Opinion: Time for a New Start

The key policy declared at the Lib Dems’ Bournemouth conference last month was not the famous ‘Tax Cuts’. It was that the State should shrink. In the run-up to conference, argument raged as to how big the tax cuts might be, and who should receive them. Only one decision appeared to be cast in stone: State spending should shrink, by a hefty £20 billion.

This stance was bolstered by bold new policy declarations on education and health. Our ‘free schools’ policy would put large sums of public money into support for privately-run schools. Meanwhile, the National Health Service should be reformed to require ordinary NHS patients to pay for some of the most expensive drug treatments – or else go without. This last step outflanked the Tories’ Andrew Lansley, whose perceptive comment was, “If the NHS could simply exclude treatments and expect patients to pay up, the values of the NHS could be progressively undermined.”

Today, these policies lie in ruins. Not – or at least not yet – because Lib Dem members across the country have woken up, recognised a betrayal of the Party’s long-held principles, and rebelled en masse. Instead, events have taken charge.

We have seen a massive growth in State power – as the only effective means of preventing financial meltdown. Bemused neo-con Bushites, so long accustomed to treating government as the humble servant of global business enterprise, found themselves forced to let government take control. In the UK, Treasury civil servants became the new masters of the financial universe. Tony Blair, who so fretted that Brown might spoil his precious legacy, had probably not actually feared the return of Clause Four socialism. But that is effectively what has happened.

No doubt Brown will gradually back away from Stalinist doctrine over the coming months, and we shall not cavil. But the absurd idea that banks (and, for that matter, schools and hospitals) can simply be trusted to regulate their own affairs is no longer remotely credible. The State is back in business. We shall have a lot to say about the pitfalls this can bring, but we cannot ignore what is happening in the real world.

At the same time, the sudden onset of recession, and the urgent need to offer practical help on jobs, mortgages and economic recovery, present major new challenges to all the parties. Barack Obama’s ability to meet these challenges has brought him a crucial upsurge in the polls. The Lib Dems’ ‘Make It Happen’ was written only two months ago, but it feels like a different era.

So it is now time for a new start. We cannot ignore the need to redraw the slate. Despite Doctor Cable’s brilliant diagnosis of what ails us, the drop in our poll rating shows that the public are not convinced that our prescription will bring recovery. Let us learn from our recent experiences. Let us also reflect, very carefully, on the perils of division. It is time for our party to seek consensus.

Tax cuts for the low paid, I would concede, must now be an important part of that consensus. Providing help for those in real need is a natural policy for a centre-left party which seeks “to balance the fundamental values of liberty, equality and community”.

But the priority must be to promote useful economic activity and save jobs. Brown will bring forward building projects in the pipeline. This may be better than doing nothing, but we can be more imaginative. What we must do is to transform our national transport systems, energy infrastructure, and built environment to meet the threats of climate change and ‘peak oil’.

It will be expensive. It will be vital. It will provide many jobs. It will depend on the State and it will depend on private enterprise. It will take many years. It should start now. With a ‘Green New Deal’ alongside our Green Tax Switch, we can take the lead, offer hope, and show what truly makes us distinctive.

And what is more, we can take a lot of votes away from one particular political party which is heading nowhere, by showing that we are so much better placed to deliver the things they are calling for. And what is more, we can listen to what my old Mum always used to say, and just for once, obey with pleasure: we can “Eat Up Those Greens”!

* David Allen has been a Liberal Democrat member for 27 years, and was until recently chairman of the Rushcliffe Local Party.

Read more by .
This entry was posted in Op-eds and Party policy and internal matters.
Advert

82 Comments

  • I really don’t see bailing out the banks as some kind of socialism or state control.

    It seemed like the Government had very little control over what it did or what happens next.

    The polls suggest that 51% of people support the £20 billion spending cuts, while just 7% think Vince would make the best chancellor.
    Perhaps this is because Vince comes accross more as a comentator than someone promoting a party.

    There is no betrayal of principle in advocating tax cuts for the less well off, or in suggesting some Government spending is wasteful and could be cut, it hardly the same as shrinking the state to 10% of GDP.

  • Clegg's Candid Friend 30th Oct '08 - 1:41pm

    One rather disturbing thing is that the party seems to be downplaying green issues – presumably in line with the new conventional wisdom that they are a vote-loser.

    I recently received a bit of Lib Dem “literature” emphasising the proposed 4p cut in the basic rate of income tax, and proclaiming that it would be paid for by “the super rich and tax dodgers”.

    I thought the plan – back in the days when the party used to cost things and explain how they would be paid for – was to fund this tax cut by a combination of revenue-raising measures, with the green “tax switch” accounting for about a third of the additional taxation.

    Has that policy changed, or is it just that it’s going to be kept as quiet as possible?

  • Only one decision appeared to be cast in stone: State spending should shrink, by a hefty £20 billion.

    This is just plain wrong. £20bn is the figure which we think is being mis-spent at present. Of this, the overwhelming majority would be redirected to alternative spending commitments with only whatever’s left over (if there even is any!) being given over to tax cuts. The overall level of spending falls by much less than £20bn even if any tax cuts are made, which is not guaranteed to be the case anyway!

    Our ‘free schools’ policy would put large sums of public money into support for privately-run schools

    Define ‘privately’. Would you include a teacher-owned cooperative here? A community-run school that is outside of LEA control? Both are ‘private’ in that they are not branches of government and both are worthwhile experiments in my view. If other institutions (yes, including companies) can do a better job than the existing system then I don’t see why we should reject them out of hand.

    Meanwhile, the National Health Service should be reformed to require ordinary NHS patients to pay for some of the most expensive drug treatments – or else go without.

    As opposed to the present situation, where the only choice is going without? If some wealthy-ish people want to subsidise the next generation of medical research by paying privately for new and experimental treatments, we should be applauding them for doing so.

    I’m happy (as a libertarian-leaning though non-ideological person) to accept the role of the state so long as innovation and diversity are protected. Allowing people to set up alternatives to state provision is something that I think is essential but something that you seem to regard as a bad thing. I confess that I don’t fully understand why, but I’d like to hear more.

