Laffing all the way

It’s pretty difficult to pick on one of the many dishonesties that flew around the Tory leadership campaign. The more idiotic concerned EU Brexit – a bad idea made much worse by the layers of lies laid across it.  But an old friend raised his head, with that appealing combination – ideology pretending to be science. The bloody Laffer curve, now called ‘boosterism’: Boris Johnson thinks his proposed tax cuts won’t reduce government receipts. He says it, and Trump agrees.

I guess you’ll have heard of the idea that if we cut tax rates, the government will actually raise more tax revenue, because it will increase the willingness to work harder (and reduce the incentive to engage in elaborate tax avoidance measures).  The Laffer curve comes from a back-of-the-envelope drawing by Arthur Laffer himself (actually, back of a napkin).  You start with a graph that has tax rates, 0-100% on one axis and tax yield, say 0-100% of GNP (or sums of money), on the other. Your line starts with a 0% tax rate, which raises no tax (obviously).  Increase the tax rate, and you raise more tax.  Up shoots the line. However, it can’t go on forever.  Charging 100% tax will raise virtually no tax at all: why should anyone work or provide products for free ?  So there must be a turning point at which increasing tax rates actually reduces the money government gets, where the line linking rates to yield begins to flatten, and then turns.  And if we are at that level, reducing the rate will boost receipts.

It’s superficially appealing.  Like the left’s view that modern monetary theory, or catching multinationals, or both, mean we can spend what we like on public services, it offers the attractive option of spending more without paying more.  But what did your old Dad tell you about things that sound to be good to be true ? Yep, this is one of them.  Because:

  • the theory assumes that people have the ability to choose to work harder – more hours, I guess – for more pay. It would be interesting to know for how many people this is true.  Certainly not the vast bulk of employees.  Your police officer, nurse, road-mender, assembly line worker, bank clerk and so on can’t decide to work more hours. They work what is in their contract.  They may welcome some extra take-home pay, but they won’t be filling the government’s coffers.
    The subsidiary argument – that people in these positions will work harder to get a promotion or upgrade if the rewards are greater – is even flakier.  A firm may gain from its employees crawling over each other on the way to the top, but no extra tax will come from people working harder at a given grade or salary.  Promotions are rarely available, and if person A gets it, person B won’t. The tax-take will be unaffected by who pays it. And experience suggests promotion seeking behaviour is, hmm, sometimes less than optimal for output and the real economy.
  • Self-employed people, however, can sometimes work longer hours or more intensively. Many of them, of course, are already eager for more work.  They would like more clients right now, and this is unaffected by tax rates.  It is also possible that tax cuts could make them work less hard, as a hairdresser or taxi driver can make their target income, the income needed to keep the family going, with fewer hours of work.  In the jargon of economists, leisure becomes less costly, and less costly things are consumed in larger amounts.  But work becomes more lucrative , so how does it balance out ?  Research on taxi-drivers in USA suggested there is a modest increase in hours offered, but you then get into arguments about elasticity of supply.  Will a 5% tax cut release 5% more hourly earnings ? If its less, then the whole things doesn’t work.
    It’s sometimes claimed that a UK tax cut on top earners, from 50% to 45%, by the incoming 2010 Conservative administration raised receipts.  This particular rabbit has been run down its burrow. What happened when the taxation rate was cut was that financiers postponed their bonuses till the following tax year, creating an illusion of growth.
  • Much tax is not income tax. Laffer considerations just don’t apply to things like Council Tax. For some – airplane tax, insurance tax, tourist tax – it’s hard to believe there is a disincentive effect.  For others – fuel tax, alcohol, tobacco – the effects of tax rises are known and factored already into government decisions. In some cases – like the sugary drinks proposals – we actively want a disincentive effect.
  • A Laffer inspired tax cut would need to know accurately where the curve turns. The UK’s 98% tax on investment income in the 1970s was indeed an invitation to evasion, but that doesn’t mean that any reduction will be profitable. The accepted estimate by most economists for the turning point is around 70%.  Currently, no western income tax rate for the common worker comes anywhere near that.
  • Effects on tax avoidance are assumed by Laffer fans to be a strong part of their argument. Others are not so sure.  Here’s Wikipedia: Furthermore, the Laffer curve does not take explicitly into account the nature of the tax avoidance taking place. It is possible that if all producers are endowed with two survival factors in the market (ability to produce efficiently and ability to avoid tax), then the revenues raised under tax avoidance can be greater than without avoidance, and thus the Laffer curve maximum is found to be farther right than thought. The reason for this result is that if producers with low productive abilities (high production costs) tend to have strong avoidance abilities as well, a uniform tax on producers actually becomes a tax that discriminates on the ability to pay

