Nick Clegg still in a tangle over tax

I went to the one day Lib Dem conference today at the LSE. It was an excellent forum, but once again the issue of taxation was raised and the answers were not forthcoming.
Nick Clegg spoke about "tough choices" - a favourite phrase of Tony Blair from years gone by.
Steve Richards, who chaired the next event has heard it all before. He reckoned that it was a complete myth that the Liberal Democrats will find £20Billion public expenditure cuts (albeit cuts that will be reallocated to expenditure elsewhere, plus tax cuts if anything is left over), and he warned about politicians who talk about tough choices and then not say what they are.
Of course student tuition fees - which the LDs plan to scrap but the leadership intend otherwise - is an example of the kind of cuts we will have to make.
Danny Alexander had to respond to that, but instead of talking about hard choices, he downplayed the prospects, saying that a lot of the cuts had already been accounted for (scrapping ID cards for example), and that 3% of overall spending is not very much.
Well come on then, are there tough choices or aren't there?
The question I wanted to ask was a) how much of the £20Billion cuts has already been accounted for and what are they, and where of the remaining £xBillion are the rest of the cuts going to come from? Students tuition? NHS? Scrapping and not replacing Trident? Afghanistan troop withdrawal?
Will we get a say in these cuts, or will they appear rabbit from a hat just before the next general election?
These tax cuts are the remnents of the ideas proposed by parts of the Orange book, an emblem of free-market economics of the kind that we do not need just right now.
However the marketisation of public services has fallen short. Private companies cannot be trusted anymore than the public sector. I am sure that the original idea of tax cuts was related to streamlining public services, but how it has turned out the Liberal Democrats are simply resorting to cutting budgets. This is what Danny Finkelstein calls "Punk Tax Cuts". Cuts not made possible by public services being run more "efficiently", but by simply being cut.
Of course I have my own suggestions; scrap Trident and don't replace it, and withdraw from Afghanistan (as well as Iraq), but I am sure I will not be taken up.
The issue of student tuition fees has not gone away. Despite a change in policy having been rejected on the Federal Policy Committee (FPC) by a massive 14-5, it looks like the matter will be discussed in our Harrogate conference coming up soon. The FPC vote indicates that the party is not ready to make these tough choices, although I would submit that without seeking to change our policy on Trident and Afghanistan, then the same is true of the leadership as well.
All the more absurd that we passed this policy on taxation in Bournemouth in the first place.

Nick Clegg calls for an end to supplying arms to Israel

The fastest ever Facebook group I ever set up can be found here;
http://www.facebook.com/group.php?gid=3950994014#/group.php?gid=54403996833
I am delighted at the overwhelming response from fellow Liberal Democrats to joining this group. Even more impressive when you consider that both the Labour and Tory parties would not dare suggest we stop selling arms to Israel.
Yet this is a matter of regret rather than triumph. The USA has made Israel the most powerful country militarily in the Middle East. In comparison to the Palestinians, most Israelis live comfortably. They have no reason to seriously negotiate with the Palestinians, they have the power to impose their own preferred solution on the conflict and they have the miliary force to do it.
Barack Obama is unlikely to change that. Even if he were so inclined - and there is no evidence that he is - his Democrat party will not allow it.
So what are we to do? There are some things we can do. As Nick points out, stop selling arms to them. Maybe stop trading with them altogether.
On the other hand if we are too confrontational, would we be able to play a diplomatic role as the Norweigans did some time ago?
It is a devil of a problem, and the US has made it almost impossible.

