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Liberal Conocracy

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So the Lib Dems have caved on Trident, immigration, the euro and voting reform. Quite a list. True, you can’t have power without compromise, but too much compromise starts to look a lot like powerlessness. At least they’ve won a concession from the Tories on income tax: according to the BBC, in their summary of the coalition’s policies, there will be a ‘substantial rise in income tax allowances for lowest paid from April 2011’.

Hang on a minute, though. Can it be that the public broadcaster has fallen for the new government’s spin? Because, as it happens, raising the personal income tax allowance won’t benefit the very lowest paid: they already don’t earn enough to meet the current threshold. And since the change will apply to everyone who earns under £100,000 (as of April this year, people who earn six figures or more no longer get the personal allowance, though I wonder if that will be quietly reversed), only a fraction of the tax relief will go to the not-quite-lowest paid who earn a bit, but not much, more than the current threshold of £6475. Before the election, Tim Horton of the Fabian Society and Howard Reed of Landman Economics put the case against the Lib Dem policy of raising the threshold to £10,000 in a paper for the (Labour-supporting, but still) blog Left Foot Forward (‘evidence-based political blogging’). Here are some of their conclusions:

the measure would do nothing to help the very poorest, who don’t have income large enough to pay tax. Three million households in the poorest quarter of the population – some of those who most need help – would see no gain from the policy

Of the £17 billion total cost, only around £1 billion (6% of the total) actually goes on the stated aim of lifting low-income households out of tax. The remaining £16 billion (94% of the total) goes towards cutting taxes for middle- and higher-income households

households in the middle of the income distribution see larger proportionate gains in their household income than those at the bottom, increasing socially damaging inequalities between the bottom and middle (including relative poverty)

And that’s all not only before you take into account the effect of cutting public services, but also assuming that the threshold at which people start paying higher-rate tax doesn’t get automatically pushed up too, as it seems it will under Cleggeron and the Liberal Conocrats’ plans. Here’s a graph from Horton and Reed’s paper showing how the benefits of the original Lib Dem policy would have been distributed, alongside the impact of the new Torified version (click to enlarge):

net change in household income

According to Left Foot Forward, the Tory leadership rejected the idea in 2005 for being too unfair. I wonder how many Lib Dem voters were hoping to install a deputy prime minister with a fiscal policy somewhere to the right of Michael Howard.

Comments on “Liberal Conocracy”

  1. Joe Morison says:

    Well, they did manage to get the inheritance tax break for multi-millionaires dropped; but, tho’ pleasing, it’s not much more than a gesture. I think it was never really on the cards that the LDs would have much influence on economic policy. The test will be social policy. Are the Cameroons liberals, if they are they’ll use the coalition as an excuse to sideline the Tory frothing-at-the-mouth tendency. The result might not be what we’d choose but it will be a lot better than what we’d have got with a Tory majority (and i don’t see how that could have been avoided in a new election later this year if Clegg had opted to let them form a minority government).
    It’s no good slagging off the LDs for not having done what they couldn’t have. It’s too early to say what we’ve got, let’s hope.

  2. Thomas Jones says:

    Maybe. The other possibility is that Cameron will be able to use the Lib Dems as a figleaf: policies that please the mouth-frothers, all the while insisting how reasonable and centrist he is because how can he not be if he’s in coalition with the Liberal Democrats. Calling yourself a liberal and behaving like one aren’t the same thing.

  3. willharwood says:

    I wonder in raising the allowance how many fewer people will have to ask the state for (what amounts to) their taxes back in the form of benefits. I would have perhaps naively imagined that it is a scandal that anyone earning less than a living wage is taxed on their income at all…

    • Thomas Jones says:

      Raising the allowance for very low earners would be hard to argue with, if that’s what they were actually doing: the trouble comes with raising the allowance across the board but pretending it will benefit only low earners.

      • willharwood says:

        I agree that it’s slippery to describe this as a policy that’s aimed at only helping the poor. A more honest positive spin might be to paint it as a tax cut for everyone but the very rich, combined with an effort to take more ow earners out of tax altogether. A Tory part and a Lib Dem part, one could say. (I must admit, when I first read about the policy I assumed that the higher tax bands would be rebalanced to make the change revenue neutral.)

  4. loxhore says:

    Does what they’ve agreed on electoral reform really qualify as having ‘caved’? If so, that’s a flat strategic ballsup. It suggests to me that Clegg isn’t being honest with himself about how easy it’ll be to distinguish ‘Lib’ from ‘Lib Con’ from ‘Con’ with any credibility: that is, it betrays a dash of arrogance that’s making him careless with the Cleggacy.

