Goldilocks, Labour and the Liberal Democrats

If you are a Labour supporter just now you are entitled to feel pretty depressed. Not as bad as a Liberal Democrat, true, but you might be forgiven for fearing that Labour is unlikely to be re-elected for a generation. Labour people are asking themselves, as they always do after a bad defeat, whether the party lost because it was too left wing or because it was not left wing enough. Such a debate completely destroyed the party in the 1980s and early 90s, until John Smith and Tony Blair cam riding over the horizon. I think this may now be an outdated question. The problem for Labour cannot be put in such simple terms. The truth is that in Scotland Labour was not left wing enough, while in much of England it was too left wing. In London, and the big cities, on the other hand, it seemed to get it just about right. It was a kind of Goldilocks scenario. The trouble is , while it was just right in some places, it was certainly not in others. So, if Labour were to move to a centrist position, it may well retain much of its support in the cities and large Northern towns, but it will lose Scotland for the foreseeable future and will not make much impact in most of England. So why so little impact in England? One part of the answer is that the centre-left anti-Conservative vote is divided between three parties, Labour, Liberal Democrat and Green. By now you should be beginning to see where this is leading. There simply seems no point in having BOTH a Labour Party and a Liberal Democrat Party. Remember that one of the reasons the Social Democrat Party, a predecessor of the Liberal Democrats, came into existence in 1981 (it lasted until 1988 when the Liberals joined it) was because Labour had moved so far to the left. The centre ground was suddenly vacant. Now that Labour looks like moving back towards the centre, those aspects of the Liberal Democrats that date back to the old SDP days of the 80s become irrelevant. Look at the last set of party manifestos and there is precious little between that of Labour and that of the Liberal Democrats. OK the Lib Dems are a little more concerned about rights, democracy, decentralisation of power and constitutional reform than Labour, but on economic and social issues they look almost identical. Labour can’t win overall from the left. We all know that. I am suggesting it can’t win from the centre. So the case for a merger is compelling. Let’s call it the Social Democratic Labour Party. I know, I know, that name has been taken by the SDLP in Northern Ireland, but, come to think of it, they could join the new party (policies are very similar). If you are a Conservative, therefore, I think you have nothing to fear from Labour moving to the centre, unless the Lib Dems disappear altogether, that is (effectively the same as a merger). The prospect of a centre-left party competing against a centre-right party looks far more attractive for British democracy than the current fragmentation. We would also have less to fear from PR under this scenario, with two parties dominating, possibly forming stable coalitions with small parties. Don’t rule it out. A Labour –Lib Dem merger may, as Goldilocks once said, be just right

