LibLink: Tim Leunig – I’d pay extra to fill my little girl’s paddling pool

In the Telegraph, Tim Leunig argues that the hosepipe ban falls unfairly on domestic users, and that there are other ways to use less water:

We are among the 20 million people in southern and eastern England affected by a crude prohibition that falls unfairly and disproportionately on domestic users. Drought orders are about to be extended to the Midlands and the South West. Yet there is a better alternative: why can’t those of us who want to fill up our children’s paddling pools, or turn on the sprinklers to keep our lawns alive, be allowed to pay more to do so?

At the same time, commercial users, such as big businesses and farmers, could be encouraged to use less water.

You can read the full article here.

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33 Comments

  • Andrew Suffield 16th Apr '12 - 9:08am

    A limited amount of rain falls, and spending more money won’t get us more rain. Allocating it based on wealth seems like a poor plan.

    Now, if people are willing to pay desalination prices (including carbon tax), then I don’t see a problem with that. We can always increase our desalination capacity.

  • If you believe it’s OK to pay ‘extra’ to fill your ‘little girl’s paddling pool’ then a millionaire can pay to fill his olympic size pool, water his grounds and wash all his cars.
    Which bit of ‘Water Shortage’ don’t you understand? If you use extra, others (less able to afford the ‘extra) are forced to use less.

    Yet another example of how, ‘We’re all in this together’ only applies to others…..,

  • I’m sure this seemed like a good idea on paper, especially when you consider that those with lawns, and the space to have a paddling pool, are probably above average lawns. However, it fails on the basics, it’s arguing that essential services should be rationed on the basis of wealth.

    That’s pretty offensive.

  • Richard Dean 16th Apr '12 - 12:54pm

    Yeah, sure. let the poor die, thanks very much, not voting for you now, didn’t think this kind of lunacy still existed

  • This sums up Tim Leunig’s philosophy – There should be more freedom but only for the rich.

  • Andrew Suffield 16th Apr '12 - 1:36pm

    not voting for you now

    For whom? I don’t believe Tim Leunig is currently standing or ever has stood in any elections.

  • Richard Dean 16th Apr '12 - 1:52pm

    Ok, Andrew, thanks for the clarification. What is CentreForum to the LibDems?

  • I think that the take-home point of the article is raising the possibility of charging wealthy water users more for above average water consumption, to pay for recycling, reclamation and desalination to alleviate the shortage.

    Of course, feel free to caricature it as ‘let the poor die’.

    Although to be fair this article does present a completely open goal.

  • Andrew Suffield 16th Apr '12 - 4:35pm

    What is CentreForum to the LibDems?

    An independent charity that a number of significant LD people are involved in – and also a few Labour and Tory people. It often publishes interesting things, but that’s about all.

  • Richard Dean 16th Apr '12 - 4:40pm

    This from http://centreforum.org/ :, which describes itself as the “liberal think tank”:

    “CentreForum is a think tank that has become ever more important over the past few years” , Rt Hon Nick Clegg MP.

    So is the Leunig proposal supported by the LibDems?

  • The article by Tim Leunig notes ” As the average person with a water meter uses 140 litres per day, there would be one price for water up to this level, and another beyond.”

    This makes sense to me. Water seems to be becoming a scarcer resource than in years past. In addition to investment to reduce leaks from the system and develop new reservoirs, measures such as toilet flush inhibitors are needed to encourage domestic water conservation.

    One of the anomalies with domestic energy supplies, is that tariffs for the first units of energy are more expensive than additional use over and above the average household use. This makes unit energy costs comparatively more expensive for low volume users like pensioners etc. It would be more rational, from an energy conservation perspective, to charge a lower unit rate for low volume users.

    The same rational apllies to water utilities. Households using average or below average volumes of water for domestic use should pay a lower unit rate (or receive a free initial allowance) than households that use above average levels of a scarce resource. How else can year round water conservation be effectively encouraged, if not than by higher unit prices for above average use?

