Wednesday, 25 January 2012

European Court of Human Rights: Worth fighting for?

In his speech today in Strasbourg, David Cameron has argued Britain must use its chairmanship of the European Court of Human Rights to reform the court.

A move likely to appease the eurosceptic wing of his party, Cameron’s call is one which paints the ECHR as overly interventionist and an unwelcome party in national legal proceedings. But is this really the case? Or is the Prime Minister overstating the impact of the ECHR on British justice and in the process guilty of “peddling myths”?

To answer this, one must consider the charges the Conservative leader has brought against the ECHR. Addressing Strasbourg, Cameron focused on three criticisms in which he stated the court is a “small claims court”, transfixed with petty rulings rather than the substantial protection of human rights, argued it is bogged down by a 150,000 strong caseload and finally that the court delivers verdicts that unnecessarily undermine the authority of national courts.

For all too willing sceptics these arguments provide ample cannon fodder to push for wide-ranging reform that would reduce the backlog of cases, but much more importantly for anxiety ridden anti-Europeans limit the scope of the ECHR. With a growing concern that the court will push for the British ban on prisoner’s voting to be lifted, an issue which was incidentally subject of a Commons vote last year, governance of the court presents an ideal opportunity to counter a perceived threat to established national law.

But in contrast with claims being made from the right, statistics reveal that Cameron’s argument that Britain needs to be allowed to make more conclusive rulings is plain wrong. An excellent post on the Human Rights Blog shows that in reality, only 3% of cases the court considers regarding Britain receive a judgment. This hardly seems like the actions of an intrusive interventionist body in dire need of reform.

Perhaps more aptly, as Sadiq Khan MP has claimed, Cameron is “more concerned with placating his restless backbenchers than he is about protecting and promoting human rights across Europe.” Talk of the court undermining British law provides weight to this theory and in actuality with the majority of cases brought before the court arising from countries such as Russia, Romania and Ukraine, it seems difficult to envision Conservatives being overly fussed about the court imposing decisions on these states.

The criticism extends beyond the opposition though, with Britain once again being forced to the fringes in a supranational setting by a party seemingly hell-bent on nullifying European influence. As with the veto in December, the warning signs are plain to see. Prior to today’s speech the ECHR's most senior judge, Sir Nicolas Bratza QC, stated, “It is disappointing to hear senior British politicians lending their voices to criticisms more frequently heard in the popular press, often based on a misunderstanding of the court's role and history, and of the legal issues at stake.”

Unlike Cameron, Bratza’s viewpoint is statistically supported and it is imperative that any push for reform is grounded in a reality-based understanding of the court. This includes honesty about the statistics and a better articulation from supporters of the positive and necessary impact the court has and continues to have on the guarantee of human rights across the 47 signatories to the ECHR.

This is a guest post by Kenneth Way

He is writing ahead of the Fabian Society’s conference “Social Europe: Worth Fighting For?” which will take place on 25th February 2012. Amongst other things, the Conference will consider the issue of human rights in a European context.

You can buy your ticket, priced £10 for non-members or £5 for members/concessions here.

Friday, 20 January 2012

Responsibility rhetoric: how Cameron is manipulating capitalism

As Andrew Neil noted on last night’s The Week, the word capitalism can no longer be used without an adjective prefixed to it. Responsible capitalism, fairer capitalism, better capitalism, moral capitalism and predatory capitalism are just a few of its personalities. Converting an adjective into convincing policy and tangible change was always going to be difficult. However Ed Miliband’s timely push for a different kind of capitalism is starting to be watered down by David Cameron’s subsumption of the same language.

The PM’s speech yesterday was criticised as being full of empty rhetoric about responsible capitalism. But it would be foolish of us to underestimate this as unintentional; David Cameron and his army of speechwriters did not forget to include a paragraph setting out specific ‘responsible’ policy. They will not have failed to realise that they will need policy to act upon if they are going to change capitalism. What he is doing is what we have seen them do to ‘tax-payer funded’ trade unions and the ‘benefit-scroungers’ of the welfare state: manipulating the notion of responsible capitalism to his advantage. The new capitalism that Labour has made the crux of their ideology is being made to look like an empty notion.

The government have clearly failed to take any substantial steps towards ‘responsible capitalism’ thus far. The Conservative-led government has cut corporation tax by 2%, scaled back and pushed back banking reform to 2019, failed to take any tough stance on capping high pay and watched while train fare increases far above inflation. “Let's judge you on your deeds and not your words” Ed Miliband rightly challenged David Cameron.

But speaking in London yesterday, David Cameron again failed to offer any tangible policies to show how he planned to work towards his responsible capitalism. Instead he set out an aim for a “socially responsible and genuinely popular capitalism. One in which the power of the market and the obligations of responsibility come together.” However the successful creation of a market that is both free and fair seems wholly unrealistic. To expect businesses to sacrifice profit in order to regulate their own ‘fairness’ is deluded. However deluded is something that we know Cameron is not; he has shown himself to be politically astute and carefully manipulative.

Tellingly, Chuka Umunna dismissed Cameron’s speech as “high on rhetoric and analysis but [with] a great hole in the middle.” But it is crucial that this is not just dismissed as a poor politics. Ben Jackson and Gregg McClymont’s pamphlet ‘Cameron Trap’ warns against such an underestimation of Labour’s adversaries. The Conservatives have been incredibly successful in framing the debate about austerity in their own terms, and leaving Labour to look internally fraught and self-contradicting.

So warning bells should have been ringing when Cameron presented responsible capitalism as a ‘nothing-idea’ of empty rhetoric. And, conveniently, a nothing-idea that’s completely compatible with free markets. What good luck.

This tactic will attract brief criticism for the government. However by using the same language as Labour, but using it in such a way that it means nothing, they will leave the opposition saying nothing. Labour should not underestimate their opponents, and must not let the notion of fair capitalism be made defunct by Conservative manipulation. They must be clear and vocal on the policy that their capitalism encompasses. Most importantly they must make it obvious that Cameron’s capitalism is not responsible, fair, better or moral.