    On the ‘green new deal’, I broadly agree, although I think this is a separate point to the current financial crisis. The government’s fiscal package which involves increased public spending on public works seems like a bad idea to me, because there is a lot of lead time involved in getting these projects off the ground – by the time work commences on any of them, the recession will be over and people may well be blaming the government for driving up inflation. For that reason, if the government must borrow at all, funding tax cuts might be a better way of kick-starting the economy, allowing the individuals and companies who benefit to find the most effective use of the cash in their own communities, which they’re likely to do a lot better than a Whitehall rush job. In particular, tax cuts could benefit the thousands who are on the margin of reposession, enabling them to service their debts and break the chain of default, reposesssion and house price collapse which is undermining the banking system. The sooner the banks return to profitability, the sooner they pay back their debts to the taxpayer and the sooner all those shares we now own in them become valuable enough to sell.

  • Clegg's Candid Friend 30th Oct '08 - 3:34pm

    Rob Knight:
    “£20bn is the figure which we think is being mis-spent at present. Of this, the overwhelming majority would be redirected to alternative spending commitments with only whatever’s left over (if there even is any!) being given over to tax cuts.”

    Of course, the problem is that while some people have implied something of that sort – though I don’t think anyone has said the overwhelming majority would be redirected to other spending – Nick Clegg has said (repeatedly) that the “vast bulk” of the £20bn would go into tax cuts. And Vince Cable implied the same thing when he spoke of tax cuts equivalent to a 4p cut in the basic rate of income tax.

    The problem is that many conflicting statements have been made about what would happen to this £20bn, and the contradictions have never been resolved.

  • Clegg's Candid Friend 30th Oct '08 - 4:16pm

    And it’s pretty bizarre to claim that “£20bn is the figure which we think is being mis-spent at present”.

    That would be the case if the party had carried out a review of spending, identified what was being mis-spent, added it up and arrived at £20bn. (Which obviously would have been the right way round to do it.)

    But of course, what’s happened is exactly the reverse. The leader has plucked a figure out of the air, and (supposedly) ordered a review to identify savings totalling the figure he first thought of.

    I say “supposedly”, because Ming Campbell did the same thing in 2006, and apparently the savings never were identified.

  • Nick Clegg has said (repeatedly) that the “vast bulk” of the £20bn would go into tax cuts

    I was there for his speech at the Spring conference and his opening speech at the Autumn conference and I heard the opposite. Will check the details and confirm.

  • Right, here’s what I have found from a few minutes’ Googling:

    Spring 2008: But we must never stop thinking about how we make taxes fairer, greener and – if possible – lower.

    Not much of an indication, but suggesting that tax cuts are an optional ‘nice to have’ if they can be afforded after other spending priorities are satisfied.

    Autumn 2008:

    My shadow cabinet is identifying £20bn of government spending that isn’t working effectively.

    thirteen billion pounds on a botched NHS IT system

    fourteen billion on over complex tanks that won’t be ready for years

    more than a billion pounds filling in forms for Whitehall inspectors

    Making these savings will mean we can afford to spend money on things that really matter.

    Homes, care for the elderly, children.

    Things that really make a difference.

    And then cut taxes for the people who need it most.

    There, as above, tax cuts are the last item on the agenda.

    The Independent, October 9th:

    Liberal Democrats are committed to lowering taxes for those who need help while raising them for the rich by closing the loopholes that benefit the wealthy.

    During the 1980s recession, the chancellor, Geoffrey Howe, raised taxes and cut spending. Many imagine that such an approach is needed today, but times have changed and it would be madness to raise taxes now. In the short term, we have no choice but to run a deficit, and Liberal Democrat tax cuts will not change that. Tax cuts are affordable without additional borrowing if we trim spending and raise taxes for the wealthiest, as we propose. If we comply with the current fiscal rules over the next couple of years, we would have to decimate public spending or raise taxes to painful, punitive rates that would do far more harm than good.

    To me, it seems that what’s being offered is a combination of things:

    1) An objective to cut some of Labour’s specific spending plans
    2) New spending commitments of our own (personal care for the elderly and others)
    3) Tax rises on the very wealthiest
    4) Tax cuts on the poorest

    I agree, it’s not exactly clear how the final figure works out. What’s clear is that we can definitely cut taxes on the poorest irrespective of what happens to spending, as that is not really a ‘cut’ but a redistribution from the wealthy to the poor. If we wind up spending less than Labour would have done, then great, that makes for more tax cuts for the low-end of the income scale.

    What may have changed is that borrowing has come back on to the agenda since Labour have adopted the idea of a fiscal stimulus package via public works projects. This might mean that we’re now looking at borrowing to fund tax cuts, I’m not sure.

    I don’t see anything terribly objectionable about the plans, but the devil is in the precise details of spending plans. I don’t really think that we’re planning all that much of a spending cut given that taxes will be going up on the wealthy.

  • David Allen 30th Oct '08 - 6:52pm

    Mouse

    “There is no betrayal … in suggesting some Government spending is wasteful and could be cut, it hardly the same as shrinking the state to 10% of GDP.”

    Well OK, yes, there are policies around that would be more harmful than a £20bn spending cut. Slaughter of the firstborn, Russell Brand for PM, etc, etc…

    Rob Knight

    “This is just plain wrong. £20bn is the figure which we think is being mis-spent at present. Of this, the overwhelming majority would be redirected to alternative spending commitments with only whatever’s left over (if there even is any!) being given over to tax cuts.”

    As CCF points out, it’s Clegg who has repeatedly argued for quite the opposite of what you say.

    Gordon Brown says that we are in favour of a £20bn cut in spending. Unless and until we clarify our position, he is quite entitled to make that assumption. Simply, the £20bn figure is the one and only thing that we have been consistent about.

    The idea that a chief executive should declare an arbitrary figure, such as “10% of you are going to get sacked by Christmas”, and then his minions should go away and sort out how to achieve his goals, comes from the Jack Welch textbook of macho management. That the Liberal Democrats should adopt such a crass top-down approach is frankly bizarre. Don’t we believe in localism, individual freedom and responsibility, bottom-up planning?

