Thursday, 17 October 2013

Making Sense of Snowden

Michael Jacobs

Perhaps the most shocking revelation to emerge from the publication of the US National Security Agency (NSA) and GCHQ documents disclosed by the American whistleblower Edward Snowden is that Britain appears not to be shocked at all. While the US Congress is already debating an Intelligence and Oversight Surveillance Reform Act to limit the powers of its security agencies, the German media are outraged by the infringement of German citizens’ privacy by a foreign power, and Brazil cancels a state visit to the USA in protest against American spying on its government and companies, in the UK the Snowden disclosures have raised barely a whimper of public debate or political scrutiny.

It’s worth recalling just what Snowden’s leaked documents reveal. Between them (and in close collaboration) the NSA and GCHQ now have access not just to the ‘metadata’ (who and when) but to the content of a huge proportion of the phone calls, internet searches and online transactions made by ordinary citizens, in their own and other countries. This ‘suspicionless surveillance’ occurs without specific authorisation by any judicial or political authority, using technologies which break encryption codes, subvert security systems and tap fibre optic cables, and laws which force telephone and internet companies to hand over their customers’ apparently private data.

This is by any account an extraordinary incursion into privacy, on a scale hitherto unavailable. And it has evidently occurred without the knowledge of lawmakers or senior members of the government in either country, as many of them are now making clear. Yet the British public and its political representatives appear to be undisturbed.

Why is this? One view being interestingly advanced is that it is because the UK’s political traditions are not based on citizens’ rights. Whereas such rights are among the founding principles of the US constitution and of European political thought, the British have claimed rights only in self-defence when the state has committed wrongs. In the UK it is the sovereignty of the state, not the citizen, which has primacy. So although the British may value privacy culturally, they do not do so constitutionally.

This has already been evidenced in relation to CCTV cameras. The UK has far more cameras per head of population (an estimated 1.85 million in total) than any other country, so much so that in urban areas we are under almost constant surveillance. Yet no one cares. CCTV cameras are patently useful in catching criminals and wrongdoers; and most people presume that the recordings are not actually watched unless there’s an incident of some kind, when they are glad it is. So why worry about the theoretical invasion of privacy? What is actually being lost or damaged, other than abstract ‘civil liberties’?

At the same time most of us now understand that every time we buy something online or perform a web search using Google our actions are recorded, and the data logged and analysed for commercial purposes. If we think about it at all, we may even acknowledge that this is the price we pay for the huge convenience of an internet accessible for free. So is it so different if the state now has this information about us too?

Defenders of the security agencies’ surveillance activities have made this argument; but it is of course a non sequitur. We may provide personal information voluntarily to a company as part of a transaction with it, but that does not mean that we have also happily given it to the state.

The fact that most of the major internet companies have given governments access to such data anyway raises a major issue about the honesty of their relationships with their customers. Download any programme or app or make any online transaction and one is required to click ‘I agree’ to a long list of legal terms and conditions. We are all guilty of not bothering to read these; but we can also be reasonably confident that they do not say that the customer hereby consents to the security agencies having access to their phone and online activities, and to the company breaking and bypassing the encryption codes and security measures which it simultaneously claims protect its customers’ privacy and safety. Yet this is what between them most of the major companies appear to have been doing.

Defenders of the state’s new surveillance capabilities argue that in the modern world these techniques are necessary if terrorists and criminals are to be caught, and their use has already led to terrorist plots being foiled and many lives consequently saved. Few people would doubt that this is true of targeted surveillance of known suspects, and few would object to it. And this is of course mostly what the NSA and GCHQ do. But what the Snowden files show is that they have also been hoovering up electronic data about vast numbers of ordinary citizens without any suspicion or cause at all. It is much harder for the public to know how important this kind of activity is to anti-terrorist work, or how many lives it may have contributed to saving. Given their vested interest in the outcome, we should not be surprised that the security services insist that it is critical.

But even if it is true that some lives may be saved, does this justify the mass invasion of privacy which it entails? What is the trade-off of values and principles here? After all, public policy does not go to any length to save a life in other spheres. Far more people die on the roads than from terrorism, yet we do not ban cars or insist on a general 10 mph speed limit to reduce their number. This is precisely the same territory as that of CCTV cameras, but writ much larger. When lives are at stake, how much do we value the largely abstract right to privacy?

