Since I’ve been blogging light in recent weeks, I’ve not commented on the ongoing mess that Labour have got themselves into over the scrapping of the 10p rate of income tax. There isn’t much I can add that hasn’t been said a thousand times before. It is of course ludicrous that the Labour backbenchers have suddenly woken from their slumber on this issue, a year after we warned them what the implications of this reform would be. That the BBC have given the rebels such an easy ride for their johnny-come-lately rebellion is just par for the course.

But they do appear to have been bought off remarkably easily. The main measures for helping those hurt by scrapping the 10p rate seem like a total crock.

Let’s start with the retrospective raising of the winter fuel allowance. This is going to apply to all pensioners between 60 and 64, including my partner’s mother who is already roughly £50 a week month* better off due to her enjoying the full impact of cutting the basic rate from 22p to 20p. This is just throwing money around at random in the hope that some of it will stick.

And then there is the pledge to raise the national minimum wage for younger workers. First of all, this will only help those earning the absolute minimum wage for 18-21s. Someone working full time on the London “living wage” (£7.20 an hour) will still be whacked by the tax rise and yet only earns £13,000 a year. Secondly, it should be pointed out that any such an increase will mean that at least some of the cost of raising the winter fuel allowance is going to be paid out of increased tax revenue generated from young earners. The very lowest earners are going to be subsidising a benefits rise that will help many of the wealthiest (and yes, I do accept that the winter fuel allowance helps poor people as well, but still).

I’m all for raising the NMW for young people so it is comparable to the NMW for older workers, but this rise is happening for all the wrong reasons: getting the government out of a fix rather than doing what is right in the first place.

Surely it is unacceptable to have people on minimum wage paying income tax anyway? It is just a deadweight cost to the economy. The government should be working to narrow the gap between personal allowance and the NMW, not widen it. What possible economic reason is there to make employment even more expensive and wages even more inflationary?

But my greatest fear is that if the Labour rebels really are so easily bought off, they will capitulate over 42 days quite easily as well. They really are a useless shower. Give them a totemic act of class warfare like fox hunting to get self-righteous about and they will push the government to the limit. But helping poor people? Defending civil liberties and the rule of law? What is the bloody point of them?

* Oops! Good job I corrected that before anyone else spotted it.

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My latest article on Comment is Free is now up:

Instead of doggedly trying to outpace property prices, imagine if the exchequer went the other way. And imagine if it used the extra revenue that resulted to cut income taxes. Wouldn’t it be fairer to allow people to keep more of the money that they earn in exchange for having less inheritance to look forward to? Wouldn’t that be better for the economy: lowering the costs of labour while doing more to capture unearned wealth? Shouldn’t at least one of the main political parties be championing such a position?

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Chris Rennard wants your questions to put to the Lib Dem candidates.

Now, I’m sure I could have borrowed a video camera from somewhere and done this with all the bell and whistles, but instead I thought I’d try to encourage other people by demonstrating how incredibly easy it is to record a video on your mobile phone and have it up on YouTube within 5 minutes.

Have to admit, it was a struggle to fit everything into the 10 seconds my phone will allow, but here it is:

I hasten to add that the handbags in the background are not mine! Well, not all of them.

I see there’s already a growing number of videos up. Great news. Now - what will the candidates have to say for themselves?

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I wrote this article in Summer 2006 for Liberalism - something to shout about, published by Graham Watson MEP and edited by Simon Titley. I’m taking the liberty of republishing it here, but if you want to read the other articles - by Graham, Simon, Ros Scott, Jonathan Calder and Simon Bryceson, follow the above link for an order form.

Any article on this topic will inevitably date quickly, so please bear that in mind. In particular, “Hands off our future” is a reference to an abortive attempt of mine to set up a campaign website on the topic which in the end I didn’t have the time to keep going.

Demographic change is creating a dangerous situation, one where younger generations are suffering increasing economic injustice. A system of ‘neo-feudalism’ will emerge unless radical steps are taken. Do the Liberal Democrats have the courage to campaign for justice – or will they miss the boat?

Introduction
There’s no easy way to put this, and I can almost hear the shrieks of outrage as I type, but young people are being expected to shoulder too much of the UK economy while older people are getting away with shouldering too little.

That isn’t to say that pensioner poverty doesn’t exist, nor is it to deny that some young people are extremely wealthy. As in any discussion on economics, we are talking in generalities here. It is however to say that, as well as being unfair, it is having a deleterious effect on our economy and stands to reinforce class barriers and social immobility at a time when we are flattering ourselves that such things have been relegated to our past.

Young people are hit by a sextuple whammy of costs that older people do not have to worry about to the same extent. These are: graduate debt, credit, saving for the future, environmental taxation, income-based taxes and housing costs. We should take a moment to consider each one in turn:

The problems
Housing costs
The owner-occupier dream of the Thatcherite 1980s is coming to an end. Only 20% of 20-24 year olds are homeowners, compared with 34% in 1994. First-time buyers now make up only 38% of total buyers¹.

Why is this? Simply enough, house prices have got out of control. According to the Department for Communities and Local Government², the average house price across the UK is now £190,051; in London it is £279,418. Median earnings meanwhile are £22,412 (less than one-eighth of the average house price) across the UK and £28,912 in London (less than one-ninth of the average London house price)³. According to Nationwide, the median home loan is now worth 3.21 times the incomes of those buying the property, compared with just 2.39 in 1994⁴. That of course means that half of new loans are being lent at even higher multiples. According to the Halifax⁵, public sector workers cannot afford average priced homes in 65% of towns, compared with just 24% five years ago. Mortgage repayments typically now use up 42% of take home income.

Unsurprisingly, 40% of first-time buyers now get parental help⁶. For many more people however, the solution is to simply rent. There again, the options available to people 20 years ago simply do not exist. The right-to-buy policies of the 1980s, which got so many people onto the housing ladder (earning many of them small fortunes in the process), were unsustainable as they depended on selling council housing that was not replaced.

