UK Election 1: A sensible start from the Liberal Democrats

Battle has now been joined in earnest for our general election in May, and it looks as though we're in for a very boring four months.  So far the Conservatives have boomed  that Labour is not to be trusted on the economy (which is perfectly true, but not in the way they mean) and Labour shrieks  that the Tories are not to be trusted on the National Health Service (NHS) which is perfectly true by any definition - after all the Tories specifically promised in 2010 that the NHS was "safe in their hands" and that there would be "no top down reorganisation."

Whether the much publicised difficulties of the past week (a private firm pulling out of its contract to run a hospital, several hospitals unable to meet their four hour "waiting times" targets  in their accident and emergency departments) are the result of the inappropriate and ill-timed top down re-organisation  or the funding freeze when the demands on the service are increasing, or both, or something else, is for experts to argue.  Whatever the reason(s) the fact remains that the NHS is not meeting our expectations, and the evidence is that "privatisation" is making it less rather than more effective.

Predictably Labour claims that the NHS is in "crisis."  This is nonsense, typical of the hyperbolic campaigning style which puts people off politics.  The truth is that the NHS is a highly efficient and cost-effective means of caring for the nation's health, but it is getting a bit frayed at the edges, partly because our  expectations are increasing, and partly because  people like me are living longer (a jolly good thing in my view)  but tend to have an increasing number of "health issues" which we'd like dealt with.

Amid the furore Nick Clegg has come up with a balanced and reasonable proposal.  In summary he suggests that we should increase the current funding of the NHS by £8bn in three stages by 2020-21 by:

• continuing each year the additional £2bn announced in the recent autumn statement for 2015-16;
• adding a further £1bn per year financed by (i) capping pension tax relief for the wealthiest (long overdue in my view), (ii)  raising dividend tax to the level of income tax and, (iii) scrapping the "shares for rights " scheme intruded by the Tories, which apparently costs £100m a year);
• from 2017-18, increasing health spending in line with growth in the economy.

I admit to being not at all t sure how that adds up £8bn, but I find the  proposal welcome for two reasons:

1.  it not only admits that extra money is necessary, but also explains how it is to be raised, and
2.  it acknowledges that funding for at least this part of the state is to increase along with the growth of the economy.  This is in stark contrast to Tory proposals to continue cutting back the size of the state.

So well done, Nick, and continue to put forward balanced and costed proposals.  The signs are that much of the media has now written us off as an irrelevance, but I am confident that if we avoid the shrillness of the others and are sensible with what we offer we shall gain a hearing.  We may even reap an electoral reward.

Orwell's "Newspeak" has arrived, and few of us notice.

My first appointment as a teacher was in the late 50s, to a school in Northolt, outer London.  There discipline was maintained  by the award to any pupil who offended against the school's ethos of a "black mark."  Recipients of these were made to stand up in one of the daily  assemblies and were were given a public lambasting by our somewhat ferocious Scottish headmaster. I don't recall any corresponding "white mark" for achievements of which the school approved, but maybe there was one.

However, when in the early 70 I took over my post as deputy headmaster of Port Moresby High School, then in the Australian sphere of influence  a more liberal regime operated. Although misdeeds were noted by a "demerit," good works received  a "credit."  I worked on this system by urging the "demeriters" in private to adopt more virtuous paths, but praising the "top credit winners" publicly in the weekly assembly.  I like to think that this was instrumental in improving the "tone" of the school.

In his very readable book "How to Speak Money"* novelist and critic John Lanchester, who claims not to be an economist, attempts to unravel the language of economics for the general reader. To facilitate this he has invented the word "reversification:" a way in which economists in general, but monetarists is particular, turn the meaning of a word into its opposite in order to make the concept it describes more acceptable.

To me the most striking example is the use of reversification to make the concept of debt respectable.  Debt used to be a "black mark" or "demerit":  a condition entered into by only the most feckless of people.  In extreme cases, they were put into prisons.  A common form of debt in my youth was called "hire purchase" and my parents were very proud of the fact that, to furnish their home, they never descended  to this disreputable device.  "Every stick was paid for."

So to make debt respectable we have changed its name to "credit"  What was laudable at Port Moresby High School is now the superficially  respectable condition which, in what turned out to be its  unsustainable private form, brought  the western economic system to a halt  in the mid 2000s.  And if, in Britain, the system is recovering, it is largely the consequence of the accumulation of yet more private debt based on yet another housing boom, the very conditions which brought the system down in the first place.

