At the heart of The Spirit Level is a wealth of statistical data outlining how more equal societies (defined in terms of income inequality) do better in terms of physical health, mental health, drug abuse, education, crime and imprisonment, obesity, violence, teenage pregnancy, child welfare and social mobility (the latter is a bit of a killer incidentally, it would appear that “The American Dream” is more of a reality in many countries which Fox News would condemn as “socialist”). If that were all the book had to offer I would suggest you save your money and simply peruse the excellent Equality Trust website which Wilkinson and Pickett have helped to set up. What is more compelling, for me at least, is the explanation about why this may be the case.

Some of this has already been covered in Duncan Brack’s chapter on equality in Reinventing the State (which you can read here). In essence, the sociological evidence fits with what we understand about evolutionary psychology and biology. As a species, we are hardwired for fairness and living in a socially stratified society is not merely something we dislike but something which we find physically stressful. Wilkinson and Pickett cite numerous pieces of evidence which suggest that, for example, low caste children in India perform worse at intelligence tests when they are told they are competing with high caste children than when they don’t realise they are being compared (New Scientist recently reported some interesting parallel research looking at exam performance of Black Americans before and after Barack Obama’s election victory). Other evidence suggests that shame can be as unbearable for people as physical pain and that living in poverty tends to cause children to mature early.

Overall, it is a compelling document. I have some qualms however. I don’t think the most startling claim, that inequality harms the wealthy as well as the poor is proven. They do provide evidence for this to be fair, but not an awful lot. I’d like to see more research on this before being convinced (I’m rather more convinced by the argument that inequality harms people earning median income and even higher income groups, just not those at the top). I would also like to better understand the dynamic between growth and equality: at what point does equality become a bigger factor in improving, say, health, than economic growth? In the first section of the book Wilkinson and Pickett do acknowledge that growth is a bigger factor for developing countries but the precise relationship between the two doesn’t get explored as much as I would have liked.

I also wish the book explored how inequality and ethnic diversity are interrelated. Most of the more equal societies listed appear to also be more ethnically more homogenous. Does ethnic diversity drive inequality and to what extent is it a barrier to greater equality? These are, admittedly, problematic questions to answer but I think it is something we need to understand. It would be nice to be able to discount the notion that the same biological factors which make us well disposed to equal societies don’t also dispose us towards more homogenous societies but what if it doesn’t? Ultimately, we can’t merely trust in social science to make decisions for us – that’s where political choices come in (for the avoidence of doubt, I’m NOT arguing for segregation or anti-immigration policies here – quite the opposite – but if there is a relationship between inequality and diversity we need to understand it and be able to respond).

So where does all this get us? Wilkinson and Pickett point to a few possible solutions. They are keen to emphasise that a more equal society doesn’t necessarily mean going down the Scandinavian route of redistributive taxation and a larger state. Japan for example has neither of these. Indeed, while they certainly do not oppose public policy solutions, most of the final chapter in the book is concerned with establishing a cultural shift.

Some of the solutions they do propose sound remarkably familiar to those of us who have read our Schumacher. A starting point for them would be to revolutionise employee ownership. “Industrial democracy” is something which the Lib Dems have forgotten about over the past couple of decades – perhaps it is time we rediscovered it as a central tenet in these post credit crunch days?

I was slightly surprised to read in a book about social problems and public health a section on the open source revolution and information technology but this is another aspect that Wilkinson and Pickett feel that politicians need to embrace in order to lead us towards this much needed cultural shift. I think they’re right to do so. The debate over intellectual property laws goes to the heart of what kind of society we want to live in – one where every tune and image is owned by private corporations or one where we have a cultural commons (all too often the artists and writers themselves tend to get forgotten in this debate but the public library system proves that we have alternatives to the limitless copyright model international law is drifting towards). A shift towards the latter would strike a blow for those of us who believe equality matters.

We can’t forget public policy of course, but as Wilkinson and Pickett point out if those shifts in policy are to be lasting they have to go hand in hand with an attitudinal change. The tricky thing is that it is clear that most people have an innate sense of fairness, outside of the laboratory there is a wide difference of opinion as to what is “fair.” This makes it all the more crucial the politicians start talking about these issues. Gordon Brown has demonstrated over the past decade that redistribution by stealth merely gets you into a mess.

The Social Liberal Forum and Compass will be hosting a fringe meeting on Overcoming Political Barriers to Equality on Monday 21 September at the Lib Dem autumn conference in Bournemouth. Richard Wilkinson and Kate Pickett will be speaking at the Hackney Liberal Democrats Garden Party on Sunday 13 September (£10 or £5 in advance).

Much of David’s article is about the causes of inequality. He rightly cites centralisation, education, snobbery and passivity. In the way that David describes them, none of them are about ‘tax and spending’. I would add another to this list, which crosses over with at least two in David’s list (snobbery and education): the persistence of social class, which leads to generation on generation holding on to power that it has, and perpetuating it through networks which outsiders can seldom access. The persistence of class is sometimes about money, but it is just as often about family connections and schooling, both of which can have an enormous impact on the kinds of informal opportunities and feet-in-the-door that are so often life-defining.

However, we must be clear that there are many problems which can only be tackled if money is spent on them, as David recognises in his article, especially in the short term. I think we also have to recognise that there are clear examples of where more money works, most notably in tackling problems like long waiting times in the NHS, and in providing resources (books, buildings and teachers) for schools. In these areas, extra spending by Labour since 2001 has made a difference, and improvements would have been very hard indeed without extra spending.

Moreover, huge challenges remain which have money as part of the answer. If you are living in poverty, then one of the greatest problems you have is a lack of money. Scott Fitzgerald wrote in his short story ‘The Rich Boy’, ‘Let me tell you about the very rich. They are different from you and me.’ A response to this, often attributed to Ernest Hemingway, was ‘Yes, they have more money’. For all that the wealthy have so many advantages and opportunities, we must not forget that fundamentally their advantages are driven by money. If we want to tackle that, then investing in public services so that all can have access to the best, regardless of their money, must be a priority. We must also not forget the people who need help now because they do not have warm decent homes, good food, clothing, and other basics which many of us take for granted. Here, the state can step in and it will take money. Moreover, let us not forget the ‘R Word’ – redistribution, which I believe should be central to any programme which seeks to tackle poverty. The Liberal Democrats are stronger on this than we ever have been, but there is more that can be done.

So the SLF must and will talk about money in relation to some policies. But we will also be addressing the many other issues that lead us to have a socially unjust and unsustainable society. We will be putting forward new ideas on decentralisaton, democracy and sustainability. It is in these, that the long-term solutions which go beyond money, can be found. A look at the many proposals in our ‘Ideas Factory’ shows how much fertile ground there already is.

We have a new Liberal Democrat think-tank. And when there has been little or no thinking around the party for two decades, that has to be a good thing. So why am I uneasy about the appearance of the Social Liberal Forum?

It isn’t that I am suspicious of social liberalism. Heaven knows, I was even a contributor to the excellent essay collection Reinventing the State.

Nor am I a closet ‘market liberal’ – if there is such a thing – dedicated to handing over health and education to faceless American corporates.

No, this is an argument inside social liberalism, but it is an urgent one. Because there is more than one kind of social liberalism, and we can’t afford for the backward-looking Fabian variety to dominate again.

When the electorate demands something progressive, it would be disastrous for us to exhume the soulless old language of the 1970s and argue that we just never tried Fabianism hard enough.

This article is me asserting my right to try to claw back a genuinely Liberal social liberalism from the jaws of the Fabian beast.

