Wednesday, 21 December 2011

Balls: “Labour’s opportunity starts now”

"Rightly or wrongly, there is public scepticism about Labour's willingness to take tough decisions on public spending. A big part of my task is to turn that round and win that argument."

In an interview in today’s Independent, Ed Balls argues that Labour have carefully bided their time before attempting to regain the public’s trust on the management of the economy.

Arguing that the focus is finally shifting towards lifting Britain out of its current mess, Balls claims Labour can win the debate on the economy as long as the party displays discipline and credibility. Labelling this a policy of ‘Credible Optimism’, Balls believes the opportunity is now for Labour, with the public increasingly searching for a credible economic alternative.

These themes are echoed in the exclusive interview with the Shadow Chancellor in the upcoming Fabian Review. Published on the 28th December, Telegraph columnist Mary Riddell interviews Ed Balls on Labour’s chance to reclaim the public’s faith on the economy and the challenge facing the party in regaining the kind of support that shot Labour to the 1997 landslide victory.

With Ed Balls set to make the keynote speech at the Fabian's New Year Conference, which is titled ‘The Economic Alternative’, Balls claims people are frustrated after eighteen months of failed economic policy, and have begun to ask, “What’s the alternative?” With this feeling of dissatisfaction rife, unemployment high and growth stagnating, Balls uses the article in the Fabian Review to argue for the establishment of ‘a platform of competence’ and suggests that Labour must both be willing to make the tough decisions and appear to be able to.

Coupled with this renewed focus on economic competence, Balls is using a range of media platforms to extend a hand to Liberal Democrats currently in coalition with the Conservatives. First formulating the basis of an offer in Mary Riddell’s column in the December 13th edition of the Telegraph, stating, “You could do it tomorrow. What’s happening is dangerous and against the national interest. If you can form that consensus tomorrow, I’d be part of it like a shot,” Balls mimics this call in both today’s Independent and the Fabian Review.

While unlikely to lead to a sudden breakdown of the Coalition, the offer itself might unnerve a coalition fraught with problems, most recently intensified by the undeniably incompatible views on Europe. Piling on the pressure, Balls makes it clear that any Lib-Lab pact will be one void of our Deputy Prime Minister, which could potentially lead to a scenario where in the near future Lib Dems are forced to usurp their leader. Either way, as times grow tougher, it will be interesting to see whether Balls' offer unsettles Lib Dems in the Coalition.

"It isn’t when somebody leaves prison; it's what leaves prison."

The quote in the title is from Barry Mizen. Back in 2008, Barry’s son Jimmy was murdered in Lee, south-east London. In response to this tragedy, Jimmy’s family created the Jimmy Mizen foundation and his father Barry Mizen now works as a spokesman for the charity, contributing a chapter to the Fabian’s Society’s new pamphlet ‘Punishment and Reform’.

This is a guest post by Kenneth Way, Media Intern at the Fabian Society.

Speaking at the launch of the Fabian Society's pamphlet 'Punishment and Reform', Barry Mizen articulated a call for a nationwide rethink on the criminal justice system, which argued for a firmer focus on rehabilitation and underlined the failures of the current system.

With an attitude emanating from a deeply personal perspective, Barry is the type of individual who should be informing the upcoming Labour policy review and the debate on criminal justice in the UK. His passion, honesty and inspiration serves as a reminder that the media’s ‘eye for an eye mentality’ is unhelpful and often a hindrance. Instead, Barry’s approach underlines the merits of proper investment in reformative solutions rather than pure punishment and wider adoption of this model could offer an opportunity to stem the growing prison population.

It’s without argument that reaching this opinion is difficult. In fact, Barry made it very clear that his viewpoint is a result of the failures of the current system, claiming, “If harsher punishment worked then I believe me I would be the first to call for it.” However, the past few years have taught Barry that in practice harsher punishments achieve little.

In fact, as Barry informed the audience in attendance, during his son’s sixteen-year life the prison population rose from 40,000 in 1992 to 80,000 in 2008. To steal a line from the man himself: Has society got double as many criminals now as it did then? The answer to this question would have to be a resounding ‘No’. Sadiq Khan MP succinctly expressed this view, arguing we as a society are failing and our communities are failing. As a result of this worrying status quo, the new Fabian pamphlet presents an overdue and welcome opportunity to critique the criminal justice system.

