Four by-election wins in little over two years, an encouraging set of council results in May, the governing party suffering dreadful poll ratings – it’s a time of optimism for the Liberal Democrats! Or is it? Sorry to prick the bubble, but there’s an elephant in the room.
That elephant is our national opinion poll rating, which is resolutely refusing to rise above the 10-12% range. With the Conservatives doing so badly, a feeling that a once-in-roughly-15-years change in government is approaching, and the reality of the Brexit disaster becoming clearer by the day, we should be up to 20% if not higher. Why aren’t we?
There’s another elephant in the room. We want a hung parliament at the next election, and the number of ‘don’t knows’ in current polls and stay-at-home Tory voters in recent elections suggests this is still possible. It will take a fair bit of tactical voting. But to persuade people to vote tactically, and for the Lib Dems to play a part in some power arrangement that gets us a change in the voting system, we have to tell people what we stand for. At the moment, the leadership of the party is not doing that.
This is what motivated a group of committed, loyal but very concerned Lib Dems to meet in York during spring conference to throw around ideas aimed at encouraging the leadership to give the party a clearer identity going into the next election. There’s no shortage of approved policies, but they need trumpeting, in particular the need for us to be the party committing to rebuild relationships between Britain and the EU, before someone else on the political stage denounces Brexit first (don’t rule out Starmer or Sunak doing so if it serves them).
The follow-up to that informal gathering in York is a formal fringe meeting in Bournemouth on Saturday 23 September to be chaired Layla Moran MP. Entitled ‘Shouldn’t we be doing better? – the need for bolder messaging’, the country’s leading psephologist and pollster John Curtice will explain how his polling shows that the Lib Dems should be scoring much higher. Curtice also believes we didn’t blow the 2019 election on our ‘revoke Brexit’ stance but by not standing for anything else, which reinforces the idea that we need three or four policies the public associate with us if they’re to lend us their votes.
Those involved in the process that has led to the Bournemouth fringe meeting have been careful not to undermine the current leadership. This is not a disagreement about party policy, but about presentation. The current thinking at HQ appears to be to say very little, so soft Labour or soft Tory voters are not put off from voting for us in our target seats. But Curtice’s polling suggests we have far more to gain from being bold and standing for something. As Paddy Ashdown said when he was rebuilding the party in the mid-1990s, “I’d sell my grandmother for a bit of definition.”
In order for the fringe meeting not to become an echo chamber, the speaker invited to respond to Curtice is Dick Newby, who is heading the group that will draw up the party’s manifesto for the 2024 general election. It keeps the whole process constructive.
There will still be some who see such a meeting a year out from a general election as disruptive, but a bit of context is needed here. Which party currently has happy members? Natural Tories are tearing their hair out at the shambles their party has become. Labour members have the satisfaction of good poll ratings, but the leadership is happy to ignore the membership (qv. members’ support for PR). The environment is a massive issue yet the Greens can’t seem to mobilise the immense concern among all sections of the public even when their principal issue is served up daily by the media. Within the Lib Dems there is no difference in philosophy – we are just highlighting the tactics needed to maximise our vote.
We have every reason to believe that the tenets of Liberalism are ideally suited to tackling today’s problems, from climate crisis through cross-border cooperation to the need to protect the individual from the malign effects of data-creep and artificial intelligence. But people won’t support us if they don’t know what Liberalism is, and what the Lib Dems stand for. It’s therefore no surprise that the host of ‘Shouldn’t we be doing better?’ is the New Liberal Manifesto, an attempt to reshape Liberalism for today’s world.
The task is simple: the party needs to state three of four key policies so voters can work out what they’d be voting for, and other parties can know our red lines if they want our support in a hung parliament. And yes, Europe will have to be one of them.
‘Shouldn’t we be doing better?’ takes place in Bayview 1 in the Bournemouth International Centre at 13.00 on Saturday 23 September. Entry free to anyone registered for conference.
* Chris Bowers is a two-term district councillor and four-time parliamentary candidate. He writes on cross-party cooperation and in 2021 was the lead author of the New Liberal Manifesto.
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86 Comments
Thank you for an important article!
Might we promote the idea and practicalities of an assertive and dynamic mixed economy?
The Conservatives have demonstrated that, without well financed, well staffed, higher status Infrastructures, our privately owned structures, our society and our children, who comprise the most important part of our next generation economy, decline and suffer. (Over 25% of our children are reported to be permanently hungry/starving)
At the present, might we seem to be the bland hoping to lead the bland?
Absolutely spot on. Paddy rebuilt the party by majoring on just one policy – education. Within a few years the party was polling as ‘best for education’. A few practical policies on issues which matter to most people – as opposed to politicos – would soon give us the definition we need.
I can see the Conservatives giving up trying to win the next election and shore up their bluewall. Do not rule out a Sunak Von der Leyen summit with good mood photographs.I agree with the notion of 3 or 4 core policies to help build our identity. Education and Environmental protection are a must. SM or CU membership and protecting the armed forces from cuts would be a good supplement.
Thank you for all you are seeking to achieve.
irrespective of our plethora of policies we need to state what our fundamental philosophy is and then go on to show how our policies underpin that.
Failing to do so means that we appear ill-defined and just another political party trying to take advantage of a whole list of “problems”. That can easily appear opportunistic and shallow – and being anti-Conservative isn’t an end in itself.
The perception from voters is – no matter how bad the Tories are on immigration , we’d be even worse…
Also I detect a pushback from the public on Gender & ID politics. Labour have pulled back on this after warnings from senior advisors …
We need to concentrate on cost of living , housing , NHS , crime etc …Things the public are concerned with day to day…
How difficult it is to accept the lessons of 2019!
Revoke switched off nearly all Leave voters and the many Remain voters.
A real own goal in a FPTP system. We needed Leave voters to get across the line in Remain-leaning contituencies. There were significant minorities of Leave voters in such constituencies, whom we scored very poorly amongst.
Alienating then from the start with our headline policy was not smart at all.
This should not be an issue this time, as the electorate is not focused on Europe as its defining issue.
We can advocate closer relations with Europe; I’m in favour with that. But it’s not going to be a big vote winner, for the reason just mentioned. We have to be realistic: what floats members’ boats is not whatprimarily concerns voters
If any evidence was needed that the Conservative party has given up on the next election, or that freedom of movement in the EU is a valued benefit, see this Telegraph article, where an economist writes “the UK seems incapable of solving its own issues, and things are set to get worse” If you’re under 50, it’s time to jump ship – get out of Britain while you can
Joe …. Ultimately fom facilitated Brexit . Huge mistake from labour , as so many of those post industrial towns that voted heavily to leave – it was a one way ticket absolutely meaningless to those that lived there. If labour had restricted that – it would of held onto more that socially conservative vote that was so crucial in the referendum…Seems strange reading that Telegraph piece , as so many people across the world seem to want to come and live & work here – given that net migration is + 600k and rising yearly ….
Maybe the circumstances of the people who want to come to live and work in the UK are so poor that even our blighted country seems like heaven? Whatever, in my mind our country needs a root and branch reorganisation before it declines even further! The standard of leadership from the top of government down has been exceedingly poor for a number years.