The killer point is that tax cuts for incentive have been tried, and have failed.  Reagan tried it, and the budget deficit soared.  Trump is trying it, buoyed by the same predictions – “some proponents … even argued that its macroeconomic effects would be so large that the bill would actually increase revenues” – but, sadly, punished by the same result.  The latest predictable report can be found here.  The state of Kansas provides perhaps the most egregious case-study: its Republican legislators cut its taxes in 2012, promising ‘an adrenaline shot in the arm for the economy’[1].  Laffer himself assured them they would make more money that way.  They didn’t: of course they didn’t. The result was close to catastrophe.  Tax receipts fell $700m in the first year.  Road repairs stalled.  Health care in rural areas declined.  The courts ruled that the cuts to the schools system (some had to close one day a week, and subsidies to poorer areas were abolished) were alarming enough to be unconstitutional (the governor promptly tried to defund courts ruling on such issues). This makes the original mistake the more deeply worrying.  Instead of saying “we got it wrong – let’s return to the original tax base”, the right will say “the budget is out of balance – we can no longer afford the current level of public services.” First in line is usually social benefits: last will be defence. It will happen under Trump: watch this space.

So, an idea that doesn’t work, and will worsen public finances.  I’m far from the only person saying this – see another blog,  by Richard Murphy, a tax expert that the BBC invited to their studios but decided not to use.  It’s truly striking how unalarmed conservatives are by all this.  Centrist or radical government causing the same deficit by more generous social benefits, better schools and transport, shorter hospital waiting lists would get both barrels from party and press about fiscal irresponsibility. But deficits caused by tax cuts for the rich, not so much.

[1] An independent study showed that higher taxed districts had been growing faster than lower taxed districts in the previous 8 years.  But the Kansas Republicans, like Michael Gove, had had enough of experts.

God Save … Er, Who

A minor, but enduring point to make about the current Brexit farrago.  The current Parliamentary impasse has revealed a grave weakness in our political system – namely the inability of a constitutional monarchy to resolve a historic deadlock.  As we descend into chaos, the head of state is nowhere to be seen.  It is hard to believe that the heads of state in other countries – especially those with non-executive Presidents – would not have taken decisive action to knock heads together – or insist on a new election. An elected President would have the authority a hereditary monarchy lacks, and a personal mandate to neutralise the idea that there is a unanimous ‘will of the people’ for a tendentious policy.

As it is, we are left with an icon, not an actor.

Standing alone

I’m 73, coming up 74, which means I was born in the dying days of the Second World War. Remember this, when people talk of what “we” did in the 1939-45 conflict: no-one under the age of 90 actually did anything.  There are five people left who flew for the RAF in the Battle of Britain, and they’re all over 100 years old.  I mention this, because references to WW2 have become increasingly common and tendentious in the debate around Brexit.

