Is “reforming the EU from within” realistic?

Today David Cameron announced – to the surprise of no one – that the EU Referendum will be held on 23rd June. He further stunned the world by announcing he would be campaigning to remain in the EU. This followed months of painstaking negotiations over some trifling ‘reforms’ he had cobbled together. This was concluded last night after a two day summit of EU leaders. The result seems to have been that Cameron can go away and say he has secured a ‘special status’ for the UK, while all the other EU leaders laugh behind his back and go home to tell their voters that nothing of import has changed.

So that’s where we are now. No one who is campaigning to remain – including Labour, the Green Party and the Lib Dems – actually say they are happy with the current set-up of the EU. ‘Reform from within’ seems to be the mantra. But given the tortuous mess that were David Cameron’s attempts to achieve his “thin gruel” reforms (as Jacob Rees-Mogg called them), what possible hope do the likes of Labour have for achieving a single reform they want going forward? They don’t have a cat in hell’s chance.

If we vote to remain on 23rd June, the EU will consider the matter settled and push on in the same direction they have been travelling for the last 40 years – towards greater and greater integration. I don’t know how anyone could vote for that.

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What should Labour be talking about?

The Labour Party is a joke at the moment. The Corbyn side seems to be trying to steal the Green Party’s manifesto at the moment with it’s talk of basic income guarantees and “Democracy Days“. Meanwhile, the rest of the Parliamentary Labour Party seems focused on ensuring it performs terribly in the May elections, with a side project of campaigning to stay in the EU. Neither side seems interested in winning round voters to their way of thinking. Here’s what I would do if I were Labour.

Most people either actively despise politicians or have no interest in it whatsoever. Someone who seems different to the norm and has a fresh approach could re-capture some of those people turned off by politics. Labour politicians should have embraced this opportunity, but instead they squandered it with petty squabbling. At the same time though, you don’t want to scare people off. The media will try and do that, but helping them to do that is not smart. You have to go to where people are before you can take them to where you want to go.

With that in mind, here’s where I think most people ‘are’ on some issues:

1. Immigration. People don’t really care about whether immigration is good or bad for the economy. They see the impact on their local area, or areas nearby and dislike the change this represents. Humans have evolved to be wary of outsiders and I don’t see this changing any time soon.
2. It’s normal for humans to compare themselves to those around them and to feel envy and resentment to those they feel don’t deserve what they have or are getting something without working for it. This is why cuts to social security generally have the support of the majority, but why cuts to working tax credits specifically are not popular.
3. Most people’s resentment about perceived unfairness can be quite easily channeled towards those at the bottom. Everyone can think of examples from their own communities where people seem to be getting ‘something for nothing’. People also resent those at the top seemingly taking the piss.

You may not agree with those descriptions of where people are, but assuming they are true, what policies would flow from them?

1. No party can do anything on immigration while a member of the EU. Personally, I can’t see why a party seeking to represent working people can support our continuing membership of the EU. In an ideal world, Corbyn’s Labour Party would be campaigning to leave. They could then advocate for a points-based immigration system, while continuing to talk up the contribution skilled migrants make to our country. Realistically though, this was never going to happen. The modern Labour Party is as pro-EU as the top of the Tory Party. What can they do now they have decided to remain in the EU whatever the terms? Answers on a postcard please.
2. Labour should adopt a position that anyone with the ability to work should work. They should scrap all welfare to work programmes and instead introduce guaranteed jobs paid at a living wage for all who find themselves unemployed and unable to find alternative work. Anyone unable to work should be give generous and unconditional support for as long as they need it, with the assurance that when they feel able to do any type of work, a job can be tailor made to suit them.
3. Our economy is far too reliant on the finance sector and the very wealthy extracting money from the economy through unproductive investments like property. Labour should pledge to put a stop to this by increasing taxation significantly on those unproductive areas of the economy, while reducing tax on productive investments which have a positive impact on the economy.

Those are just three areas then, a fair immigration system, focus on employment guarantees rather than traditional social security, and – as Keynes might say – on euthanising the rentiers. I don’t see much prospect of any of these things becoming Labour policy, but all those 3 areas would have popular appeal in my view. What other areas could they focus on?

