Tories new hereo: Reagan

Daniel Hannan is stirring up some fuss with his launch of a British version of the US Tea Parties. Let's ignore the contradiction of creating a British version of an organisation named after a revolt against Britain, and look at what Hannan is saying. The following is an initial report on ConservativeHome by one of the site's editors, Jonathan Isaby:

He [Hannan] referred to the time when Ronald Reagan was asked how he could justify cutting taxes when the deficit was so large, and he recalled the President's reply:

"I'm not worried about the deficit - the deficit is big enough to look after itself".

In other words, if you bring down taxes there will be economic growth, revenues will rise and the deficit will be reduced. Reagan took a massive gamble, he recalled, and it worked, with Margaret Thatcher doing much the same thing in Britain. "We have lost sight of that wisdom," he lamented.

Now hold on a minute, Reagan's policy did not work. Search the internet for "us deficit" and you'll get an image like the following:

 

(from bushlastdayparty.com)

This clearly shows that Reagan and the two Bushes (GHW and GW) increased the US deficit, the younger Bush seemed to be extremely profligate and this graphic does not show the bank bailouts which have been inherited by Obama. The graph clearly shows that it was a Democrat, Bill Clinton, who got the deficit under control. Yet Hannan and his proto-Earl Gray Teabaggers claim that Reagan was an economic genius who we should emulate. Someone, please, save us from this lunatic!

The frightening thing is that Hannan's message, that "bring down taxes [and] there will be economic growth" (ie classic, and discredited Laffer Curve theory) is the basis of Osborne's New Economic Model.
The lessons from the Reagan years are that if we have Osborne in control of the economy, the £178 billion deficit that we have now will be looked upon by future generations with fond memories of a time when we had some deficit control.

The Nasty Party Shows Itself

Are you thinking what we are thinking?

Remember that slogan from the 2005 election? The Conservative Party could not say out loud what the right-wing was saying about immigration, so they used this phrase to try and nudge voters into thinking that the Tories would do what the right-wing thought but could not utter. That strategy failed. We all know of someone who has said "I am not being racist but..." and then go ahead and say something racist, but this is just another version of the Tories' 2005 slogan on immigration.

The current Conservative policy on immigration is deliberately vague, partly because the bulk of the immigration over the last decade has been from the EU accession states and any controls on this immigration would require that Cameron open the Pandora's Box that is marked "Europe". On EU immigration the Conservatives say they would "apply transitional controls as a matter of course in the future for all new EU entrants" which is very much a non-policy. On non-EU immigration the policy talks about "making eligible for admission those who will benefit the economy" which is essentially government policy anyway, and "an annual limit to control the numbers admitted".

A recent survey by ConservativeHome showed that their candidates for the general election placed immigration as a middling issue: more important than "help for marriage and the family" but less important than, say, "reducing welfare bills". Further, the Conservatives campaign for new voters, "Ten reasons to vote Conservative" does not list immigration at all. In response, Tim Montgomerie, the editor of ConservativeHome remarked "I'm disappointed it doesn't mention immigration".

It is clear that the right wing of the party regard immigration as a hot topic. There is also a sinister meme working its way around Conservatives that immigration over the last decade has been a deliberate act of gerrymandering by Labour. The idea started at the right-wing pressure group Migration Watch, and propagated by the Daily Telegraph who said "Voting trends indicate that migrants and their descendants are much more likely to vote Labour." Lord Tebbit, on his Telegraph blog, goes a step further, saying:

"All the evidence is that immigrants from the Third World are more likely to vote NuLab than Conservative. So is that what it was all about? Was it the most cynical dirty act of vote-rigging in our history. Was it part of an effort to change the very nature of British society?".

The right-wingers at ConservativeHome illustrated this meme with the image of a line of asylum seekers with the caption I've never voted Labour before, but I will be soon.

Tebbit, of course, was not impressed with Cameron's attitude to immigration. And neither are the grassroots Tories (The Sun survey indicates that 43% of its readers who responded thought that "immigration and asylum" was the most important issue in the election).

With the Tories slipping in the polls, Damien Green, the opposition spokesman on immigration has sought to shore up the Conservative message on immigration by saying that immigration "is out of control", and:

"If you look at the general immigration picture, it shows all the government policies and tough rhetoric are having no affect whatsoever"

He still cannot give the right-wingers the red meat that they desire, but his statements are another take on the "are you thinking what we are thing?" slogan. Green does not say what the right wing want him to say (namely tough restrictions on all immigration including from the EU, and actions to reduce the number of "illegal" immigrants already here), but he is saying "we hear you, trust us, we want what you want".