    Let me try to offer a way we can dig ourselves out of the hole we have created for ourselves. The £20bn figure, let us say, was just a very rough guideline of the sort of scale we should be thinking of. After all, the more we can save on wastage, the more we can spend on a whole lot of desirable new priorities. But we have absolutely no commitment to that figure. No obsession with the figure twenty (or, indeed, the figure thirty…).

    OK with you, Rob?

  • Clegg's Candid Friend 30th Oct '08 - 7:01pm

    Rob:
    “I was there for his speech at the Spring conference and his opening speech at the Autumn conference and I heard the opposite. Will check the details and confirm.”

    Here is one of the press articles quoting the “vast bulk” version:
    http://www.telegraph.co.uk/news/newstopics/politics/liberaldemocrats/2697033/Nick-Clegg-promises-larger-Lib-Dem-tax-cuts.html

    There was a lot of discussion of this here at the time. Part of the problem is that Clegg himself has said several different things about this.

    As for the Independent article you link to, it confuses matters even more. Is he saying tax cuts should be funded by increased borrowing (as he appears to imply when he says the current fiscal rules are unsustainable), or is he saying that they should be funded by a combination of spending cuts and tax increases on the “wealthiest” (as he says in another part of the article)?

  • David Allen 30th Oct '08 - 7:21pm

    Rob Knight

    “If some wealthy-ish people want to subsidise …. medical research by paying privately for … treatments, we should be applauding them for doing so.”

    To fix ideas, let’s suppose that the NHS will currently buy you life-saving drugs provided they cost less than £25K. If they cost more than that, tough. (In reality of course NICE also thinks about just how life-saving the drug is anyway, and it gets more complex, but the principles don’t change.)

    Then along comes the Klaxon Corporation with a miracle cure priced at £30K.

    As of now, neither Dives nor Lazarus can get this drug on the NHS, so they both die, unless rich Dives can get his treatment entirely outside the NHS, that is.

    Now, on the face of it, it might seem pretty harmless if we let Dives spend his own £30K on his own drug, and carry on looking after him on the NHS. After all, at least one guy will then live, though he’ll have to watch Lazarus lying in the next bed as he coughs his last breath.

    However, we’ve forgotten the politics. Instead of Dives and his family demanding a better funded NHS, Dives and his family are now going to be far more relaxed about NHS cuts.

    Specifically, we’ve forgotten the Liberal Democrats’ politics. We know that Clegg has “refused to rule out” NHS cuts. Which, of course, means he would rule them in. But how can he save the money? He has talked about IT, but, that’s not going to do it. If we scrap one expensive IT project, we’ll only have to start up another in its place.

    This figure of £25K that we now let the NHS spend on life-saving drugs. Couldn’t we save a lot of money if we reduced that threshold to, say, £15K, so that we could withdraw a whole lot more expensive treatments? After all, most of our articulate wealthy patients can afford that sort of money, so we shan’t have too many loud complaints. Anyway, people can take out private insurance to fund these awkward eventualities, can’t they?

    Hey presto, the Lib Dems have created a two-tier health service, and far more people than previously are denied access to life-saving drugs!

    Do you people out there see what the problem is now?

  • Gordon Brown says that we are in favour of a £20bn cut in spending. Unless and until we clarify our position, he is quite entitled to make that assumption. Simply, the £20bn figure is the one and only thing that we have been consistent about.

    I’d expect that kind of mendacity from Gordon Brown, but I’d hope not to have to read it here.

    Did you miss the bit of the speech where Clegg enumerated our alternative spending plans, which have to be funded out of the £20bn and must happen before we can determine if there’s any money left over to reduce overall spending?

    I admit that the Telegraph article linked to by CCF definitely muddies the waters somewhat. We still have a question mark over the ‘vast bulk’ issue, but I think that we can still safely conclude that we are in favour of raising taxes on the rich and cutting taxes on the poor, and an unspecified further tax cut on the poor will come from the remainder of the sum £20bn – X, where X is the cost of our new spending pledges. Where borrowing fits into the picture, I don’t know, but this is something that really has been changed by events. Government borrowing is set to soar irrespective of what we say about it now. In summary, I think you’re right to ask for clarity on exactly how much we’re going to be spending and how much will be tax cuts.

    However, we’ve forgotten the politics. Instead of Dives and his family demanding a better funded NHS, Dives and his family are now going to be far more relaxed about NHS cuts.

    Mmmm. I can see your point, sort of. As an aside, have you ever read “Exit, Voice and Loyalty” by A.O Hirschman? It covered this kind of topic in depth.

    I personally have a moral problem with saying “we’re going to ban you from paying for your own treatment so that you will be forced to vote for higher taxes to fund your treatment instead” which is what your argument adds up to. I just don’t like it. Innovation and new technology requires a ready supply of people willing to spend money trying out new things – the computer processor industry has been sustained by the fact that there’s always a market for the latest whizzy fast processor at high prices; a year later, that same £400 processor is the £80 processor that everyone gets. Yes, it might temporarily mean that the wealthier get better access to the best things, but the long-run effect is to promote a faster rate of innovation. The consequence of this is that people 10 years further on benefit from 10 years of heightened innovation – they can access drugs that would not even have been invented or would still be at the ‘too expensive’ phase had innovation proceeded at a slower pace.

    Of course, you may reject my assumption of a faster rate of innovation, but I think that you’re trying to decide the question based on politics and ideology rather than a consideration of the real world consequences (I’m sorry if that sounds a bit insulting, I don’t mean it to be).

    Couldn’t we save a lot of money if we reduced that threshold to, say, £15K, so that we could withdraw a whole lot more expensive treatments?

    Hey presto, the Lib Dems have created a two-tier health service, and far more people than previously are denied access to life-saving drugs!

    Well, this assumes two things. Firstly and most objectionably, it assumes that Lib Dems in government would be the kind of people who would cut life-saving drug funding. I don’t have quite so dim a view of our party, but I’d certainly welcome a move to get the MPs to give some kind of commitment here just to be sure.

    Secondly, you’re ignoring innovation again. If we let people spend £30k on drugs now, we can be confident that these early adopters (see here) will have created sufficient economies of scale that the drugs can now be mass-produced at a lower price – maybe even below your notional £15k, thus saving the NHS money anyway without the need for government to mandate a cut in drug spending!

