There's been a lot of debate about housing recently. Cameron thinks that people shouldn't have a council house for life, but the Lib Dems are aghast.
Cameron's point certainly makes sense. It clearly can't be right that people who don't really need council houses have their housing costs heavily subsidised by the state whilst families in desperate need of a home languish on ever-growing waiting lists.
The idea has pretty much come out of the blue. No consultation, no debate, just a simple Prime Ministerial statement and its virtually policy - if there was ever evidence of the Prime Minister having far too much power, this is it. But most unfortunately, noone seems to have bothered to consider if there might be a better way.
For example, why not make council rent respond to incomes?
As people earn more, it is reasonable to expect them to pay more. Rents could approach private sector levels for tenants on middle-incomes, meaning that there would no longer be an incentive to stay-put, reducing waiting lists and increasing labour mobility.
An added bonus is that it could end a very serious poverty trap. When canvassing at the last election I was struck by a handful of single parents on low incomes who saw no incentive to work because nearly all of their wages went towards rent and Council Tax (it probably didn't help that I was in one of the highest rent local authorities in the country). If rents took account of incomes, it would be possible to charge a lower rent to those on the lowest incomes, removing one of the biggest disincentives to taking up low-paid or part-time work.
Got to be worth considering, surely?
Thursday, 5 August 2010
Friday, 30 July 2010
A "new politics"?
In the election campaign we were promised a "new politics" by all three parties. Clegg promised to "persuade you to put your faith in politics once again" and Cameron created a taskforce on restoring trust in politics.
But have we entered a new era of transparency, honesty and integirty among politicians, or have we moved further along the centralised, closed-door and media centric approach that has grown since the 80s?
Unfortunately, it appears to be the latter. I want to highlight several examples that aren't significant on their own, but taken together show a worrying tendency to lie amongst the coalition.
1) Gove misleads on academies
In early June, Gove announced that 1,114 schools had applied to become academies in just one week. But it emerged yesterday that only 153 had applied - just days after the Academies Bill was rushed through parliament. Of course, the number that apply at such an early stage is not necessarily indicative of the scheme's eventual success, but to rush the Bill through without bothering to make the true state of affairs known to parliament is extremely slippery.
2) Pushing through boundary changes
Equalising constituencies and reducing the number of MPs by 10% was in the Tory manifesto, so is hardly surprising. But the way in which the issue is been tackled is truly shocking. For the first time in living memory, local people are to be denied rights of consultation or appeal. Is this the "new localism" the Lib Dems talk about or the "empowering communities" agenda the Tories talk about??? Of course, there are exceptions - you'll be allowed to have much less than the average number of people per MP if your constituency is over 13,000 square miles - all Scottish Lib Dem constituencies.
All very dodgy. But instead of taking the entirely sensible course of splitting AV and boundary changes into two separate Bills, Cameron simply ignores Labour criticism by making a completely irrelevant point about AV. I find it quite worrying that the government are prepared to debate AV but aren't prepared to have a proper debate on perhaps more significant changes to constituency boundaries.
3) Clegg tells two stories on AV
Clegg told the Commons that AV without a referendum "was not offered by the Labour Party in those discussions". Utterly unequivocal. Its important to realise how important this is. Cameron told Tory MPs and the shadow cabinet that Labour had offered AV without a referendum, the basis on which the Tories offered a referendum on AV to the Lib Dems. This leads to one of three irresistible conclusions. Either Clegg lied to Cameron to get him to improve his offer, Cameron lied to Tory MPs to get them to make the offer, or both leaders were so incredibly full of spin that they were perfectly happy to trick both their MPs and the public into something that simply wasn't true.
4) Clegg U-turns on cuts
In the campaign, Clegg described Tory spending cut plans as "economic masochism". Of course, it was understandable that the Lib Dems would compromise on cuts as part of the coalition agreement. But its the narrative Clegg provides that worries me.
Initially Clegg and most Lib Dems claimed that they got convinced when they "saw the books". But this isn't remotely credible. Borrowing was revised down by £11bn in Labour's March Budget due to better than expected tax revenues and it was revised down again by another £5.5bn just after the coalition took power. The case for immediate and/or deep cuts was substantially weaker in June than it was before the election.
After being caught out on this, Clegg claimed that he actually changed his mind just before the election. He just "forgot" to mention this to the electorate and continued to campaign against immediate cuts and for the maintainance of fiscal stimulus. Oops.