Are you thinking what I am thinking about what the Conservatives policy on immigration and immigrants will be should they win the election?

Osborne's Cuts

It is unclear whether David Cameron and George Osborne are a "good cop, bad cop" act or whether there is real disagreement between them. At the end of January David Cameron said on the BBC Politics Show:

"We're not talking about swingeing cuts. We're talking about making a start in reducing our deficit."

At the time it was odd to have such an announcement from the leader and not from the economics spokesman, and clearly it was meant to try and shore up the polls so as to not scare voters. However, the announcement was not popular with the Conservative Party's right wing which went apoplectic over the suggestion that cuts would be neither immediate nor savage.

Now, however, it appears that David Cameron is listening to his right wing. On Monday (22 Feb 2010) Cameron was interviewed by Jeff Randall on Sky News. Randall pressed Cameron hard on the issue of cuts and although the leader of the Conservative party refused to give the merest hint of how the Conservatives would implement the cuts he did say:

"Now I think two things, one is that we should start earlier. 2010, this coming year, we should make some reductions in public spending programmes, we should get on with it because it’s all very well having a plan to halve the deficit, we can all have plans for the future."

Cameron's message is getting tougher, but it still is not in the realm of swingeing cuts that the Conservative right wing require from him. Cameron is clearly maintaining his good cop image.

Enter George Osborne into the fray, in his role as the Conservative bad cop. Tonight Osborne gave the Mais Lecture at the Cass Business School. In it Osborne said:

"A credible plan is not really credible unless you're prepared to make a start on it this year."

"Those who say we should simply ignore the markets are siren voices, ­luring us on to the rocks. For an economic policy maker to rail against the unpredictable nature of financial markets is like a farmer complaining about the weather. A loss of market confidence could force dramatic tax rises and spending cuts that were indeed savage and swingeing. That would represent a loss of economic sovereignty.

"And those cuts would be far larger than the actions that are needed now in order to retain our economic freedom in the first place. Far better to be prepared and protect ourselves against the storm."

Yet again Osborne is talking down the economy. As I mentioned on an earlier blog post, the Governor of the Bank of England discounts that the country's credit rating is in danger:

'I don't believe the rating agencies are concerned, in the sense that they are not re-rating the UK and I would be very surprised if they were to do so,' he said.

He said that ratings agencies would remain somewhat 'uncertain' about the fiscal outlook for the UK economy, but the UK's AAA-rating wouldn't be down-graded.

Osborne clearly does not listen to the experts and is talking down the economy for political purposes. But clearly he is at odds with his leader. Osborne listens to the right wing and is chomping at the bit to make savage cuts.

Where will the cuts fall? The clue is in Randall's interview with Cameron. Randall, with his feet firmly placed in the mire of right wing politics, asked:

"Labour has added something like 900,000 jobs to the public sector payroll, how many of those are superfluous, how many should you get rid of?"

Cameron, as usual, ducked the question, replying with "I don’t have that figure", but it is clear that if you are a public service employee, regardless of whether you are on the front line, or in one of the important support roles, your job is at risk.

Conservative Social Care Policy

The Conservative draft manifesto on health outlines their policies on social care for the elderly. The manifesto says:

"we will allow everyone – on retirement – to protect their homes from being sold to fund residential care costs by paying a one-off insurance premium of £8,000."

That is, if people wish to receive residential care when they need it and paid by the state, they will have to pay a voluntary £8,000 retirement tax. At the time the policy was attacked. First, people pointed out that residential social care is very expensive, with the average weekly cost of social care at £980 (source: Audit Commission), so a one-off insurance payment of £8,000 is unlikely to pay for the care that will be needed by the average person. The other criticism of this policy is that it is specifically for residential care and does not cover care in the home, which the Audit Commission says is the most cost effective solution. Further, some charities said they were worried that it would lead to people being admitted to residential care before they are ready for such a move. They point out, quite rightly, that most people want to remain in their own homes as long as possible, but if the Conservative plan had no provision for care in the home it would mean that as soon as an elderly person needed help they would have no option other than to go into residential care.