    • Thomas Jones says:

      A referendum on AV is a long way from the Single Transferable Vote. Based on Clegg’s fooling around in the garden at Downing Street like Cameron’s little brother overexcited at getting to play with the big boys I wouldn’t trust him to be thinking too strategically about anything at all. Who’s to say the Tories won’t swallow the Lib Dems whole – or half of them, anyway, while the other half defect to Labour or wherever else they can feel comfortable in opposition, making promises they know they’ll never have to keep on nuclear disarmament, European integration etc.

  5. pinhut says:

    Really, would it not be better to just give money to the poorest? There is not really a convincing method of cutting taxes for the poor without cutting them for the rich, and, of course, 1% of a lot is always a lot more than 1% of almost nothing.

    In Taiwan, straight after the financial crisis hit confidence, the government simply gave away money, a few hundred pounds’ worth of state vouchers that had to be spent within a couple of months (and could be redeemed anywhere, for anything). Sure, it’s a gesture, but 200 pounds to somebody on a very low income, received all at once, surely is worth more than a couple of quid a month improvement to be swallowed up by rising prices anyway.

  6. ober says:

    I am surprised that LRB readers – and writers – seem to think Clegg could have done better. What are you suggesting he should have done? The parliamentary arithmetic and political dynamics post-election effectively meant only one possibility: some form of basically Tory government. There was never any viable anti-Tory coalition (though for various reasons it suited all parties to pretend there was). Clegg’s choice was either do some sort of deal with the Tories or force another election where the (historically very high) Lib Dem vote would have collapsed, benefiting the Tories and giving them an overall majority. So he had to do a deal. I thought confidence and supply was more likely, but the Lib Dems went for full coalition, mainly, I think, because they know they are almost certainly going to get punished at the next election anyway so they may as well (a) try and exert some policy influence, (b) gain some credibility by sitting in govt for the first time in decades but most crucially (c) postpone the next election for as long as possible by restraining the Tories from calling it when it suits them. It beggars belief to suggest that a Tory party with such a strong hand would or could ever accept the Lib Dems’ more controversially liberal proposals such as the immigration amnesty and the review of Trident – and it is frankly inane (or disingenuous) of TJ to think (or suggest) that they were achievable. As for a full PR referendum, that was a no-hoper too – and anyway the brighter Lib Dems (among whom Clegg) will surely have realised that the chances of a yes vote were slim, in the context of the massive cuts and unpopularity that looms. This was, as has been pointed out, a good election to lose. Very sad that the Tories didn’t win it strongly enough to save the Lib Dems from govt.

    • pinhut says:

      This is mostly fair comment, the only part I would disagree with is the last sentence, because surely for the Lib Dems simply to be a part of government and to witness its workings from the inside is going to be an enormously beneficial experience, win or lose (and I think they have little to lose), just in terms of knowledge gained. I also think people are overplaying the extent to which the Con-Lib coalition will be blamed for austerity measures which, while unpopular, are seen (rightly or wrongly) as necessary, and as something that a government of any stripe would have to implement.

      What seems to be going on in the media right now is a forced rethinking of how to cover politics, as the journo class are as mired in their two-party binary every bit as deeply as Jack Straw. One of the basic questions seems to be, can a coalition that results from two collective failures at the polls be seen as a success, or is everything it does, by the nature of its composition, doomed to compromise. Or, conversely, is compromise something to be welcomed, with the Lib Dems tempering the possible excesses of Tory fiscal and social policies, etc. Seems to me that none of the newspapers have quite worked this out yet.

      • Phil says:

        On this last point, Chris Addison went up several notches in my esteem after the way he dealt with the post-election press on HIGNFY – “but these two politicians are in different parties! how can they be in a coalition?”

        It would be good – or at least not entirely bad – if the LDs managed to exert a moderating influence on Cameron, Osborne & (perhap the scariest of all) Duncan Smith, rather than just being called in aid by Cameron & co to balance out the reactionaries on the backbenches. My gut tells me that the LDs are going to be either smothered or swallowed by the Tories, and that the loathing I felt for them when they clinched the deal is only going to be confirmed. On the other hand, my gut told me that Labour were going to form a coalition, so I guess there’s hope.

    • Thomas Jones says:

      Inane or disingenuous of me? I wasn’t the one making the unkeepable promises.