Problems pile up for Obama

It is worth pointing out that Barack Obama won the presidential election by only 5%. As far as US elections are concerned, that is supposed to be a big margin, but lets bear in mind that despite the monumental failure of US foreign policy in the Middle East, and notably Iraq, the Republicans were actually inching ahead until the US economy took a sharp downturn. It is hard to imagine a more incompetent president than GW Bush, yet the Democrats won by just 5%.
In terms of the demographics it was women, and a late swing from Latinos that built up the Democrat vote. And best of all, it was young voters, indicating a shift similar to that which supported New Labour in 1997 and forced the Tories to painfully reinvent itself as a nice "liberal" party.
However there is not a harder time to imagine taking power than now. The economic problems have been long debated. Obama is less likely to be constrained by the free market dogma that got us into this mess. He may not pull it off in terms of resetting the economy - it may not be possible for one thing, but he is more likely to get it right.
Foreign policy is just as troublesome. His gung ho utterances on Pakistan and Palestine during the campaign did not read well, and continue not to do so.
The best we can hope is that that was just a ploy. Maybe the rhetoric in public is meant to impress the right people, but behind the scenes real progress is being made. I suspect this will be wishful thinking.
But why the rhetoric in the first place? Until recently we were living in a unipolar world, with the US far and away the most powerful nation on earth. And now? The case can still be made that this is the case. Militarily it is still the case, the US spends an extraordinary amount and no one can keep up with them. How was this possible? The narrative of the Republican party about the need for US power in the world, conflating the interests of the world with that of the US, and reinforced by the "Shock Jocks" radio talk show hosts who loved attacking "weak" liberals all contrived to win public support for this.
Failure in Iraq has presented the Democrats an opportunity to attack this illusion. Unfortunately many of them bought into this illusion in the first place and it does not look impressive to "flip-flop" in public. And it is not an easy shift to make. To admit that the US is a declining power is not a positive message, and does not fit in well with the need to be patriotic.
Yet it is clear now that it is not enough to be strong militarily and weak politically, which is what the US is now. It remains easier to pretend that the US can still throw its weight; by siding with Isreal whatever it does, by threatening Pakistan and by "surging" in Afghanistan. The problem Obama faces is that the US does not have the power by force to control these countries, and yet the need to find political solutions remains paramount.

The problem with New Labour is that they do not regulate enough

Schardenfraud is a nasty trait, and yet it was hard to avoid enjoying the experience when Sarah Palin got caught out in a high profile interview recently.
The question she was asked was about specific actions that John McCain took to tighten regulations to prevent irresponsibility in the financial markets. The only way she could have answered the question is to not answer and quickly move on to another point and make the interviewer ask questions on that instead. No doubt some politicians can do it, and it is one thing to have the skill to do it, but the fact remains that the question is unanswered.
The reality is that the economic orthodoxy built up since the 1980s is one based on free market ideology, of which deregulation was a fundamental component.
First it was the political right that believed in it, then powerful forces on what was previously the left, and in the UK it is Liberals who have joined the concensus. Indeed many now argue that Liberalism is now defined by this free market ideology.
Now of course this ideology faces a major challenge. It seems so obvious now. Economic growth has been strong because of the bubble in the housing market. Housing in itself does not generate wealth, so it was bound to be unsustainable.
So now we are in a downturn, which we are assured by free market ideologues will not last long.
However if we have learnt the lessons from the housing bubble and we decide to regulate the market to stop this from happening again, then where is growth going to come from in the future?
Vince Cable is absolutely right to point out that he had been warning about debt for years. Some of his colleagues appeared not to take heed however. At a fringe meeting at Lib Dem conference Jeremy Browne argued, incredibly, that as he believes in markets then he was sceptical about nationalising any banks, even in the emergencies that we have today. He also said that although he bought a house with a very expensive mortgage, he was not worried about a slump in the housing market.
However it is not just debt, it is lack of regulation that causes debt. What has Vince said about that prior to 2008? If someone interviewed me and asked me this question, I for one would have a Sarah Palin moment.
What I do recall is a fringe meeting a couple of years ago at a Lib Dem conference where Ed Davey told us how he was going to deregulate further in the financial markets. He seemed very proud of this policy at the time. Personally I was horrified.
Of course I am sure it is possible to look back at the archives and find in the small print suggestions that might imply greater regulation. Given that Vince correctly identified the level of debt as a major flaw of New labour's economic record, I am sure Vince had a good set of policies to deal with it.
However greater regulation was never the headline solution as it has suddenly become, and the free market ideology had been encouraged within the Liberal Democrats, gaining a momentum where there is now a significant fundamentalist fringe within the party.
That fringe simply has no answers to the economic problems we are facing today. No one knows what the solution is to the economic downturn we are now heading into, but even George Bush is being forced to accept that "more of the same" free market ideology is the last thing we need to turn things round.
However Keynes once warned;
<<
The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.
>>
That is the problem the Liberal Democrats now face. Can they adjust their thinking quickly enough to account for the new realities?
These 2 links are the best articles I have read so far on the crises we now face;

http://www.guardian.co.uk/commentisfree/2008/sep/28/usforeignpolicy.useconomicgrowth

http://www.guardian.co.uk/commentisfree/2008/sep/30/marketturmoil.wallstreet

Should we make a deal with the Taliban and pull out of Afghanistan?

