Cameron's half-baked economics

Having chided the Shadow Chancellor yesterday for focusing too much on trendy social psychology and think-tank-esque ideas rather than getting on with his day job, I guess I have to comment on David Cameron's economic strategy as outlined today in a speech to the CBI. I didn't hear the speech just read it so I can assume that he didn't say the following with any hint of irony:

The more you look at [the Government's economic plan], the more you realise that it isn't an economic strategy, it's a political strategy."

Good one David. His speech is actually more interesting for its political meaning than as an expression of economic policy. Not because it could in any way be described as an economic strategy. It's not. It's a rag-bag of loose ideas that are chucked in the economic sack and fail to meet the challenges they set themselves. What marks the speech out though is a wicked sting in the tail. The Spectator has been spitting feathers at the proposals to introduce a British version of the US bankruptcy protection, Chapter 11. So Cameron has given up on creative destruction. He might well get another visit from Margaret Thatcher soon.

That's not the real sting in the tail though. What The Spectator did not comment upon was the policy of massive state intervention that Cameron appeared to sneak in under the radar.

"Businesses need the infrastructure to succeed. And I mean infrastructure in the broadest sense of the word. Transport. Education. Skills."

Wow. That seems to imply major intervention. Are the Tories finally reconciled to post neo-classical endogenous growth theory? Governments do boost economic growth after all. This is a complete accommodation of the economics of new Labour. Perhaps that's something for Gordon Brown to celebrate?

I'm afraid on the specifics, the speech was sorely lacking. Just some examples:

- His welfare to work policy is basically a copy of Labour's with public sector providers excluded. Why, for example, would you exclude further education colleges from provided basic skills? It's what they do, it's what they have expertise in delivering, and they are trusted by local communities.

- Taking first time buyers out of stamp duty. Fine at the margins. But surely David you've read about the credit crunch and its impact on the mortgage market? Stamp duty is not what is holding people back in the housing market, it's the availability of affordable mortgages. You've missed the point.

- On the cost of living, he says, "Of course, many of the problems families face come from abroad." You may be revealing your little Englander instincts there David. We are part of the global economy. Our demand contributes to global demand as does our supply.

- Funding corporation tax reductions by reducing complex reliefs and allowances. Well, (i) firms are interested in their overall tax burden not necessarily just the headline rate; (ii) Does this mean abolishing measures such as R&D credits and how does this sit with promoting hi-tech investment?

- Shire Pharmaceuticals and United Business Media have not left because of the 'burden of regulation.' Most regulation is European so applies pretty much anywhere they HQ.

I was sceptical about the fair fuel stabiliser but I think it's worth having a closer look at for one major reason. It would have an impact on inflation which would mean that interest rates could be more focused on the real economy rather than the price of oil. Though notice that the oil price has increased relative to other EU nations due to the depreciation of the £ vis-a-vis the Euro. There is something you could do about that David......

So this is not an economic strategy at all. There are some good ideas, many just copied from the Government (did I mention underwriting all deposits up to £50,000? There are others....), and there are some largely irrelevant ideas. There is nothing in it to reduce the cost of living in the long-term as his conclusion claims. It confirms my view that George Osborne needs to spend less time on extra-curricula activity and more on economic policy. If you really believe that you are going to form the next government, time to get serious about economic policy, Dave and George.

A 'nudge' in the right direction?

George Osborne writes on 'nudge theory' in today's Guardian. As argued elsewhere, Cameron's Conservatives are busy hoovering up a whole range of concepts borrowed from social psychology in order to build an ideological platform.

Non-state, collectivism is the approach and it's characterised by local interventions by voluntary groups and behaviour influencing public policy. The rather cheap point to make, but I'll make it anyway, is how does all this tally with lecturing people about 'good. bad. right.wrong'? We'll come back to the glaring inconsistency another time.