  • Richard Shaw 16th Apr '12 - 5:59pm

    Why don’t we have we have water meters for everyone and then bill people based on usage and income and/or asset wealth? It would mean that everyone, regardless of income or wealth, would be encouraged to make more efficient use of water and/or make more use of water storage. The price could be set at a certain % of annual income for whatever the average usage is per person and then prorated up or down depending on actual use.

    Everyone could have a ‘Water Tax Code’ from HMRC which they submit to their water provider and get billed accordingly. Perhaps we could use the same method for Gas and other resources. As a result fuel poverty would be reduced or eliminated as bills are set at whatever is the affordable level for someone’s income and we could reduce or eliminate some of the extra fuel-subsidy benefits as a result. (I suppose it would have to take into account cyclical increases or decreases in usage).

  • Richard Dean 16th Apr '12 - 6:32pm

    Quite apart from questionable ethics and naïve politics, the CentreForum proposal appears to be based on questionable economic models.

    The problem is immediate. Cash from water sales to high-usage customers can fund investments in pipelines, desalination plants, and reservoirs but these won’t be ready in time. That cash might also fund trucks immediately to carry water from wet to dry areas, but those trucks run on liquid fuel that causes environmental damage. Is this what LibDems want?

    Water is not a good that can be substituted for another. It is necessary for human life, health, and the production of food. Its absence causes people to drink from contaminated sources which leads to cholera and all sorts of other nastiness that we in the UK essentially conquered in the Victorian era. Beer is not a substitute in this context, since beer consists mostly of water. Economic models for substitutable goods do not apply to water.

    In economic terms, the water supply system is presently unable to cope with a demand spectrum that originates in three quite different markets:

    1. Vital – for life, health, and food
    2. Semi-vital – for industry
    3. Non-vital – such as domestic hosepipe uses on gardens and cars

    CentreForum appears to be proposing to allow market 3 to compete with markets 1 and 2, but the present technical limit on supply means that this will inevitably cause positive damage to customers in markets 1 and 2.

    As humans, we have chosen to regulate competition in a way that protects market 1 at least. And fortunately, as even the Victorians understood, even the nastiest of business leaders recognize that more profits can be made if the workforce is alive and healthy.

  • Richard,

    economists call this kind of problem the ‘Tragedy of the Commons.’ The term comes from the incentive to over-graze common land for which no payment or a relatively low payment is required to use, as compared with the more careful use and husbandry of privately owned land. Individuals do not care about the negative externality of water shortages where there is no (or a low) cost to the individual for excessive use.

    Economists aren’t keen on property rights just because they are property rights; economists like them because property rights enable rationing of scarce social resources based on pricing.

    If climate change is going to permanently reduce the level of national water resources available each year, we will need to have a range of solutions that address the priorities you list above.

  • Richard Dean 16th Apr '12 - 8:31pm

    Joe. You may like to read Hardin’s original paper (http://www.icevirtuallibrary.com/content/article/10.1680/ensu.2011.164.2.105). My severe criticsim of the paper will appear in the same journal in a month or two. However, I am now beginning to believe the paperis more relevant than I thought when I submitted my critique.

    I believe there is lots of science fiction describing future water wars. Water shortages do appear to be on the increase (http://www.newsday.co.tt/features/0,116677.html) so pethaps CentreForum should start to think along the lines you suggest.

  • I am used to a bad press, but I have obviously explained myself very badly here, judging from the comments. No-one, least of all me, is suggesting that the average water use – 140l per person per day – should be affected. All I am suggesting is that in the short run we allocate water above that level to the people who want it most – with business getting the first right to it.

    If heavy domestic water users want to fund business to install water saving devices, and get to use the water saved as a result, what is the problem? Come to that, if we grow a few fewer tomatoes, and fill a few more paddling pools, what is the problem with that, if the would-be paddling pool fillers are willing to pay the tomato growing to grow a less water intensive crop?

    In the medium term it would also give us information on the extent to which people are willing to pay sufficient for water to make it worth investing in more reservoirs, desalination plants, etc. Wouldn’t that be useful?

    As one contributor said: “I think that the take-home point of the article is raising the possibility of charging wealthy water users more for above average water consumption, to pay for recycling, reclamation and desalination to alleviate the shortage.”

