Debate of the day: George Osborne delivers his ‘mini-budget’ on Wednesday. Tell us what economic measures you think he should be announcing
George Osborne has a tough week coming up. Ahead of this Wednesday’s autumn statement, in which the chancellor will update the country on the government’s plans for the economy, Larry Elliott writes in the Guardian:
“Booed at the Olympics. Author of the worst received budget in memory. In charge when the economy plunged into its first double-dip recession since the 1970s. It has been a year to forget for George Osborne. And it is about to get worse.
The biggest week of the chancellor’s two and a half year stint at the Treasury began on Sunday with a dogged ‘no turning back’ performance on The Andrew Marr Show. It will culminate on Wednesday when he delivers his autumn statement.”
“It’s going to make acutely uncomfortable listening,” says Jeremy Warner in the Telegraph.
So what will Osborne announce? The Times (paywalled article) rounds up the various proposals being floated in the papers over the weekend, pointing to the political positioning going on behind the scenes.
“David Cameron has refused to sanction the new property taxes that Nick Clegg has pushed for, including any new council tax bands for properties over £1 million. In turn, Mr Clegg rejected a Tory proposal to take housing benefit away from under-25s. Liberal Democrats also appear to have fought off Tory pressure for a freeze on work-related benefits. Non-pensioner benefits are likely to be increased next year by about 1 per cent, below September’s benchmark 2.2 per cent inflation figure.”
What would you like to see in the chancellor’s autumn statement on Wednesday?
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As the Leveson proposals split the party leaders, newspapers have a final opportunity to prove a law is not needed
I hear Australia is nice at this time of the year. It must certainly be a more pleasant climate for Brian Leveson, who left for the other side of the world as soon as he had unveiled his opus about the British press, rather than stay here to listen to David Cameron lavish thanks on the Lord Justice for all his labours, speak of his boundless admiration for the report’s principles, before going on to explain that the prime minister had no intention of implementing the central proposal.
Imagine we were talking about a 16-month, £5m, government-commissioned inquiry into abuses perpetrated by doctors or lawyers or members of the armed forces. Imagine that this inquiry had catalogued repeated illegality, systematic breaches of the profession’s codes, the corruption of public officials, the compromising of political integrity and outrageous misconduct that had maimed innocent lives. Imagine that the report had arrived at the verdict that, while this profession mostly “serves the country well”, significant elements of it were “exercising unaccountable power”.
Imagine the prime minister who had set up that inquiry then responded that it was all very interesting, with much in it to commend, but he was going to park this report on the same dusty shelf that already groans with seven previous inquiries and allow this disgraced bunch one more chance to regulate themselves. We know what would be happening now. The newspapers would be monstering the prime minister as the most feeble creature ever to darken the door of Number 10. But since this is about the newspapers themselves, David Cameron has received some of the most adulatory headlines of his seven years as Tory leader. “Cam backs a free press,” cheers the Mirror, for once in full agreement with the Daily Mail, which salutes as “Cameron leads the fight for liberty”, and the Daily Telegraph, which hails “Cameron’s Stand For Freedom” and the Sun, which stands to “applaud David Cameron’s courage in resisting Lord Leveson”. The prime minister’s staffers are chuckling that he has generated some of his most glowing headlines by rejecting the cornerstone recommendation of his own inquiry.
If you can briefly suspend your cynicism about the whole thing and block your ears to the sound and fury that has accompanied the publication of Leveson, you’ll see a fairly broad consensus about what needs to be done. Across the political parties and in much of the press there is considerable agreement that the report’s principles are generally sound and many of the proposed remedies are sensible. The stark division is over whether it needs law – “statutory underpinning” in the rather hideous jargon – to put those principles into practice. As Nick Clegg rightly observed to MPs, it is an argument about “means” rather than “ends”. The battle is no less fierce for that. And no less infected with some base motivation, among both politicians and the press, about what best serves their interests. In rejecting any legislation, even along the modest lines proposed by the judge to guarantee the independence of the regulator and compliance with its judgments, there is both liberal Tory conviction and low calculation at work in the mind of David Cameron.
The prime minister took this position conscious that he would fail the “Milly Dowler test” that he originally set and later came to regret once its implications sank in. “We knew DC would be accused of betrayal,” says one of his senior aides and so he has been by many of the victims of press abuses. He’s taken a calibrated gamble that it is better to be attacked for breaking previous promises to implement Leveson than to engage in a protracted fight with the national press on an issue over which his own party is divided.
By taking the opposite view and backing the judge’s opinion that regulation will not be robust or durable without some statute, Ed Miliband and Nick Clegg expose themselves to being pilloried by the same newspapers, which is a bit of a risk, but not that large a one since those papers habitually either ignore or trash them anyway. Every leader builds a story in which he is the hero of his own narrative. For Mr Miliband, one of his defining moments was leading the charge against Rupert Murdoch and that spurs him to take the uncompromising stance on Leveson he talks to us about today. The Labour leader was a bit rash when he initially pledged himself to support the report’s proposals “in their entirety” before he could have possibly read all 1,987 pages of the heavy tome. He has now drawn back from that somewhat, joining those who had immediate reservations that the recommendations about the application of data protection legislation could have a chilling effect on investigative journalism in the public interest. But his overall position remains inflexible.