Bad capitalism, good capitalism

I am very much looking forward to reading Steve Hilton’s book 'More Human' when it appears at the end of this week. His interview with Evan Davis recently was extremely revealing and I shared Evan’s feeling that he sounded more of a socialist than a conservative, which is what he professes to be. It seems that Hilton is arguing that we are sleepwalking into a world where we will find ourselves increasingly exploited by large organisations, in both the public and private sectors and that, further, there is a kind of ‘power elite’ of leaders who are economically and socially cohesive and who share concentrated power between them. Anyway, more will be revealed when the book appears. The interview also chimed with the common current criticism of Labour’s election campaign, suggesting it was too anti-business. It brought to mind a blog I wrote some time ago when I suggested something similar. At the heart of my concern is that we should be able to distinguish between ‘good capitalism’ and ‘bad capitalism’. Bad capitalism for me consists of companies who are exploiting their market power to exploit stakeholders. The stakeholders include their own workers, their customers, the community, taxpayers, sometimes their suppliers and even in some cases their own shareholders. The kind of industries where this kind of exploitation is common include energy companies, oil companies, supermarket chains, phone companies, insurance firms and, of course, the banks, the daddies of them all. I’d include, incidentally the growth of what might be called secondary market companies that operate on the net and increasingly hoard control over bookings for various services. These include the secondary events ticket market, hotel and holiday booking firms and now even restaurant reservation services. I am not suggesting these kinds of firms exploit all their stakeholders, but that they do exploit a substantial proportion of them. In addition, it has to be said that these industries are often characterised by barriers to entry so that they are able to maintain their market power against competition. Often, of course, these barriers are natural (e.g. the huge investment needed to enter a market, or the established reputation of existing firms), but sometimes they are manipulative, such as supermarket groups hoarding sites for possible development by competitors, threats to suppliers who consider serving competitors (which is illegal but difficult to detect), cartel practices such as banks colluding to control markets, secondary ticket firms buying up all available tickets, predatory pricing (reducing price temporarily to undercut new entrants, then raising prices when the competitors have been deterred) and a variety of other anti-competitive practices. We all know about the behaviour of banks in exploiting customers and rigging markets, but there are many other examples, such as energy companies remaining opaque over pricing structures (rail companies and airlines do the same). Complex pricing systems have the effect of making customers pay higher prices than they need to unless they can find their way through the small print. Many of us will recognise the problem of trying to find the best return on our cash savings or the best annuity deal. It can become a full time occupation! Insurance companies are notorious for small print – literally. Tax avoidance and evasion has now been well documented. It is not victimless. This exploits those taxpayers who cannot or do not wish to engage in such practices. The list goes on and on. Recently joined is the Premier Football League whose vast and ever burgeoning income does not find its way into the hands of supporters, exhausted by ever rising ticket prices that take advantage of their loyalty, but instead finds its way to greedy players and their agents who earn lottery win sums every week but continue to beg for more. Good capitalism is simply the opposite. I would offer John Lewis as an example, but there are clearly others. I think Prêt à Manger has good practices as do some internet tech companies. These firms pay decent wages and have strong career development systems, are transparent to their customers and do recognise competition as a natural feature of capitalism. Good capitalism also consists of thousands of small firms who lack market power and so have to look after their customers and offer quality, who are unable to keep out competition and who are unable to hide their true profits in the interests of tax avoidance. They do not rig markets, they do not exploit their customers through complicated price structures or they would have no customers at all, and they cannot erect barriers to entry. It may be true that smaller firms pay low wages as there is so much pressure on their cost base and they may have to offer zero hours contracts but that is inevitable in such industries, but as full employment looms even these firms will be forced to pay good wages or face staff shortages. Now back to politics. The implication of all this is that I would like to see policy makers, of any party, recognise the difference between good and bad capitalism. It should not be a case of being pro or anti business, but pro good capitalists and anti bad capitalists. This should impact upon such issues as corporate taxation, market regulation, tax enforcement, consumer protection and labour practice legislation. If we turn to ideology, there has been an ideological consensus in the politics of the developed world since the 1980s that says that the state should not intervene in free markets as this has a distorting effect. Underpinning this is a simplistic belief that runs: ‘free market good, state intervention bad.’ Further, the answer to all the problems of modern capitalism – of the kind I have described above – is posited as more competition, not state intervention. Time and again such policies have failed. The banks are the classic example, as are energy companies. The problem here seems simple to me to be this: When a market fails, as many of the ones I describe have done, the answer cannot simply be more competition. Even if more competition can be created, a market prone to failing will continue to do so. Markets that work in the interests of stakeholders are self-evidently desirable, but those that are failing cannot be treated in the same way. What I would like to see is that the state should intervene when a market is failing and has been failing despite vain attempts to revive it. The problem of distorting the market by state intervention disappears when the market has already been distorted by the market power of large companies, often acting as cartels. So, why not a state bank to compete on a fair basis with the others but which is not exploitive? Why not have local authorities building affordable houses for sale to its deserving residents when private constructors constantly renege on their promises? Why not a state railway corporation offering transparent prices? Some of this will indeed require international co-operation as governments remain petrified that, if they regulate businesses, they will take their offices and their investment elsewhere. This is another reason why UK membership of the EU is so vital. The EU has a decent record of controlling monopoly power. It can do still more. So let’s see Labour as not anti-business, let them be pro good business.