It is a kind of open letter to Matthew Sowemimo, Richard Grayson, Duncan Brack, and all the others involved in the Forum, to look forwards – to look for the real reasons why Britain is becoming so unequal. To be Liberals, which means, I believe, rejecting the Fabian idea that everything can be solved by tax and spending.

Cerebral Knees-up

The inspiration for writing this was the fringe meeting at this year’s Liberal Democrat annual cerebral knees-up at the LSE, under the title ‘Reclaiming the State’, an attempt to push the issue of equality higher up the agenda. Fair enough. We are social Liberals: that is what we are for.

But here we come to the crux of the matter. Measure equality broadly and design policies that can genuinely understand the complexity of it, and maybe we can move forward. Measure it narrowly, and assume that tweaking the bottom line is all the government needs to do – that it is only a question of how much money the state spends – and we find ourselves back where we started, somewhere around 1977.

The heart of the fringe meeting was a presentation by a personable young man from the Institute of Fiscal Studies. Listening to him made it horribly clear why narrow technocratic Fabianism failed to shift equality in Britain before.

Because defining equality in terms of income is all very well, but it misses the real question as we pore over the graphs: why is such inequality so persistent?

Defining it in terms of consumption, as he preferred to do, is an interesting intellectual exercise but compounds the error. It assumes that Lord Scrooge is poor because he spends as little as he can, but that a single mother is rich when she has five children and juggles the same number of credit cards.

This is the Fabian approach to policy. It reduces everything to a handful of technocratic metrics, chosen largely because it thinks the government can make a difference to them, but which ignores the basic problems.

Not just money

It pretends that the whole problem is about money, when people outside the policy bubble know perfectly well that it isn’t. It certainly is partly about money, but it is just as much about power, class, education and culture and much else besides.

And it implies that the whole solution to the problem is welfare. That poor people should be supplicants to government redistributors, when we know that won’t be nearly enough.

This is the original Fabian sin. It reeks of elitism, and ineffectual elitism too, rooted as it is in an organisation that was originally dedicated to moving very slowly and that – thanks to George Bernard Shaw – ridiculed anything that did not reduce any problem to money alone.

None of that is to pretend money is irrelevant. Of course it isn’t. But what the narrow obsession with poverty graphs is emphatically not is Liberalism, with its broader understanding of the problems of power, its human sympathy, and its understanding of the limitations of the central state.

Of course, Liberalism learned from the Fabians, especially in the days of the Newcastle programme. It learned, for one thing, to trust the state so far – that no other institution was available. But it always understood that human beings come before bureaucracies and that bureaucracies are not nearly as effective as politicians imagine they are.

Even if the occasional Liberal policy paper imbibed some of the technocratic language (it made them sound serious, after all), Liberals never followed the fearsome Beatrice and Sidney Webb in their rejection of people power.

“Some old ladies fall in love with their chauffeurs,” said Beatrice Webb just before she died, at the height of the Stalin’s purges. “I have fallen in love with Soviet communism.” Liberals never followed her that far.

Nor did they follow the Fabians where all this led to: the punishment of impoverished communities that failed to respond in the way the theory prescribed, to the destruction of their neighbourhoods and the theft of what power they had to the centre.

“We are dealing with people who have no initiative or civic pride,” said Newcastle’s chief planner in 1963. “The task surely is to break up such groupings, even though people seem to be satisfied with their miserable environment and seem to enjoy an extrovert social life in their own locality.” That was the logical consequence of technocratic Fabianism.

None of this suggests that equality is unimportant. Of course it is. But the Fabian idea that you can measure it simply and solve it just by increasing public spending dangerously misses the point – and leaves people just as unequal, but a little more cynical. The real problem is much more insidious than that.

Sixty years after the Beveridge Report, which identified the Five Giants that blighted mankind and predicted their progressive destruction, the Giants are still with us.

Beveridge didn’t slay them, and neither did the Fabians with all their graphs. Neither did Gordon Brown over the past decade when he doubled the money going into the NHS and increased the national budget from just below £4 billion to nearly £6 billion.

So tell me, Fabians. Is it possible that some other factors are involved which meant that the money wasn’t spent as effectively as it could have been? Or is the question really only how much?

Should we, as an effective opposition, articulate the real reasons why Britain doesn’t work for everyone? Or should we just confine ourselves to the old tried and failed metrics and the sheer dullness of the political promise of specific amounts of money?

Here is a handful of Liberal explanations of why such inequality is still with us:

• Centralisation: this plays a major role in increasing isolation and sense of powerlessness, as institutions get ever more distant from people – geographically and politically – and as frontline staff become ever more enmeshed in the target culture and ever less effective in helping those they are supposed to help.
• Education: generations of people in Britain have inherited a suspicion of schools and universities, and it is a suspicion that is reciprocated – how else can we explain why successive governments believe it acceptable that we shove teenagers into monstrous factories of 2,000 pupils or more?
• Snobbery: there are structural reasons why our public services are geared to treat some people differently from others, and to treat poorer people with deep and authoritarian suspicion. Why else is my local shiny new Children’s Centre absolutely empty of punters? Because those it is aimed at believe it isn’t on their side – and they are correct.
• Passivity: we have structured our public services in such a way that they prefer the poorest and most dependent to be passive supplicants rather than authors of their own destiny.

This last one is an insidious legacy of Fabianism; creating public services that are ruled by technocrats, and which waste the energy and imagination of the people who go so passively through the system. It is precisely what Beveridge warned against in his less famous second report on the urgency of people power.

The truth is – a Liberal insight this one – that none of our huge social problems are going to be tackled sustainably and effectively without a huge injection of voluntary effort by ordinary people on an unprecedented scale, bringing to bear their human skills, and to do so via our public service institutions.

Will that require more money? Of course it will, at least to start with. But is this primarily about money? It isn’t that simple.

So this is my challenge to the Social Liberal Forum. Will you dare to grapple with these broader structural issues – or will you turn back to the old Fabian delusions, handing down percentages and targets from on high to an electorate that has long since ceased to believe in numbers?

Will you hammer out a non-market social Liberalism that trusts people to take charge of their lives – or will you remain suspicious that this implies somehow that they need no support from government, central or local?

Will you develop a critique of the combination of state and corporate power, the new reality – or will you just re-hash the tired old assumptions of tax and spend?

The danger is that social liberalism becomes what the media tells us it is – torpedoing outdated market reforms to public services, without suggesting any real changes instead. A symbolic gesture, with money attached, here and there perhaps. No articulation of the basic problem. No ambition. No faith in people.

The real battle seems to me to be a tussle inside social liberalism for the soul of the party – not to accept or reject the state, but to decide between the old technocratic abstractions versus human solutions.

People can see the wreckage of Westminster solutions all around them. They want a political force that can see that too, but which doesn’t respond by consigning them into the arms of American corporations ringed all around by ‘commercial confidentiality’.

I still believe the Liberal Democrats will be that force. Not until they have excised the fantasies of Fabianism, they won’t be.

In the end, the people who can do that most convincingly are the new Social Liberal Forum. This is a small plea from a potential recruit: give us a lead into the future.

Social Liberalism is the mainstream philosophy of the Liberal Democrats and has been so since the Grimond era. Social liberalism recognises that an individual’s material and personal circumstances can act as a constraint on them realising freedom. How meaningful is freedom if you don’t have a house or a pension? This core Social Liberal analysis is as relevant to today’s world as it was to the Edwardian era.

While political freedoms such as freedom of speech are crucial, poverty, inherited disadvantage and in today’s world, climate change, can curtail freedom. Lloyd George preceded his challenge to the landed aristocracy with the damning phrase that “a nation that ruled the waves could not even flush its own sewers.” Liberals have used state action to challenge disadvantages that prevent individuals realising their full potential. As Nick Clegg has said, “freedom and liberty mean nothing unless the barriers to progress and opportunity are removed.”