Reduce energy costs by investing in renewables/home insulation
Reduce housing costs by building lots more (X million) homes
Trickier:
Electoral reform – not normally a hot issue with the public but with all the recent concerns about corruption etc., it might fly if presented as a way to stop one party having absolute power.
Reduce transport costs by making buses and trains better and cheaper (fits with LibDem aims and would be massively beneficial but might not resonate with the car-driving public, and there would be questions about paying for it)
Health – a way to reduce waiting times really would resonate, but there are no easy solutions – it’s not credible to propose just forever throwing more and more money at it. Long term the only realistic way to get waiting lists down is to get people to live more healthily but that’s not an easy electoral sell.
To answer the question of why we aren’t doing better – Time.
Normally, Parties take between 13 & 18 Years to recover from Disaster & we have only had 8 Years. Most Voters move slowly & there is no way to hurry them.
On the Policies, for a third Party like us, one or two Policies is the most we can get across. I would go for one policy -ideally relating to the Economy or The NHS.
Can we please abandon these fantasies about Hung Parliaments. Labour will get a Landslide.
” I would go for one policy -ideally relating to the Economy or The NHS.”
I would have thought both of those could be covered. The NHS and its problems are very important to a large proportion of the people and a particular economic issue has been raised earlier in the discussion – “Reduce energy costs by investing in renewables/home insulation”. A poorly insulated dwelling is just money down the drain which many struggle to afford.
@Barry….
If you’re in a tented village in Calais with a portaloo – I suppose it is …Other than that there’s still plenty people from Europe wanting to work in the UK , and indeed have remained here since the referendum..
How about none shall be enslaved by poverty, and build the rest of the manifesto around what causes and perpetuates it. That’s not just bold, but understandable and motivational too. The bland idea of fairness I’ve heard bandied around really doesn’t cut it.
Here we go again, “Hung Parliament”. That is the last think this party needs, do we never learn from the past. We need a solid base of 20 -30 MPs, who are the third force in Parliament, nothing else. The ideal is a Government with a comfortable majority enabling us to develop further without being associated with one side or the other. Then its up to 50 seats and so on.
In my younger days I was all for hung parliaments and the power it may give us as Kingmaker, but bitter experience has taught me that is , as I say, the last thing we need.
Sighs. We won those by-elections by being a safe blank canvas on which we, and voters, could paint more or less whatever we/they wanted. Hate HS2? Vote LD. Love public transport? Vote LD. Think there are too many houses near you? Vote LD. Think there are too few houses nationally? Vote LD. I could go on. There are really two strategies for minor parties. One is to be very specific and clear. Think of the SNP. What do they want? Scotland first! They’ve been saying it consistently for 70+ years. Mostly, people ignored them. Then, eventually, the stars aligned. The rest we know. The post-war Liberals took a different tack and surfed general discontent with Lab/Con. We’ve been a more consistent but low key presence as a result. That’s where we are now. We could change it, but do we really want to?
Here is my shortlist of four stand out policies:
1. Europe – it should be publicly acknowledged that Brexit and the Tory Brexit deal have been a disaster. However, we must start from where we are. We support pragmatic policies to reverse the damage, including rejoining the single market. If the British public shows itself open to rejoining, we will be prepared to consider this alongside all other options.
2. The keys to levelling up are improving education and the NHS.
3. A new emphasis on social housing is needed to solve the housing crisis.
4. Britain needs to ‘come together’ to heal the cultural wars over our national narrative. This would be done by forging a new narrative that shows pride in this country’s achievements while at the same time acknowledging things done by or on behalf of this country that have been profoundly wrong and which still cause pain across many parts of the world today.
It will be observed that none of these mentions the economy, but the first three are very relevant to the economy and economic policy should be developed with those three policies in mind.
John McHugo:
You give four tendencies or attitudes that could be the bases for policies (though your second really splits into two). They look fine in themselves, but could you use them to suggest a set of four or five specific policies?
Absolutely spot on.
Very often we belittle ourselves – I rem on multiple occasions with different members on policies discussion, as a new LD member I was always be reminded that we are a “small party” – this is not only off putting for me as a new Lib Dem member, as a new BNO arrival trying to promote LD, it is sure off putting for those public voters who don’t know much about our party.
3-4 key , bold points would be great for PR & prepared as our slogan. I would say 4 key points should focus on our bold messages are:
1/ Clear post Brexit road map how to get back to Single Market. Rejoining EU is not the emphasis for next GE but get back to single market for SME & labour mismatch are
2/ structural change to reform NHS rather than just giving more funding (look at the latest Lucy Letby case, no admin manager need to be responsible & NHS system is getting more & more inefficiency)
3/ Housing especially for London. Planning reform should be on the card NOW if we want to be bold
4/ Level up on STEM education. With the new tech corridor being facilitated by railway btw Cambridge & Oxford via Kings X, there should be bold change on our education system to create more tech apprenticeship rather than degree and make tertiary education more affordable, which help to reverse Lib Dem’s tattered image as the king maker to create the most expensive university degree for locals in Europe.
I think it is clear that the condition of the NHS will feature prominently in next years election. The Kings fund report this spring set-out the issues The rise and decline of the NHS in England 2000–20: How political failure led to the crisis in the NHS and social care
“Multi-year funding increases and a series of reforms resulted in major improvements in NHS performance between 2000 and 2010, but performance has declined since 2010 as a result of much lower funding increases, limited funds for capital investment, and neglect of workforce planning. Constraints on social care spending has also resulted in fewer people receiving publicly funded social care and a repeated cycle of governments promising to reform social care but failing to do so.
The health and social care sector now finds itself facing unprecedented challenges, from increasing demand and growing waiting lists, to a workforce in crisis.
While the current situation can feel overwhelming, the improvements that occurred between 2000 and 2010 show that change is possible where the political will exists. The paper concludes by setting out what now needs to be done to sustain and reform the NHS, with a focus on spending decisions, moderating demand and sharing responsibility with patients and the public, alongside a long-term perspective.”
The biggest issue next election will be the inability of the NHS to cope with demand but the reality is that much of this is due to bed blocking – ie, patients who are medically ready to be discharged but for a variety of reasons stay put. Bed blocking means that patients arriving at A&E are unable to be admitted to a bed which in turn results in ambulances queueing outside hospitals unable to discharge patients, and in turn patients waiting several hours for ambulances to arrive even in emergency situations.
So, the Party needs to be bold and have a policy that there will be financial charges applied when anyone stays on for ‘bed, breakfast and meals’ once they are medically ready to be discharged. These fees could be charged to local authorities if they are responsible for the delayed discharge by not having completed assessments etc, or to the individuals or families if they are delaying the discharge to a care home to postpone having to pay fees.