The Labour government is trying to formulate a policy on social care and recognises that there are the twin problems of the need for flexible care on the one hand and the cost of such care on the other. For this reason the current green paper lists the options so that the public can discuss the options. The Conservatives, opportunist as ever, spun the green paper saying that Labour was planning a secret 10% death tax which would mean that every estate would pay £20,000. This resulted in the Conservatives "Death Tax" poster which has been mercilessly mocked.

The problem with the sordid affair is that the issue is complex and sensitive and affects some of the most vulnerable people in society, yet the conservatives are using tabloid gutter press politics for the sake of simple point scoring at Prime Minister's Question Time.

Let's have a look at where these figures come from. The £20,000 is in the government's green paper. The green paper lists five funding options, but when you read these options keep in mind the Conservative's hysterical noises about a "Death Tax". The options are:

1. Pay for yourself. This is the option that no one wants because it has no state help for the poor.
   
2. Partnership. In this scheme people would get a proportion of their care paid by the state, the proportion of the costs paid by the state would be higher for those on lower incomes. This option would mean that most people would have to use their own assets to pay for the remainder of the care costs.
   
3. Insurance. This is a refined version of the Partnership option where the proportion of care costs not paid by the state would be paid by insurance.
   
4. Comprehensive. In this scheme everyone would pay into a state insurance scheme, and everyone who needed care would get it for free.
   
5. Tax-funded. Social care is paid ouit of general taxation. This was rejected because of the "burden on people of working age".
   

The first and last options were rejected as unworkable, but it is interesting to note that Kelvin Mackenzie said on Radio 4's Any Questions (on the 12 Feb 2010) that the first option was his preferred option, Mackenzie, of course, often espouses the opinions of the Conservative right wing.

In the explanations for these options in the green paper, typical costs were given, as outlined here:

1. Pay for yourself. The average cost is £30,000, but 20% of people will need care that costs less than £1,000 and 20% will need care that costs more than £50,000.
   
2. Partnership. Someone who got the basic offer of a third or a quarter paid for by the state might need to pay around £20,000 or £22,500.
   
3. Insurance. People might need to pay around £20,000 to £25,000 to be protected under a scheme of this sort.
   
4. Comprehensive. The total cost of insurance would need to be between £17,000 to £20,000.
   
5. Tax-funded. No costings were given, but this option had been rejected anyway.
   

The Conservatives jumped upon the Comprehensive option. The green paper says:

"Alternatively, if people wanted to be able to know exactly how much they would have to pay, most people other than those with lower levels of savings or assets could be required to pay a single, set figure, so that people knew how much they would have to save for. As an indication of the costs, people might need to pay around £17,000 to £20,000 to be protected under a scheme of this sort compared with the average cost of care for a 65-year-old which is £30,000. The cost would be less for people who were over 65 when the scheme was introduced."

This is the source of the £20,000 "death tax" from the Conservatives. However, they omitted the paragraph that followed:

"However people paid, the insurance payment would help people to protect their wealth and the value of their homes. Whether they decided to pay during their working life, during their retirement or after they died, people would know that once they had made their contribution and paid for their accommodation, the costs of their care and support would not prevent the rest of their wealth being passed on to their children. We would also look at having a free care and support system for people of working age alongside this."

This says that the payment may be "paid during their working life, during their retirement or after they died", there is no commitment to a death tax (payment at death), that is just one of the options. Note also that the Conservatives' policy (payment at retirement) is also listed, clearly the government is trying to be open minded about this.

Anyone reading these costing will see a common thread. Of the three most likely options (Partnership, Insurance, Comprehensive) the cost to the average person will be around £20,000. So where do the Conservatives get £8,000 from? This certainly seems a case of Cameron promising jam tomorrow.

The Prime Minister and the Secretary of State were clearly wrong-footed by the Conservative's bizarre choice to present the green paper as a death tax. This payment option is simply one of the options and Andrew Lansley, the shadow Health Secretary, knew this because he had instigated confidential talks between himself, Andy Burnham (the Health secretary) and Norman Lamb (the Liberal Democrat health spokesman) in an attempt to seek a consensus. These talks were apparently held without the initial knowledge of David Cameron, but later when the leader of the Conservatives was informed Lansley says that the leader didn't object. Trying to reach a cross-party consensus is clearly the mature type of politics that we expect, and the sort of politics that Cameron promised us when he became leader of the Conservatives. But breaking the consensus in this way, with a hysterical poster campaign, is clearly despicable. Some MPs report that Andy Burnham was furious:

Several MPs heard Mr Burnham shout at Mr Lansley in the Commons: 'You told me you wanted to reach a consensus on this, and now your lot make wild allegations against us. You have bloody shafted me and you should be bloody ashamed of yourself. You've blown it.' One eyewitness said: 'Andy is usually so mild-mannered but he stood there laying into Lansley.'