Some parts of the Middle East, notably parts of Iraq and Afghanistan are too dangerous for reporters to venture, so we do not really know what is going on.
So from time to time, we are told that things are going well in Afghanstan. Prince Harry loves it out there. He would far rather be there than at home, he said on a TV interview.
But consider this. Our troops have been there for nearly 7 years, and although by now they should have started leaving, in fact we are putting more in. This is a sign of it NOT working.
And now Brig Mark Carleton-Smith has confirmed what we suspected. We are wasting money, lives and resource out there. We are causing more ham than good. We should settle with the Taliban and leave.
If we could do better, then why have we not already done better?
I went to a fringe meeting at Lib Dem conference last month where Paddy Ashdown presented his solution to the problem. It was good to see that he has taken on the lesson learnt from Iraq, he gave a very realistic analysis of the country I thought.
As for his solutions, I would say that most of the pieces fitted, but some did not.
I asked him how he expected local people to "defeat" the Taliban. He clarified that his view of them was more nuanced, and only some parts of the Taliban should be defeated. He then said that we had been in Northern Ireland for 35 years, implying that is how long it might take in Afghanistan. If that really is a timescale you are considering, I would suggest you do not have a viable plan. Northern Ireland, and within it the IRA was a much smaller scale problem in a culturelly similar country.
If it took 35 years there, I dread to think about Afghanistan. 35 years really means no idea how long it will take.
So I was not persuaded by that. Many of the peices in the plan fitted. But for the plan to work, the most important pieces must fit, and I do not think they do.
There is a price to pay either way. There are 3 main objections to the Taliban;
1/ They raise money by selling drugs
2/ They might habour Al Qaeda again.
3/ From a Liberal point of view, we loathe them because of their human rights abuses.
My solution does not fix these problems. But then neither does anyone elses. Having to make this choice is indicative of how the power of the West has seeped away...

There is no perfect solution. Withdrawing our troops is the least worst solution.

March against child poverty

I congregated with a group of Lib Dems recently to go on a march against child poverty organised by the Child Poverty Action Group.
Nick Clegg is determined that the Liberal Democrats have a high profile on this issue. It was a dominant theme at our last conference with lots of fringe meetings. Martin Narey of CPAG had a high profile at conference and is helping the party develop our policies on this theme.
So I was delighted to see Nick Clegg join the march. I may not be his favourite activist given my opposition to some of his policies, but I was happy to help out holding a banner as background to his photos.
Demonstrations have changed over the years. These days the London School of Samba come along with there drums, and you can put on a special costume and have a dance! I remember the times when it was more serious and if you did anything like that then you were a wierdo and you had to go to the back of the demo. Well it is better the way it is now.
The title was "Keep the Promise". Will Labour stick to it's pledge to eliminate child poverty by 2020? We will probably never know of course. The hardest thing is keeping on track with child poverty when we have serious fuel and food inflation, an economy about to go into recession, and ever worsening public finances.
Despite the gloomy prognosis, we will remain one of the richest countries in the world, so there isn't really any excuse. It is a matter of priorities.
Combatting child poverty should be priority over replacing Trident and ighting an unwinable war in Iraq. But there is a lot more to those arguments of course...

Tax cuts? You must be joking!