Martin Gray 2nd Sep ’23 – 2:57am:
…Ultimately fom facilitated Brexit . Huge mistake from labour…
Tony Blair does get a mention in despatches…
‘Three cheers for Tony Blair – the unsung hero of Brexit’ [June 2023]:
https://www.briefingsforbritain.co.uk/three-cheers-for-tony-blair-the-unsung-hero-of-brexit/
I also believe that our leadership need to build a media presence. Carla Denyer was in Cornwall this weekend and had plenty of media coverage on TV. SirEd is invisible for most of the time.
I believe Adrian Sanders is right, ‘None shall be enslaved by poverty’ is a principle of our party which we need to turn into action. And we now have the means to begin to do so, having passed at the York Conference our F12 A Fairer Society motion, with enthusiastic acceptance of the option in it to pursue a Guaranteed Basic Income. I am submitting an amendment to the F23 For a Fair Deal motion in the Bournemouth Conference agenda, so as to include the Guaranteed Basic Income specifically. So, in the paragraph 9 which reads ‘Repair the broken benefits safety net and set a target of ending deep poverty within a decade’ I propose we add, ‘by introducing Guaranteed Basic Income, with the further aim of eliminating the need for food banks within the decade.’ Chris Bowers, this policy should surely be one of our three standout policies: a unique and radical policy which we will demand becomes part of the intentions of the next, hopefully progressive, government.
How about:
1. Fair taxation of both income and wealth
2. High standards in universal services such as health, education and council housing*
3. Commitment to Net Zero and whole green agenda
4. Rejoin Europe
* paid for by fair taxation
There is a requirement that our manifesto pledges must be costed and we must say how we will pay for them. We have already effectively missed the deadline for passing a tax policy that would pay for even a minimum implementation of F12a.
I would love for our manifesto to contain a genuine commitment to redistribution but it has already effectively been blocked. Given the seats our parliamentary party represent and our target seat strategy, I’m not entirely surprised.
@Tim Davies. Ed’s relative invisibility is not for lack of trying. I am sure his team would welcome insights from you on how to make the press pay attention!
I fear if the LibDems included any commitment to to guaranteed basic income or anything similar as part of a key pledge, they’d be laughed into oblivion at the election. It’s good for key pledges to be eye-catching, but they also need to be, and be seen to be, sensible and affordable and reasonably economically sound.
The IFS published a report last month Tax and public finances: the fundamentals
“The public finances are easier to manage when economic growth is strong; it is easier for governments to improve services when the whole country is getting richer and it is easier to manage the stock of (nominal) debt when the economy grows faster than the rate of interest on government debt. In most postwar years, UK governments could afford for revenue to fall below the level of non-interest spending and still see debt falling as a share of national income. No longer. High public sector debt, in conjunction with weak economic growth and high interest rates, means the next government would need to run a primary surplus simply to stop debt rising. That is, it would need to raise more in revenue than is spent on public services and benefits (excluding spending
on debt interest). Spending pressures will grow, most notably because the share of the population that is over the state pension age is about to start rising for the first time in 50 years. Spending would need to rise simply to provide the same health services and state pensions to an ageing population. The planned move to net zero, meanwhile, will bring further costs.
Without tax rises, UK public service and benefits provision will not simply tread water, it will deteriorate. Unless levels of tax increase substantially, a reduction in the scope of the public services that the British state provides is likely inevitable.”
Perhaps people should stop theorising and start dealing in practicalities. Especially the potential impact on public finances which the growing scandal of failing RAAC concrete is probably going to have on education and NHS in particular.
Put the philosophy away in the cupboard for now.
I think this article highlights the bind the party is in at the moment, a position which has been getting progressively worse. We have lots of policies, (mostly!) all worthy and worthwhile but which together don’t really create a whole because there doesn’t feel like an underpinning structure any more.
When I first became active in the Thatcher-Major years, I would trot off the following as guiding principles…
– a commitment to internationalism and further European integration (Brexit leaves us totally at sea on that one)
– reform of the constitution, not just proportional voting but reform of the Lords and decentralisation of power, so that it is always exercised at the lowest level (seems we’ve left that to Gordon Brown)
– home rule for Scotland and Wales (achieved but can’t go any further lest we seen to be pandering to the SNP)
– free high quality education for all (kinda scuppered by the tuition fees debacle)
– local income tax for councils rather than rates, poll or council tax (do we still support it, not sure)
– integrated public transport, decent railways and bus services (hardly touched upon)
-unswerving support for civil liberties and human rights (all now steeped in the quagmire of culture wars and social media)
I’m sure there are others that will come to me.
If people know the kind of society we strive for they will be less turned off voting for us because they dislike a particular policy or two… we really do need to be bold about it
“The public finances are easier to manage when economic growth is strong…..”
If we consider the economy of the country to be the same as a household except on a larger scale, then this what we might think on the basis that tax receipts will be high. Therefore many will say the government has ‘more money to spend’. For some governments such as a local governments or even a devolved national government this will be the correct approach.
However, for a currency issuing government it isn’t. If growth is strong, it is likely that there aren’t many spare resources available in the economy. Therefore extra spending by government is probably going to cause inflation. On the other hand if the economy isn’t growing strongly…….
So the “easier to manage” comment could still be argued to be true, but not for the reason that many assume.
The problem is the antiquated nature of the voting system which is basically Lab-Con and adversarial politics. Lib Dems would need about 36% of the vote to even be in with a chance of being the Government, so its best hope is securing the balance of power and putting a series of conditions on Labour, which will probably be the largest party. If Tories and Labour get 25-45% respectively, Labour could get 500 seats which would be ludicrous and shows how bad our FPTP system is. The leadership needs to show that both Labour and Tories are unfit to govern on their own as they are essentially class based parties and both are not capable of running the economy and making people’s lives better. We will remember the Labour period in the 70s with mega inflation and very high tax and the Tories who privatise most things and are obsessed with low tax and profit (though we are very heavily taxed). A new politics is what we need to have and Lib Dems can show the way and deliver if it gets the chance. Not a formal coalition in future though.
Adrian Sanders makes a sensible proposal.
A plethora of “promises” is not ever going to be clear, believable messaging. Even three or four key ones probably won’t gain traction unless CLEARLY AND CONSISTENTLY seen to be allied to a clear overall objective.
And we need, as a sub-set, to present policies under specific national concerns such as Agriculture, Health, Education, Environment, Energy and Defence. All too often we refer to dealing with specific concerns out of context and as if they exist in isolation. Agriculture may not be a worry to many people – but it ought to be!!!
Might it be helpful and right to point out and campaign upon the fact that our parliamentary constituencies are gerrymandered to favour the Tories?
Please see “Funding the Future” (Formerly “Tax Research UK), led by Richard Murphy
https://www.taxresearch.org.uk/Blog/
‘Action required on local government funding’ (to quote the Yorkshire Post yesterday). Many local authorities are teetering upon bankruptcy.
I am a travel writer now after a life as a Liberal Councillor and PPC for Twickenham. I deliver my books to Greece. I have family in Denmark and the US. I am on Amtrak from Miami to the wedding of our granddaughter. I have yet to find anyone who can understand Brexit. Everyone thinks the UK is crazy. And I cannot understand why we are not screaming out about the horrors of Brexit.