Embedded in this rethink Sadiq Khan MP, who wrote the introduction, emphasises the need to put victims at the heart of the justice system. In this remodeling of the justice system, Khan believes that, “a significant shift in attitudes to and treatment of victims is required”. The Shadow Justice Secretary has spent some eighteen months with the brief, and this collabortation with the Fabian Society comes within sight of the Labour Party’s upcoming policy review.
With this in mind, event chair and Telegraph journalist Mary Riddell identified the retributive mindset of the public and media, which reached unquestionably high levels in the aftermath of the summer's riots, and austerity as the two catalysts responsible for the current prison population. To put it simply, with around half of all adults reoffending within a year of their release the criminal justice system is failing.

Considering this abysmal record on reforming offenders, Mary Riddell asked the panel: Are the perpetrators of crime also victims? Bearing in mind the public’s and more importantly the media’s attitude towards crime, this is a challenging argument to win, but Mizen gives this position credence with an approach alien to many. Coupling this notion with our growing prison population means we cannot afford to dismiss this position as pure idealistic sentimentality.
As Khan, Mizen and the pamphlet suggest we indisputably require a fresh approach.

‘Punishment and Reform’ claims victims should be involved in the judicial process, instead of baying for blood, we should be careful and deliver justice with rational heads. Alongside this, rehabilitation must conquer retribution. Preventive techniques and a focus on early intervention could be key to this rethink and provide us with a criminal justice system many may not feel they want, but definitely the system we need.

Mary Riddel's take on the event and pamphlet can be read here

Friday, 16 December 2011

Nine Paradoxes of the Euro Veto crisis

One week later, as we enter the hangover phase of the Euro-veto crisis, clouds of paradox hang thick in the air. The last week has thrown up contortions, contradictions and ambiguities which have left heads spinning on all sides. Here are nine paradoxes to emerge from the chain of events:

Both a ‘storm in a tea-cup’ and the end of an era: The deal struck by the ‘Europe of 26’ is already fraying at the edges and seems set to unravel before it sees the light of day. Other non-Eurozone members are grumbling and Francois Hollande has said he would renegotiate. So from a legal perspective Mr Cameron’s ‘no’ may have little consequence. He could have bitten his tongue. However psychologically something snapped, in the minds of the Germans and French, as well as with Cameron himself. By walking away from the table the Prime Minister has created a rupture in Britain’s European relations which will endure even as the detail becomes a fast fading memory.

By walking away, the UK won on how the EU should do business: The deal the UK forced on its partners, outside the apparatus of the EU institutions, confirms that the UK’s vision of how Europe should do business has prevailed even without its participation. It is the death-knell for ‘federalists’ who back the authority of the independent European institutions over member states and proves that Britain and France have won their long battle for an ‘intergovernmental’ Europe. In the long-run this will put a break on the pace of political integration even if this looks implausible after the weekend agreement.

A bid to safeguard the City ended up undermining it: A veto ostensibly designed to protect the City’s interests has ended up undermining them. With Britain on the sidelines other member states are now more likely to make unhelpful decisions on financial regulation which the UK cannot veto.  It is curious that Mr Cameron took a position with such a significant down-side for Britain. Of course, it was a compromise package which Cameron hoped would be acceptable to EU leaders, Liberal Democrat ministers and his own backbenchers. The risk in his negotiating position became apparent when Mr Cameron concluded that it was not possible to reconcile the competing demands. He was placed in a position where he had to prioritise his base over the national interest.

Cameron wanted to undo Mrs Thatcher’s work: The Prime Minister wanted to remove majority voting from key elements of single market decision making affecting financial regulation. It was Mrs Thatcher and her Conservative European Commissioner, Lord Cockfield, who presided over the introduction of majority voting to prevent anti free-market forces blocking progress towards the single market. Ever since, the British government has taken pride in working the Brussels machinery to achieve an open and competitive European economy. The centre of gravity has gradually shifted towards the right as a result. Cameron’s demands revealed his own lack of confidence in the Conservatives’ ability to work Europe to their advantage.

