Saturday, July 19, 2008

The collapse of the "progressive consensus"

Do centre-left governments have any room for manoeuvre on tax anymore? Here's my column in today's Newcastle Journal.

***

Aneurin Bevan once famously described socialism as the language of priorities. It has been a fairly long time since the Labour Party talked about socialism, but at times like the present, it can't help but talk about priorities.

And few issues go more to the heart of what a centre-left government's priorities should be than the ongoing controversy over fuel taxes.

Is it the primary job of a Labour government, especially in times of economic hardship, to protect the living standards of the worst-off by trying to keep household bills as low as possible?

Or in this era of climate change, do governments of the left have a higher responsibility - to try to save the planet from the potentially deadly effects of the free market by curbing the use of fossil fuels?

The consensus of opinion within the wider public on this score has ebbed and flowed back and forth over the past decade.

Nearly eight years ago, in the autumn of 2000, New Labour's political hegemony was brielfy threatened by the eruption of the fuel protests, following the imposition of a "fuel price escalator" designed to curb greenhouse gas emissions.

Public sympathy at the time was initially with the protesters, though it evaporated pretty swiftly once they started blockading power stations and generally behaving like a bunch of 1970s flying pickets.

And over the ensuing years, opinion swung decisively back in the direction of the "green" lobby, to the point where any government which failed to do something to tackle car use risked being seen as irresponsible.

But that was before the credit crunch. The environment, which at one time was a big enough issue to persuade David Cameron to start cycling to work, has now slipped back down to its customarily more lowly place in the public consciousness.

Instead, we're back on the old, familiar ground of "the economy, stupid."

When the proposed fuel tax increase was first outlined in last year's Pre-Budget Report, inflation was still well under control and the effects of rising food and fuel costs had yet to be seen.

But nine months on, it seems, greenery has once again become a luxury that the nation cannot afford.

The pressure had been on Prime Minister Gordon Brown and Chancellor Alistair Darling over the fuel tax issue since the start of the year when the business and motoring lobbies first begun to hone in on it.

At one time, it might have been seen as a test of the government's resolve. I myself wrote in this column that the question of whether ministers were still prepared to make the case for the tax rise would show whether the Brown administration retained a shred of self-belief.

In the end, though, it was no great surprise when Mr Darling announced on Wednesday that the increase had been postponed once again. He probably had little option.

Indeed, with another crucial by-election for the government coming up in Glasgow East next Thursday, perhaps the only surprise was that he didn't do it sooner.

It won't stop there, either. Now that the government has u-turned on the fuel tax rise, expect it to come under sustained pressure to scrap the planned changes in vehicle excise duty to discourage "gas guzzling" cars.

When this idea was first dreamed up, the government probably had the so-called "Chelsea Tractor Set" in mind - a fairly convenient political target.

But in yet another example of the law of unintended political consequences, it turns out that the cars most likely to be hit by the proposed changes are overwhelmingly owned by the worst-off.

In the end, backbench Labour MPs are no more likely to let this happen than they were likely to allow the government to scrap the 10p tax rate.

I recently saw the planned changes to vehicle excise duty rather unfairly but amusingly caricatured on a satirical website as a spoof news item about Labour's "master plan" to restore its political fortunes.

"Labour will today unveil a detailed plan to alienate its last remaining pockets of support. The central plank of the party's strategy involves identifying the ten most popular family cars in Britain and then making them a nightmare to own," it read.

A “Labour spokesman” was quoted as saying: "We're going for the double whammy of making them too expensive to drive, but also impossible to sell."

Silly? Maybe, but it was a light-hearted way of making the serious political point that Labour simply cannot afford to antagonise its natural supporters any more than it already has done.

But the vehicle taxation issues are an illustration of a much wider political truth, that the government now finds itself in a position on tax where it has virtually no more room for manoeuvre.

Both Tony Blair and Gordon Brown have talked at length over the past decade about the need to build a “progressive consensus” in which people accepted that decent public services required taxes to be maintained at a certain level.

In fact the opposite has happened. People seem increasingly less and less happy to pay their taxes, with the result that the existing tax-take as a proportion of GDP is likely to come more and more into question.