Beveridge provided the intellectual underpinnings for a welfare state that brought about significant improvements in life expectancy and quality of life for many Britons. The call for state intervention to give disabled people full civil rights in the high street and the workplace did not come from some Fabian elite but from the grassroots. It came from people who had been dismissed from employment and who could not cross the threshold of the local supermarket.

The state can play a role as an enabler and can break up concentrations of power and wealth essential for expanding life chances. But a call for renewed state action does not mean an embrace of the forms of intervention favoured by Crosland, Brown and Blunkett. The state of 2009 is centralist, insensitive and unresponsive.

Despite record funding, our public services remain stubbornly unresponsive. All the consultation documents in the world do not amount to a genuine voice for citizens in the planning of key services like health care. Liberal Democrats need to refashion and reinvent the state and not simply through decentralisation.

For example, will citizens have a stronger voice in shaping decisions about schools and hospitals if they are given social and economic rights, enshrined in a written constitution? Campaigners used South Africa’s constitutional entitlement of ‘the right to health’ to force Thabo Mbeki to overturn his ban on the funding of HIV drugs. Defining clear rights in these areas should also be part of the debate.

But why the Forum and why now?

Social Liberalism speaks powerfully to the needs of our times. This is an age when we survey the ruins of insolvent financial institutions bequeathed to us by the abdication of regulation. Across the world, existing divisions over ethnicity, religion or caste are being intensified by poverty and the advance of climate change. Equality is now not just a moral imperative but is essential for the quality of life of people across the social spectrum.

Economies like South Africa and Brazil are the real growth engines for the world economy in the future but they are being held back by the inequalities within their borders.

I am diminished if the child down the road is underachieving at school and leaves school with inadequate qualifications. If a woman in Salford is paid less for her work than a male colleague doing the same job, our taxes will end up paying for her retirement. How can we compete in the world economy when working class children born at the millennium are already falling behind their less academically able middle class peers?

Richard Wilkinson’s new publication, The Spirit Level, has provided powerful evidence that unequal societies like Britain diminish the quality of life available to people across the social spectrum. For example, Wilkinson found that even in an area that is closely associated with working class disadvantage – achievement at school – more equal societies see higher levels of literacy among the children even of better educated families. He demonstrates how inequality hits the quality of life across the whole community in areas ranging from trust in your neighbours to homicide. Wilkinson’s findings should chasten those who believe that the affluent can insulate themselves from the consequences of deprivation elsewhere in our society.

So while there is a compelling case for a reinvigorated national and international effort to achieve equality, can Liberal Democrats generate the electoral support to make this possible? Some people have suggested that we have now reached the limits of public support for redistribution of wealth and opportunity. I disagree. When voters are shown the impact that successful anti-poverty policies can have, they rally in support of equality.

The banking crisis represents a major strategic moment for the centre left. Margaret Thatcher exploited the IMF crisis and the Winter of Discontent to press her case for free market policies and possessive individualism. The banking crisis demonstrates that free markets do not inherently serve the public interest. In this recession, both middle and working class people share economic insecurity and will look to the state to provide them with social protection. President Obama is taking advantage of this climate in the United States to push forward with the biggest expansion of the federal government since the New Deal.

And Social Liberalism is indispensable for our electoral coalition. Labour voters put us over the top in a series of seats won from the Conservatives in 1997 and 2001. We now represent a swathe of seats in university towns where middle class Labour voters were won over by our policy on tuition fees and our uncompromising internationalism on Iraq.

The Social Liberal Forum was formed in order to generate debate within the party and beyond. Our title is not accidental. We don’t exist simply to promote some pre-defined policy agenda. We want to engage with party members across the country. That’s why we have started the Ideas Factory on our website. A liberal party needs open debate.

There are some really big questions for our party to consider as we formulate our manifesto and beyond:

• Can we break the cycle of inherited disadvantage by investing in education alone? Will an emphasis on education be distinctive enough to counter David Cameron’s Conservatives?
• If we are serious about hitting the 2002 child poverty target, and we reject means-testing, what does that mean for child benefit?
• Who are the poorest in our society and what are the policy interventions that will help them?
• While worklessness is a key driver of poverty, free marketers should recognise that work that delivers low pay and limited progression can also entrench poverty, particularly for women.
• How can we develop a framework where business meets its social and environmental obligations and maintain competitiveness?

One hundred years on from the People’s Budget, the inequalities in life chances in today’s Britain demand that we reconnect with our radical heritage. Throughout our party’s history – whether it be honouring moral obligations to the Hong Kong Chinese; Kosovo; or upholding international law on Iraq – where we have shown leadership and moral clarity, we have been rewarded.

For the record, while the Social Liberal Forum does indeed believe that social liberalism is the mainstream ideology of the Liberal Democrats, we do not believe it is incompatible with other strands of liberalism. Being a broad church, and having its tenets challenged from time to time is healthy for a political party.

We established the Social Liberal Forum to encourage debate within the party not to shut it down. Everything we have done thus far (the Ideas Factory, the policy discussion evenings) has revolved around this. We very deliberately chose to launch this website with David Howarth’s article examining the different strands of liberal thought precisely to move on from debate which at times can be dogmatic and based on the assumption (often promoted by the media) that this is a zero-sum game in which for economic liberals to ‘win’ social liberals must automatically ‘lose’, and vice versa.

David Howarth adds:

My views on this are well known – ‘economic’ vs ’social’ is a debate within social liberalism about means, not ends. ‘Classical’ vs ’social’ liberalism is a different debate within liberalism about whether the core commitments of liberalism should be supplemented by commitments to the redistribution of wealth and power and to democracy for its own sake. It’s important not to get these two debates confused.

But I do think the Liberator ‘Blues under the Bed’ editorial is quite wrong when it claims that classical and social liberalism cannot exist within the same party. That depends on what the leading issues of the day are. When current politics is exclusively about the redistribution of wealth it might well be difficult to keep a combined liberal party together. But if the issues of the day include a large element of having to defend core liberal values – such as political freedom and civil liberties and keeping the state out of private lives – I can’t see why liberals of all kinds could not work together, even in government.

Here, Richard sets out what he believes are distinct limitations to the market. Richard will assert that there is still a very clearly designed role for the state, one that is creative and enabling, rather than centralising and stifling.

I’m going to try to tackle three broad issues this evening. First of all, how recent events have affected views of the state. I then want to look at how social liberals approach the state, and finally consider what a social liberal state would be like.

In terms of recent events, I think one word illustrates how far debates have shifted. It’s a word we used to hear a lot about, but had largely been consigned to the history books.

The word ‘Keynesian’ was rarely heard in public debate in a positive sense. Today, faced with global economic meltdown, politicians of quite diverse shades have embraced some of the interventions which Keynes argued for. The word ‘Keynesian’ has been almost absent from political debate for two decades. Even where people have advocated job creation schemes, they have been shy of describing them as being influenced by an approach to political economy that the orthodoxy of the 1980s and 1990s had trampled under foot. Now it is on the lips of many, though sometimes only partially accurate, to describe the interventionist approach which governments are taking in the current crisis.

This, I think, shows how far current views of the state are in a state of flux. More fundamentally, as another co-editor of Reinventing the State, David Howarth, recently put to me, the fundamental realisation which many are making now is that where we once believed that key aspects of the market economy operated freely of the state, they now in fact rest on the state in more ways than we have imagined.

That does not just mean the state maintaining a basic framework of law which provides, for example, a framework for consumer protection. I am talking about the extent to which business people who, in usual times, want government to stay out if their daily lives, now plead for government to bail them out. The rhetoric of entrepreneurship, bemoaning the burden of the state, seems strangely hollow now. We are not quite in the 1970s, with every major employer the possible recipient of state aid, and we will not get there, but the mood music has certainly changed.