Nick Clegg’s stance is more nuanced as he tries to seek a solution that both guarantees the freedom of the press and the right of innocent people not to be wronged. Some found it remarkable that David Cameron’s statement to the Commons was followed by a conflicting one from the Lib Dem leader. I thought it was a mature way of handling the differences between the prime minister and his deputy. Better, surely, than sending out their spinners to brief against each other.
In theory, Mr Miliband and Mr Clegg have the numbers in Parliament to force through a press law against the opposition of the Conservative party. In practice, this is highly unlikely. The Labour and Lib Dem positions are similar, but not identical. The Lib Dems will probably not react well to the threat by the Labour leader to “pull the plug” on cross-party talks unless they very rapidly produce a legislative proposal. While Mr Miliband is convinced that nothing less than a new law will do, Mr Clegg is a bit more open to persuasion that it might not be absolutely necessary.
It was one thing for Mr Clegg to make a parallel statement to Mr Cameron. The coalition can survive that. It would be quite another for the Lib Dems to engage in detailed co-operation with Labour to try to push through legislation against the wishes of the prime minister and most Conservatives, the largest party in both the Commons and the government. I just don’t think that is going to happen and neither, privately, do senior Labour people.
So we will now see what one member of the cabinet calls a “beauty contest” between those who want a press law and those who don’t. I’m not sure that’s an appropriate metaphor given the contestants, but this is what he means. Those who think a statute is essential to prevent future abuses will need to show us what it would look like and how legislation could protect the innocent without compromising the freedom of the press. A battle is already being waged within government about the draft law being written inside the Department of the Culture, Media and Sport.
When Maria Miller, the culture secretary, gave interviews saying the purpose of this exercise was to show why a law wouldn’t work, I am told that Nick Clegg “got very heavy with her”. The Lib Dem leader has assured colleagues that he will be “crawling all over it” to ensure this is a proper attempt to draft a workable law. Yet within Number 10, it remains the view that they will publish a law simply to demonstrate why it shouldn’t be enacted. According to a senior member of the prime minister’s team: “When people have looked at all the pages, all the amendable clauses and all the appendices, they will see why David came to the conclusion that a press law is a bad idea.”
This deadlock among the politicians creates space for a case to be made by those who contend that it doesn’t require legislation to guarantee truly independent and rigorous regulation of the press. Newspapers themselves have the biggest incentive to prove that it can be done. If they are serious, they will have to do a lot better than the so-called Hunt-Black plan, authored by two Tory peers in a belated attempt to pre-empt statutory regulation, which comes nowhere near meeting the test because it would leave the invigilation of the press essentially in its own hands, a privilege enjoyed by no other power in society, including MPs. To have a hope of gaining the confidence of the politicians and the public, the press will have to do much, much better than offer a mildly beefed-up version of the miserably ineffective, hopelessly compromised, utterly discredited Press Complaints Commission.
Leveson rightly called for regulation that was independent of both proprietors and editors and politicians and government. He was correct again when he insisted that there has to be swift, affordable and meaningful redress for those who have been wronged and penalties with bite for those who transgress. The British press has been given what may be a very last opportunity to show that it doesn’t need a law to stop sections of Panorama behaving as if they were beyond the law.
All of us who work in newspapers should be acutely conscious that this is a chance that many of our fellow citizens think is utterly undeserved.
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They need to be seen as kinder than the Tories, safer with the economy than Labour and more radical than either
It is a paradox that may or may not console the Lib Dems. Britain does not love its coalition – in fact, many members of the coalition do not much like it themselves – but another hung parliament is a quite plausible outcome of the next general election.
Senior Labour figures are already half-thinking about a scenario in which they are the biggest party in the Commons, but fall short of securing a parliamentary majority. When members of the shadow cabinet flirtatiously suggest that there are Lib Dems that they could do business with, they are trying to destabilise the coalition, but it is more than just mischief-making. Few senior Labour people believe that their current opinion poll leads are a reliable indicator of a solid Labour victory at the next election. Many Conservatives rant and rail about being forced to share power with the Lib Dems. But the more thoughtful and electorally numerate among them wonder how they can win on their own next time and don’t find many answers that are convincing. In both the bigger parties, forward-looking people can see themselves once again seeking the support of the Lib Dems. Providing, of course, that there are enough Lib Dem MPs left to form a coalition.
Our opinion poll today underlines the punishing price in lost popularity that they have paid for power. Nor does the poll offer an easy answer to the party about how it might rebuild its support between now and its next rendezvous with the electorate. In the darker corners of their conference in Brighton, there will be Lib Dems conjecturing whether a change of leader might do the trick. There may even be a few who openly advocate replacing Nick Clegg with someone who might be able to retrieve some lost support. But our poll also suggests that the most frequently mentioned someone else – Vince Cable – would not be a miracle cure for his party.
Rather than waste their time on the leadership question, speculation about which is probably at least a year premature, the Lib Dems would be better off discussing where they want to go. To do that, it would be helpful first to understand how they got here. Richard Reeves, until recently the party’s director of strategy, offers some typically candid, illuminating and provocative thoughts about that in a pamphlet for Demos called “A Liberal Inside”. He writes: “The impact of the Liberal Democrats on government has been strong and positive. But the impact of government on the Liberal Democrats has been devastating.”
