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Tribalism, reform and political cul-de-sacs

In the end, the last Labour government’s centralist model of public services exhausted itself, but it was probably the single most important driver of improved standards in vital areas such as education and health. The strategic cul-de-sac for Labour in opposition would be to retreat to a simple defence of the public sector. Instead, a new and distinctive account of reform is required.

My former colleague Patrick Diamond and ippr associate fellow Mike Kenny, have written this piece in today’s Guardian, on the occasion of a Political Quarterly conference on the lessons of the New Labour period. There is much in it with which I agree, notably that Labour suffered significant electoral damage at the last general election from stagnation in living standards and an inability to connect to deeper currents of political and community identity. Gavin Kelly and I have written a piece in this month’s Prospect magazine on similar themes.

Patrick and Mike are also undoubtedly right on their central argument that there is no future in British politics for Labour tribalism of the 20th century kind. All over Europe, mainstream social democratic parties are polling at around 25 per cent of the electorate, or worse. They are habituated to the politics of coalition and compromise.

A similar state of affairs prevails in the UK’s devolved administrations, where proportional electoral systems properly reflect popular political preferences. Whatever the fate of the Coalition government in Westminster – and nobody should be in any doubt about the significance and audacity of the political realignment it has effected – the politics of pluralism are here to stay. This is a development to be welcomed, not resisted, and whoever wins the leadership of the Labour Party will have to acknowledge the reality of this fundamental shift.

The fate of localism – or more properly, sub-national politics in England – is less clear cut. At the heart of the Coalition government’s agenda is a fundamental tension between devolving power to elected local authorities (the Liberal Democrat starting point) or to the little citizen platoons in our communities (the Conservative Big Society agenda). This tension is not irreconcilable but it is stark in some areas, such as free schools policy. Do you want local government to play any role in education or can it be left to a local quasi-market? Moreover, despite their enthusiasm for Tony Blair’s public service reform agenda, many Conservatives too often skip over the one thing that drove the greatest improvement in standards in education, health or policing: the ‘delivery state’ that directed, from the centre of government, the literacy hour or minimum hospital waiting times.

In the end, this centralist model exhausted itself, but it was probably the single most important driver of measured standards (if that is indeed how we should account for improvement) in our public services during the Blair-Brown era. In contrast, the Coalition has taken some almighty gambles on reform – GP commissioning in particular – that may not pay off. Combine that with cuts to spending, stagnant living standards and rising unemployment, and you have a perfect storm of discontent brewing. That is not an argument against reform: far from it. But if these trends coalesce, we can expect to see a sharper centralist edge to the Coalition’s public services strategy, if not a reinvention of New Labour statecraft.

The strategic cul-de-sac for Labour would be to retreat to the comfort zone of defending the public sector, rather than setting out a new and distinctive account of reform: which services to prioritise and which to cut, and how to renew public services in this new century. In the forthcoming conference edition of Fabian Review, Gavin and I set out our thoughts on this key task.

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2 Responses to Tribalism, reform and political cul-de-sacs

  1. neri says:

