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7 December 2019

Groundhog Day

Tag(s): Foreign Affairs, Politics & Economics
In the 1993 American film Groundhog Day Bill Murray plays a self-centred weatherman who goes to the town of Punxsutawney for an assignment. He is later shocked when he wakes up next morning and realises that he is reliving the same day over and over. With this turgid election campaign I know the feeling. I have reread the blogs I wrote both before and after the 2017 General Election and think that very little has changed. There have been some changes in the cast of characters it’s true but the political leadership on all sides seem to have learnt nothing from the lessons of the past few years. As for the media they have learned nothing at all. They are still trying to turn our ancient, well-tested representative democracy into a presidential system. They only seek to find fault and inconsistency, which frankly is not hard. But they rarely get to the real truths which are that all the parties bar none have not prepared properly for this election although it has been obvious that it would have to come in order to refresh a dysfunctional House of Commons. The manifestos are just a collection of wish lists with no properly thought out plans and no real attempt to show how the books can balance. In the case of the Labour one they can’t.

I wrote in last week’s blog that I would focus in that one on the Brexit factor and then try to cover the other main issues this weekend. I will stick to that plan. I see these as the economy, the National Health Service, immigration and then the question of political leadership. These are not the only issues that matter but I think on balance they are the main ones in people’s minds. But I will try to find space to at least cover in outline some of these other issues where there are real problems facing the country: defence, justice and education.
  1. The economy.
In most General Elections it is usually the economy that is the biggest issue in people’s minds in deciding how they will vote. If in general they feel better off than last time then the incumbent government has a good chance of re-election and vice versa. But as I have explained before the economy does not mean Gross Domestic Product. GDP is defined not by what we produce but by what we consume. If the government increases borrowing and spends all the money then GDP has gone up. But the nation is now worse off, unless most of the money went into capital projects or R&D where we can expect a return on investment.

Under the Conservative-led government of the last near-decade the economy has recovered from its dire position in 2008-9 and most people are to some extent better off. Earnings have risen, income inequality has reduced slightly and the government has substantially reduced the deficit it inherited.

However, I think the real problem is that the nation is still paying for the disastrous management of the economy under Gordon Brown’s chancellorship in 1997-2007. He substantially increased spending on the National Health Service, education and other public services. Some of this was paid for by increases in taxation but most by two kinds of borrowing - public borrowing thus increasing the deficit hugely and the rest by so–called Public Private Initiatives. Under these NHS trusts were encouraged to enter into contracts with private suppliers of building services and the debts incurred were taken off the public balance sheet. However, when these debts fell due that cost went to the Trust whose employment costs had also increased sharply. Those costs are still there. Brown simply put up the cost of running the State with debts falling in the future. The future is here and the Government spends more on its interest costs than it does on defence, one of the first responsibilities of the state. George Osborne as Chancellor introduced a programme of so-called austerity but protected some public services, particularly the NHS at the expense of others. So while much of the focus is on the NHS which is simply unsustainable in its present form, other key services like defence and justice have been seriously squeezed.

The Labour leadership is planning to make this far worse by putting up costs sharply and pretending that this can all be paid for by taxing more those who earn over £80,000 pa. But at £100,000 pa the marginal rate of tax including National Insurance is already 62%. Many professionals turn work away rather than paying such excessive rates of tax. John McDonnell is planning to raise this by another 5%. This will not only reduce further the amount of work taken on by professionals like surgeons but will drive many wealth creators out of the country. The top 1% of earners in this country already pay over 30% of the Income Tax collected by HMRC. It is economic illiteracy to think that more money will be collected by raising these rates further. It won’t. It will probably go down.

Most of the Labour manifesto is similar to Francois Mitterrand’s in 1981 with labour reforms and extensive nationalisation. After he won the French General Election the stock exchange fell by 20% in just two days; the French franc collapsed losing half its value against the dollar in two years; the economy went into sharp decline and hundreds of thousands of the more highly paid fled the country, taking their capital with them. Many of them came to London. The budget deficit multiplied six times; government borrowing costs rose and inflation mushroomed to 12.6%.
  1. The National Health Service
I have already covered some of the economic aspects of the NHS. But there are many other problems with it. The NHS is founded on the principle of a minimum standard of health care, free at the point of use.  There are two difficulties with this principle and they are both getting more acute. The first is, what is that minimum standard of health care? When Beveridge designed the system I think he would have set the bar quite low. He wanted to end the injustice of poorer people not getting to see a doctor even when they were quite ill but he didn’t envisage hip replacement surgery or an ever older population. He didn’t envisage the vast progress that has been made in drugs and surgical practice. The second is that if you make something free then demand will rise exponentially. Supply cannot meet such demand and so in the absence of price as a means to control demand you get rationing, i.e. queues and waiting lists. That is economically certain.