I hope that against the backdrop of that new mood music, people will come to realise that the best way to come out of the current crisis is not by pursuing policies which will just take the country back to exactly how it was beforehand. If government pursues policies which simply restore levels of growth, salaries and property prices to the levels they were until recent times, it will in my view have failed. If we restore rampant consumerism, materialism, and obscenely unequal salaries, we will be doing no favours for the long-term sustainability of the economy and our environment. If we encourage people to believe that collective action only needs to tae place at times of crisis, and do nothing to engage people in the political process, then we will do nothing to create to kind of co-operation which needs to guide our future.

This will must mean a role for the state, because government is one of the methods by which people come together to tackle their shared problems. But the state as it currently exists is deeply flawed and we must take the opportunity to recast what we mean by ‘the state’. I think those who can articulate a coherent and resonant view of the state, can shape debate for a generation to come.

How do I approach this? Well, I am a Liberal Democrat parliamentary candidate, vice-chair of the party’s national policy committee, and a former Director of Policy of the party, as well as having written as an academic on aspects of liberalism. More specifically, I should say that I approach this question from a social liberal perspective. To explain how that might differ from other liberal perspectives, I want to bring in some history, which will no doubt be familiar to many but worth recounting.

There was a decisive change within liberalism around the turn of the last century. Prior to that point, the liberal view of the state had been quite limited. It rested on John Stuart Mill’s view, published in 1859, that ‘The sole end for which mankind are warranted, individually or collectively, in interfering with the liberty of action of any of their number, is self-protection.’ In practical politics, the liberal approach to the state as practised by Gladstone was focused on political rights. It involved expanding the rights defined by law, and much of that flowed by a belief that in so far as at the state had affected individuals, it has been a largely negative influence, at times tyrannical. There is a clear line between the arguments of the radicals of the English Republic and liberal beliefs in the nineteenth century. This line involved circumscribing the powers of the state – so that it could do less rather than more. For nineteenth century Liberals, the state was more often an enemy than a friend.

That is not to say that Liberals were averse to collective action. Far from it. Liberals pioneered a local government role to tackle problems like poor housing and public health. Joseph Chamberlain’s Birmingham in the 1860s and 1870s was the radical centre of this – Chamberlain himself used the phrase ‘municipal socialism’.

Yet the Liberal Party nationally was divided over the extent to which such measures should translate to national politics. This might have split the party, but it was instead split by Irish Home Rule in 1886. This drove Chamberlain into the arms of the Conservatives. It is ironic that it was the Conservatives, not the Liberals, who established county councils, long a radical Liberal demand as a way of expanding collective methods of tackling shared problems. It is hard now to think of county councils as a radical triumph, but they represented a significant stride in the 1890s, and allowed education to be publicly run in a way that was unimaginable without a uniform local government structure.

Despite the loss of many radicals over Home Rule, the Liberal Party radicalised at the turn of the century. It was the Liberal Party, between 1906 and 1914 which laid the foundations of the modern welfare state, and a new philosophical framework was provided by L.T. Hobhouse in his 1911 text, Liberalism.

Two sections sum up his approach. The first relates to the shared ground between the pursuit of freedom – the cause of all liberals – and the pursuit of greater equality. Hobhouse argued:

… the struggle for liberty is also, when pushed through, a struggle for equality. Freedom to choose and follow an occupation, if it is to become fully effective, means equality with others in the opportunities for following such occupation. This is, in fact, one among the various considerations which leads Liberalism to support a national system of free education, and will lead it further on the same lines.¹

Hobhouse was right in his prediction for this approach led social liberals to advance the cause of public services throughout the twentieth century.

Meanwhile, in Hobhouse’s struggle for both liberty and equality, the state was a weapon. He did not believe it was the only source of collective action and described it as ‘one form of association among others’. But he had little to say about the other forms of association, and was clear that it was on attitudes to the state that New Liberals ‘stand furthest from the older Liberalism’. He argued:

… that the “positive” conception of the State which we have now reached not only involves no conflict with the true principle of personal liberty, but is necessary to its effective realization.²

Although Hobhouse believed that the concerns of classical liberalism should inevitably lead to endorsement of the state, his own overt statement of distance between ‘new’ and ‘old’ liberalism showed how far Liberals had travelled from the days of Gladstone to those of Asquith and Lloyd George. This conception of the state has underpinned key developments in Liberal thought since 1911: the contemporary work of the Asquith government; Beveridge’s proposal of social insurance; and Liberal Democrat enthusiasm for public services, especially education.

To some extent these views of the state dominated the politics of the post-war era. So when that system collapsed, I think that one of the problems the Liberal-SDP Alliance had was, as it has been said before, that it simply promised a better yesterday. Essentially, the party was offering the same state system but run better.

Yet the dominant view of the state in British politics, at least dominant for the last twenty years is the neo-liberal state. On the fundamental issues, Labour has not challenged the basic tenets of Thatcherism about the role of the state in the economy. Indeed, at the core of the Clinton-Blair-Schröder ‘Third Way’ was an acceptance of them. That is not to say, that Labour has failed to use the state with some success in public services. It has done that in one way: without challenging the framework, it has invested massively in health and education. There are some who say that this has made little difference, but I am not one of those. Admittedly, some of the money has been swallowed up by higher salaries, but many public servants were relatively low-paid, and simply improving morale among them is significant. On other issues, you only have to look at hospital waiting lists to know how much change there has been.

But those successes are also accompanied by huge public dissatisfaction over their lack of voice in public services, and that boils down to failure of the central state. The experience of many individuals and local communities is one of being completely unable to influence the big decisions on public services. That is something that I have seen at close-hand in my local area where despite the extra investment, we are steadily losing hospital facilities as they are shifted to hospitals elsewhere. Meanwhile, the standard narrative of many public servants is of being weighed down by bureaucracy.

What do we do about that?

Within the Liberal Democrats, there are broadly two approaches. A minority view, that sees little reflection in party policy, but which has attracted much media attention, is the school of thought associated with the Orange Book, published in 2004. It is a view which suggests that we need to emphasise ‘choice’ in public services, tends to see the state as ‘nannying’ and believes that the way forward is to treat individuals as consumers and offer them choice through insurance schemes.

Less eye-catching to the media is the social liberal approach, which tends to influence party policy much more.

What does a social liberal state look like?

It starts from view that the state has the ability to advance individual freedom. It takes the view that such freedom is often best advanced by collective action. The state should not only step in where markets fail, but that there are areas where markets will always fail to deliver progressive social goals.

However, and this is the crucial difference between the social liberal approach and the Labour approach, it is impractical for state to be so centralised, and also risks thew intrusions about which liberals are concerned.

I think there are three priorities for greater state action: the environment; equality and redistribution, and public services.

I want to focus today on public services, particularly the NHS, and use an example from another country, of how things could be done differently: Denmark.

Why Denmark? Principally because it has high levels of satisfaction from the public.

There are some crucial differences between the Danish and UK health services.

They spend more than us – both per head and as a percentage of GDP, and they have done for many years.

They also have a recent innovation whereby if state cannot deliver within one month, then the state pays for them to go private, although the system is currently suspended due to pay disputes

But their system is also radically devolved.

Since 2007, the governance of the health service has focused on five regions, ranging in population from about 600,000 to 1.6 million, thus making them analogous in size to English cities or counties rather than regions. There are also municipalities below that – 98 of them.

Regions are responsible for:

• Hospitals;
• Psychiatry; and
• General practitioners.