This is a guest post by Georgia Hussey (@Georgia_Hussey), Fabian Society Publications Intern

Wednesday, 18 January 2012

Any willing provider? Labour's anti-state chic

Steve Akehurst (@SteveAkehurst) takes a look at Labour’s multi-coloured movements in a review of The Purple Book and Tangled Up In Blue

Perhaps the most striking thing about the years following the economic collapse of 2008 was the absence of new ideas on the democratic left. Labour's election defeat confirmed for most that something had gone awry with modern social democracy. Most agreed that approaches to state and market had been ill struck, and that the economy had become too dependent on the City. But these axioms never gave birth to much in the way of renewal. All the while the Tories were stitching together their own story, re-casting the crisis as one of overspending and inefficiency, co-opting Britain's other allegedly centre-left party along the way.

It's amid this impasse in 2011 that Labour's multi-coloured insurgencies have emerged, offering their own readings of the past, present and future. Chief among them have been the Purple Book, organised by Progress, and Blue Labour. and the two actually started life closer than is often recognised. A number of the Purple Book's contributors and cheerleaders (e.g Caroline Flint, Tessa Jowell, Philip Collins) were involved in the first wave of seminars and publicity that gave rise to Blue Labour. They've since sensibly gone their own separate ways, but retain their shared starting point that the root of Labour's woes lay in becoming too centralist and remote; “administrative, elitist and technocratic”, as Rowenna Davis puts it. Both claim to be interested in returning to Labour's decentralising tradition, and both eschew 'big state' Fabianism, top-down universalism and public spending as the solution to all of societies' ills.

The Purple Book

The Purple Book approaches this argument in a considerably more slick, metropolitan way. At its best, it is far more thoughtful, practical and self-aware than many of its critics have given it credit for. It hangs together in a way few anthologies do, and is more astutely conscious of itself as an electoral strategy than its rivals. There are plenty of interesting ideas on the value of co-operatives as a means of spreading social control over public services and on revenue-raising at a local level.

The trouble with it is, at times, it feels like a new language is being adopted to advance a familiar agenda, which is essentially one of marketisation. The impression gained through the book is not of a central state endowing local communities, but of diversification and the state “letting go” as an end in itself. All this is fine if one believes in it, but it's difficult to know how it differs from the current government's 'any willing provider' approach to healthcare. Co-ops are in the mix and are to be encouraged, sure, but what of the potential for conflict between different providers? Surely a Co-Op couldn't hope to compete with private providers in terms of outcomes; does the state inherently privilege Co-Ops in the contracting process to balance this out? What are the rules applied when opening services to tender? What if no local group – or demand for co-operative control - emerges? None of these questions are ever really explored satisfactory, apparently lost to the contributors reforming zeal.

A similar frustration stalks you as you read the books' sections on political economy. Tristram Hunt's contribution is fantastic, by far and away the best of the bunch. It wisely focuses on 'pre-distribution' and the need for the state - in smart, considered ways - to get 'up stream' and shape a more equitable distribution of the benefits of growth, as opposed to simply redistributing through the tax system. But this bolder, hands-on approach with the market is never matched or built on elsewhere. The living wage, pay multiples, greater democratic organisation in the workplace, regional or national investment banks - all are examples of small, fairly inexpensive things that can be done to achieve the more balanced economy the book talks of, but nothing like it is ever touched on.

Throughout there is often simply an unwillingness to leave well-worn comfort zones and suggest anything that might appear 'anti-business' or 'old Labour'. Instead the book frequently retreats into public service reform, or constitutional issues, as if the past 5 years hasn't happened. At the end of the book, editor Robert Philpot lists its recommendations – there are around 10 pages on reforming the state, and just 1 on reforming the market. But what the UK has seen is surely not a failure of the big state, but the market – or at least, the state's relationship with it. How else to understand the financial crisis, or the de-coupling of growth from wages?

In short, it's not that 'leaving the big state behind' (the books' promotional strapline) feels like the wrong prescription for the UK's problems – it's that it's the wrong diagnosis. When Patrick Diamond argues that “social democrats need to acknowledge that state intervention has left a multitude of social and economic ills untouched”, he writes as if we've just experienced 30 years of post-war Keynsianism. Nor did Labour lose because it was too statist. Philpot triumphantly reveals 1 in 4 of Labour's lost voters saw 'government as part of the problem not the solution' – but what of the other 3 in 4? Nobodies arguing there's a thirst for a Soviet-style command economy, but there is room for a positive case to be made for the state in the market, actively shaping it not least so that it puts money in the pockets of ordinary, hard-working people. A brash anti-statism simply neglects the challenges of our time.

Tangled Up in Blue

A similar misreading pops up through the Blue Labour story. It holds at its heart the mantra that “relationships are transformative”; that organising local communities is the best means by which to achieve social change. But instead, to Glasman, Davis writes, “the modern Labour party...seemed obsessed with expanding the state”. This would be fine were it just a piece of posturing, but it leads Glasman to sweeping statements (“the model that we had in 1945 of universal state based [provision]... lead to massive erosion of solidarity”) which can in turn beget frustratingly rigid policy conclusions.

Take Sure Start centres. Blue Labour, says Davis, wouldn't open more of them, because it believes they've become “a means of...free childcare” while both parents are at work, not of promoting relationships. Instead, Glasman wants the state to facilitate neighbours taking turns to look after each others kids. But Sure Start centres more often serve as a space where parents interact with and help other parents, picking up tips or sharing support as well as receiving it from staff. They foster exactly the sort of relationships that Blue Labour values in a more effective manner than ad hoc approaches. The idea that universal state services are always an anathema to social solidarity is simply false – as the public support the BBC or the NHS further shows.

This belligerence denies a more important, complicated conversation about when, where and how state services get it right in promoting relationship, and how they can change to get it right more often, rather than just cease. Here Davis tellingly notes that traditional social democrats were the only under-represented sections of the Labour party during Blue Labour's formative seminars - Sunder Katwala couldn't make it, and no Brownites were involved. It's difficult not to conclude that greater dialogue with the schools of thought Blue Labour sets up such antagonism to (particularly Fabianism) could give more nuance, and less divisiveness, to its conflict with 1945.
Yet there remains much to engage with about Blue Labour, and Davis convincingly argues that it has been received rather lazily by parts of the media (the reaction to Glasman's recent intervention serves as a case in point). Unlike both the Purple Book, and Philip Blond's Red Toryism, Blue Labour is rooted in a powerful critique of free markets, seeking to organise communities “against the dominance of capital”, on their high street and their workplace. This lends itself to plenty of thought provoking policy prescriptions. It has cogent ideas, for instance, on shifting the UK towards a more skills based economy, and its ‘a third, a third, a third’ model of public services (wherein, for example, a school would be run equally by the state, parents and staff) avoids a lot of the ambivalences of the Purple Book.

