Monthly Archives: April 2009

When I was 16 I joined the Labour Party for much the same reasons Daniel Clarke did; now the former Labour PPC for Eastleigh has joined the Liberal Democrats because he feels that our policies best advance the causes he cares passionately about, social justice, the environment and above all moving towards a Britain of ‘opportunity for all’. One thing I think we still don’t fully grasp in this Party is that for many people the commitment to the Labour Party is often as much emotional as intellectual. In many places voting Labour is almost a badge of identity (due largely to historic class identification) so winning support from ex-Labour voters is as much a question of a emotional as intellectual dialogue. We have to create an emotional identification between our hopes and dreams and the aspirations of our target voter.

It won’t surprise anybody to hear I agree whole-heartedly with that argument but it might interest them to know why I feel the only route for people who share the same concerns as Daniel and me is to oppose this government totally and support the Liberal Democrats.

Taxing Times:

Much has already been written in favour of our taxation proposals and I don’t intend to go over old ground but instead of looking at our proposals let’s look at the government’s proposals. Much fuss and bluster is made about the new 50p rate but little is said about the 0.5% hike in National Insurance Contributions. This is a real tax on wealth creation (as opposed to a tax on already existing income a fair portion of which will not flow back into the system); when the economy contracts people lose their jobs and when it is growing more people are employed. However, when people are employed they spend more and thus more people need to be employed; it thus makes sense that the motor force of any economic recovery is not only keeping people in work but making sure they are able to stay there. Why, then, has this government to levy a punitive tax increase on both employees and employers?

In reality, the rise in NIC’s is as bad as the now infamous 10p tax blunder. A mistake which cost the Exchequer a fair amount of money in itself it might be added and it is a mistake which will cost the British economy dear; and, of course, it is a hike that will hit the lowest earners hardest as even more of their income is taken by the taxman (not to mention the downward pressure on wages that will result). Here we see the ineptitude of the government in full flush as it desperately tries to claw back the money it has spent any which way it can. So, all the good work which was done in regards to introducing a minimum wage is undone virtually in one fell swoop.

Purchasing Problems

We all know where most of that money was spent; on slinging a life buoy to the floundering banking system. However, Labour has refused to take control of the banks outright; call me old fashioned but when I buy something I expect ownership to pass to me. No doubt this was borne of an inbred timidity, a determination that no matter what ‘Old Labour’ shouldn’t be seen as being steering the ship. It however has proved to be disastrously misguided as the banks have taken the money with a Thank You Very Much and used it to write-off the bad debt that they created in the first place or else fund exorbitant pension deals for people who could barely be said to have earned them. We were rightly told that the financial sector needed to function and be saved to lessen the damage on the wider economy but instead of acting in the interests of wider society acted to prop up a system that had already failed; badly and rewarded the people who steered the ship onto the ice

Interest rates have come down so surely that will reduce debt problems? Not if you happen to have a credit card from the Royal Bank of Scotland group as they now charge a whopping 16.9% interest rate on it’s credit card. Remember, this is a company that we allegedly own a 58% stake of; so, as you can see we really got value for money there.

Education, Education, Education

One of the key facilitators of actual movement and social mobility is education and the start and here we see an awful lot of problems with the government’s approach. Tuition fees remain regardless of ability to actually pay them back, so a student who I know personally but shall remain nameless whose family is likely to pay back their fees is treated the same as somebody who will come out of University, struggle to find a job in the current climate, and will thus be saddled with debt from the start (and thus incidentally will be able to contribute less economically).

So, instead of helping those who start from behind the race run with the pack we are saddling all the runners with a lead-filled backpack and those that are ahead stay ahead albeit moving at a slower pace. One of the great boasts of this government is that it would eradicate child poverty and yet again it is a headline-grabbing measure which sounds amazingly like social justice but actually falls well short on delivery, this is because the government is obsessed with the stats and doesn’t watch the ball when it comes to real social movement and prospects.