Municipalities are responsible for:

• Preventive treatment, and non-hospital care and rehabilitation; and
• Treatment of alcohol and drug abuse.

The State is responsible for:

• Planning for specialist treatment; and
• Follow-up on quality, efficiency and IT usage.

Approximately 80 per cent of each region’s funding comes from a national health contribution, amounting to a rate of around 8 per cent on income tax. The rest is essentially from variable local taxes.

I think we need this kind of radical democratic decentralisation if we are not only to devolve decision-making in the NHS but to create the kind of devolved government in England that is enjoyed in the rest of the UK. Such radical reforms should be centred upon cities or counties, which are historic units of England, and many of which encourage strong feelings of local identity. Moreover, the last thing the public wants is another level of government, as was discovered in the north-east in the referendum on a regional assembly.

There are two options for the way in which such devolution could be achieved to provide local people with the voice that they lack. The quickest and simplest way might be to give Primary Care Trust and Strategic Health Authority commissioning powers to existing city/county-level authorities. The great advantage of this approach is that it could have positive effects on the quality of government beyond the NHS. By giving city/county councils significant powers over the NHS, counties would become more directly comparable to the devolved bodies in Belfast, Cardiff and Edinburgh. This would help to answer the ‘English question’, which is increasingly a factor in debates on the power of Westminster. If an effect of that was that people who are ambitious to wield power in their area stood for city/county councils rather than Westminster, the overall quality of decision-making at a county level would be greatly increased.

An alternative option would be for each city/county-level local authority to choose whether to run the local NHS itself, or to create a Local Health Board with powers to vary local taxes in much the same way as unelected police authorities do. Such a Board would be directly elected by local people at the same time as local elections, on the basis of manifestos put forward by local parties or independents. The advantage of such an approach over submerging NHS functions into wider county-council matters would be that there could be a very clear focus on NHS-related issues at election. All the evidence suggests that this is the primary concern to voters, so why not give them a chance to have a separate debate over how to run the NHS? This would allow clear choices to be made over, for example, additions to the NHS budget in return for maintaining a local hospital ward, rather than confusing health matters with the broad range of issues tackled by local authorities. It would also allow those with specific expertise of the health service, such as retired doctors or nurses, to get involved in the running of the local NHS, having put their case to the electorate. Their expertise could greatly inform manifestos and invigorate local debates on health care.

Underpinning these changes in decision-making must be one crucial change on funding. Core funding has to remain at the national level, as it does in Denmark, to maintain fairness across the country and so that poorer areas do not have under-funded health care. Yet local decision-making cannot be effective unless there is local flexibility over funding. So aside from having the power to make those decisions currently made by PCTs and SHAs, local authorities must have the ability to support those decisions with necessary funding. Only by having the ability to raise extra funds can authorities truly respond to local needs because more often than not, local demands for services will have a price attached. Thus, authorities should be empowered to raise funds for the NHS through additions to an NHS Contribution, based on National Insurance, and distributed using current formulae.

Within such a national framework, a reformed local NHS can flourish. But it can only do so if the existing bodies are scrapped and given to democratically accountable local people with wide-ranging powers. Those could be existing local authorities on a county or city basis, or they could be new Local Health Boards. But without one of these reforms, people will not have a voice over the local NHS and will be continually frustrated about their inability to influence decision-making in the areas of the NHS that most affect them.

Without local power, local people will be continually asking for health care that is not on the menu, and for which they have not been given a price.

Without local power, people have no chance to pay for the quality they want, and monitor the quality of local services.

Radical devolution has happened in Denmark, and it works.

The challenge in England is to sweep away swathes of unaccountable local bureaucracies and give their powers back to the people through elections in which local health care can be thoroughly debated.

As regards the NHS, that does not mean reducing the overall size of the state, but relocating it to create the real voice and real choice which market-oriented alternatives cannot provide.

1. L.T. Hobhouse, Liberalism, (first published 1911; New York: Galaxy Press, 1964 edition), p. 21.
2. Hobhouse, p. 71.

This article was originally published in Reinventing the State: Social Liberalism for the 21st Century. We are grateful to David for allowing us to reproduce this article.

Sometime in the late nineteenth century, liberalism began to divide into two different streams. One stream, which came to be called ‘classical liberalism’, confined liberalism’s ambitions to establishing a robust framework to protect individuals from a rapacious and power-hungry state. It aimed to control the size of the state, especially its military expenditure, and to promote international free trade, both for its own sake and as a way to encourage peace. Its ideal was a state that left us alone to get on with our lives. It valued political freedoms – especially of speech and of belief – but also tended to see property rights in themselves as an important bulwark against oppression.

Some classical liberals shaded into what ought to be called libertarianism rather than liberalism. They came to view property rights as natural rights existing outside the framework of the state, so that the state may not even redefine property rights without committing a wrong.

The other stream, which has come to be called ‘social liberalism’ (but which might better be called ‘social justice liberalism’¹ ), also valued political freedom, also thought that the state should as far as possible leave us alone to make our own decisions on how to live our lives, also opposed militarism and also believed that international free trade was a way to preserve peace, but it believed in addition that liberalism required a commitment to a fair distribution of wealth and power, which in turn led to support for redistributive taxation and public services as ways of fairly distributing wealth and for democracy as a way of fairly distributing power.

Fairness can be seen both as a condition for the legitimacy of the state itself (the characteristic ‘social contract’ view as revived by John Rawls) and as a condition for meaningful freedom. In contrast to the views of libertarians and some classical liberals, rights of property came to be seen by social liberals as instruments of state policy that had to contribute to broader political goals rather than as goals in themselves.

In some countries, the division of liberalism eventually led to the creation of two separate liberal parties. An early example was the separation of the Danish Venstre and Radikale Venstre. Later examples include the Dutch VVD and D66 and the division of the French Radical Party into the Radicaux de Gauche and the Valoisien Parti Radical. But in Britain, and in a different way in the United States, ‘liberalism’ has come simply to mean social liberalism. British and American liberals believe not just in political freedom but also in social justice and in democratisation.

As a consequence classical liberalism does not have its own political home in Britain. Some classical liberals have ended up in the Conservative Party, but that has never been a particularly comfortable home for them because of the ever-present authoritarian and socially illiberal strands in Conservative thinking.

The confusion about ‘economic liberalism’

Occasionally the idea comes up that some British liberals are ‘social liberals’ whereas others – for example some of the authors of The Orange Book² – are ‘economic liberals’, and that there is a fundamental difference between them. This is a confused view, which comes about through not understanding the difference between means and ends. All British liberals are social liberals, even the ones who claim to be more ‘economically’ liberal than others. To take an example often cited by commentators, David Laws, regarded by many as an ‘economic liberal’, is nevertheless an advocate of a very social-liberal view of redistribution. ‘Freedom is curbed by poverty and inherited disadvantage’, he has written, ‘which is why liberals have been concerned about these issues for more than a century’³ . Economic liberalism, for Laws, is about the way in which we pursue social liberalism, not about the aims of social liberalism. He has further explained that his often-expressed view that British liberals should ‘reclaim our economic liberal heritage’⁴ has been ‘misunderstood and misrepresented, as implying a downgraded commitment to the party’s social liberal roots … The argument is that social liberal goals should be pursued with economically liberal means.’⁵

The confusion comes about because ‘economic liberalism’ is an ambiguous term. One possible meaning is that it is identical with ‘classical liberalism’, with the view that liberals need not be concerned about redistribution or with democracy but only with limiting the scope and activity of government. If that were what ‘economic liberalism’ meant, it would indeed sometimes come into conflict with social liberalism. That is not, however, the meaning used by ‘economic liberals’ within British liberalism. Their version of ‘economic liberalism’ is a preference for market mechanisms not in opposition to redistribution but as a method to be used in the detailed design of mechanisms for it. For all social liberals, whenever the use of the market might undermine the central aim of social liberalism – namely a society that protects effective freedom for all and which thus can generate and recognise a legitimate form of government – the market has to give way. The political goals of liberalism are always more important than any particular method of achieving them.

