industrial policy will be open as government will expect influence in return for its largesse: as Riddell himself admits, “the larger that government guarantees become - and they could be enormous - the greater the demand for specific commitments in return.”

Queen's Speech a textbook example of meddling and failure

Today’s Queen’s Speech is another fine example of government meddling and failure.

One Bill after another is being introduced to interfere with people’s legitimate freedoms and try to paper over the cracks in their interventionist system.

I have recently written on the phenomenon that government intervention is doomed to fail and that in doing so it encourages further intervention as governments try to repair the unintended consequences of their own legislation. Clear examples of this are to be found in the Queen’s Speech.

There is too much in the speech, and there is too much as yet unclear, to make a comprehensive attack on the Labour agenda for 2008-9, but the following is an analysis of some of the problems raised.

Business Rate Supplements Bill

The proposals to enable upper tier local authorities and the Greater London Authority to levy a supplement on their business rates, and use this to promote economic development, have a certain charm in that they restore a tiny modicum of tax-raising discretion to local authorities (though not, infuriatingly, to the 32 London Boroughs!).

Of course, any wise local authority would exercise the better part of discretion and not exercise the power. Increasing business rates by up to 2p in the pound will simply squeeze business profits, putting some out of business, driving others away and reducing the ability of the remainder to invest in capital goods (including training) that improve their productivity (and thus the wages of staff). The money raised will never achieve the level of “economic development” that would otherwise be achieved by individuals allocating resources based on their own priorities (a level of information detail that no government can hope to emulate) but will instead be wasted on schemes that appeal to legislators and those who are best able to influence them. It will replace the freedom, efficiency and effectiveness of the market with imperfect politicised outcomes.

Interestingly, the Bill makes provision for allowing businesses to vote on any proposals. It must be assumed that this vote will not be extended to those businesses (with rateable values of less than £50,000) that will not be taxed, as representation without taxation would just allow them to pillage the profits of their more-successful rivals.

It does raise an interesting question, however: why not allow Council Tax payers a similar freedom: a plebiscite enabling them to veto any council policy that would be funded primarily by local taxation. That would certainly put the wind up spendthrift officers and councillors.

Local Democracy, Economic Development and Construction Bill

The devil is in the word “Construction”. Little detail is available on this one, but it does appear to include provisions for a more level playing field for construction businesses, particularly smaller local ones, in construction contracts. Whether this is more anti-success regulation is unclear, but considering the onerous costs that businesses and authorities already have to incur putting tenders through OJEU and other legal competitiveness tests, this can only be detrimental to business. Fairness is best achieved through a free market, where those that discriminate against providers for any reason other than efficiency will be forced to pay higher prices for poorer goods or services and so will see their businesses suffer.

Saving Gateway Accounts Bill

The government’s plan to establish a Saving Gateway scheme, administered and approved by HMRC, with the government “matching” every pound saved with 50p from government up to a maximum of £300 (not the “matching” that Anglophones will be familiar with!), is old-fashioned redistribution of wealth with an added paternalistic twist: the poor must “do the right thing” – by which Labour means save money in bank accounts – to earn their redistributed wealth.

Glossing over questions about the sense of or justification for transferring wealth, this is bad legislation for two reasons: firstly, because it creates a massive dead-weight cost in that the government will have to pay people who would have saved the money anyway; and secondly because it will encourage rent-seeking as people make arrangements to borrow-to-save, for example by borrowing on credit cards (at rates of, say, 25% or 30%) knowing that there is a guaranteed profit of 50% in the first year.

Children, Skills and Learning Bill

The Children, Skills and Learning Bill promises to enforce compliance with the Standard Teachers’ Pay and Conditions Document. The very existence of this document is a problem, as the setting of national standards across England ignores the different costs of living and levels of supply and demand, and further undermines educational independence. At worst, it could see pay and conditions set at too low a level to attract staff to some areas, while being unnecessarily generous (with the resources of local taxpayers) in others.

It also creates a statutory entitlement to apprenticeships for all those suitably qualified by 2013. Unless the meaning of “apprenticeship” has changed, this is idiotic. Apprenticeships involve qualified individuals working for established providers so as to learn on the job; the government cannot increase the number of apprenticeships beyond the demand among qualified workers for apprentices. The proposed duty on the Learning and Skills Council to provide apprenticeship places may easily morph into the provision of further course-based training, which would defeat the supposed purpose.

Policing and Crime Bill

A bill to protect vulnerable groups, particularly women and children, may seem welcome at first. But one has to wonder at a government that considers 51% of the population to be a “vulnerable group” simply because of their gender!

The main problem with this bill is the plans to tighten regulations on lap dancing clubs and the sale of alcohol. Lap dancing clubs are places where consenting adults go to watch other consenting adults perform erotic dances; it should have nothing to do with the government what these individuals (or groups) choose to do. Similarly, government has no business interfering with the right of businesses to sell, or adults to buy and consume, alcohol. As I have noted before, this kind of legislation is never directed at our claret-swilling elites, but at those whom they see as they look down their wine-flushed noses.

Where there are ancillary problems (for example, anti-social behaviour in the environs of the club or pub) they should be dealt with in their own right,

Marine and Coastal Access Bill

The Marine and Coastal Access Bill continues the assault on private property by forcing property owners to allow trespassers to walk over their land simply because they happy to have bought property adjacent to the sea. If the proposal was applied to all properties, so that ramblers may cross anyone’s land at will, it would be fair, but it would also be as welcome as the Poll Tax.

Constitutional Renewal Bill

Finally, something good in the government’s proposals. Thank heavens they are finally repealing their own, oppressive legislation. One law down, 10,000 more to go!