  • Jock

    “unless we are simply state socialists who would watch both die”

    I have written a long (and no doubt boring!) post to explain why it isn’t that simple. Are you going to engage with my argument, or just try to sidestep it?

  • Well it’s nice to see the NHS being claimed as a Liberal idea to replace the libertarian nightmare that existed before. I don’t think Beveridge would claim the credit.

    The Dawson Report of 1920 was the first big step towards a national health service, recommending a comprehensive system under the auspices of a single authority. It was followed by the Royal Commission on National Health Insurance in 1926 which pioneered the idea of a publicly funded health service.

    The creation of the Emergency Medical Service in Second World War further hastened the pace of change. It was the first time healthcare funding had been taken over by central government.

  • Rob Knight (re ‘free schools’ and public money supporting privately-run schools)

    “Define ‘privately’. Would you include a teacher-owned cooperative here?”

    Very much so Rob! My wife is a dyslexia advisor, and one of her favourite conversational topics is the problems she has with schools who would like to avoid their legal obligations with provision for special-needs pupils, because it means extra work, and they would rather just get off home.

    Teachers do of course have demanding jobs – as do others – so I’m not entirely unsympathetic. But our prisons are full of dyslexics who have been short-changed by the system. Things would be even worse if teachers had the opportunity to do as they pleased, with no oversight or regulation!

    That’s what the credit crunch showed us. Letting organisations have total control of their own affairs is a problem, whether they are banks, hedgies, or teachers.

    All that said, I don’t dismiss the idea of free schools out of hand, either. But a regulatory framework has to be found.

    Rather than spend billions of taxpayers’ money on free schools ASAP, I would argue for starting with lightening up the State. We have a horribly onerous and stultifying national curriculum. Let’s first try to bring in a much lighter touch from the State, and much more freedom for teachers, under the oversight and regulation of the existing LEAs and Ofsted. There is lots of scope!

  • Can’t find much to disagree with there David. A gradual experimental process would work best, I think. In practice, lightening up state control of schools would have much the same effect as what I’d imagine free schools would have. I’d see your proposal as being the minimum that should be done. Perhaps some local areas could experiment with free schools if the local people want them?

    I do, however, have a post currently held up in the spam filter which disagrees with some of your other points!

  • Jock – if you find it funny, that’s probably because you spend too much time at liberatian gatherings and not enough time with ordinary people.

    Like a sad marxist clinging on to the idea that Communism has never been tried you just ignore the reality of history.

    We been there, done relying on friendly societies, charity and people dying from unregulated medicine and ‘cures’. Life expectancy was low and lives were blighted by ill health in a way un imagianble today. But anyone with an ounce of sense can see that in third world countries today. Of course you will say that the haven’t reached the libertarian Utopia, but I’m sure you know waht Utopia means.

  • Alix Mortimer 31st Oct '08 - 9:44am

    Mouse, I don’t particularly self-define as a libertarian and don’t have an axe to grind here, but I don’t think anyone can seriously suggest that the system pertaining before the NHS came into being was a libertarian one.

    What existed in this country before the welfare state was protectionist, monopolistic capitalism. That’s got nothing to do with libertarianism. As I understand the word, there’s a strong Benthamite streak involved. The sense of a near-as-possible universal liberty that it implies has got nothing to do with the protected liberty of a rich class to do as they like.

    “Life expectancy was low and lives were blighted by ill health in a way un imagianble today.”

    But that was to do with the primitive state of medicine at the time and so isn’t an outcome of what you think of as libertarianism as such. I don’t think we can assign the history of medicine to any particular ideology (though I suggest that if we tried, we’d find state spending pretty low on the list of innovation drivers, and most of that would be attributable to exceptional wartime spending).

  • Alix Mortimer 31st Oct '08 - 1:09pm

    Thank christ the Chandila adverts have disappeared.

  • David Allen 31st Oct '08 - 1:48pm

    Rob Knight – Thanks for your thoughtful reply on the NHS issue – I see it has now got through the spam filter and appeared as of 7.54pm last night.

    “I personally have a moral problem with saying “we’re going to ban you from paying for your own treatment so that you will be forced to vote for higher taxes to fund your treatment instead” which is what your argument adds up to.”

    You do have a point. It is difficult to defend saying a simple no. I hope I have convinced you that it is equally difficult to defend saying a simple yes!

    The Tories’ response to this dilemma has been to sit on the fence and say they haven’t decided what to do yet. (Or at least, that was where they were when Lansley made the quote I quoted, a month or so back.) Just for once, I do have a sneaking sympathy for political cowardice.

    But let’s try to do better. The contrasting positions are:

    Simple no (Labour government): If NICE don’t approve your drug, you can’t go and buy it off the Internet, and also still stay an NHS patient. If you want to do that, you will have to buy yourself private care as well.

    Simple yes (Nick Clegg): You can buy what you like off the Internet, bring it into an NHS hospital, and expect the nurses to administer it to you for free, while not giving any of your drug to Lazarus in the next bed.

    The “simple no” will of course reduce the number of rich people who are rich enough to go this route, although those who can also afford private care will still cope. The “simple yes” is a green flag for a two-tier NHS.

    There could be various compromises in between. For example, “You can buy what you like off the Internet, bring it into an NHS hospital, and expect the nurses to administer it to you. But you’ll also have to pay the NHS the full cost of care, if you do that.”

    Would that be a good compromise? I don’t know, you’d have to get a specialist view on that. If I’m going to be generous to the Tories, maybe that’s the sort of stance they would hope to work towards.

    Now, what really gets me about Nick Clegg’s intervention is – Why did he make one? He took great pride in us being the first to come off the fence. But since it is such a difficult issue, both morally and pragmatically, why did he insist on making the first leap, when nobody forced him to?

    My nagging fear is that the answer is – Because he is a much greater zealot for a market economy red in tooth and claw than he would really like to admit. He saw a slippery slope beckoning, and he jumped enthusiastically off the ledge, fully aware how far he would end up sliding.

    I hope I’m wrong.

  • Clegg's Candid Friend 31st Oct '08 - 2:02pm

    Rob

    “… I think that we can still safely conclude that we are in favour of raising taxes on the rich and cutting taxes on the poor, and an unspecified further tax cut on the poor will come from the remainder of the sum £20bn – X, where X is the cost of our new spending pledges.”