He is right to contend that some of that devastation was an inevitable consequence of the translation from a party of protest into one of power. That was going to be painful for the Lib Dems in almost any circumstances. Even in benign economic times, junior partners in coalition governments almost always lose support the moment they move into office. The Lib Dems’ experience in power has also demonstrated just how hard it is to govern as a liberal, especially when hitched to a party with very different impulses. Some of their most cherished objectives, such as parliamentary reform, have been left as roadkill by the juggernauts of Tory and Labour hostility.
Damage has also been self-inflicted. They have made some serious mistakes in power, some of which had their origins in errors they made in opposition. The slump in their support has been exacerbated because of the contradiction between how they generally presented themselves for most of the time that Tony Blair and Gordon Brown were in office, as a leftish alternative to Labour, and what they did next, which was to go into government with the Conservatives. In the run-up to the 2010 election, Mr Clegg made an effort to alter both the party’s policies and public perceptions of where they sat on the political spectrum, but the social democratic wing of his party resisted.
One result, which has had consequences that no one anticipated, was the reckless pledge about tuition fees, the subject of the pre-conference mea culpa by Mr Clegg. The tuition fees policy was a classic opposition pledge, designed to scoop up votes from students without putting much, if any, thought into what would happen if the Lib Dems were ever required to deliver on it. That much their leader has now basically admitted. Some of his advisers counselled against the apology on the grounds that it would be ridiculed and taken as a sign of his desperation – both of which it has been – though none of them seems to have anticipated that it would also spawn musical spoofs on the internet. Mr Clegg has embraced the viral mockery, largely because he didn’t have much choice. He hopes that he may eventually get some credit for manning up to a mistake and, by doing so, win more of a hearing for the things that the Lib Dems have achieved in government.
It is important to be clear, because some of the headlines haven’t been, about what he was apologising for. He did not say sorry for breaking the pledge, but for making it in the first place. And the reason they did that was because the Lib Dems were hoping to outbid Labour for votes on the left.
That is not going to work for the Lib Dems next time, not least because it would be so incredible. I cannot see a profitable future for the Lib Dems as another social democratic party. Britain already has a well-established social democratic party which is larger than the Lib Dems. It is called the Labour party. Having spent five years governing with the Conservatives, the Lib Dems would be deservedly ridiculed if they went into the 2015 election presenting themselves as some sort of vaguely leftish alternative to Ed Miliband. Nor is there going to be much joy for the Lib Dems in trying to compete with the Tories on terrain which is naturally Conservative. In private discussions within the coalition, Tory strategists sometimes ask their Lib Dem counterparts why the party persists in its liberal approach to immigration and its pro-Europeanism when these positions run against the grain of a lot of public opinion. True enough; they do. But there remains an important slice of the electorate that has generous instincts on immigration and still believes Britain’s future should be as an engaged member of the EU. If the Lib Dems are not going to represent them, no one else will.
As the Lib Dems have discovered, it is a challenge sustaining a distinctive identity as the junior partner in a coalition. But in some ways, their rivals are helping them carve out some potential electoral niches. It is a long time since I heard David Cameron describe himself as a “liberal Tory”. It is also a long time since he claimed that a government led by him would be “the greenest government ever”. The shrivelling of liberal and green Toryism creates space for the Lib Dems to be clearly differentiated from their frenemies in the coalition.
In his pamphlet, Mr Reeves makes a strong case that, to be true to their historical traditions and to stand a chance of clawing back some support by the time of the next election, their future has to be as a radical liberal party, distinct in its values and philosophy from both Labour and the Tories, fighting the tribalism of conservatives of both left and right, presenting itself as more compassionate than the Conservatives and more trustworthy with the nation’s finances than Labour, and a more reliable guardian of civil liberties than either. His central, positive theme would be the radical redistribution of power away from failed institutions, whether they be Westminster or the banks.
Convincingly presented, this prospectus might indeed help the party to rebuild its support. Voters who are instinctively liberal anyway could find their way back to the most liberal of the parties. For more negatively minded members of the electorate, the Lib Dems, for all the mistakes they have made in office, could be the lesser of three evils. Then there are voters who could back the Lib Dems because they don’t trust either Labour or the Conservatives to govern on their own.
One problem is that those voters may be too thinly spread across the country to secure all that many seats. Another – the problem they failed to solve at the last election – is how you write an honest manifesto of your liberalism when you know and the voters know that, if you do get to see power again, it will be shared with someone else.
The Lib Dems’ biggest mistake at the last election was not the tuition fees pledge, but failing to be clear with the electorate that coalition inevitably means compromise and compromise entails not being able to deliver previous promises. The answer, perhaps, is for their next manifesto to tell us how seriously its commitments should be taken. Signed-in-blood pledges would be ones they vow to stick by come hell, high water and coalition negotiations. Pencil pledges would give fair warning that these commitments were subject to being erased. The final category would be invisible ink pledges, liable to disappear during the first hour of any power-sharing negotiations with other parties. That’s something for the Lib Dems to think about. In fact, given that another hung parliament is quite likely, it is something for all the parties to think about.
Unless the prime minister deals with the wreckers in his party, the Lib Dems will scupper boundary changes
In the honeymoon days, when the atmosphere within the coalition was so light and breezy that David Cameron and Nick Clegg could be amused by the differences between their parties, they shared a private joke. The Lib Dems’ attachment to elaborate consultation and exhaustive internal democracy was like “a kibbutz”. In contrast, the Tories were “Napoleonic” in their apparent willingness to follow unquestioningly orders handed down from above.