I was brought up in a world that was marked by ‘the war’.  Up until 10, I lived in Berkshire – Wokingham, then a sleepy market town, now a commuter belt for London, with its own motorway spur and the largest Conservative majority for miles.  In 1945 Dad came home from the RAF.  He wasn’t a combatant: he was a station adjutant – senior administrator officer – for two Coastal Command squadrons, which meant he was based all around the country. Wales, Cornwall, Northern Ireland, Stornoway, anywhere that could ensure quick access to the Atlantic and its convoys.  Remembering the war wasn’t a big part of his life.  I think he was proud of what his colleagues had done – stopping the only democracy in Europe from being starved to death by U-boats full of volunteers – but not excessively so.  He never to my knowledge went to the British Legion club, or took part in November 11th march pasts: the battle dress only came out when he wanted to paint the hall or dig the garden.

When we moved to London in 1955, there were still bomb-sites, and families (like my Auntie Bet) still lived in prefabs. Primary school playgrounds were full of kids zooming round, Spitfire arms outstretched, shouting ‘yadda yadda yadda’ in imitation of machine guns we’d never heard. But on the whole, my impression was that society was moving on.  There was a skiffle group on the street corner, a Ford Anglia in the drive.

Nevertheless, I maintained an interest in the war, and especially the air war.  I can still tell a Handley Page Hampden from a Vickers Wellington, and have a few model aircraft in my study. Just to my right as I type, on the bookshelf, there is a Halifax model, with the same markings as Dad’s squadron. I’ve read most of the good histories of the conflict, and a few of the bad ones.  What I found out was the mess that is war, the mistakes alongside the gallantry, the reliance on allies and the role of luck. In the very area that concerned Dad, thousands of lives and dozens of ships could have been saved by letting the RAF use their long range bombers to escort convoys rather than plaster German civilians at enormous cost in lives and resource.  Another dodgy decision by Churchill, whose errors may not be mentioned.  In fact, as soon as the right decision was taken, the Battle of the Atlantic was effectively won. And as soon as that was won, we could get the troops and equipment from America that were needed to land armies on the European mainland, which was the only way to actually beat the Germans.

But I feel slightly ashamed of my interest in, and knowledge of, the war, because of the uses to which that conflict is put by British politicians and right-wing commentators.  Astonishingly, Theresa May’s tribute to the New Zealand mosque killings had a sentence about how New Zealand had ‘stood by us’ in the past.  As if shooting Muslim worshippers would be less problematic if NZ hadn’t provided Bomber Command crews. The idea of gallant little Britain beating the Nazis – and particularly the ‘standing alone’ meme – seems almost daily fare.  Even if this were true (it isn’t*), what possible relevance does it have to trade policy in the 21st century ?  And, of course, the insult to allies are never far away. The French, who suffered more casualties per day in 1940 than they did in the First World War, are routinely depicted as incompetent cowards: the fact that the British army was decisively defeated in 1940 is rarely covered, except as a brief prelude to coverage of Dunkirk (which was not  a triumph, but a retreat, a national humiliation: contrast the John Mills film of it with the recent Hollywood version.  The Battle of Britain was important because the German army needed air supremacy to cross the Channel; the Straits of Dover were as vital as Spitfires and Hurricanes.  A Tory MP tells us we didn’t get any post-war help from the Marshall Plan, when we got the biggest slice.  My daughter was solemnly told by North-Eastern friends that we had to leave the EU because the French and Germans wouldn’t stand by us in the next war.  70 years of NATO, gone in the whiff of a Daily Express editorial.