It's imperative that Fabians engage with the strength and weaknesses of these two books. Social democrats shouldn’t allow ourselves to be boxed in as reflexive defenders of the state. Not even the most ardent among us can deny that occasionally government ends up feeling top-down and transactive, or that services need to be shaped by those running and receiving them. Neither should we dismiss the power and energy of community activism as only to be harnessed for winning election campaigns; sometimes we need to govern in poetry, too. But there is an urgent need to push back against the bogeyman-esque depiction of the state that at times animates Purple Book and Blue Labour thinking. We need to articulate a vision of the state that's not in opposition to organised communities, but in constant partnership with them, providing a bulwark against the dominance of capital and the dysfunction and alienation which accompanies free market capitalism.

How’s that for a New Years resolution?

Monday, 16 January 2012

The Economic Alternative - Ed Balls' Full Speech to Conference

Thank you to everyone who attended year's Fabian Annual Conference

Over 1,000 people came through the doors and over 100 volunteers and speakers helped make the day happen.

The response was absolutely huge with the frontpage of the Guardian, TV coverage on all major networks and over 4,000 tweets on #fab12.

Our next major event is our conference on Social Europe. Click here to get your tickets and debate one of the biggest questions in politics today.

Over 300 of you attended our breakout session on the Left's response to the new European crisis during Fabian Annual Conference, buy now to secure your place. We're already planning next year's annual conference. Remember to mark the second and third weekend's in January 2013 in your diaries.

Ed Balls' speech to conference

Thank you Suresh and Andrew – and to all of you for coming along today and giving up your Saturday.

And let me start by saying – after over 20 years of attending the Fabian annual January conference – what a great honour it is to be invited to give the opening speech.

I first spoke at this conference in January 1993 – when I was a junior leader writer at the Financial Times.

It was a very different conference then – not the huge event it has become – with perhaps 100 or so people gathered at Ruskin College, Oxford, including among them the leader of the Labour Party, John Smith.

That conference was held the January after Labour’s election defeat in 1992 – an election in which the Labour opposition had failed to pass either of the two necessary political economy tests for electoral success:

- neither having a real alternative to the straitjacket of the Exchange Rate Mechanism, which could meet the aspirations of anxious voters on growth and jobs;

- nor a credible approach to tax and spending which could win public trust.

Ten months on from that defeat, as we met in Oxford, sterling had recently crashed out of a troubled ERM, the idea of the single currency as the solution for Europe was gaining momentum in Brussels, and here in Britain Labour’s ‘modernisers’ were trying to persuade John Smith that ‘safety first’ would not be enough.

And my contribution at that Conference?

To speak about my Fabian pamphlet, published a week or so before, which argued:
- that Labour could only win the argument for a radical alternative on growth and jobs if we had economic credibility;
- that neither the ERM nor the single currency could provide that credibility;
- and that the right approach for Labour and Britain was to make the Bank of England independent – a pretty controversial idea at the time.

I remember showing the pamphlet draft to my FT colleagues Martin Wolf and John Plender, who both said: right approach, very brave – but the Labour Party will never forgive you.

THE GLOBAL ECONOMIC SHADOW

That 1993 Fabian Conference was held in the shadow of seminal events:

- German unification in Europe;

- Black Wednesday in Britain;

- a fourth election defeat for Labour.
And today’s conference – again to debate The Economic Alternative – is, without doubt, being held in the shadow of much greater and more defining events:

- political deadlock and an abject failure of economic leadership in the Euro area, Britain and the US Congress;

- following on from the biggest global financial crisis of the last century.
A toxic combination of grossly irresponsible bank lending, poor governance and weak regulation round the world which in its aftermath poses – as I have argued consistently over the last eighteen months – a threat to the world economy as grave as that which we faced in the depression of the 1930s.

So this is my starting point for today’s Conference.

If Britain and the world are to avoid repeating the mistakes of that 1930s ‘lost decade’ and the 2008 global crisis, then we badly needs political leadership in Britain, Europe and the world to meet two great challenges:

The Growth Challenge – to stop the aftermath of the financial crisis turning into years of slow growth, high unemployment and rising debts - leaving a permanent dent in our prosperity - and, The Reform Challenge – long-term reform to make sure such a financial crisis on this scale can never happen again and to build a stronger and fairer economic model for the future – what Ed Miliband has called a more responsible capitalism – which can, even in tougher times, meet our aspirations for social justice and strong public services.

LABOUR’S POLITICAL SHADOW

But of course, there is another shadow which casts itself across this Conference today – a political shadow which presents a particular challenge to Labour.

I believe we are right to resist the ideological and ahistorical Tory analysis which tries to pin the blame for a global financial crisis on Labour’s approach to public spending – when it is clear that the global financial crisis bankrupted banks and pushed up deficits in high spending and low spending countries alike.

But it is a fact that this financial crisis did happen on Labour’s watch – and that Labour lost the subsequent General Election.

We have never denied that a plan is needed to get the deficit down, and that it would mean tough decisions on tax and public spending. Before the election, I set out £1 billion of cuts to education.
But as a party and a leadership, I said then and I still believe now that Labour should have been clearer before the election that if we had been re-elected there would have been spending cuts as well as tax rises.

And I have no illusions that there is a big task to turn round Labour’s economic credibility and show – even as George Osborne’s plans deliver unemployment rising, growth stagnating and long-term reform stalling – that Labour can be trusted again.

It is not enough simply to be right in our diagnosis of the Coalition’s failures and unfairness.
And it is not enough to set out a clear alternative – on growth, as we have with our five point plan for jobs; or on long-term reform of our economy, as Ed Miliband did this week and Chuka, Rachel and John Denham have too.

The challenge we face is both to set out a radical and credible alternative; and to win public trust for that alternative vision.

‘KEYNESIAN OTHODOXY’

I referred to that January 1993 Fabian Conference.