One other option is buy-to-let: buy a house in a more affordable area than the one you live in and use the income from that as security. This in turn of course helps bloat the housing market even further, pricing even more first-time-buyers out of the market.

Ultimately, all of this must be unsustainable, although the bubble is still looking fairly robust at the moment. If the housing market does crash however, it is again young people who will predominantly suffer.

The obvious solution to all this is to build more affordable homes. Yet that has been official government policy for years now and little progress is being made. We cannot escape the fact that, under the current system, property developers have very little interest in building large numbers of affordable homes.

Graduate debt
People graduating from university this year owe an average of £13,500, according to the Association of Investment Trust Companies (AITC)⁷. As with many of these figures, it needs to be emphasised that this is an average: graduates from wealthy families typically have far less debt to repay, while poorer graduates will have significantly more. This figure also does not take into account variable top-up tuition fees, introduced this year: at a stroke, such fees will increase debt for graduates from the top universities by £9,000 to £12,000.

Liberal Democrat policy is to scrap tuition fees. This has been very popular, but it should be remembered that students from the poorest backgrounds don’t pay fees anyway while students running up average debts and paying full tuition fees would still end up graduating with £10,000 hanging over their heads.

One argument used to justify the increased burden that individuals themselves pay is that graduates earn more; the Dearing Report⁸ claimed that graduates would, on average, earn £400,000 more over their lifetime. Yet, as higher education has expanded, so the worth of each individual degree has fallen. The University of Swansea estimates⁹ that the ‘value’ of a degree for a male arts graduate is now just £22,000. Yet with degrees now a minimum requirement for so many jobs these days, non-graduates find themselves severely disadvantaged regardless of their ability.

Credit
71% of young people (aged 18-29) have an overdraft facility and one-in-five are permanently overdrawn¹⁰. 18.7% of all bankrupts were aged 18-29 in 2004/5, compared with just 7.8% in 2001/2.

There is a temptation to dismiss these figures as simply young people spending irresponsibly, yet that is to ignore how credit has been promoted quite as fiercely as it has been over the past couple of decades. It is also to ignore the fact that banks will tend to refuse lower interest loans to customers with little credit history while being quite happy to give them credit cards. Borrowing is treated as a rite of passage that young people are expected to go through and, whether individuals struggle or not, banks are guaranteed a profit.

To his enormous credit, Vince Cable MP has been making a noise¹¹ about the problems associated with unsustainable levels of debt for some time now. The party should pay him more attention.

Saving for old age
Young people are now expected to save for their own old age in a way that their parents’ generation never need worry about. Final salary pension schemes are a thing of the past. The Turner proposals¹², largely accepted by the government, offer some hope for the future, but there is no escaping the fact that, for them to work, people must contribute more out of their own salaries.

Yet as the importance of saving for the future has increased, in fact the opposite has happened. According to Pensions Minister James Purnell in July 2006¹³, the number of young people saving for a pension has fallen from one-in-three to one-in-four since 2000. Purnell was quick to pin the blame on young people themselves for their “live fast, die poor” lifestyles. Can we really simply dismiss this trend as shortsightedness, or are young people simply expected to cope with debt? This is a vital question for politicians to answer if they hope to make opt-out stakeholder pensions – one of the lynchpins behind the government’s new pensions strategy – a success. If it is financial pressures that are putting young people off from taking out second pensions, there is a real risk that a disproportionate number will opt-out under the new scheme.

Income-based taxes
There is no denying that income taxes fell significantly during the 1980s and 1990s. I mention them here because it needs to be emphasised that this form of taxation is paid predominantly by economically active middle-income earners: the rich avoid them while the poor and economically inactive pay very little.

In the recent past, income taxes have begun to creep up again, under the guise of national insurance contributions. Liberal Democrat policy in 2005 would have added an additional 4p in the pound due to the introduction of a local income tax.

Climate change and resource taxation
It is now largely accepted that the human race is responsible for global warming and climate change. Because of inaction in the past and little scope of major improvements in at least the short term, significant climate change is also now regarded as all but an inevitability. Mean temperatures are expected to increase by two degrees Celsius by 2050¹⁴. Today’s young people, their children and their grandchildren will be paying the price in the future.

Today’s young people, however, are also expected to pay the price now; environmental taxes will either creep up if the timidity of the current government continues, or significantly increase if a more environmentally responsible government takes control. Either way, today’s young people will be expected to bear the brunt, on top of everything else, in a way that their parents’ generation was never expected to.

The future – neo-feudalism?
What no-one should be blind to here is that these factors do not affect all young people equally. Families with assets are able to help their children out by subsidising student costs, housing and ultimately by passing on an inheritance. They help out in other ways too. A recent report from the Sutton Trust¹⁵ found that 54% of top journalists went to public school, up from 49% in 1986. Similar statistics can be found for the legal profession and other white-collar jobs.

One factor driving this is that, as more and more people have degrees, employers are increasingly dependent on other ways of assessing candidates. A simple mechanism used by a lot of employers is to offer internships and most young people who take up unpaid work experience in this way are dependent on their families to see them through. Thus the expansion of higher education seems to be doing little to improve opportunities for young people from poor backgrounds; indeed, it could actually be entrenching privilege.

There are other ways as well in which the ‘haves’ can consolidate their position. The subsidised loans available to students may be intended to help poorer students feed and house themselves at university, but increasingly they are used by wealthier families as an investment: invest the money in an ISA and pocket the difference. Inheritance tax, properly managed, is effectively voluntary, with wealth handed down the generations long before the aging relative dies – and the bigger the estate, the greater the likelihood that families will have made such provision.

The important question we should be asking ourselves is, where is this taking us? I have dubbed the (avoidable) nightmare scenario ‘neo-feudalism’. Through a combination of some talent, some hard work and a large amount of luck, some families are consolidating their position at the expense of other families. The current fad for buy-to-let could be the tip of the iceberg: there is every reason to believe that the people who play the system well will increase their property portfolios over time, pricing ever more people out of the property market in turn.