    I AM NOT COMFORTABLE WITH YOUR UNDER ESTIMATION OF NEW LABOUR ACHIEVMENTS. NOTHING HAS “EXHUSTED ITSELF”. POLICY HAS BECOME A CHALLANGE OF PERMANENT MAITENANCE. IN THE LONGUE DUR’EE BLAIR GOVERNMENT HAS PROMISED BRITAIN A SMOOTH TRANSITION INTO WHAT GIDDENS REFERS TO AS LATE MODERNITY. IT RESEMBELS THE ACHIEVMENT OF “LET AS FACE THE FUTURE” IN 1945. TRY TO IMAGINE WHAT IT COULD HAVE BEEN WITHOUT A NEW LABOUR AGENDA. LABOUR WOULD HAVE BEEN OUT OF OFFICE BY 2001. ENGLAND WOULD HAVE BEEN CAPTIVE IN THE OLD DICHOTOMIES OF LEFT VS RIGHT, BIG GOVERNMENT VS SMALL GOVERNMENT. IN THE NINETIES SOME CONCIEVED BRITAIN A POST- DEVELOPED COUNTRY IN THE COMPANY OF FAILING POLITIES.NEW LABOUR SPARED THIS FATE.
    FROM THE OUTSIDE IT IS REALLY HARD TO UNDERSTAND THE ANTI BLAIR SENTIMENT. NEW LABOUR HAS BECOME THE CONSENSUS OF SOCIAL POLICY AROUND THE WORLD FROM ACTIVE LABOUR POLICY, THROUGH LAW AND ORDER POLICY TO PERSONAL ACCOUNTS IN SOCIAL SECURITY. NEW LABOUR CREATED A NEW VOCABULARY AND SHAPED THE CHANGING IMAGINATION OF THE WELFARE STATE.
    THERE IS HOWEVER ONE FACTOR THAT WAS NEGLECTED AND COULD REVIVE NEW LABOUR AND DIFFERNTIAITE IT FROM CURRENT GOVERNMENT. THIRD WAY POLICIES ARE EXTREMELY DEMANDING ON THE HUMAN IMPROOVMENT PROFESSIONS AT THE DAILY CONSTITUTING INTERACTION WITH CITIZENS .SOCIETY DEMANDS MILLIONS OF SOCIAL WORKERS, HEALTH AND CARE PROFESSIONALS, POLICEMAN, TEACHERS, SOCIAL SECURITY WORKERS, WARDENS AND EMPLOYMENT ADVISORS TO TACKLE THE COMPLEXITY OF POLICY THROUGH INTERVENTION. WISE GOVERNMENTS SHOULD ARM THEM WITH THE ETHOS OF A SERVING PROFESSION. RECOGNITION, RESPECT AND A POLICY OF INVESTMENT COULD ALSO BRING BETTER EQUILEBRIUM ON THE CNTRAL – LOCAL DIVIDE. NEW LABOUR SHOULD SHAPE THIS NEW ETHOS AND REDFINE THE ROLE OF “STREET LEVEL BUREAUCRATS” AS COLLECTIVE AGENTS OF THE GOOD SOCIETY HOLDING THE HIGH MORAL GROUND OF HUMAN WELFARE.

  2. David Chester says:

    How much longer is ippr going to continue play with this issue without presenting a few answers? After all ippr is supposed to have people in it who can actually think and reason both the cause and the solution to our economic woes. Or could it be that they don’t really wish to present the solution that lays literally below our feet and which would then stop the need for any more research into what should be a burning political issue not a “back-burnered” “nice to know” way of keeping ones job.

    The need is for more opportunity to be provided by government for people to earn a living and that means greater demand for goods. This will come about (an occasionally is being shown by lower real estate prices) when there is an across the board reduction in land prices and an end made to speculation in land values and lowered prices. Of course it will throw a few fat cats out of the gravy in which they have been feasting for years after having contributed nothing to the macroeconomy. But this is a mere morsal of our discontent compare to what good gould be caused by the 10% or so unemployed who would then find their work being competed for.

    What we need is a gradual introduction of land value taxation. The situation is summarized below:

    14 ASPECTS of LAND-VALUE TAXATION affecting Government, Land Owners, Community and Ethics

    Theory of Land Value

    As a community grows, the use of land and other natural resources is limited by the territorial claims of its occupants, the poor means for access to its bounty and the slow external communications. The government invests tax-payers’ money in various local and national infra-structures and the benefits from these improvements to the surroundings, gradually raise the living-standards of the population, allowing it to be more active. However, this enhanced productivity of the land is not returned to the community as a dividend on its public investment. Instead, this advantage is taken by a small number of land-owners whose monetary gain is in the form of a potential or actual ground-rent, which is the true measure of the land value. The ground-rent on urban sites becomes progressively greater with the more central locations, having been intensely developed due to their high-density populations.

    Speculation in land values often results in choice sites being unused, which wastes their potential. The relatively few land owners and their production-managers also control the opportunities to earn of the landless majority of workers, whose labour needs access to the land and its improvements.

    These two social injustices should be rectified by the introduction of land value taxation (LVT) instead of the main tax burden being placed on the earnings, goods-sales and ownership of built-up property. The following 4 economic aspects of LVT are as listed according to the above titled categories:

    3 Aspects for Government:

    1. Most of the ground-rent being collected as LVT, adds to the national income. It allows the taxes on earnings, purchases and family/corporate ownership of buildings to be reduced or eventually to be eliminated.

    2. The cost of collecting the LVT is much smaller than for income tax and other production-related taxes. The ownership of each land parcel is registered. Using regularly updated maps, the rental value of each site (as if without buildings) is public knowledge. Then the LVT is simple to understand, the amount of tax easily found and its payment by the land owner impossible to avoid. The many problems arrising from legal and confusing escape-clauses in the other tax regimes require an army of tax inspectors. This is not needed with LVT, the the only additional jobs being the up-dating of the land-rent maps and tables of sites data.