As it has turned out, they have both been proved wrong. So has everyone else who started off with the assumption that there would be a big strain on the coalition from the contrast between obedient, realistic Tories who understood that power involves compromises and difficult, naive Lib Dems who would insist on putting their precious principles ahead of the deals necessary to make coalition government work. Sure, there has been that contrast – but, by and large, it is the Lib Dems who have been the grownups of the coalition and the Tories who have been the juveniles.
The Lib Dems have understood the fundamental premise of coalition: that a marriage between two parties can be sustained only if both partners are prepared to sacrifice their own preferences for the greater cause. Mr Clegg’s party has been astonishingly disciplined over the past two years. To a fault, they have often put aside their own desires and interests for the sake of coalition unity. They have held their noses and voted through welfare cuts, immigration caps, tuition fees and a health plan which was not even in the coalition agreement. With one or two exceptions, their ministers have been stalwart defenders of the coalition and their backbenchers have refrained from badmouthing it.
For this, they have paid a punishing price. At local elections, Lib Dem councillors have been slaughtered. On their current opinion poll rating, they have lost more than half of the support they received at the last general election. They have virtually no friends in the press. Their leader has been flayed to within an inch of his political life.
Coalition has generally been much easier for the Conservatives. As the bigger party, they have been asked to make far fewer compromises. It is the snarl of the rancorous tendency on the Tory backbenches that David Cameron has allowed the yellow tail to wag the blue dog, but there is scant evidence to support their cries of betrayal.
Sayeeda Warsi, the Tory party co-chairman, can cheerfully, and pretty much accurately, boast that the government is implementing 80% of the Conservative manifesto. Where the coalition has pursued Lib Dem ideas, such as tax cuts directed at those on low incomes or the pupil premium for schools in deprived areas, Tories have not had to grit their teeth. They have taken up these policies because they liked them. Yet a significant section of the Conservative party was never happy with coalition from the off and these rejectionists have been growing in noise and numbers as time has gone on. Unlike the Lib Dems, they refuse to accept the fundamental basis of coalition: that of give and take on both sides.
This contrast came to a vivid head last week when the government had to beat its humiliating retreat over Lords reform – legislation shaped by a Tory minister and approved by the whole cabinet – because almost 100 Tory MPs defied their whips. This is a debacle with several consequences, none of them good for the health of the coalition. Tory MPs now think they know that when they see the whites of the prime minister’s eyes, they can make him blink. The Lib Dems now know that when David Cameron promises he can deliver the Conservative party, his word cannot be relied on.
“Cameron didn’t work anything like hard enough,” says one senior Lib Dem. “He’s had two years to think about how he was going to do this and failed.” Mr Clegg felt obliged to accede to the prime minister’s plea to be given more time to work on the Tory rebels, but there is little confidence among senior Lib Dems that Mr Cameron will be able win over enough of the dissenters to secure a timetable for the legislation when parliament returns in the autumn.
Whatever you may think of these proposals for the Lords, the Lib Dems burn with an entirely understandable resentment that they have repeatedly done their duty by the coalition by swallowing a lot of things they don’t like, but a blocking minority of Conservative MPs simply will not reciprocate when it comes to something that Lib Dems care about. From my conversations with very senior Lib Dems I have absolutely no doubt of this: if Lords reform does not progress in September, the Lib Dems will respond by killing the redrawing of constituency boundaries which are estimated to be worth an extra dozen to 20 seats to the Tories at the next general election. Moreover, they will veto the boundary changes as an explicit act of payback for Tory sabotage of Lords reform. It won’t be a case of Nick Clegg quietly licensing his backbenchers and peers to work with Labour to vote down the boundary changes. All Lib Dems, ministers included, will vote against.
More than once, and in terms no one could misunderstand, Mr Clegg has warned Mr Cameron that the Lib Dems cannot go into the next election having delivered all the constitutional changes which suit the Tories and not secure a single reform hoped for by the Lib Dems. As one Lib Dem minister puts it: “What will it say about the whole idea of coalition government if the junior partner always gets the shit end of the bargain?”
The Conservatives attach enormous importance to the small haul of extra seats they expect to gain from these boundary changes – a sign of their lack of confidence that they can win the next election. If the Lib Dems vote down the boundary changes, some Conservatives predict that the anger among Tories will be so intense that it will be the death knell of this government. So it is possible that the coalition will collapse in poisonous acrimony and Ed Miliband will be prime minister by Christmas.
On the spectrum of probabilities, this remains an unlikely scenario. Mr Cameron and Mr Clegg have a mutual interest in keeping the show on the road if only for fear of what would happen to their parties at an early election triggered by a squabble over the constitution which would look arcane and self-indulgent to the vast majority of the public. Both men would have a hard time explaining to voters why Lords reform and bagging a few extra seats in the Commons for the Tories were more important to them than sticking to their original promise to work together for a full parliament to fix the economy.
So the coalition will probably endure. The question is in what sort of state. Tomorrow Mr Cameron and Mr Clegg will try to reinvest their partnership with some dignity by making one of their joint appearances, on this occasion to launch their latest ideas for trying to stimulate the economy through housing and other infrastructure projects.
They will never recapture the early romance of coalition when their claimed willingness to put aside party differences to tackle a national economic emergency captivated many voters and deeply alarmed senior people in the Labour party. The sweet scent of the rose garden has evaporated for good. The best they can probably now aim for is to demonstrate that there is still some residual shared purpose to this endeavour.