For the new underclass, the future is bleak, with the rising middle-class operating an effective closed shop in a way that would make the most militant shop steward baulk. Meanwhile, the children within these ‘landed’ families will be trapped in a cycle of dependency. These mini-Princes of Wales will be forced to wait impatiently for their inheritances to come through, conflicted by love for their parents and the desire for freedom and independence. Entrepreneurship, creativity and hard work will be stifled by an economy dominated by class and privilege.

Policy solutions
Higher education policy
The Liberal Democrats’ policy to scrap tuition fees has served the party well, but there are at least two major reasons for reviewing it.

A principled reason is that it doesn’t actually help the poorest. We may well wish to argue that students from lower middle class backgrounds can ill-afford the tuition fees they are forced to pay under the present system, but it is highly doubtful that scrapping fees will see a massive influx of students from the poorest backgrounds.

The pragmatic reason is that tuition fees have been with us for seven years now. Hundreds of thousands of young people have already paid them, and there is an increasing danger that this policy will decline in popularity as young people and their families increasingly ask themselves “well, we had to pay fees, so why shouldn’t they?”

One equitable solution to this would be to offer tax relief on student debt repayments. The full amount may not be affordable, but a significant proportion would not only amount to the same thing as paying full tuition costs, but would benefit all graduates.

Going further, we could replace our existing spending commitment to scrap fees with a return to the means-tested maintenance grant. This would target our funding at those least able to pay.

It is unlikely to amount to much while the massive expansion of higher education continues however, and this leads me to consider an even more radical proposal. Why not remove the universal state subsidy on university tuition altogether, replacing it with means-tested cover for both tuition and maintenance? This more targeted approach would enable us to help students most in need, while giving the market a greater role in determining demand for higher education.

There are bound to be howls of protest regarding this proposal and I have to admit I am not fully convinced of it myself: how would we preserve liberal arts departments for instance? How can the market determine how many medievalists the country to fund? I am merely throwing these ideas in to provoke a discussion I believe the party desperately needs to be having.

The bottom line for me is that, at the next general election, we need to have much more to say to both graduates and the poorest students. With the party committed to keeping spending commitments down to a minimum, this cannot be done without significantly changing our existing policy of tuition fees.

Taxation
Just as we are sometimes guilty of portraying our policy of tuition fees as a social justice issue when the poorest are unaffected, so the same is true with our policy to replace council tax with a local income tax. The claim is frequently made that it would benefit the poorest, and specifically pensioners. Yet the poorest are entitled to Council Tax Benefit and are thus exempt.
We aren’t, to be fair, alone in this. Help the Aged’s website¹⁶ claims that an elderly couple with just £182 per week income “could end up paying the same level of Council Tax as their neighbours, a young and wealthy couple with an income of tens of thousands”. Yet if you look elsewhere on this website, it helpfully explains that an elderly person on that level of income is exempt from the tax. A curious game of deception is at hand here, and unfortunately the Lib Dems bear much responsibility for it.

The real problem with our existing policy is that it represents a massive tax cut for the owners of some of the most valuable properties in the country, while shifting the entire burden of taxation onto economically active young people. This makes no economic sense at all and will help to increase property prices still further, enriching the wealthy and pricing even more people out of the housing market.

We are frequently told that this policy is important because it helps old people who may have large wealth, but have little income. In fact, asset rich, cash poor pensioners form a tiny minority. In his submission¹⁷ to the Tax Commission report, Prof Iain McLean cited research from Warwick University, which shows that just 1.2%-2% of the population fits into this category. There are other ways to ensure that this small group does not unduly suffer without introducing a system that would unfairly penalise others.

The signs coming from the party’s Tax Commission unfortunately sound remarkably confused. By the time you read this essay, its final report¹⁸ will have been published but, at the time of writing, it looks as if it will be a strange mix, calling for national income taxes on the one hand while introducing even higher local income taxes on the other. This strange, hybrid ‘pushmepullyou’ is unlikely to please anyone and is likely to confuse seriously both journalists and the general public.

So what’s the solution? Simply put, our new taxation policies have a property tax-shaped hole in them. We should fill it with our historical commitment to introduce a system of land value taxation. This would encourage greater efficiency of land, lower property prices, and discourage second home ownership and buy-to-lets. Safeguards could be introduced to ensure that old people would not be taxed out of their homes, such as a system whereby people could voluntarily choose to defer tax payments until after they realise the asset.

Funding the future
Britain is appalling at squandering its assets. North Sea oil, now rapidly drying up, has been used as a cash cow by successive chancellors for the past 30 years, with Gordon Brown using it to fund spending commitments last winter. Yet once this natural resource is gone, it’s gone.
Other countries have a more enlightened view. Since 1995, Norway has invested its North Sea oil receipts into its National Petroleum Fund (recently renamed the National Pension Fund)¹⁹. This fund, worth 1.48 trillion Kroner (about £125 billion or €185 billion) in 2006 and administered by the Central Bank, is designed to ensure that this short-term windfall is enjoyed by future generations.

Alaska operates a similar scheme called the Permanent Fund²⁰. Though much smaller – $32 billion (about £17 billion or €25 billion) at the end of 2005 – the fund is enough to pay out a dividend to Alaskan residents of around $1,000 per capita per year.

It is mostly too late to put Britain’s North Sea oil receipts into a similar fund, but as climate change is taken more seriously, this could be a useful way to handle receipts from environmental taxation.

Using environmental taxes to fund general expenditure is problematic at best, particularly at high levels, because if they are successful we can find ourselves with a shortfall. Climate change is likely to make the twenty-first century a very unstable period. Establishing a fund in this way would help give future generations a helping hand.

Getting our message across
One major objection to the party shifting its policy more towards young people is that older people vote in greater numbers and should therefore be our main target. I would repeat that I am not calling for us to ignore old people in elections, and strongly support our policy positions on a Citizens’ Pension and increasing the basic rate.

But, despite the fact that we all but stuffed their mouths with gold coins in the last election, old people did not generally vote for us. This is partly because of tribal loyalty, and partly because of a perception of the party brands – indeed, where we do well amongst older voters it is because they recognise our strengths as community campaigners. By contrast, younger people flocked to us in the last general election, despite us having very little to offer them. We have a real opportunity here not simply to capitalise on the votes of under-40s but to create lifelong Liberal Democrat supporters.