Secondly I have written about climate change, fires and a tsunami in Corfu. Even in the US many are worried about the fires and the . Please make number two policy saving our world for the future generations.
I travel a lot in Europe BY LAND. I am on Amtrak in the US to the wedding of our granddaughter. I have yet to find anyone who can understand Brexit. Everyone thinks the UK is crazy. And I cannot understand why the LibDems are not screaming out about the horrors of Brexit. NOT ONCE BUT TIME AND TIME AGAIN.
Secondly I have written about climate change, fires and a tsunami in Corfu. Even in the US many are worried about the fires and the seas getting hotter. Please make number two policy: saving our world for the future generations.
John Waller 3rd Sep ’23 – 4:59pm:
…I have written about climate change, fires and a tsunami in Corfu.
There, as here, people are being indoctrinated by “climate change” propaganda that has little or no basis in reality or even to the politicised IPCC reports. Here’s climate scientist Roger Pielke Jr. …
‘What the IPCC Actually Says About Extreme Weather’ [July 2023]:
https://rogerpielkejr.substack.com/p/what-the-ipcc-actually-says-about
Wildfires are not caused by “climate change”. They are a natural ecological feature in many parts of the world. The vast majority in Europe are started accidentally or deliberately by human activity. Their extent is largely determined by land-management practices (clearance of undergrowth, cutting of firebreaks, prescribed burns, etc.). So far in 2023, the burnt area in Europe is below average…
‘Area burned by forest and wildland fires in Europe as of August 2023, with average for 2006 to 2022, by country’ [16th. August 2023]:
https://www.statista.com/statistics/1260777/area-burned-by-wildfire-in-european-countries/
The annual burnt area in Europe, as elsewhere, has been trending down for decades…
‘European Environment Agency: Burnt area in European countries’:
https://www.eea.europa.eu/data-and-maps/daviz/burnt-forest-area-in-five-4#tab-chart_5
‘Jeff 3rd Sep ’23 – 7:02pm
Professor Rob Kesseler says in Venetian Corfu and Edward Lear’s Paintings: ‘What is very telling is the relation to climate change. In 1856 Edward Lear tells us about olives falling in February. In 1911 the picking started in the new year and continued till May says ‘An Artist in Corfu’. Global warming must be having some effect – France, Italy and especially Spain had a very hot drought summer and the olive crop was decimated. Today picking starts in October and is mostly finished by Christmas.”
On November 25 last year, our olives were black and fully ripe. They had fallen off our high trees. We shovelled them into four of the largest bags the supermarket had. 2 weeks later just a few more had fallen after a storm and went into a little bag. All would have fallen by Christmas.
In November 2022, the dam system built to protect Venice from flooding withstood the challenge of an exceptionally high tide as heavy rains swept across Italy. The occurrence is caused by a combination of factors exacerbated by climate change, from rising sea levels and unusually high tides to land subsidence that has caused the ground level of the city to sink.
The fires that burnt Mount Pantokrator this year and were in the news were due to drought unique to this green island. The tsunami which destroyed a wide beach ere unique in my knowledge of 57 years in Corfu.
@ John Weller,
” I am on Amtrak in the US … I have yet to find anyone who can understand Brexit.”
You might have more success north of the border on a Canadian railway. They may well exist, but I have yet to find any Canadians who want to get too close to the USA in the sense signing up to an “ever closer union”. Canadians want good relations with the USA, including trading relationships, but they don’t want common laws, common elections, a common Parliament etc. They certainly don’t want a common currency!
John Waller 3rd Sep ’23 – 9:29pm:
Currently, we have a meridional jet stream (wavy rather than zonal like a halo) caused by low solar activity (electro-magnetic not insolation). This brings warm air up from the tropics and colder air down from the artic depending on which side of the ‘wave’ is passing over. Hence the alternate ‘blocks’ of often unseasonably warm or cold weather. Last year the sea froze off the coast of Greece…
‘Sea Freezes in Greece in an Once-in-a-Lifetime Phenomenon’ [January 2022]:
https://greekreporter.com/2022/01/26/sea-freezes-greece/
These swings between extremes may persist for some decades during a Grand Solar Minimum. The cycles of the sun are likely caused by planetary motion and not rising carbon dioxide levels on earth.
Sea levels have been rising due to thermal expansion at a linear rate since the end of the Little Ice Age when measurements began — long before atmospheric carbon dioxide levels started to rise.
There is no evidence that droughts are any more frequent or longer…
‘What the IPCC Actually Says About Extreme Weather’ [July 2023]:
https://rogerpielkejr.substack.com/p/what-the-ipcc-actually-says-about
John McHugo 2nd Sep ’23 – 11:37am:
…rejoining the single market.
UK exports to the EU recovered to record levels. Any gains from rejoining would be small – just a reduction in paperwork on less than a quarter of our total exports; the losses and downsides huge…
1. We’d lose our free access to the EU as we’d have to pay (Norway’s EEA membership costs a lot, but doesn’t include agri-food – the products subject to most EU protectionism).
2. We’d have to raise our trade barriers to the rest of the world where we do the majority of our trade and where almost all future growth is (UK has risen to eighth in the international Trade Barrier Index).
3. We’d have to revoke all our much improved trade agreements and revert back to the shallow and poorly suited EU deals which don’t even cover services (UK is the world’s second largest exporter).
4. We’d have to scrap our widely acclaimed Developing Countries Trading Scheme (DCTS) covering 65 developing countries (trade is the most effective way to reduce poverty).
5. We’d lose our regained influence in the world (now second in the Soft Power Index) as we’d have to abandon our WTO seat and CPTPP membership (which puts us at the heart of world trade).
6. We’d be outsourcing our entire trade policy to the EU who could then tout tariff free access to the UK market when negotiating trade deals to benefit EU exporters (free access for wine, not whisky).
7. We’d be trapped in an over-regulated protectionist trade bloc that’s rapidly declining in importance — the EU share of world GDP has already halved and is forecast to drop to just 9% by 2050 (PwC).
8. We’d be back on the pathway to poverty running a £100 billion pound trade deficit with the EU while being unable to make our own trade deals with the rest of the world where we run a surplus.
‘The EU is useless at negotiating Free Trade Agreements’:
https://joelrwrites.wordpress.com/2019/09/26/the-eu-is-useless-at-negotiating-free-trade-agreements/
‘The EU is a Major Drag on the UK economy’ [March 2019]:
https://www.briefingsforbritain.co.uk/the-eu-is-a-major-drag-on-the-uk-economy/
Here are four suggestions for our priorities. I am not sure if they are ‘stand-out policies’,
• Ending deep poverty within the decade by having a Guaranteed Basic Income of 50% of median income based on household type.
• Increasing Statutory Sick Pay to the equivalent of two-thirds of the National Living Wage and extending it to the 2 million workers who are currently excluded because they earn less than £123 a week.
• Increasing spending on the NHS and social care, funded from putting a penny on all the rates of Income Tax.
• Introducing free personal care based on the system introduced under the Labour-Liberal Democrat government in Scotland.