Lessons from the Labour deputy-leadership race

It’s a good job I’m not a betting man, because I would have put my money on Alan Johnson winning the Labour deputy-leadership election.

As it happens, he was beaten into second place at the very last minute by Harriet Harman, losing by less than a percentage point on the final round. Interestingly, the shortfall was almost exactly the same in the first and final rounds.

What is far more interesting, however, is that John Cruddas won the first round, and Harriet Harmon came second. Their success carried them all the way to the penultimate round. Thus, despite Peter Hain’s early ejection, this suggests that there is still a lot of life left in what is usually called the “left” of the party, and what I might prefer to call the socialist wing, Old Labour or (borrowing some of their own more irritating semantics) the “unreconstructed” elements within the Labour Party.

What is also fascinating and shocking is the turnout: at least a couple of MPs and MEPs failed to vote, but more notably, almost half (46%) of members did not vote either. This suggests that a large part of the party was either unimpressed by all the candidates (and this seems unlikely, as the offered genuine diversity and choice) or believed that the vote was of little importance or value. With Harriet Harman now elected, we can expect that the post will prove of little importance or value, too.

As for levy-paying members of affiliated Trades Unions, just 8% bothered to cast votes. This last raises some interesting questions. If only 8% of levy-paying members bothered to vote, what proportion are actually interested in Labour Party matters? What proportion are even supportive of the Labour Party? And perhaps most importantly, what proportion are actually aware that they pay the levy?

If I understand correctly (and please let me know if I’m mistaken) Trades Unionists pay the levy automatically unless they specifically opt out. If this is the case, then this vote raises the spectre that a huge proportion are paying the levy unwittingly. If so, there may be a case for legislation requiring Trades Unions to reverse this situation, so that would-be Labour supporters must actively opt into levy-paying.

In the meantime, Liberal Democrats would be well advised to draw to the attention of Trades Unionists that they may be unwittingly funding a Party that they do not support, and perhaps oppose. A case for a publicity campaign, perhaps?

A no win situation

You’re damned if you do, and you’re damned if you don’t.

That certainly seems to be the verdict of political pundits and illiberal elements as they pour opprobrium on the recent discussions between Gordon Brown, our next Prime Minister (acts of god permitting), and Sir Menzies Campbell about a role for Lib Dem peers in a Brown government.

My view is that Diane Abbot (one of the more pleasant socialists) got to the heart of the issue when she said that such a deal would be “electoral suicide” for the Liberal Democrats. For our party, the greatest challenge is ridding itself of the popular misconception that Labour and Liberal are different shades of the same colour (red, or red with a hint of yellow), different wings of the same centre-left family that stands in contrast to the centre-right blue(-rinse) alternative.

Such misconceptions are not helped by Sir Menzies’ persistence on referring (and proudly at that!) to the Liberal Democrats as a party of the centre-left. We are not a party of the centre-left, of the centre-right, or of the centre-anything. We are a liberal party: as opposed to socialism as we are to conservatism, both committed to fairness and distrustful of the state. As my more avid reader will recall, I have discussed this before.

Part of disabusing the public of their view of us as a Labour ginger-group (it would explain the orange!), “the social conscience of the Labour Party”, is to quash the assumption that in any coalition we would automatically side with Labour. This is not to say that we should show any eagerness to side with the Conservatives either (especially not this current shower!), but we must dispel the myth that if Labour fails to make it to the necessary 324 seats they can trust us to prop them up.

After a general election, in the event of a hung parliament (and I’m still not prepared to put my money on it happening), we should be prepared to negotiate with either and both parties – showing no favour – to identify which is prepared to put forward the more liberal policy platform. We must also be prepared to reject both parties and allow one (no matter which one) to form a minority administration, if neither are liberal enough.

That seems pretty clear to me. So why is it that some Lib Dems seem to think we have a natural ally in one of the other parties? And why is it that the pundits seem not only to agree, but to be genuinely shocked that we should reject the chance of power? After all, nobody joined the Lib Dems in the hope of enjoying the faux-leather seats in the ministerial limo.

This baleful piece in The Times is typical. According to the Editor, the Liberal Democrats ought to be more willing to collaborate than other parties (he is not clear why) and should therefore jump at any opportunity that presents itself. Strangely, the article notes that we have “declined to negotiate a coalition with either the SNP or Labour in Scotland… leaned in Labour’s direction in Wales [and] then flirted with a bizarre bargain with Plaid Cymru and the Tories before lapsing back into opposition” and also, inaccurately this time, claimed that “they also toyed with reaching an understanding with David Cameron over a common contender for mayor of London… before backing out of that accord too” (which is a crude distortion of the truth). What conclusion does the Editor draw from our apparent three bouts of discussion followed by refusal? That “This behaviour is neither consistent nor coherent.” I beg to differ. It is clearly consistent, and its coherence comes from our willingness to enter into coalition only within a broadly liberal framework.

My point is not that this is all grossly unfair, however. One would expect little else from the Murdoch press, wed as it still is to New Labour. Indeed, none of the press are impartial – that’s not really their job, despite another common misconception. My point is that had the discussions turned out differently, and were Lord Ashdown and his fellow Lib Dem peers preparing to spend less time with their families, you may rest assured that the press would have howled with derision all the same. Instead of being incoherent and not ready for power, we would be unprincipled and interested only in office; instead of Campbell being weak and indecisive, he would be weak and easily seduced; instead of talking of a missed opportunity, they would speak of our losing our identity.

I have said it before and I will say it again: the more popular our party and our ideology, the more the reactionary elements (on both sides) will attack us; the more powerful we become, the more our enemies will concentrate their fire upon us. That is the price of success. So be it.