Eighteen months later, in September 1994, just a few weeks after Tony Blair was elected Labour leader, and against the backdrop of stubbornly high youth unemployment, rising inflation and squeezed living standards, the Labour Party held a conference at the National Film Theatre on the new economy and Labour’s alternative.

As it happens, that conference was the occasion of the infamous ‘post neo-classical endogenous growth theory’ moment – which, for those who don’t know what it means, says that the rules of the game that the government sets on taxes, spending and regulation are not irrelevant to growth but can have a profound impact – for good or bad – on how the economy works.
Of course, those were very different times, and the policy debates of that time emphatically do not offer a blueprint based on the past when today we face such different economic and political challenges.

But the unspoken purpose of that 1994 conference – and its emphasis on Bank of England reform and fiscal discipline – was to address Labour’s economic credibility deficit, and dispel the idea that the party was addicted to the short-term, quick fix, vested-interest-appeasing solution to every problem.

I went back this week to look at the reporting of that conference - and in particular a preview piece in the Independent on Sunday with an anonymous briefing from ‘a senior party insider’.
The article started by saying Tony Blair and Gordon Brown will “ceremoniously ditch Labour’s traditional ‘tax, spend and borrow’ image this week, in a fundamental re-positioning of his party’s economic strategy.”

All under the headline… Labour Ditches Keynes.

As someone who had only recently studied ‘New Keynesian’ economics at Harvard, with Democrat Keynesians like Larry Summers and Republican Keynesians like Greg Mankiw, I must admit I was pretty appalled to see the greatest economist of the twentieth century traduced like that.

But the fact was that in the Monetarists versus Keynesians economic debates of the 1970s and 80s, the label ‘Keynesian’ had become - certainly in Conservative circles – a dirty word: profligate, irresponsible, statist, inflation-loving, not to be trusted.
A caricature that clearly could not be allowed to be a Labour caricature if we were to go on and win the 1997 election.

And what has been so striking to me over the past year listening to right-of-centre politicians and commentators – in Britain, America and Europe too – is how much the austerity debate has been used to try to reprise those old ideological divides.

Warn about the risks of deflationary fiscal policy – and that makes you a ‘deficit denier’.
Worry about the dangers of all countries trying to cut their deficits at once – and you are a ‘deluded Keynesian’.

Counsel that the world needs a plan for growth as well as deficit reduction – and you are ‘an irresponsible deluded Keynesian deficit
denier’.

Keynes himself must be turning in his grave.

For, as has been fully documented in Lord Skidelsky’s biography, the real Keynes was no profligate tax-and-spender. He would have had no time for some of his disciples.
His seminal 1930 Treatise on Money was as hawkish on inflation as Milton Friedman decades later.

His attitude to irresponsible wage bargaining in the 1920s was as unforgiving as Margaret Thatcher in the 1980s.

Central bank independence? I think Keynes would have backed it - though not if his contemporary Montagu Norman was the Governor.

And as for the irresponsible and inflationary profligacy of the 1970s Tory Barber boom? He would have abhorred it.

KEYNES AND THE GROWTH CHALLENGE

But – and this was his great insight – Keynes also knew that economies could occasionally get stuck in a deflationary rut.

Although he called his famous book in 1936 ‘The General Theory’, it actually was not a general theory at all.

It was a description of what can happen in the unusual and special circumstances after a big financial crash – for him 1929, for us 2008 – when the ‘animal spirits’ of companies and consumers are so depressed that private spending stagnates.

When interest rates are so low that they can’t be cut any further.

When governments crudely cutting spending risks making deficits worse.
Of course, there will be naïve ‘Keynesians’ who will think it is always a special case – time to let rip and just ‘tax, spend and borrow’ in the hope that will deliver full employment – people who think we are always in 1930s-style depression and more borrowing is always the solution to unemployment.

And that is what gave Keynesianism a bad name in the 1970s.

It is why Labour leader Jim Callaghan was right to tell the Labour Party Conference in 1976 that that you can’t just spend your way to full employment.

But, as I argued well over a year ago now in my Bloomberg speech, the reason why the real Keynes is so relevant today is that the global economy has been sliding into that rare and dangerous ‘special case’ that Keynes identified in the 1930s and Japan suffered in the 1990s.
You either learn the lessons of history or repeat the mistakes of history.

With growth stagnating around the world, every country pressing ahead with deep cuts risks being a catastrophic mistake.

Which is why Ed Miliband and I have argued for a global plan for growth, with clear medium-term plans to get deficits down, but stimulus now to avoid a global slump too.

Rejecting the complacent isolationism of the 1930s and instead following Keynes’ lead by setting out a global solution to global problems – an economic alternative based on growth, job creation and balanced deficit reduction, which is the only sane way forward for Britain – and the only way back to credibility in the Euro area too.

Let us be honest: the Eurozone crisis is a catastrophe building week by week. And the pre-Christmas summit was a disaster for Europe and the Euro and for Britain too.
Europe’s leaders failed to back decisive action by the European Central Bank; they did not address the issue of the current fiscal straitjacket; and they still have no plan for jobs and growth

– hence the downgrades of the past 24 hours.
And did our Prime Minister bang the table and demand action?
No, he walked out and undermined our national interests as he did so.
Given the huge risks that the Eurozone crisis poses for Britain, we desperately need a Prime Minister and Chancellor who can lead in Europe.

But they can’t – and not just because their party won’t let them.

Because to do so means also admitting that they have got things wrong here in Britain too.
George Osborne and David Cameron took it as read that deep and immediate spending cuts and tax rises would at least serve the goal of deficit reduction – no matter how much Labour warned that going too far, too fast would be bad for borrowing as well as for jobs and growth.
The Chancellor claimed that public retrenchment would boost private sector confidence, investment and job creation. He called it ‘expansionary fiscal contraction’.

But this has turned out to be a false prospectus – a repeat of the discredited ‘Treasury View’ of the 1920s. Fragile consumer and business confidence has been crushed by the inflationary hike in VAT, the threatened withdrawal of public sector demand, the reality of falling incomes and the fear of rising unemployment.

And now the Government claim growth is stagnating because of the chilling effect of the Eurozone crisis – when our exports have actually been over performing compared with expectations, and it is weak domestic demand that has driven growth in the UK down, borrowing up and depressed long-term interest rates on government bonds.