To these could be added:
• Introducing proportional representation to elect local councillors in England
• building the UK’s relations with the EU by following our four-step roadmap (as set out in Spring Conference 2022), including agreeing partnerships or associations with EU agencies and programmes such as the European Aviation Safety Agency; once those trading relations are deepened and the ties of trust and friendship are renewed, we aim to place the UK-EU relationship on a more formal and stable footing by seeking to join the Single Market.
Labour has actually gone further and pledged not to raise any income tax rates. We will now have all the main parties standing on a conservative economic agenda.
“Labour has actually gone further and pledged not to raise any income tax rates”
Have they promised not to raise any other taxes e.g. capital gains?
Please could we stick to the issue Chris Bowers raised: 3 or 4 stand-out points that define LD priorities (and differentiate us from other parties)?
How about:
1. Fair taxation of both income and wealth
2. High standards in universal services such as health, education and council housing*
3. Commitment to Net Zero and whole green agenda
4. Rejoin Europe
* paid for by fair taxation
@Brigid
In principle yes but perhaps your proposals are somewhat vague.
Don’t we need some more clearly defined objectives – SMART objectives?
Thank you to everyone who has commented, in particular Frank Bowles and Brigid who have understood the task at hand and have kept us to it. And in the asterisked comment “paid for by fair taxation”, Brigid has hit upon another elephant in the room: where is the money to come from? Just about every home/social news story has at its root the results of public funds having been cut, so there may be a gap in the political market for a party to say “we need to raise more money” (although past polling experience for all parties suggests that voters don’t like plain speaking when the message might be “you will have to pay more in taxes”).
To Chris Moore, I would say: please come to our meeting in Bournemouth. I don’t like viewing anyone as a guru as we can all get things wrong, but the reason John Curtice is revered is because all his pronouncements are based on polling, and he is clear that ‘Revoke’ did not cost us at the last election. We have to be careful to avoid thinking that a policy will lose us votes when it might win us more overall. But come and hear the prof’s own words on 23 September. And if you can’t, we hope to have a filmed recording available online shortly after the event.
Joe Bourke 1st Sep ’23 – 10:29pm:
If any evidence was needed that […] freedom of movement in the EU is a valued benefit, see this Telegraph article,…
It was a valued benefit to East Europeans who came here in droves. For British workers, not so much. Take-up was highly asymmetrical which suppressed UK wages and pushed up housing costs.
As the article states: “Fifteen years of anaemic growth mean that real wages are still below their 2008 peak – there are 30 year olds who have seen their entire working career go by without seeing meaningful growth in wages.” — showing once again what a ”disaster” our EU membership was.
Now the supply of cheap imported labour from Europe is reduced, many British workers are benefiting from higher wages, free training and faster promotion – just as Vote Leave said.
‘UK haulage industry forced to train army of homegrown drivers to cope with Brexit’ [May 2023]:
https://archive.ph/2023.05.09-161631/https://www.ft.com/content/13a0a9f5-5db6-488c-9860-18bd74fd2572#selection-1453.0-1453.125
The reader comments below that Telegraph article, including both featured comments, show most British emigrants are going to countries outside the EU, such as Australia, New Zealand, Canada, the US, Dubai, etc. High and rising UK taxes and house prices are frequently cited as reasons. Few seem to relish the prospect of another five more wasted years under a Labour government.
Chris was asking for fundamental big ideas so voters can quickly grasp what the Lib Dems stand for. On the whole voters are fairly vague about what they want and they need something they can grasp emotionally, and perhaps interpret in slightly differently ways according to their own thoughts and situation.
How unfortunate that the fringe meeting is precisely the same moment as the big (we hope) Rejoin March
@Jeff – the really cheap labour came from and continues to come from outside the EU. Westminster had “full control” (if it had wanted to exercise control over it) over this immigration…
Remember there were many in the Leave camp who wanted easier access to more, not less, cheap foreign labour…
The HGV drivers and other shortages is wholly down to daft short sighted thinking over many decades (that predates by many decades our membership of the EEC/EU) many of the guilty parties also backing Brexit…
William Beveridge didn’t have to worry about Climate Change, but his list of the five Great Evils is still relevant in the quest for ‘three or four standout policies’. One was Want: modernise to Poverty, which we are pledged to fight. Another was Disease: relate to saving the NHS and all associated services. The third was Squalor: now we need to save people from living in it by providing decent and affordable housing for all. The fourth and fifth we can relate to Education and full employment, but I think the first three, along with the demands of Climate Change, are still the most important aims we hold and will fight for.
We should resurrect a version of the “remain bonus” from the 2019 campaign i.e. we would have £50bn more to spend than the other parties because of rejoining the single market. We can then set out 3-4 key areas we would invest that money in e.g 1) Universal free childcare 2) expand pupil premium and free school meals 3) increase Carers benefits etc.
50bn bonus from rejoining…… Stick it on the side of a bus.
Jeff: honestly, you have surpassed yourself with this latest intervention. Have you not noticed that net migration has soared post-Brexit. 600k the last year?
@Marco – good that you’re thinking about where the money can come from. Unfortunately, as I recall, that £50Bn was a very rough estimate of the extra revenue the Government might have over 5 years from not Brexiting. Not Brexiting in the first place is very different from Brexiting – with all the disruption that involves as businesses adjust to the new environment, and then rejoining the single market – which then repeats all the disruption as businesses have to adjust back. So there’s no particular reason to expect you’d still get a £50Bn bonus: That particular horse has long since bolted. And perhaps more importantly in electoral terms, joining the single market would mean bringing back freedom of movement and mass EU immigration. That went well for the LibDems in 2019 didn’t it…. Outside a small hardcore of ardent Remainers, it’s likely to totally repel voters.
Also, are there any calculations that £10Bn a year is enough to pay for your suggestions? And childcare and pupil premium etc. are CURRENT expenditure. It’s a bit of a cheek to describe them as an ‘investment’.
@ Chris and Simon surely the real lessons of 2019 were: Don’t be a single issue party, don’t say we’ll win the election and do focus on beating the Tories. Calling for a 2nd referendum got us to 20%. Revoke was unnecessary because Labour’s promise to be neutral in a 2nd ref meant we would still have had room to be distinctive.
” And childcare and pupil premium etc. are CURRENT expenditure. It’s a bit of a cheek to describe them as an ‘investment’. ”
No it’s quite sensible. Only some professional economists would disagree.
Even they would probably agree that the spending on the education of their own children was a “good investment”!
Tax policy has to be a key element of the manifesto. Josh-Ryan Collins in a critique of Lanour policy In ditching a wealth tax, Labour is rejecting growth and embracing bad economicswrites
“The truth is that the UK is a leading global example of an economy where the tax system incentivises a form of “wealth creation” that doesn’t actually support growth. By taxing capital gains less than income (as much as 50%, less according to a recent study) and instigating a swathe of tax breaks favouring property ownership and housing investment, we have supported the creation of a sophisticated form of “rentier capitalism”.
In such a system, the majority of investment flows into the capture and ownership of assets such as property, infrastructure or financial assets. This money does not then flow into the creation of new businesses, inventions or socially useful infrastructure, nor rising wages for middle- and low-income earners.