Labour’s John McDonnell on Google and tax avoidance

I wrote this post yesterday about the recent news about a tax deal reached between HMRC and Google. In the comments a reader alerted me to an interview on Channel 4 News with Labour’s Shadow Chancellor John McDonnell. He’s almost very good in it. As seems usual these days, no Government Minister was willing to be interviewed about Google (no empty chair though again), so Cathy Newman stepped in. She tried her best to trivialise the issue, but McDonnell didn’t do too badly under her line of questioning. He did a reasonable job of linking the issue of tax avoidance with the concept of ‘fairness’. This is the correct way to address the issue in my view, but he went about it the wrong way in one sense, and dropped a clanger in another.

A couple of times he implores companies to “pay your taxes”. The trouble is though, they are paying their taxes according to the law. What he should actually be doing is targeting the anger at George Osborne to “change the tax system”, preferably with a few concrete ideas about how to do that. By focusing on the companies themselves, he lets the Government off in a big way and makes it purely an administrative issue on the part of HMRC, saying they are not doing their job right or are underfunded.

McDonnell’s clanger came when he talked about taxes paying for things he thinks should be funded. By doing this, he sets himself up to fail later on because whenever he suggests a policy, the Tories will either say there is a funding black hole or that taxes will have to go up on ‘hardworking families’ to pay for it. A smarter play would have been to just hype the fairness aspect. Every individual and SME can relate to having to pay a more ‘standard’ rate of tax, so the unfairness of tax avoidance should be an easy sell.

Here’s the video. See what you think.

The blind alley that is tax avoidance

In the last few days, HMRC reached a deal with Google who agreed to pay £130m in corporation tax to cover the last 10 years. George Osborne called announced this on Twitter, saying:

Good to see #Google paying more tax on past profits. We want successful businesses in UK – but they should pay their taxes.

— George Osborne (@George_Osborne) January 23, 2016

#Google tax bill is a victory for the action we've taken.I introduced Diverted Profits Tax.We now expect to see other firms pay their share

— George Osborne (@George_Osborne) January 23, 2016

Many people think Google has been unfairly avoiding tax and so are less than happy with George Osborne’s celebratory tone. There have been questions in Parliament today about this deal. Labour have been making a lot of noise about it, and the story could run for a bit longer. The thing is though, this payment from Google is actually an over-payment. They paid all their taxes due under the law. I don’t think anyone is saying Google have broken the law, but they have gone to the limits of what the law allows. Criticisms of this deal focus both on Google and on HMRC’s treatment of Google, but I think both are unfounded. Google is paying all the tax it is required to (or even more) and HMRC is trying to maximise the revenue it collects within the law. If it has extracted this voluntary payment from Google, it’s actually not done too bad.

So is tax avoidance OK then? No it’s not OK. It’s not fair that ordinary people and businesses have to pay more than those who can afford to pay accountants to minimise their tax bills in inventive ways. We need to be clear though. If Google paid £2 billion extra in tax rather than £130m, what would this mean for public services? Could the government then afford to spend more? No, absolutely not. The government can afford to provide public services at any level (within the constraints of inflation) whether it receives tax payments from Google or not.

Should people be able to feel the tax system is fair though? Yes, I think that is a reasonable wish. The best way to achieve this though would be to change the tax laws though, not to try to shame amoral companies into paying more voluntarily. This is why I think the issue is a blind alley for Labour (as it was in the last Parliament). It can generate some headlines, but to make a difference, you need to come up with specific changes to the tax system that would make a real difference.

This is not about how much tax is received in total, it’s about who pays that which is collected and whether that distribution is perceived to be fair. While you link cuts to tax avoidance, you will always be on the wrong side of the argument, because if you accept the link between taxation and spending you are exposed to the retort “how are you going to pay for it?” if you suggest any new spending initiative. It’s not a good strategy.