    But none of these tax cuts is “on the poor”. The existing policy is for a cut in the basic rate of income tax. Cable has indicated that the further cut would probably be some combination of reducing the basic rate of income tax and raising allowances.

    So the bulk of the money would actually go to the middle class, and they would receive larger tax cuts per head in absolute terms than the poor. And poor people who don’t pay income tax would get nothing. It was dressed up as “tax cuts on the poor” only to get conference to agree to it.

    But of course, that’s the whole point. The party is trying to defend its traditionally Tory, predominantly middle-class seats by calling for tax cuts for the middle class.

  • David Allen wrote:

    Simple yes (Nick Clegg): You can buy what you like off the Internet, bring it into an NHS hospital, and expect the nurses to administer it to you for free

    I think that mis-characterises the idea somewhat. I don’t think that people should be able to simply buy whatever drugs they like and demand that the NHS picks up the pieces of it goes wrong. But if their doctor recommends a drug that the NHS won’t pay for, I think that we should allow individuals to make their own arrangements. As I said, I think that this will bring forward the point at which that drug becomes available for general use, which is a benefit to all.

    I realise that this does create a two-tier system. But we already have a two-tier system with private healthcare existing alongside the NHS. This approach might reduce the gap between the two. I’m not sure that there’s much more explanation that either of us can do here, we just place different levels of emphasis on what’s most important. A compromise between the two positions, as you suggest, is probably the best idea.

    My nagging fear is that the answer is – Because he is a much greater zealot for a market economy red in tooth and claw than he would really like to admit.

    I don’t know if this is true or not. I can only say that I think the problem here is that we’re trying to divine policy from the character of an individual. This is wrong. Nick Clegg’s personal tendencies should not be the defining issue. But, as it happens, I’m really not sure that he’s quite as ideologically-driven as you think. I think he’s sensible enough to know that, even if he holds a strong personal conviction, there’s a good chance that he can be as wrong as the next man, hence the need for decentralisation, diversity, experimentation and so forth. A Lib Dem PM (which Nick would, I suppose, aspire to be) should never be in a position to impose such a far-reaching set of reforms from the top down, as it goes against our whole idea of how government should be done.

    CCF wrote:

    So the bulk of the money would actually go to the middle class, and they would receive larger tax cuts per head in absolute terms than the poor

    Yes, you’re right. But I’ll say this only if I can first try to decontaminate the words ‘middle class’. In America, the ‘middle class’ means what it says: the average people in the middle, neither rich nor in poverty, who are at best a couple of pay-cheques away from financial crisis (especially so these days), who do own their homes but have substantial mortgage payments, and are generally considered to be the legitimate recipients of redistributive taxation settlements.

    In Britain, because of our historical class structure, we’ve extended the ‘middle class’ to include people who are, by any measure, pretty damn well off. The reason for this is that we have no category for people higher than middle class other than ‘upper class’, and that has been reserved for the ‘nobility’; no matter how rich you are, you’re not upper class unless your ancestors were upper class too. This creates an absurd scenario where millionaires and even multi-millionaires are considered ‘middle class’ despite being well inside the top few percent by wealth. These figures are a bit out of date, but as of 2005 if you earned anything over £40,000 per year you’re in the top ten percent of the country. Yet common perception would describe that as a fairly normal middle class salary. Bruce Anderson in the Telegraph once said:

    The average Tory MP looks at his upper-middle class friends and feels poor.

    In 2005 an MP’s salary was £57485. By 2005 figures, that puts the ‘poor’ Tory MP inside the top five percent of the whole country by income. If that’s, as implied, somewhere at the low end of ‘middle class’ then there’s something badly wrong with our definition of ‘middle’.

    So, with the proviso that ‘middle class’ does not mean ‘actually pretty well-off Tory MPs’, I don’t see anything wrong with the middle class getting a tax cut. By 2005 figures, the median income was £16,400. That is the ‘middle’ and I don’t see anything wrong with a tax cut for those people.

    Many of the real middle class are likely to be having trouble with mortgage repayments and are likely to spend any tax cut they get, making this a decent way of stimulating the economy.

    You might point out that I’ve not included the notion of the ‘working class’ anywhere here. That’s true, but only because nobody else has; we’re talking about ‘poor’ and ‘middle class’. For what it’s worth, I think that the majority of what we might regard as the ‘real middle class’ overlaps with the ‘working class’, with the ‘poor’ being those who are unemployed or substantially underemployed.

  • I’m conscious of straying from the original topic into another interminable debate about libertarianism.

    First to try and clear up a misunderstanding.

    I didn’t say that there was a libertarian healthcare system because I don’t think there is such a thing.
    What I wrote was that it was a ‘libertarian nightmare’, an ironic reference that without the ‘oppressive’ NHS people hadn’t lived
    in a wonderful Libertarian paradise.

    Healthcare in the UK prior to WWII was a patchwork quilt of private, municipal and charity schemes,
    but with millions of people were unable to afford the proper healthcare.

    The Beveridge report itself says:

    “In one respect only of the first importance, namely limitation of medical service, both in the range of treatment which is provided as of right and in respect of the clasess of person for whom it is provided, does Britain’s achievement fall seriously short of whta has been accomplished elsewhere.”

    Libertarians come in all shades – so it is hard to know what they support, however, as a rule of thumb,
    whenever something bad happens it’s either the fault of the monopoly capitalism or state control
    while the panacea of Land Tax will solve every known political, social or economic problem (well almost)

    There are even libertarians who hanker after some kind of return to an Elizabethan Poor Law with
    each parish or collection or parishes judging for themselves the deserving or
    undeserving poor on everything from unemployment benefit to pensions.

    For other Liberarians this is state intervention gone mad.

    As a Liberal I welcome the people’s budget in 1909, upping income tax on the rich and being the first every budget
    explicitly having redistribution of wealth as an aim. I welcome Beveridge as having a Liberal approach to pensions, welfare and health. Of course times move on and they woudl be the firts to accept that as Liberals we adapt their policies.

    But when someone in the party says we should chuck all that Liberal Heritage out in favour of a better Victorian era, I say no thanks.

