The latest fashion: Euroscepticism

A satirical animated program called Headcases (based on Spitting Image) was released in 2008, and one particular scene humorously summed up the Tories’ longstanding anguish over the subject of Europe. At a press conference involving David Cameron, the question is put to him “how come you never talk about Europe?” After repeating the word “Europe” with contempt, Cameron dithers by associating himself with the band known as Europe, before causing a distraction and running off the stage. Tony Blair, not too long ago, wanted to put Britain “at the heart of Europe”. Now, the United Kingdom Independence Party is going from strength to strength, and threatens to overtake the Liberal Democrats in the polls. What went wrong, and is there a place in the political discourse for pro-Europeans anymore?

As a moderate pro-European, I’ve gone through two specific motions on the subject; one is of boredom and monotony, the other is the feeling of isolation (an ironic use of the word). The monotony stems from the relentless repetition of Tory backbenchers demanding a referendum on leaving the EU, whilst the feeling of isolation is because, quite simply, Euroscepticism seems to be in fashion. Pro-Europeans, be they starry-eyed Europhiles or moderates like myself, feel marginalised. Steve Richards sums it up well in The Independent: “Here we go again...we are pro-Europe, but realistic about Europe. We are realistic about Europe, that’s why we are Eurosceptic. We are Eurosceptic, but want to stay in. We are Eurosceptic and want to get out”. It’s the “never ending dance”.

When the doomed House of Lords proposals were being discussed, the ever rebellious section of backbench Tories were adamant that a dose of pragmatic and sensible democratic reforms were “not a priority” for the country; the focus should firmly be placed on growth. How ironic, then, that rather than focusing all out on a growth strategy now (something which surely can be done hand in hand with electing the House of Lords), the repeated call from the same rebels is always for a referendum on leaving the EU. A pro-European contingent on paper, Labour have played party politics on the subject, be it their vote against the Maastricht Treaty in 1993, or their siding with the Tory right to vote for a cut in the EU budget that they had increased in office.

What fuelled such prominent distaste of Europe? It is strange to think now that Ted Heath’s pro-Europe Conservative Party in 1973 took Britain into the EEC (European Economic Community), whilst Margaret Thatcher was part of the ‘yes’ campaign to stay in the EEC during a referendum on the issue in 1975. Tony Blair, displaying rare criticism of the Iron Lady, points the blame at Thatcher, saying that she fuelled anti-European sentiment. Having originally been a pro-European, Thatcher spoke out against further European integration in the late 1980s, reinforced by her famous “No! No! No!” outburst. John Major nearly lost the confidence of the House of Commons in a knife-edge vote on the Maastricht Treaty in 1993, which paved the way for the European Union and the creation of the single currency; the Euro. Pro-Europeans in the Conservative Party such as Michael Heseltine and Kenneth Clarke steadily lost their influence, and from Major’s election defeat in 1997, the Tories consistently elected Eurosceptics as their leaders, from William Hague to David Cameron.

What hasn’t helped the debate have been divisions over the matter Conservative and Labour Parties, and this seems to indicate the root of the problem. Harold Wilson reluctantly applied for membership in the 1960s (entry was vetoed by Charles de Gaulle), and in the referendum campaign of 1975, the incumbent Labour Party took no official stance on the matter; for every Roy Jenkins in the ‘yes’ camp there was a Tony Benn voting ‘no’. As Blair implied, Thatcher could have led a more European agenda, but chose to attack it. On Question Time in 2011, Nigel Farage made reference to his parents voting ‘yes’ in 1975, for “a common market”, but he now leads UKIP. Interestingly, being Eurosceptic or pro-European is not necessarily linked to the political spectrum; take Heseltine from the Tories being pro-European, and Tony Benn from Labour being Eurosceptic. With the exception of the Liberal Democrats, no political party appears to take an unequivocal and official stance one way or the other.

Gordon Brown’s “five tests” in the early 21^st century for changing from the Pound Sterling to the Euro is the closest we have come to joining the single currency. At the time, public opinion was less polarised, and “putting Britain at the heart of Europe” could have been a real possibility. The price for ardent Euroscepticism from William Hague in 2001 was a crushing electoral defeat. Despite this, Paddy Ashdown observantly notes in his autobiography that Britain is now more anti-Europe than it was when Tony Blair came to power in 1997. This sentiment has rapidly progressed since Blair stood down in 2007, yet politicians still seem timid at the idea of addressing it; remember David Cameron doing a U-turn (I could stop there) on his “cast-iron guarantee” of a referendum on the Lisbon Treaty?

In a way, it is understandable why large swathes of the electorate are Eurosceptic. With financial woes in Eurozone countries such as Greece and Spain the main focus of media attention, companies lamenting that they are tied by European ‘rules and regulations’, and cries from newspapers that EU memberships costs the UK billions of pounds, who can blame them for being enticed by UKIP? Added to that, with budgets being squeezed by the Coalition, it’s not surprising that voters feel angry with EU members calling for a budget increase in the EU for the period 2014-2020. With the Lib Dems no longer the ‘protest party’, Nigel Farage’s constant attack on the “political class” seems to strike a chord,  with UKIP finishing second in the Rotherham and Middlesbrough by-elections, pushing the Lib Dems down to 8^th in Rotherham. The Tories are taking notice, and backbench MP Michael Fabricant has called for an election pact with UKIP.