Osborne provides three examples of how 'nudge theory' can work in a political context: encouraging energy efficiency, paying people to recycle (he strangely gives a US example when other European countries have been doing this for decades), and discouraging people from getting into store card debt. The latter example doesn't seem to follow his argument unless he is saying that customers are being nudged into getting into debt so they need a cool off people to un-nudge themselves. All three sound like sensible and workable policies.

A couple of things strike me about the argument though. Is Osborne just using 'nudge' as another word for incentive? It seems that the authors of 'Nudge', Thaler and Sunstein, mean something different to incentive. They refer to 'nudge ' as an act of social persuasion. Paying people the more they recycle is not social persuasion. It is economic incentive. A very different thing and something we are very familiar with in politics. Tax credits work in exactly this way: they incentivise people to work.

The other thing that strikes me is that these are all really neat ideas. They are also pretty micro. They are the sorts of ideas that local authorities should be coming up with and implementing. A Conservative government is going to need something a little more macro if its to deal with (in their words) 'social breakdown', environmental degradation, and economic woe.

George Osborne is Shadow Chancellor. It is to economic difficulties that his attention should be focused. He completely fluffed the ball on Northern Rock. He has no identifiable analysis about why we are facing an economic downturn and what the response should be. The Tories have no proposals about how we can get the housing market going again both in terms of sales and construction, or the regulatory architecture that a modern economy needs in an age of global and free financial flows. It is a huge gap in the Tory platform. They can get away with blaming the Government for only so long. At some point, they will have to reveal their hand.

So perhaps, I could respectfully suggest, rather than fiddling around with nifty think-tank-esque ideas inspired by the latest fad in social psychology, Mr Osborne needs to go back to some economic basics? By far the biggest service he could offer to his Leader would be to knuckle down and come up with a credible alternative economic plan. Thanks for the ideas, now back to the day job.

Tories on social justice: back to the future

Just when you think that the Tories have changed, along comes a sharp reminder that there is a Thatcherite instinct lurking within. Tim Montgomerie, Editor of ConservativeHome, argues that the Conservatives are becoming the home of social justice.

Montgomerie's argument is without content. It is a broadside at the deeply ingrained social problems that we face with some random policy solutions. Quite why this claims the mantle of the 'party of social justice' is beyond explanation. If this is representative of the depth of thinking in the modern Tory party then Labour can breathe a little easier.

What are these 'values' to which Montgomerie refers? Take 'commitment to the family' as a case in point. Well, this is just as much an outcome as a cause of deprivation. Of course it is desirable that kids are brought up in a stable home environment. That stability can not be legislated for or incentivised using the tax system. Instability at home is corollary of unstable communities characterised by casual labour, uncertain futures, an absence of hope and self-confidence, and infected with organised as well as petty crime. It's all well and good discussing family breakdown as a adjunct of 'social breakdown' but a hectoring approach will reap few if any rewards. It may actually cause more harm than good.

Into the fray, enter the Leader of the Opposition stage left. Previous posts will demonstrate that I take the intellectual and political challenge posed by the new Tories deadly seriously. Yesterday David Cameron announced that the Tories will issue sentencing guidelines that anyone convicted of a knife crime should receive an automatic custodial sentence. The vast majority already do of course. What was interesting though was the language that David Cameron is now deploying:

"We talk about people being at risk of poverty, or social exclusion - it's as if these things - obesity, alcohol abuse, drug addiction - are purely external events like a plague or bad weather.

"Of course, circumstances - where you are born, your neighbourhood, your school, and the choices your parents make - have a huge impact. But social problems are often the consequence of the choices that people make.

"There is a danger of becoming quite literally a de-moralised society, where nobody will tell the truth anymore about what is good and bad, right and wrong.

"We as a society have been far too sensitive. In order to avoid injury to people's feelings, in order to avoid appearing judgemental, we have failed to say what needs to be said.

"We have seen a decades-long erosion of responsibility, of social virtue, of self-discipline, respect for others, deferring gratification instead of instant gratification.