  7. ober says:

    TJ, if the Lib Dems had been in a stronger bargaining position, they would have been able to implement more of their agenda. That is the way coalition govt works: compromise. They were fairly explicit about the fact that they would seek to form a coalition if that was the way the seats stacked up, and also explicit that they would look first to the party with the most votes and seats to seek to form a government – and indeed Clegg attracted a lot of criticism in the campaign for spelling that out. So I don’t see how your implication of bad faith is justified. What are you suggesting the Lib Dems should have done instead?

    I do take your point about the raising of the tax threshold, though. Not the egalitarian measure that it is being spun as – although I suspect it may do more to benefit low earners, in terms of reducing poverty and benefit traps, than the headline figures you quote would imply: in practice it is not easy to target benefits at this group – witness the *dreadful* problems caused by the complexity of Brown’s working family tax credits – and the new measure at least has the advantage of relative simplicity. (As would the Lib Dem policy of equalising rates of non-business CGT and income tax, if it were to be implemented.)

    But don’t expect much good from this govt in terms of economic and social policy – (a) because the Lib Dems have very little leverage, but more importantly (b) because the economy is absolutely screwed and whichever party got in would have been obliged to implement absolutely enormous cuts: see the IFS report, etc, etc. That is why I see it as a tragedy that the Lib Dems had no choice but to become implicated in this govt.

    • Thomas Jones says:

      On the question of compromise, see my third sentence above.

      What should the Lib Dems have done instead? Confidence and supply would have shown more integrity.

      Your third paragraph is right enough, except for the tragedy part. Tragedy for whom?

      • Joe Morison says:

        Confidence and supply, then in the autumn Cameron calls an election saying he needs a mandate to rule. The allegation that an LD vote is a wasted vote hits home, people still not ready for Labour again, and Cameron gets a working majority. How is that better?

  8. ober says:

    But what I’m saying is, you can only judge the compromise by measuring it against the degree of power that they had – which was very little. They got what was for them a large number of votes, but failed to break through in terms of seats. This meant that, at a subesquent election, their vote would almost certainly have been squeezed heavily, mainly to the benefit of the Tories. So the Lib Dems had a far stronger interest in avoiding another election than the Tories.

    I initially expected confidence and supply, and would have felt more comfortable with that. But in truth it would have been politically at least as damaging: opposition could have (with characteristic cynicism and dishonesty) blamed Lib Dems for letting Tories in; Tories (and others) would have argued that the Lib Dems were wishy-washy (can’t decide whether to support or oppose govt) and, more significantly in terms of the longer-term case for PR, that even Lib Dems couldn’t make coalition govt work, so PR would never work. But more important as a reason for coalition is that minority Tories would have been able to go to country again sooner rather than later – and so get an overall majority, as mentioned in previous para.

    Why do I see this as tragic? Well, first of all, as I have tried to explain, I think the Lib Dems have acted with a degree of integrity and I am sad that even sophisticated observers apparently can’t grasp this. But the practical consequence of that lack of insight is what really saddens me. I am not a Lib Dem member, but I think the country would be much better off with some of the constitutional reforms they have long championed, especially PR. A durable constitutional settlement along those lines would require a fair degree of cross-party support, or at least support from Labour. We could have had it in 1997, but Labour were too tribal, too short-sighted. The tragedy of this result – and of the betrayal myths that are already being cultivated on the “left” – is that it probably makes realignnment less likely than ever.

  9. alex says:

    Lots of interesting viewpoints. But it seems all sides are assuming that the Lib Dems would have come out worse if there’d had to be another election. But if they’d fought shy of an alliance with the Tories and really pushed the PR issue, mightn’t they have picked up a substantial strategic vote from Labour supporters in the recognition that, given Labour were shafted, this would be a lesser evil?
    And a suggestion for a future post: what are the class/gender dimensions? My hunch is that Clegg’s kowtowing to Cameron is somehow related to Brown’s dissing of Mrs. Duffy. A male-but-Scottish-and-intellectual (correctly but unpopularly) ticking off an ignorant-but–English-and-working-class woman has been replaced by a soft-Westminster-and-Cambridge-social-anthropology-liberal-pro-European-brush-haired-man (correctly because somehow deferentially) licking the arse of an Eton-and-Oxford-PPE-floppy-haired slightly younger man. If this is Cameron’s 18 Brumaire, then Marx’s words about history repeating itself, the first time as PR disaster, the second time as all-male Carry On outtake, have never rung truer.