My main concern with UKIP and the electorate is that their focus is only on Europe and dissatisfaction with the “political class”. I am not saying that these are insufficient reasons to vote for UKIP, but I wonder if many of their new voters are aware of UKIP’s other policies? On education, they would support grammar schools equally with state schools, whilst on the economy they would abolish inheritance tax and bring in a flat tax of 31%. A frequent criticism levelled at the Coalition is that they are cutting “too far, too fast”, yet UKIP want to reduce the size of the public sector to “what it was in 1997”. Meanwhile their deputy leader, Paul Nuttall MEP, favours the return to the death penalty. I am not saying that every single UKIP voter is ignorant of these facts, indeed these policies are an attraction to many of them, but if polling groups consistently show a clear lead for Labour (citing discontent with the Tories being too rightwing), then why vote for a party that is to the right of the Conservative Party?

I want us to stay in the EU, because I think it’s good for free trade, and beneficial; I fear we will become isolated and protectionist if we leave. I’m not starry-eyed over Europe, and willing to submit to anything that is put forward, but I am steadfastly against screaming from the sidelines. I feel isolated on the subject, because whilst Euroscepticism is catching on, no one is speaking up for the other side of the debate. The Liberal Democrats can’t because no one will listen to them, now that they are lampooned for being a party of Government. Deborah Meaden made a very good point on Question Time recently, saying “let’s have a proper debate”, highlighting the fact that 50% of our exports go to Europe. She didn’t come out offering a pro-European or a Eurosceptic position, but said that a debate needs to be had highlighting the relevant pros and cons, not just piecemeal red tape.

 I will be honest and say that I don’t want a referendum on leaving the EU, because I think that the pro-Europeans would lose. Polls aren’t the be all and end all, but a recent Guardian poll revealed that 56% of voters would “probably” or “definitely” vote to leave. With UKIP progressing, a referendum is likely. That is why it is more important than ever to have a grown up debate. Public anger is understandable because there is too much fence sitting from the major parties on the subject (hence Farage’s appeal), but we need someone to stand up for the pro-European side, and unashamedly highlight the merits of staying in the EU. The public deserve clarity on the matter of a referendum, but they also deserve a balanced and grown up debate from both sides, not childish squabbling.

Barack Obama: Four More Years

This is my first post for quite some time!

In my September 2011 blog post on Obama’s chances of re-election, I noted that he faced a very tough, but not impossible, journey to regaining the White House. Despite bleak poll and unemployment figures, I said that a divided alternative could yet aid his cause and play into his hands. It is fair to say that this proved to be a crucial factor in Obama becoming only the second Democrat since FDR to win re-election.

The Republican Primaries were a farce. We were treated to an “oops” moment from Rick Perry, an “erm” stuttering on Libya from Herman Cain and a declaration from Rick Santorum that Obama is “a snob” for wanting every American to have the opportunity to go to college, to name a few moments. Michele Bachmann, an early contender and a Tea Party member of Congress, declared at an Iowa event that the Founding Fathers had abolished slavery in the USA, with John Quincy-Adams at the forefront (Adams wasn’t a Founding Father). The American Civil War must have been an irrelevance, then.

Although at many times comical, the sheer extremism of the Republican Party is nothing if not offensive. Rick Santorum (Mitt Romney’s strongest challenger in the primaries) decreed that sex amongst homosexuals is equivalent to “man on dog sex”. With Nadine Dorries recently suspended by the British Conservative Party for appearing on I’m a Celebrity, it doesn’t take much to wonder what fate would befall an MP if they made similar comments. However, such views appear commonplace amongst Republicans; remember Todd Akin’s “legitimate rape” comment? With such a backdrop as this with the GOP, serial flip-flopper Mitt Romney emerged as the most credible candidate.

With this in mind, Obama theoretically should have stormed ahead in the polls as 2012 began, even with unemployment hovering around the 8% mark. America may be considered a far more right wing country than Britain, but Obama had larger than 10 point leads over Santorum (arguably the most right wing contender in the Republican primaries) when placed in hypothetical contests. In conjunction with this, Mitt Romney has flip-flopped on almost every major issue, highlighted by Romney contradicting himself at different points in time over issues such as healthcare, abortion and women’s rights:

http://www.youtube.com/watch?v=K9njHHyRI7g

However, Romney nevertheless capitalised on an uncharacteristically feeble performance by the President during the first election debate, something which had Democrats seriously fearing that they would lose in November. Obama fought back in the other two debates, but the polls remained stubbornly narrow, with Romney even stretching ahead in some cases. On the eve of the election, Obama v Romney was 48.8% v 48.1% in the polls (source: Real Clear Politics).