"Instead we prefer moral neutrality, a refusal to make judgments about what is good and bad behaviour, right and wrong behaviour. Bad. Good. Right. Wrong. These are words that our political system and our public sector scarcely dare use any more.

What is this if it isn't Thatcherite moral posturing? More seriously, it is yet another attack on the public sector which actually has a fundamental role to play in fighting knife crime. Instead, Cameron is going to rely on the likes of Ray Lewis to deliver his social policy.

Self-styled community leaders and reformers are a mixed bag, some are inspirational for sure but you never quite know what you are dealing with. Working alongside the police, social services, the schools, and local authorities they can be effective. To contract your entire welfare policy to them, without proper vetting or oversight, is absolutely barking mad. The impact on deprived communities will be patchy and minimal and the waste of state money will be serious.

So with their voluntary approach to social policy shaken to its foundations, the Tories have reverted to type. We are now back to hectoring the poor for being poor. Public policy ideas have a habit of coming back around every decade or so. In the Tory universe, you can watch the policy cycle on fast forward, ideas swing back around every few months. The only conclusion has to be that they haven't really decided who they are and what they are for. Whatever it ends up being, this vacillation will in no sense claim for them the mantle of the 'party of social justice' no matter how many times they assert it.

Post script: The Spectator launches a predictable attack on The Mirror's predictable attack (as the arguments are roughly similar, I guess that makes my attack predictable as well. Everyone's predictable just like the English Summer!)

David Davis- he's got balls and they are in the air.

Politics is patient game, incremental in many ways, painstaking, about subtle positioning and differentiation. Just occasionally, someone takes a chance, tries to change the game, takes a gamble. Wise old heads shake and sometimes tut, the media has to try to decide whether to give the gambler a line or let them go over the top alone, supporters have to decide whether to go with it or turn their backs.

We'll see what happens in the case of David Davis. I suspect, judging from the initial reaction, he is going to fall flat on his face. The Labour party may not even field a candidate. Deprived of oxygen, David Davis's political career could just quietly expire.

The Telegraph is even sceptical. Adam Boulton is saying that the pressure has just been taken off Gordon Brown and now the focus is on the Tories. If that is the case and the Tories can not withstand the pressure, this could be the most spectacular political gamble in living memory.

David Cameron must feel very frustrated that David Davis is gambling with his chips as well. Game on.

The British Obama?

Fraser Nelson is a very talented commentator. I don't think that this line, good though it is as a journalistic construction, will be seen as his finest hour:

"Cameron has plenty heavyweight ideas, he just needs a good slogan. Obama has the reverse problem."

Hmmm. Let's compare. Here is the Conservatives' policy page:

http://www.conservatives.com/tile.do?def=people.opportunity.page

Three pages, three basic areas, not many actual policies and certainly very few costed policies.

Now compare Barack Obama's policy-rich agenda:

http://www.barackobama.com/issues/

There is no comparison. Just take one critical area, both America and Britain are both facing difficult economic times. Barack Obama's economic plan (notice the link), whatever you may think of its merits, is clearly something that is thought through and actionable. The Tories' economic plan (notice the absence of a link)? Do they have one apart from the usual platitudes? It's certainly not any of the 'policies' listed on their website.

It's interesting watching the US elections- the early attacks on Obama for lacking substance have completely disappeared from the terrain. Experience is now the dividing line. Clearly the collective conclusion of media commentators, political opponents and friends alike is that Obama is a candidate of substance.

The off-the-mark attacks on Obama's lack of substance of a few months ago still ricochet around the UK political landscape. It's time that the bullet hit the ground- how on earth could anyone get through the most gruelling political process in the world without having solid and defensible policies? It just doesn't make sense.

The suggestion that David Cameron has the substance where Barack Obama just has rhetoric is just a tad fanciful. OK, it's utterly ridiculous. David Cameron's challenge is to find the slogan AND the heavyweight ideas. We'll wait with bated breath.