Conservative ministers scoff at our five point plan for jobs and growth, saying ‘Labour’s proposal is to borrow even more’. But it is Chancellor George Osborne who is being forced to borrow billions more – £158 billion more than he planned.

Not borrowing to support the economy through difficult times and help get people back to work, but wasteful extra borrowing to pay for failure – the price of slow growth, rising unemployment and a bigger benefits bill.

Because every time George Osborne revises down his growth forecast, he has to revise down tax revenues and increase the benefits bill too.

Even the IMF has said that if our economy undershoots expectations and risks a period of stagnation, then the UK should slow down the pace of spending cuts and tax rises to get the economy growing again.

Just think: last autumn, many 16 year olds who would otherwise have stayed on at school have lost their Education Maintenance Allowances, and – following the abandonment of the Future Jobs Fund – many have gone straight onto the dole, adding to the more than 1 million young people now unemployed in our country.

On the surface of things, cutting EMAs and the Future Jobs Fund saved money and reduced borrowing.

But at what cost? How much more will it cost our society and our economy to leave those young people long-term unemployed and unproductive; they and their children receiving benefits rather than paying taxes and contributing to the national wealth?

If we do not invest now in jobs and growth, if we let a year of economic flat-lining become a decade of stagnation, what price will our country pay in the long-term?

That is why to meet the Growth Challenge and get the deficit down we are right, as we have set out in the five point plan for jobs, to call for temporary tax cuts and investment in jobs and growth – to stop a decade of slow growth and higher debts becoming a self-fulfilling prophecy.
Action now for growth, jobs and reform which does not conflict with the need for a credible medium term plan on the deficit, but which reinforces it.

KEYNES AND THE REFORM CHALLENGE

But changing times also demand new and long-term reforms to re-shape our economy for the future.

As Ed Miliband argued earlier this week, we will need long-term reforms of our economy to boost growth and deliver social justice in straitened times.

And here again, the words of Keynes writing in The General Theory in 1936 are instructive: “Speculators may do no harm as bubbles on a steady stream of enterprise” he wrote.
“But the position is serious when enterprise becomes the bubble on a whirl-pool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.”

Keynes was right then and now – we cannot simply let markets, in which speculators spend their time chasing one another’s tails, dictate important investment decisions and set the benchmark for what is fair and unfair.

Unregulated capitalism is not only unstable; it is inherently short-termist too.

So just as the current coalition are wrong to reject the insight of Keynes based on his experience of the 1930s, we must, as Ed Miliband has said, learn the lessons of the past three decades and meet the Reform Challenge:

- tougher financial regulation and new capital standards with financial stability at the heart of economic policymaking and banking reform to make sure that the needs of small businesses are addressed, including examining the case for a National Investment Bank;
- stronger corporate governance to make sure decisions are taken in the long-term interests of wealth creation and jobs, not the short-term interests of traders, speculators and their chums;
- government action to back business and ensure markets work for the long-term, including tougher competition rules, tax incentives for long-term investment, research and development and skills;
- and a youth jobs guarantee with tough rights and responsibilities

- and an expectation that every young person would take up work or training.

GROWTH, REFORM AND DEFICIT REDUCTION

This is the Economic Alternative:

- to meet the Growth Challenge: short term action now to support jobs, growth and get deficits down;

- to meet the Reform Challenge: long-term reform to tackle short-termism and instability and support long-term investment, growth and fairness.

But to make that alternative work and be credible, it must be underpinned by a clear commitment to balanced but tough spending and budget discipline now and into the medium-term.

The question for Labour has never been about ‘whether’ to get the deficit down but ‘how’ and ‘when’, who carries the greatest burden, and what kind of country we leave behind for our children.

And while we would not have started from here – a fairer and more balanced approach to deficit reduction would not have choked off recovery and thrown borrowing plans off track – we are where we are.

As Ed Miliband and I have said for months this government’s failure means the next Labour government will inherit a substantial deficit
that we will have to deal with.

After just 18 months, the government’s autumn statement admitted that it will not balance the books by 2015 – the promise that was the cornerstone of the coalition.

And George Osborne has had to admit that he will now have to borrow more than the plan Alistair Darling set out before the election – because of the slow growth and higher unemployment his reckless plan has delivered.

This represents a big challenge for Labour, as Ed Miliband made clear earlier this week. As I said at Labour’s annual conference, we will set out before the next election tough fiscal rules that the next Labour government will have to stick to – to get our country’s current budget back to balance and national debt on a downward path.

In our manifesto we will commit to do the responsible thing and use any windfall gain from the sale of the government’s stakes in RBS and Lloyds to repay the national debt – not for a giveaway.

And, however difficult this is for me, for some of my colleagues and for our wider supporters, we cannot make any commitments now that the next Labour government will reverse tax rises or spending cuts. And we will not.

Because we don’t know how bad things will be on jobs, growth and the deficit. But we do know that the next Labour government will have to sort out the deficit where this government failed and deliver social justice in tougher times.

And as we make the argument that cutting spending and raising taxes too far and too fast risks making the economy and the deficit worse not better, it is right that we set out where we do support cuts and where we would be making the tough but necessary decisions.
In education, as I have said, £1 billion of cuts – but not the biggest cuts to schools since the 1950s. In policing, 12 per cent cuts to budgets – but not 20 per cent cuts which will hit the frontline hard and see 16,000 officers lost. In defence, £5 billion of cuts – but not a strategic defence review that raises more questions than answers.

And because as progressives we believe in the role of the state and public services to do good, it is vital that we are even tougher on waste than our political opponents – whether that is the £2 billion being wasted on a reckless reorganisation of the NHS, billions being lost in tax avoidance or the waste of mass unemployment.

Times will be tough – we will have no choice but to make difficult choices.
Let me give you one example.

Pay restraint in the public sector in this parliament would have been necessary whoever was in government.

But George Osborne’s economic mistakes mean more difficult decisions on tax, spending and pay. It is now inevitable that public sector pay restraint will have to continue for longer in this parliament.

Labour cannot duck that reality. And we won’t. Jobs must be our priority before higher pay.
That said, there are important issues on incomes, pay and pensions that George Osborne must get right.

We will continue to press for fair pay and fair pensions reform while defending the vital role the national pay review bodies play in delivering discipline, reform and fairness.

