Sunday, 24 October 2010

Easy-peasy, LibDem squeezy

LibDems always suffer from squeezes, but they've never been knocked out despite the rush to paint all issues as either-or questions. So we shouldn't count them out just yet, despite current opinion polls putting them at the lowest for a generation.

There is a simple reason the LibDems are consistently squeezed before mounting a fightback – false arguments are habitually employed against them.

This may be done sincerely or as deliberate politically-motivated scare tactics, but the truth has a way of fighting back.

Labour is currently scaring people that the cuts are a callous ideological-based attempt to hit the poor, and this clearly has some traction, but while some thatcherites may wish this the doubling of the long-term growth rates in public spending since 2000 from 3% to 6% simply can’t be sustained – especially during an economic downturn.

In fact this is one of the major contributory factors in spurring the downturn, and until spending is put right the national economy risks spiralling out of control.

The thatcherites want to see the trend fall below inflation. LibDems are arguing that current spending growth should return to trend.

Cameron has overseen the formation of a coalition between these two different arguments and this enabled him to gain power – it is interesting that he has diplomatically avoided a full declaration of his intentions, which is why he is regarded with suspicion by both thatcherites and LibDems (and outright contempt by left-wingers), but that is how he was successful in becoming PM – he holds the key to maintaining the tenuous balance of power.

Which is also why the left is remorseless in attacking Clegg’s use of ‘fairness’.

According to forecasts the cuts will see the country return to trend in 4-5 years, or about the time the coalition has stated they will call the next general election.

If LibDems didn’t support the proposed level of cuts the point at which their arguments diverge from the thatcherites would occur after the next election and this would necessitate an electoral pact – which is against LibDem interests and runs against all instincts of activists in both LibDem and Conservative parties.

So Labour’s hopes of returning to government within the next decade depend upon either an early election caused by LibDem withdrawl from the coalition, or upon a lower rate of cuts to enable them to paint LibDems as tories in disguise.

Labour is making a big political gamble, but then so too is the coalition gambling that the private sector is able and willing to grow at the same rate as the state will contract - and 120,000 jobs per year would be more possible if it weren't being done at the same time as raising the retirement age.

Saturday, 23 October 2010

A Tale of Two Graphs

It was the best of graphs, it was the worst of graphs...

...and both were prepared according to the same formula by the prominent think-tank, the Institute of Fiscal Studies.

The first was given much weight by the Treasury during the Comprehensive Spending Review (full document pdf).

The second was published as a slide to accompany the IFS' own post-CSR briefing (text pdf).

As Sunder Katwala confirms it was the first time ever that the Treasury had published a distribution of spending annexe, but only after some urging from groups such as his own Fabian Society.

The point of interest is the difference between the two: the official document omits the two lines indicating the totals as a proportion of income (white line) and as a proportion of expenditure (yellow line).

As we shall see below these illustrations are at the heart of a storm which encapsulates the whole debate over the current agenda of cuts dominating current politics and which provides the backdrop for the current parliament and the coalition government.


When Chancellor George Osborne declared that the CSR "sets out a new vision of fairness for Britain," he determined that an acceptable definition of fairness now meant one which prioritises social mobility, on the grounds that "the existing system of support for the poorest has failed to deliver."

During his speech he used the word 'fairness' 24 times.

Socially-minded Trade Unions were quick to denounce this new definition, while economically-minded voices of business offered staunch resistance.

Fairness has been the watchword of the LibDem contingent in the coalition government ('putting fairness at the heart of the LibDem manifesto', speech to conference announcing the £7bn 'fairness premium', email to party members following the CSR, ) and attacks on their definition of fairness have been a continuous theme of opposition to the coalition - as ConservativeHome's Tim Montgomery pointed out during the conference season the strategy is designed to get LibDems to pull out of the government, and force a neutered minority government to limp on or force a new election.

Even local LibDem councillors are highly conscious that fairness is a dangerously subjective concept which allows Ed Miliband to practise divide-and-conquer tactics by focussing in remorselessly on individual policies.

And in an influential article Julian Glover notes how "LibDems are making a poor job of defending themselves."

Clearly Nick Clegg's party are vulnerable to this line of attack and Labour scent blood.

But in one sense Mr Clegg handed his opponents a recipe for his destruction by setting fairness as a test for the coalition's implementation of the promised cuts in the spending review.