It's not just the economy, stupid

So much, so much. Following the local election post mortem is like standing in the middle of the climax of a firework display. Every angle, every axe, every agenda is whizzing and fizzing around the pages of the Sunday press and TV studios. Gordon Brown must be reflecting on something wise that Tony Blair once said (not the only thing...) As you gain more experience, you learn to trust judgement over intelligence.

But the disagreements seem to be not just about 'where next?' but over 'what happened?' Two points to anyone who campaigned on Thursday are obvious:

i) It is not just suburban voters that are beginning to taste what it's like to vote Tory. It is traditional Labour support as well- in smaller numbers then their more affluent neighbours but significant nonetheless. Jon Cruddas' analysis in the Sunday Mirror is right. Ivan Lewis is optimistic in describing the elections as a 'suburban revolt.' Labour losses may have been concentrated in areas that had suburban characteristics but the quiet but significant switching of the traditional, working class could be just as corrosive to Labour's chances at the next election. Labour ignores this at its peril.

ii) It's not just the economy, stupid. Pocket book issues are hurting Labour, one of which, the abolition of the 10p tax rate, was self-inflicted. But this is more fundamental than that. The Government's achievement over more than a decade are tremendous but people are confused about the direction in which Labour is heading and they still feel that their lives and communities should be better. They are not wrong and the Government needs to answer their fears and insecurity.

So the best advice of the day? I think that has to go to Matthew Taylor, former Number Ten strategist. Define competence, tell people how it can be measured then focus exclusively on meeting the challenges that you've set for yourself.

Big policy documents and 'meeting long term challenges' are not the order of the day. Labour has two years, it is about reminding people what a Labour Government is about, why it is different to the Tories, why it is important, and showing that it can lead and deliver. So it's not just the economy, stupid. It is about showing that it is Labour that will make people's lives and communities better.

Local election aftermath

So the blood-letting begins. And already it has got off to a false start (and Mayoral results haven't been announced yet.) It has been characterised as the Progress line (don't forget the southern, middle-class) versus the Compass line (it's the core vote, stupid.) The reality is that if you read the Progress and Compass responses to last night's appalling results, they are basically arguing a similar and rather superficial point. Apparently, we have to assemble a winning coalition to win. Get it?

As Neal Lawson of Compass concedes, Labour has the to retain the support of both the working-class and middle-classes. The genius of Blairism is that it unified the interests of both. Now I don't see how a political strategy that achieved a majority of 64 in some the most trying of circumstances just three years ago can be described as 'dead' as Neal declares in his piece. My experience on the door-step yesterday is that Labour is hemorrhaging support from both the middle classes and the (white) working class. More worryingly than Neal Lawson suggests, the white, working class was often jumping straight to the Tories. The BNP were a fleeting concern and they have flatlined in this election with some local exceptions but it is the Tories who pose the major threat to Labour's core vote now.

Politics moves on and the priorities of the last ten years are not necessarily the same priorities of the next ten years. There is no doubt the Government has reached an impasse and only a new appeal will induce a recovery. This appeal can not be about sprinkling goodies on this group and that group as a desire to secure their allegiance. Instead Brown needs a clear vision, consistently and clearly communicated, and backed up by a political sensitivity.

What is that vision? Nothing I have heard so far is in any way convincing- 'big challenges', 'on your side', 'unlocking talents', it all sounds hackneyed and wan. We know we have to build a winning coalition. But how?

Brown's choice: re-erecting the tent v the strategic strike

Labour is poised for a period of internal reflection no matter what the results are like tomorrow. You can speculate endlessly about what the outcome will be but in low turnout elections (and with rain on the day turnout could be affected further- the forecast for Rugby where I am campaigning is here.) The reality is that a great deal depends on local factors such as the effectiveness of local organisation when you are looking at turnouts in the low 20s. That is difficult to judge in advance. So I'm not going to make a prediction other than to say that the London count will be very exciting indeed.