  • I really dislike all this talk about classes and what’s considered left-wing or right-wing policy positions as this is completely relativisitic.

    Whether someone can be described as ‘deserving poor’ or ‘undeserving poor’ is neither here nor there, as the fact remains that they are poor and that their poverty reflects the failure of society and indicates problematic consequences for society.

    I’d rather we spent time discussing quality of life issues and the educational policies which advance them rather than the quantity of life issues related to health policy.

    For me politicians should be talking about preventions and letting specialists in their field talk about cures.

    With better education people understand the reasons why they should exercise more, eat healthier and smoke less; with better education we won’t need to legislate for solutions to problems that arise from our stupidity and ignorance; with better education we will be richer physically, spiritually and materially.

    So let’s talk more about our education system.

  • Clegg's Candid Friend 31st Oct '08 - 3:17pm

    Rob

    “So, with the proviso that ‘middle class’ does not mean ‘actually pretty well-off Tory MPs’, I don’t see anything wrong with the middle class getting a tax cut.”

    I doubt anyone thinks there is anything wrong with it per se, but of course nothing comes for free in this world, and to make a sensible decision we would have to know what the price was (and who was going to pay it).

    But in any case, whether there’s anything wrong with it is a different argument.

    What I was pointing out is simply that the proposed tax cuts are not – as you twice described them – “on the poor”.

    If the leadership wants middle-class tax cuts, then it should have the honesty to say so clearly and argue its case. It shouldn’t try to dress them up as a crusade against poverty.

  • The problem is that in order to argue for middle class tax cuts, you have to do what I just did – explain why what everyone thinks is ‘middle class’ actually isn’t. It’s easier just to say ‘the poor’ and go along with everyone else’s skewed view of the income distribution. To be fair, I think we have been trying to do this, by talking about percentiles of the income distribution when discussing who will pay more or less, but it’s very easy to trip yourself up here (remember Charles Kennedy during the 2005 election not being able to explain who would pay more or less under LIT?).

  • David Allen 31st Oct '08 - 4:11pm

    You could of course adopt the triumphant slogan “Neither Left, Nor Right, But Forward!”

    Only, that was David Owen’s slogan. And we all know where he went with it.

  • Exactly – Owen went backwards!

    But then he was never truly motivated by principle, he was motivated by power.

  • David Allen 31st Oct '08 - 4:44pm

    Backwards and rightwards, I would say.

    Owen did also have pretty strong principles, of a sort. Late-in-life converts, whether to Catholicism or to right wing politics, always do. (In Blair, of course, you get both!)

    … and is Clegg the next in the line?

  • David Allen 31st Oct '08 - 5:17pm

    Rob Knight

    “You’re ignoring innovation again. If we let (rich) people spend £30k on drugs now, we can be confident that these early adopters … will have created sufficient economies of scale that the drugs can now be mass-produced at a lower price …. saving the NHS money anyway, without the need for government to mandate a cut in drug spending!”

    I really don’t buy this argument. Sure, early adopters are very important in hifi and geek products generally, but not for drugs.

    Actually, if a drug is really a major lifesaver, NICE generally says yes to it, and it goes on the NHS. The drugs that get disputed are those that probably only give a minority of people a few months of low quality added life. (Though of course, if it’s you that faces that position, no doubt you desperately want to live.)

    These, therefore, will be the drugs that didn’t really achieve what their developers hoped for them. The development, the expensive safety trials, etc, will all have been done long ago. Selling a few of them at high prices to a few rich punters won’t make these mediocre drugs any better.

    Of course, the Klaxon Corporation does have to make money somewhere, so as to cover its R&D costs (and then some more!) However, rather than encourage them to go on targeting marginal benefits for the very rich, shouldn’t we be encouraging them to target cheap lifesavers for Africans who are dying like flies?

  • Clegg's Candid Friend 31st Oct '08 - 5:46pm

    Rob

    I think you are still missing the point.

    For simplicity, let’s take these hypothetical further tax cuts. From what Cable has said, these would go to all income tax payers, and the absolute benefit per head would be less for the poorer than for the wealthier. So it is quite wrong to present them as tax cuts “on the poor”.

    It’s irrelevant what conceptions or misconceptions people may have about the composition of the middle class. But if you want to use a simple term, then “everyone” is a lot closer to the truth than “the poor”.

    This isn’t just a pedantic point. At conference a determined effort was made by the leadership to present these cuts specifically as a measure to help the poor. That’s not the case.

  • David Allen 31st Oct '08 - 5:47pm

    I should have said midlife crisis, just like Blair’s. As for me, you’re right, I’m beyond my midlife crisis!

  • Clegg's Candid Friend 31st Oct '08 - 5:50pm

    Julian H:
    “David, I hope you’re not suggesting that our youthful leader is “late-in-life”. I doubt he’s been a Lib Dem member for 27 years.”

    That does seem unlikely, especially considering he was a member of the Cambridge University Conservative Association in 1986-7.

  • David Allen 31st Oct '08 - 6:31pm

    Rob Knight

    “…the problem here is that we’re trying to divine policy from the character of an individual. This is wrong. Nick Clegg’s personal tendencies should not be the defining issue.”

    No, indeed they shouldn’t. But they are. Policy is being made on the hoof by our leader, virtually on his own as far as one can tell. He needs his “candid friends”!

  • CCF wrote:

    From what Cable has said, these would go to all income tax payers, and the absolute benefit per head would be less for the poorer than for the wealthier. So it is quite wrong to present them as tax cuts “on the poor”.

    I’m going to apologise in advance for the lack of a real conclusion here, but I thought that the further tax cuts might not be income tax cuts. The lack of clarity on this point is annoying and I can’t easily defend the cuts without knowing the details. Might have to come back to this once I do know.

    But if you want to use a simple term, then “everyone” is a lot closer to the truth than “the poor”.

    This hinges on the question of what point taxes start going up to pay for the tax cuts at the lower end. I think we’ve gone around in circles quite a lot here and there are really two arguments:
    1) what our policy actually is
    2) having decided the first point, whether or not our policy is a good idea

    Let us assume that our basic policy is to cut the basic rate of income tax, to be funded by a combination of: green taxes and increased taxes on the wealthy. This ought to work out better for the majority of people and worse for the wealthy. The poorest will gain, but I agree that they don’t gain as much on an absolute scale as those who are already paying more tax than them (and thus get a bigger cut).