Each is indicative of unnecessarily dishonest politics. You do expect that kind of thing at elections, but to my mind its pretty shocking that such a bad pattern is emerging so quickly into the coalition's first term.
The coalition has only been in power 2 months and we are already seeing the kind of rot normally seen once a party has been in power for a decade. It simply isn't necessary to make up lies about academies or gerrymander constitutional Bills through when you are guaranteed to pass them anyway. Once the rot sets in, its all over: you only have to look at how inept and unprincipled the last Labour and Conservative governments became in their dying days. Sooner rather than later the public are going to grow weary of this rubbish. The coalition is going to become desperately unpopular by this time next year if it continues to operate in this way; and that is before you factor in the impact of cuts.
But have we entered a new era of transparency, honesty and integirty among politicians, or have we moved further along the centralised, closed-door and media centric approach that has grown since the 80s?
Unfortunately, it appears to be the latter. I want to highlight several examples that aren't significant on their own, but taken together show a worrying tendency to lie amongst the coalition.
1) Gove misleads on academies
In early June, Gove announced that 1,114 schools had applied to become academies in just one week. But it emerged yesterday that only 153 had applied - just days after the Academies Bill was rushed through parliament. Of course, the number that apply at such an early stage is not necessarily indicative of the scheme's eventual success, but to rush the Bill through without bothering to make the true state of affairs known to parliament is extremely slippery.
2) Pushing through boundary changes
Equalising constituencies and reducing the number of MPs by 10% was in the Tory manifesto, so is hardly surprising. But the way in which the issue is been tackled is truly shocking. For the first time in living memory, local people are to be denied rights of consultation or appeal. Is this the "new localism" the Lib Dems talk about or the "empowering communities" agenda the Tories talk about??? Of course, there are exceptions - you'll be allowed to have much less than the average number of people per MP if your constituency is over 13,000 square miles - all Scottish Lib Dem constituencies.
All very dodgy. But instead of taking the entirely sensible course of splitting AV and boundary changes into two separate Bills, Cameron simply ignores Labour criticism by making a completely irrelevant point about AV. I find it quite worrying that the government are prepared to debate AV but aren't prepared to have a proper debate on perhaps more significant changes to constituency boundaries.
3) Clegg tells two stories on AV
Clegg told the Commons that AV without a referendum "was not offered by the Labour Party in those discussions". Utterly unequivocal. Its important to realise how important this is. Cameron told Tory MPs and the shadow cabinet that Labour had offered AV without a referendum, the basis on which the Tories offered a referendum on AV to the Lib Dems. This leads to one of three irresistible conclusions. Either Clegg lied to Cameron to get him to improve his offer, Cameron lied to Tory MPs to get them to make the offer, or both leaders were so incredibly full of spin that they were perfectly happy to trick both their MPs and the public into something that simply wasn't true.
4) Clegg U-turns on cuts
In the campaign, Clegg described Tory spending cut plans as "economic masochism". Of course, it was understandable that the Lib Dems would compromise on cuts as part of the coalition agreement. But its the narrative Clegg provides that worries me.
Initially Clegg and most Lib Dems claimed that they got convinced when they "saw the books". But this isn't remotely credible. Borrowing was revised down by £11bn in Labour's March Budget due to better than expected tax revenues and it was revised down again by another £5.5bn just after the coalition took power. The case for immediate and/or deep cuts was substantially weaker in June than it was before the election.
After being caught out on this, Clegg claimed that he actually changed his mind just before the election. He just "forgot" to mention this to the electorate and continued to campaign against immediate cuts and for the maintainance of fiscal stimulus. Oops.
Each is indicative of unnecessarily dishonest politics. You do expect that kind of thing at elections, but to my mind its pretty shocking that such a bad pattern is emerging so quickly into the coalition's first term.
The coalition has only been in power 2 months and we are already seeing the kind of rot normally seen once a party has been in power for a decade. It simply isn't necessary to make up lies about academies or gerrymander constitutional Bills through when you are guaranteed to pass them anyway. Once the rot sets in, its all over: you only have to look at how inept and unprincipled the last Labour and Conservative governments became in their dying days. Sooner rather than later the public are going to grow weary of this rubbish. The coalition is going to become desperately unpopular by this time next year if it continues to operate in this way; and that is before you factor in the impact of cuts.