Well he's certainly being tested now!

The public guillotine and the baying crowd

While strikes paralyse Paris and her provinces, in England the watchers wait and wonder where the chop will come.

The Guardian was first to splash how 'the UK's most respected independent tax and spend monitor' IFS exposed a fairness gap in the spending review cuts during their post-CSR briefing, using the proffered graph as the prime illustration of their calculations.

While admitting the difficulty in calculating accurately the full impact, acting IFS director Carl Emmerson announced unequivocally that the impact (as shown by the yellow line graph) was "regressive, not progressive," before prudently adding the rider (with which they would later absolve themselves) that this did not reflect on the fairness of the plan, since fairness is 'in the eye of the beholder'.

But by then the dirty deed had been done and editors everywhere had written their prepared headlines. It was a call to arms. They intended to claim their latest victim and reassert the power of the press over a politician who had shut them out during 5 ravenous days of coalition discussions.

Like a merry dance the press had been primed for this briefing session well in advance - they'd even had a practise run after the budget when Mr Clegg slammed the 'partial' IFS report against it.

Guardian Liveblogger Andrew Sparrow even noted how there was a neat symmetry between the IFS briefing and a simultaneous joint Q&A session with David Cameron and Nick Clegg on the subject, bemoaning the lack of cameras at the IFS which would have enabled 24-hr news channels to show both on split-screens.

And C4's economics editor Faisal Islam tweeted at the laughter in the IFS briefing which greeted "the most regressive graph in history".

What everyone seems to have overlooked in the course of this choreographed entertainment was the partner to the yellow line in the IFS' presentation: the white line.

Or at least everyone except Nick Clegg was conveniently hoodwinked. The Deputy Prime Minister actively grabbed at it, using it to contradict the IFS' assertive conclusions, knowing how he was the prey in their sights he attempted to use the weapon they'd provided for his defence.

Almost immediately an interview with the Guardian was arranged, which he used to accuse the IFS of 'distorted nonsense'.

The Guardian was the obvious title for the job as the repository of opinion formers and readers most likely to be swayed by any controversy over 'fairness'.

Lifting itself up on it's legs, the story now ran.

Reuters boasted 'Clegg rejects IFS austerity criticism'; The Daily Telegraph reported Nick Clegg says IFS claims poor will be hardest hit are 'nonsense'; The FT offered some balance Clegg hits back at criticism of UK cuts.

And that was the friendly treatment!

If you want to check through the pack of laughing hyenas in nearly 5,000 stories (so far) you are more than welcome.

So although Nick Clegg was using conclusions constructed by the IFS, the IFS had pulled the rug from under his feet.

The IFS may be an acknowledged expert in policy analysis, but there are many of those. The IFS has gained its' hard-won tiger stripes as a canny operator within the Westminster jungle - respect is due for its' ability to successfully bait chosen targets... and feared for it.

Even by head-hunting the former top honcho at the IFS, Robert Chote, and installing him in the newly created Office of Budget Responsibility the coalition hasn't blunted the teeth of the IFS.

Clegg had been manoeveured into the trap, which was now sprung. wrote Clegg faces IFS 'trashing' backlash and the flurry of post-spending review opinion polls now announced LibDem support down to 10%, less than a third of the pre-election high.

Perhaps he knew better, but was powerless against the magic of these dark arts - as Mehdi Hassan in the Labour-leaning New Statesman intimates Mr Clegg was happy to give self-congratulatory praise the IFS during the election leadership debates which saw him briefly become the most popular politician in the country. Some coincidence.

With ironic gall Mehdi Hassan signs off, "And then our politicians wonder why the media and the public are so cynical and distrusting..."

Do they indeed?

On it rumbles, Mr Clegg looks wounded, the coalition may be teetering - even ranking hard-liners fear Labour will succeed in toppling the government.

ConservativeHome took up the baton.

It may not be natural territory for them but a quiver of reasons why the coalition is compassionate and good for the poor was hastily stocked, quickly increasing in number from 5 to 20 arrows.

But they were distracted by gains made at the expense of their partner - as Jonathan Isaby hazily admits with a hint of disinterest, the issue does have traction.

Words put in the mouths of the public confirm the pollsters conclusions that the soft underbelly of the LibDems was ripe for a hit, just as perceptions that the vulnerable and 'squeezed middle' would suffer from the 'savagery' of the deficit clawback.