It was daft of Brown to think that he could co-opt the Liberal Democrats at a time when they have more MPs, higher poll ratings and more persuasive policies than ever before. Sir Menzies is right: our priorities should be maximum votes; maximum seats.

Thanks, Gordon, but we’ll go it alone!

Labour deputy leadership promises of renewal founder in politics as usual

A day late, I have just watched the Newsnight special on the Labour Party’s deputy leadership contest. What a depressing experience!

Every single one of them stressed their desire to “Restore trust in politics” (Benn) and “renew the party” (Blears). Yet by-and-large they all committed the same sins that make politicians so contemptible.

Asked to give a “yes or no answer” to four policy questions, only Alan Johnson was prepared to say what he believed without either hedging or explaining. When pushed about replacing Trident, new nuclear power, ending the charitable status of independent schools and an amnesty for illegal immigrants, their answers were:

Cruddas: No Yes Yes (failed to answer)
Hain: Yes Yes No No
Johnson: Yes Yes No Yes
Harman: (failed to answer) Yes No Yes
Blears: Yes Yes No No
Benn: Yes Yes No No

When asked who they would vote for if they were not themselves standing, all five of the front bench candidates refused to answer, insisting that they were “in it to win it” (Blears). Only John Cruddas was honest enough to answer – perhaps because he was asked first and did not know that the others were so spineless; he said he would vote for Harriet Harman “because of her gender activism” (he might as well have said because she was a woman).

In fact, the straightest answer came when asked if they would have voted for the Iraq war (they all did) if they knew then what they know now. Both Cruddas and Harman said they would not and added that Labour ought to apologise for its mistake; Hain said he could not wriggle off the hook with the benefit of hindsight (which I thought was an honourable answer); while Johnson and Hilary Benn said they were glad Saddam was gone. Blears still fudged; she wanted to look forward, not back (having clearly not moved on since 2005*).

On one issue they all agreed, however. None supported caps on the size of donations to political parties (though most supported caps on spending) and the Trades Unions ought to be exempted from any ban on large donations. Some things, it seems, have not changed in the Labour Party.

--

*Interestingly, I tried to link to Britain: forward not back, Labour's 2005 election manifesto, but it has mysteriously disappeared!

Brown in, Reid out

John Reid has told the Politics Show that he will not serve in a Gordon Brown cabinet. However, he avoided attacking the Chancellor, even claiming that Brown had offered him a place in the Cabinet, which Reid declined. Reid has also said that he will back Brown for the leadership.

Speculation will be rife as to the motivation behind Reid’s announcement. One thing is certain: it has become clear even to the “anyone but Gordon” crowd that Brown is going to be the next prime minister. Usually, this would trigger a rush to embrace him before it is too late; few ministers easily give up the ministerial limo. But is may be that for the likes of Reid, serving beside Gordon Brown is too awful a prospect to face.

But why openly support Brown’s move to the leadership (it hardly warrants being called a “bid” anymore). There remains the option of retiring to the back benches, there to snipe and hope to undermine the Brown premiership. Yet Reid was categorical in his refusal to act as a lightning rod for anti-Brown New Labour sentiment (as opposed to anti-Brown old Labour sentiment, for which two lightning rods have emerged). Even from the back benches, he promised to be supportive.

Jaded political analysts among us might wonder whether this is mere window dressing, with Reid in fact planning to join the likes of Alan Milburn and Charles Clarke in fermenting dissatisfaction with Brown. But I doubt it. The Home Secretary is committed to the Labour Party, and may prove to be a wiser politician than either Milburn or Clarke.

I suspect Reid has accurately judged that any opposition to the Chancellor will damage Labour as a whole without necessarily protecting Labour or the country from the worst Brown has to offer. Battles between Brownites and Blairites have been at the root of many of Labour’s most difficult moments. It may therefore be the case that Reid is actually being frank when he says he will retire quietly to the backbenches and support Gordon Brown.

As Thursday’s election results showed, the pendulum is rapidly swinging from red to blue, and as the Tories demonstrated in the 1990s, that is not the time for party in-fighting. Reid may not like Gordon Brown, but he finds him infinitely preferable to David Cameron.

It was ten years ago today

Ten years after being elected, Tony Blair has expressed regrets, apparently. I can imagine that would take a while!

InnerWest sums up Tony Blair's successes and failures thus:

Tony's Tenure's Top Three....

1. An Independent Central Bank. People really have never had it so good.
2. Northern Ireland. The IRA - remember them?
3. Devolution. Not everybody agrees about how much power should be given
away from the centre, but the important thing is that some was and it's gaining
it's own momentum....

and the Bottom Two:

1. Foreign Policy. An ethical intent gave way to the allure of the ends
justifying the means - only for the ends to become an almost unmitigated
fiasco.
2. Public Services. Lavishing money and ducking tough questions does not
equate to reform, just a stay of execution.

Well, 3-2 seems to be a victory for Blair.

Then again, Inner West seem to have discounted a number of (own) goals:

1) Spin - need we say more?
2) Cash for Honours - because Cash for Questions was so last government
3) Human Rights - they started so well, and then it all fell to pieces
4) That economic record, which ignores the fact that unemployment, inflation and taxes all rising

5) "Education, Education, Education" - three times as much priority, and still a quarter of school leavers are illiterate, a quarter innumerate, and a third have no qualifications worth a damn...

One really could go on!

So go on. Why not add your own personal lowlights of the Blair administration. After all, it was ten years ago tomorrow!

If only everbody thought like an FT reader

The Financial Times is running an online poll on whether Gordon Brown would make a good Prime Minister.