Reasonable social liberals can disagree about the desirability and practicality of specific proposals for delivering social liberal goals. Market mechanisms will always have attractions for liberals, because they decentralise decision-making and encourage innovation – both important liberal enthusiasms – but market mechanisms will never be more than means rather than ends in themselves. The inherent limitations of market mechanisms, even in the absence of barriers that all liberals, including classical liberals, have always recognised, such as monopoly, are now very well-known. Asymmetries of information, transactions costs, and our limited capacity as human beings to calculate and imagine (‘bounded rationality’) all inevitably contribute to market failure. That does not mean, of course, that other mechanisms – state regulation or voluntary action – will do any better, but the possibility that they might should not be excluded. Above all, liberalism, as opposed to libertarianism, sees markets, and the property rights on which they rest, as intimately connected with the state, since markets, other than the most elementary and short term, fail without state guarantees of rights. Thus, for liberals, whether a market exists is a matter of policy choice, not a matter of brute fact.

It is an oddity of British political debate that so much emotional energy is expended on a question that almost certainly has no general or stable answer, namely whether public services should be organised using market or administrative mechanisms – except that no one now disputes that the state should compete for labour in the labour market and not be able to direct people into its jobs (though perhaps even that is not fully accepted by some in the National Health Service, who have recently attempted – with disastrous results – to introduce a directed labour element to the employment of junior doctors in training to become consultants). As a practical matter, some kinds of service at some times are better suited to be delivered through commercial contracts with separate organisations, whereas other kinds of service at other times are better delivered by directly employing the providers of the service. For example, where the aims of a service are in dispute or in transition, and so the criteria for its success or failure are unclear, governments would be well-advised not to attempt to contract the service out but instead to retain the flexibility of direct employment and management. On the other hand, simple services with uncontroversial aims might be better managed through a contract with another organisation. The fact is that British politics – largely because of a party structure that originally organised itself around the ‘sides’ of industry – elevated issues of personnel and resource management into matters of fundamental principle, while paying very little attention to issues that really are fundamental, such as political freedom, the development of democracy and the effects of gross inequalities of wealth and power.

The common core of liberalism

One should not, however, exaggerate the differences between classical and social liberalism. Both begin, and end, with the view that a state that fails to secure political freedom is not legitimate. Both reject the conservative view, for which the main advocate in Britain is the Labour Party of Tony Blair and Gordon Brown, that security is always more important than liberty. That view attributes to the state a wildly exaggerated capacity to provide security – not only because of the all-too-apparent limitations of the competence of state officials to keep us safe but also because, as the arbitrary power of the state increases, the more the state itself becomes a source of insecurity. The citizens of the Soviet Union were not more secure because of the immense arbitrary power of the Soviet state – they were less secure. The politics of fear, as practised in Britain by Labour, is ultimately self-defeating. It will destroy both the very freedoms it is the state’s task to preserve and security itself.

That is not to say that liberalism denies any significance to security. It is just that it values security only in so far as it contributes to freedom. Tony Blair’s view, in contrast, seemed to be that the only right that matters is the right to life. He would have sacrificed any political freedom if he thought that by doing so he would save a single life. One wonders what our forebears who sacrificed their lives for political freedom, from the seventeenth century to the twentieth, would make of the view that political freedom is not worth a single life. One wonders what the Blair doctrine would have implied in 1940, when we could have avoided a great many deaths in exchange for sacrificing the political freedom of the whole of Europe. For Labour, however, political freedoms are only ‘traditional’, as if they were a form of folk dance, and as such are merely romantic indulgences be sacrificed on the altar of the ‘modern’. In contrast, for liberals of all kinds, unless the state guarantees political freedom, it has no moral claim on us at all.

Admittedly, to the extent that liberalism is built upon a social-contract view of politics, it cannot ignore existential threats. The social contract is not a suicide pact. But, as Lord Hoffmann has said, aptly but to the fury of large numbers of conservatives in the Labour Party and beyond, the current threat from terrorism is not existential. We are not faced with 1940. The greater threat is from laws that remove political freedom.⁶

Indeed, if there is an existential threat that creates a need to readjust the basic liberal social contract about what powers we ought to cede to the state, it is not terrorism, but climate change. But even a real existential threat such as climate change does not justify the erosion of fundamental liberties such as freedom from arbitrary arrest.

Nevertheless climate change does pose a challenge for classical liberals who are tempted by libertarianism. If one believes, as libertarians do, that property rights are fundamental and pre-political, one will find climate change a very thorny issue. Libertarians typically deal with environmental problems by saying that they depend on deciding which person, the polluter or the pollutee, has the better property right. But the global and existential nature of climate change makes this analysis very difficult for libertarians to apply. The consequence of saying that the polluter has the better right will be to undermine all property by destroying the physical conditions in which property has any meaning. But, because carbon emissions are so pervasive in our way of life, the consequence of saying that pollutees have the better right is to undermine such a broad range of property rights that one would be close to having to abandon any pretence of giving absolute priority to property rights. The exception would have swallowed the rule. Perhaps this dilemma explains why some libertarians tend towards climate change denial.

Classical liberals who are not libertarians, however, should have no difficulty with the idea that property rights should be designed by the state so that catastrophic effects such as climate change are avoided.

Two forms of social liberalism

Social liberalism moves beyond classical liberalism in two ways – a commitment to redistribution and a belief in democracy. But both are affirmations of liberalism’s attachment to political freedom, not contradictions of it. The fundamental idea is that the over-concentration of power is itself a threat to political freedom. Excesses of wealth and poverty are themselves threats to freedom because they tend to produce self-perpetuating oligarchies who buy up the political system, either directly or through politically influential actors such as the media. On the other side, democracy, with its basic rule of political equality (one person, one vote) tends towards the dispersal of power, which safeguards liberty, especially if it takes the form not just of the passive democracy of occasional voting for representatives but also the active democracy of taking part in public decision-making. Social liberalism thus opposes gross inequalities of wealth and supports the extension and deepening of democratic decision-making.

Stating the basic principle does not, of course, settle how far to take it in particular circumstances. Indeed there is a disagreement within social liberalism about whether the principle that freedom should be safeguarded from the consequences of economic inequality is sufficient in itself or whether it should be supplemented by some further principle of fairness (for example John Rawls proposed two such principles: ‘la carrière ouverte aux talents’ – the principle that state jobs should be held only on the basis of ability; and his ‘difference principle’ – that material inequality should only be tolerated to the extent that it benefits the least advantaged). No social liberal would allow a supplementary fairness principle to undermine their commitment to political freedom, so that for all social liberals there is a clear hierarchy of value between freedom and equality (and one that is the opposite of that held by socialists), but there is disagreement about whether state policy should promote economic equality beyond the point strictly required by the goal of safeguarding political freedom.

What is sometimes interpreted as a difference of approach between ‘social’ and ‘economic’ liberals in Britain is often merely a difference within social liberalism between those who recognise supplementary fairness principles (‘maximalist’ social liberals) and those who recognise only the principle that there should be redistribution to the extent that maintains the conditions for political freedom (‘minimalist’ social liberals).