In terms of boosting families the government would doubtless point to the recent boosts in tax credits and the much-touted Child Trust Fund. However, in terms of how much of this additional money will be seen we are again faced with a question of delivery. Also, with specific regard to the Child Trust Fund we again have a measure which is scattergun. If this government had been inventive then it could have offered large tax breaks to higher incomes providing for their children, paying into a ring-fenced fund and actually given more money to people who need it. The lack of targeting is why these measures make barely a dint in the numbers of children actually in poverty and 3 million children remain so.

Envionmentally Toxic

We all know that the recent Budget provided a paltry £100 million for the eco-towns project and to be totally fair there probably isn’t the money available to invest in renewable energy there was all those years back but the reality is that change has been so piecemeal that this can go on the charge- sheet.

Obsessed as always with targets over delivery the government has enshrined climate change targets into law; however, this is an area where we need to keep our own party honest. The ‘Green Tax Switch’ seems to have mysteriously vanished off of the Liberal Democrat radar. Measures such as a windfall tax on energy companies to cut energy bills are socially redistributive and ones we should champion vigorously.

One aspect of this which may have to be placed on hold is any form of punitive taxation on fuel duties which are not viable and of questionable social justice value until the public transport infrastructure is much better than it currently is; however, this is an area where incrementally changes can be made.

Conclusion

Labour’s problem historically has been to assume it can sustain it’s base in it’s current place and that this is ‘left-wing’ where as true progress demands much more than 50p tax bands. It demands that while some people pay more; others pay less. It demands that the government is truly opening doors for people to advance (this is something Margaret Thatcher realised well-enough when she captured the votes of those Labour voters who aspired to better and didn’t merely wish to be maintained in their current state). To make an uneven surface level some parts have to be flattened and some elevated. The state is in a unique position to truly level playing fields and actually enable people to advance and it is right that this power is used where necessary but only if the state then steps back and provides the space (as well as the guide ropes) needed for people to flourish. Socialism in it’s statist ossification of society is a failure because state’s cannot take the place of the people in a system of government where the state merely represents the people and even then it barely does that.

A government truly committed to Labour’s foundation values should be opening those doors; not slamming them shut like this Labour government is. It is my contention that although we may disagree with individual policy aspects the Liberal Democrats are actually the true standard bearers of progress as Nick Clegg said not so long ago.

By Darrell Goodliffe

By the time Alistar Darling rose to deliver his speech Prime Ministers Questions had already set the tone with David Cameron undermining the government’s projections at every opportunity and Nick Clegg questioning the record of delivery on pledges of ‘one million new jobs’. Darling had an impossible task because the media narrative of a government ‘ready for the knackers-yard’, as Cameron puts it, is already pretty well-established but even by a reasonable measure the Budget was truly dismal and totally failed to rise to the challenge of the times.

Looking at the ‘headline grabbers’ the surprise was unquestionably the announcement of the new 50p top-rate of income tax for those earning over £150,000 and it being brought forward to next year instead of left until 2011. Cameron trying to tie these into duty rises for fuel, tobacco and alcohol as part of a package of ‘tax rises for all’ in an attempt to undermine there popularity is unlikely to work; people are used to punitive taxation on alcohol and tobacco certainly and they are becoming inured to it on fuel too. However, this does put both opposition parties in an interesting quandary whether to oppose or support the increase. If we are committed to a taxation system that is fair then we have to support a shifting of the burden and that naturally involves the top-rate paying more.

Where this budget falls down and does indeed lack imagination and boldness as Nick Clegg rightly said it does is tackling the other end of a redistributive tax program; namely the easing of the tax burden on lower and middle incomes. Without easing the pain on the lower end of the scale the small amount raised by the top-bracket is so tiny as to be almost totally symbolic. This is obviously where our call for tax cuts is focused and where it is strongest in opposition to the governments program. One fly exists in the ointment of our proposals; the extension of National Insurance to multiple jobs is a punitive tax on precisely those people we are trying to help who are desperately trying to make ends meet.  Also, we will have to watch carefully our proposals for reform of the tax system with regard to the families and children who have been the main beneficiaries of the government’s largess for the last two budgets.

However, it remains stronger and more redistributive than what the government is offering. The area where it is much stronger is that we are looking to radically restructure the taxation system. Darling indicated that the government may well start to sing from our songbook on this area of policy at least. Force of necessity and a budget deficit the size of which you could house several families in is compelling the government to close these; pension tax relief on those earning over £150,000 is to be restricted.