  • Richard Dean 16th Apr '12 - 10:15pm

    A new form of water torture – starve us of water and see how much we pay to get some! Lovely. What a nice Brave New World it is where everyone uses exactly 140 liters of water a day – baby, child, adult – where the pool industry controls the tomato market, where hospitals are rationed and breweries are not, and where Orwell’s piglets get to shower while dogs like me cornfim the stereotype of the “great unwashed” I’m afraid I get a very different take-home message.

  • Richard – the point of my proposal is to prevent some people being starved of water!!!!!!!!!!!

  • Richard Dean 17th Apr '12 - 12:36am

    Tim. My point is that supply is insufficient but also not quickly changable, free market mechanisms risk unacceptabe outcomes, and money is valued differently depending on how rich you are or expect to become. If there’s not enough water to go around, using hoses means someone else loses out.

  • Richard: under my scheme the only group who can “lose out” are businesses that voluntarily agree to cut use. How can that be an “unacceptable outcome”?

  • I am with Richard Dean on this, and I am certainly going to take less note now of T. Leunig, surely part of the remit of Centre Forum is to come up with fresh thinking, not tired old capitalist solutions.? We could start by requiring industries to publish their figures for water usage, eg it takes far more than a pint of water to make a pint of beer, and have you any idea how much water is used to make a car..!!? Why not ban drive-thru car-washes, require owners of swimming pools to ensure when they change the water it is re-used before it reaches the sewers, require all new build property to use grey water for flushing WCs.. have an open suggestions box for other ideas and get Centre Forum to sift through the pro/con of each.

  • Tim, which part of a water shortage/drought do you not understand?

    The volume and frequency at which water enters the water companies system is not predictable, or controllable by man (I’m ignoring the potential impact of water imports and desalination since they currently only make a miniscule contribution to the UK water supply). Hence , so called ‘normal’ usage projections are predicated on assumptions – based on historical data (but remember past performance is no guarantee of future performance), specifically that sufficient water will enter the system to replenish known stocks so as to enable the projected ‘normal’ levels of consumption to be sustained.

    The only variable that the water companies and government have some control over is the rate of consumption, which they do so by deploying a range of measures; a hose pipe ban being one of them, at the time when reality and (more accurate) short term forecasts show ‘normal’ levels of consumption to be unsustainable. Obviously, the greater the discrepancy the more severe the measures that need to be taken to conserve known stocks, as there is greater uncertainty (and margin for error) in forecasting when ‘normally’ may be resumed.

    Hence, whilst it is probably a good idea to let the water companies charge more for higher levels of consumption (by both domestic and industrial consumers), these measures in themselves will not change the issues with the water situation, unless prices are set so high as to dramatically reduce demand.

    However, lets step back a moment: According to Water UK “Typically it takes 25 years from the concept of a new reservoir to bringing it into use.”, I’m not aware of any major new reservoir currently under construction so basically don’t expect dramatic changes in our water supply in the next 20+ years. According to the Environment Agency the two biggest pressures on the UK’s water resources are (in order): POPULATION GROWTH (and associated housing particularly in the South East), CLIMATE CHANGE (changes to rainfall patterns). So we can conclude that increasingly severe water shortages will be normal for at least the next 20 years. Hence in the near future, you may be able to afford to fill your paddling pool, but expect to queue at a public stand-pipe to actually achieve it.

  • Peter (and others)

    CF’s job is to come up with liberal solutions. Banning stuff is not very liberal, which is why I came up with a more liberal solution. If I were a selfish dictator, I would ban car washes and watering golf courses (neither of which I use), but that would be just as arbitrary as banning garden hoses and paddling pools.

    My solution allows us to find out whether golfers value water more than gardeners or more than beer manufacturers, while protecting water for drinking and standard domestic uses.

    And it tells us how much people value water for secondary uses such as gardening, which tells us how much it is worth investing in reservoirs, pipes, desalination, etc.

    I don’t understand why any liberal would oppose this.

  • Richard Dean 17th Apr '12 - 11:17pm

    Tim.