For such a campaign to work, however, it cannot simply be conducted by the occasional press release. At the moment, the media is largely unaware of this issue, normally reporting rises in property prices as an unequivocally good thing. For us to make an impact on this issue, our frontbench team must be seen championing it. It should get mentioned in every speech Ming Campbell makes between now and polling day.

The good news about a campaign aimed specifically at young people is that much of our target audience is web-savvy. What’s more, the people whom these issues affect are getting increasingly organised – see websites such as housepricecrash.co.uk, pricedout.org.uk and Hands Off Our Future. It is clear from reading the forums on sites such as these that there is a real sense of injustice out there and that people are crying out for a political party to take these issues on. If we miss this opportunity now, we may find ourselves paying the price in the future.

References
1 BBC (2006). How hard is it to afford a house? BBC News Online, 6 July; http://news.bbc.co.uk/1/hi/business/5145090.stm
2 UK Department for Communities and Local Government (2006). House Price Index – May 2006 (DCLG Statistical Release 2006/0051). Press release, 10 July; www.communities.gov.uk/index.asp?id=1002882&PressNoticeID=2197
3 Bachelor, L. & Flanagan, B. (2005). On average, you can’t afford it. Observer, 4 December; http://money.guardian.co.uk/houseprices/story/0,1456,1658132,00.html
4 BBC (2006). ibid.
5 Halifax plc (2006). Halifax Key Worker Housing Review. Press release, 29 July; www.hbosplc.com/economy/includes/KeyWorkerAffordability(UK).doc
6 BBC (2006). ibid.
7 AITC (2006). Press release, 9 August; www.aitc.co.uk/press_centre/default.asp?id=5439
8 The National Committee of Enquiry into Higher Education (1997). www.leeds.ac.uk/educol/ncihe/
9 O’Leary, N. & Sloane, P. (2005). The Changing Wage Return to an Undergraduate Education. IZA Discussion Paper No. 1549. http://ssrn.com/abstract=702781
10 Credit Action (2006). Debt statistics. www.creditaction.org.uk/debtstats.htm
11 Cable, V. (2006). Press release, 23 July; www.libdems.org.uk/news/young-peoples-debt-spiralling-out-of-control-cable.html
12 The Pensions Commission (2005). Second report. www.pensionscommission.org.uk
13 Purnell, J. (2006). Speech, 12 July; www.dwp.gov.uk/aboutus/2006/12-07-06.asp
14 UK Department for Environment, Food and Rural Affairs (2001). Literature review of the implications of climate change for species, habitats and the wider UK countryside. www.defra.gov.uk/wildlife-countryside/ewd/rrrpac/lreview/06.htm
15 The Sutton Trust (2006). The Educational Background of Leading Journalists. www.suttontrust.com/reports/Journalists-backgrounds-final-report.pdf
16 Help the Aged (2006). www.helptheaged.org.uk/en-gb/Campaigns/PensionsAndBenefits/CouncilTax/
17 McLean, I. (2006). www.libdemsalter.org.uk/archives/000078.php
18 Liberal Democrats (2006). Fairer, Simpler, Greener. Policy paper 75. www.libdems.org.uk/media/documents/policies/PP75%20Fairer%20Simpler%20Greener.pdf
19 Wikipedia (2006). The Government Pension Fund of Norway. http://en.wikipedia.org/wiki/The_Government_Pension_Fund_of_Norway
20 Wikipedia (2006). Alaska Permanent Fund. http://en.wikipedia.org/wiki/Alaska_Permanent_Fund

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Nick Clegg repeated his claim yesterday that under Ming the party was too inward-looking. To quote Elspeth Campbell: “I don’t know if you’re being helpful or not.”

I’ve already rebutted that argument and don’t intend to repeat myself. But I’m not blind to the fact is that by repeating this nonsense argument, Clegg is subtly contrasting himself with Chris Huhne and his stance on Trident. The subtext is that he’s the candidate that will concentrate on the issues that matter to the public, while Huhne would have the party revisiting old policies in an act of ideological purity.

And as I said yesterday, in that respect he’s right. Huhne’s Trident stance is, in my view, good policy but bad politics. This isn’t a debate the party should be having during this contest. It smacks of vanity, and at 11% in the polls, vanity is something we can ill afford.

If Huhne wants to talk about policy, he should concentrate on issues which have immediate relevance to large sections of the public. I’ve already mentioned two interrelated ones - housing and intergenerational equity - I’m sure he could come up with others. He should be concentrating his firepower on Clegg’s inability to make his own rhetoric match his detail, calling on the party to move out of its comfort zone and reach out while being apparently afraid of saying anything of substance along those lines in case it alienates a wing of the party.

Huhne’s advantage is that by going for the big tent approach, Clegg has compromised himself. In a large number of areas he will struggle to say anything at all that won’t alienate either David Laws or Steve Webb and their respective camps. He should be pressing that advantage home, not making Clegg’s points for him.

While at the start of this campaign I was guilty of a bit of policy arson myself by rubbishing our existing commitment to replace council tax with local income tax, even I wouldn’t expect either candidate to use this opportunity to set out detailed policy in that area. This is a good opportunity to signal areas that need revisiting, not to spell out solutions.

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Okay, I admit it. If I hadn’t been hungover yesterday morning I probably would have resisted the temptation to use the word “meltdown” in my blog about Team Clegg yesterday. A wobble it certainly was however, and while I of course accept Richard Allan’s apology, he still has not explained where the email addresses they were using had come from. One suggestion has been that it was Ming Campbell’s supporter list (something which I was signed up to as I was certainly an ABH voter).

The fact that I claim to be undecided in this election despite the fact that I express warmth to Chris Huhne’s campaign and am rather more critical of Nick Clegg seems to cause some people a lot of confusion, so let me be more explicit: my default position is that unless Nick Clegg badly alienates me, or Chris Huhne does something bloody spectacular, my vote will be going to the former not the latter.