So far the results are

Yes 17.8%
No 82.2%

Now, I know not everybody thinks like the readers of the FT, but I do wonder how many people nationally really do think that Gordon's fit for the job.

It seems we're getting a PM by default, because of his ability to bully his colleagues rather than woo the voters. I can only think it'll end in tears.

BBC readers think Brown's budget is a disaster

As regular readers (or should that be "reader"!) will know, I am the first to point out that the BBC does not represent the views of the public, and its viewers/listeners/readers are not an acurate cross-section of the populous.

However, after 3697 votes cast in a BBC poll on the budget, over 57% believe the budget has not been good for them, while barely 20% think that they have benefited. Over at Have Your Say, the commentators are furious!

The British people are clearly more perceptive than than the cheering Labour backbenches. Or is it simply that Gordon Brown is unlikely to offer them a job (or even make it easy for them to find one!).

The Trap: Whatever happened to our dreams of freedom? (part 2)

Last night BBC 2 showed the second episode of Adam Curtis’s new series, The Trap: Whatever happened to our dreams of freedom?

As I explained when I reviewed part 1, the general premise of the programmes is that over the past thirty years, trends in psychology and economics that viewed the people as a rational, selfish individuals interested only in personal gain have come to dominate public policy. Policy-makers have lost faith in the concept of public service and have instead applied market forces to public services in an attempt to give power to citizens (as consumers) and free them from the shackles of bureaucracy. However, Curtis argues that this has in fact backfired, leading to worsening inequality and a collapse in public services and political efficacy.

Part 2, subtitled The Lonely Robot, expanded on these themes with particular focus on the 1990s, and in so doing highlighted both the mistakes of what we call the Thatcherite Revolution and Mr. Curtis’s own erroneous analysis. I will explain these errors below, but first I will provide a synopsis of the programme. Those familiar with it may wish to skip the next six paragraphs and move on to my comments.

The programme began by returning to Buchanan’s Public Choice Theory, which argues that politicians and civil servants actually pursue their own rational interests rather than the public good. Curtis juxtaposed John Major’s efforts to create an internal market in public services that would use the rational interests of public servants to achieve public ends, with Bill Clinton’s interventionist presidential campaign, in which he publicly berated President Bush for his laissez faire approach, saying that if Bush would not use the powers of the presidency to improve America, he should stand aside for somebody who would. Clinton was elected, but before he took office was visited by Alan Greenspan and Gene Sperling, who explained to him that if he tried to intervene in the economy he would just worsen the economic crisis of the early 1990s. They convinced him that the power of governments to effect positive economic outcomes was a chimera; only the market could provide the prosperity America craved. Clinton accepted this advice and presided over one of the greatest economic booms in American history.

However, Curtis criticised the underlying basis of this belief. He argued that the consumer society did not in fact reflect the economics of Adam Smith. Rather, its assumption of the rational individual pursuing self-interest ignored the sympathy and moral sentiment which Smith argued were essential to man’s role in society. Instead, the selfishness of the species stemmed from scientific theory. Curtis dwelt upon and later critiqued anthropological studies of the Yanomamö people of Central Brazil, and also noted the view (promoted by Richard Dawkins, among others) that animals – including man – were merely vehicles and tools for the promotion of their selfish genes. Meanwhile, the revolution in psychological diagnosis described in last week’s programme had led to around half the population reporting themselves as suffering psychological disorder. New drugs such as Prozac appeared to offer a cure. The result was that millions of people took drugs to “normalise” their behaviour and emotions – a practice that some interviewees believed threatened to create a static, stagnant society.

Back in the world of public policy, 1997 saw New Labour elected to govern Britain. Labour took the distrust of policy-making to a new level, as demonstrated by the granting of independent powers to the Bank of England. Labour’s means of “incentivising” public servants was to set centralised targets and reward or penalise them accordingly. Curtis cited some of the more ridiculous examples of targets set by the Labour government, including:

• A community vibrancy index
• The quantification of bird-song in the countryside
• A target to reduce world conflict by 6 per cent
• A target to reduce malnutrition in Africa by 48 per cent

The result was not driven and measurable success, but what a member of The Audit Commission called a systemic “gaming of the system”. The NHS would employ people who’s job it was to greet people on admission so that they met their targets of seeing patients within a certain time, though no treatment was given; wheels were removed from trolleys and corridors were renamed wards so that patients could be counted as being in a bed in a ward; the police reclassified crimes as “incidents” so that crime fell; schools taught easy subjects and concentrated on mediocre children so as to raise the number of children gaining GCSE grades A-C. The result was a decline is social mobility to the point where a child born in Hackney was twice as likely to die in its first year than one born in Bexley.

Curtis also critiqued the supposed boom in the US. The apparent rise in the financial markets was based increasingly on dodgy accounting practices rather than reality. Meanwhile the economic progress was increasingly one-sided: one interviewer highlighted three interesting comparative statistics:

• The real term after-tax income of a family in the lowest quintile fell between the 1970 and the 2000s
• The real term after-tax income of a family in the middle quintile rose only slight between the 1970 and the 2000s
• The real term after-tax income of a family in the top 1 per cent rose by an enormous amount between the 1970 and the 2000s

Thus Americans were not only becoming less equal; the poorest were getting poorer.

The result of the revolution of the last thirty years, concluded Curtis, was that politicians were weakened by a mistaken belief that they could not affect change or improve welfare. Politicians were emasculated and corrupted and felt powerless. Meanwhile, the masses were not fulfilled by either consumerism or politics, but were instead doping themselves up on psychiatric medicines. At the same time, scientific evidence was emerging that undermined the selfish-gene and anthropological evidence of the 1970s, John Nash – the father of game theory – had begun to repudiate much of his work, and the free market was under attack by economists who argued for greater intervention and critiqued the rational individual thesis.