Norman Lamb appears to believe that Lansley genuinely intended to create a consensus but was undermined by Andy Coulson, the Conservative communications chief. Whether it was Coulson, or Cameron who decided to break the consensus, it was clearly an underhanded act considering the importance of the subject and the vulnerability of the people affected.

The size of the Conservative "retirement tax" has not been ignored. The three health spokesmen were booked to discuss the issue on the BBC Politics Show on 14 February. In the video of the interview Lansley behaved abominably, showing that the Conservatives have sunk back into the nasty politics that Cameron claimed was a thing of the past. Burnham, clearly still furious about Lansley's behaviour, was reported to have refused to appear in the same studio as Lansley. It is a pity that he didn't, because it has now come to light that Lansley admitted to Norman Lamb before the interview that the plan was not workable in the form that the Conservatives had given in their draft manifesto.

According to Lamb, Lansley said that the Conservative plans were three voluntary insurance schemes:

One, which the Tories have already outlined, costing £8,000, would be for those who wish to be covered in the event they had to go into a care home. The second, said Lamb, was a new admission: a one-off payment of £10,000 to secure care for people in their own home. The third was a "cheaper, stripped down package for critical care at home"

David Cameron wasn't so keen to outline these three options at the dispatch box when he broke the consensus at Prime Minister's Question Time. However, even the third option would still not be enough to cover the costs, being half the cost identified in the green paper.

It is clear that the "death tax" poster was a political stunt. It is also clear that the Conservative policy will be seriously underfunded and unworkable. The sad thing is that there was a possibility of something that is rare in politics: a consensus, and this has been thrown away by David Cameron for the sake of cheap political point scoring at Prime Minister's Question Time.

A New Economic Model: Part 9

A New Economic Model: Eight Benchmarks for Britain.

This is my analysis of George Osborne's economic policy should the Conservatives win the next election.

8 Build a greener economy

Climate change worries all the major political parties and the Labour government has an excellent record in this area introducing the Climate Change Bill in 2008. The Labour party is committed to addressing climate change, the Conservative party, however, is divided with grandees like Lord Lawson and Peter Lilley, and senior members like David Davis denying that climate change has any human cause. Indeed, a survey by ConservativeHome shows that Conservative parliamentary candidates put climate change at the bottom of their list of priorities. Osborne knows that green policies have very little support in his party and that they are unlikely to be passed by a future Conservative government, so any policies that are presented to the public are merely for the purpose of the election.

The details:

"We will reduce UK greenhouse gas emissions and increase our share of global markets for low carbon technologies."

Laudable, but unlikely to occur with the current sceptical Conservative party. Where are the figures for a real benchmark? What are these low carbon technologies and who will provide the investment? (Remember that Osborne will cut the stimulus package.)

"We will create Britain's first Green Investment Bank, which will draw together money currently divided across existing government initiatives, leverage private sector capital to finance new green technology start-ups and back the bright ideas of the future. Lord Stern has agreed to advise us in the creation of this Bank."

Lord Stern has said that he will not be an advisor for the Conservatives. It is worrying that the Conservatives could get something like this so wrong. Don't they fact check their documents?

"We will safeguard Britain's energy security and reduce our exposure to volatile fossil fuel prices by ensuring that we have a diverse range of electricity generating capacity and a resilient energy infrastructure."

The Labour government is already doing this.

The government has already pledged to cut CO2 emissions by 80% by 2050. The country currently has a generation capacity of 75GW. In January the government announced the third round of offshore wind farms which will cost £100 billion and will generate 25GW (this is in addition to the already 8GW of capacity already being built). The Conservatives are simply saying "we will do what they are doing". Policy plagiarism. The other pledges are similar to the Labour government's pledges. In addition:

"We will increase the proportion of tax revenues accounted for by environmental taxes, but any additional revenues from new green taxes that are principally designed to change behaviour will be used to reduce the burden of taxation elsewhere."

This is a pledge on green taxes, which will not please the majority of Conservatives.