We believe the 3p in the pound rise in pension contributions should never have been imposed without negotiation.

And it is wrong and unfair to penalize those on low and middle incomes by cutting tax credits, hitting women harder than men and families with children hardest of all.

But pay discipline in the public and private sector needs to be accompanied by fairness.
That is why the government should also ask the pay review bodies to deliver the 1 per cent average settlement cap in a fair way – being tougher to those at the top in order to offer more protection to those at the bottom.

Pay also needs to be fair in the private sector, where there have also been tough decisions – with real pay in the private sector falling around 3% in the last year. But for those at the top boardroom salaries in FTSE 100 companies have increased by 50% in the past 12 months.

That is why Ed Miliband has rightly called for reforms to ensure that rewards at the top better reflect the success people achieve and the contribution they have make to our economy. David Cameron has now started to talk the talk on this issue, but he now needs to take the action we have been calling for.

THE POLITICAL CHALLENGE FOR LABOUR

Let me finish by returning to the politics.

Because it would be naïve for anybody to think that the government’s deepening economic failure will automatically translate over the coming months into success for Labour.

And the question the public will of course ask is: who can we trust?

Credibility is based on trust and trust is based on honesty.

And let’s be clear: the Tories won’t own up either to the scale of the challenge or the failure of their plans.

They claim Britain is a safe haven… when our low long-term interest rates are not a sign of enhanced credibility but a reflection of stagnant growth in our economy, as it was in Japan in the 1990s.

And they claim we’re all in it together… when middle and lower income families, women and young people are hardest hit, and the pain is only now beginning.

So with determination and vigour – loud and direct – we must expose day by day the huge gulf between what Coalition ministers say and the truth.

But we must be honest with the British people that under Labour there will have to be cuts, and that – on spending, pay and pensions – there will be disappointments and difficult decisions from which we will not flinch.

But honesty does not mean going along with a failed Conservative plan because it is easier in the short-term. We tried that when Labour supported the disastrous decision to join the ERM and stuck with a failing policy right up until September 1992.

I have heard much advice over the past year from people who admit that combining stimulus now to get the economy moving with a tough but balanced medium-term deficit plan may be good economics – but who argue that it is bad politics because it is ‘out of tune’ with the public mood.

But that is not honest politics either.

Now is not the time to stand aside, bite our collective lip while this government and Euro area governments make historic and terrible mistakes.

I do believe that we have both a duty to make the right argument on growth and jobs – even if this has put us outside the consensus for a time.

And I do believe this is an argument we can win.

Now is the time to hold our nerve.

To make the case for The Economic Alternative.

To speak up for the people we seek to represent and the values that we stand for.
And to do so in a typically Fabian way – steady, step by step, determined, credible and radical in our vision for a better and fairer future for Britain.

Thank you.

Closing date looms for Labour Executive Director posts

As part of a series of wide-ranging reforms of how the Labour Party operates, party General Secretary Iain McNicol announced in November the creation of six new Executive Director posts to lead the party's work on Communications, Rebuttal and Policy, Field Operations, Commercial, Governance and Services, and Membership and Supporters.


This reorganisation forms part of former ITV Chief Executive Charles Allen's report on improving the managerial, campaigning and commercial units of the Labour Party.


The closing date for these positions is coming up this Wednesday 18th January.


Fabian Society members are most welcome to apply and further details can be found at http://www.labour.org.uk/new_job



Friday, 13 January 2012

Winning the economic argument: how to fight on Labour's own terms

Stephen Beer is the author of The Credibility Deficit he will be taking part in this Fabian Annual Conference. Afternoon tickets are still available. Please head to www.fabians.org.uk for details.

There could not be a more appropriate theme for this year’s Fabian New Year conference than the economy. Opinion polls tell us that Labour is still not trusted on economic policy, yet the Coalition has already had to rewrite its budget plans. The government plans even more spending cuts lasting beyond this parliament. In such circumstances, can Labour retain compassion for the worse off while regaining economic credibility?

That is the theme of a seminar I’m taking part in at the Fabian conference on Saturday. When faced with the severe cuts to spending, including on the welfare budget, compassion surely compels us to campaign against such measures vociferously. Yet we run the risk that people won’t believe we are serious about managing the public finances properly. In that case, at the least they will suspect we will put up taxes to pay for higher spending.

I argue in The Credibility Deficit, a Fabian pamphlet published last year, that Labour has to take significant steps to improve its economic credibility. These include a clear plan to reduce deficits and a clear plan for growth. Since the pamphlet was published, some on the Left have taken up the same theme and argued that Labour should be more focused on reducing government borrowing levels. The problem is that we can end up fighting the next election on the basis of Tory arguments about deficits, with Labour even promising to match Tory spending plans as we did before the 1997 election. Not only does that tactic concede ground to the Tories before we have even started, it is not likely to be enough to win the election. Instead, we need to convince the electorate that our spending will be effective and that their money will be spent in a way which will produce results and avoid waste or inefficiency. Furthermore, the Office for Budget Responsibility could limit Labour’s room for manoeuvre by declaring what it believed is and is not an acceptable budget. That is why Labour should announce an ‘Effective Spending Guarantee’ ahead of the next election, with independent verification of the effectiveness of any new spending plans we have.

There are two types of economic credibility. The first is with financial markets. Taking hard decisions on spending is one way to convince investors a government means business getting debt down.. However if they doubt those decisions will actually take effect (because, for example, public protests will force u-turns) they will stop believing budget plans are credible. They will also quickly become concerned if they believe growth will be too slow to deliver tax revenues and profits that were expected. The second type of economic credibility is with our fellow citizens; not simply on whether we have the right policies here and there but whether we have the right approach and will deliver. The right approach for Labour means holding fast to our values, emphasising that we are the same Labour Party, believing that everyone should have an equal start in life, that power (including economic power) should be dispersed and accountable, and that virtue has a place in markets. Broadly, that translates as building an economy not simply so that everyone benefits from the proceeds of growth (one way or the other) but in which everyone who can contributes to growth and has the opportunity to lead a fulfilling life. And in practice that will mean for example that we guarantee employment and do all we can to invest for our nation’s future prosperity.