Chris Huhne was the right candidate in 2006 and everything that has happened since has vindicated that fact. We wouldn’t be where we are now if he had been elected. But Nick Clegg is not Ming Campbell. That Clegg is the better communicator is clear. One person who was at the South Central conference last Saturday put it to me yesterday thus: both candidates spoke with passion about social justice but while Huhne barraged the audience with statistics, Clegg talked about a woman on a housing estate in his constituency. The best part of Ming Campbell’s speech at party conference - the part that signified that he finally got it - was when he talked about the people he had met since becoming leader, and their experiences.

Chris Huhne ought to set himself a challenge: when he next does a keynote speech he should make it a statistics-free zone. Clegg’s speech this week certainly was.

Saying all that however doesn’t make me an uncritical flag-waver of Nick Clegg by default, a fact which appears to cause a number of readers of this blog great difficulty. Where did all this bullshit about undeclared bloggers having to be impartial come from? What’s wrong with being inclined to vote Clegg but having a sense of loyalty to Huhne? And what’s wrong with pointing out that the Golden Child has feet of clay?

For feet of clay he certainly has. His campaign launch last week didn’t merely not impress me, it pissed me off because I felt he was insulting the intelligence of a very significant section of the party. Extolling the party to move out of its ‘comfort zone’ does not ring true coming from a candidate who, two years ago, was telling us to do the opposite. It was simply not true to claim that the party has been locked up in “internal self-analysis.” And claiming to be anti-establishment whilst having the clear backing of most of both the party and media establishment was simply bizarre. He should hire Antony Hook as his personal BS-detector.

But let’s take the two key ideas that came out of his Sheffield speech - the need for the party to move out of its comfort zone and the need for us to extend our supporter base - and apply it to his speech this week at the National Liberal Club. The latter speech has five main themes - empowering individuals, extending opportunity, balancing security and liberty, protecting the environment, engaging with the world - and I’ll take each one in turn, giving each a rating out of five for comfort (5 - the Liberal Democrat equivalent of a plush sofa in front of a roaring fire), reaching out (5 - the political equivalent of Mr Tickle) and my personal opinion. Generally speaking, a low comfort rating and a high reaching out rating suggests that the substance broadly matches the rhetoric:

Empowering Individuals

First of all, “empowering individuals” is horrid language. Of course, Huhne has already bagged “people in charge” so maybe he was stuck with how to put it. And to be fair, he recovers well with this important distinction:

“Our objective isn’t simply to bring power closer to people. It is to give power to people.”

I’m also not sure about this stuff about favouring communities over bureaucracies. Of course the former is always preferable over the latter, but they are hardly opposites and communities can be pretty oppressive things. One of the key features of “proper” community politics as opposed to communitarianism is that the latter lionises community while the former critiques it. Indeed, at worst, communities can be pretty bureaucratic themselves: there is an order of things, and woe betide anyone who does not go along with that. My parents’ experience of joining a village community 7 years ago would confirm that.

Much of the rest of this section is firmly in the comfort zone: change the electoral system and localism. No great surprises there. The key paragraph in this section is here:

“We need to set some ground rules here: our universal public services must be free to use and accessible to all. But beyond that, I want us to think afresh about how they should be funded and delivered.”

It is a shame he does not expand on this. How does this differ from, say, the Huhne Commission on Public Services which the party adopted four years ago? Does he side with Steve Webb or David Laws (Chris Huhne’s own position on this is spelt out here)? This is a crucial area we need to hear much more detail from him on.

Comfort rating: most of it is pretty safe ground and even the rhetoric about public services is pretty similar to what Kennedy was saying five years ago. 4/5

Reaching out rating: talked about PR without mentioning PR, which is good politics. But mostly this is well trod territory for the Lib Dems. 2/5

Personal rating: nothing new, but little I object to. 4/5

Extending Opportunity

This section, to me, is particularly confused. First of all, it’s a red rag to a bull, I’m afraid, to call for the Lib Dems to work ceaselessly for a meritocratic society, for reasons that I’ve already outlined on this blog. Saying you believe in a society where everyone gets their just deserts is another way of saying that some people ‘deserve’ to be poor. You can comfort yourself that you strive for equality of opportunity, but ultimately it is social Darwinism by any other name.

Much of this section is taken up discussing the pupil premium policy, which is already party policy and wholly uncontroversial within it.

On benefits, Clegg seems to be, well, confused. In particular, I simply don’t understand this bit:

“Tony Blair famously promised ‘a hand up, not a hand out’, but Gordon Brown’s obsession with means tested benefits has had precisely the opposite effect.

“The Liberal Democrats will deliver where this government has failed. We must take people on higher earnings off means tested benefits and use the money to help the poorest pupils in our school system.”

What he’s actually calling for here is more means testing, not less, but he presents it as if he opposes means testing. Again, what it boils down to is a restating of party policy, shortening the taper of tax credits. But then our policy isn’t quite as simple as that as we are also in favour of raising child benefit, which higher earners would also be entitled to.

This bit is also confused:

A higher basic pension, linked to earnings, will get our pensioners out of poverty and off welfare for good.

Well, I suppose. If you don’t regard the basic state pension as welfare - a position which is pretty unsustainable since the link between NI and pensions became so eroded. And again, there’s nothing new here.

We have, to be fair here, a slightly confusing policy (not a criticism, just a statement of fact), but Clegg’s role here is to provide clarity not obfuscation.

But in a section on social mobility, it is striking what Clegg does not mention here: housing. How can you do a speech about social mobility and not reflect on housing? This is an issue that effects hundreds of thousands of people across the country and is shooting up the political agenda. We can’t afford to be silent on it. What is his position on the number of houses we need to build nationwide for instance? What does he have to say about council housing?

Linked to that is another of my pet issues: intergenerational equity. Linked inextricably with social mobility, what does Clegg have to say about the fact that wealth is increasingly being locked up within families, causing wider mobility problems and causing the burden of taxation to lie unfairly on incomes?