So there will be a weekend of hysterical reaction when actually the results mean very little from a national perspective. Next week, a fierce internal debate about how Labour should begin its recovery will swing into action. Tuesday sees a Compass 'what now?' event and it's the Fabian's turn on Thursday with a talk on Labour's appeal in the south by the thoughtful John Denham MP.

Jonathan Freedland clearly defines the terms of the debate. The Compass approach of 'recovering the lost Labour vote' of public sector workers, ethnic minorities, "urban intellectuals" and the traditional working class versus the strategic strike approach of targeting a small number of swing voters in a small number of constituencies. Freedland describes this as the approach of the centre-left Progress Group.

This strategic discussion is all very well but in practice what will it mean? Instinctively I tend towards the broad Compass approach but until we see what it means in black and white it is difficult to conclude that they have the answers. We will see over the coming weeks.

Nothing I have heard yet is a convincing platform for halting Cameron's march onto Labour ground. Some of that can be undone tactically- i.e. undermining the credibility of Cameron by challenging the substance or effectiveness of what he is saying on the NHS, the environment or poverty. But there needs to be something broader also.

I will cover the debate as it evolves over coming weeks as this is a key moment for the Labour Government. These debates will be critical in determining the outcome of the next election. Just one comment is worth making at the outset. The Government is going to have to get itself in a position where it is assessing the politics of its decisions not just the administrative merit. This is where it went wrong over the 10p tax issue. This is not government by focus group but it is a more sensitive form of government. If it gets the politics wrong then the strategic discussion becomes an irrelevance. Instead, Brown's administration will simply be playing back-foot politics. The damage will be limited but victory will be denied.

Compulsory voting? Electoral reform?

The Government is consulting on the introduction of compulsory voting and changing the voting system for Westminster elections. Are either of these things a good idea? On balance, I favour the introduction of preferential voting (where second or third choices are re-distributed to the leading two candidates) but I am opposed to compulsory voting. I've come to two opposite conclusions but for the same reason.

There is only one good reason to change our system of voting. That is democratic engagement. Political engagement is weak in the UK and is getting weaker. Local organisations of all the parties are failing to motivate voters to either vote or participate in the democratic process. That harms politics: it makes political decisions seem remote and imposed and that further feeds disillusionment. Politics is something that is done to people rather than done with them.

I have always been sceptical about electoral reform- I never bought the arguments about 'fairness' and I do still have concerns about handing disproportionate power to minority parties in Government (that can happen in the current system of course and is more likely to when you have a third party with 50 seats or more as the Lib Dems currently do.) But the gains to be had from an electoral system that forces parties to engage locally with 70% or 80% of the electorate rather than 45%-50% are considerable and parties that fail to widen their appeal will face electoral defeat. So I am in favour of the Alternative Vote system for Westminster elections because the democratic benefits could be considerable and the risks are not monumentally greater than the current system.

But compulsory voting is another matter. The 'liberal' objection, that to force people to express an opinion is wrong doesn't quite fly. We force people to do all sorts of things (including registering to vote, for example) when there is an overriding community benefit. But voting rates have been declining, give or take, for a considerable period of time. It is something that politicians, local or national, should be deeply concerned about. Compulsory voting would mask this fact and therefore would allow politicians to feel that they were engaging competently when the opposite could well be true. That would only further feed disillusionment. If you want to really anger people then introduce state funding for political parties at the same time...

So the Alternative Vote could improve democratic engagement and compulsory voting could harm it. I am for the former and against the latter.

Post script: How would the parties benefit from change? Labour would benefit most from compulsory voting (its voters have a lower propensity to vote.) In the current context, Labour would also benefit to a certain extent from electoral reform in terms of seats won (though coalition politics would probably then determine whether it was in or out of power.)

It is worth seeing some research from a year ago about the second preferences of Liberal Democrat voters.