With the race almost too close to call, numerous commentators made reference to the neck and neck race between Al Gore and George W. Bush in 2000, where the state of Florida proved to be crucial in deciding the outcome. It would be the swing states of Ohio, Florida, Wisconsin, Michigan, Pennsylvania and New Hampshire that would decide the election, with Ohio of particular importance; it has backed every winner since the 1964 election. Two competing economic visions were at stake; Obama wants to increase taxes on the wealthiest Americans to help plug the multi-trillion dollar debt and deficit, whilst Romney wanted a multi-trillion dollar tax cut for the wealthiest Americans; a return to Bush’s trickle-down economics.

The quirks of the electoral system in America meant that Obama clinched a decisive victory over Romney; 303 electoral votes to 206 (with Florida still waiting to declare). However, the reality is that despite winning the popular vote with 50%, Romney finished just two points behind. This polarisation is reflected in the makeup of the House of Representatives and the Senate, just as it was after the 2010 mid-terms; the Republican Party hold a majority in Congress, whilst the Democrats have control of the Senate, but crucially without a 60-seat ‘filibuster-proof’ majority. The “fiscal cliff” is looming, and Obama will once again have to compromise with a fiery Congress if he is to avoid another debt and credit rating crisis, but Republicans remain determined in refusing to countenance a single tax rise, favouring substantial cuts to domestic programs, and an increase in the military budget.

FDR was the last President to be re-elected with such high unemployment figures, but his New Deal offered hope around the corner in 1936. There are signs that Obama is on the right track too. However, a divided alternative gave him a big boost, and arguably saved him. The independent vote was vital for both candidates in swing states, but the Republican’s “severely conservative” (to quote Romney about himself) social policies alienated many of them. 93% of African Americans backed Obama, along with 71% of latinos. Romney may have had more whites vote for him, but the number of white Americans is slowly decreasing as a demographic, with the latino presence on the increase; Republicans don’t know how to cope with this change, or possibly offer an appeal to minority groups. These elements also aided Obama, but a moderate Republican opponent could well have ejected him out of office.

Romney could have been that “Massachusetts’s moderate”, as he was once labelled. In the liberal state in Boston, Romney had a centrist record, with his healthcare plan ironically similar to Obamacare, leading Jay Leno to humorously (but accurately) describe Romney as “the man who invented Obamacare before he was against it”.  Furthermore, if we are to take one side of his flip-flops, he has (at some point) held pro-choice views on abortion, supported economic stimulus and pledged support to the auto industry (which he later wished to “go bankrupt”). Had Romney remained consistent with these policies when running for President, I think it would have been more than likely that Obama would have lost. However, Romney was determined to gain the suspicious Tea Party vote and lurched rightwards, and was secretly videotaped accusing 47% of Americans as government-dependents who will always vote Democrat. His choice of Paul Ryan as running mate, a darling of the Tea Party with an aggressively fiscal conservatism budget plan, further underlined his determination to appease anyone who he though could propel him to the White House. It clinched the Republican nomination, but not the Presidency.

I don’t wish to sound too critical about Obama’s victory; I’m unequivocally delighted that he won. His powers of oratory remain undiminished, and he has faced adversity at every turn with considerable strength. Governments frequently blame their predecessor’s record for poor growth performance, but I believe Obama is allowed to do this more than most; he inherited the worst financial crisis since the Great Depression, aided both by global events and George W. Bush’s reckless spending and regulatory policies.  I had to laugh at the satirical caption online which exclaimed “Vote Republican, because Obama is taking too long to clear up the mess that we created!” As with Jay Leno’s comments, it has a strong element of truth for me. Furthermore, Obamacare is far more secure now, and its best elements will bear fruit in the next two years. Whatever the concerns, I couldn’t abide the vehement Republican critics of it; how can one of the richest countries on Earth justify millions of its citizens going without basic health insurance? Now entering his second and final term, Obama can defend Obamacare further, free from the pressures of having to run for office again. Having suffered a second consecutive election defeat (and with no landslide victory since the Ronald Reagan era), Obama has forced the Republican Party to rethink their policies and positions; lurching rightwards is not the answer to clinching those crucial swing states.

Obama faces old challenges as well as new; he must work with a heavily partisan Congress to reform the tax code and immigration, and he must get those stubbornly high unemployment figures down (currently at around 7.9%). The signs are promising, however; growth has remained in positive figures since 2010, something still lacking in the UK. Obama is also still a respected figure on the global stage, and continuity is welcome. US Democrats and UK Conservatives may not be natural bedfellows, but the self-proclaimed “compassionate Conservative” David Cameron is far closer to Obama ideologically than Mitt Romney (and indeed large swathes of the Republican Party), and there’s little doubt who the Labour Party and the Liberal Democrats will have been rooting for.