Stephen Beer


Wednesday, 11 January 2012

Feminism must be put at heart of welfare state reform and economic growth

By Ivana Bartoletti, Editor of Fabiana

As women bear the brunt of the Tory-led Government’s reckless choices, the development of a fair and equal society for women is under threat. We are now seeing women pushed out of the workforce as their income is driven down, while cuts to legal aid undermine their access to justice and make them more vulnerable to violence.

However, stating the obvious is not enough. As has come increasingly to the fore this week with Ed Miliband’s speech to London Citizens, Labour's challenge is to re-design a welfare state with less money, and with much better control of public spending.

The welfare state has been a key ally of women, enabling them to work, access justice and healthcare and become less dependent on men.

The Institute of Fiscal Studies says that between 1968 and 2009, over a quarter of all growth in household wealth came from women working, compared with 8% from men: this means that women in the UK have been the main driver of the rise in living standards over the last 40 years.

At the same time, the UK is different to how it was 70 years ago; its demographics have evolved, and statistics still show that women have not reached the equality feminists were hoping for in the 1970s. Too often, women's freedom has been at the expense of other women, poorly paid to replace those services the State has been unable to provide effectively: childcare, in the first place.

This indicates that it is not a matter of cuts, as the simplistic but devious agenda of the Tory government dictates, but of ambition: the ambition of putting women at the very heart of a reform of the welfare state, which can and should be really rooted in women's needs and aspirations.

The key concept of a modern welfare state ought to be responsibility: it is not about discouraging people from taking risks or initiative but encouraging them to take control of their life so they can fully contribute to the economy. Responsibility is a concept inherent to feminism, as a women's responsibility generally encompasses responsibility for others, starting from their children.

The second element ought to be long-termism. The Tory-led government is all about reckless cuts dressed up as prudence, not about true rigour and transparency of costs. How much is it really costing to prevent women from working, to make them better off on benefits than in employment, as the Institute of Fiscal Studies revealed last week?

IPPR has shown there is an economic case for universal childcare for preschool-aged children, as this would pay a return to the government of £20,050 over four years in terms of tax revenue minus the cost of childcare for every woman who returns to full employment after one year of maternity leave.

I think it is about time to treat universal childcare as a strategic priority for public services and growth. In times of financial crisis, it is up to a responsible leadership to cut unnecessary expenses, even if that is unpopular, and focus on the strategic ones: the opposite of what the Tories are doing, which are simply random cuts.

You can read the new edition of Fabiana here.

In this edition:

Hilary Cottam makes the case for a more relational welfare, Torbjörn Hållö presents a Swedish perspective, Shadow Innovation Minister Chi Onwurah highlights the untapped ‘potential energy’ of women in the UK. There are also updates on Ed Miliband’s support for Fabiana and you can catch up on our latest Fabian Women’s Network seminar, hosted in partnership with IPPR and Cambridge University on Gender Justice, Society and the State.

Tuesday, 10 January 2012

Don't Mock Good Capitalism: It's already on the way

The below is a guest blog by Christian James Smith, Corporate Social Responsibility manager at ASOS, the online fashion retailer. Christian is not a member or supporter of the Labour Party and this blog represents his own views and not those of his employer


When the Conservative government mocked Ed Milliband’s idea of “good capitalism” late 2011, claiming that it unworkable, they were inadvertently mocking a number of businesses (Unilever, M+S, Kingfisher) who have adopted this model for future growth. The simple fact is that the neo-liberal system, which has underpinned years of growth, no longer meets the needs of the masses. “Good Capitalism” means being aware of the impacts of your company and striving to limit them – whether they are social or environmental. It means internalising costs that companies have long ignored. Not just because it is the right thing to do but because it can lead to further innovation and can help protect the resources (whether natural or human) needed in order for business to thrive.

The profit at all costs paradigm is over. Growth does have limits and we are seeing the results of reaching some of those limits. If people do not have money to spend, there can be no growth. If there are diminishing resources, there can be no growth. If spending on education, research and development dwindles, there can be no growth.[1] If too much of your economy is based on one sector – a sector deemed too big to fail, there can be no growth.

That does not mean the end of big business. It means that start of something more meaningful; the creation of businesses that connect people to their communities once more - a process already underway and an aspect that continues to elude the Tory Government.

The UK already possesses a high level of creativity and companies admired around the globe for quality and durability. Fashion companies such as Aquascutum, Burberry and Mulberry are desired all over the world. This desire for British inspired design is not just in the luxury sector but also further down the chain with companies such as Superdry, Topshop, Karen Millen, Ted Baker and ASOS flying the flag for the UK fashion industry. However, the UK manufacturing sector barely exists today – it was also not helped by the decision to focus on banking and services – in case you had not realised, not everyone wants to be a banker or work in a mobile phone shop. Competing with the Far East over price would have been foolhardy; competing over quality is a battle that British manufacturing would have won hands down. With a little more support from government, there is no reason why some of this sector cannot flourish once again.

Companies want to employ people at the local level. They want to be part of communities and they want to be part of progress. They want to, and in some cases already do, provide apprentices to graduates or school leavers. Part of the focus in the service sector has lead to a dearth of qualified people to work in these sectors – people with specialised skills essential to the success of certain industries. “Good capitalism” helps them and it helps the image of the UK. It can reinvigorate the UK economy, can attract the best graduates to areas other than banking and finance and can provide the counter point to the staid and unimaginative neoliberal polices of the current government.

In 1784, Kant wrote the paper “What is Enlightenment?” The answer to that was: “...man's emergence from his self-imposed immaturity..” The system does not work and government seems unable to properly address the problems we face with new ways of thinking. Those benefiting the most from the status quo need to open their eyes to the changing times. Ed Miliband is right to vocalise the need for change.


For the cutting edge of the debate about good capitalism and the new economy we need, don't miss Fabian New Year Conference 2012 featuring a keynote speech from Ed Balls

[1] 'Cornucopians' can talk about scientific progress, but that won’t happen if we don’t have excellent education systems and companies with the necessary impetus to be progressive

Monday, 9 January 2012

Why politicians are fighting over fair capitalism

When Ed Miliband used his Labour conference speech in September to call for fundamental reform of capitalism, the media rolled out a predictable insta-critique: 'anti-business' and 'lurch to the left' were the knee-jerk descriptors of choice. But now everyone's at it: criticising capitalism is positively in vogue. Both the prime minister and his deputy have hit the airwaves over recent days with Hutton-esque attacks on 'crony capitalism'. Such is the shift that Andrew Rawnsley warned Ed Miliband yesterday he risked having his clothes stolen; Patrick Wintour was making similar points in the Guardian before Christmas.