The UK said no when little was at stake for us. Eurozone members said yes to a deal which risks their future: Wielding the veto was bad for Britain’s national interest while by agreeing the UK would have lost nothing. By contrast for all those vulnerable Eurozone members who accepted the accord, the outcome is very risky. The new fiscal rules do not address the problems that brought on the Euro crisis, certainly in the case of Spain and Italy which had healthy public finances before the crash. But if applied strictly, the new regime could plunge Southern Europe into enduring economic turmoil undermining the Eurozone further in the medium term. The fiscal provisions are simply there to persuade Germans to intervene. So observers on the left face the difficult task of opposing David Cameron for walking away and undermining UK influence, while also criticising a deal which would rule out the sort of fiscal stimulus which the US and UK adopted in 2009. For now there is nowhere for pro-European Keynesians to turn. This explains Ed Milibands discomfort on the question of what he would have done. In truth he would have agreed to let the Eurozone do what it wanted as long as the UK was not involved, while believing the course of action extremely unwise.

The version of Britain in Europe most people want is becoming less achievable: Since Harold Wilson’s day Britain has sought a middle-way on Europe, between isolationism and full-speed integration. Every political leader, including David Cameron, has followed this course in one way or another. The week’s events make the UK’s half-way position highly unstable. The UK may now face the remorseless pressure of disaffiliation, reversing decades spent wrestling with forces pulling us inwards. The domestic dynamics of the Conservative Party and the right-wing press could combine with the hostility and exasperation of the UK's European partners to bring about a referendum on withdrawal within a very few years. The UK may end as a small island economy at the mercy of global forces and (if we want access to the European market) of EU rules we have no power to shape. Or perhaps if a referendum says ‘no’ to exit or if the economy takes a nose-dive, Britain will be forced back into the European fold, on terms dictated to us. Whatever happens, the Euro-realist status quo most people actually want is becomes more and more unlikely.

Anti-European English nationalism brings Scottish independence closer: The more anti-European the Conservatives become, the more Alex Salmond can exploit it. A UK referendum on Europe would offer the SNP a perfect platform for an independence vote, predicated on Scotland’s EU membership. For some English Nationalists in Conservative ranks this may be no paradox, as they are increasingly attracted to a right-leaning, free-market England free from all encumbrances.  But it represents a historic parting from the Conservative and Unionist tradition of at least two hundred years.

While all this happens Britain is becoming a more European country and the Atlantic is widening: US politics has lurched to the right over the last decade but the British public remains wedded to a UK version of European social democracy. Only one in ten voters want a smaller state, the NHS is our best loved institution, a substantial majority want to keep current employment rights and want the gap between rich and poor to close, and climate change-denial remains a minority sport. The public shares the Tory’s instinctive Euro-scepticism, but on social and economic issues the Conservatives are drifting into the mid-Atlantic leaving mainstream opinion behind.

And the EU is proving its point on the global stage: David Cameron said ‘no’ just as the value of Britain in Europe was on show in Durban. The climate change deal was far from perfect, but it still demonstrated beyond doubt the essential role of common European politics. In an Asian century the issues Britain cares about – like climate protection, but also political freedom and open economies – will only be advanced through strong, united diplomacy from the EU. Britain cannot go it alone in the 21st centrury.

Monday, 12 December 2011

'In the Black', 'Labour's Business' and 'The Credbility Deficit'

A guest post in a personal capacity from Stephen Beer. Stephen is Senior Fund Manager and UK strategist at the Central Finance Board of the Methodist Church and chair of Vauxhall Constituency Labour Party.

Debate about the economy in the Labour Party is at a really good level now and something I was looking for when the Fabian Society published my pamphlet The Credibility Deficit – How to rebuild Labour’s economic reputation at the Labour Conference this year. However, we need to tackle how we can have a credible economic policy, not simply one that is fiscally prudent.

Perhaps the biggest splash since Conference has been made by In the black Labour by Graham Cook, Adam Lent, Anthony Painter and Hopi Sen, and published by Policy Network (interest declaration: I’m a board member). The authors maintain that Labour needs to embrace fiscal conservatism and show how it will get the annual deficit down and where it will cut spending. They argue that this is a progressive policy, because if the public finances are not under control we will be unable to be progressive about anything much. Instead of triggering a harsh reaction, the discussion paper has been well-received (including by Ed Balls). That’s a healthy sign. However fiscal probity is a necessary condition for progressive economic policy but it is not sufficient. Even if Labour relied on a promise to keep to George Osborne’s latest fiscal plans, it would still not win an election centred on the economy.