In the short term, Obama must sort out the fiscal cliff, and try and cajole Republican dissenters. His reputation as a pluralist was diminished through little fault of his own, but he must be bipartisan to get things done. In the long term, he must get the economy back on track. Four year predictions are very tough, but I am confident that Obama will bring unemployment down substantially in that time. A sound template to follow is that of Bill Clinton, one of his key supporters during election rallies. Like Obama, Clinton suffered a bruising mid-term defeat and lost Congress to the Republicans. Like Obama, he was re-elected. In Clinton’s second term, he turned the budget deficit into a surplus, and left office with approval ratings above 60%; all of this with a Republican Congress. Obama can reclaim that audacity of hope.

-Ben

“Hello, I’m Ben; I’m from the Derbyshire Dales...”

A weekend in Newcastle for a teenager will no doubt conjure up stereotypes of partying and heavy drinking, or perhaps taking in Demba Ba’s latest goal scoring heroics at St James’ Park (or perhaps a combination of all three factors). Therefore, it wouldn’t surprise me if people were to be somewhat baffled by my involvement in something very different on Tyneside. In a more reflective and diary like entry, I will share in this blog piece my experiences of the Liberal Democrat Spring Conference 2012, sandals and all...

Thanks to the generous help of the local party in the Derbyshire Dales, I was able to attend my first Conference earlier this month. Since first taking an interest in politics in Sixth Form, I seem to have made steady progress in terms of involvement. From attending local party meetings to appearing in the audience of Question Time in Derby, I felt ready to attend my first Conference (although University dates meant that attending the Autumn 2011 Conference was tricky, I felt that I had missed out). Asking for directions to the Premier Inn allowed me to hear the delightful Geordie accent, and it felt great (but touristy, I confess) to take a detour past St James’ Park (heritage and common sense prevents me from calling it by its newly branded name). I was fortunate to be guided around the Conference by the East Midlands Vice-Chair Craig Day, who was also very helpful in introducing me to people (I don’t think my standard “which football team do you support?” question would have gone down well). I was at a local government fringe meeting when the sandal-wearing stereotype of Lib Dems was partially confirmed; he was wearing socks too, and yes he did have a beard! To my considerable surprise, Nick Clegg walked in to the room.

Clegg had the task of presenting various awards at the event (full credit to everyone at the event; the time was pushing 11pm on a Friday evening), and when it ended I sensed my opportunity. With one of Craig’s friends knowing Clegg, I was introduced to the Deputy Prime Minister. Having arrived in Newcastle with the optimistic hope of merely seeing him close up over the weekend, to meet him on the first night was a real coup. As many people will agree, it’s strange seeing people from television up close, and he was taller than I expected (taller than my 6 foot 1 frame). After a handshake, I introduced myself as a student from the University of Manchester, and surprised him by answering his membership question by saying that I had become a member just after the 2010 General Election. He gave me a pat on the shoulder and a laugh of “thanks for sticking with us”, no doubt surprised that a student (and still a teenager) would still be supporting the Liberal Democrats! I exchanged a few more pleasantries with him (“ah the Dales; not far from me”, “yes I know John (Leech); Manchester Withington”), before bidding him goodnight. He was personable and he listened, but I didn’t want to keep him too long (and neither did his PA!). For a man under pressure, I think he looked at ease at the event (despite the approaching midnight chimes); he probably appreciated a relaxed atmosphere amongst fellow Liberals, along with a much earned glass of wine. Happy with a productive first day, I headed back to the hotel over the picturesque Tyne.

The Sage in Gateshead was a wonderful venue for the Conference, and it was refreshing to see MPs and Party bigwigs socialising and mixing with Conference members in the halls. When attending a policy motion on various Party constitutional matters, I admired the conviction and passion with which various speakers delivered their amendments and motions, and the candour they related to the audience. I was treated to a dose of political wisdom from Vince Cable’s speech, with a reassuring commitment for the Government to play a positive (but not overbearing) role in providing recovery and growth to the economy, themes which have been addressed in this blog in the past. With skilful placement from Craig and Chris in the main hall, we were able to get near front-row seats for the following Q and A session with Nick Clegg. I had no cast-iron intentions of asking a question, but when the topic revolved around a quicker raising of the income tax threshold to £10,000, I decided to plump for a question; haven spoken of my desire to raise the threshold even higher in this blog, who better to ask than the leader of the Liberal Democrats? Surprised that he pointed to my outstretched hand, I felt slightly nervous but calm as the microphone was passed down the row to me. As I stood up, I re-introduced myself to Clegg with the line “Hello, I’m Ben; I’m from the Derbyshire Dales”. I briefly turned to the numerous conference members and said “I’m sure we can all agree that raising the income tax threshold to £10,000 has been a brilliant achievement...” “We’re not there yet!” interjected Clegg. Feeling more at ease, I said “however, what’s the possibility or likelihood of raising the threshold to £12,500, which would take everyone on the minimum wage out of income tax, in the 2015 Lib Dem Manifesto?” To my surprise again, the whole Conference hall clapped my question, giving me an immense sense of satisfaction. As a good communicator, Clegg was consistent in addressing both me directly and the audience; his answer was very pragmatic and realistic, saying “we need to walk before we run”, and stating that raising the threshold to £10,000 will cost billions of pounds, but it was a fair answer that I nodded in agreement to, understanding the realism which often has to go with politics. It won’t stop me pressing for its inclusion in the coming years!