John Lanchester's book* is a excellent read, even for those who think they know quite a lot  about economics.

* How to Speak Money, pub Faber and Faber, 2014

Even the rich may need an emergency ambulance.

I have just ordered, but not yet received, a book by Professor Sir John Hills entitled: "Good Times, Bad times: The Welfare Myth of Them and Us". According to the review that prompted me to buy the book, Hills's argument is that our welfare state is not, as the tabloids and Tories pretend, a system by which a virtuous tax-paying majority subsidise a growing minority of layabouts in a "life style choice" (David Cameron) of idleness.  Rather, "Britain's welfare state remains a resource for the great majority, not just the feckless few."

This weekend's leaked proposal that the government intends to introduce slower emergency ambulance responses is a case in point.  Even the rich have heart attacks, road accidents and all the manifold perils and dangers to which the flesh is heir. As far as I know BUPA runs no emergency ambulance service, nor trains any paramedics,  so cutting back on that bit of the state's provision could be just as inconvenient for the wealthy  as for the rest of us.

This illustration came too late for Hills's book, but, as the review points out, not just the very wealthy but so called "Middle Britain" (that is, most of us) benefit considerably from such as tax subsidies for the purchase of houses and the tax-subsidised  pensions which on average we receive for longer than those at the bottom of the pile.  And then there's the heart bypasses which may be beyond the capacity of the private hospitals, and the mental and physicals disabilities for which the private medical sector makes little provision, but which affect indiscriminately all sorts and conditions of men (and women and children) regardless of wealth.

Hence not just the poorest but all of us should be fighting to maintain and indeed improve the level of state services, and fiercely resisting the proposed further cuts.

I look forward to reading the book and having my natural prejudices reinforced by facts.

There is an alternative, but it's not on offer.

All three British political parties have now set out their economic policies for the election next May.  A BBC  commentator summarised them as follows:

Conservatives: continue with drastic cuts and austerity in order to achieve a budget surplus by the end of the next parliament.
Labour:  continue with cuts, but not quite so drastic, so as to eliminate the so-called structural deficit  by the end of the next parliament, but also spend on investment in the infrastructure.
Liberal Democrat: more like the Tories in the short run, but more like Labour in the long run.

That is, of course, a crude and unfriendly description if the Liberal Democrat position  - I hate our being defined by what the other two are doing - but that's what he said and this is above all an honest blog.

Unfortunately no one has the guts offer the alternative, a Keynesian stimulation of the economy, the effectiveness of which is authenticated by both economic theory and practical history, and supported by a pantheon of economists and informed commentators.

First, we need to challenge the assumption that "the deficit" is the most important issue in British politics and that to eliminate it is an urgent requirement  The government's spending deficit is largely an internal matter:  it is borrowing money from one group of Britons wearing one set of hats ( in pension funds, insurance companies, other financial institutions, unit trusts, holders of National Savings,   those  rich or bold enough not to bother with National Savings but who buy government securities directly.), and paid back by much the same people as taxpayers.  So we pay as taxpayers and receive as pensioners etc.  The only part of government debt is that could be a problem is that fraction of it that is held overseas.

In my view, a far greater potential economic  problem is the Balance of Payments deficit. That is all owed overseas  and a supposed deficit (revised figures showed that it wasn't) brought down the Wilson Government in the 1970 election. Today  a very real deficit is  far larger and therefore more serious, but hardly gets a mention.

And there are other suggestions for "top of the bill." In an article in this weekend's Observer Bill Keegan takes the view that our most serious economic problem that of low productivity.

However, economics, though important (not least because I've earned my living teaching it) is not the be-all and end-all.  My own view is that the most serious problem facing our society today is growing inequality.  We are in grave danger of  becoming not one society but two: perhaps we already are.  This situation really does need urgent attention before it becomes dangerous, but it seems will hardly feature in the election campaign, other than to further blame and victimise the chief sufferers from the recession, that bottom 20%, while those who caused the recession continue to flourish.