    A further tax cut funded by savings should, in my view, be in the form of an increase in the personal allowance (which is what I thought Vince had proposed). If it had been up to me, the whole tax cut package would have been based around increases in personal allowance rather than basic rate cuts.

    I feel like I’m on a bit of a sticky wicket defending these policies (even assuming that I’ve correctly identified what they are). To be honest, I do have to come off the fence and say that I think that lower taxes are a good thing in and of themselves. Government surely must have room to do more with the money it already has – businesses have to do this all the time and we’ve already ramped up spending over the last 10 years. A period of consolidation where the focus is on doing more with the same or fewer resources is called for, in my view – helped on by the fact that some of the present government’s spending commitments won’t be missed by anyone if they’re abolished.

    Whilst defending that basic principle, I do think that we could be delivering those tax cuts in a more effective way than presently proposed, and I’d like to hear more about what we’d do differently in other ways rather than just about how we’re going to juggle the numbers.

  • Clegg's Candid Friend 31st Oct '08 - 7:52pm

    Rob

    I’m not arguing about whether the policy is right or not.

    As I keep saying, I’m just making a very simple point. The tax cuts are not tax cuts for “the poor”.

    And, by the way, I did specify in my last message that I was talking about the _further_ tax cuts. Those would supposedly be paid for from the £20bn savings, so they really would represent cuts for all income tax payers.

    Admittedly the existing policy to cut the basic rate by 4p wouldn’t benefit quite everybody – “the super rich and tax dodgers” would end up worse off.

  • Clegg's Candid Friend 31st Oct '08 - 8:18pm

    Julian H:
    “Hmmm, one would have not expected a “candid friend” to spread desperate Tory propaganda.”

    Nothing I’ve seen suggests to me that it’s “Tory propaganda”. Indeed, it all seemed to be quite adequately documented.

    And there’s nothing intrinsically discreditable about having been associated with another party in one’s younger days. Even that great Liberal statesman Winston Churchill was originally returned to Parliament as a Conservative!

  • Steve Travis 31st Oct '08 - 10:58pm

    Rob – it would be interesting to see the relative benefits in perception terms.

    For example, if you earn £100 per week, £10 makes a big difference (or seems like it). If you earn £1000 a week its just loose change.

  • Steve Travis 31st Oct '08 - 10:58pm

    CCF – you mean … Churchill was a Tory?

  • David Allen 1st Nov '08 - 12:16am

    Alix,

    If we use this word “middle income”, then we are back into endless fudgery as to what middle means, we are back to Clegg spinning it as “all but the richest”, we are back to the populist freebies-for-all position.

    Let’s do as you say, and just extend the personal allowance, which will concentrate cuts on the low paid.

  • Clegg's Candid Friend 1st Nov '08 - 12:28am

    Alix

    This is the statement of Rob’s I was responding to:
    “I think that we can still safely conclude that we are in favour of raising taxes on the rich and cutting taxes on the poor, and an unspecified further tax cut on the poor will come from the remainder of the sum £20bn – X, where X is the cost of our new spending pledges.”
    [my emphasis added]

    And I’m sorry, but I did listen to the speeches in the debate on the amendment at conference, and this was presented in just the same way that Rob presented it. Surely you don’t think he invented that idea himself?

  • It’s quite possible that I did, in all honesty. If so, I apologise, as I’ve been loose in my use of words in exactly the way that annoys me in other people. Alix is quite right to say that the tax cuts are targetted at ‘lower and middle income’ people rather than ‘the poor’, though we now have to debate what we mean by those terms.

  • David Allen 1st Nov '08 - 11:23pm

    Well yes – we have indeed heard repeated use of the statement “tax cuts for lower and middle income earners”. But we have also heard repeated use of the statement that there could be no tax cuts at all, if in fact we decided to reallocate all our £20bn cuts back into alternative spending priorities. Simon Hughes, I’m pleased to say, repeated the latter version today at the East Midlands Regional Conference.

    So we still have muddle and confusion. We need to clear it up, move on, and develop a more inspiring narrative that will enthuse people. The Green New Deal is my proposal.

    Now, speaking for myself, I wish we had never heard of these wretched tax cuts at all, frankly. However, we need a compromise that our leader can live with.

    Tax cuts, targeted specifically at the low paid, via an increase in the personal allowance. If economic circumstances permit. But a significant cut will be our aim.

    OK?

  • Sounds good to me.

    I think the situation is still being a bit confused by the fact that there are two sets of tax ‘cuts’, one is the tax cuts achieved by cutting spending, the other is actually revenue-neutral and involves shifting more tax on to the rich. I presume that the latter are not being objected to? Of course, one could argue that they’re not really tax ‘cuts’ given that the overall level of taxation doesn’t change.

  • Clegg's Candid Friend 2nd Nov '08 - 12:24pm

    “Tax cuts, targeted specifically at the low paid, via an increase in the personal allowance.”

    The trouble is that, while increasing the personal allowance is more beneficial to the poorest income tax payers than cutting the basic rate, it’s certainly not “targeted specifically at the low paid”.

  • CCF: I may be stretching a point here, but a personal allowance rise would reduce the proportion of a low paid person’s income that is spent on tax to a greater extent than it would do for a better paid person (and this is why it’s more beneficial for the low paid than a straight base rate cut).

  • Clegg's Candid Friend 2nd Nov '08 - 1:11pm

    Surely it’s more beneficial for the low paid simply because it results in bigger tax cuts for them!

    I think people are bending over backwards to complicate something that’s actually quite simple. Raising the personal allowance would benefit all income tax payers, not just the low paid. Basically everyone would get the same tax cut, so it’s better for the low paid than a basic rate cut (which would give small tax cuts to the low paid and bigger ones to the higher paid).

    If the party really wanted to target tax cuts (or some of the various tax cuts that are being proposed) exclusively towards the low paid, it wouldn’t be beyond the wit of man to do that.