The TV is full of it.  In the last month, we’ve had documentaries about the Imperial War Museum, about the struggle against the V-bombs. Dad’s Army and The World At War are replayed endlessly.  We’ve had a documentary about the war films that ‘raised our morale’ in the post-war years, followed by “The Wooden Horse” (gallant British POWs outwit the Krauts again).  The old ladies who delivered military planes are dragged out time and again, wheel-chair bound RAF pilots are inserted in a two-seater Spitfire for one last flight.  Al Murray, a decent enough comedian, drives a jeep to Berlin.  Archaeology enthusiasts waft their metal detectors over old USAAF bases, and enthuse to the waiting cameras about a cap badge or spent bullet. What these programmes have in common is that they tell us nothing we don’t already know. It’s as if they are secular religious services, repeating the holy writ we’ve already heard a thousand times. It’s not all of WW2, or even all of the British experience of WW2.  There is little on the debacle of Singapore or Tobruk, the loss of the Royal Oak or the Prince of Wales, which would counter the triumphant narrative.  The recent publication of Fighting The People’s War shows the incompetence and lack of enthusiasm of many units of the British & Commonwealth armies.  By ignoring the losses and missed opportunities, and looking only at heroism and victory, the WW2 coverage is similar to the Hundred Years’ War documentaries – oodles of Agincourt bowmen, nothing on the battles that cost us all our French possessions.  TV viewers seem unaware we lost the Hundred Years’ War, as we lost the Crusades.

There is much history to learn, but we need more than the triumphalist WW2 narrative that has been covered again and again, to the exclusion of much else.  The economist and commentator Simon Wren-Lewis points out that the real WW2 generation voted against Brexit – it was the slightly less oldies brought up on war films and documentaries that voted to leave so heavily.  That generation actually doesn’t know real war: the Tory MP who refers to his army experience when he means Boy Scout exploits with the TA is typical.  There is virtually nothing on TV concerning – for example – the post-war Labour government and the creation of the welfare state.  For that matter, there is nothing about the Liberal government of 1906, and its use of taxes to get old age pensions past the Tories.  Suez ? Korea ? Economic policy under Thatcher ?  De-industrialization, globalization and robots ?  The growth of the threat to our environment ?  Nope, none of it. What we get is Dan Snow, or Tony Robinson, or Jeremy Vine walking backwards across D-Day beaches, or past Arnhem canals.

And whilst this carries on, the importance of confronting fascism and totalitarianism, the danger of anti-semitism, the role of international collaborations like the EU or NATO are ignored.  The distinguished historian Margaret Macmillan recently lectured and published a book on the uses and abuses of history.  We are seeing the abuses, right enough, all around us.

 

* we weren’t – the Commonwealth, Greece, Yugoslavia, the Czech and Polish airmen – the Canadian navy took over much of the Atlantic convoy work … plus the help & money of the USA.  The Indian army provided many of the troops fighting the Italians in East Africa at the time.  And, of course, the vast majority of the allied combat deaths in WW2 were suffered by Russia.

A Zionist moron writes

A bit late to lob into the anti-semitism debate – especially for someone (me) who left the Labour Party two years ago on this very issue.  Well, not too late as I had a go in February 2014, but I want to add some things that are rarely said but I find particularly irritating: things you dare not say on Twitter (where I am a Zionist moron, according to one correspondent)

(a) the idea that somehow anti-semitism is only of interest to Jews. This is part of identity politics, I guess – see also how when you say you support the NHS you have to say that someone in your family has had life saving treatment, or you’re against ham-fisted immigration policy because your gran came here from Jamaica. The idea that common decency is just a matter of, well, common decency and not self-interest seems so old-fashioned.

(b) “I’m not anti-Semitic, I’m anti-Zionist” as if that is an OK attitude, as if Jews aren’t allowed their own country, as if what the Middle East really needs right now is one less democracy and ten million more refugees. Of course the current Israeli government is an unpleasant bunch of chancers – welcome to the club. It’s not an area where the UK or the US can take any great moral stance. Netanyahu is appalling, but leads an elected government with a free press and independent judiciary. If I had the choice of which police force between Greece and Australia were to arrest and detain me, I think I’d choose Israel.

(c) why no-one sues these bastards.  If you say an MP’s views reflect the fact that they’re funded by Israel, when plainly they aren’t, it’s slanderous and you should be made to pay up.