Finally, the till-now conveniently absent Labour leader, Ed Miliband can be watched swooping down from his eerie in order to make the kill assiduously prepared for him by his cohorts.

"Instead of trashing the IFS, [Clegg] should be owning up to the truth that the spending review hits the lower and middle income families hardest."

"The unedifying spectacle of Mr Clegg rubbishing the IFS will convince nobody of the government's case."

If you say so Mr Miliband!

Alighting from her bough as she wings her way to the rescue, Ms Flanders cuts to the chase in order to avoid being pinned down, explaining," it comes down to whether you measure the impact of spending cuts on individuals as a share of their income, or as a share of the overall benefits they receive from the state." other words whether you follow the IFS' yellow line or the IFS' white line.


previous thoughts

Friday, 22 October 2010

IFS – independent and impartial experts on the economy, or Labour astroturf? You decide

In a controversial briefing the IFS has launched an attack on the 'fairness' of the cuts proposed by the coalition government.

Well, not the 'fairness', they say that's in the eye of the beholder, rather they contradict the coalition view that the cuts are 'progressive'.

But according to Nick Clegg, the IFS are guilty of a ‘cavalier misrepresentation’ of the truth, which he explains stems from their continuing adherence to the Gordon Brown’s own analysis of fairness based solely on the tax and benefits system.

He says this is not right and it is frightening people – which appears to be supported by the evidence of commenters in this thread.

Anyway here's the relevant graph from the original Treasury document.

Compare and contrast with the relevant one from the IFS.

The Guardian describes it as a highly unusual step to attack a think-tank in this way, but Clegg argues any calculation of fairness should also include access to public services, and points out that even after the cuts take hold public spending will still be 5% higher as a proportion of GDP than when Labour came to power.

It seems the debate has come a long way from thatcherite ideology if people are now complaining that the growth of the state is not fast enough!

Meanwhile the Daily Telegraph describes the IFS presentation as a traditional post-match hatchet job.

Ah well - everyone's got a newspaper to flog!

If we take 1997 as the baseline and consider the spending review cuts as a rollback of Labour decisions I’d like to know who exactly do people think is still getting that extra 5% of taxpayer (mine and yours) money?

Obviously increased debt levels means higher repayments, in which case Labour has been taking money out of the pockets of working families to hand it over to the bankers.

Taking into account their own £20m overdraft, Labour have an ongoing interest in keeping unscrupulous city loan sharks happy – which means the basis of their opposition to the coalition looks more and more like a massive fraud and that they are the real con-artists.

The public is not stupid – when the next election comes around they will appreciate LibDem pragmatism, even if that includes giving temporary support to the dogma of others up to a point.

It will be interesting to see where that point is.

With a referendum on AV scheduled, and backed by Labour leader Ed Miliband, it strikes me as a short-sighted and counterproductive strategy for Labour to have already put distance between themselves and any prospective coalition partners - perhaps that's why their proxies at the IFS were given the job of getting their hands dirty, so Miliband could be starting their decontamination project by making a show of retreat from favouring them to the extent that Brown did.

If so he's planning on a Lab-Lib coalition.

Which means we can watch to see if any Labour denunciation of the IFS the next step in the orchestration.


Update: Something interesting is definitely going on.

Traditional supporters of a Lab-Lib coalition, The Fabian Society, have hit back at the criticism with a seemingly robust defence of their brethren IFS, suggesting some selectivity in the Treasury presentation - a standard, if strong, oppositional tactic.

Perhaps it is piqued pride at having their preparations thrown out of the window by the coalition, or maybe it's selective emphasis and an inability to take criticism on their behalf.

Still it's a solid point that Robert Chote, the director of the newly created Office of Budget Responsibility (it's still a bizarrely portentous name) and only recently departed from the IFS, hasn't been more prominent in the process.

For one it would defuse some of the more partisan criticism, and for two it would show the OBR is a serious creation which takes its' responsibilities seriously.

I can't imagine Mr Chote isn't busy behind the scenes, although it does make me wonder what he's doing... and then there's the matter of who pushed the particular quote from Nick Clegg at the post-CSR Q&A to Andrew Sparrow for Sunder Katwala to pick over and selectively emphasise (umm, 'take out of context').

But back to the IFS, Faisal Islam's tweet of the laughter which greeted their presentation showing "the most regressive graph in history" is perhaps most informative of all.