Abandoning a wealth tax is a ruinous Labour strategy. It’s ‘Blairism without the cash’
Instead, it goes to private domestic and international investors and households lucky enough to own property, whose assets further inflate. None of the income generated goes into productive investment. Instead, the rest of society faces higher house prices and rents. The banking and asset management sectors have fully embraced this approach, preferring bigger loans against less risky assets, such as property, to lending to small firms.
This capital misallocation is a key structural driver of the UK’s stagnant growth and low productivity.”
To Brexit supporters:
Today’s Guardian: ‘Brexit: Dover port to reclaim land from sea to help avoid long queues
This summer, passenger numbers recovered and are nearly back to pre-pandemic levels at the port. Dover had its busiest day since before the Covid outbreak on Saturday 29 July when 800 cars arrived every hour at peak times. The average wait time over the summer was 41 minutes during busy periods.
The owner of Eurotunnel, Getlink, is also working to create a new area at a cost of £100m where passengers will be able to register their data at 75 stands.’
The French look at the cover of my Irish passport and not even open it. We are straight through – just like the good old pre-Brexit days.
If you chose several key policies there is a greater chance the electorate will find one to disagree with and vote accordingly. I think we need a key theme to wrap the policies around. Then as long as they agree with the theme they are more likely to support us. Choosing it is challenging. It certainly should include valuing people, the environment, spending sensibly and investing for the long term. I wouldn’t necessarily include Brexit.
@Jeff – “ What the IPCC Actually Says About Extreme Weather”
Interesting, what is notable is the simplistic logic linking extreme weather and climate change and the way extreme weather is assessed and categorised. I’m a little surprised the checklist hasn’t been pulled apart and ridiculed.
Reading the list and asking some simple and basic questions, it is clear the IPCC checklist has been constructed to support a do nothing (denial even) viewpoint rather than a more proactive one. Given the sheer scale and nature of our climate, when (or is it “if”?) the IPCC checklist flags abnormal extreme weather and thus recognised climate change is real and happening, it will be too late to do very much to mitigate events. Ie. The checklist isn’t an over the horizon radar, necessary for supertanker course corrections, but a tabulation of observations hand couriered from a lookout on the bows…
Marco, voters were well-aware of our pro-European stance. We didn’t need to double down with Revoke.
The reality is in an election where our relationship with Europe was the defining issue our Remain Alliance stance put off half the electorate from word go. And we needed those voters to win in anything other than a few seats.
Chris, good original article, with which I largely disagree.
Regarding Sir John Curtice: he’s an esteemed psephological academic. But he’s not a political strategist and is, in fact, regularly wrong in his predictions. And analysis. Heaven forbid we start regarding him as an authority on our strategy.
Chris, you may have forgotten that Jo, our esteemed ex-leader, developed very poor personal ratings during the GE 2019 campaign. This was not because she was unpersonable, but because of Revoke: she was perceived by Leavers to be saying that we as a party didn’t respect the Referendum in wishing to Revoke an electoral result we didn’t like. By their lights, they were rightly disgusted.
“The French look at the cover of my Irish passport and not even open it. We are straight through – just like the good old pre-Brexit days.”
This is also just like it used to be in the days before we actually joined the EEC/EU. I can remember just having to hold up our UK passports as we entered France and being waved through. There were also only minimal checks as we crossed other borders on a drive through to Portugal. Some people actually wanted to collect a stamp on their passports but that meant having to wait in line which obviously took time.
The Beatles famously worked in Hamburg in the early sixties and I don’t remember ever reading how it was the big problem it is said to be now for musicians.
So if it was possible then it could be again in future. We just need to wait a little while until our European friends have forgiven us for leaving their EU ! 🙂
@ Joe,
“…….Instead, it goes to private domestic and international investors and households lucky enough to own property, whose assets further inflate.”
I’d agree with much of what you’ve said in your previous post except that you put all the blame on the tax system. You don’t mention monetarist economics. Sure we can reduce interest rates to nearly 0% as we did after the 2008 GFC as an economic stimulus, but we shouldn’t then be surprised if the extra borrowing involved pushes up the price of assets: Property, land, company shares etc. What else should we expect?
This is not to say that we couldn’t use the tax system to help counter some of the worse consequences of a flawed approach to macroeconomic management but it doesn’t change the reality that it is a flawed approach.
The linked briefing paper Cost of Living Crisis: Inflation, mortgages and rents presents land value capture solutions to the problems of house price inflation and support to both the rental/housing benefit sector and distressed mortgage borrowers.
Interest rates or monetary policy are not the main driver of house price inflation or even supply/demand imbalances, It is the concentration of bank lending in the mortgage market that is the main driver. House price inflation over and above general inflation was seen in the 1960s and early 1970s when new house construction was running around 350,000 per year peaking at 425,000 in 1968. The greatest period of house price growth was from 1995 to 2007 when a typical mortgage rate was 7% or 8%.
If bank credit creation is heavily directed at the housing market we will see rapid price increases as the number of potential buyers in the market for the current housing stock increases dramatically. The same principal applies to financial assets. The more credit made available the more demand and prices follow upwards. If excess credit is directed into the consumer market then inflation will take hold in consumer goods and services where supply takes time to catch-up with demand or to the extent it is not offset by other factors like the entry of low cost Chinese labour to world markets. If credit is directed at small and medium size business, then take-up of new technology is enabled in the sector that creates the majority of new jobs and drives the productivity growth that brings about improvement in living standards.
To redirect newly created bank credit to where it is best employed for the economy, the tax system needs to discourage rent seeking activities and encourage productive entrepreneurial investment and innovation.
@ Chris Moore if you read my post I did say that revoke was UNnecessary (but not undemocratic in my view as the referendum was only consultative).
It seems to me that studies have shown that the real problem was the lack of clear policies other than stopping Brexit. Do you have any evidence that Curtice and others are wrong in their analysis?
Interesting article in Prospect magazine: https://www.prospectmagazine.co.uk/politics/62811/sam-freedman-liberal-democrats-recovery
@ Joe
“Interest rates or monetary policy are not the main driver of house price inflation”
Hardly anyone would agree with you. In any case the empirical evidence is against you.
A feature of every credit boom in the last 50 years or so has been a reduction in the rates of interest and a surge in the price of housing. It’s not the absolute rate of interest which causes the increase in prices but rather it’s the rate of change in interest rates.
Prior to the 1995 boom which you refer to interest rates had been increased which caused the deep recession of the early 90s. This in itself was a reaction to the Lawson boom of the late 80s which caused house prices to surge. Prior to that interest rates had been high in the early 80s.
We are currently in a period of increasing interest rates which is causing house prices to fall. So even though they are still lower than they were in the 90s it isn’t reasonable to expect house price inflation to be the same! I’m not sure why economists of a monetary inclination have a problem understanding their own theory. Did they skip maths lessons when the first derivative was being taught?
Peter Martin,
the issue of money creation was debated in Parliament in 2014 https://www.youtube.com/watch?v=EBSlSUIT-KM.