(d) Why don’t the virtue brigade worry about genuinely appalling regimes (Sudan ?  Saudi Arabia ? Iran ? Turkey ? Hungary ? Russia ?  Any one of many African regimes – we are now getting up to 6m dead in Central Africa) ? Articles on the awfulness of mining cobalt in Central African Republic leave any injustice to Palestinians way, way behind. The idea of calling Israel ‘an apartheid state’ when it accords the same rights to Arab citizens as Jewish (or Christian, etc), rights including voting – is simply name-calling.

(e) if establishing a nation by exchange of populations is wrong, let’s abolish Pakistan and India, Poland and the Ukraine.  If taking over the lands of native people is the problem (historically iffy, I know, but let’s run with it), why not chase much more egregious cases (New Zealand, Australia, USA, anywhere in South America ?).  If there must be the right of return, why not restore all Jewish property in Arab lands ?

None of which you can say in public print, because of the misery of the trolls.  Twenty years ago, I thought antisemitism was dead, and the main issue was race and sex.  Jeez, was I wrong – it springs back up like the vampire at the end of the horror movie. Well, I hope it’s the end.

Funding for nerds

The decision has been taken to move the budget for funding London’s adult and further education to the Mayor of London. By itself, not a bad decision – we are an over-centralised country, and tying in the post school training and education system to locally accountable people seems sensible enough. The problem comes in that the responsibility is being moved to people who know nothing of the work in hand – because since 1992 the responsibility for commissioning and delivering further education has been national.  As a result, the management of the system gets into the hands of people who are attracted to all sorts of whizz-bang ideas, often ones that have been tried and failed or (worse) that have previously been proposed and rejected as being bad.

And that’s what we’ve got.  The Mayor has first of all top-sliced the budget to create new layers of bureaucrats (I’m not sure of the need for 18 third tier posts earning six figure salaries). We now have a proposal that the providers of education and training will be paid by results (an idea the Victorians tried and gave up). Not just results – employment outcomes.  Colleges and trainers will get more money if their students get into jobs.  This falls into the category of “ideas that sound clever but are in fact stupid”.  Here’s why.

Problem 1:  What happens when there is a variation in the overall national rate of unemployment ? Suppose, for example, Brexit leads to another 2008 style crash ?  Do we cut the budgets of every provider because their magical job outcome statistics have fallen ?

Problem 2: How do we find out whether students have got a job ? There is an enormous problem in the cities, where young adult students change addresses frequently.  In the past, responses to postcard or phone surveys have faced this problem, and also the problem of differential response. You’re more likely to respond if you have succeeded in finding a job you like.

Problem 3: And anyway, what is a job ?  How many hours a week (we’ve recently discovered that when the government boasts of higher employment figures, they count one hour a fortnight as a job) ? Paid ? Intern ? Community volunteer ?  And for how many weeks must it be held ?  Does it have to be in the course subject you were trained for – e.g. is someone who finishes a hairdressing course considered unemployed if they are working in retailing ? And if a plasterer is working as a brickie ?  Administrators might be able to give an answer – I’m not sure that thousands of surveyed ex-students will.

Problem 4: It is usually much easier to find the outcomes of an 18 year old who has finished an “A” level course at a school sixth form or sixth form college. They progress to higher education, which presumably ticks the right box as a positive outcome.  In my day, an institution could simply look up the UCAS print-out – I guess they still can.  So the proposed system will favour institutions which teach mostly stable, middle class kids.