    Being liberal is not the same as not taking leadership decisions. And voters don’t vote for people who do social experiments in crisis situations – unless of course they work! Perhaps we should work on these thoughts if we want to lead this country after 2015.

    (Take-home Lesson No.23 1/2. Let’s hope we all learned something! :-))

  • Rationing by wealth? If something is in short supply it should be rationed by need not by ability to pay. So my poor old relative who needs extra water for washing and medical care should be allowed to have more water than me who has a job but no need for more than enough water to survive and keep basically clean. That sounds fairer to me than allowing a millionaire to fill his swimming pool whilst a little old lady gets the minimum ration of water. Maybe seedy spivs would buy up water supplies and resell them at an inflated price in a water “spiv’s” market. No. Allocate water according to need not wealth.

  • Alex Sabine 19th Apr '12 - 3:38am

    The horror with which several commenters here react to the idea of rationing by price rather than official diktat is rather alarming for a supposedly liberal forum. Apparently these are “tired old capitalist solutions”…

    Presumably the price mechanism is equally offensive when deployed to help deal with congestion, pollution, CO2 emissions etc through congestion charging, green taxes and the like? After all, rich people find it easier to pay the London congestion charge and the taxes on air travel than their poorer counterparts. Or is that different because it conforms to Lib Dem prejudices about the evils of driving and flying?

    What worries me is not so much whether people agree or disagree with Tim’s interesting proposal to deal with the water shortage specifically, but the visceral dislike of the very idea of the price mechanism being used to allocate resources – that is to say, a market economy.

    Experience shows us that the opposite model, a planned economy with extensive rationing and controls, not only tends to create more shortages of things people want (eg the well documented effect of post-war rent controls on the supply of private rented accommodation) but also condemns a larger proportion of the population to absolute poverty for longer than a free enterprise economy does.

    But to the extent that – even under the most successful economic model we have available – some people are still too poor to live a tolerable and decent existence, or are denied key opportunities by a lack of means, I would contend that it’s better (and certainly more liberal) we tackle this through (for example) the tax, social security and education systems than by junking the market mechanism in favour of administrative fiat.

  • Alex SabineApr 19 – 3:38 am…………After all, rich people find it easier to pay the London congestion charge and the taxes on air travel than their poorer counterparts. Or is that different because it conforms to Lib Dem prejudices about the evils of driving and flying?………..
    You manage, spectacularly, to miss the point.. There is a shortage of water and therefore not enough water for both ‘serious’ and ‘frivolous’ requirements.
    Are you seriously suggesting that, if this year there will be only 1,000 vehicles permitted into London (and no other way to enter the capital), Mrs. average should have her permit, to see her sick child, ‘gazumped’ so Mr. millionaire can run two cars and visit a casino?

    Were there only 1000Were there no shortage of water the rich could, if they wished, fill the Albert Hall with water. an, if they wish, ‘pour

  • I, clearly, missed the ‘delete key’.

  • Richard Dean 19th Apr '12 - 9:18am

    What heartens me the the visceral dislike of the price mechanism expressed by so many. It’s ok for non-essentials, but government exists to protect its citizens, and that won’t happen when price mechanisms are used for everything.

  • Whilst I don’t have a problem with tiered pricing (I was a little surprised that water companies don’t already operate tiered domestic pricing and charge more for usage above a certain level.

    The key problems with Tim’s idea of more accurate usage charging are fundamentally around metering. Putting to one side the problem of detecting use of a garden hose etc., the main problem is the periodicity of meter readings, my water meter is actually only physically read once a year, so my household’s entire annual consumption is reduced to a single figure. Whilst we can talk about smart meters etc. to improve the granularity and periodicity of data, in reality it would take 10+ years to deploy sufficient to make any real impact and hence any measure would have to work with the current installed base of meters and reading patterns.

    The second issue is where to put the threshold? If the overall objective is the long term sustained reduction of overall domestic water consumption, which seems reasonable given the long term pressures on our water supply, it seems pointless putting it at the UK average (148 litres per person per day) as for ~50% of the population this figure will include ‘non-essential’ usage such as watering the garden, paddling pools and washing the car and hence would not encourage them to change their usage patterns. Putting the threshold at the standard deviation, could potentially have greater impact – however without knowing the shape of distribution we do not know if this is 50, 120 or some other number of litres per day.