What matters is being credible. I make no apologies for banging on about this because we need to get it. It’s the point I made in The Credibility Deficit. We lost credibility with both voters and markets. We lost it with voters because living standards got squeezed for years and we had no credible plan or even rhetoric to answer it. So we need to make sure we have a credible and relevant answer today. We lost credibility with markets because we fudged the way we kept our fiscal rules. Adopting new rules and saying we really will keep to them this time is therefore not going to be enough. Besides, the scale of the financial crisis was so enormous that any fiscal rules would have had to be broken to avoid a deep depression. It will be the same next time. And we lost credibility with both voters and markets because both now need convincing (whether fairly or not) that Labour will keep spending under control and effective. The Conservatives and Liberal Democrats have successfully blamed us for the deficits but if we had cut spending to match the fall in tax revenues, millions more would be unemployed and the UK would be heading rapidly down the economic performance tables.

We are living in grim economic times, with Office for Budget Responsibility forecasts suggesting we have years of flat or declining living standards ahead of us – and that’s if the eurozone actually sorts itself out. At the moment most people believe that austerity is the only answer. It will take a while for countries to travel down the austerity death spiral before they reach out for a different answer. Even if they do, the likelihood is that we will see years of half-hearted stimulus measures some of which, by virtue of their temporary nature, will make things worse.

The big problem is that the economy lacks sufficient demand. If we have a couple of quarters of unexpected growth I fully expect the OBR to change its mind and decide that perhaps more of the deficit is cyclical than it believes today (economic forecasts are not usually accurate; a reason against giving the OBR more say over policy). Business and consumer confidence is low. Who can blame them? Governments need a convincing and credible growth plan as well as a deficit-reducing plan (the In the black Labour authors make this point too) and not merely a new tax cut or spending tweak here and there.

Governments need to convince people and markets that they are fully committed to proactively increasing the productive potential of the economy for the next decade or more. Such a policy will be highly focused on encouraging enterprise and investment: spending on infrastructure will be high; a national investment bank will sit behind bank loans and stimulate small businesses. And government – or at least a Labour government – would stand behind the labour market with a jobs guarantee. The current debate about how Labour can be fiscally sound is welcome and much needed. But we need to do more to restore the economic reputation we spent so many years of opposition building last time around.

Friday, 9 December 2011

Cameron veto undermines Britain's future

This is a guest post by Kenneth Way, Media Intern at the Fabian Society. 

David Cameron’s veto of the proposed EU treaty change is a gross error of judgement and undermines Britain’s future within the union.

Back in May 2010, the Coalition agreement promised Britain would play a “strong” and “positive” role in working with our European partners. However, as Britain woke to discover Cameron used his veto, it became painfully apparent that the government has reneged on this promise and in the process worryingly sidelined Britain in Europe.

This is not the first time the government have forgotten their promise on Europe. In October, in the midst of the crisis, the Conservatives thought it helpful to hold a “symbolic” debate and subsequent vote in the Commons on EU membership. Despite defeating this vote, albeit with the largest rebellion ever on Europe from backbenchers, eurosceptics remain worryingly at large, vocal and influential within the party.

Lest Conservatives forget, in the past Europe has ripped stronger blue governments apart. This government does not have the privilege of a stable majority. Modern European history reveals that a severe lack of foresight at the insemination of the European project saw Britain say ‘No’ to Europe on multiple occasions. When the merits of Europe were finally understood, Britain started knocking on Europe’s door only to be rebutted by a dogged and insulted Charles De Gaulle adamant to block British membership. It took until 1973 to join the EEC, some sixteen years after the Treaty of Rome and some sixteen years locked outside a growing union.