Neither housing nor intergenerational equity are obscure issues. Read any national newspaper and you’ll see these cropping up again and again. There are votes in these areas for a party leader looking to reach out beyond the Lib Dems’ normal supporter base.

Comfort rating: there doesn’t seem to be anything here that the party didn’t back overwhelmingly at conference last month. 5/5

Reaching out rating: education and pensions are hardly new territory for us. 2/5

Personal rating: no mention of housing or intergenerational equity is a major disappointment for me, and much of the rhetoric seems confused. 1/5

Balancing Security and Liberty

First of all, since when did Liberal Democrats talk about “balancing security and liberty”? Indeed, I challenge any liberal to demur with this statement from our recent governance policy paper (pdf):

“Security can only be genuinely realised if liberty, justice and human rights are upheld as the cornerstone of our democratic system, to be enjoyed by all on an equal basis. Liberal Democrats believe that ceding liberty to attain security jeopardises both.”

With that said, this lazy formula is not returned to in the body of the speech itself. Indeed, not surprisingly for our Shadow Home Secretary, this section is one of the strongest parts and I think he gets the balance right.

What I’m less convinced by however is that there is anything here that Simon Hughes or Mark Oaten weren’t saying before him. One of Clegg’s selling points is that he isn’t afraid to talk about crime but I’m simply not convinced that he’s bringing anything particularly new to the table.

What he is probably better at doing is articulating our policies. Credit to him is due for ditching Oaten’s stance about “tough liberalism”. But again, is this reaching out to people and knocking the party out of its comfort zone? Oaten at least could be credited with attempting to do that with his rhetoric; the problem was his rhetoric was utter balls.

Comfort rating: nothing new here, and a comfortingly liberal approach. 4/5

Reaching out rating: I know how the media works and that simply by saying that the Liberal Democrats must not be afraid to talk about crime makes it sound like he’s being much more radical than he is. 3/5

Personal rating: I can’t fault the rhetoric, but the slogan about balancing security and liberty has got to go the same way as Tony Blair who loved it so much. 4/5

Protecting the Environment

This is turf that Huhne has made his own, so it is interesting to see how Clegg’s position contrasts. What he does not do is make the case for climate change - that battle has already been won. What he does instead is discuss how we can win people over to make personal sacrifices for environmental gains. I have to give credit where it is due: this is an important topic to highlight and a good tactical stance to try and put some water between the two candidates.

Once again: notice the complete absence of statistics in this section, even in a section on climate change of all topics. His broad theme, that government must practice what it preaches, reminds me of the running battles that Donnachadh McCarthy used to have with the Ashdown and Kennedy regimes to persuade them of the same thing. How far we’ve come.

But for all that, once again, I’m also very conscious that there is almost nothing here that is new. It is also unclear where he ultimately stands on the party’s green tax switch policy - the line about people hearing only “tax” when you talk about green taxes is well made but almost suggests an antipathy to this approach. There is almost nothing in this section that David Cameron wouldn’t be comfortable about saying, with the obvious exception of the last two paragraphs of course.

Comfort rating: a gentle critique of the current party stance. 3/5

Reaching out rating: the emphasis on practicing what we preach and international efforts don’t hurt. But ultimately, talking about the environment at all will switch a lot of people off. 3/5

Personal rating: I don’t disagree with his line of argument, but wonder where it leads us. 3/5

Engaging with the world

Another strong section which I struggle to find fault with. Indeed the final three paragraphs are quite stirring stuff for any internationalist:

“But the great external threats that we face – from climate change to terrorism to cross border crime – are all linked by one fact: that power has been globalised, but our methods for controlling it have not.

“The challenge before us then is to construct a system of global governance capable of controlling global power.

“Only Liberalism, with its easy accommodation both with the market economics that drive globalisation and the internationalist politics needed to regulate it, is capable of guiding us in this process.”

But once again I return to my two tests: in what way is this breaking free of the party’s comfort zone or reaching out to new supporters? This is traditional Lib Dem policy in traditional Lib Dem territory.

Comfort rating: stirring internationalist stuff which conveniently avoids any talk of referendums. 5/5

Reaching out rating: even the populist globalisation stuff such as international development (I thought it was required by law that all senior politicians must pay homage to Make Poverty History in any speech on globalisation these days?) is barely touched on here. And what about that referendum? 1/5

Personal rating: Great stuff, but then I’m weird. 5/5

TOTAL COMFORT RATING: 21/25
TOTAL REACHING OUT RATING: 11/25
TOTAL PERSONAL RATING: 17/25

Conclusions: the rhetoric does not match the detail. There is very little that I could find in this speech that was new or challenging. This was a well articulated speech that will do little to persuade members of anything other than of Nick Clegg’s presentation skills and accord with core party values. Some of his rhetoric - about balancing security and liberty, a rose-tinted view about community and a mild scepticism about green taxes - sound conservative, but there is more than enough evidence here to suggest that Clegg is firmly liberal.

If he wants a rightwards shift in our policies on crime and public services (for example) now is the time to start talking about them and to seek a mandate for change. But he hasn’t. There is little I object to here and much that I strongly applaud. But if Clegg is going to continue to make speeches like this, he should drop the hyperbole about shaking up the party.

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Polly Toynbee mourned the death of social democracy in the Guardian yesterday which, based on her definition, is not something I will be shedding many tears over. He kneejerk reaction that what Brown should have done instead of raising the IHT threshold was to increase income tax on people with incomes above £100,000 was akin to arguing that instead of shooting himself in the foot he should have simply shot himself in the head. Not only would such a move have been massively unpopular, but it wouldn’t have made much economic sense either.

Fortunately, calmer voices were also to be found in the Grauniad, with Shelter’s Chief Executive Adam Sampson giving a much more lucid account about why wealth taxes are a good thing and the government so wholly wrong this week. In doing so, he breaks a major taboo, suggesting that our home owning economy might not be the unambiguous good that the cross-party consensus asserts.