    The third issue is pricing, the differential needs to be sufficiently great to act as an incentive for people to actively make changes to their water usage, the £1000 fine for using a hose pipe is an extreme example of such pricing.

    Interestingly, if the objective is the long term sustained reduction of total domestic water consumption (to keep it within the capacity of the existing water infrastructure) then the government can greatly assist by putting strong downward pressures on population growth and associated development (eg. by not enlarging the existing housing stock by 2M+ homes in the next 10+ years)…

  • Alex Sabine 19th Apr '12 - 6:34pm

    Jason: With respect, it is you who is missing my point. I made it clear that my main ‘beef’ with the comments was that I detected “a visceral dislike of the very idea of the price mechanism being used to allocate resources – that is to say, a market economy”.

    The response of Richard Dean, who says “What heartens me [is] the visceral dislike of the price mechanism expressed by so many”, rather confirms my impression.

    Clearly, a shortage of an essential natural resource like water is a more serious problem than a shortage of consumer goods like cars or washing machines – but that doesn’t mean that we should dismiss the possibility that the price mechanism could help in delivering solutions as it does in so many other areas.

    As Tim suggests, not only would it enable a less arbitrary rationing of scarce supplies as between different activities involving water use, it would also convey useful information about the extent to which it is worth investing in reservoirs, pipes, desalination and the like, thus making shortages less likely in the future.

    The point of my analogy with things like congestion charging was simply that we use the price mechanism to ‘ration’ the use of congested urban road space because it is the most efficient and least bureaucratic means of bringing supply and demand into a tolerable equilibrium.

    We do so despite the fact that the charge (other things being equal) penalises less well-off motorists more than richer motorists, because it also happens to be an effective means of ensuring that those who most value driving their car in central London continue to be able to do so, while those who value it less stop doing so. Adverse distributional effects are better dealt with by other measures (eg progressive tax cuts or the provision of public transport) that boost the income, spending power or mobility of lower earners.

    If you are horrified by the very idea that better-off people who really value driving in central London every day can absorb the cost while others are priced out of their cars, then logically you should simply ban the use of cars rather than making it more expensive. Likewise you would ban flights rather than raising their price to reflect the environmental impact.

    The problem with this approach is that, by banishing the mechanism of price, it doesn’t enable individuals to make any calibration of the cost-benefit to them of driving or flying – in effect it dictates that these activities have only costs and no benefits, which is clearly absurd. So instead we make an intervention through public policy (taxing externalities) to reconcile individual actions with the public good, but having done that we leave it to individuals to determine their own priorities and trade-offs.

    Anyway, I cited these examples not because there was a straightforward analogy with the water shortage but purely to illustrate that we find nothing offensive in principle about using the price mechanism to deal with social or environmental problems (indeed arguably Lib Dems are rather too keen on levying green taxes at a level beyond that which reflects external costs), and so we shouldn’t dismiss the concept out of hand as a pragmatic means of solving a particular problem that has arisen.

    As I said earlier, it is the wider hostility to the market mechanism that I find more disturbing. Richard Dean tells us that “It’s ok for non-essentials, but government exists to protect its citizens, and that won’t happen when price mechanisms are used for everything.”

    On one level, this is simply a truism: Citizens wouldn’t be protected, for example, if the provision of defence or law and order were left to the price mechanism. Some citizens would be inadequately catered for without public policy measures to ensure access to health and education irrespective of ability to pay (though there is considerable room for debate here about the extent and means by which this is achieved). So far, so uncontroversial.

    But the socialist idea that markets are for frivolous non-essentials while government is for the things that really matter (the ‘commanding heights’) is where I, and I hope most liberals, would part company. We would surely regard food and clothing as essentials: is anyone seriously suggesting these would be better provided if the state either produced or rationed our access to them?