Elective dictatorship revisited

The conservatives rightly claim a great victory in the election. They are, after all, back in government on their own. But did they really win? After all they only put on 0.8% from their proportion of the vote in 2010. They also benefited, it can be argued, not from Labour’s discomfort, but from the collapse of Liberal Democrat voting. It is true that they had to mount two might hurdles. One was the rise of Ukip and the other was the low expectations of their performance suggested by opinion polls. But they have been elected on only 36% of the vote. No one else has a right to govern, of course, so the rules of this game are being played out as normal. The Conservatives are the legitimate government for sure. But now let us consider the context of Lord Hailsham’s accusation that British government is an elective dictatorship. He made the remark in his Dimbleby lecture in 1976. At the time there was a Labour government with a wafer thin majority (Hailsham was a leading Conservative). He was bemoaning the fact that, as long as the government has a Commons majority, any majority, it can pass any legislation it wishes as long as the party whips do their work efficiently. His comments would therefore apply equally well to 2015. A Majority of 12 and yet the Conservative government is claiming the authority to carry out some pretty radical reforms, notably the abolition of the Human Rights Act and a law against organisations which threaten British values in someone’s judgment, greater devolution to Scotland and to English cities and deep cuts in some benefits. All this on 36% approval of the British electorate on a two thirds turnout. Do the Maths and we discover that only 24% of the adult population voted Conservative. Put another way, 76% did not vote Conservative. Then we can add the situation in Scotland where even David Cameron had accepted that his legitimacy is blown. Yet they legally claim a mandate to do virtually anything. This is not a partisan point. The same would apply to any other party, and even more so a minority government. Now on the EU there is to be a referendum – probably. Here legitimacy of the decision will be certain, a long as there is a decent turnout, that is. But in the current situation we really must ask ourselves whether there is a legitimate majority supporting the government’s programme. In particular should there be a referendum on the repeal of the HRA? True its introduction was never entrenched by a referendum (looking back, perhaps it ought to have been), but can a government, an elective dictatorship if you like, legitimately make such a constitutional change on the basis of a 12 seat majority and 36% of the popular vote.

The Milibands

Yes Steve Buckley, the Labour field of contenders does not look great. I heard today, rather second hand, I know, but...... David M is rather kicking his heels in the States and wants to be back. It is quite possible to be party leader and not an MP as Nicola proves. Who knows? There will be a vacant seat before long, no doubt, maybe Ed's?!!! I have also suggested in a tweet that maybe Labour and the Lib Dems should consider merging. Look at the manifestos; there is not much between them. Old Labour tribalists wouldn't like it, nor would traditional liberals, but time maybe to start with a clean page. At the moment the centre-left vote is being split. Roll on the new liberal,social alliance! As for David Cameron, I underestimated him and his advisers. They rather got it right and clearly succeeded in attracting defecting Lib Dem voters more effectively than Labour. On the other hand the Conservative share only rose by 0.8% since 2010. Enough, though, to bring in 25 more seats. Give him his due, Cameron said he would.

1992 all over again?

Well, this blog got it wrong, big time. My only comfort is, so did all the experts and pollsters too, until that last exit poll. I suspect that Balls' defeat late in the day is an indication that it was Labour's economic record that did it. If that is true the Conservative campaign strategy proved right in the end. One point that should not escape us is that this will be a blow to the SNP who will have little leverage in the new House of Commons. Sturgeon made a huge play of keeping the Tories out, but her partner, Labour, failed her. Another reason for the Scots to dislike Labour. That said, a new devolution, possibly federal, settlement is now required. Will the Conservatives seize the opportunity to create an English Parliament and keep Labour out for the foreseeable future? There are several uncanny similarities to 1992. Small majority, the eurosceptics still threatening the government from the right, Labour needing to find a new leader and re-invent itself, the Scottish problem looming again and a crisis over Europe. I am not going to speculate on the Labour leadership after calling the election wrong, except to say the potential field looks very thin, nor can I guess what the Lib Dems will do. So here we go for probably five years (surely the UK will vote to stay in the EU and Ukip will wither away?!) and let's watch out for child benefit changes despite the loose pledges to the contrary.