Other events in the day included me and Craig chasing after a meeting with Shirley Williams, who belied her age of 81 years and vanished before we could find her, and meeting Deputy Leader and MP of 29 years Simon Hughes. Having met him at the ‘Yes to AV’ launch in Manchester a year ago, he remembered the unseasonably good weather of that day in Castlefields. Staying true to the Centre-Left values of this blog (sorry Craig and Chris, I’m not an Orange Book Lib Dem!), I went to the interesting Social Liberal Forum, which had Vince Cable and Duncan Hames amongst its speakers.

The Saturday also showed the two contrasting elements of conflict. With the Health and Social Care Bill in its final stages, there was a lot of Union pressure at the Conference on the Lib Dems to kill the bill. Inevitably, a group of us with Conference ID badges attracted dissidents of the Bill. On the one hand, we had a calm and turn-taking debate on the Bill with a small group of people, and we were considerate of each other’s responses. On the other hand, groups of youths walked past with cries of “Lib Dem scum” and “you’re just a Tory too”, along with a man younger than me who was more interested in looking for a fight than looking for a political debate. It mattered not to the tribal youths that many Lib Dems (myself included) favoured the dropping of the Bill. I believe in pluralistic politics, and find a productive and considered debate with people who hold a different view point just as stimulating as a discussion with people who share the same opinion, but unfortunately you cannot reason with people who think that shouting the loudest within a group mentality is the best way to win an argument, and who aren’t prepared to listen.

Debates aside, Craig and Chris displayed their skill yet again in finding near-front row seats for Nick Clegg’s speech on the Sunday. Supporting a smaller Party in politics can leave members in desperate need of morale, especially when involved in a Coalition, but it was fair to say that Clegg’s speech left us leaving the Sage in higher spirits than when we entered it. Tough decisions are being made, but increasing the income tax threshold to £10,000, bringing in a big increase in State pensions, the Youth Contract, the Green Investment Bank, the Pupil Premium...all Progressive measures. The line that resonated with me in particular was this one: “Look at the electoral map: blue seats in the south, red ones in the north. Look at where the money comes from: trade unions on one side, City financiers on the other. That is why we can say today: the Liberal Democrats are the only true one nation party”

Not being in the throes of vested interests is one of the reasons I am proud to be a Liberal Democrat.

Returning home to Manchester, the Spring Conference gave me a real appetite for more. It felt refreshing to be part of the democratic process; what Party members vote on can ultimately become Party policy in the Liberal Democrats. It will also hopefully make me less apologetic for being a Liberal Democrat; being in Government often entails unpopularity (more so for junior Coalition partners), but there’s no need to apologise for bringing in 75% of the 2010 Lib Dem Manifesto in to the Coalition (compared with 60% of the Conservative Manifesto).

Of whatever political persuasion, I urge people to go to a Party Conference, if they can. It is an engaging and active way of becoming involved in politics and the affairs of your Party in particular, and if you want to challenge the Party on policy (sandals are optional), where better to do it than Conference, and who better to challenge than the policy makers themselves? I want to see the income tax threshold one day raised to £12,500 and beyond, but asking the Deputy Prime Minister about it is not a bad first step.

Taxation (part 2)

In my first blog piece on taxation, I spoke of the system in a more philosophical and idealistic tone. Whilst idealism and philosophy can never be ignored, it is also worth evaluating taxation in a more present day and practical way. Is there a ‘best’ way of taxation? Should taxation be the art of “plucking the most amounts of feathers from a goose with the minimal amount of hissing”?

Once again, I stress that I’m not an economist, and I welcome budding economists to offer theoretical analysis, especially when it comes to taxation. However, my own view is that the right balance needs to be struck with taxation. Let’s look at two extremes; one in the UK, one in the USA. Before Margaret Thatcher came to power, the top rate of tax in Britain was as high as 83%, far too high an amount, and surely an incredibly unproductive tax. If you follow the link below, you will see an illustrative example of ‘The Laffer Curve’, a theoretical representation of the relationship between government revenue and taxation, and all possible rates of taxation. When applying the 83% rate, you can see quite clearly that it is not fulfilling its purpose of raising maximum revenues:

http://www.google.co.uk/imgres?q=laffer+curve&hl=en&biw=1366&bih=667&gbv=2&tbm=isch&tbnid=3UgzFp3IfasPPM:&imgrefurl=http://www.georgescoville.com/2010/11/01/why-we-shouldnt-use-the-laffer-curve-to-set-tax-policy/&docid=RROwYqeArsr9OM&imgurl=http://www.georgescoville.com/wp-content/uploads/2010/11/laffer-curve1.jpg.gif&w=329&h=283&ei=Mc0lT9vgEenG0QXB_pDOCg&zoom=1&iact=hc&vpx=364&vpy=327&dur=684&hovh=208&hovw=242&tx=132&ty=73&sig=108043120439097359438&page=1&tbnh=134&tbnw=156&start=0&ndsp=18&ved=1t:429,r:7,s:0

Thatcher rightly cut this burden over her premiership, no doubt leading an influx of returning businesses and entrepreneurs to Britain (it’s highly unlikely that many people will have been prepared to stay and pay this rate of tax). However, she raised indirect taxation at the same time, something I will come to later.