In effect, this "benchmark" is either parroting the Labour government's position, or it is providing platitudes that are unobtainable should the Conservative party have a majority of MPs in Parliament, since those MPs will be extremely sceptic about climate change. George Osborne knows this, he knows that such policy would be impossible under a Conservative government and yet he is still making it a "benchmark". A "benchmark" that he is guaranteed to fail. It is no wonder that he does not promise to resign if he fails to achieve this "benchmark".

A New Economic Model: Part 8

A New Economic Model: Eight Benchmarks for Britain.

This is my analysis of George Osborne's economic policy should the Conservatives win the next election.

7 Create a safer banking system that serves the needs of the economy

Remember the big bang? That was when the Thatcher government de-regulated the financial sector, to create cheap credit and the foundations for the finance sector to become 20% of the UK's economy. Any government inheriting the de-regulated finance sector would have found it difficult to re-regulate, and so in 1997 Gordon Brown sensibly decided to bring in a light touch regulation. The global nature of international finances mean that the markets around the world are inter-connected and so a financial collapse in the United States was bound to affect the finance sector in the United Kingdom. Of course, Gordon Brown and Alistair Darling's decisive action to support the banks in the UK prevented the American sub-prime crisis from causing more serious damage to the UK economy. The question is whether the further regulation of the finance sector is necessary, or desirable.

The details:

"We will reform the regulation and structure of the banking system to ensure lower levels of leverage, less dependence on unstable wholesale funding and greater availability of credit for small and medium sized businesses."

These are platitudes again. Every government wants to promote "lower levels of leverage, less dependence on unstable wholesale funding and greater availability of credit" the question is how?

Osborne's "benchmark" (OK, policy) is to munge the tripartite regulation system (Bank of England, FSA, OFT) into the Bank of England and a new quango called the Consumer Protection Agency. More reforms, more changes. It is unclear whether such changes will have any effects. Osborne is also promising reforms to the finance sector similar to the Obama reforms and Osborne openly admits that they are dependent upon international agreements. This is a pledge which can be promised, but there is no guarantee of delivery, so how can Osborne include it as a benchmark?

A New Economic Model: Part 7

A New Economic Model: Eight Benchmarks for Britain.

This is my analysis of George Osborne's economic policy should the Conservatives win the next election.

6 Reform public services to deliver better value for money

The Conservatives plan yet more "reforms" of public services. Some of these "reforms" are simply to return public services policy back to where they were in 1997 (for example GP fundholding) or to introduce policies that have been rejected by the public at previous elections (for example, the Patients' Passport proposed for the 2005 election). These reforms are at best a petulant reaction from the Conservatives, but they would mark a return to the dilapidated services run down by Thatcher and Major.

The details:

"We will raise productivity growth in the public sector in order to deliver better schools and a better NHS."

This is a vague platitude. Governments always try to raise productivity in public services and it is erroneous to suggest otherwise. The fact is that the Conservative plans for health and education are to outsource the services. Outsourcing means that someone else has the responsibility, and that someone else has to be financially rewarded for taking on that responsibility. That profit is money that will not be spent on the service.

"We will raise public sector productivity by increasing diversity of provision, extending payment by results, giving more power to consumers and improving financial controls."

"Our health reforms will empower patients, making service providers accountable for results, bring in new providers, and use payment for results to incentivise quality, outcomes and value."

This is the NHS privatisation plan. The plan of "increasing diversity of provision" means less funding for NHS providers, which means less money for your local NHS hospital. This is a cut in funding for NHS providers to produce money that is given to private providers. Cuts and privatisation.

"Our radical school reforms will break open the state monopoly on taxpayer-funded education by removing the obstacles that prevent new providers setting up the new state schools that parents want."

In fact the "draft manifesto" on education does not have any "radical" reforms. The details of the much touted Swedish "free schools" programme was left out. If we assume that Gove's plans will be enacted, it will result in the closure of publicly-run schools and the creation of new schools by education corporations and special interest groups. If you are unlucky you may find that there will be an end of secular education in your area as "faith groups" opening schools in your area mean that the previous, secular, state schools close due to lack of funding. There is one thing that is fopr certain, there will be huge unheavals in education planned for the next few years if the Conservatives gain power.

"We will cut the cost of bureaucracy in Whitehall and quangos by one third over the course of a Parliament."

A cut of a third is huge, this is a promise that they will not be able to keep, and I am surprised that George Osborne's nose did not grow half a metre when he announced this.