Be that as it may, there is growing recognition that the main reason for the now returning deterioration of the government's finances is not profligate spending but the fall in tax revenues through continued business stagnation, unemployment , zero-hours contracts, part-time and low paid work, and that the way to restore balance is by a classic Keynesian stimulus which, along with growing prosperity, would increase the tax-take.

Not only is this increasingly understood but it would actual be popular.  In his blog Mainly Macro Oxford professor Simon Wren-Lewis quotes a You-Gov poll which shows that in response to the question :

Thinking about how the next government handles the issue of Britain's deficit, which of the following best reflects your view?

A.    The next government should prioritise reducing the deficit, mainly through making cuts to spending on public services

B.    The next government should prioritise reducing the deficit, mainly through increasing the level of taxation

C.   The next government should not prioritise reducing the deficit, and should spend more on public services or cutting taxes to try and promote growth instead.

only 27% supported Option A (broadly the Tory policy), 25% Option B, (broadly Labour) but a whopping 48% Option C, which ought to be the Liberal Democrat policy.


So come on, Liberal Democrat manifesto writers:  the policies of Keynes are not only right, but almost twice as popular as continued misguided, damaging  and unnecessary cuts in the  public services which make our society civilised.  Stop aping the outdated and failed neoliberal consensus and give us something to campaign on which is worthy of the traditions of our party.   Do that and we could win!

Pep talk for Liberal Democrat canvassers

About the only perk I get as Hon. President of my local Liberal Democrat Party is to give a little talk at each AGM.

Here's the  gist of last week's:

1.  We have absolutely nothing to apologise for in going into coalition with the Tories.   No principles have been abandoned: rather the reverse. As a party we are passionate advocates of proportional representation, which means that balanced (not "hung") parliaments are both likely and logical, and coalitions inevitable.  Natural justice demands that the party with the largest number of seats should make the first offer to the minority part(ies) and in 2010 it was the Tories.  As Simon Hughes put it: "You have to play the cards the electorate deals," and that is what we did.  In any case, the alternative of a partnership with Labour was not on:
a) because, although Gordon Brown was keen, Labour's tribal big beasts, with Jack Straw and David Blunkett to the fore, were dead against, like boys in the playground taking their bat home if the game couldn't be played according to their rules, and;
b) with the support of the nationalists and the one Green a "rainbow coalition" with Labour would have and a majority of only one.  On average three MPs die each year so such a coalition government would have been fighting for its survival at every by-election.

 It also follows that we believe a coalition legitimised by a majority of the voters provides a better government than a single party supported by only a minority.  Even Polly Toynbee, no longer our friend, has admitted  (Guardian 07/10/14) that without us the Tories would probably have:

       1.    Scrapped the Human Rights Act.

       2.    Further emasculated the BBC.

       3.    Held a fire sale of the NHS.

       4.    Maybe “Brexit” from the EU.

       5.    Made state funded schools available for private profit.     

2.  The gibe that Liberal Democrat leaders will "sacrifice any principle for a  whiff of power and a ministerial car" is risible.   No one with that as their priority would dream of joining the Liberal Democrats.  Ours is the hard road.  Ming Campbell fought five times before he won his seat.  Nick Clegg was virtually offered a safe Tory seat by Leon Brittan, his boss when working for the European Commission, but turned it down because he, Nick, was first and foremost a Liberal.  Those whose first  priority is the trappings of power join Labour or the Tories.      

3.  So far I've counted 23 progressive achievements which would probably not have happened if Liberal Democrats hadn't been in government.  They are:

1. The fixed-term parliament.
2. The triple lock on pensions
3. Raising of the income tax threshold.
4. Pupil premium.
5. Shared parental leave.
6. Increased provision for child-care costs.
7. Detention of immigrant children stopped.
8. Free school meals for infants in first three years.
9. Loans to part-time students.
10. Protection of ECHR retained.
11. ID cards blocked.
12. Civil liberties defended against Theresa May’s advances.
13. Target for 0.7% of GDP to aid retained.
14. Green investment bank.
15. More powers for Welsh Assembly.
16. Proposals for increase in minimum wage.
17. Employers’ NICs for under- 21s discontinued.
18. Vince Cable’s call for limits to executive bonuses.
19. Equal treatment for mental health patients.
20. Tied pub landlords freed to buy from any supplier (per Greg Mulholland)
21. £200m to encourage and make roads safer for cyclists. 
22. £10m to promote electoral registration of students (rather than pensioners on the Costa del Sol).
23. Unlike our government partners, we were and are unequivocally "the party of IN" on Europe, with the only leader prepared to take on Nigel Farage "head to head."