Monday, 26 July 2010
Cameron goes to India
It's easy to criticise the coalition: the budget was heavily regressive when compared to Labour's, defence and justice policy seem to be completely different to the policies advocated during the campaign, and its difficult to discern any coherent principles or realistic long-term vision for the country.
Nonetheless, Cameron's trip to India is a remarkable display of political skill and vision. You only have to look at the personnel to see how seriously Cameron is taking the trip: Cameron, Osborne, Hague, two more cabinet members and 50 FTSE Chief Executives make for heavyweight diplomacy. We also have to remember India's status: as a relatively young democracy with an extremely young middle-class, India yearns for respect on the international stage - giving it the appropriate respect could do wonders for international relations, and be the foundation of a new and equally important 'special relationship'.
In the wider political landscape, the trip along with the new bilateral and trading emphasis Hague has brought to the Foreign Office signal a major change in the way we see foreign policy. Since the bitter debates we used to have about the future of the British Empire in the 50s and 60s have fizzled out, Foreign Policy debate has been purely reactionary. Of course, there is much to criticise: I very much doubt whether forging independent biltaeral relations is realistic for a country the size of the U.K., and if it results in policies that differ substantively from those adopted by other EU nations of the US it will substantively weaken relations with our most important diplomatic partners for miniscule gain.
There was very little debate about whether or not to go into Iraq, Afghanistan, Kosovo or Sierra Leone. We argued about the sexed up dossier, and about whether we had enough troops, and about whether other NATO countries do their share; but very rarely did the major parties say anything substantively or fundamentally different. A move from multilateral to bilateral relations, however, would be a fundamental change in the way the UK conducts itself and a return to pre-WW2 diplomacy.
It will be fascinating to see how Labour respond. A credible response must be different to the response in other policy areas: it is easy for Labour to be reactionary and simply criticise Tory cuts, Tory academics and Tory unfairness, but it is very difficult to blitely criticise positive action. Labour must either agree with the changes; or put forward a positive alternative vision that focuses on multilateral rather than bilateral relationships. Either will require a change of tack from the reactionary politics dominating at the moment, and will be a significant test for Labour's new leader.
Nonetheless, Cameron's trip to India is a remarkable display of political skill and vision. You only have to look at the personnel to see how seriously Cameron is taking the trip: Cameron, Osborne, Hague, two more cabinet members and 50 FTSE Chief Executives make for heavyweight diplomacy. We also have to remember India's status: as a relatively young democracy with an extremely young middle-class, India yearns for respect on the international stage - giving it the appropriate respect could do wonders for international relations, and be the foundation of a new and equally important 'special relationship'.
In the wider political landscape, the trip along with the new bilateral and trading emphasis Hague has brought to the Foreign Office signal a major change in the way we see foreign policy. Since the bitter debates we used to have about the future of the British Empire in the 50s and 60s have fizzled out, Foreign Policy debate has been purely reactionary. Of course, there is much to criticise: I very much doubt whether forging independent biltaeral relations is realistic for a country the size of the U.K., and if it results in policies that differ substantively from those adopted by other EU nations of the US it will substantively weaken relations with our most important diplomatic partners for miniscule gain.
There was very little debate about whether or not to go into Iraq, Afghanistan, Kosovo or Sierra Leone. We argued about the sexed up dossier, and about whether we had enough troops, and about whether other NATO countries do their share; but very rarely did the major parties say anything substantively or fundamentally different. A move from multilateral to bilateral relations, however, would be a fundamental change in the way the UK conducts itself and a return to pre-WW2 diplomacy.
It will be fascinating to see how Labour respond. A credible response must be different to the response in other policy areas: it is easy for Labour to be reactionary and simply criticise Tory cuts, Tory academics and Tory unfairness, but it is very difficult to blitely criticise positive action. Labour must either agree with the changes; or put forward a positive alternative vision that focuses on multilateral rather than bilateral relationships. Either will require a change of tack from the reactionary politics dominating at the moment, and will be a significant test for Labour's new leader.
Tuesday, 13 July 2010
Labour must back the Big Society to be credible
The Big Society has been ridiculed by Labour, the Lib Dems and even by Tory activists. Many of these criticisms are legitimate: the mish-mash of different policies is difficult to explain to the public; attempts to do more with less do look like cover for a reducing state; and parts of the Big Society are completely unrealistic - for example, the idea that 5,000 community organisers will be able to raise their own salaries by organising deprived communities.