But why the sudden surge of interest in an idea that in the autumn was seen by the chattering classes as electoral hari kari?

Firstly, it was never actually that radical. Despite 'good' capitalism being a relatively new addition to a political agenda that's been stuck in a neo-liberal consensus for decades, businesses, NGOs and academics have all been on this territory for some time.

Secondly, politicians are beginning to realise that this is where the public is.

New polling in the Fabian Review bears out both points. Rather than being a fringe concern of the dangerously detached left, concerns about inequality are now mainstream: 70% agree 'the gap between the top and everyone else is now too wide and is bad for ordinary people'. Interestingly, the gap is of greater concern to those over 60 (78%) than 18-24's (63%), suggesting this worry is not borne of starry-eyed idealism but a rational consideration that our economic model isn't working.

Ed Miliband's distinction between 'predators' and 'producers' didn't really take, but our polling suggests this may have had more to do with language and communication than ideas: only 12% think a company's first priority should be maximising short-term profit for shareholders, with 80% agreeing companies 'should be willing to forego some profit in order to recognise a wider responsibility to their employees, their customers and their communities and to ensure they invest more for the long-term, even if this means less money is paid out to shareholders'.

Business expert Stefan Stern writes in the magazine:

Ed Miliband’s speech to the Labour party conference this autumn was the act of a whistleblower, someone confronting parts of the business community and challenging them to defend their ways...This debate is still in its early stages as far as many business people are concerned. But it is heading in the right direction. My money is on whistleblower Ed achieving vindication, and sooner than you might think.

Recent political developments suggest that day is approaching fast - now the challenge is to make sure Labour is the party that benefits politically.


The Fabian Review Winter issue includes ideas for a better capitalism from David Coats, Patrick Diamond, Stewart Lansley, Vicky Pryce, Kitty Ussher and others. Visit the Fabian Society website for more details.

Friday, 6 January 2012

Cutting the credibility deficit

Shadow Defence Secretary Jim Murphy has today suggested that Labour needs to have “genuine credibility” on the economy.

While Murphy is not the first frontbench Labour MP to make such a claim in recent weeks, with Ed Balls highlighting a similar approach in the latest Fabian Review, this idea was also expressed in the Fabian Society’s September 2010 pamphlet The Credibility Deficit by Stephen Beer which focused on Labour rebuilding its economic credibility and in the process regaining the public’s trust.

You can read Stephen Beer's The Credibility Deficit here.

At the centre of this pamphlet’s assertions was the notion that Labour faces a difficult challenge it must overcome in order to win the next general election. In fact Stephen Beer claimed Labour needed to respond to the tough decisions it faced on the economy, outline an economic plan for the future rather than a retrospective attack on Coalition policy and most importantly close the economic credibility gap that was first conceived and then grew during Labour’s last years in office.

It is worth noting that these same arguments are now being widely embraced by the frontbench of the Labour Party. Before Christmas, Ed Balls hit the press with his argument for what he termed a “platform of competence” stating, “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.”

Mirroring this, Jim Murphy’s interview with the Guardian, in which he has outlined a willingness to accept £5bn in defence cuts, adds to this growing consensus. Purporting to advocate cuts to Nimrod spy planes, deliver savings on trident and instigate cuts to civilian allowances, Murphy claimed. "It is important to be both credible and popular when it comes to defence investment and the economics of defence,” adding, “Credibility is the bridge away from populism and towards popularity.”

Ahead of Saturday 14th January’s Fabian New Year Conference there is a renewed focus on how Labour gains economic credibility in proposing the economic alternative, and it is imperative that such a policy convinces the public. To ensure this, Labour must conquer their demons and be willing to add weight behind these proposals. Coherence is key, as is conviction. With these tenants guiding the party’s path the argument can be won. Either way, success or failure, the next year promises to play a pivotal role in determining Labour’s credibility on the economy.

This is a guest post by Fabian Society intern Kenneth Way.

Thursday, 5 January 2012

Glasman’s lesson to Ed Miliband

Maurice Glasman made it too easy for headline writers and Tory opponents to spin his New Statesman article as an attack on the Labour leader and his shadow chancellor Ed Balls. The negative press coverage that charged Glassman with 'savaging' his leader has left those at the top of the party with a further hangover from the barrage of criticism they faced in 2011. Baroness Warsi claimed that Glasman had made it clear “Ed Miliband is simply not up to the job".

But there could also be an important message in Glasman’s words, and one which could prove a useful lesson for 2012. As Glasman recognises in his article, “the world is on the turn”, and Ed Miliband must be at the forefront of that change. With rumours that Lord Glasman has met with the party leader just three times in the last 18 months, this could be seen as his effort in shaping the leader’s plans for 2012; a critique rather than a criticism.

His headline-grabbing article, though perhaps ill-worded, demonstrates what Ed himself must now do; he must find a way for the “shock of the new” to be pushed into the forefront of debate, so it can be transformed into accepted policy. Ed Miliband’s ‘predator and producer’ analogy in his Party Conference speech laid the foundations of his idea for a new capitalism, and it was a move that was met with misunderstanding and derision.

But this notion has since started to win favour throughout 2011. Recent polling for the Fabian Society showed that only 12% thought the prime responsibility of a company was to maximize profit for its shareholders. 80% said that companies should be willing to forgo some profit in order to recognise a wider responsibility to employees, customers and communities. Ed Miliband was one of the first to recognise that 2008’s banking crisis was a seismic event, after which things would have to change. Glasman admits that, on this, Ed Miliband has so far succeeded. And this change would always have to be a gradual adjustment in what we expect and require from our businesses, rather than an instant change. This is what Ed Miliband did in 2011.

But for 2012 our leader must be encouraged to push further, and the New Year should be marked as the year in which Ed will grow from the position he has carefully placed himself. This placing demanded delicacy; Glasman admits Labour needed to be steered from the splits it faced in 1931, 1951 and 1979. But having done this, the time for delicacy is over. 2012 should be a time for strong and directive action, for showing voters that there is another way, by leading the way.