So ended the second episode. The third promises to discuss the War on Terror and – I suspect – “spin”.

Sadly, the second programme lived up to all my expectations. Curtis is an excellent documentary maker, but while he highlights genuine and important crises within society and provides a plausible historic context, he tends to misinterpret the causes and thus advocate policies that would exacerbate rather than alleviate those problems.

For a start, Curtis is prone to simple mistakes. For example, his critique of the American economic experience in the 1990s made a schoolboy error, confusing the state of the financial markets with that of the economy. In fact, the eventual collapse in share prices as the Dot Com and dodgy-accounting bubbles both burst had almost no effect on the US economy – the 2001 recession was the shortest and least painful in American history. Similarly, the statistics about relative welfare did not explain how far this was a result of taxes undermining the incomes of the poor (the statistics being post-tax incomes which suffer from heavy taxation), or of the effects of immigrant labourers who generally take low-paid work at the bottom of the economic pile, thus lowering averages without adversely affecting anybody, while they are happy to make a new life for themselves and their families. Similarly, in comparing infant morality rates in two London boroughs, Curtis failed to clarify whether the widening gap was due to a decline in Hackney or an improvement in Bexley.

Other errors, however, are more substantial, and demonstrate that he has fundamentally misunderstood both the classical liberal case and the causes of Thatcherism’s failures. The fundamental example in The Trap is Curtis’s belief that market mechanisms have been injected into public services and have as a result created perverse incentives for deliverers to “game the system” by aiming at achieving targets rather than positive outcomes for citizens; that governments have acted upon the belief that bureaucracies serve their own interests first. This is a profound error. In fact, the supposedly-liberalising agenda of the three (soon to be four) Thatcherite Prime Ministers has been completely undermined by the distrust that both the Conservatives and Labour have for freedom and the market.

Instead of creating a true market, with individuals holding the power as consumers and using their power over the money to reward success and punish failure, the past thirty years has seen the greatest centralisation of power in Britain since the Stewarts attempted to introduce an absolute monarchy. Distrustful of what a true market might produce, successive governments have endeavoured to micromanage the public services from Whitehall. Thus, instead of eliminating the power of self-interested bureaucrats, they have made local authorities and public services answerable to central government, made delivery departments answerable to the Treasury, and made the Treasury answerable to a small coterie around the Prime Minister and the Chancellor. This has led not to liberty and a genuine market, but to an over-regulated, over-centralised, overly-bureaucratic system. This is not what either classical- or neo-liberal economists would have suggested.

A real market that genuinely empowered people and lifted the dead hand of bureaucracy from our shoulders would put citizens in control. Rather than being answerable to civil servants in Whitehall, deliverers would be answerable to citizens through the latter’s ability to allocate funding. As Friedman demonstrated in theory and Sweden demonstrated in practice, voucher schemes not only drive up standards but they are particularly beneficial to the poorest in society. Sweden – that paragon on Social Democracy – has similarly had a very positive experience with creating a healthcare market.

Sadly, this kind of freedom is not to Curtis’s taste. For him the volatility and unpredictability of the market is disturbing, and the freedom of the individual is a myth. He prefers the certainties of Statism and the comfort of the community. But with the lack of hindsight that only a shift of generation can provide, he ignores the bleakness of the last period of interventionist government and the abject failure of Statist solutions. One need not look to pre-1990 Eastern Europe for evidence of the failure of state planning; dirigiste France’s youth unemployment of 25 per cent and Germany’s stagnant economy are lessons enough for us. Governments are incapable of managing so complex and delicate a system as the economy, which rely on incalculable pieces of information. Economies are, in essence, merely a mirror of society as a whole, and efforts to manage economies are therefore efforts to manage society. Whether it is through dictating how many hours an employee may work or through confiscating a portion of their earnings for central distribution, such efforts are inherently illiberal and should be kept to a bare minimum.

The desire of recent governments to end the old bureaucratic tyranny is laudable, but their efforts have been risible and their methods misguided and ultimately counter-productive. Only by genuinely empowering citizens through giving them the power to allocate their resources – be they those they earn or those transferred to them by a welfare state – and allowing the consequences of those decisions to have their effect, will we improve the quality of public services and benefit society more generally. Into the bargain we will re-invigorate the population who, being now in control of their own destiny and no longer supplicants at the mercy of the state, will rediscover the moral sentiments that Smith and Mill thought vital elements of a fully rounded person.

I have separately reviewed part1 and part 3. Curtis's conclusion and my analysis of it are discussed in a final post.

Laws against discrimination will not make society more tolerant

I’ve been steering clear of the Catholic adoption row so far. Nothing like coming late to a story! I think it may have been because I have found the whole affair depressing. Rather than take up arms, I’d rather put my head in my hands.

This is partly because I feel that this row has been deliberately engineered by Cabinet Ministers who want to take the opportunity to burnish their socialist credentials prior to the Labour Party's deputy leadership election by confronting both a conservative organisation (a church) and their own lame-duck leader. This is not to deny that there are real issues here, but I am sure that they could have been addressed far more maturely if there were not political points to be scored.

If the machinations of Labour politicians were enough to depress me, however, I’d have wept myself dry long ago. Instead, I have found the tenor of the debate equally depressing. This has become one of those polarised arguments where one is either manning or storming the barricades; a totemic issue around which a lot of anger and bile is being expressed while children remain to be adopted. The fact is that the Catholic adoption agencies are unusually effective at finding places for children - particularly troubled and teenaged children, who are the hardest to place. As with many religious schools, the attempt to mould society in a progressive image may result in the loss of a great deal of expertise and skill.