Problem 5: The effect on providers.  Let us not fall into the trap of thinking the employment based funding will be new money: it won’t.  It’ll be scratched out of the existing budget.  So how is this employment-related element to be paid ? Will colleges get a lower fee – say 90% of cost – with the last 10% to be paid at some future date ? If that’s how it works, who will pay the teachers, buy the library books or fund the gas bill while they’re waiting for the money ?  Or perhaps trainers will get the full unit cost, but be subject to claw-back later.  This is open to the same question as before – so who will pay the costs of provision ? – adding an additional note of uncertainty.  Remember, these are not well-funded institutions with large, Oxbridge-style alumni funding; recent research showed post 16 funding for colleges and trainers had fallen by 17.5% in recent years. Think of the outrage this would cause in the NHS, in police or the army – or in schools.  The result will not surprise you.  Private trainers frequently collapse.  In the public sector, we have lost more than 100 colleges since incorporation and independence in 1992.  Only last month, a Yorkshire college had to be bailed out to the tune of £50m.  This really isn’t a good sector to use to try out fancy-Dan funding changes.

Problem 6: A job-based funding system will encourage low-skilled courses (cleaning, care) where providers can be pretty sure they can tick the boxes later, rather than high-skilled (journalism, accountancy). It is surely up to the student to choose what to study, as long as they know the realities of the job market.

Problem 7: A job-based funding system works against challenged students. Why enrol a kid with mental health difficulties when they will yield less than a less problematic entrant ? Who needs a student with second-language needs when they will probably do less well at interview later ?  Remember too that London has rich and poor areas – are we sure that such a funding system will be as fair to those in Newham and Brixton as those in Bromley and Richmond ?

Problem 8:  The invitation to corruption by over-claiming is substantial, especially for a small trainer working on the edge of their budget. Where similar schemes have been tried in the past, there have been corrupt or semi-corrupt examples.  For example, employing your own students for the prescribed period (say, six weeks in the office) has been known.  So, for that matter has blatant lying.  Are we sure that even the army of auditors that will be needed to run this system – many more than a simple payment for work done – will find out the wrong ‘uns ?

I could go on, but in the spirit of “I know what you’re against – what are you in favour of ?”, I have some suggestions.  A far better idea would be to fund providers on student numbers, weighted for expensive courses (e.g. construction) or special needs (e.g. learning difficulties or second languages).  Better still, do so on planned numbers – it is no more expensive to run a course for 18 computer students as for 12, no cheaper to train 12 nursery nurses than 15.  And do not penalize under-recruitment – outside posh universities, no provider turns away qualified applicants.  Paying for planned numbers has the advantage of keeping provision in place during recessions, rather than making (it happened) building teachers redundant only to find five years later we have no plumbers.  This doesn’t mean we ignore the labour market – volumes commissioned can be adjusted in following years in the light of vacancy and unemployment numbers.  And an appropriate allocation can be put to one side for non-vocational studies – the contact with arts, languages, politics, history that enriches lives, builds confidence and educates an electorate.  But, of course, this was the system we had in the late 1980s, under those inefficient local authorities, before the think-tanks and saloon-bar planners came to power.  So it can’t  right.  Can it ?

 

Who should form the next government ?

Our political life is in a terrible state.  It would be interesting to speculate how we got here – with a worthless, leaderless Conservative government whose Cabinet members fight like ferrets in a sack leading an unimpressive Labour opposition with a domestic policy based on nostalgia for the 1940s (nationalise, tax, free universities) and a foreign policy based on being anti-Israel, and not much else.  It isn’t possible to join either party and influence things locally, for each are in the hands of people who would be called extremists in any normal political world.

What therefore should the ordinary decent voter – the one who thought battles against fascism were over, who bases economic views on evidence not dogma, who though food banks and means tests were in the past, who believes in an efficient public sector and adequate welfare provision for the poor, but knows they are easier to achieve with a lively and prosperous private sector: what can such a person do in today’s politics ? I think it means selecting the best candidate locally, regardless of party.  If widely adopted, this would create a coalition of common sense in Westminster.  A movement could publish a list of essential moderates to support.