But we shouldn't be hasty. The fundamental idea of a strong, politically engaged and giving society is simple and powerful. The contrast between "Big Society" and "Big Government" is a bad one for Labour. The public accept that the Big Society is vacuous; but they worry greatly about Labour being the party of an over-bearing state.
Labour's leadership candidates recognise the problem. Diane Abbott says that she wants to take back the civil liberties agenda from the Tories; David Miliband complains about an overly-large state stopping parents from taking children swimming in his constitueny; Ed Miliband wants to pass powers to individuals; Andy Burnham says that Labour didn't listen to people on these issues.
Its also worth noting that the Big Society is nothing new. Nearly all Big Society policies were adopted from the last years of Labour. Free-schools are a re-launch of academies, public sector procurement was already changing and a devolution of powers to communities and local government had already started. The ideas put forward by the Conservatives in their Big Society White and Green Papers are almost identically to those contained in Labour's 2008 Empowerment White Paper.
It isn't credible for Labour to oppose the Big Society. The rhetoric used by the leadership candidates is exactly the same as that used by Cameron and co. By adopting the Big Society as its own and presenting a credible set of policies based around the same ideas, Labour can immediately expose current ConDem plans as vacuous and decisively turn the page on the overly-statist approach of New Labour.
But we shouldn't be hasty. The fundamental idea of a strong, politically engaged and giving society is simple and powerful. The contrast between "Big Society" and "Big Government" is a bad one for Labour. The public accept that the Big Society is vacuous; but they worry greatly about Labour being the party of an over-bearing state.
Labour's leadership candidates recognise the problem. Diane Abbott says that she wants to take back the civil liberties agenda from the Tories; David Miliband complains about an overly-large state stopping parents from taking children swimming in his constitueny; Ed Miliband wants to pass powers to individuals; Andy Burnham says that Labour didn't listen to people on these issues.
Its also worth noting that the Big Society is nothing new. Nearly all Big Society policies were adopted from the last years of Labour. Free-schools are a re-launch of academies, public sector procurement was already changing and a devolution of powers to communities and local government had already started. The ideas put forward by the Conservatives in their Big Society White and Green Papers are almost identically to those contained in Labour's 2008 Empowerment White Paper.
It isn't credible for Labour to oppose the Big Society. The rhetoric used by the leadership candidates is exactly the same as that used by Cameron and co. By adopting the Big Society as its own and presenting a credible set of policies based around the same ideas, Labour can immediately expose current ConDem plans as vacuous and decisively turn the page on the overly-statist approach of New Labour.
Wednesday, 7 July 2010
The OBR
The OBR was definitely a good idea. Preventing Chancellors from making up optimistic growth figures by using independent financial forecasts sounds great. But is the OBR really independent?
It doesn't have its own premises and operates inside the Treasury machine - when its members are part of the Chancellor's Treasury machine, its difficult to see how they can remain independent.
Perhaps the killer blow to the OBR's credibility is the fact that Cameron knew unemployment predictions before everyone else. Indeed, the OBR was kind enough to bring forward the publication of those statistics to help him out of a tough spot at PMQs. "New Politics" my arse.
It doesn't help that the OBR's chair, Alan Budd, has just quit amid rumours not being allowed the independence he was promised. Of course Osborne claims that he was always on a three-month contract: he just conveniently forgot to mention it in any of the Treasury's press releases. "New Politics" my arse.
Given the above, its difficult to see how the OBR's optimistic growth and inflation predictions are at all credible. It's also difficult to see how the OBR could survive a Labour government without serious reform.
Of course, even if the OBR is fefashioned into a truly independent and credible body, it still needs politicians to respect its findings instead of trying to ignore and spin unfavourable figures. Margaret Thatcher set-up the British Crime Survey to do the same thing for policing: provide credible independent figures that can't be fiddled by politicians. That didn't stop Chris Grayling trying to spin crime figures to claim something that was patently untrue, and judging by PMQs today it didn't stop Cameron making the completely unfounded claim that violent crime has doubled. Actually, it's fallen enormously - whether you use the BCS or any other independent measure, but that doesn't stop the spin.
Bloody politicians...
It doesn't have its own premises and operates inside the Treasury machine - when its members are part of the Chancellor's Treasury machine, its difficult to see how they can remain independent.
Perhaps the killer blow to the OBR's credibility is the fact that Cameron knew unemployment predictions before everyone else. Indeed, the OBR was kind enough to bring forward the publication of those statistics to help him out of a tough spot at PMQs. "New Politics" my arse.