For Mr Clegg and his party, the long-term point of being in coalition was to prove to Britain that it could be a stable, effective and attractive form of government. A descent into a permanent condition of seething acrimony, punctuated by furious shouting matches and parliamentary defeats, will discredit the very idea of coalition government. Voters will not be minded to repeat the experience, which won’t be good for Lib Dem hopes of being in office again.
Quite a lot of the Tory party would be secretly – and not so secretly – delighted if this coalition gave a bad name to the whole notion of coalitions. David Cameron has a decision to make: is he one of them? It was his initiative which led to the formation of the coalition. When he made his bold offer to the Lib Dems on the morning after the last election, it was the most creative gambit of his political career, the best response to the circumstances and highly popular with much of the electorate. Failure to make it work will not say good things about his judgment or abilities.
So the prime minister has some hard thinking to do over the summer. Is he ready to take ownership of the coalition? Can he confront those in his party who want to wreck the government with the determination now necessary to save it? Will he tell the hard truths to the Conservative party about the necessary compromises of sharing power?
If he is not able or willing to do that, then no one else can rescue the coalition.
The coalition has been weakened. Cameron-Clegg relations have been strained. The loss of shared purpose is palpable
Forced to make a choice about its priorities, the coalition government placed the importance of its own survival above the importance of its bill to reform the House of Lords. By withdrawing the timetabling or programme motion which would have secured the Lords reform bill’s passage through the Commons but which faced certain defeat, the government buckled. The original bill passed by 460-124. But the government lost face – especially on the Tory side where 91 voted against the bill – and may have lost Lords reform too.
For ministers, however, the alternative was simply too dangerous to contemplate. If the programme motion had been put to the vote and lost, as seemed certain, the coalition might have unravelled with unexpected speed. A rapid outbreak of hostilities between the coalition parties was the talk of the Commons.
In the end, that was a price neither the Conservatives nor the Liberal Democrats were prepared to pay. The coalition therefore lives to fight another day. Another can has been kicked down another road. Politically, that was the only pragmatic outcome on offer.
Yet no one who regards reform of the House of Lords as historic unfinished business can be comfortable with this outcome. Labour claimed a victory for parliament, but that was only true in the sense that something had to give. In all other respects there was no cause for parliamentary pride. The withdrawal of the programme motion greatly increases the likelihood that Nick Clegg’s bill will run into the sands . It is not dead yet. But the events of the past 48 hours have hugely reduced its chances of making it onto the statute book. To put it as neutrally as possible, that is another lost opportunity, after a century and more of waiting. True, the passing of the reform bill’s passing on second reading on Tuesday night means that Lords reform is still theoretically in play. That perhaps offers something to build on if Labour is serious. Yet any building depends on a flexibility of approach and a willingness to compromise that have been conspicuously absent from this week’s manoeuvrings. The conservatives on both sides of the Commons tasted blood. It is hard to see much sign of a change there.
An autumn timetabling motion is promised. Maybe it will meet the objections of those who opposed the motion that was withdrawn. It might in theory succeed where the old one failed. But the Conservative rebels are not interested in making Lords reform easier for Mr Clegg; on the contrary, the rebellion will embolden them. Meanwhile Labour, while still professing commitment to reform, finds it far easier to unite behind opposition towards anything proposed by the coalition than behind reform of an upper house of whose influence many Labour MPs are afraid, even while many of them hope eventually to see out their days there at the taxpayers’ expense. The truth is that Labour talks the talk about Lords reform but cannot deliver.
This week’s events are likely to have large consequences. Politically, the coalition has been weakened. Relationships between David Cameron and Mr Clegg have been strained. The loss of shared purpose across the coalition is palpable. The Tory revolt will only strengthen the belief on the Labour benches that their oppositionism is bearing fruit.
But the faltering on Lords reform has a wider effect too. “We both want a Britain in which our political system is looked at with admiration, not anger,” wrote Mr Cameron and Mr Clegg in their coalition agreement in 2010. Two years later, there is not much sign of progress. A Hansard Society survey showed increased levels of disengagement and even outright rejection of party politics. Last weekend, a YouGov poll found 64% of the public believe that British politicians have neither ethics nor principles. A grand total of 1% think politicians behave in a very principled and ethical way. Nothing that has happened this week is likely to turn that tide. On the contrary, these events suggest it is running stronger than ever.
The London Stock Exchange is to launch a new FTSE Employee Share Ownership Index
In a speech on Wednesday at a summit on employee ownership at the Institute of Chartered Accountants in England and Wales, deputy prime minister Nick Clegg is expected to announce the establishment of an Institute for Employee Ownership.
According to Mr Clegg, the institute will be “(a) professional body, offering accreditation to its members. A body whose very existence will give this business model more of a presence – a bit more swagger – in our corporate world.”
Mr Clegg’s speech coincides with the publication of the final report and recommendations from the review of employee ownership carried out by the government’s independent advisor on the issue, Graeme Nuttall, which was launched in January.
The deputy prime minister will say that the government will ‘take forward’ proposals from Mr Nuttall for “off-the-shelf toolkits” for employee-owned companies. Mr Clegg describes the toolkits as “DIY packs to build the John Lewis Economy… employee ownership in a box.”