As was noted in the debate, money supply (driven by private bank money creation) quadrupled from 1991 to 2009, tripling between 1997 and 2010 with the vast majority of this new lending being directed at the Property and Financial Markets. That tripling in money supply occurred while mortgage interest rates were running around 7% to 8%. It was this dramatic increase in money supply that drove the real terms increase of 173% house price inflation from 1995 to 2008.
Dramatic increases in interest rates from the norm will cause a contraction in lending as there are fewer borrowers able to meet bank lending criteria and drastic lowering of interest rates will have the opposite effect. However, marginal changes of a few percent have only a marginal impact compared to the vast increases in money supply made available to the property and financial markets and impact nominal house prices rather than driving real terms increases. The empirical evidence is clear as the speakers in the Parliamentary debate point out and the Savills report in the briefing paper linked above shows. It is the monopoly of the 5 too big to fail UK banks on credit allocation and the imperative for ever increasing loan books that drives asset price inflation in both the Property and financial markets, irrespective on interest rates, just as Hyman Minsky pointed out.
There’ve been plenty of debates in the Parliament. It doesn’t mean much. Many MPs wouldn’t even have known which of the many possible definitions of money supply they were talking about in any case. It doesn’t really matter because bank lending isn’t about “money supply”.
A £ is a digital entity to a bank in the same way as a chip is a real entity to a casino. Both can create as many as they like. If a casino lends out some of its chips are they creating money? If the bank is, then so are they, but neither the bank nor the casino, nor the borrower are getting any richer in the process. This is true even in money terms, because every created asset is matched by an equal and opposite liability.
No-one borrowing money from a commercial bank has an improved balance sheet as a consequence. They don’t have more ££ to spend in the long run. Instead future spending ability is being brought forward. Of course there are reasons to want to borrow money if a large purchase is involved. Borrowers are probably worse off when interest payments and other fees are included.
On the other hand, if the government does provide a fiscal stimulus by cutting taxes or by spending more money into the economy then everyone does have more ££ to spend. Conversely if taxes are raised and/or govt spending is reduced we do all end up with less to spend. This is the only sensible way to regulate the economy.
Parliament has a Treasury select committee that has regular briefings by the Bank of England, so I am sure that many MPs will have a good understanding of money supply measures.
As the Savills report A brief history of the UK housing market 1952 – 2022headline makes clear “Over the past 70 years the average UK house price has risen by 365%, even on an inflation adjusted basis”. That is not CPI inflation that is real terms increases that has not been caused by a change in the level of interest rates since 1945. The first big post-war increase in house prices was in 1971-73 i.e. the period of the Barber boom when credit restrictions on banks lending to the mortgage market were lifted. After 1973 house prices fell back until 1977 as lending contracted during a period of high inflation, as the cycle started by the Barber Boom worked its way through the economy with recurring price-wage spirals. The 1980s saw inflation adjusted house price growth, during a period of relatively high interest rates. until consumer price inflation resumed, culminating in the 1989 crash. 1995 to 2007 saw inflation adjusted house price growth of 173% when bank base rates were around 5% and mortgage rates 8%. After the financial crash, despite a near zero bank rate and mortgage rates of 3%, inflation adjusted house prices fell by 37% as bank lending contracted for 5+years . As banks began lending more freely from 2013, real terms house price increases began again. That is the empirical evidence and the nature of business cycle as documented by Hyman Minsky. It is not government deficits that drive asset price inflation, it is excessive money/debt creation in the banking system that requires an ever greater proportion of disposable income to service. Large government deficits above the norm will only impact inflation if both the economy is already near full capacity and the debt is monetised. If the deficit is funding by borrowing from the public (not banks) then there is no credit creation that expands the money supply and generates inflationary pressures.
@ David Blake that is a good article you linked to.
There is a difference between themes that signal our values such as being closer to Europe, having a more humane asylum system etc and on the other hand election time spending pledges. We should highlight the former in between elections to build the core vote then pivot to spending pledges and local issues come the election campaign.
I fully agree with the principle and Mark Pack said essentially the same thing in his ‘winning more power’ email in March this year.
Chris, do you agree we should focus these policies on the key issues that the electorate care about? Ipsos and Yougov polls show consistently that the top 2 are:
1. Cost of living/inflation/the economy
2. The NHS
With some jostling between immigration and the environment as the third.
I don’t feel we currently have anything distinctive for any of those areas.
@ Joe,
“Over the past 70 years the average UK house price has risen by 365%…… that has not been caused by a change in the level of interest rates since 1945.”
There have been many changes in interest rates since then. The downward changes have produced surges in house prices. The upwards changes don’t cause prices to fall significantly because that would destroy the collateral upon which previous loans were issued. They can’t be allowed to fall significantly if the entire economy is floated on private debt.
The government has always taken steps to prevent this happening in the last 50 years or so. The most significant of these is the deregulation of the lending process. At one time any prospective borrower had to show means and an ability to repay. This no longer happens and the end result is apparent in the figures you quote.
Looking at the process from a macroeconomic POV, the emphasis of government policy since monetary policy became the economic orthodoxy with the election of the Thatcher govt in 1979 has been to minimise government borrowing. This is only possible if the private sector can be induced to do the borrowing instead. Someone has to do it to keep the economy functioning. This seemed to be working well enough until the crash of 2008. We know the problems have been since.
After the Bank of England was nationalised in 1945, the state directed the level of credit expansion and maintained capital controls until the end of the Bretton Woods system in 1971. From that time there has been deregulation of the banking sector and capital controls were gone by the end of the seventies.
Interest rates have fluctuated up and down by a couple of percent or so outside of financial crisis. These are not the cause of house prices rising from 3/4 times average earnings to its highest level ever at 7/ 8 times average earnings before the financial crash.
Mortgage payments and rents are taking an ever greater share of earnings to service and will continue to do so as long as the great bulk of lending is directed at the existing housing stock and housing as a speculative financial investment.
The 80 or so directors spread across the 5 major UK banks determine where and how much credit goes into the economy, not the Bank of England. The commercial banks self-interest is in expanding their business which is as it should be. However, the right to create money is a privilege bestowed by government license.
The Bank Charter Act of 1844 gave the Bank of England a monopoly on the issue of paper currency, but did not address the issue of the creation of money via bank deposit accounts which constitute 97% of the money used today.
Commercial banks do not need government borrowing. QE, reserves or even a central bank to create money. All that is required is borrowers with the potential to repay loan capital and interest from their future income and a banking license issued by the government.
Peter Martin “This is also just like it used to be in the days before we actually joined the EEC/EU. I can remember just having to hold up our UK passports as we entered France and being waved through. There were also only minimal checks as we crossed other borders on a drive through to Portugal”
In 1962 I hitchhiked to India. At EVERY border the trucks were stopped at the customs building, many of which still exist. Good for hitchhikers as we got a lift at the front of the queue but bad for the movement of goods. Leaving Socialist Yugoslavia the customs demanded a big bribe or we would have to return to Belgrade. On my return, north of Munich the German driver said “Adenauer (the German Chancellor) loves De Gaulle (the French President)”. At that moment I knew we could build a new Europe. My war which started being evacuated from East Kent in 1940 was over. I joined the Liberals, the only UK party that would help build that new Europe.