It doesn't help that the OBR's chair, Alan Budd, has just quit amid rumours not being allowed the independence he was promised. Of course Osborne claims that he was always on a three-month contract: he just conveniently forgot to mention it in any of the Treasury's press releases. "New Politics" my arse.
Given the above, its difficult to see how the OBR's optimistic growth and inflation predictions are at all credible. It's also difficult to see how the OBR could survive a Labour government without serious reform.
Of course, even if the OBR is fefashioned into a truly independent and credible body, it still needs politicians to respect its findings instead of trying to ignore and spin unfavourable figures. Margaret Thatcher set-up the British Crime Survey to do the same thing for policing: provide credible independent figures that can't be fiddled by politicians. That didn't stop Chris Grayling trying to spin crime figures to claim something that was patently untrue, and judging by PMQs today it didn't stop Cameron making the completely unfounded claim that violent crime has doubled. Actually, it's fallen enormously - whether you use the BCS or any other independent measure, but that doesn't stop the spin.
Bloody politicians...
Monday, 5 July 2010
Pay-as-you-go road charging
The RAC has given an excellent demonstration of most of the dishonest tactics used by politicians to obscure policy debates
Every now and then, you get an idea so phemonenally stupid it deserves a blog post. The RAC's proposal for a national pay-as-you-go road scheme is one of those ideas. The idea that everyone should be forced to retrofit an expensive satellite spy-system into car - not to mention the enormous potential for fraud and large administration costs - when we already have fuel duty is so obviously stupid I don't think it even merits argument.
But this blog isn't about that. I want to analyse the tactics used by the RAC, and hopefully help people to keep the wool away from their eyes when politicians use the same techniques.
The "something for nothing" delusion
Mr. Glaister argues that 1) the private sector benefits from better roads, 2) motorists benefit from not having to pay fuel duty and road-tax, and 3) the Treasury gets to mine a new income stream.
This is a very common technique. By separating out businesses, tax-payers and the Treasury, you look like you have got a fairly policy, and sound like you have really have thought about it and conducted a broad and balanced analysis. It allows you to look only at the benefits, without analysing the costs. You instinctively feel that there is no need to probe deeper into into the benefits and costs for any individual party, because you instinctively feel that there has been a proper analysis.
Of course, this is nonsense. If businesses benefit from better roads, this is only because they pay more tax. If motorists benefit from not needing to buy a tax disc, this is only because they had to buy a big black box instead. Conversely, the treasury's new income stream can only come at the cost of losing other income streams. None of this tells you anything unless you know who is paying more, who is getting less and what the net effect on investment is.
The result is that the questions that really matter are completely obscured. Questions like how much investment should there be? How should this be paid for? Who should pay it - should car-users subsidise lorry-users? How big should the public sector be?
These important issues get thrown up by real debates about public spending. But politicians simply avoid having these debates in the first place by having a ridiculous focus. For example, note how little discussion there is over cuts to the schools budgets when compared to discussion over free-schools: this is despite the free-schools policy only affecting a minority of already top-performing schools. Or how we have avoided a debate about local government finance by having a Council Tax freeze instead of debating the real problems. Or how politicians escaped debates on social care, pensions or the retirement age during the general election by focusing only on trivial freebies like the winter-fuel allowance and free bus passes.
People naturally respond to balanced language, even if the policy is not balanced. It is why tripartite expressions like "equality, fraternity and liberty" are so popular, and part of the reason why http://www.theyworkforyou.com/ tracks the number of times MPs use "three-word alliterative phrases" in debates. You may like to know that Ed Miliband has done it 338 times, and that's only just above average. A little birdy told me that Nick Clegg is floating with the idea of suggesting a 66% threshold to dissolve parliament, so that the coalition looks moderate and compromising if he goes for 55% - not unlikely, I think.
And the consequences? It is no surprise that people don't trust politicians anymore. We instinctively react to balanced language because normal people usually only use things like three-word alliterative phrases if they have something significant to say. That is why these linguistic techniques are so confusing, and it is disappointed to see that the RAC has joined politicians in the battle to pull wool over people's eyes.
Every now and then, you get an idea so phemonenally stupid it deserves a blog post. The RAC's proposal for a national pay-as-you-go road scheme is one of those ideas. The idea that everyone should be forced to retrofit an expensive satellite spy-system into car - not to mention the enormous potential for fraud and large administration costs - when we already have fuel duty is so obviously stupid I don't think it even merits argument.