National debt is projected to stand at £175 billion for 2009 and fall incrementally in the following years and this is the other ‘headline grabber’. Darling’s projections remain wildly optimistic and are predicated on a surge in consumer confidence and thus consumer spending. However, since what people, except families or those with children, gain will be limited the likelihood here is that Darling’s timidity will undermine the very foundations of his own budget. Cutting taxes for lower and middle incomes is economically sound because these people are the kind least likely to save and thus spend and get the cash flowing round the system again; not being more bold clearly is storing-up trouble ahead. This is especially true when you consider that the 0.5% hike in NIC’s is yet to come in 2011 and that will see these groups spend less; assuming it gets implemented. People will see the headline deficit and baulk but the picture get’s even worse if you look at the projections of the net debt which is expected to rise to 79% by 2013/14.

The further £9 billion in extra effciency savings that will be trimmed from the public purse is in reality a political move. Darling wants to postpone ‘tough decisions’ until after an election; if Labour win the next election they will have 5 years to plan and pump extra money in towards the end of their term and if they don’t they can blame the Conservatives. However, here again is where we should push our plan for the reform of the taxation system; in theory, reformed properly it should minimise the hurt for the public sector and allow most services to remain unscathed. Instead, we are left with one measure which will raise a billion in revenue. Also postponed were proposals for reform of the financial sector which will doubtless be sneaked out because they are not going to be as tough as the rhetoric implies.

The real sin of this government is not that it is doing nothing but that it is making bold promises which simply don’t come to fruition as Nick Clegg rightly says. The endless schemes and grand ideas either never get implemented or else never yield positive results; it is in this vein that I view the continued extra funding for Job Centre Plus. Why do Job Centres need an extra £1.7 billion? Job Centres do not employ people; businesses do and here once again the grand promises of the stimulus have failed to deliver. Credit is still not flowing; people are not spending, the % of sectors showing growth is miniscule and also allot of people are losing their jobs. If the stimulus had worked and the credit was flowing; even at lower levels than before, this extra investment (still mystified as to what is going to be done with it) wouldn’t have been needed. I have even heard reports that credit card companies are actually increasing interest rates; a move which needless to say is entirely counterproductive to combating debt and getting people spending.

However, more welcome is the money ring-fenced for creating additional sixth-form places. I would be greatly surprised if Darling will be able to deliver on his promise to get everyone under-25 who has been unemployed over 12 months into work and/or training by January next year. Investment in clunky, failing schemes is ten-a-penny under this government but real investment where it counts and where it could actually make a difference is harder to find. Thus we find that a paltry £100 million is the only money that local authorities will get to develop eco-friendly housing.  Again, our Green Tax Switch is much more radical than this government which is too timid of it’s past to actually take the moves necessary to get the economy back into shape (a prime example of which is the stimulus which was given to the banks gratis).

Bold and radical change which is redistributive in nature is actually the best medicine our economy could have and in that sense the interests of the market and social justice are in perfect harmony as opposed to how it is often portrayed by right-wing free marketers. A healthy market needs a healthy society and vice-versa; a market which does truly serve the people is actually in the markets best interest. Never has there been a more pressing need for those that believe passionately in social justice and redistribution to make their case heard; this government has failed because it is timid and far too reactive; the roof is leaking and Alistair Darling frantically scurries around looking for buckets. We can be proud of the package we are putting forward as an alternative and know for sure that social liberals are actually charting the way forward.  We need to be weary of leftish soundbites which actually achieve zero-sum results in terms of being of real benefit to people and hold the government to account where it fails there so we can rightly call for the money to be invested where it is needed.

By Darrell Goodliffe

The Social Liberal Forum will be hosting a fringe event at this years Compass Conference; No Turning Back – building a new political economy for the 21st century. The Conference will be held on the 13th June at the Institute of Education in London

Running in the afternoon slot the SLF session is titled Work and Happiness: Democracy and Work-Life Balance.

Register for the Conference on the Compass website, come along and join the debate.