Martin, you say: “We just need to wait a little while until our European friends have forgiven us for leaving their EU !” By then, our trade with our major partner will have seriously suffered and I will be dead!
@ Joe,
“However, the right to create money is a privilege bestowed by government license.”
No it isn’t.
As Minksy famously said: “everyone can create money; the problem is to get it accepted”. Naturally, the big commercial banks who have all required licences in any case, will find it easier to get their money accepted than will you or I if we simply write IOU £10 and sign our names on a piece of paper, or do the same thing digitally, but there’s no difference in princple.
Commercial banks do not need government borrowing. QE, reserves or even a central bank to create money.
“Commercial banks do not need government borrowing. QE, reserves or even a central bank to create money.”
True. They could write IOU one gram of gold on a piece of paper or do the same thing digitally. Just as you or I could -in principle. If it were a major bank we would probably trust them to actually give us the one gram of gold on demand. But would we say the banks were actually *creating* gold by doing this in the same way we’d say they were creating £, euros or dollars which is how they normally denominate their IOUs?
I don’t think we would! There’s nothing wrong with saying the banks create money if it is understood the correct way. The problem is that it often isn’t.
Money in the banking system is principally currency (legal tender) or bank deposits. Only licensed banks can create bank deposits as opposed to the function of accepting existing deposits and borrowing to make loans to clients as non-banks can do. Anyone can create debt. While money is debt not all debt is money. Only that which is accepted in final settlement of contracts i.e. legal tender or bank payments are commonly considered money that can be used in daily transactions.
Where bank credit is allocated drives economic activity. Residential and commercial mortgages and investments in financial instruments (including government bonds) absorb over 80% of bank lending with about 8% going to SME’s and 8% to personal loans/credit card finance etc.
Therein lies the source of the problems with an increasingly unaffordable inflated housing market, stock and bond market bubbles and comparatively poor productivity growth resulting from SME’s lack of access to credit for investment.
Higher levels of taxation of interest earnings from loans secured on land can disincentivise excessive lending into the current housing stock and incentivise business lending.
@ Joe,
You last explanation is somewhat opaque and contradicts Minsky’s definition of what “money” actually means. You seem to be suggesting that only BoE created IOUs can be described as money because they are at the Apex of the money pyramid. They are ultimately what are “accepted in final settlement of contracts”. However this is inconsistent with your ” 97% of the money used today” quote. These are not BoE IOUs.
If I pay my tax bill from a Barclays bank account or someone else who has, say, a Lloyds bank account I’m going to be pretty confident there won’t be any problem because Barclays is financially solvent. However neither Treasury nor Lloyds bank will want Barclay’s bank IOUs. They’ll ultimately want payments in BoE IOUs. ie Payments from Barclays reserve accounts unless they can be cancelled out with other payments by contra.
Money that can used to settle transactions must be accepted as such by the other party. That is what we refer to as an increase in the money supply or more precisely bank credit creation. It is comprised principally of bank deposits not illiquid debt instruments.
There is no need for BofE IOU’s to settle inter-bank transactions. Any trusted clearing house or bank within the banking network can perform the function of settling transactions between banks and making funds available from banks with surplus funds in their accounts. This is how the International banking network that is the Eurodollar system works without any central bank at its core. The USA banking system operated without a central bank until 1913.
Derivative transactions are typically settled by the London Clearing House. Clearing here is the process of reconciling an options, futures, or securities transaction or the direct transfer of funds from one financial institution to another. The process validates the availability of the appropriate funds, records the transfer, and in the case of securities, ensures the delivery of the security or funds to the buyer.
Central banks serve as lender of last resort in a banking crisis. But again this is not essential. Banks in a network can decide who to support and who to let go in a crisis. In 2008 in the USA, it was Lehman Brothers who was left with no chair by the other big Wall Street bank when the music stopped and the Federal reserve chose not to rescue them. The state’s role here is limited to banking regulation and protection of depositors up to a specified limit.
@ Joe,
“The USA banking system operated without a central bank until 1913.”
This is possible if you define your currency in terms of a fixed amount of gold. It would have been possible for the USA then, although there were still good reasons for having a central bank, but it isn’t possible now there’s no gold backing at all. The US Fed defines what a dollar actually is and everyone else uses that as a unit of measure.
“There is no need for BofE IOU’s to settle inter-bank transactions.
There is if the transactions are in £ sterling. There’s a technical difference between clearing and final settlement.
“The Bank of England acts as a settlement agent to enable financial institutions to make payments to each other.”
We might imagine a card game where the players all bring their own IOUs to the table. At the end of the session most of the IOUs will be cancelled out by contra. However the winners will want their winnings and the losers must cover their losses. The winners very probably don’t want the IOUs of the other players. They might settle for bank IOUs, but the banks themselves, in essentially the same way, will always settle accounts between themselves with a combination of cancellation by contra and BoE IOUs.
https://www.bankofengland.co.uk/payment-and-settlement
@ Joe and Peter – To be honest the Gold Standard doesn’t come up on the doorsteps as much as it used to. And most voters seem to be over Labour’s decision to enter the National Government in the 30’s.
Marco,
that’s very true. I very much agree with the theme of Chris Bowers article . Mark Pack reports that what does come up on the doorstep now is the NHS, Cost of living and State of the economy.
A century ago Keynes predicted that national income would grow so much that the problem facing today’s generation would be what to do with their leisure time. Keynes was right about the growth of national income but failed to recognise how it would be distributed Whatever happened to Keynes’ 15-hour working week?
“Keynes’s big failure was to recognise that distribution matters. The economic problem will not be solved while a quarter of the world lives in abject poverty, nor while a good slice of those living in developed countries are not sharing in economic prosperity or feel they need to spend longer and longer on the treadmill just to make ends meet”
On Gary’s theme of three or four stand out policies, I would focus these policies on funding the NHS, a job guarantee scheme and skills training for log-term unemployed and redistribution of the growth in national income primarily through Land Value Taxation.
@ Marco,
You’re right. The gold standard and central banks don’t get a lot of mention in my local pub either.
However on occasion the discussion does turn to politics and the mess the economy is in at the moment. It seems self evident to some that interest rates have had to rise to “pay for” the crisis. But when I ask them to explain how paying more money to landlords and banks is supposed to do this they are somewhat flummoxed and don’t know the answer!
As the Lib Dems are largely in favour of monetarist economics you really ought to be able to explain your own party’s policy on the doorstep. If the election is 12 months away the chances are we could well have a huge credit crunch induced crash before then.
Sorry about the link to the Express, but I think they may well be right with this article and it will be caused by our adherence to a faulty economic theory.
“Step forward Jeremy Grantham, Peter Schiff and Nouriel Roubini, who are now urgently warning that we are charging towards an even bigger disaster…..”
https://www.express.co.uk/finance/personalfinance/1764305/financial-crisis-banking-crash-global-recession-meltdown-forecast-Dr-Doom