But this blog isn't about that. I want to analyse the tactics used by the RAC, and hopefully help people to keep the wool away from their eyes when politicians use the same techniques.
The "something for nothing" delusion
Mr. Glaister argues that 1) the private sector benefits from better roads, 2) motorists benefit from not having to pay fuel duty and road-tax, and 3) the Treasury gets to mine a new income stream.
This is a very common technique. By separating out businesses, tax-payers and the Treasury, you look like you have got a fairly policy, and sound like you have really have thought about it and conducted a broad and balanced analysis. It allows you to look only at the benefits, without analysing the costs. You instinctively feel that there is no need to probe deeper into into the benefits and costs for any individual party, because you instinctively feel that there has been a proper analysis.
Of course, this is nonsense. If businesses benefit from better roads, this is only because they pay more tax. If motorists benefit from not needing to buy a tax disc, this is only because they had to buy a big black box instead. Conversely, the treasury's new income stream can only come at the cost of losing other income streams. None of this tells you anything unless you know who is paying more, who is getting less and what the net effect on investment is.
The result is that the questions that really matter are completely obscured. Questions like how much investment should there be? How should this be paid for? Who should pay it - should car-users subsidise lorry-users? How big should the public sector be?
These important issues get thrown up by real debates about public spending. But politicians simply avoid having these debates in the first place by having a ridiculous focus. For example, note how little discussion there is over cuts to the schools budgets when compared to discussion over free-schools: this is despite the free-schools policy only affecting a minority of already top-performing schools. Or how we have avoided a debate about local government finance by having a Council Tax freeze instead of debating the real problems. Or how politicians escaped debates on social care, pensions or the retirement age during the general election by focusing only on trivial freebies like the winter-fuel allowance and free bus passes.
People naturally respond to balanced language, even if the policy is not balanced. It is why tripartite expressions like "equality, fraternity and liberty" are so popular, and part of the reason why http://www.theyworkforyou.com/ tracks the number of times MPs use "three-word alliterative phrases" in debates. You may like to know that Ed Miliband has done it 338 times, and that's only just above average. A little birdy told me that Nick Clegg is floating with the idea of suggesting a 66% threshold to dissolve parliament, so that the coalition looks moderate and compromising if he goes for 55% - not unlikely, I think.
And the consequences? It is no surprise that people don't trust politicians anymore. We instinctively react to balanced language because normal people usually only use things like three-word alliterative phrases if they have something significant to say. That is why these linguistic techniques are so confusing, and it is disappointed to see that the RAC has joined politicians in the battle to pull wool over people's eyes.
Wednesday, 30 June 2010
Analysing the Council Tax freeze
Osborne promised to match Council Tax rises of less than 2.5% with treasury funds, effectively freezing Council Tax for two years. This is a foolish policy: it will spell diaster for the coalition in two years time and lead to a Labour landslide in the 2014 local elections.
Council Tax has the dubious distinction of being Britain's most hated tax. Who can forget the pensioners - people like retired social workers and former vicars - who went to jail rather than pay Council Tax rises of 12.9% in 2005?
We may be heading for a 1980s-esque confrontation between local and central government and very serious Council Tax rebellions. I'm predicting extremely serious problems for the coalition in two years and a big swing to Labour in the 2014 local elections.
You don't have to be a genius to see that an end to the Treasury's matched funding is enough to cause large Council Tax rises in the fiscal year 2012-2013. Assuming that inflation averages out at 2.5%, that central grants and redistributed business rates keep pace with inflation and that local government's costs increase with inflation - all three generous assumptions - there will be a 7.7% increase in 2012-13.
However, that doesn't begin to take account of cuts. Local government spending is not a ring-fenced budget, and assuming that health/aid remain ring-fenced and that defence/education face cuts of 10%, it is likely to be cut by a third.
But how much scope is there for such large local cuts? I've spoken to Shire councillors who think they can do it - we will see. But metropolitan areas in particular are going to really struggle, and 60% of District councils think that relatively modest efficiency savings are not achievable.
Part of the reason is that local authorities have already made cuts. Local authorities were asked to make 3% of efficiency savings in 2008-09 and a further 4% during 2009-10, and were the only part of the public sector to meet the targets set in the Comprehensive Spending Reviews in the last few years of the last Labour government. Many of the inefficiencies that exist in other parts of the public sector no longer exist in most councils.