We have known for some time that the Liberal Democrats have advocated tax cuts for those on low incomes. The idea was that there would be a shift in the burden of taxation towards those on higher incomes and those who pollute (ie green taxes).
As a progressive I am OK with that, although I am not sure that tax cuts are the most efficient way to help the poor. Many pay little or no tax to begin with.
The holding position of the party on the overall tax take was to keep it at the current level, until we are closer to the next general election and we can then make a judgement on what level we can set.
As the big day gets closer we see that the state of the public finances is dire, and the economy is tipping into a recession.
It is surely clear by now that this is a particularly bad time to advocate a reduction in the overall tax burden? How can this be possibly be acheived without painful cuts?
As I understand it, this is what the Liberal Democrats are now proposing.
Of course there is the familier list of pet projects that can be stopped. National ID cards for a start. Nuclear energy is suggested by some, although I suspect the economic argument might not be so clear cut after the rise in commodity prices. Our troops will leave Iraq (although not Afghanistan). I would like to helpfully suggest not replacing Trident, but the party decided differently.
On the other hand, the flagship "pupil premium" policy that incentivises children from poor backgrounds to go to good schools will cost money, and there is some concern that to be effective we need to pay more than we are currently committed to do so.
On balance we are not looking at huge sums compared to the national budget.
At the last general election, the party came up with an odd looking list of public spending cuts, simply to stand still. Economic conditions were far better then. Some of those suggestons have been implemented. Now we have to find another £20Billion!
If it is obvious that we can cut £20Billion now, why did we not suggest it before? And why have the Conservative party not done so? If anything, they are concerned that they might have to increase taxes according to some reports.
I get a horrible feeling of deja vue. I remember the Tories in the 1980s telling us that public spending cuts would not make public services worse, even though they did. It prompted Roy Jenkins to remark that they wanted European level public services with American level public spending.
The "solution" to this conumdrum is to say it can be done by "restructuring" and getting the private sector more involved in public services. We are told we should look to Holland and Sweden to find out how.
Yet in the case of Sweden, whatever you think of their public sector model in terms of how it is organised, it is also the case that Sweden is a country of very high taxation, and the the higher level of finance that goes into the public sector is an important part of the equation as to how their model works. Do we really believe that their model would work well with less finance? If it could, then they would spend less on their own volition.
Another mistake in my opinion is how the party is going about this. We appear to be looking at the existing figures and then making reductions from that. However a lot of the existing figures are inadequate. Our public services are worse than those of comparable countries such as France, Holland or Germany.
Health service costs are likely to go up because we have an aging population.
What about the effects of global warming? James Lovelock predicted we will have a greater frequency of Extreme Weather Events (EWEs), and that is what has happened. There are still some people homeless today after the floodings of last year. In the 5th richest economy in the world.
Surely we can do better than that? Well not if we are not anticipating these EWEs in the future. I think the party should do a proper audit of the likely costs of global warming, and the tax implications of that. I suspect it will be huge.
We need to consider the political implications. Historically the party has built up a level of support that wanted an anti-establishment political party that actually proposed tax increases as a way of being honest about improving public services (and education in particular).
As the party reaches out to new supporters on the Right, might it not also lose it's existing supporters on the way? Those same people who supoprted tax increase before are surely the least likely to support public spending cuts today. Personally I look around and I do not see anywhere else to go with my politics. However out of our supporters, a massive 30% give the Green party as their second choice party. I would strongly urge Lib Dem supporters not to go down that route, because our first priority is to change the electoral system. A resurgent Green party at Lib Dem expense will scupper that prospect to the detriment of both parties. Under the existing system, like it or not, only the Lib Dems can deliver on this.
Since the 911 bombings one of the remarkable chracteristics of the global economy is the level of growth, and that it is relatively evenly spread around the world. Neoliberalism has continued to be fashionable, probably for that reason, and that applies to all 3 UK political parties. Supporters of Neoliberalism have always been reluctant environmentalists, or even anti-environmentalist. Ideas that we should conserve resources and limit economic growth are routinely derided by such people. The Liberal Democrats generally have good policies on the environment thanks largely to a section within the party that predated this modern trend. The long term costs of what Schumaker called the economics of the "Forward Stampede" are now being seen as food and commodity prices spiral out of control. The social cost of this could be very high.
The propects are that Neoliberalism may not be fashionable for much longer, and the Liberal Democrats will hopefully soon decide to shift away from this deadend. However I suspect not before the next general election, which is a shame.