It is this that has essentially brought about the Liberal Democrats’ near-total volte-face under new leader Nick Clegg from being a party of 50p tax rates to a party of tax-cutters.

Back in the early days of New Labour, John Prescott and others dreamed of using the tax system to bring about a major shift in public behaviour, making private transport progressively more expensive and using the proceeds to fund better and more accessible public transport.

However desirable this might once have seemed, the government’s inability to impose even small increases in fuel tax show that it has now become a political impossibility.

When Bevan talked about the “language of priorities,” there was a basic assumption that governments had the ability to choose between competing interests and concerns.

Increasingly, for this government at least, those choices no longer exist.

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Monday, July 14, 2008

Linford v Smithson on Brown v Blair

Mike Smithson is one of the genuine giants of political blogging so I'm always rather flattered when he namechecks this blog. Today he devoted an entire post to a discussion I raised on his blog last week over whether Labour would be in quite the mess it's in now had Tony Blair stayed as leader.

My view on this has always been that Blair had become a liability for Labour long before 2005 and that had Brown been leader at the last GE the party would actually have won a majority in excess of 100, but Mike disagrees and thinks that if Blair were still leader the Tories' lead now would still be only in single figures.

Most of the posters on PB.com sided with Mike on this but there was some support for my point of view from the distinguished pollster Robert Waller who made the following very interesting comment:

"By 2005 Blair was a very significant disadvantage to Labour, with Professor Harold Clarke and other academics using the British Election Study claiming that there would have been another 100 plus landslide majority if he had not been PM at the last general election.

"Thereafter, he did have to go, forced out earlier than he intended by pressure within various sections of the party culminating in the ‘plots’ around the time of the Lebanese invasion/crisis.

"With his party as well as the public thoroughly fed up with him, there was no possibility of remaining; the massive sigh of relief was the cause of the ‘Brown bounce’ (that really wasn’t Brown’s attractions!) in the third quarter of 2007. If for some reason Blair had managed to avoid all the pressure to go in mid 2007, the head of steam of ‘time for a change’ would just have got stronger and stronger.

"In addition he would have faced almost all the significant problems Brown does, unless he would be able to work a miracle with the oil and other commodity prices and economic peessimism which are the reasons for Labour’s current dire position in the polls. They would surely have been even worse off under Blair."

Ultimately, of course, as one other poster pointed out, all such counterfactuals are meaningless. But they are good fun, nevertheless.

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The Anglos

It's that time of the year again - the blogging awards season. First up are the Anglos - better known as the Witanegemot Club Awards, my favourite set of awards as no-one takes the results terribly seriously. There is even a category for the blogger you would most like to go for a pint with.

Cast your vote HERE.

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BBC perpetuates regional stereotypes

No further comment required.

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Saturday, July 12, 2008

All quiet on the Barnett front

Why has it all gone quiet over the Barnett Formula? And could it be anything to do with Glasgow East? Here's my column in today's Newcastle Journal.

***

Earlier this year, a brief flurry of excitement went around the Westminster village that Gordon Brown might be about to do something that few thought possible for a Scottish PM.

The Treasury had ordered a study into the workings of the controversial Barnett funding formula which governs the allocation of public spending within the UK - surely a precursor to its eventual abolition.

At the same time, Labour, the Tories and the Lib Dems agreed to set up a Commission to look at the Scottish Parliament’s powers and funding, likely to include consideration of whether the Scots should move towards greater financial self-sufficiency.

Could the 30-year-old formula, long a source of disquiet in the North-East on account of the tens of millions of additional spending it awards to Scotland, finally be on the way out?

BBC Political Editor Nick Robinson certainly thought so, proclaiming on his blog that "the skids appear finally to be under the Barnett Formula.”

I myself was slightly more circumspect, commenting on these pages that the long battle for a fair funding deal for the North-East still had a way to go yet.

Since then, though, nothing. Maybe Mr Brown has thought better of it. Maybe the various reviews, studies and commissions are taking longer than expected to come to fruition.

Most likely, it's been put on the back burner pending the resolution of other political crises requiring more immediate attention.

The issue, of course, has not gone away. This week's report by the regional think-tank ippr north once again underlined the case for reform.