Possibly it may have something to do with Robert Chote's prescient departure, but somehow I suspect the IFS' days as the most respected economic think-tank in town are numbered!

The spending review document

Find it here

Read it at your leisure. Then demand hasty repentance.

Thursday, 21 October 2010

The housing market is a mess because the housing debate is a mess

Proposals by the coalition government to remove or reduce security of tenure for council housing residents has kicked off a pretty storm of reaction.

Much of the anger is directed towards the agenda of cuts which left-wing commentators argue is designed to hit the poorest hardest.

But though this may seem justified it is completely unfair.

Over at LDV the well-meaning LibDems identify the problems:
"Millions on waiting lists. An affordability crisis pushing up the average age of the first time buyer to 38. Housebuilding completions falling off a cliff. Empty homes in areas where there are no jobs and scarcity where people want to live."
But the nub of the matter has yet to be fully grasped.

The political problem is all about the term 'affordable housing'.


My stamping ground in Reading has been at the forefront of developing an effective housing policy - for a more detailed look into the background you can read a range of local stories I compiled here.

The town has experienced massive growth in the past 15 years as a hub of the new information economy, helped by good communication links, but boundary problems mean the borough has long been overcrowded as neighbouring authorities tacked their housing requirements onto growing suburbs and even they are now struggling to find space - currently around half of people living in the Reading urban zone live outside the Reading local authority.

Cllr Daisy Benson (who chairs the RBC housing scrutiny panel) reflecting on the Home Truths 2010 report issued by the National Housing Federation, said, "The fact is there is a shortage of affordable housing and because housing is not affordable it puts pressure on social housing."

Everyone agrees on the need for more 'affordable housing', but nobody knows how this can be delivered.

Is it a matter of planning? of locations? of finance and wider economic issues?

There are three interlinking, yet distinct issues conflated into the deceptively simple term - and in my view this is the cause of all the confusion: it's about quantity of supply, quality of supply and the price of the stock.

'Affordable housing' has insidiously penetrated the political vocabulary to become the new default term for all these things together - it is used interchangably to cover everything including council-owned and housing association stock, social and sheltered housing and low-end private rental property as well as average prices and general affordability.

And that's where things start to go wrong.

'Affordable housing' simply can't mean all those things simultaneously and retain any relevance. The term has poisoned the debate and prevents any advance.


Let's go back and cull a few stats from those links:
  • average house prices in Reading are nine-times average incomes (£213,346 compared to £24,487)
  • 832 affordable homes are needed every year, but only 270 are being delivered (32% delivery rate)
  • 6,000 people live in council-run social housing in Reading (including 368 sheltered homes) with another 1,300 in south Reading in privately-run social housing
  • 4,834 households are on the waiting list for social housing (an increase of 41 per cent in five years)
  • the waiting list for social housing in Reading is 7.38 years
  • 90% of increases in housing capacity in Reading are flats and house conversions
Pressures include internal migration to the town attracted by relatively high employment and income rates related to Reading's status as a growth area, helped by a variety of banner social and cultural amenities which make it a more attractive destination (university, sports clubs, retail and entertainment centre, festival etc).

All this helps explain why despite an outward image of success and growth there are a number of pockets of persistent deprivation (8 out of 93 domains in RBC boundaries are among the bottom 20% of most deprived areas in the country) and there has been growing levels of inequality among residents of the borough.

15,558 people, or 11% of Reading's 141,897 population, live in areas of most deprivation - yet this is despite being consistently ranked as the second least deprived city in the country as a whole!

More light can be thrown on this by comparing Reading's council tax bands - although each band is priced at almost 3% higher than the national average [1] the actual average paid by each household at £1,236.00, is over 3% lower than the average paid in England at £1,278.93 [2].

Reading is simply a prime example of the challenges facing the country at this time.

Divergent demographic trends have enabled politicians to ignore the underlying structural problems for too long, but while the public debate remains mired in muddled language I don't see any swift resolution to the issues.

So we must tackle the term 'affordable housing'.

This means getting back to the real issues of quantity of housing stock, quality of housing stock and the prices of the stock.

It means having the foresight to have enough of the right type of housing in the right areas.

It means ensuring cheap stop-gap solutions are not the standard.

And that means government must work together at local, national and intermediate levels in order to coordinate in the public interest.