Not that I’m suggesting that what is required is some sort of woolly, third-way, middle-of-the-road compromise. I’ve never been that kind of liberal! I am the kind that rejects conservatism because I believe in progress, and rejects socialism because I believe in the rule of law. The rule of law is particularly important to this discussion, because it is often mistakenly assumed that the “rule of law” is synonymous with the “rule of laws”. A lot of the debate has been about how the Catholic Church must obey the law – there can be no exemption.

To make my point, I was prompted to finally break cover by a question from a friend, who asked “what are your thoughts on the homophobic Catholic Church clinging doggedly to their 'right' to discriminate, over and above the law? ”. In responding, I stated that

I am rather disturbed by what I infer as a belief that the law is something that we can use to force minorities to comply with the wishes of the majority. It was not so long ago that homosexuality was illegal. Would you then have railed against “homosexuals clinging doggedly to their ‘right’ to sodomy, over and above the law”?.

The rule of law does not mean that anything that is enacted in law is justified. The German Enabling Act that gave Adolph Hitler and his cabinet the power to enact legislation without reference to the Reichstag was a law, but it was a violation of the legal principles to which we refer when we talk about the rule of law (and should also sound eerily familiar to students of British politics).

Rather, the rule of law relies upon the fact that certain basic liberties are beyond the scope of the law to dispense with as particular parliaments choose. Younger nations have written constitutions which make this clear, but our constitution – though not enshrined in a single document – is no less rich. One of these basic liberties is freedom of association. Stepping back from adoption and looking at the law in the round, the effect is to compel people to associate (in this case conduct business) with people with whom they would otherwise choose not to associate. Furthermore, the law is arbitrary in its application: it prescribes certain types of discrimination (e.g. age) while ignoring – and thus implicitly sanctioning – others (e.g. weight).

I do not think that tolerance and understanding are best spread by law enforcement. They are best spread by interaction, debate and education. That requires openness on all sides. It is, of course, easier to get to the short-term end one wants (no discrimination against homosexual adoption, for example) by using the law to crack down on dissent. But I suspect that the longer-term ends (a society of tolerant and open-minded people based on mutual respect despite differences of lifestyle) are retarded as a result.

In the end, we create a society that does not discriminate because it is not allowed to, rather than people who do not discriminate because they do not want to.

"That's quite enough Dyslexogate, thank you"

David Aaronovitch has written an excellent op ed. on "The Ruth Kelly Affair".

As well as exposing the real hypocrisy - journalists who tut-tut about her decision when over half of them privately educate their own children - he takes a swipe at Labour back-benchers who put ideology over the interests of the child (the point I made yesterday).

I know a comment piece is good if it is both informative and humorous. Enjoy.

Losing sight of the child

There is something unseemly about the row that has erupted in the Labour Party over Ruth Kelly’s decision to send her child to a private school.

Labour’s commitment to state provision has always made it difficult for Labour ministers to school their children privately. Yet the fact remains that private education can provide better outcomes for children that state schools.

This is not always the case: past Labour administrations were crammed full of and led by grammar school boys who had got the best state education by passing their 11+ exams (or their parents paid for the privilege). But since Labour dismantled the two-tier grammar school system, our current Labour Prime Minister has been drawn from the ranks of the private schools.

In fact, debate still rages over whether private education always provides better outcomes for children. Every few weeks another study emerges arguing either that children from private schools enjoy better outcomes as a result of their education, or that there is no discernable difference.

Whether or not parents should have a right to educate their children outside the state system, and whether parents should be allowed to take the money their children would have costed the state and spend it elsewhere if they see this as in their child’s interests are important but macro-level debates. What is so disgusting about the reaction of Labour members to Ms. Kelly’s decision is that it shows absolutely no concern for the welfare of the child.

Take these quotes in today’s Times:
Ian Gibson (Norwich North): "I think it’s wrong. You should set an example as a minister and support your local school. It is a slap in the face for the teachers and the pupils in the school that the child has been taken out of."
Ann Cryer, (Keighley): "MPs should try to get state provision for their children because that is what we believe in."
Lynne Jones (Birmingham Selly Oak): "I think it goes against the principles of the Labour Party. It makes me wonder about the sort of people who achieve high office who are in New Labour."
Margaret Hodge, Trade and Industry minister: "Given our commitment to state education, it is an issue of public interest."

Not one of these Members of Parliament even qualified their statements by suggesting that Ms. Kelly’s main concern as a parent should be the welfare of her children. A government minister may choose to sacrifice their own interests for their career – say, by spending time on an NHS waiting list rather than paying to go private. For a minister to sacrifice their child’s interests would be disgraceful. For the minister’s colleagues to berate her for not doing so is disgusting.

Ms. Kelly’s child struggles with dyslexia. Whether or not state education should be able to provide her child with the best schooling is beside the point. The child’s parent has made an informed choice about what is in the interests of her child. We should respect that choice.

We may of course cite that choice as proof that Labour is failing to provide state education that meets the needs of children with special educational needs, but we should not condemn Ms. Kelly for recognising that fact and responding by doing what she can for her child. It does not matter that she was once Education Secretary. What matters is the welfare of her child.

That is what the likes of Gibson, Cryer, Jones and Hodge fail to appreciate. Too wrapped up in the battle of ideology, they have lost sight of the child.

Just a cog in the machine

I think I may have come across the epitome of Labour’s belief in command and control. It is also the most egregious example of government waste so far. The Taxpayers Alliance are going to have a field day with this one. The next Bumper Book of Government Waste is going to have a special chapter just for this.