Conservatives on balance would favour the status quo. Liberal Democrats have much to gain from any type of proportional voting system. Compulsory voting is neither here nor there for them. I bet on the basis of this analysis, you can predict how each of the parties' will vote on the overall package.....the question is whether the Conservatives can prevent the changes coming in before the next election by crying foul at a Government changing the rules of the game.....It will be a brave short term political decision for the Government to try to force these changes through in time for the next election.

Tories and the NHS

At 7.42am this morning just as I was spitting out my Sultana Bran in complete surprise, somewhere in Mannings Heath, Norman Tebbit was spitting out his cereal in absolute horror (an aside: what do you suppose Norman has for breakfast? Iron filings in Castrol GTX?).

Andrew Lansley, Shadow Health Secretary, has committed the Tories to increase health expenditure somewhere in the region of £30 billion! Fine. Maybe. But I just don't see how they can. They want to 'share the proceeds of growth', i.e. constrain public expenditure to a level less than the growth rate and use the remainder to fund tax cuts. To increase health expenditure by around 2% of GDP there would have to year on year increases greater than the growth rate to get there.

So what gives? Well, a Tory Government wouldn't be able to reduce expenditure on defence or law enforcement- there would be blue rinse flowing into the Thames Estuary before they could. Social security is sensitive to the economy and we are now into the base expenditure that is really hard to cut without leaving many people in penury. They could get rid of tax credits but that would hit families really hard. Education? Transport? All the big line items are pretty tough to significantly cut. Will they borrow more to spend locking in unsustainable debt?

No something will have to give: either economic competence, tax cuts, or expenditure pledges. Whichever one it is, they are going to look pretty incompetent. Which one it is will say a lot about where the Tories' real heart is. Norman Tebbit is probably chewing on scrap metal in anger as we speak.

No Barack Obama

It was only a matter of time before the Obama wave hit these shores. It was inevitable that it would be David Cameron that would go for it first. See below for a familiar anti-establishment/ change message:

David Cameron's first attempt to be Barack Obama

Incidentally, linked with this initiative is the 'opportunity' to sign up to be a friend of the Conservatives (for as little as a £1!) It's a great idea. From now on, I am going to charge people to be my friend too. The basic fee will be £10 with a 50% discount for under-25s, UB40 and OAPs. I know it's more than Dave's charging but most (OK, some...) of your friends will still talk to you if you are a Friend of Painter and they probably won't if you're a Friend of Dave. If you want to pay more you can. Fees will be reviewed on an annual basis. Please do not request special treatment- as Dave says 'you can get it if you really want it.'

Hackney twinned with Soweto?

The Tories have re-released their 'what a dark world we live in, bring in a ray of Tory sunshine' video. About twenty seconds in amongst the 'interesting facts about the world' bit of the video comes the claim 'The streets of Soweto are safer than those of Hackney.'

My close affinity with Hackney forced me to double take. That 'fact' is surely absolute nonsense given that this is Soweto and this is Hackney. Crime plummeting, house prices soaring, more green spaces than any other London Borough and the most improving Council, Hackney, one of the Olympic Boroughs, is flying. It also happens to be home to the fantastic Hackney Community College of which I am a Governor (there, interest declared...)

So what on earth are the Tories up to? It turns out that the 'fact' refers to an absurd claim made by a South African surgeon back in 2002! A South African journalist, Justice Malala, rebutted the claims robustly and convincingly in the Guardian at the time, articulating that what an injustice the accusation was to the actual victims of crime and those who fear of crime in the Johannesburg township. It is also a disservice to Hackney and the people of Hackney.

It turns out that not only is crime rapidly falling in Hackney but it is far from the worst Borough in London: Camden, Islington and even Westminster are worse. None of them can in the slightest way be compared to the Soweto.

So let's have an honest debate about the challenges that face us instead of this outmoded and tenuous stereotyping, Mr Cameron.