I say this in the knowledge that there are good people (pace Trump) in all parties, and also some dreadful ones.  Where I live, in Sheffield, we have a fine local member, and an absolute shit in the constituency next door. Within the Tory party, there must remain the moderate majority that supported Major, and voted Remain in the referendum.  They are keeping their heads down now, but they cannot all have disappeared.  So here is my proposal – that we list the characteristics we want in a member of Parliament, and see who fills them the best.  This might involve making some political decisions you’ve never faced before.  I’ve never voted Tory, but give me Nicky Morgan ahead of Jared O’Mara any time.  This is no time to be tribal.

What would such a checklist involve ?  Here’s my suggestions, and any additions, subtractions, or comments are welcome.  The main priority is evidence based policy, and new initiatives launched with clear and measurable objectives. That would enable us to assess progress in the following areas:

  • We need members who recognise that there are factors at work in our economy pushing the distribution of income and wealth in an unwelcome direction. So, set a target for greater economic equality, with sensible measures to get us there.  This will avoid the silly 95% ‘soak the rich’ taxation of the past, but include progressive income tax, and an inheritance tax (probably best based on recipients’ income).
  • An intelligent understanding of environmental issues. These are more important to our children and grandchildren than some microscopic shaving of the national debt, or restriction on productive immigrants.
  • Vigorous action on tax avoidance and evasion. Governments of all hues get enthusiastic about this now and again (Panama Papers, anyone ?), then the trail goes cold. A suggestion: we need at least as many officers working on this as on welfare fraud.
  • Public and private sector links are essential – for both sides – and so we must see the crude PFI of the past replaced, and public service potential and skills recreated. Read Marina Mazzucato if you don’t understand.
  • Staunch support for NATO, and a realistic attitude to Putin’s Russia. Other than that, keep us out of external entanglements apart from supporting democrats and refugees.
  • We are one of the most centralised states in the advanced world, and this cries out for strong regional government, with powers on education, transport and economic development. While that happens, we must seek a generation of local government, with a sensible land/property tax to provide the resources that have been stripped over the past decade.
  • Substantial, long term investment in transport infrastructure, with a priority to reducing private carbon based journeys. Our transport system at the moment is inadequate, and some parts (trans-Pennine roads, northern commuter rail) are a disgrace.  Actually, governments recognise this, but then do nothing (and obfuscate when challenged).  Any investment needs to look at ownership issues.  Public money must come back to those who put it in.
  • We need a unified state education system. There is little evidence that the patchwork of free schools, academy chains, faith schools, home schooling and so forth are any improvement on a well-supported and coherent state system.  There is plenty of evidence that selective schooling is worse.  Have you ever tried to explain our system to a foreigner ?
  • Recognition that the NHS is underfunded: any international comparison, or even assessment of the past ten years in the UK show plainly that it needs a substantial increase in money based on simplified organisation and evidence based medicine.
  • Attitude to national debt that respects the above priorities. It is not a major target that should dominate government policy (it was always a bit of a red herring, but useful to those who wanted to cut public spending anyway).  Of course government finance needs to be managed well, and on the whole spending lots of taxpayer money on interest payments to foreigners is not a good idea.  But the way to have a buoyant public finances is to have a buoyant economy, not cutting capital projects.  In passing, quantitative easing should be aimed at supporting the poor and our development needs, not providing cheap reserves for banks.  A recent BBC radio programme showed less than 1% of the cash created for quantitative easing went to productive investment: the bulk just drove up asset prices.
  • Vigorous action to reduce the influence of the rich and other undemocratic bodies on the democratic system. The right complains about George Soros, the left about the Murdochs.  They are both correct.    If corrective action means public funding political parties and making donation illegal, so be it.  There is work also to be done on the bias in the media, but that can wait.

Above all, (as George Orwell might say) break any of these rules rather than support someone awful.  This implies some idea of the moral strength and decency of our candidates.  We don’t want an expense-fiddler, or someone with an array of private businesses, or who makes appearances on the TV channels of dictators.  We need members who can bring us together, who will not blame the poor for being poor, expel unsupported teenagers to countries they’ve never seen or prevent NHS GPs from re-entering the country.  Sexists not welcome (this might mean raking through Twitter), nor anti-semites (especially those who look into the far distance and say “I’m against all racism”).