    3. With LVT, the national economy stabilizes and no longer experiences the 18 year housing boom and bust cycle, which was due to the changing prices that arose from speculation in land-values during town expansion. Without LVT this cycle initiates due to the growing land prices as building sites are used, however speculators begin to withhold the opportunities to use them and the prices inflate. After the speculators have sold land to them, the site developers eventually find the land too costly to use,. When in panic, they try to sell the real-estate, it quickly drops in price. Instablity from co-lateral borrowing on land value also decreases with LVT.

    6 aspects affecting Land Owners:

    4. LVT is progressive, the owners of the most potentially productive sites pay the most tax. None is paid on marginally productive sites, since their owners cannot claim ground-rent from possible tenants.

    5. The land owner pays his LVT regardless of how the land is used. When the land is leased to tenants most of the resulting ground-rent is the tax. After LVT is introduced, the majority of the population benefit since they are consumers, whilst a minority who are monopolists and speculators in land values and their banks, sustain losses.

    6. Without LVT, as time passes the speculators in land value withhold more sites from use. This raises the prices chargeable for access to all the sites, due to their increasing unavailability.When the community is not growing and more so when it is, the tax payers’ money is continuously being invested in the infrastructure. So the urban sites become more useful, scarce and valuable. When LVT is collected it stops the speculation in land prices because any withholding of land from proper use is too costly for its owner.

    7. The transfer of tax from production activities and the introduction of LVT, reduces the sales price of sites. Then the government investment in infra-structure no longer influences the land sales-prices, even though their value (or potential usefullness) may continue to grow.

    8. With LVT, land owners are unable to pass the tax on to their tenant renters, due to the competition for land use. The users of (untaxed) marginal site price their produce according to the costs of their labour, the use of the durable capital and the added transport needs. Owners/occupiers who access more productiuve land pay LVT/ground-rent and compete in their producton, so this tax cannot be added to what buyers willingly pay.

    9. With the introduction of LVT, land prices will drop. Speculators in land values will tend to foreclose on their mortgages and to withdraw their money for reinvestment. Recent mortgage contracts will cease to be worth retaining and the banks holding these contracts will experience losses, after they reposess their properties and need to sell them quickly and cheaply. (The property prices depend on the natural demand for homes, the current rate of LVT and the response by the land owners, not all of whom speculate.) Depending on the rate of these changes bankrupcies can result. LVT should be introduced gradually to allow the investors sufficient time to transfer money to company-shares in durable capital goods, where their greater use will meet the increased demand for produce (see below).

    3 aspects regarding Community

    10. With LVT, there is an incentive to use the land for production, rather than it laying idle or being partly used. An optimum amount of urban land is brought into use, which reduces the spread of the suburbs onto rurual land and avoid vacant city centers. Some of the urban land was previously held out of use by land value speculators. As these sites become available, their costs decline resulting in the same competition for their greater use.

    11. With LVT, greater working opportunities exist due to the cheaper land and an increased number of available sites. Consumer goods become cheaper because entrepreneurs have less difficulty in starting-up and running their businesses. Demand grows, unemployment decreases and with it a reduction in the polarization of our class-society and its degree of poverty.

    12. As LVT is introduced, investment money is withdrawn from land and placed in durable capital goods. Then production with more modern tools becomes less costly. The investors in company-shares tend to be wage-earners (as well as banks and monopolists). Their decisions favour more competition and cheaper local production without heavy transport costs, whilst the monopolists have less control of prices and the unavailability of alternative goods. This is a natural trend of our free-marketing social system.

    2 aspects of Ethics

    13. The collection of taxes directly from productive effort and commerse is socially unjust. The associated philosophy favours coersive robery and is “Robin Hood” in style. LVT replaces this form of extortion by gathering the surplus rental income which comes without exertion. Consequently LVT is a natural system of money-gathering, which avoids the present-day distortion of business economics. It also implies the need for taking better care of the environment and that spoilers of nature should repair or pay for the damage.

    14. Bribary and corruption cease with LVT. Before this was due to the leaking of news of municipal plans for housing development. However the speculation in land values is no longer worthwhile after LVT is in place.

    SO WHAT ARE WE WAITING FOR?