In his speech, Mr Clegg commits the government to looking at a new ‘right to request’ for employees, and will issue a call for evidence from business and employees on how a right to request could work.
He will also announce new UK figures on the employee owned business sector from Co-operatives UK. The figures show that the UK employee-owned sector has grown at a rate of 1.1%, compared to 0.7% for the economy as a whole. Ed Mayo, secretary general of Co-operatives UK, said the figures add to the growing body of evidence that employees with an ownership stake are more engaged and make for more resilient businesses.
Mr Clegg’s remarks will be accompanied by an announcement from the London Stock Exchange of a new FTSE Employee Share Ownership Index.
Xavier Rolet, chief executive of the London Stock Exchange Group plc will say: “A new FTSE Employee Share Ownership Index will highlight some of the key benefits of encouraging employees to take an active interest in the future success of the companies in which they work. This new FTSE index will help raise awareness of how significant employee equity ownership can be advantageous for both companies and employees. London Stock Exchange Group welcomes today’s report and is delighted to be contributing to a greater understanding of how employee share ownership can help deliver growth. As part of our group, FTSE will work with Graeme Nuttall and his team to develop the Employee Share Ownership index as a fully fledged benchmark.”
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Both the weather and the political mood in May 2012 are now a world away from the sunnier climes and promises of May 2010
Both the weather and the political mood in May 2012 are now a world away from the sunnier climes and blithe promises of May 2010. And a tractor factory in Basildon is a world away from the Downing Street rose garden too. Two years into government, the innocence of the new coalition has long gone, stuff has happened, economic conditions are even tougher, times are more troubled and public opinion is more impatient, as the results in last week’s local elections showed. All this explains why David Cameron and Nick Clegg chose an Essex factory as the backdrop for their latest joint press conference. They wanted to make the point that they understand the voters’ pain and know what needs to be done to get the British economy back on its feet. But their speeches and their answers did not prove that they do. If this was a renewal of vows, it was based more on faith than on fact.
Times have changed all the same. Two years ago, there was no practical alternative to the Conservative-Liberal Democrat coalition. The Cameron-Clegg experiment enjoyed initial public goodwill. In its early months the coalition also won a crucial argument, persuading public opinion that Labour had overspent as tax incomes began to dwindle, necessitating coalition cuts in public programmes which could no longer be sustained. But that was then, not now. Now, public opinion is impatient with the coalition. Voters believe the government is doing a bad job, that its policies are harming ordinary people and that the economy is getting worse not better. Not surprisingly, voters have kicked the coalition parties hard in the ballot box, just as they have done in France and Greece. The voters may not be very clear about what they want to put in its place, and about how they hope any alternative might be achieved – see France and Greece again – but the shift in mood in this country against coalition economic policy is nevertheless impossible to miss.
Mr Cameron and Mr Clegg tried to respond to that shift in Basildon. The economy, now as in 2010, was the core of their message. But they had remarkably little new to say about it, given the subject’s overwhelming importance and the degree to which incumbent politicians’ fates, including their own, are tied to it. Compared with two years ago, the blame for Britain’s woes was now laid more at Europe’s door than at Labour’s, perhaps. There was more talk about the need to rebalance the economy than there would have been in 2010 – though precious little to prove that anything significant is actually taking place. But the heart of the message was that nothing must or will change. The government’s fundamental belief that we can cut our way to economic health was reasserted again and again by both men. They appeared to have heard the voters’ pain but to be incapable of responding to it. That famous line from Bob Dylan’s Ballad of a Thin Man came increasingly to mind the longer that the prime minister and his deputy spoke. Something is happening here, and you don’t know what it is, do you, Mr Jones?
To be fair to Messrs Cameron and Clegg, no one else entirely knows what is happening either. The coalition is in a dilemma that many other governments currently share. Do nothing different, and the likelihood is that the voters will take their revenge in due course. Do everything different, and it would be an admission of failure from which neither party could recover. So the coalition plods on, neither effective nor popular, but hoping for better times.
Some in each party may dream of going their own radically different ways, but the reality, not least of the parliamentary numbers, is that they are bound together. Labour under Ed Miliband is making few mistakes, but most members of both coalition parties know that, for now at least, they are the only game in town. Active and effective internal opposition is very slight, even in the Tory party. The reality is that times are grim, coalition is difficult, the economy is all and there are three years to go.
Nick Clegg (The centre will hold, 7 May) sets out three lessons for the government from the local elections – and I agree with him. But he is also leader of the Liberal Democrats and his lesson for the party focused on more political reform, rather than any change in economic strategy. Yet in London we took a hammering in large part because we are not seen as offering economic light at the end of the austerity tunnel. Fiscal responsibility alone will not save Lib Dem seats at the next general election. We need to be campaigning now – in and outside government – for a massive house-building programme, more small business lending, and jobs and skills for young people in the new environmental industries.
London assembly member 2002-12
• Mr Clegg left me underwhelmed. Having signed a pledge to students on tuition fees, the honourable thing to have done was to abstain on the vote. What does he think his broken pledge did to students’ and young people’s faith in politicians and democracy? When David Cameron broke his promise to remain neutral on the AV referendum, then Clegg should have announced his party was leaving the coalition. When his party is decimated at the next election, he will doubtless be given a seat in the (still) unreformed House of Lords.