On the flip side, George Bush (Junior) initiated vast and long lasting tax cuts over the course of his Presidency for the super wealthy, just when he had inherited a stable and growing economy from the fiscally cautious measures of President Bill Clinton. Having been bequeathed a budget surplus, Bush quickly turned it into a deficit, with his tax cuts coming at the same time as wars in Iraq and Afghanistan; the national debt in the USA is estimated to be as high as $15 trillion. The typical conservative response to this would be that Bush’s tax cuts encourage wealth and business (which had hardly been doing shabbily under the Clinton administration). In that case, it’s best to hear from Warren Buffet on the issue, one of the richest men on the planet:

"My general theory is that you should have a tax system where those making millions and millions of dollars, who are paying a much lower rate for one reason or another, get moved up to the rate that people think they are paying, in the mid 30's. There are about 80,000 taxpayers within that group paying that lower percentage of taxes. I would move those people up...my friends and I have been coddled long enough by a billionaire-friendly Congress".

In my opinion, looking at both of these examples presents dilemmas; tax too highly, and you lose revenue and drive people to tax havens; tax at too low a rate, and you create a yawning budget deficit, and you can do serious harm to social mobility. Buffet has also said in the past that he pays a lower percentage of his income than his secretary; it’s not hard to see why people in America are so enraged at the inequities that are purported by Congress, and the Republican Party in particular. So much for Bush’s “compassionate Conservatism”, and the global recession of 2008 meant that his tax cuts’ so called aims for growth were not being realised.

Coming back to Thatcher, whilst her cutting of the tax burden at the top was a wise move, her increases in VAT (indirect taxation) could well be considered a regressive measure. VAT disproportionally hits the poor far more than the rich, as the poor pay a greater percentage of their income in tax than the rich do. VAT rightly exempts essentials such as baby clothes, milk and bread, but it makes the current “we’re all in this together” message very hollow. Should Governments, especially when inheriting a precarious financial position, do their best to maximise revenue by raising VAT, or should they cut VAT and hope for an increase in consumer spending?

With the 50p tax rate currently out of the news (for now), the focus has again been on helping those at the lower end of the income scale. Nick Clegg has spoken of his desire to speed up raising the personal allowance threshold (which will be at £10,000 by 2015), in order to help out families which Ed Miliband frequently refers to as “the squeezed middle”. This should rightly be applauded, but as with Clegg’s desire in the past for the public to have shares in state owned banks, it could fall upon deaf ears. I believe Clegg is genuine in wanting the process to be sped up, yet it could be more of a symbolic move, as ultimately George Osbourne has the final say at the Treasury. It is likely that Osbourne will decide on the issue based upon whether there is financial leverage to do so, but I believe Clegg’s calls are a necessary measure which should not be vetoed due to a matter of economics. At the 2011 Liberal Democrat Autumn Conference, Chief Secretary to the Treasury Danny Alexander spoke of raising the income tax threshold to £12,500 as a centrepiece for the 2015 Lib Dem Manifesto. I absolutely applaud this measure. In one of my previous blog pieces, I spoke of one of my idealistic aims of raising the threshold to £15,000, and this proposal certainly goes a long way towards that goal. By setting the threshold at £12,500, everyone on minimum wage would be exempt from paying income tax altogether. The fact that it has been seriously considered is a positive sign that such an ambition, be it £12,500 or £15,000, it not implausible or impossible.

Not only would this measure be a huge symbol of fairness, but it would massively increase the incentive to work, and would reward those who work long hours and receive little recognition. Furthermore, purchasing power could increase as a result, as people would be left with more disposable income; for the economy to grow, consumerism needs to develop at the bottom, not just at the ‘trickled down’ top. Furthermore, it would help to boost the progressive credentials of the Liberal Democrats whilst they are unpopular Coalition partners; the Labour Party are yet to devise such a radical and fair model. With regard to the 50p tax rate, the issue will eventually rear its head again, most likely at the 2015 Election; the Conservative Party will want to pledge to cut it. I have already spoken of my opposition to its demise, but accept that hard evidence in economic terms could counter my argument. Whilst I strongly believe that the 50p rate is both fair and viable, I believe there should be a progressive alternative should it be seen fit to cut it.