The Times reports that £7 million has been spent conducting a time-and-motion study, the upshot of which is that staff at National Insurance are being told not only what they may and what they may not put on their desks, but what must sit where. The “Lean” programme by logistics consultants Unipart actually sets out where a civil servant should position their phones, their mouse and even their pens to provide for optimal efficiency in desk usage.

The idea that we are all identical and that the Government knows best what we need and how we should go about leading our lives is rooted at the heart of the socialist idea of progress (Liberal progressives, by comparison, believe that progress is good but should be allowed to advance naturally rather than being driven by a controlling mind – the state; ‘conservative progressive’ is an oxymoron).

I have never been an advocate of the “clear desk policy” (as you can see!) and firmly believe that a man’s desk is his kingdom (and “The king is emperor in his kingdom”, as the French could have told us 600 years ago). In fact, a messy desk may represent a representation of the mind of its owner:

People spread stuff over their desks not because they are too lazy to file it, but because the paper serves as a physical representation of what is going on in their heads—“a temporary holding pattern for ideas and inputs which they cannot yet categorise or even decide how they might use”, as [Alison Kidd, a psychologist] puts it. The clutter cannot be filed because it has not been categorised. By the time the worker's ideas have taken form, and the clutter could be categorised, it has served its purpose and can therefore be binned. Filing it is a waste of time. (In praise of clutter, The Economist, 19 Dec. 2002)

More to the point, it is one small way that an individual can express their freedom in the workplace. Not all workplaces are dark, satanic mills, but many (and Whitehall in particular) try to impose a rigid uniformity on their employees. A few “inactive” tea cups and a photograph of one’s children are not clutter; they are a workers cry that "I am not a number, I am a free man!".

The Lean Programme appears to be a terribly misjudged attempt to achieve a notional productivity rise at the expense of worker’s freedom. It is a sad statement of the mindset of Labour ministers. It is also a pointless waste of our taxes; at a time when the Government is complaining that Freedom of Information legislation is too expensive and are trying to save £12 million by curbing our right to hold ministers to account, I for one can think of better ways to spend that money.

Labour Party in panic over party funding plans

Sir Hayden Phillips’s second interim report on party funding has been leaked to the BBC, and it contains bad news for Labour.

Sir Hayden appears to be leaning towards capping donations at £500,000, and reducing that cap over four years to just £50,000. This would be hard for the Labour Party, as it has less high income donors than the Conservatives, who have been calling for a £50,000 cap for this very reason. How it would leave the Liberal Democrats is known only to Cowley Street insiders.

However, it is in the following section that Sir Hayden strikes at the heart of the Labour Party. With impeccable logic and no sense of the political ramifications involved, the former Permanent Secretary at the Lord Chancellor’s Department has declared that “I see no reason why donations from trades unions should be exempt from the cap”. This, and another suggestion that trades union members should be allowed to opt out of donating part of their subscription to the Labour Party, could deal a fatal blow to Labour.

Labour has traditionally relied heavily on trades union donations. If these are now capped at £50,000 it will cripple them financially at a time when they are £23.4 million in debt. More importantly, it will break the unhealthy grip that trades unions have over Labour Party policymaking, effectively freeing the party once-and-for-all from the rent seeking of these particular special interest groups.

If proof of the significance of this were needed, it was provided by John McDonnell MP, so far the only Labour member to announce his candidacy for the leadership (his slogan: “Another world is possible” – and he should know, as he must be living on one if he expects to receive anything other than a drubbing).

McDonnell claimed that the party would react with “fury” to this independent review, and that there would be “uproar” at the next National Executive Committee meeting. According to McDonnell, trades union donations are the “cleanest money in politics”, and at a time of Labour sleaze should be welcomed. Presumably, he thinks cash-for-favours is somehow better than cash-for-peerages.

While there are important liberal questions about limiting how individuals dispense with their money, this is probably a good policy. Individuals will still be able to finance their own campaigns that support particular issues and so guide the decisions of electors but their power over elected officials will be greatly reduced. Even if Labour can survive the financial pain these proposals will cause them, Sir Hayden will have provided a great service to democracy.

Labour's election strategy - threaten the voters

The Labour Party has come up with an interesting new strategy for the Scottish elections: threaten the voters.

Labour and the Liberal Democrats are facing a drubbing from the Scottish National Party (SNP), due to a combination of high oil prices and anti-incumbency feeling. The Conservatives continue to carry no weight north of the border.

The prospect of Gordon Brown taking over from Tony Blair just in time to see his party mauled in his home country and its new First Minister threatening a referendum on secession is causing panic in Labour ranks.

The response from countless cabinet ministers at the Scottish Labour Party conference has been to suggest that if Scotland votes in an SNP government it will threaten the heavy dose of subsidy that Scots enjoy at English taxpayers expense. Scots receive on average £1,500 a head more than in England, which partly explains why over half their economy is built on the public sector.

It seems pretty unlikely that the Scots are going to warm to a Labour Party that is intent on reminding them of their dependency on Sassenach largesse. Gordon Brown’s premiership looks like getting off to the worst of starts.

Faint praise from The Economist

The Economist gave faint praise to the Liberal Democrats in its article on party funding this week.

Describing the loans parties had taken out, it said "Labour owes £23.4m, a sum that exceeds... its spending... in last year's election campaign. The Conservatives have piled up even more debt, worth £35.3m... The Liberal Democrats are in the happier position of owing only £1.1m."