• Nick Clegg still doesn’t get it. The Lib Dems’ collusion in the destruction of the NHS unites people of all political persuasions and none. I trust they will never be forgiven.
Stourbridge, West Midlands
Nick Clegg’s proposed amendments do not safeguard the NHS against privatisation
The last time a proposition was put to the country with such a slippery argument, the Liberal Democrats made a defiant stand, and said “not in our name”. The health and social care bill is not the Iraq war, but the claimed rationale has changed almost as often. At first the big idea was “promoting competition”, which was soon softened into “real choice“, before giving way to some fuzzier notion of devolving power to professionals – who, by the way, mostly bitterly oppose the whole thing.
The Lib Dems have undoubtedly extracted a few worthwhile concessions on the detail during the bill’s turbulent voyage through parliament. But as the final crunch votes loom in the Lords, there is still utter confusion as to the central purpose. The Conservative health secretary, Andrew Lansley, continues to claim that his bill will enable competitive forces to reign as they do in “any other sector“, likening the future NHS to the innovative consumer goods markets which gave rise to the MP3 player. The deputy prime minister, in contrast, has just written to all his own parliamentarians to insist that the bill’s real agenda is instead preventing private providers from cleaning up at the expense of public hospitals. Ahead of Tuesday’s deliberations on the all-important competition chapter, anxious crossbench and Lib Dem peers must decide whose interpretation to trust – the man who penned the original plans, or the man who initially signed off on these without having read them.
Nick Clegg’s credibility here is not helped by what happened during the bill’s unprecedented pause. No 10 set up the Field review to get itself out of the fix, and when it duly served up fudge Mr Clegg hailed a decisive victory against privatisation. But it was no such thing, and such anxieties persisted in the Lords that the government was forced to bring in dozens of last-minute amendments, some dealing with the foundational role of the secretary of state in the system. Many more changes would be required, however, to turn this legislation into something that any peer committed to the NHS ought to countenance voting for.
Mr Clegg himself suggested five fresh tweaks to persuade the sceptical Shirley Williams to co-sign his pro-bill letter. Some are useful – such as ditching the provision that would drag the marketopian competition commission into play. Others are undeliverable – the prospect of the NHS being ensnared in European competition law is threatened by a complex mix of statute and case law; it cannot be prevented by shoving in a standalone clause proclaiming that this will not come to pass. Others again simply miss the point, such as the promised “safeguards” against abuse of the private patient income cap, when that cap is being raised sixteen-fold, from an average of around 3% of hospital revenue up to 49%.
All told, it is plain that these amendments do not add up to a thoroughgoing safeguard against privatisation. That can be seen by delving into the detail of the bill: it continues to place an unbalanced duty on the regulator to stamp out anti-competitive practices, but not practices which undercut co-operation; and it has been slyly revised to shift the gung-ho order to marketise away from that regulator (where it was so controversial) and shunted on to commissioners instead. But the same verdict is reached if you take a step back and survey the bigger picture. Just as corporate scandals engulf workfare, some excellent reporting by the Mail on Sunday has revealed McKinsey’s extraordinary schmoozing of health service bigwigs. Doctors, meanwhile, scratch their heads anxiously when they spot high-paid business consultants stepping into modestly renumerated hospital management roles.
One need not be a conspiracy theorist to suspect ulterior motives here. Fears of corporate takeover chided the traditionally apolitical Royal College of Physicians to lurch towards opposition last week. The envisaged future of the NHS may be replete with thrilling opportunities for business services sector, but that is precisely why parliamentarians – and patients – ought to be worried.
The Lib Dem leader’s call for help for low earners will probably be heeded, but Tories won’t concede a wealth tax
There are not many people in George Osborne’s Treasury who would admit to any nostalgia for the days when Gordon Brown was king of the great counting house. For the current chancellor and his under-strappers, Mr Brown is the man on whom everything must be blamed as the author of “Labour’s mess”. Among the Treasury officials who once genuflected to the Scotsman when he was in his pomp, mention of their old boss leads to some embarrassed shuffling of feet. Whitehall now sees it as an era when too many clever civil servants who ought to have known better succumbed to the delusion that they had abolished the boom-bust cycle and were seduced by the fantasy that an ever-expanding banking sector was a wholly good thing.
But among George Osborne’s friends, I do occasionally hear sighs of envy for Mr Brown’s way of doing things, especially how he did budgets. These he would brood about with a very tight circle of trusties – a group composed of himself, Ed Balls and, er, well, that was usually about it. He would delay communicating a lot of the critical decisions until the very last moment, sometimes because he was struggling to make up his mind and always because he simply didn’t want to share what he had decided with anyone else.
He would often leave the prime minister in the dark about what was going to be in the budget until the night before. By which time it was too late for Tony Blair to do anything except impotently protest. The rest of his senior colleagues were usually lucky if they got to hear what was going to be in a Brown budget until the cabinet meeting just before he went over to the Commons. This approach did not make him many friends, but it did greatly augment his power. As George Osborne prepares for his third budget in a few weeks’ time, one of the chancellor’s inner circle muses: “I can certainly see advantages to Brown’s way of doing things.”
Coalition means elaborate negotiation before a budget. The chancellor is a hugely powerful man, but that power is not untrammelled. The Lib Dems have to have their say and sometimes they even have to get their way. There have already been several meetings of the “Quad” – the gang of four composed of Mr Cameron, Mr Clegg, Mr Osborne and the chancellor’s Lib Dem deputy, Danny Alexander – devoted to haggling about it.