Arguing against “really simple” economics

I blogged earlier about Labour’s decision to sign up to George Osborne’s “fiscal compact” and whether or not that was a good idea. I’ve just been reminded of a bit from Thursday’s Question Time when a member of the audience talked about being “really simple” with the government’s budget being just like his own. I wonder if this kind of thinking is was prompted John McDonnell’s move yesterday. As you can see in the video, economist Yanis Varoufakis quite succinctly set the audience member right, prompting applause from the rest of the audience. It shows that this kind of “common sense thinking” can be countered quite easily if the will is there. I suppose the question is whether the bloke who asked the question changed his mind after the exchange, or still thinks he is right:

Labour chooses to play on away team’s turf for next five years

The Labour Party Conference starts tomorrow and on its eve, Labour’s Shadow Chancellor John McDonnell gave an interview to the Guardian in which he committed Labour to signing up to George Osborne’s “Fiscal Charter”, which commits the government to running a surplus by 2019-2020 and beyond in ‘normal times’. In effect, the fiscal charter is meaningless because governments don’t have total control over either their spending or the amount of tax they collect, so the government’s budget balance is largely dependent on factors outside its control. That said, it was a ‘clever trick’ designed by George Osborne to trap Labour. I guess they were supposed to reject it on the perfectly reasonable grounds that it’s economically illiterate, after which Osborne and co. could paint Labour as ‘fiscally irresponsible’.

McDonnell’s decision then is a tactical one. One would hope he realises the fiscal compact is nonsense, but he has decided for whatever reason to go along with the charade. In doing so he is like a sports captain who agrees that his team will play all their games away from home. It doesn’t mean you won’t win the league, but it does make your task a lot more difficult. McDonnell is clear that committing to ‘live within our means’ does not mean a continuation of austerity for the poor, but rather a shift of the burden onto those on higher incomes.

Playing on the away team’s turf in this context means you must cost every policy along the lines of “We will pay for x by raising tax on y or cutting spending on z”. You also need to get organisations like the Institute of Fiscal Studies to mark your homework and say “yes the sums add up”. If your plans include raising taxes on the rich, there will be no shortage of people queuing up to tell you apocalyptic consequences will follow as a mass exodus of ‘wealth creators’ ensues. Labour should be ready for this. They’ll also be attacked along the lines of their plans not being believable. “You can’t trust Labour” etc etc.

The alternative for Corbyn’s Labour would have been to bring the Tories onto their home turf. They started to do that, even getting the term “Corbynomics” coined. Some of the ideas within Corbynomics – PQE in particular – took a look of flak and they now seem to have backed away from them somewhat. To me though, they had sparked quite a bit of interest in academia and they could have used that as a launch pad to start to talk about the economy in new and much more interesting ways. It would still have been tough, but it would have been in keeping with Corbyn’s “new politics” vibe.

So now they are playing on the Tories home turf instead of their own, can they still win? It’s not impossible, but it makes anything they propose open to the same old attacks. If I had to guess, I would think Corbyn and co. realise they will face the constant threat of a coup from now and for the next five years, so are trying to head that off by appeasing some in the party. There’s an idea that what you say in opposition and then what you do when in power don’t have to bear too much similarity to each other – Osborne is keenly aware of this – but whether McDonnell’s tactics are wise here, I’m not so sure.

How could Corbyn maintain Party discipline?

It seems very clear that many in the Parliamentary Labour Party are hell bent on undermining Jeremy Corbyn at every turn. While not all are as up front about it as the publicity seeking Simon Danczuk, some big tests to party discipline await. It seems unlikely that the conventional ‘whipping’ system will be enough to keep MPs in line, particularly when Corbyn has been one of the most consistent rebels over the last 30 years. So what could Corbyn do?

To me, his strength lies in the mandate he has earned from the members and registered supporters of the Labour Party. A majority seemed to enthusiastically sign up to his ideas which he was not afraid of being open about (unlike the other three candidates). The other day, I received an email from Corbyn (seemingly sent to everyone on their mailing list) asking people to sign a petition against the trade union bill. In just a few hours, well over 150,000 has signed. More than double that number have now signed.