  • David Allen 2nd Nov '08 - 8:45pm

    CCF

    “If the party really wanted to target tax cuts … exclusively towards the low paid, it wouldn’t be beyond the wit of man to do that.”

    No, indeed it wouldn’t. But, we have also said that we will increase taxes on the better off. Depending on exactly how we did that, we might see various outcomes, small increases or small decreases in tax bills, for various upper-middle, middle, and lower-middle earners!

    Now, there must surely come a point at which we should stop trying to dot all the i s and cross all the ts on our blog, and leave a bit of wiggle room. You and I might prefer something more restrictive, but, the party as a whole needs a policy that all sides can be reasonably comfortable with.

    Rob Knight clearly starts from a different perspective from yours and mine, but he has had the courtesy and intelligence to argue this through rationally, and it seems that we can meet halfway. As far as I’m concerned, I would just hope that Nick and Vince could do the same!

  • David,
    David Owen (at least according to recent comments I’ve heard) seems to be using his independence to good effect as a means to criticise this government by demanding that they publish accurate statistics (in a way which we’ve been doing consistently for some time).

    Perhaps this crisis has shocked him out of his complacency and into the realisation that it was a mistake to leave us at all!

  • David Allen 3rd Nov '08 - 12:45pm

    Hmm, maybe. Just please don’t invite him back!

  • Now that’s something I agree with, Alix. The question is deciding at what level to set each of the bands and what effect this would have.
    So 50p at £100k, at £1m or somewhere in between?

    I think it would be amazingly popular to raise the levels of all the bands by adding a new top level, but while this sounds possible in theory and could provide some consumer stimulus, would this be revenue neutral or would it in fact have some negative knock-on effects with regard to high-end employment (which government finances disproportionately rely on keeping in this coutntry)?

  • David,
    following on from the ‘Green New Deal’ idea, I also hear of a new ‘Innovation New Deal’ coming out of Brussels – any thoughts?

  • David Allen 3rd Nov '08 - 6:32pm

    Before we even think of tangling with the 50 pence band issue again, let’s get some sense into our brand management policy (to coin an ugly phrase!) The great British public is not going to fuss much about details such as what level the band kicks in at, so long as it’s more than they ever expect to earn themselves. But they are going to see it as an acid test of what sort of party we are.

    So let’s not make the mistake, again, of announcing a 50p band with a big fanfare, and then not very long afterwards, announcing its abolition with …. well, let’s call it a big funfair. Or farce. It just didn’t help convince the public that we know what we are doing.

    Personally I would be in favour of bringing it back, for good. If we did it, we should first agree amongst ourselves that, if we then get cold feet some time in the future (i.e. we get bloodcurdling threats from the powerful rich, no doubt), then we might quietly raise the threshold, but we won’t again ditch the 50% figure.

  • Clegg's Candid Friend 7th Nov '08 - 4:44pm

    Joe Otten:
    “So higher income taxes on anybody could only be justified by lower taxes on someone else or worthwhile spending programmes, never in its own right.”

    Has anyone here suggested otherwise?

  • David Allen 7th Nov '08 - 5:17pm

    CCF:

    Well, certainly not me. I don’t think income tax should be punitive. It is enough to argue that the rich should pay their fair share.

    However I do think a punitive, or at least a disincentive, element is justified in some other forms of taxation. The high tax on fags is obviously intended as a disincentive, as are our own plans for green taxes on carbon emissions.

    Joe Otten:

    When it comes to wealth / inheritance taxation, I disagree fundamentally with the argument that taxation is only “a necessary evil for the purpose of raising revenue”. The main reason why we don’t have the appalling wealth disparities of a South American banana republic, and why UK politics isn’t confined to millionaires the way it is in the US, is inheritance tax.

    The main role of inheritance tax has been to moderate the excessive accumulation of wealth and power in rich families over multiple generations. It doesn’t actually raise a great deal of revenue, compared to its cost of collection, but that isn’t the point. If it wasn’t for inheritance tax, our society would be grossly illiberal!

  • David Allen 7th Nov '08 - 6:39pm

    “How does a tax which raises not a great deal of revenue, prevent excessive accumulation of wealth?”

    Because it only affects a tiny percentage of all estates. It takes a significant share of those estates, but because there are so few of them, it does not raise anything like as much for the government as (for example) VAT, where a much larger number of people each pay a smaller amount of tax.

    It used to be set at a higher rate for the largest estates. It was then more effective at restraining gross wealth inequalities.

    “David Allen is arguing that some taxes can be good simply for making some people poorer than they would otherwise be. Am I right?”

    Well, let’s say “less grossly rich” instead of “poorer”. Look at who owns all the football clubs these days. Look at who bankrolls the Tory and Labour parties with their millions, often ill-gotten. Look at who now call the shots on their policies, so that the primary aims of the Tory and Labour parties include perpetuating the wealth and power of their donors. Are you saying we should be unconcerned about these things?

  • Clegg's Candid Friend 8th Nov '08 - 9:22pm

    “CCF, does David answer your question there?”

    My question was about income tax, and he answered it above.

Post a Comment

Lib Dem Voice welcomes comments from everyone but we ask you to be polite, to be on topic and to be who you say you are. You can read our comments policy in full here. Please respect it and all readers of the site.

To have your photo next to your comment please signup your email address with Gravatar.

Your email is never published. Required fields are marked *

*
*
Please complete the name of this site, Liberal Democrat ...?

Advert



Recent Comments

  • Caron LindsayCaron Lindsay
    Leon, thank you so much for sharing your experience when Noa was born. I really appreciate it and I hear how painful it was for you....
  • John Nicholson
    I totally agree with the phrase "malignant dishonesty" applied to the Home Office by @Anthony Durham. A few years ago, they refused a visa to a Professor from ...
  • Roland
    >we have relied somewhat on the assurances of Ministers at the Dispatch Box This seems to be a big problem with UK law making, too often much is seemingly a...
  • Roland
    @David Raw - thanks for the UCAS figure which gives an indication of the ratio of undergrads and postgrad. My point wasn't to deny international students a "nor...
  • Mark ValladaresMark Valladares
    John, You rather prove my point, I’m afraid. Pro-Zionist? Really? We’ll publish anything that actually makes a valid point, but pieces that are intended ...