The weeks of negotiation that now proceed a coalition budget can make the Treasury a bit paranoid about leaks. The more people who have to be involved, the more likely it is that internal rows will bubble up into the media. This year, though, it is too late to worry about that because we already know one of the biggest areas of contention about this forthcoming budget. It has been blatantly leaked by a senior Lib Dem. We can even name this Lib Dem because he did his leaking in front of TV cameras. Nick Clegg told us a few weeks ago that he wants the budget’s priority to be tax cuts for low earners – “taking people out of tax altogether” in his phrase.
Mr Clegg is not arguing for a dramatic change of coalition policy: raising the threshold before income tax bites to £10,000 is there in the coalition agreement as a goal to be achieved by the end of this parliament. He is pressing for an acceleration in its implementation. When he first went public with this demand, the chancellor’s people were sniffy, some Tories were rather cross and others were simply baffled by Mr Clegg’s motives. Treasury officials familiar with the budget bargaining say that it remains an “open question” whether or not the deputy prime minister will get what he wants. If George Osborne does not satisfy the Lib Dem leader’s demand – or at least meet him halfway – we will be in “humiliating rebuff for Clegg” territory, not a place where the Lib Dems want to be.
I understand why Mr Clegg took this risk. Lib Dems think it is a good and popular policy, which is both pro-aspiration and pro-fairness, but that not enough voters know about it. Even if they do know, they don’t associate the policy with the Lib Dems. More will appreciate it if there is some noise around it, even if that clatter is a bit of a row with the Tories. The Lib Dems may also have guessed that Mr Osborne, who will need something to cheer up someone, was already minded to do more for low earners. So they hoped to get credit for pushing him in a direction in which he was willing to go.
Linked to their desire for tax cuts for the less affluent is Lib Dem pressure for more to be contributed by the rich through some form of tax on wealth. There is certainly a big argument to be had about whom, what and how we tax. It is also long overdue. This is not a question that Britain has seriously debated for years.
Consumption is now taxed even more steeply since Mr Osborne jacked the rate of VAT up to 20%. It is especially severe on certain “evils” – the unholy trinity of fags, booze and driving. As for tax on income, this is relatively heavy for many of what it is politically fashionable to call “the squeezed middle”. You do not have to be earning a great fortune before the state takes away more than half of every extra pound you earn. In the current tax year, earnings of more than £35,000 a year are taxed at a marginal rate of more than 50% (income tax at 40% plus 12% national insurance). If you do earn a great fortune, you probably pay a considerably lower tax rate because there remain many devious, but legal, ways for the super-rich to avoid paying the tax rates imposed on the less affluent.
In combination, consumption and income taxes take from most Britons a considerable portion of whatever they can earn. By contrast, accumulated wealth gets off lightly. The maximum rate of capital gains tax is 28%. A wealth tax, which is a feature of revenue raising in quite a lot of advanced economies similar to our own, just does not exist in Britain.
By pushing for a shift in emphasis, Nick Clegg’s party is returning to a classically liberal position. John Stuart Mill, the great liberal philosopher of the 19th century, argued for taxes on income to be set on the low side. But he saw the taxation of wealth as a generally good thing. He especially advocated a high tax on inheritance as a way of “restraining the accumulation of large fortunes in the hands of those who have not earned them by exertion”.
Many of his arguments about tax remain rather compelling today. There is a strong case for shifting the balance between taxes on income, which can stifle initiative and the willingness to work, and taxes on assets, especially when wealth is not doing anything very productive. The meritocratic position – and all politicians of every stripe at least claim to be meritocrats – would favour lower income taxes and higher rates on unearned wealth.
Labour is having a think in this area and it needs to be a hard one. If Ed Miliband is to put plausible flesh on the bones of his promises to help the “squeezed middle”, he will have to show where the money would come from. The Lib Dems already have a policy. This is their proposed mansion tax, an extra levy on anyone owning a home worth £2m or more. There are some obvious attractions to taxing property as a way of asking for more from those with accumulated wealth. Property is a visible symbol of affluence and it is fairly simple and efficient to tax. Even the most cunning accountant finds it hard to hide a house.
Against that, the Lib Dem mansion tax is crude. It doesn’t allow for the higher cost of servicing a mortgage in pricier parts of the country. There is not much fairness in someone who owns 10 properties worth £1m each escaping the tax while it is levied on another person with just one house worth £2m. And a mansion tax would levy only one form of wealth.
Still, this could be a useful starting point for a proper debate about income taxes versus wealth taxes. Could be, but I fear won’t be. Most Tories loathe the idea of a mansion tax, which would ask for more from people who generally live in constituencies with Conservative MPs. Only a few, rare Tories see the merit in other forms of taxes on wealth, such as higher inheritance taxes, to fund cuts in income tax.
So my budget prediction, for what it is worth, is that there will be some modest tax relief for lower earners. That will save Nick Clegg’s face. George Osborne probably had a mind to do it anyway, and a chancellor, even in austere times, can usually find a bit of spare cash down the back of the Treasury’s sofa or by fiddling with his figures. There will also be the usual blowhard rhetoric about cracking down on avoidance by the super-rich, but there will not be a wealth tax. Not, at any rate, so long as the chancellor is a Conservative.