Why not then harness this enthusiasm in other ways? Corbyn could offer his MPs free votes on every issue, but the day before he can poll the members/supporters on the issue and publish the results by constituency. That way, if Labour MPs vote against Corbyn, they will know the strength of feeling in their constituency. It would really test the backbone of some of these brave dissenters to go against thousands of their own constituents. It would also be an good litmus test for any line Corbyn wants to take.

What do you think? Good idea, or am I talking rubbish again?

From compassionate and aspirational to radical but credible

Before Jeremy Corbyn entered the race for the Labour leadership, all candidates agreed for the need for Labour to be both compassionate and aspirational. Post Corbyn Mania however, the three ABC (Anyone but Corbyn) candidates have really stepped it up a gear (/s). Each has a whole new message for voters.

Here’s Andy Burnham:

What this contest has shown is that the Labour Party is crying out for change. Members are sick of standing on doorsteps with little to offer voters. They want a radical vision that can inspire and excite, but also one with credibility at its heart. That is what I am offering.

Yvette Cooper:

We need to be confident enough not to swallow the Tory myths and to set out a strong, radical alternative instead. But it also has to be credible – credible enough to be delivered, and to build public confidence in Labour’s economic approach so we can win, and change Britain’s economic policy in practice.

Liz Kendall:

The most radical political ideas often begin with the simplest of beliefs. I believe that every single person in our society has potential and should be given the opportunity and power to realise their potential, and live the life they choose.

…And giving young people, who’ve been hit so hard since the global crash, credible hope for the future – by working with businesses to revolutionise skills and lead the world in new clean energy jobs.

This is the conversation I imagine they might have had:

AB: “Jeremy is winning because he’s radical. We need to be radical”.

YC: “Jeremy is not credible though. We must be”.

LK: “How?”

YC: “Just say we are radical and credible but importantly, we must never spell out what that means.”

LK: “Genius”.

AB: “But surely if we all say that, no one will be able to tell us apart?”

YC: “Well you say you are radical and credible, I’ll say I am credible but radical, and you say you want a radical vision that offers credibility.”

LK: “Great idea.”

AB: “I can see no flaws in this plan.”

Is it any wonder Corbyn is wiping the floor with all of them?

The bad economics of ‘top Labour figure’ would keep Tories in power

The Guardian reported comments made by current Shadow Chancellor Chris Leslie today in an article headlined “Corbyn’s economic strategy would keep Tories in power, top Labour figure says”. To me it says much more about the Labour right than anything Corbyn has come up with. It’s the mode of thinking Leslie expresses that will really keep the Tories in power. If Corbyn does win, he needs to make a clean break from the sloppy thinking set out in the Guardian’s article.

The current view on the economy in the Labour Party is identical to to that expressed by the Conservatives (but completely at odds with what most sensible economists would advocate). That is to say they think is the government’s deficit gets too high, and the total stock of debt gets too high, ‘the markets’ will start to doubt the government will be able to repay their debts and interest rates will rise, which will mean the government actually can’t repay its debts and may have to default, leading to economic ‘chaos’. To mitigate this risk, the government needs to cut spending/raise taxes to try and reduce its deficit in order to get the public finances back on a sustainable track.

It’s not clear at all to me that the Conservatives actually believe this argument, but that’s the one they have been endlessly repeating and which Labour apparently agree with. The trouble is though, if you accept this argument as true, Labour’s calls for ‘fairer cuts’ looks incredibly weak and makes it easy to attack. I don’t see how Labour can win with this argument, but the media and the Westminster establishment seem to think it’s an absolute must. I got an email from the Liz Kendall team today giving me a long list of nice sounding ideas (with no detail) about her ‘vision’ for the country, but while maintaining this wrong model of how the economy works, she and others in the Labour Party can argue for nothing more than that they will be better managers that the Conservatives. If you buy the argument on deficits and nobody is disputing that version of reality, surely you would just vote Tory?

The current view however, is nonsense. The economy just doesn’t work like that. The government always has as much money as it needs. High deficits don’t lead to higher rates, and there is no chance the UK would ever default on its debts. What we need is someone who gets this and doesn’t let bad economics prevent them for arguing for what needs to be done. Can Corbyn be that person?