Sadly, the dire state of the two main parties' funding suggests that the chances are growing of their using their power to oblige the taxpayer to provide them with cash directly. They will argue that to save politics from the grubby world of donations and loans, and the influence they buy, parties should in future receive direct funding from taxpayers.

One cannot help but wonder, as our venal leaders feather their own nests, whether what the parties really need to save them from sleaze and corruption is a some honour - and not the kind that gets doled out in return for a loan.

Labour Party’s centralising tendency comes home to roost

Neil Woollcott has posted an article about a Labour Party proposal that its councillors contribute towards paying off part of its massive £23.4m debt. According to Woollcott, the media are “causing a big stir” about this and he expects Liberal Democrat bloggers to do the same.

Before we all jump onto our high horses about his, I think we should bear in mind that it is largely an internal Labour Party matter. If they want to ask their Councillors to contribute to a fund, it is up to them. If they want to oblige those holding the Labour whip to do so, that is a decision for them, and potential councillors and voters can judge them accordingly.

In my experience, those who run for office and especially those who hold public office tend already to be very generous with their time and their money - both to the local community and to their party.

What is sad about this proposal is that it is a typical example of cack-handed Labour Party centralisation that will probably cause more harm than good. For one thing, those who currently give generously may now limit themselves to donating only the prescribed amount. Perhaps more importantly, how those funds are used will be decided by Labour Party central office staff rather than by the individuals themselves.

This should be no surprise; Labour is a party that is committed to centralisation and does not trust individuals - even individual members, it seems - to dispose of resources as they see fit. It is, however, sad that local members’ generosity is to be replaced by a system that smacks of the very centralised tax-and-spend approach that has proved so ineffective in Government. Fortunately, this time it can only harm the Labour Party and not the country.

Electoral Commission report on donations and loans to political parties casts a shadow over Labour and the Conservatives

The latest figures from the Electoral Commission on the loans and donations received by Britain's political parties provide fascinating reading. Sadly, reporting on them has been less enlightening.

Indeed, there is something rather disingenuous about the BBC’s claim that “the main political parties owe a total of £60m in loans”.

£58.7m of this is owed by just two parties, The Conservatives and Labour.

As Labour admits struggling to pay its loans, it’s claim that “political parties should live within their means” sounds hollow. Labour has been living well beyond its means for some time, with the 2005 general election a lesson in how to finance the present by borrowing from the future. While it may be an exaggeration to suggest that it would not have won the 2005 election without the tens of millions of pounds of debt it ran up, it is undoubtedly true that its majority would have been far more precarious had it not chosen to mortgage its future in an effort to win a third term.

The issue of loans raises serious questions about the credibility of the financial arrangements of political parties. The Conservatives appear not to have declared loans on the grounds that they were made “on commercial terms” despite those loans being at preferential rates, below bank lending rates. The Labour party’s “cash-for-honours” scandal continues to cast the shadow of sleaze over the Government. By comparison, the Liberal Democrat’s outstanding loans could be cleared by a £15 donation by each member; it is unlikely that Cowley Street will be on the market in the near future.

LOANS OUTSTANDING
Conservatives: £35.3m
Labour: £23.4m
Lib Dems: £1.1m
SNP: £525, 393
Plaid Cymru: £352,000
Respect: £34, 878
UKIP: £19,200
Source: BBC Online

Meanwhile, donations to the major parties seem to eerily reflect the parliamentary landscape, with the Labour Party receiving slightly more than the Conservatives while the Lib Dems received approximately a fifth as much as Labour. On the other hand, a couple of the minor parties have received significant donations that belie both their small size and their supposedly-socialist roots. Both the Green Party and the Co-Operative Party have received large donations that should help them pursue their radical socialist agendas.

DONATIONS
Conservatives: £2,867,019
Labour: £3,227,340
Lib Dems: £629,903
SNP: £52,430
Plaid: £12,250
Co-operative Party: £142,036
Ukip: £17,913
Green Party: £138,396
Scottish Greens: £31,373
Source: BBC Online

More nuclear nonsense from Peter Hain

Yesterday I wrote that Peter Hain was reported as having shifted from card-carrying member of CND to a supporter of Trident on the grounds that unilateralism had cost Labour votes in the past.

Today, on Sunday AM, he gave Andrew Marr a different reason for his U-turn. Rather than crass opportunism, as it appeared on Friday, he now says that "...since we are where we are, and the history of having an independent nuclear deterrent, I do not think that people in Britain will accept us giving that up." So basically, the reason for replacing Trident is because it is there. One is reminded of the World War One song "#We're here because we're here because we're here because we're here...#"

Saying that he had been a CND member in the past and "I don't apologise for that" (hardly a ringing endorsement!) he then expressed shock and irritation that Marr would suggest that Parliament should have a free vote. No vote on conscience over whether to develop the most massive of all weapons of mass destruction at a cost of tens of billions of pounds; "You couldn't expect a serious government, in charge of one of the world's global powers - Britain - making a recommendation to Parliament and just say 'you can do what you like, chaps' ."

Hain repeatedly mentioned that "this is a serious government", as though by reiterating the mantra he could give the government more credibility, but he was also clear that the Labour Party members would be whipped through the lobbies.

In fact, the Northern Ireland Secretary is wrong. There is absolutely no reason why Parliament could not vote on its conscience on this matter, except that the parties might reasonably argue that if retaining the deterrent were in the 2005 manifestos then everyone who stood on that manifesto has committed already to upholding it.

On the general principle that no serious government in charge of a global power would allow a free vote, one cannot help but note that the United States Senate and Congress are not bound to follow their Government's line. If the worlds' superpower can have a free vote on its tens of thousands of warheads, can the UK not have a free vote on replacing the system for delivering its 64?