We must learn from our past. While we currently remain justifiably absent from the single currency, envision a completely feasible world with a recovered booming Euro and a Pound in freefall. An economy under threat, Britain could look to the single currency as a saviour. This current short-sighted approach towards helping Europe could trigger a response akin to De Gaulle’s refusal to accept Britain into the union. Wise, farsighted decision-making will help ensure that the eurozone survies not only beyond this week, but long into the future, so that one day, if we want or need to, we can join our counterparts in a stable, secure and prosperous single currency.

Rather than fruitless attempts at holding Europe to ransom as the “awkward partner” determined to get a better deal, the government should therefore be forcing its way into discussions central to Europe’s future working side-by-side with our Franco-German counterparts. A Britain standing alongside France and German would remain powerful in these days of the emerging BRIC nations. In fact, if our beloved allies across the Atlantic continue to search for new partners in this globalising world order, the importance of Europe multiplies for Britain.

To counter this approach, British exceptionalism must end in the hearts and minds of the public. We must fight to change the wholly negative European discourse and question the idea that sovereignty is always king. Unquestionably, being pro-European is a traditional vote-loser in Britain. The notion of “Europe bad, Britain good” means the EU is seen as greedy, intrusive and unwelcome, the public are bombarded with press who inform us “Brussels controls Britain” and most of the union’s good work is buried beneath a combination of irrational jingoism and scaremongering hysteria. This attitude must change before it is too late. Failure to respond to this challenge could leave Britain in the European wilderness for generations to come.

You can follow Kenneth on Twitter @kennethway

Tuesday, 6 December 2011

The Price of Patient Privacy

Guest post by Georgia Hussey

Yesterday’s announcement that NHS patients’ data is to be opened up to aid potentially life-saving research seems, initially, to be a fair one. Excluding external factors, such as potential leaks of information, deliberating between patient privacy and the advancements that could be made with patients’ data seems weigh considerably on the side of the potential benefits of the research. Moral philosophy tells us that when presented with an ethical dilemma between two things, the right choice is the one that does the least harm and the most good. So long as anonymity is guaranteed (and the fact that perhaps it can’t is another issue), the potential harm to patients is far outweighed by the benefit of the availability of such information. With an opt-out system resembling the successful organ donor policy held by countries such as Spain (where there are 33 inhabitants in a million are organ donors, compared with 14.1 in the UK), the change can be justified in a similar way; its likely that most people would be happy for data to be used, just as 90% of us support organ donation. The consequences of this decision would indeed be positive: greater medical innovation, encouraging research and facilitating the fight against diseases.

However moral philosophy also tells us that the consequences of an action alone aren’t enough to make it morally right, it must also be motivated by the right reasons. The context of this announcement is therefore crucial: it’s hard not to consider this another move in the right’s creep towards NHS privatisation.

After the controversy that has surrounded the government’s policy on the NHS, hearing David Cameron and Andrew Lansley utter the words ‘private firms’ and ‘NHS’ in the same sentence triggers scepticism. Lansley’s Health and Social Care Bill has faced significant opposition, with many criticising the speed with which it’s been pushed through parliament, as well as the far-reaching implications it will have for our country’s health service. Lansley dismissed claims that the bill will be a major step towards the privatisation of the NHS as “ludicrously scaremongering”, but a document that emerged two weeks ago seemed to also point in this direction. Medical professionals said the implications of the document -a report on ‘Developing Commissioning Support: Towards Services Excellence’- which was sent out to various health organisations, would inevitably be that large sections of the health service would be overpowered by private providers. GP commissioning groups would eventually have to hand over responsibility for some services to private companies, unable to compete with them without support.

The further changes to the NHS announced yesterday seem more worrying within this context. In his speech on life sciences yesterday, David Cameron detailed his plan to open up the NHS to pharmaceutical companies for clinical trials as an effort to foster a closer relationship between the industry and the NHS. With a brief reference to the patients that could be helped, Cameron’s speech centred on the life sciences as “a jewel in the crown of our economy” with the NHS as the convenient cloth to polish it with before the auction. The focus on the economics of the decision exposes where the true interest of the government lies in opening up the NHS. Andy Burnham has rightly warned of the need to “tread carefully” on this issue. Rather than showing themselves as making an altruistic move to encourage medical research, the announcement is the Conservative party’s inability to forgo a chance to twist the NHS into turning a profit.