Labour were too left-wing?

Yougov published some interesting polling results today which in a lot of ways seem contradictory. They asked people about Ed Miliband’s leadership of the Labour Party, and the direction Labour should take in the future. Here’s the results (click to enlarge):

Around a third of respondents think that Labour under Ed Miliband was too left wing and 40% thought the new leader should move Labour more to the centre. This should be a surprising result, as Labour’s manifesto was not remotely left-wing, promising to continue austerity and talking tough on immigration and social security. To me though it shows the power of framing, and how media presentation can feed through to public perceptions. Constant reinforcement of ‘Red Ed’ and labelling certain policies as ‘communist’ seems to have done the trick.

If we contrast this with some other results from the same poll, the picture becomes a bit less clear as Yougov’s Peter Kellner explains in this blogpost. If you ask people where they sit on the political spectrum, the most popular answer seems to be ‘right in the middle’. You get a rather nice bell shaped curve like this:

“The centre is where I am” seems to be the mantra. You hear politicians talk quite a lot about ‘reclaiming the centre ground’. For example the Lib Dem’s entire strategy seemed to be based around placing themselves slap bang in the middle between Labour and Conservative. They failed miserably of course, but not for that reason. Tony Blair was probably the master of claiming the centre ground, but the main point for politicians I guess is that to be successful you need to reframe the centre as “whatever platform we are running on”.

Words associated with left-wing and right-wing have a lot of negative baggage attached now so trying to attach a positive message to them is probably futile. They have kind of lost all meaning now. Everything to the left of whoever is in power is labelled as dangerous socialism, while the same is true to a lesser extent of the right wing.

So what does this mean for Labour? It seems clear that whoever wins the Labour leadership contest will want to present themselves as being in the centre. A moderate. A safe pair of hands. This is probably unavoidable, but being in the centre doesn’t mean your ideas need to bland and middle of the road. If you look at the public’s opinion on a range of issues, they are quite ‘leftish’ on a number of things (while still calling themselves centrist). Here is another finding from the Yougov poll linked to above:

Previous polls have also shown strong public support for nationalisation of certain industries like the railways and utilities. Unfortunately (to me) though, the British people also seem quite preoccupied with making sure those unlucky enough to not have a job are not too comfortable:

To me though, this presents an opportunity. If you can successfully frame yourself as being part of the centre, you can promote some quite radical policies while keeping a lot of voters on side. The public clearly want to see less people dependent on social security payments, so why not give them that by offering a guaranteed job to anyone willing and able to work?

It seems also that people can clearly see that capitalism is working incredibly well for those at the top, but less well for everyone else. There are some quite radical ideas that can tap into this while still being “pro-market”. I liked this recent comment from fellow blogger Neil Wilson:

It’s time to stop being ‘pro-business’ and start being ‘pro-market’.

– If you’re pro-market then you remove power and size differentials wherever they may be to ensure competition is allowed to work.

– If you’re pro-market then you ensure that everybody has an alternative job offer open to them via a Job Guarantee, ensuring there is always competition for labour resources.

– If you’re pro-market you address monopolies and rentier issues to ensure that resources are always fully utilised and available at the best prices.

‘pro-business’ people take the opposite view on these points.

Business needs to be treated as cattle not pets. They are looked after and farmed for what the output they provide, but if they stop doing that then they are culled to avoid wasting resources better used by others.

I think that’s dead right and is an attitude that should have support from across the political spectrum. The more interesting thinkers on the right like Douglas Carswell often talk of their disdain for ‘crony capitalism’, and would likely sign up to policies that were ‘pro-market’.

‘The radical centre’ is a phrase I’ve often heard (usually by people who are neither radical nor in the centre), but it does sort of capture an approach that could be successful. Convince voters you are in the centre and they’ll feel comfortable coming out to support you even if your policies offer a clear break with the status quo. It’s all about hitting the right notes by framing your ideas in the right way. It will be hard for any Labour leader to achieve this though, but hopefully one or more will at least try something new. The early signs are not great though.