The problem, which Sampson readily acknowledges, is that when you live in a society where 70% of the electorate are home-owners, making the national interest case for wealth taxes is a thankless task. Quite what a mountain we have to climb is summed up by Andy Beckett’s article on IHT which explores quite how unpopular the tax is and why. Beckett or more precisely Professor Stuart White, for that is who he is quoting, manages to both sum up the conundrum and miss the point with this sentence:

“What seems to have come through in Britain, post-Thatcher, is not so much a meritocracy as a feeling that what you get is what you’re entitled to.”

Michael Young, the man who coined the term meritocracy in 1958, became exasperated towards the end of his life at the way in which politicians came to adopt the term uncritically. His 2001 essay on this is even more relevant now than it was back then. The point is that exhorting meritocracy leads precisely to the view that people get what they deserve. The political establishment’s failure to challenge the idea that it is okay for the rich to get ever richer so long as you piously acknowledge the importance of “equality of opportunity” is precisely why the general public seem so resistant to wealth taxes. The fact that it could lead to, among other things, lower income taxes, increased social mobility and a more entrepreneurial culture falls on deaf ears.

The vested interests which ultimately defeated the 1909 People’s Budget sat in the House of Lords. Sadly, those same vested interests now dominate the electorate (although I suspect that over the longer term these mini-property empires will begin to aggregate as some manage to press home their inbuilt advantage better than others). For a substantial minority of the population that represents the death of hope: a life of no accumulation of assets, high income taxes and high user charges on services.

I see this as a profoundly depressing future; the very antithesis of progress whether you are coming at it from a liberal or a socialist perspective. Yet the Lib Dems can’t really give Gordon Brown too hard a time over it. While the rhetoric of our taxation policies is quite sound, almost everything we are committed to doing in our hypothetical first term of government is to compound the problem. In the long term, we’re committed to land value taxation; in the short term we’re committed to scrapping municipal property tax (making the eventual implementation of LVT much harder). In the long term, we’re committed to reforming IHT into an acquisitions tax, thus closing off a major loophole; in the short term we’re committed to raising the IHT threshold as well. Ming was careful at is conference speech to talk of transferring the burden of taxation from incomes and onto pollution - not resources. At a time when he desperately needs a USP, and the cause of progressive taxation needs a champion, he’s being advised to back away slowly from the sound of gunfire.

But perhaps I’m being too harsh on political parties. They are, after all, prisoners of an electoral system that gives enormous power to a handful of swing voters. All the time the parties are forced to chase the same small part of the electorate around like Pepe le Peu, the scope for making the case for broader policies will always be limited. Somehow we need to capture the public’s imagination outside the party political sphere. Anyone got any ideas?

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There are two ways you can indulge in a bit of fantasy at Blackpool this week. One is to see Hot Ice, the iceskating spectacular. The other is to listen to Gideon Osborne for an hour. If you are under 50, the former would probably be more worth your while.

To be fair, his idea of a flat rate charge on all non-doms (I thought someone who is not dom was called a submissive, but clearly I frequent with the wrong sort of people) is worth considering. It is very easy to threaten to crack down on people who live here yet evade taxation, yet Gordon Brown has demonstrated that the reality rarely matches the rhetoric. We should not dismiss a proposal out of hand that would at least do something. I have an open mind, and I’d be interested in hearing what others thing of this.

This tax rise is to be balanced out with two tax cuts: one on stamp duty for first time homebuyers, the other on inheritance tax. Sadly, both of these cuts are wholly irresponsible.

Firstly, the cut in stamp duty for first time homebuyers for property values up to £250,000. Sounds fair enough, although it means chuff all to anyone buying a first home worth more than £250,000. Is a one-off payment of £2,500 really that significant to a first time homeowner? We might see a few houses just below the £250,000 threshold drop their prices in the very short term, but it is also likely to increase inflationary pressure on properties worth significantly less than that. Overall, it will do nothing whatsoever to make houses more affordable or to discourage speculative property investment.

The proposed inheritance tax cut is even worse. It will lock up even more property that would otherwise be available to first time home owners. It will benefit those families who have benefited from the massive increase in property values over the past decade while punishing everyone else. Far from rewarding hard work, as Osborne suggests, it will severely curtail the purchasing power of anyone struggling to get onto the housing ladder.

I’m not denying that Stamp Duty Land Tax and IHT are bad taxes, although I suspect my definition of bad differs from Osborne’s. I would replace them, along with all other existing wealth taxes with a single land value tax. Simple, fairer and a dampener on property speculation.

Let’s be clear about this: these tax proposals will result in higher, less affordable house prices for first time buyers, while offering the already wealthy a significant tax cut. They are about entrenching privilege not expanding opportunity. Faced with a choice of cutting income taxes on low wage earners and rich homeowners, they’ve opted for the latter. True to form, but the fact they are pretending otherwise really sticks in my craw.

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I’ve been going down the list of tax cuts that John Redwood is proposing. Scrapping inheritance tax, lowering corporation tax, raising the super tax threshold, restricting capital gains… to be brutally honest, I regard all of these as good things in principle, but even leaving aside the affordability issue, how can they be said to be priorities?

Inheritance tax, for example, certainly does hit a lot of middle-income families these days. But what would you prefer? A tax cut on your estate when you die, or a tax cut on your income now? I know that I for one would prefer the latter. Happily, I’d also argue it is better for both the economy and society more generally.

As I’ve argued before, the accretion of wealth within an ever declining number of families is not a particularly healthy thing for our society. It creates a situation whereby, because of historical accident, some individuals end up higher up on the ladder than others. If that wealth is bound up in property, it is a finite resource and our existing financial system creates a situation whereby the more property you own, the easier it is to acquire more. As it is a finite resource, that means that, over time, private ownership becomes nothing more than a dream for more and more people and an underclass emerges.

To a certain extent you might argue that is inevitable, but if anything ought to be a candidate for taxation, it is this. Indeed, the creation of IHT and other fiscal tools in the last century have done much to create a more egalitarian society which we now seem to be slowly slipping away from.