The Big Prediction

So here we go. The eve of the election and it’s time for predictions. McNaughtonspolitics is predicting this. Labour will be a whisker be the largest party, possible a dead heat but I am going for a small advantage. I’m going for Labour on 272, Conservative 270, Liberal Democrat 28, , SNP 52, PC 4. Ukip 3, Green 1 The rest, NI and others. More importantly, what will happen afterwards? Clearly, if Labour is the largest party they will be summoned to the palace and asked to form an administration, and Miliband will accept. I go along with the idea of a Labour/Lib Dem minority coalition, so there will be five days negotiation between the two parties followed by some kind of memorandum of agreement. That will add up to about 300 seats. Precise numbers don’t matter because the two will not be able to muster enough seats for a majority without SNP support. The Queen’s Speech will follow after private discussions with SNP, probably not publicised and even denied, this will be approved by a parliamentary majority as the SNP will not dare to bring down a prospective government. There will be further budget negotiations and, again, SNP will support the final version. Again the government will deny a deal with the SNP, but there will have been one privately. Thereafter the fun starts. If the Conservatives are the largest party, the scenario is less clear. My feeling is that, assuming the numbers don’t add up (i.e. Con/LD combined + possible DUP, forget Ukip) I think Cameron will go quickly and advise the Queen to summon Miliband. After that the scenario is as above. Longer term, I think a Labour government may last for one session and then engineer an election. In its first year it will pick the low hanging fruit and produce a raft of popular measures (bank levy and regulation, taxes on the wealthy, minimum wage increase, more devolution to Scotland etc. and only a few unpopular ones. By then Johnson will be Conservative leader. The election of 2016 will be interesting to say the least as Scottish independence will then be back in play (Scottish Parliament elections in 2016). For me, in such a story, the key question will be, has Miliband grown into the role of PM? A footnote. If Farage loses his seat and resigns, it’s goodbye to Ukip.

It's driving me mad! You too?

It’s driving me mad! You too? What am I talking about? It is the refusal of both Cameron and Miliband to answer questions about what will happen if they try to form a minority government or just possibly a coalition. This is outrageous arrogance on their part isn’t it? We all know the likely outcome is a hung parliament yet they insult us by claiming they are hoping for an outright majority. John Humphrys had it right when he asked Miliband this morning (May 4th) what he intended to do as it would inform the electorate before they cast their vote. Some people (not me as it happens) need to know what the Conservative or Labour leaders will do in a hung parliament because it will affect their choice. Come on. It’s obvious. While I’m on the subject of frustration, I am continually annoyed by Ed Miliband’s failure to articulate clearly what he meant when he said the last Labour government did not overspend. I know the correct answer, but he seems not to. The correct answer, from a Labour perspective at least, is that, yes, Labour increased the budget deficit significantly, but this was not wasted expenditure, much of it went on health, education and other public services. Had they not spent that money, these public services would have been in a desperate state and the next government would have had to pick up the tab. We as a country did have considerable debt but we also had a strong health and education system to show for it. The money was not frittered away. Why can’t Miliband explain that properly? It’s like this. Suppose a family had a child who became severely disabled and they were unable to access compensation or enough benefits to give that child a decent quality of life. The family has no resources, so they borrow a large amount of money that puts them into debt for the foreseeable future. Has that family overspent? Its debts have increased considerably, certainly, but was their spending justified? I will leave you to answer that.