    • Joe Morison says:

      Re. another election: the thing to remember is that Cameron would have been able to call it when it was in his interest to do so. It would have been before the honeymoon wore off and after he had engineered a piece of populist legislation that the LDs couldn’t accept – something particularly harsh on immigration, say; on top of that there would, i think, by then have been a hunger for strong government. The LDs would have looked irrelevant, Labour still reviled – there is every chance he would have walked it.

      • Mike says:

        Joe, I’m not convinced about that. Why would anyone who didn’t vote Tory earlier this month do so later this year, after they had raised VAT to 20% and proposed to cut key services? I think part of the logic of the coalition is the thought in both leaders’ minds that a second election might produce a very similar result.

        There have only been two previous examples (1910 and 1974) of “double elections” since the introduction of anything like a popular franchise (and yes, I know there was nothing approaching universal suffrage in 1910) – on both occasions there was very little change in the autumn from the spring result.

        • Phil says:

          1974 is interesting, particularly if we’re already setting our alarms for 2015.

          2/1974(a): coalition of 2nd and 3rd parties (Con+Lib); failed
          2/1974(b): minority government led by 1st party (Lab)
          10/1974: very small majority for one party (Lab)
          3/1977: coalition between 1st and 3rd party (Lab+Lib)
          7/1978: minority government led by 1st party (Lab)
          5/1979: 2nd party takes power with large majority (Con)

          We can at least see why Cameron might have wanted to avoid a minority government, even with the option of going to the polls again sharpish. What’s in it for Clegg remains a conundrum of inscrutable potentialities.

        • alex says:

          Thanks Mike – support for Lib Dems has been pretty stable over the years. The only time it dipped was in the mid-90s, cos of the need to get the Tories out and Labour’s exceptional success. If they had stuck to one burning issue, such as insisting on PR reform, they would have either stayed the same & gained moral prestige (if attempts at forcing reform failed) or gained more real power (if it succeeded). What they’ve just done can’t but lose them both moral prestige or any real influence. I accept they were on a pretty sticky wicket, but not that they had a stronger interest in avoiding another election than the Tories.

          • Joe Morison says:

            Well, we’ll never know and the above views may well be right. For me, tho’, it’s the fact that the time of the election would have been Cameron’s to call (surely, if the LDs had brought down the government on what would have been as issue of Cameron’s choosing, they’d have been punished); and that there would have been a widespread feeling that the country needed strong and stable government.
            It was a grim choice for Clegg and i don’t think it was obvious either way.

  10. ober says:

    Result of a next election… Not, of course, a foregone conclusion (which was one important reason why Cameron agreed coalition), but a drop in Lib Dem support and an outright gain for the Tories must have been the most likely outcome of another 2010 election.

    The Lib Dem case was premised on the idea of them (a)exerting influence in a hung parliament in the short term and (b) reforming politics to encourage cross-party cooperation in the longer term. So not doing a deal would have been a double-whammy for their credibility and would probably have compromised them more than doing a deal has (and – justly or not – it has).

    I can’t see Alex’s argument about votes possibly shifting from Labour to the Lib Dems. On the contrary, the most important devpt in the final week was a shift in votes the other way as Brown concentrated successfully on firming up core Labour support to beat the Libs in vote share. Ironically this meant that the Libs did not then do well enough for a Lib-Lab deal to be feasible. But in a second election more Lab-oriented LD voters would have failed to appreciate that paradox and would instead have switched to Labour while anti-Labour LD voters would have gone Cons to spur on a clear result; in other words, the squeeze of the campaign’s final week would have become far stronger.

    In terms of seats, that squeeze would have tended to benefit the Tories. And they were better placed to fight a second campaign anyway, with advantages in terms of money, momentum, morale and media support. (Don’t underestimate the importance of having a party that is fighting fit – demoralisation/loss of activists within Labour post-Iraq was the main reason Brown couldn’t risk an election in 2007.)

    Control of election timing could also have benefited Tories. Indeed, removal of the PM’s power to do this is a significant shift in power away from the executive and so a genuinely valuable liberal constitutional reform from the coalition. But preumably both Cameron and Clegg calculated that once the cuts start in earnest, their best hope is to stay in office for as long as possible. They are doing this because they both need to, not because it is politically palatable. The fact that they chose five years as the fixed term rather than four (the more natural British election rhythm) indicates how very long the economic pain is likely to last.

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