One point, however, tends greatly to reduce the practical distance between minimalist and maximalist social liberalism. Nearly all social liberals accept that the existence of formal political rights cannot be enough by itself to create a liberal society. Citizens need to be in a position to exercise their rights. That principle, which sounds modest, in reality implies a far-reaching programme of public services that goes beyond the classical liberal list of ‘public goods’ (such as defence). It implies in particular a commitment to the broadest possible provision of education, not for the sake of economic development, as in the socialist and utilitarian traditions, but to ensure that citizens can exercise their democratic rights in practical ways and not fall victim to political fraud and demagoguery. It also implies government guarantees in health care, since citizens who are ill or constantly in fear of illness are hardly in a position to give their time to public affairs.

Democracy – dialogue, community and localism

The commitment of social liberalism to democracy, especially to democratic participation, introduces another potential point of tension between social liberalism and markets. Markets are essentially a way in which people can communicate their desires and their abilities to other people without saying very much. Information flows through markets by the device of the price mechanism alone. The process of bidding prices up and down communicates all that needs to be communicated about preferences and costs. Democracy, however, especially in its participative form – but even in its representative form, when the representatives engage in debate – implies a much richer form of communication. Both markets and democracy use forms of rationality, but the rationality of the market is closed. It is limited to working out the consequences of what we happen to want. Democracy, especially in its deliberative forms, goes further, into open discussion of what we ought to want.

Social liberals are drawn to markets because of their ability to disperse power and to promote innovation, but they are often also repelled by their impersonality. Moreover, markets seem potentially to undermine political freedom by undermining political activity. They do this by providing a means for obtaining what one wants without having to engage in anything but the thinnest of dialogues with one’s fellow human beings. The extensive availability of the option of ‘exit’, to use Hirschman’s venerable but still useful vocabulary,⁷ tends to dissolve the option of ‘voice’.

The dangers of replacing political participation with markets are apparent in British society today. It is connected with the rise of consumer politics, in which one’s vote is seen not as a responsibility to choose what is best for all but as an instrument of self-interest. It is one of the factors behind growing disillusion with politics, which in turn is a major threat to political freedom, as disillusion turns inevitably to cynicism. If politics is seen simply as ‘buying’ products in a political marketplace, it will soon lose all coherence, and hence, in the longer term, it will lose all credibility. Pure manoeuvre replaces attempts to reflect values. That in turn leads to endless disappointment, since, unlike in a real market transaction, if voters choose incoherently, as they are likely to do if they follow only their immediate desires (more services and lower taxes) they can and will blame ‘politicians’ for their own incoherence.

In contrast, political participation in decision-making (and not only in campaigning – single-issue politics can only be entry-level politics, not the full deal) is an education in political responsibility. It gives an insight into understanding the problem of political value and choice. To govern is to choose, but if only a few people understand that fact, and the rest are infantilised into believing that they can have everything they want, democratic government will not endure.

The classical liberal view that all the state should do is guarantee rights and then move out of the way leads to a situation in which politics appears not to be necessary. Social liberals fear that this classical liberal dream is a dangerous delusion, for there never can be a society in which rights are so firmly guaranteed that no political action is necessary to secure them. That is because securing rights can only take place through human institutions, such as the legal system, and human institutions are populated by human beings, who are not necessarily to be trusted. Any attempt to create such a perfectly non-political society (what might be called ‘legal liberalism’) will have the unintended but serious effect of making rights ultimately less secure. Liberalism, to be sure, values the rule of law, but social liberalism also recognises that law should not attempt to replace or abolish politics. Instead, law should be seen as a form of vitrified or frozen politics, a form that is valuable because it deliberately slows down some kinds of decision and because it is more firmly committed than the rest of the political system to ideas of procedural justice; but we also need the means by which other decisions can be taken more quickly, whether in the marketplace or in politics.

The value social liberals give to dialogue and democratic participation also emerges in another theme of British liberalism, that of community. If one were to read only recent liberal political theory, and ignore the practice of liberal politics in Britain over the past forty years, one might conclude that the idea of ‘community’ was the exclusive possession of an anti-liberal group of politicians called ‘communitarians’. It is true that anti-liberal, and indeed illiberal, communitarians exist. But they are not the only politicians interested in community. The liberal idea of community arises from the democratic ideal of people taking and using political power⁸ rather than from any metaphysical notion that people only exist in their relations with other people – a view liberals would reject, even though they value opportunities for rich human interaction. Liberal community politics can be criticised as tending to confuse society and the state, but its deeper meaning is as a form of active democracy, in which people come together, decide what they want to change and then work to bring that change about. The idea is not that politics should reflect the views of existing ‘communities’ – the amorphous groups within which communitarian (and specifically Labour) politicians want to trap people – but that it should create communities. More than that (and this is where the practice of community politics can go wrong), liberal politics should aim to create liberal communities.

All this explains why localism is a long-standing social liberal commitment. Local government combines all the liberal desiderata, not just some of them. It helps to disperse power and to promote experimentation and diversity, but, in addition, unlike markets, it can facilitate political participation. It has a human dimension that markets tend to suppress. Classical liberals sometimes criticise social liberals for claiming to believe in decentralising power but failing to promote further decentralisation from local government to individuals through markets. The social liberal response is that political freedom depends on active participation in politics and that can best happen, both from a practical point of view and from the point of view of avoiding the dangers of excessive concentrations of power, in local government.

Localism lies at the heart of what social liberals mean when they talk of reinventing the state. If the units of decision-making are small enough, more people will believe that their participation can make a difference and hence they will be more likely to participate. But, even more importantly, they have to believe that the unit of government in which they are invited to participate can make decisions that make a difference. The first condition of wider participation in local government is that local government needs to have effective power. Undermining that power, by, for example, purporting to ‘devolve’ power further to individuals in markets, will defeat the whole exercise. This is why both Labour and Conservative versions of localism will ultimately fail.

Classical liberals might object that the implication of localism is that, as long as the state is decentralised, it should be permitted to displace the market entirely. But this is not the implication of localism, at least for social liberals. Social liberalism’s devotion to localism arises principally from its commitment to preserving political freedom through encouraging political participation. The degree to which localised state institutions should displace market mechanisms, or quasi-market mechanisms such as voucher and insurance schemes, depends on the degree to which such mechanisms might undermine political participation, and the degree to which local political control might encourage political participation.

Because social liberalism supports localism for its political effects, for its contribution to liberty rather than to fairness, it ought to be supported by all types of social liberal, both minimalist and maximalist. The difference between them will be that minimalist social liberals will be satisfied if localism succeeds in safeguarding political freedom. Maximalists, however, will want to use local power to further their extended fairness goals. Maximalists will also argue that the dangers of state action for freedom itself will be less acute if that state action is taken at local level, since power will inherently be less concentrated and individuals will retain an option to exit (that is, to move house) that will usually be fairly easy to exercise. But maximalist social liberalism is not socialism. Ultimately it values political freedom above fairness, and it should not ignore the real dangers of the abuse of power at local level.

Getting the economy out of the state – beyond public choice

Classical liberalism enjoyed an intellectual and academic renaissance between thirty and forty years ago largely because of the rise of public choice theory.⁹ The basic premise of public choice theory is that since politicians and public administrators are humans too, their behaviour can be explained in the normal economic way of assuming that they are maximising their own welfare. Political behaviour in a democracy, for example, is explicable through the fact that politicians need to win re-election. Bureaucratic behaviour is explicable in terms of bureaucrats’ desire to maximise their number of subordinates. Both incentive structures lead to obvious inefficiencies. Public choice thus became the study of state or bureaucratic failure, a study that parallels, supplements and, crucially, changes the policy conclusions of economic thinking about market failure. Its central policy message was that market failure does not necessarily imply state intervention because state or bureaucratic failure might be worse.