Well – could this be the basis of a national movement.  I have more than 100 Twitter followers, so plainly, in the words of the old song, as soon as this pub closes, the revolution starts.

State your case

Getting tired of being told the public sector/government does not create wealth, that can only be done by the private sector.  This is demonstrably untrue.  The Soviet Union ran for seventy years – maybe not very efficiently, but well enough to put the first man in space and beat the Nazis – on public sector production.  The reason the claim is made is basically to justify a low tax economy with minimal public services.

Still, it’s worth saying why the assertion is untrue, because it is lazily spouted (and left uncontested) in many discussion shows.  A business executive can trot it out as if it was a law of nature that no-one could dispute.  In fact state creates value in a number of ways:

  1. Simply providing law and order, property rights and defence creates wealth. Assets that can be defended in the courts and protected by police are worth more than those that can’t.  If you don’t think so, have a wander round the Congo basin to see what an economy does without that.  Welfare services that ensure a healthy population create efficient workers (and also, in passing, effective soldiers. Some of the push for a British welfare state came when it was found that about half our young men were too malnourished to carry a rifle in the Boer War).
  2. The state has a role in direct provision of many services, like education and health care. Now, these could be provided privately, and let’s not argue whether that would be better (I’ll spare you the rant about US health care or UK rail services). The truth is the bulk of UK education, health and many other services are provided by the state.  The very existence of private providers shows that the state is wealth providing, for the same activity often goes on in both sectors.  An example: I have two knees.  One had an NHS cartilage operation, the other a private cartilage operation.  Is it seriously maintained that one of these operations created wealth, but the other one didn’t ? Or that a kid doing “A” levels at Eton is getting wealth creation, but not at Slough Comp next door ?
  3. The state is often behind innovation. It is conventional to depict the contribution of the public sector as behind the times, a sluggard compared with the dynamism of a changing privately owned world.  Except for antibiotic drugs, discovered by a public sector researcher. Or the jet engine, where the state had to lick a failing private operation into shape. Or DNA & gene therapy, where the latest breakthroughs are announced from public hospital research departments, and universities. Or the internet.  Professor Mariana Mazzucato’s book “The Entrepreneurial State” shows how the new economy is based on support from the public sector.
  4. The state can add value by granting permissions – like adding planning permission to a tract of land, vastly increasing its worth; allocating frequencies for radio stations and mobile phone companies; mapping areas for oil & gas exploitation; or granting permission to a business merger, allowing companies to reduce costs and raise profits. This aspect of value adding activity is rarely mentioned, but is plainly true.  The point is to ensure that the nation benefits from this power to permit – which it does in the case of auctions of phone wavelengths, but is less obvious in the area of building planning. Sometimes supermarkets or developers undertake to add a feature of public value to their project – affordable housing, social facilities, better access roads – but it’s rarely done well.

The state is so important in the modern economy that big business puts a lot of effort into getting it to do what they want.  It’s a fallacy to believe that the new right want a minimal state.  They would like quite a big state, but one that benefits them, allocating rail tracks to them, asking them to run social services, schools, healthcare and prisons, buying their fighter-bombers, selling them postal services and water supply and training contracts.  James Galbraith (son of the great JK) dealt with this deliciously in “The Predatory State” – “a system where entire sectors have been built up to feast upon public systems built originally for public purposes”. George Monbiot sometimes argues that this process has gone so long and so deep that progressives need to think of abandoning the idea of the state as a knight riding to social rescue.

So, in summary, the state is an essential part of a functioning modern economy.  It is not a limp parasite, as the right suggests, nor a way of using some of the wealth created by others for social good, as wimpy centrists sometimes advocate.  Anyone running a modern country must find ways to use the power and wealth of the state, rather than seek to disempower it.