Some of these are more important that others.  In my view the achievement of a fixed term parliament is the most important constitutional advance since the extension of the suffrage  to women on the same terms as men in 1928, and £200m for making roads safer for cyclists is small beer compared with and extra £15bn for motorists, but it's better than nothing.

 It's not been the government we'd have preferred, but we're proudly confident of what we have achieved with our mere 57 MPs, compared with the Tories' 300+.

So off we go, to face the electorate "with courage high and hearts aglow."

Osborne the closet Keynesian

So the country has money to burn and the government is going to splash out with an extra £2bn for the NHS,  for road improvement schemes including a tunnel under Stone Henge, for flood defences, railways in the north  and Lord only knows what else.  All this is possible, in Chancellor George Osborne's very words, because the economy is now "on course for prosperity."

But, just a minute, the economy was growing, when he took over the reigns from Labour and 2010.  And not only that, but the deficit was then falling as well: it's rising again now.  Had Osborne introduced this public expenditure stimulation at the time, the recovery could well have continued, real rather than zero-hour-contract jobs created, taxation revenues increased through rising prosperity and, most importantly, additional misery for the weakest in our society avoided.

Instead.Osborne put the  recovery he inherited  into reverse by cutting government expenditure and raising taxes (VAT from 15% to 20%) and we've endured four years of stagnation until a low-wage quasi-recovery fuelled by increasing private debt and yet another housing boom has finally emerged.

In fact Osborne has abused the the classic Keynesian mechanisms to achieve his political ends.    In 2010 he deliberately used the existence of a deficit at an allegedly dangerous level (it wasn't) to achieve the Tory goal of shrinking the state*.  Now he is using Keynesian expansion in order to win next May's election.

Integrity and devotion to the welfare of the nation are not descriptions which readily.spring to mind.

* For further and better particulars on this see http://mainlymacro.blogspot.co.uk/2014/11/destroying-state-is-no-accident.html

Privatisation of East Coast Mainline service: why no outrage?

Our  East Coast Main Line Railway is somewhat misnamed since most of it doesn't go anywhere near the coast.  Certainly the bit I use, Leeds to London King's Cross and back, doesn't.

However, its geographical position is not the cause of the present outrage, or, rather, the lack of any.  Like the rest of dear old British Rail it was taken out of public ownership and privatised by the Tories in 1993.  Since then two private companies, GNER and National Express, have had to pull out because they couldn't make enough profit, and the running of trains on the route had to be taken back into public ownership  in 2009.

Since then the trains have been operated by Directly Owned Railways (DOR), a public body responsible to the Department of Transport.  They seem from my experience, albeit I'm an infrequent user, to have made a thoroughly  good job of it.  Trains to and  from Leeds are every half  hour rather than the hourly service the private companies offered, they are punctual, and the fares, if you book early enough, are very reasonable.

And they also make a profit, which is handed over to the exchequer.

So on the splendid maxim of "if it  ain't broke, don't fix it"  why not leave things as they are?

But no, our ideologically fixated Tory government has insisted that it be re-privatised, and last week a consortium of two private companies, Sir Richard Branson's "Virgin" and Brian Souter's "Stagecoach," were  awarded the franchise.  DOR was not even allowed to enter a bid  - so much for fairness and the level playing-fields of Eton.

There was a time when the Tories accused Labour of being soaked in ideology whilst they, the Tories were pragmatic.  Now it seems they are tarred with the same brush, with a complete lack of evidence to support their case.

What I cannot understand is why this outrageous decision has passed almost unnoticed.  We seem to have lost our will to react.

For further and better particulars of the failure of Mrs Thatcher's supposed  triumph of privatisation read James Meek's excellent book: "Private Island: why Britain now belongs to someone else," - but only if you have no problem with high blood-pressure.  Most bizarrely, many of the utilities privatised by Mrs Thatcher to encourage eider share ownership have been renationalised, but not by the British government.  Our electricity supplies are now largely owned by EDF, an arm of the French government, and, back to railways,  Arriva UK Trains is actually owned by the German government's Deutches Bahn.  You couldn't make it up. a chunk of our railways is now owned