A ‘Mansion Tax’ was in the 2010 Liberal Democrat Manifesto, and it proposed a 0.1% levy on houses worth over £2 million (the original plan was on houses worth over £1 million). Such a tax would make those “with the broadest shoulders” (David Cameron’s words, not a raging Lefty) pay their fair share, but in a more indirect way (Margaret Thatcher was certainly no stranger to raised indirect taxation). Such a tax would not just be for the sake of it, but it could raise valuable revenue whilst also symbolising fairness. I believe the Mansion Tax is a fundamentally good idea, and would be a fair compromise between the opposing sides with regard to the 50p tax. If the 50p tax was abolished, perhaps the threshold for the Mansion Tax could be lowered to £1.5 million or even £1 million; a 0.1% levy is hardly crippling. Abolishing the 50p rate and not having a progressive alternative such as the Mansion Tax is both wrong and unjust.

Returning to the issue of indirect taxation, Council Tax has proven to be a regressive measure. Whilst better than Margaret Thatcher’s hugely unpopular and unfair Community Charge (better known as the Poll Tax), it still does not take in to account people’s income. A family of four in a modestly sized house could have both wage earners made redundant in these hard times, yet due to the value of the house and having two children, their Council Tax would be considerably high. It is an issue that has not been properly addressed since the Rates system was abolished by Thatcher. I believe a comprehensive review needs to be put in place to evaluate the merits of Council Tax, and whether there can be a better and fairer alternative; many households are hit hard in the best of economic times by Council Tax.

To conclude, I believe the ‘best’ way of taxation (if there is such a thing) is to find the right balance. The tax system needs to be both economically viable (taxation levels prior to Thatcher were far too high; Bush could not fund his irresponsible and unnecessary tax cuts) and fair (retain the 50p tax, or provide a progressive alternative). Tax becomes a more important issue than ever when there is a stagnant economy; measures must be taken to increase the threshold quickly to £10,000 and beyond. VAT is a fundamentally regressive measure, and should be kept low wherever possible. When cutting a deficit, tax increases have to be made as well as public spending cuts, so perhaps raising VAT to 20% is necessary in order to maximise revenue (for now). However, there needs to be restraint at the top too; it is not a just world when people at the bottom are suffering whilst those at the top feel a small splash in the ocean; keep the 50p tax, or introduce a Mansion Tax. The economy needs consumer spending to get it going again, so if VAT is to be increased (which will affect purchasing power), then speed up tax cuts at the bottom to provide more disposable income.

I don’t think it’s possible to pluck “the most amounts of feathers from a goose with the minimal amount of hissing”, as people will never truly be 100% happy with the amount of tax they pay. Therefore, viability and fairness need to be the overriding themes when addressing the issue. Legislators in Government should therefore act on this, and act on it without referring nervously to their trade union or tax evading paymasters.

-Ben

links for Warren Buffet quotes:  http://www.marketoracle.co.uk/Article32766.html and The Guardian

The Iron Lady

The sheer mention of Margaret Thatcher’s name evokes intense and partisan responses; she is viewed either as an icon and hero, or a toxic and bitter enemy. Such is her divisive legacy, that there is very rarely a middle ground viewpoint about her. Until recently, I confess that I was not well informed enough about her; I would often criticise her without much evidence. Having now addressed that issue, and having recently viewed the film The Iron Lady, I will do my best to offer an evaluation of her from my own viewpoint.

Prior to viewing The Iron Lady, it was my hope that the film would neither demonise nor praise her. When it comes to cinema, I don’t feel that bias is a wise element. If the film praised her too much, a vicious backlash on the Left would emerge; if it demonised her, a similar response would be met from the Right. What the film successfully did was to focus on the person herself, rather than on concrete policies and historical facts. I believe it’s fair to say that whatever people may think of her, the facts are there to be seen; she was the first (and to date only) female Prime Minister, and she rose from relatively humble beginnings as a grocer’s daughter to lead the Conservative Party to three General Election victories. Furthermore, she did this as a female in a heavily male dominated arena. The film successfully captures this against-the-odds feat, and it celebrates the woman herself and her strong and stoical demeanour rather than placing her on a political pedestal.

As a Social Democrat, I could never subscribe to Thatcherite policies. The mixed economy was all but disintegrated with the rapid privatisation of major utilities. Contrary to the general belief that mass privatisation was clamoured for by a substantial majority, Simon Jenkins notes in his book Thatcher and sons that general indicators and opinion polls at the time suggest the opposite. In terms of legacy, any talk of nationalisation now is likely to be dismissed out of hand as some sort of incompetent, leftists notion. Indeed, nationalisations in recent times have only really resulted from emergencies, such as the worldwide financial crisis from 2007-2010 (Northern Rock, one of the nationalised banks, has since been sold). In his autobiography, Tony Blair stated that he did not want to use resources to renationalise British Rail, despite a manifesto pledge; John Major had privatised British Rail in a widely unpopular (and in hindsight unsuccessful) move, essentially carrying on a Thatcherite tradition. Whether it could work in the national interest or not, Thatcherism has meant that nationalisation is essentially off the agenda for generations to come.