So although the consequences of using the NHS as a resource for medical research and clinical trials are likely to be mostly positive, the government’s motivation for doing so is cause for concern. Perhaps David Cameron has deliberated about the ethical dimensions of the dilemma, and reasoned that the potential risk to patient privacy is worth the good that will result. But if his motivation is actually based on a “calculation about what’s best for our economy” we do indeed need to tread carefully; if the motivation that lies behind the decision is economic, then David Cameron has sold patient privacy for another jewel to go in his crown.

Monday, 5 December 2011

Was Osborne Right On Public Sector Pay?

A guest post written by Peter Kenway, Director of the New Policy Institute. A longer version of this article can be found here

George Osborne's claims on public sector pay in the Autumn statement do not stand up to scrutiny. In his statement to parliament on 29 November, George Osborne said the following:
"We will set public sector pay awards at an average of 1% for each of the two years after the pay freeze ends.
"Many are helped by pay progression – the annual increases in salary grades that many people are entitled to, even when pay is frozen.
"It is one of the reasons why public sector pay has risen at twice the rate of private sector pay over the last four years."
Was he right?

The latest statistics on average weekly pay from the ONS is for September 2011. These show that compared with four years earlier, average weekly pay in the private sector had risen 6.2% whereas average weekly pay in the public sector had risen by 12.8%, that is, an excess of 6.6% . Osborne’s basic premise is therefore correct – public sector pay has risen more than twice as fast as pay in the private sector.

What about pay progression in the public sector as the reason for this difference? While it is true that many public sector workers do enjoy pay progression, the information needed to quantify its extent, in both the public and private sectors, cannot be gleaned from the official statistics. So no evidence here either way.

But are there other factors that might explain the difference in the rates of growth of pay in the two sectors over the four years and for which evidence does exist? There certainly is, and once this is accounted for, the picture changes dramatically.

Bonuses and Arrears

First, it is clear from the data that bonuses in the private sector were down sharply in January 2009 compared with a year earlier. Given what had happened to the economy and the financial sector in over the previous year, that is entirely understandable. But since this is exactly what is meant to happen with bonuses at times like this, it is absurd to use the collapse as a reason for holding down public sector pay.

Luckily, the ONS publishes alternative series for average weekly earnings which strips out the effect of both bonuses and pay arrears. On this basis, instead of rising just 6.2% over four years, private sector weekly earnings rose 7.8%. Over the same period, public sector earnings rose 12.6%. While the overall picture is the same, leaving out bonuses reduces the gap between the two sectors by nearly two percentage points.

A chart that plots these two series from 2005 onwards can be seen here. One thing this chart shows is how the public and private sectors seem to take it in turns to lead on earnings growth. In 2005, public sector earnings were rising faster than those in the private sector. Between 2006 and 2008 the private sector led. Then from late 2008, the private sector fell back again – for a period of about 18 months substantially so. Since mid 2010 the two sectors have been tracking one another closely.

The Changing Public Sector

Much more surprising is the sudden step in average public sector earnings in mid 2009? What was this? A sudden bout of generosity on the part of public sector employers at the tail end of the recession? No. It is a statistical quirk caused by the fact that from July 2009, earnings in the now nationalised banks, RBS and Lloyds/HBOS, started being included in the public sector. When this is taken account of – luckily again, the ONS produces a public sector average earnings series excluding financial services – the apparent step up in public sector pay in mid 2009 disappears.

It is true that in mid-2009 the public sector was still doing better than the private sector (where earnings at this point had slumped). This would still be true even if the two banks were still in the private sector. We estimate that if they were, private sector earnings would have risen 8.4% over the four years. Over the same period, public sector earnings excluding financial services rose 11%. So there is still a gap but it is down to 2.6%.


Failure to take account of the effects of something as big as the nationalisation of RBS and Lloyds is a gross error. Osborne’s claim depends upon it. Once that error has been corrected however, it is less the small difference between the two sectors that is the story than the large difference between earnings growth in both sectors and inflation at 5%. The resulting fall in ‘real’ wages – that is wages after allowing for inflation – is a major reason why the economy is now so sluggish. Since the economy will not recover until pay picks up, bigger rises in both sectors, and especially in the private sector, are fast becoming a patriotic duty.