Tory-run Dorest council declared last week that “We are now starting to look at which of our statutory services can have any excess trimmed. We have virtually no discretionary services left to cut.". Discretionary services are anything that local authorities don't *have* to provide by law, including libraries, swimming pools, museums, parks, meals-on-wheels and the like. Even after pretty much getting rid of all those things, Dorset isn't anywhere near making the required cuts. I don't see how they can possibly do it - particularly as there are minimum standards for statutory services, those councils have to provide.
Compounding this is great public misunderstanding. Last year, only 16% of local authority income came from Council Tax, and the majority comes from grants. This leads to an effect called "gearing". If funding coming from the grant system is cut by 1%, this requires more than a 5% rise in Council Tax for local authorities to . Vice versa, if inflation causes the cost of providing services to rise by 2% p.a., and the grant stays static, this requires a 10% p.a. increase in Council Tax just for spending to keep pace with inflation. You can quickly see how any real-terms cut in the grant quickly causes massive Council Tax increases, AND councils are going to have to deal with relatively high inflation AND they are going to have to deal with demographic pressure as the number of elderly requiring social care increases AND they are facing Herr Pickles telling them to increase the frequency of rubbish collections. Councils who don't meet the unrealistic level of cuts expected over less than 2years are going to need absolutely thumping Council Tax rises in 2013-14, and I think this will be the majority of councils.
My crude modelling predicts that the average local authority which only manages to cut by 10% in real-terms will have to raise Council Tax by - wait for it - 169% in 2013-14. And I thought the 12.9% rises in 2004-05 were bad: Osborne is literally sleep-walking into a complete disaster.
(I'm making the following broadly accurate assumptions: it remains true that grants finance 50% of expenditure and Council Tax finances 16% giving a gearing ratio of 3.125, councils have no significant liquid capital reserves, inflation stays at 2.5%, matched funding ends in 2013-14, income from service charges and business rates stays static, grants are cut by 33% and there are no serious changes to the system).
Unfortunately for the coalition, the public are unlikely to appreciate the reasons for thumping Council Tax rises. Most of the public don't understand how local authorities are funded, assuming that Council Tax funds 70-80% of local authority expenditure. And, of course, when faced with these rises the public usually don't go to the council, they go straight to central government and ask them to cap Council Tax and set local authorities new budgets, exactly what happened in 2004-05.
Something is going to have to give. So, what can the coalition do about it?
The simplest solution would be to take use a more realistic target of 10% real-term cuts over 2years and instead make greater cuts in central government, which started cutting later and more shallowly than councils and has more slack. But Osborne has bottled this, instead pushing local government to one side and hoping it goes away. The other option would be to drop the Council Tax pledge, which was made in 2008 without thought of the consequences. In other words, get some large inflation-busting Council Tax increases out of the way now whilst cuts are popular and spread the pain. It would be sensible, but again the coalition has bottled it.
A more controversial option would be for local authorities to slash and burn to meet their targets any way they can. But as I've already argued, they've already cut and the scope simply isn't there. For a council like Dorset to meet its targets, it would quite literally have to close every park, library and pool it has; demand ridiculously large social care fees; cut high-way maintenance completely and move to monthly rubbish collections. That is the kind of cut we are talking about in some cases.
The final solution would be to fundamentally overhaul local government finance - as recommended by every councillor, every academic, every think-tank and every review of the area that I've ever come across. If councils are to be accountable to local people rather than Whitehall beauraucrats, then that has to come with a good degree of financial autonomy. Unfortunately, the general concensus seems to be that no national politician will ever risk touching Council Tax after the poll tax brought down Thatcher. Shame.
Council Tax has the dubious distinction of being Britain's most hated tax. Who can forget the pensioners - people like retired social workers and former vicars - who went to jail rather than pay Council Tax rises of 12.9% in 2005?
We may be heading for a 1980s-esque confrontation between local and central government and very serious Council Tax rebellions. I'm predicting extremely serious problems for the coalition in two years and a big swing to Labour in the 2014 local elections.
You don't have to be a genius to see that an end to the Treasury's matched funding is enough to cause large Council Tax rises in the fiscal year 2012-2013. Assuming that inflation averages out at 2.5%, that central grants and redistributed business rates keep pace with inflation and that local government's costs increase with inflation - all three generous assumptions - there will be a 7.7% increase in 2012-13.