Labour are also trying to pretend that if the Conservatives win and get the Brexit deal done they will immediately put up for sale the whole of the NHS to the highest bidder. But when Labour came to power in 1945 and began to launch their version of the NHS the British Medical Association, the general practitioners' union if you like, refused to go along with it. The Labour Minister for Health, Aneurin Bevan, a famous Labour folk hero, in a famous phrase said “I stuffed their mouths with gold.” In other words he privatised that part of the NHS. All doctors’ surgeries in the country are private practices usually run as business partnerships.
  1. Immigration
Immigration was undoubtedly a key factor in the Referendum and remains a key issue in this General Election. Just as politicians get into dreadful contortions over the NHS as they defend the indefensible they also get into trouble over immigration. Those who want to control it are seen as racist. This is a shame because while there is undoubtedly an issue with racism - Labour has been severely criticised for institutional anti-Semitism while the Conservatives are accused of Islamophobia - most British people in my experience are not racist but many feel that there has been excessive immigration. Some immigration is undoubtedly a good thing in many different ways, not just economic but also culturally. But if immigration is uncontrolled then these benefits seem outweighed by the disadvantages of pressure on public services like schools and the justice system. It also contributes to a lack of productivity as businesses choose cheap foreign labour over investment.

The Conservatives have finally dropped their dreadful policy of setting a target for net migration. No democratic government can achieve such a thing because even if it can control immigration it cannot control emigration. Therefore by definition it cannot control net migration. There are other widespread misunderstandings about migration. One of these relates to one of the EU freedoms, the Free Movement of Labour. It is not the Free Movement of People but Labour, i.e. EU citizens are free to move from one EU member state to another if they are going to a job there, but not to become another dependent of the Welfare State.  
  1. Political Leadership
In a representative democracy like the UK citizens primarily vote for the person on the ballot in their constituency that they want to represent their interests at Westminster. A number of things have gone wrong with this idea. I have already mentioned the media who prefer to see it as a clash of personalities. The idea that people can make their minds up on how they should vote based on a so-called debate on television which is not a debate at all, or on how individuals perform when harangued by a highly biased journalist, is ludicrous. More seriously there has been a weakening of the representative principle by changes in the way the parties choose their leader.

The Labour Party has changed the rules by how it elects its leader no less than eight times since 1981. Traditionally the votes were divided between three groups, the MPs, the trade unions and ordinary members. Over time the more left wing MPs have been kept out of the frame by having a high enough threshold on nominating members. In 2007, when Tony Blair stepped down, John McDonnell, the left wing candidate who wanted to oppose Gordon Brown failed to get the necessary 12.5% of MPs to support him. But by 2015, when Ed Miliband stepped down as leader, Jeremy Corbyn did get the necessary threshold when 14 MPs ‘lent’ him their nominations, although they then did not vote for him. After sustained pressure from the left of the party they now have a one member-one vote system. Corbyn won this easily as the party members are primarily of hard left and far left persuasion.

The Conservative party has also moved to a method that leaves the final decision to the party members. Boris Johnson also won this easily defeating Jeremy Hunt after the two were selected in successive rounds of voting by Conservative MPs. While not far right this method is also more likely to produce a leader on the right of the party.

The result is that both major parties are therefore led by leaders who do not naturally appeal to the centre ground. Corbyn has always been on the far left of his party and would never have become leader under the old system. It is essentially a coup by the Momentum wing of the party and there are numerous more moderate Labour MPs who regard him as totally unfit to be Prime Minister.

None of the major leaders are winning in the popularity stakes. With the polarisation of Right and Left it should be a golden opportunity for the Liberal Democrats. They have adopted the clearest position on the EU, that is to Remain by revoking Article 50 which, while anti-democratic ,should go down well with a large proportion of the electorate. But it seems their new 39-year old leader Jo Swinson is not well-liked. According to a recent Ipsos Mori poll Just 18% of people looked on her favourably while 50% had an unfavourable view.  Boris Johnson was a brilliant campaigner in the past winning the Mayoralty election in London twice when London has a natural leaning to Labour and then dominating the 2016 referendum. But perhaps familiarity is breeding contempt as in the same poll only 33% look favourably upon him while 47% are unfavourable. But Mr. Corbyn gets just 24% favourable and a massive 59% unfavourable making him the clear winner of the unpopularity stakes.

And with a final word on those issues that in a healthy election with less focus on Brexit, the NHS and the leadership, let me consider defence, justice and education.

While we do meet our NATO target of spending 2% of GDP on defence this expenditure includes long standing commitments to pensions for veterans, a familiar Whitehall trick. Our real spending on current and future defence is inadequate and often poorly directed. Ministers seem to like spending on massively expensive but rather impractical projects like aircraft carriers with no planes when we should be spending far more on newer threats of terrorism and hybrid warfare with cyber-attacks, satellites and drones.

The austerity measures have badly damaged the justice system. Hundreds of Courts have been closed and magistrates are leaving in droves. Less than 10% of crimes are solved. The Conservatives have promised to recruit 20,000 more police but this does not get back to the numbers in 2010 and crime has risen sharply.

Education should not be a political football. There is very little that the state does better than the private sector. Private schools are superior to state run schools which have to compete for funds with the NHS etc. It is a human right to have your child educated in a school of your choice and this right is protected under EU law. Labour’s proposals to abolish private schools would be against EU law and would be dragged through the courts. Even their proposal to charge VAT on school fees will produce a terrible effect as thousands of parents who already make big sacrifices to get a decent education for their children will be forced to take them out and dump them on the state system which will be unable to cope.

I have a suggestion for you. We need better people in the House of Commons. Why not vote for the candidate you think is most likely to be able to work for cross-party consensus on the best way forward on all these issues in the longer term, as long as they can also add up?

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