Public choice theory has important weaknesses. Its view of what politicians want is very thin, because it ignores the role of political values and ideals. It promotes a view of democracy that is entirely passive – as a marketplace for desires in which votes are expressions of existing preferences, not as a forum in which desires are formed and changed. It assumes that political actors have no concept of virtue or public service whatsoever, an assumption that has the potential to feed back into a substantive belief that politicians in reality have no such concepts. It turns the older liberal-republican idea that, although political virtue exists, it is limited in supply and thus needs to be husbanded carefully¹⁰ into a conception of politics that dissolves all virtue and seems to require politics to be suppressed altogether.

Nevertheless public choice theory has a kernel of truth. The theme that political discretion is often dangerous and should be minimised forms part of the intellectual background to policies of all the main British political parties. It crops up not only in the Conservative privatisations of the 1980s but also in the quintessentially Liberal Democrat policy of independence for the Bank of England, a policy subsequently stolen by Labour.

There is, however, a problem. Public choice theorists tended towards libertarianism, and therefore tended to downplay the part played by the state in creating and structuring markets. They thought that if state activity were to be replaced by market activity, politics would be less important and we could all sleep more safely in our beds. This turned out to spectacularly wrong. The privatisations of the 1980s and ’90s were accompanied by the biggest-ever rise in lobbying, especially by business. The consultancy sector in the UK rose by a factor of thirty-one (or eleven-fold in real terms) between 1979 and 1998.¹¹ What happened was that for privatisation to work, the state had to create, through regulation, a series of new organisations and markets, but it also created, in the form of the newly privatised companies themselves and others who might have an interest in them or their activities, a vast number of people who might benefit or lose according to precisely how the government chose to regulate. Furthermore, these organisations, unlike the previous state organisations, had budgets to spend on influencing those decisions.

British politics is now dominated by corporate lobbying. Lobbying lies at the heart of the crisis in party funding, for example, and the cash-for-honours scandal. It also contributes to alienation from politics, and ultimately from democracy itself, because the power of big economic interests to get their way demonstrates to everyone else their powerlessness and encourages a belief that political activity is pointless. Corporatism was not killed off by Thatcherism, as the public-choice theorists hoped. It has merely been reborn in a new form, with, for the most part, only one ‘side’ of industry being represented, but still otherwise intact.

Although we should be wary of the dangers of public choice theory’s libertarian anti-politics, its anti-corporatism remains entirely admirable. Public choice theory’s error lay not in hoping for the end of corporatism but in promoting methods of pursuing that goal that only made things worse. But the anti-corporatist theme itself, and especially the aim of rolling back the corporatist-lobby state, is entirely in line with social liberal instincts.

The role of a social liberal party

The question remains: how broad a church should a social liberal party be? Clearly there is no difficulty in holding within itself social liberals with different ideas about how to pursue social liberal goals, such as ‘economic liberals’. Almost as clearly, the gap between ‘minimal’ and ‘maximal’ social liberals does not lead to insuperable difficulties. The question in practice is about the degree of desirable redistribution or equality of opportunity, not the desirability of those things in the first place. And all social liberals can agree about democratisation and the redistribution of power.

The case of classical liberals, however, is more difficult. Classical liberal adherence to the common core of liberalism, namely the ultimate importance of political freedom, provides a very substantial shared base. But where classical liberalism starts to look like libertarianism, with pre-political theories of property rights and suspicion of all politics including democratic politics, there is more difficulty. Perhaps the issue is ultimately a practical one for classical liberals – do they feel more uncomfortable with fellow liberals who happen to believe in redistribution and democracy or with people who are not liberals in the first place?

There is also, and finally, the question of the relationship between the party and personal liberalism. Liberals in politics are often liberals in their own lives as well. Many liberals hold liberalism as a ‘comprehensive’ doctrine – one that offers guidance for all aspects of life – and not just guidance for politics. ‘Comprehensive’ liberalism means, for example, not just that the state should refuse to condemn other people’s choices when it does no one harm but themselves, but also that we should refuse to do so personally as well. Ultimately, personal liberalism comes down to the idea, derivable from the philosophy of Immanuel Kant, that there is no ‘core’ self that we cannot escape. We should be prepared to abstract away from any allegiance or prejudice and be prepared to start again.¹²

There are difficult questions here. Comprehensive liberalism has political implications, for example about the extent to which we should tolerate illiberal behaviour within other people’s communities. Should we tolerate communities that do not allow people to leave them, for example? Irrevocable membership violates the most basic comprehensive liberal view, that people always have the capacity to change, and that denying that capacity denies their humanity. But should the state intervene to preserve that capacity for people who seem not to believe in it or to want it to be preserved?

If we accept the reality that a social liberal party will always have as its bedrock people who are comprehensive and personal liberals, the question becomes whether such a party should discourage from membership liberals whose liberalism is not personal but only political? That is, what about people who are not liberal in their own moral views but who are only liberal to the extent that they believe that, in public life, we should refrain from invoking arguments that appeal only to those from very specific cultural backgrounds or with very specific religious views (roughly ‘political’ liberals in Rawls’ sense)? Or what about those who would not even go that far along the route of restraining their own commitment to their own moral view but who believe that the only way to create a tolerable state of affairs in a society dominated by competing and incompatible comprehensive views is by a non-aggression pact, or more accurately a no-attempts-at-domination pact (‘modus vivendi liberals’)?¹³

These questions are particularly pressing in a party that has always welcomed religious minorities and dissenters (for example the Nonconformist tradition) but whose political line tends towards secularism.

The best tradition of the party is that it should welcome liberals of all sorts, although it should recognise the tensions that will arise as a result. Liberalism, although as strong a political force in Britain as anywhere in Europe, is not so strong that it can afford to divide its forces. And it is also no longer possible to imagine, as Ralf Dahrendorf once did, that there is no need for a separate liberal party because the other parties could be sufficiently suffused with liberalism to make them safe. The rise of illiberalism, both in the media and in the New Labour government, has been too strong in the past decade to make that a plausible stance.

Social liberalism’s combination of political freedom, social justice and democracy are needed now more than ever.

1. See G. Gaus, ‘On Justifying the Moral Rights of the Moderns’ in E. Paul, F. Miller and J. Paul, Liberalism: Old and New (Cambridge University Press, 2007).
2. P. Marshall and D. Laws, The Orange Book: Reclaiming Liberalism (Profile Books, London, 2004).
3. J. Astle, D. Laws, P. Marshall and A. Murray, Britain After Blair: A Liberal Agenda (Profile Books, London, 2006) p. 144.
4. D. Laws, ‘Size isn’t everything’ in J. Margo, Beyond Liberty: Is the future of liberalism progressive? (IPPR, London, 2007) p. 145.
5. Ibid., pp. 145–46.
6. See Lord Hoffmann in A v Secretary of State for the Home Department [2004] UKHL 56 at 95–97.
7. A. O. Hirschman, Exit, Voice and Loyalty: Responses to Decline in Firms, Organisations, and States (Harvard University Press, 1970).
8. See B. Greaves and G. Lishman, The Theory and Practice of Community Politics (Association of Liberal Councillors Campaign Booklet 12, Hebden Bridge, 1980).
9. For a quick summary see the reissue of G. Tullock, The Vote Motive (Institute of Economic Affairs, London, 2006).
10. See B. Ackerman, We, The People: Foundations (Belknap Harvard University Press, 1991), ch. 7, ‘The Economy of Virtue’.
11. D. Miller ‘The Rise of the PR Industry in Britain, 1979–98’, European Journal of Communication 15 (1), 2000.
12. See A. Ryan, ‘Newer than What? Older than What?’ in Paul, Miller and Paul, Liberalism: Old and New.
13. Ibid.