IHT’s biggest problem is that it doesn’t do this terribly well. Nothing a half-competent financial adviser can’t wriggle around any way. There are better ways of taxing wealth such as a land value tax. Needless to say, this isn’t top of Redwood’s wish list.

For me, the “Competitive Challenge” is to ensure that the fruits of people’s labours and entrepreneurship are kept by the individual to as great an extent as possible. IHT doesn’t make our economy uncompetitive; income tax does. The point at which the 40p rate for income tax kicks in isn’t the main issue: the 20p rate and the level of personal allowance are. And then, of course, there’s VAT (which Tories historically seem to love).

But if I don’t understand the economic case for Redwood’s priorities, I understand the political case even less.

It’s a gift to the Lib Dems: not only are our policies better targeted at people at the lower end of the scale (I’d go further, but that’s another issue), we explain how we will pay for it. Redwood’s case, by contrast, is tax cuts for the relatively well off, paid for by vague, amorphous cuts in ‘red tape’. I for one would relish that particular fight.

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I meant to blog about the Centre for Um discussion paper on demographic change by Alasdair Murray a couple of months ago, but I ended up getting distracted. As part of my general post-holiday catch-up, I thought I’d get my comments off my chest now, but as it was a while since I read the paper, I’m a little rusty.

On specifics, I don’t quibble with a lot of what the paper is saying. It is surely correct to point out the problems of simplistically emphasising how the aging population will lead to more elderly dependents on the economy without looking at how other dependents (the young, the economically inactive) effect the economy at the same time. I don’t think any liberals question the need to scrap the fixed retirement age of 65 (socialists are another matter - I seem to recall Labour activists queuing up to denounce this at their last autumn conference). I agree also with the need to bring more young people into the labour market - a stark contrast with Labour’s obsession with giving 50% of the population a (potentially worthless) university degree and raising the school leaving age to 18. There certainly should be an emphasis on skilling young people, but that should be done in the workplace, not in pseudo-universities (on which point, can I recommend Geoffrey Wheatcroft’s article on the subject last week: “Those who insist that expanding higher education is virtuous in itself never stop to say why this should be so. And they never explain why it should be better to be a third-rate media studies graduate than a first-rate carpenter.”).

It is the wider arguments of the paper that trouble me. First of all, the bland claim that “pessimistic predictions about Europe’s demographic future overstate the problem in most countries and ignore the potential to adapt.” That is half true, but how are we to adapt if we ignore the pessimistic predictions? Alasdair Murray points out that a number of countries have already dealt with the “pensions time bomb” in their policies, but this has to be at least partially because of the scare reports that have been dribbling out over the past 20 years and more. This doesn’t prove them wrong: it proves their worth.

More irritatingly, I can’t go along with his bald assertion that inter-generational conflict isn’t worth bothering with. He bases this on two lines of argument: that there is little evidence of an emerging conflict, and that young people are better educated, richer and have higher rates of employment than their parents.

The first argument is just plain daft; it’s the Nelson defence (”I see no ships”). To start with, it depends where you look and what you’re looking at. What’s more, the fact that there is little tension now is not to say that there won’t be tension in the future.

The second argument misses the point that it isn’t incomes that we are quibbling about, but assets. Those subsidised right-to-buy homes people bought in the 80s simply do not exist. Greater earning potential is one thing, but if the economy drives people into habitual debt - thousands just to get “credit rating”, tens of thousands on graduation, hundreds of thousands of mortgage debt - that leaves very little at the end to build a nest egg. I’ll come onto the underlying assumption in the paper that population growth is an unalloyed good in a moment, but assuming that is the case for a moment, it is surprising that he appears to have missed the growing evidence that one of the main reasons that people are starting families later in life now is because they struggle to afford the housing; indeed housing is barely mentioned either in the paper as a whole, or in the section on inter-generational conflict.

Worst of all, he parrots that old canard about wealth cascading down the generations. I’ve lost count of the number of times I’ve said this: that’s the problem. Because people don’t, as a general rule, spread their wealth evenly to the younger generation: unsurprisingly they favour their children. This entrenches privilege, deepens the divide between rich and poor and, by putting wealth in the hands of ever fewer families and individuals, is a potentially catastrophic cause of social immobility. No-one is questioning that the millionaire couple who profited from the buy-to-let boom will eventually hand their assets over to their children; what we’re questioning is whether they should be the beneficiaries and what economic impact it will have further down the line.

The biggest single omission however is that this paper does not mention the environment, climate change and the management of natural resources. At all. I’m amazed that you can even write a paper on demographics without mentioning these things. A dry debate about immigration is one thing, but what do we do if Bangladesh goes underwater and Africa becomes an arid dustbowl? Where do the people go? What if they decide to come here? Cheery forecasts about pensions is one thing, but what about peak oil? Europe’s stagnating population is one thing, but global population is expected to reach 9 billion by 2050 (it seems like only yesterday when we reached the 6 bn mark - now we’re at 6.6 bn).

You may argue that all these big questions go beyond a simple paper on the economics of European demographics; I accept that they would have lead to a substantially different paper. What I do seriously question however is how the paper can assume that population growth is a good thing that policy makers should aim for. The paper does not oppose pro-natal policies, just the practicalities of the more crude of these (such as Germany’s tax system). Instead, it recommends policies that “best create the conditions where fertility rates might rise by removing structural obstacles to female labour market participation”.

I’m not in favour of radical anti-natal policies such as China’s one child policy, let alone anything more draconian. Nor do I believe in putting obstacles in the way of “female labour market participation” with a view to reducing fertility rates. I do however feel that population growth and environmental sustainability are heading for a full on collision, that one will have to give way to the other and that if the species is to survive in the long term, it had better be the latter. How do we develop genuinely liberal anti-natal policies? And if those policies are successful, won’t they exacerbate the problems associated with an aging population (if fertility rates dropped significantly, the average age would increase quite rapidly)?

In short, while he has some good points, Alasdair Murray’s pamphlet is exactly the wrong paper at the wrong time. It sets out to deal with a problem which, from the outset, it asserts has already been solved, and fails to answer the important questions relating to demographics that we need to be answering in the 21st century.

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