  • Alex Sabine 19th Apr '12 - 6:59pm

    One example where the state for a long time did precisely that in many otherwise capitalist countries was in the market for rented accommodation, through a panoply of rent controls and subsidies. The empirical evidence is that the chief effect of this was to worsen both the quantity and quality of available housing, so that, while every other element of the standard of living streaked ahead, housing for millions obstinately lagged behind. Thus by the 1960s you had the paradox and the parable of the slum with the television set inside and the motor car outside.

    For that reason economists as different as Paul Krugman and Milton Friedman have unequivocally opposed rent control as doing more harm than good. In fact the leftist Swedish economist Assar Lindbeck went so far as to say, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing it.”

    Indeed, recognition of the harmful effects of rent control is one of the least controversial issues in economics, next to the benefits of trade. The persistence of rent control for many years in spite of that chorus of professional disapproval led Krugman to conclude: “So now you know why economists are useless: when they actually do understand something, people don’t want to hear about it.“

    As Krugman wrote when diagnosing the problems with the San Francisco housing market in an article titled “That great sacred cow, rent control, is a textbook case of economic stupidity”. He went on:

    ”…Consider an article that appeared in yesterday’s New York Times, ‘In San Francisco, Renters Are Supplicants’. It was an interesting piece, with its tales of would-be renters spending months pounding the pavements, of dozens of desperate applicants arriving at a newly offered apartment, trying to impress the landlord with their credentials. And yet there was something crucial missing – specifically, two words I knew had to be part of the story.

    Not that I have any special knowledge about San Francisco’s housing market – in fact, as of yesterday morning I didn’t know a thing about it. But it was immediately obvious from the story what was going on. To an economist, or for that matter a freshman who has taken Economics 101, everything about that story fairly screamed those two words – which are, of course, “rent control”.

    After all, the sort of landlord behavior described in the article – demanding that prospective tenants supply résumés and credit reports, that they dress nicely and act enthusiastic – doesn’t happen in uncontrolled housing markets. Landlords don’t want groveling – they would rather have money. In uncontrolled markets the question of who gets an apartment is settled quickly by the question of who is able and willing to pay the most.

    And so I had no doubts about what I would find after a bit of checking – namely, that San Francisco is a city where a technology-fueled housing boom has collided with a draconian rent-control law.

    The analysis of rent control is among the best-understood issues in all of economics, and – among economists, anyway – one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that “a ceiling on rents reduces the quality and quantity of housing.” Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand.

    Sky-high rents on uncontrolled apartments, because desperate renters have nowhere to go – and the absence of new apartment construction, despite those high rents, because landlords fear that controls will be extended? Predictable.

    Bitter relations between tenants and landlords, with an arms race between ever-more ingenious strategies to force tenants out – what yesterday’s article oddly described as “free-market horror stories” – and constantly proliferating regulations designed to block those strategies? Predictable.

    And as for the way rent control sets people against one another – the executive director of San Francisco’s Rent Stabilization and Arbitration Board has remarked that “there doesn’t seem to be anyone in this town who can trust anyone else in this town, including their own grandparents” – that’s predictable, too.

    None of this says that ending rent control is an easy decision. Still, surely it is worth knowing that the pathologies of San Francisco’s housing market are right out of the textbook, that they are exactly what supply-and-demand analysis predicts.

    But people literally don’t want to know. A few months ago, when a San Francisco official proposed a study of the city’s housing crisis, there was a firestorm of opposition from tenant-advocacy groups. They argued that even to study the situation was a step on the road to ending rent control – and they may well have been right, because studying the issue might lead to a recognition of the obvious.

    So now you know why economists are useless: when they actually do understand something, people don’t want to hear about it.”

    What Krugman grasped was that the same mechanism which provided food, clothing, furniture, carpets, cars etc, and has done so to an ever-rising standard for everybody, could provide houses too.

    And quite apart from the empirical evidence, I reject in principle the notion that people should only have choice over what to do with their ‘small change’, with the “non-essentials”, but not over the things that really matter to them.

    Even Douglas Jay, who wrote in The Socialist Case in 1937 (with a better excuse than today’s generation) that “in the case of nutrition and health, just as in education, the gentleman in Whitehall really does know better what is good for people than the people know themselves” spent much of his subsequent political life qualifying the phrase and disowning the apparent implications.

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