However, that doesn't begin to take account of cuts. Local government spending is not a ring-fenced budget, and assuming that health/aid remain ring-fenced and that defence/education face cuts of 10%, it is likely to be cut by a third.
But how much scope is there for such large local cuts? I've spoken to Shire councillors who think they can do it - we will see. But metropolitan areas in particular are going to really struggle, and 60% of District councils think that relatively modest efficiency savings are not achievable.
Part of the reason is that local authorities have already made cuts. Local authorities were asked to make 3% of efficiency savings in 2008-09 and a further 4% during 2009-10, and were the only part of the public sector to meet the targets set in the Comprehensive Spending Reviews in the last few years of the last Labour government. Many of the inefficiencies that exist in other parts of the public sector no longer exist in most councils.
Tory-run Dorest council declared last week that “We are now starting to look at which of our statutory services can have any excess trimmed. We have virtually no discretionary services left to cut.". Discretionary services are anything that local authorities don't *have* to provide by law, including libraries, swimming pools, museums, parks, meals-on-wheels and the like. Even after pretty much getting rid of all those things, Dorset isn't anywhere near making the required cuts. I don't see how they can possibly do it - particularly as there are minimum standards for statutory services, those councils have to provide.
Compounding this is great public misunderstanding. Last year, only 16% of local authority income came from Council Tax, and the majority comes from grants. This leads to an effect called "gearing". If funding coming from the grant system is cut by 1%, this requires more than a 5% rise in Council Tax for local authorities to . Vice versa, if inflation causes the cost of providing services to rise by 2% p.a., and the grant stays static, this requires a 10% p.a. increase in Council Tax just for spending to keep pace with inflation. You can quickly see how any real-terms cut in the grant quickly causes massive Council Tax increases, AND councils are going to have to deal with relatively high inflation AND they are going to have to deal with demographic pressure as the number of elderly requiring social care increases AND they are facing Herr Pickles telling them to increase the frequency of rubbish collections. Councils who don't meet the unrealistic level of cuts expected over less than 2years are going to need absolutely thumping Council Tax rises in 2013-14, and I think this will be the majority of councils.
My crude modelling predicts that the average local authority which only manages to cut by 10% in real-terms will have to raise Council Tax by - wait for it - 169% in 2013-14. And I thought the 12.9% rises in 2004-05 were bad: Osborne is literally sleep-walking into a complete disaster.
(I'm making the following broadly accurate assumptions: it remains true that grants finance 50% of expenditure and Council Tax finances 16% giving a gearing ratio of 3.125, councils have no significant liquid capital reserves, inflation stays at 2.5%, matched funding ends in 2013-14, income from service charges and business rates stays static, grants are cut by 33% and there are no serious changes to the system).
Unfortunately for the coalition, the public are unlikely to appreciate the reasons for thumping Council Tax rises. Most of the public don't understand how local authorities are funded, assuming that Council Tax funds 70-80% of local authority expenditure. And, of course, when faced with these rises the public usually don't go to the council, they go straight to central government and ask them to cap Council Tax and set local authorities new budgets, exactly what happened in 2004-05.
Something is going to have to give. So, what can the coalition do about it?
The simplest solution would be to take use a more realistic target of 10% real-term cuts over 2years and instead make greater cuts in central government, which started cutting later and more shallowly than councils and has more slack. But Osborne has bottled this, instead pushing local government to one side and hoping it goes away. The other option would be to drop the Council Tax pledge, which was made in 2008 without thought of the consequences. In other words, get some large inflation-busting Council Tax increases out of the way now whilst cuts are popular and spread the pain. It would be sensible, but again the coalition has bottled it.
A more controversial option would be for local authorities to slash and burn to meet their targets any way they can. But as I've already argued, they've already cut and the scope simply isn't there. For a council like Dorset to meet its targets, it would quite literally have to close every park, library and pool it has; demand ridiculously large social care fees; cut high-way maintenance completely and move to monthly rubbish collections. That is the kind of cut we are talking about in some cases.
The final solution would be to fundamentally overhaul local government finance - as recommended by every councillor, every academic, every think-tank and every review of the area that I've ever come across. If councils are to be accountable to local people rather than Whitehall beauraucrats, then that has to come with a good degree of financial autonomy. Unfortunately, the general concensus seems to be that no national politician will ever risk touching Council Tax after the poll tax brought down Thatcher. Shame.
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