It found that although the gap between Scotland and the North-East in terms of public spending has narrowed in recent years, it still stands at £716 per head.

The report's main author Guy Lodge said the Barnett formula was no longer "fit for purpose" and should be replaced.

"It does not result in a fair distribution of spending, and is becoming an increasing source of tension between the nations of the UK," he added.

In its response to Thursday's report, the Treasury certainly gave little indication that anything was about to change.

It said there were "no plans" to change the Barnett formula, describing it as "a fair allocation which reflects population shares in the different nations of the United Kingdom" - which is pretty much what it's been saying for the past 11 years.

But whatever the reason behind the apparent lull in government activity around the issue, it is doubtful that much more is going to happen in the next fortnight at least.

Why? Because on July 24, voters in Glasgow East will go to the polls to elect a successor to Labour MP David Marshall, who resigned his seat on the grounds of ill-health last month.

Like Crewe and Nantwich, like Henley, this was undoubtedly a by-election that Mr Brown could have done without.

The main opponent will be Alex Salmond's Scottish Nationalists, and even the slightest movement on the Barnett Formula is bound to be exploited.

Mr Salmond, indeed, got his retaliation in early in his response to Thursday's report, saying: "It is abundantly clear that the motivation of both Labour and the Tories on this issue is slashing Scottish spending."

He claims that, far from being subsidised by England, Scotland's oil revenues are actually subsidising the rest of the UK to the tune of £4.4bn a year.

Does Glasgow East represent any sort of threat to Mr Brown, given that Mr Marshall had a majority of 13,507and had held the seat for Labour since 1979?

Well, ordinarily, no - but these are not ordinary times and the Prime Minister's record in by-elections thus far hardly inspires confidence.

Furthermore, there is one aspect of the Glasgow East contest that carries a particular danger for Mr Brown - the fact that it is taking place in his own Scottish political backyard.

If he can't win this one, Labour MPs will justifiably start to wonder whether he can actually win anywhere.

Mr Brown can at least take comfort from the fact that the by-election is taking place two days after the start of the summer Parliamentary recess, reducing the scope for plotting.

But the fact that even Harriet Harman has been talked about during the past week as a possible replacement demonstrates the extent of the trouble the Prime Minister is in.

My guess is that Labour will hang on, and that the immediate danger for Mr Brown will recede until the start of the conference season in September.

But as for the future of the Barnett Formula, the Prime Minister finds himself as caught between a rock and a hard place as he ever was.

It was, I think, always Labour's hope that it could safely ignore the problem, and that the formula would simply wither on the vine as spending between the different parts of the UK gradually converged.

It has now become clear, though, that this process will take so long that unless something is done sooner, the union could well fall apart in the meantime.

Reforming the Barnett Formula might have been one of the many radical things that Mr Brown dreamed of doing once he got to Number Ten.

Now he's there, though, he has found himself far too preoccupied simply with staying alive.

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Friday, July 11, 2008

Will DC bring DD back?

No, says Iain Dale, who as Davis's close friend and former campaign manager probably knows more than most.

But I'm not so sure. As I've said on Iain's blog, Cameron does not strike me as a vindictive man and if, in time, it becomes clear that bringing back Davis in a senior role would strengthen the team - which in my view it will - I think he'll probably be prepared to let bygones be bygones.

Whereas incoming Labour Prime Ministers are required by the party's own rules to appoint Shadow Cabinet members to the Cabinet - although it didn't stop Tony Blair sacking four of them after a year - there is a fairly long Conservative tradition of bringing in heavyweights from outside whenever the party enters government.

Lord Carrington, chosen as Foreign Secretary from outside the then Shadow Cabinet by Margaret Thatcher in 1979, was an example.

There has been much talk in Tory circles about whether Prime Minister Cameron would bring in, not just DD, but also IDS, Ken Clarke and even Peter Lilley if he wins the next general election.

Such talk is a tacit recognition that the current Shadow Cabinet, while strong on intellect and ideas, is lacking in that indefinable quality that, in the days of Trollope, used to be known as "bottom."

My guess is that at least two of the aforementioned "Big Beasts" will return, and that the first Cameron Cabinet will indeed look fairly different from the current Shadow Cabinet line-up.

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