Furthermore, Thatcher bitterly divided a nation. Proving its unbiased credentials, The Iron Lady presents this in an often graphic manner. The sight of thousands of people taking to the streets in protest, along with violent destruction and discord, is as evocative today as it was in the 1980s. Her economic policies have destroyed the Tories in Scotland for years to come. Prominent members of the Cabinet, such as Michael Heseltine, strongly opposed Thatcher’s plans for introducing a poll tax (Community Charge), along with vast swathes of the Conservative Party, yet she was adamant in bringing it in. A hugely regressive tax, with the poor bearing far more of the burden than the rich, resulted in yet more mass demonstrations, and the tax was swiftly removed once John Major replaced Thatcher as leader.

As I have touched upon at times in this blog, I do believe in pluralism, and therefore I think it’s only fair to give credit where credit is due. Thatcher drastically reduced the income tax burden, an essential measure; the top rate of tax was as high as 80% when she took office. Furthermore (and this will depend on how you view this topic), she curtailed the power of the trade unions. I am not against trade unions; they are at their best when they protect the rights of the worker, and for too long they struggled in the late 19^th and early 20^th century to have the freedom to express and legislate their rights, especially under brutal oppression in the USA. However, at times the unions had far too much power in the UK, bringing industry to a standstill in times such as ‘The Winter of Discontent’ and the three day working week. Previous governments, especially the Ted Heath administration, had been feeble and weak in dealing with strikes. Thatcher stood firm over closed shops and strikes before ballots, and greatly diminished the trade unions’ power to hold a government to ransom.

Furthermore, ownership greatly increased under her tenure. People were able to buy their council houses for the first time, although what is often overlooked is that this meant little to those who could not afford to do so. Victory in the Falklands War vastly increased British patriotism and morale, although it is yet another divisive legacy. Such a victory essential crushed a missed opportunity for the SDP-Liberal alliance, who had approval ratings as high as 50% prior to the victory, something which I always view with a sombre attitude! Her leadership credentials cannot be denied, with the film aiding the portrayal of a strong and determined woman.

For all these attributes, I don’t think I can ever accept the notion that unemployment is a necessary measure for reducing inflation, something which Thatcher readily promoted. Unemployment peaked at well over three million in her premiership, with fairness and compassion severely lacking; it emerged recently that Thatcher had been urged by Geoffrey Howe to “abandon Liverpool”, and to not waste resources there. I will hastily add that Thatcher did not concur with this, but such a comment highlights the prevalent attitude of this era. I talk of pluralism, yet Thatcher (for all her leadership qualities) was consistently abrasive with her colleagues, and had no interest in seeking a consensus viewpoint. Such an approach alienated her from many elements of the Conservative Party, with Geoffrey Howe’s resignation (and damning verdict in his speech) in 1990 an indicator. In The Iron Lady, this is painfully portrayed in a cabinet scene where Thatcher is merciless in her criticism of Howe’s seemingly elementary mistakes. Perhaps because of this approach, along with sliding approval ratings, prominent figures such as Michael Heseltine launched challenges to her leadership. With not enough votes on the first ballot to secure an overall victory*, Thatcher resigned as Prime Minister.

*Ironically, for all of their trenchant opposition to electoral reform, the Conservative Party use an Alternative Vote system to elect their leaders!

To conclude, evaluating Margaret Thatcher’s legacy is a good way to surmise. From 1945 until Thatcher’s reign, there was an economic post-war consensus, which revolved around state planning and significant intervention into the economy. Thatcher bequeathed another consensus; Thatcherism is currently viewed as almost totally irreversible. New Labour accepted most of Thatcherism, and their time in office was essentially Thatcherism ‘with a human face’. As a Social Democrat I will always view this negatively, as I have faith in a mixed economy when properly managed. However, such is Thatcher’s legacy that the seemingly permanent nature of Thatcherism will be viewed by many as a good thing. From a Progressive standpoint, the nature of the First Past the Post electoral system overlooks the statistic that more people voted against Thatcher than for her; the vote was split between Labour and the Liberal Democrats. I agree that this argument can be overused and applied to most things, but I believe such an argument hopefully highlights that there is a strong Progressive contingent in the UK as well as a Thatcherite contingent.

I believe that Thatcher was a great woman, even if I don’t view her policies favourably. I’m pleased that The Iron Lady focuses on the achievements of a female individual against a heavily male orientated business, a feat that is often overlooked due to divisions over her. I cannot praise her for permanently changing Britain, as this had negative consequences socially, but I can praise her for her strong leadership qualities. She made many necessary reforms (Income tax, the trade unions) as well as many unnecessary reforms (the poll tax, denationalisation in some cases). The Iron Lady offers a poignant evaluation of her life, taking the emphasis away from some of her political aspects, something which, as stated, I had hoped for prior to watching the film. When talking about Thatcher, I do despair at the mass hysteria over her on both sides of the fence; a measured response is key. As a Social Democrat, do I like what Thatcher did, and how she did it? No will always be the answer. Do I respect some of the decisions she took, and her rise to power? Yes will always be the answer.

-Ben