The time-honoured reassurance issued by politicians and security chiefs is that ‘if you’ve nothing to hide you’ve nothing to fear’. But this misses the point. Of course most of the data now being collected is never actually inspected. But the civil liberties objection is not that government operatives are poring over our web browsing history looking for suspicious or embarrassing activity. It is that they could be, and have no right to. And the risk is not small. We are told that there are around 480,000 US government staff and contractors with the same level of security clearance as Edward Snowden; some have claimed the number is nearer 850,000. That is a lot of people with potential access to our private data. (It would also appear to be a huge security risk in itself. If Snowden could leak these documents to the press, could others not already have leaked them to terrorists and foreign states?)

More importantly, there really are slippery slopes here. We know that security services are never interested just in terrorists and criminals. As the quite separate revelation that British police officers did not just infiltrate peaceful environmental protest groups but that some of them formed relationships with, and even fathered children with, female members tells us that the state is always tempted to extend its security anxieties to political campaigners and those they see as subversives. Law abiding citizens may not have anything to fear now, but under other circumstances these surveillance capabilities could well be used against entirely legitimate political and cultural activities.

At the same time, it is openly admitted by NSA and GCHQ staff in the Snowden files that the security services do not intend to stop at their current capabilities. In principle, they want to be able to access all communications data, everywhere. The novelist John Lanchester has posed the issue well. What if it were possible (as it almost certainly could be) for household electrical sockets to be used as eavesdropping devices? Would the NSA and GCHQ seek to ensure (by applying legal pressure on socket manufacturers) that every room in the country could potentially be monitored? And would we regard that as acceptable? If not, why is their ability to monitor our phone calls and online activity?

The question is not, it should be noted, whether suspicionless surveillance on a mass scale is legal or not. In both the US (where much of the NSA’s activity in this area is authorised by the 2001 Patriot Act) and in the UK (where its equivalent is the Regulation of Investigatory Powers Act 2000), it is now evident that the law is at best not clear on what kind of activities are permitted and what are not. Devised before the new surveillance capabilities were available, and certainly (as US Congressmen and women are now lining up to admit) before they were understood by lawmakers, legislation in this areas lags significantly behind technology. But even if it is legal, the question in a democracy is whether it should be.

And in this respect it really is not appropriate for the head of MI5, Sir Andrew Parker, to argue that the very revelation of these activities aids the terrorists’ cause and should not have happened. The very least citizens have rights to in this field is the general knowledge of what is being done in their name and with their privacy. When both the former head of the NSA General Michael Hayden and former head of MI5 Stella Rimington (in separate interventions but with telling linguistic coordination) argue that the security services should ‘show more leg’ in public, it is clearly time for a proper public examination of what they should be allowed to do and where the lines of privacy and surveillance should be drawn.

In today’s complex society there is an inevitable balance to be struck between our security and our civil liberties. We have an interest in both. But there is no balance to be struck between public debate and the absence of it.

Sunday, 22 September 2013

Reflections on One Nation Labour

Michael Jacobs

Ed Miliband’s speech to the 2012 Labour Party Conference was doubly significant. His bravura performance – speaking for more than an hour without notes – had a palpable effect on the way in which he was perceived by the Westminster media lobby, rebuilding his fragile leadership credentials in a single stroke. And the theme of the speech, the idea that Labour stood for ‘One Nation’, became the slogan for Miliband’s attempted resurrection of the party’s ideology and electoral fortunes.

Taking Peter Mandelson’s advice that the public do not hear what a politician is saying until he or she is bored of saying it, Miliband has taken every opportunity since to hammer the concept of One Nation Labour into the public mind. Under the weight of repetition supple ideas quickly harden into vacuous slogans, so it is worth taking a moment to explore what this one really means and the work it is meant to perform. It was for this reason that the Political Studies Association organised a conference in April this year at Queen Mary College London, supported by The Political Quarterly, to examine the ideology and politics of ‘One Nation Labour’, from which the articles in this collection are drawn.

Two themes emerged. One was that One Nation Labour is already just a name for whatever the current Labour leadership thinks at the moment, rather as socialism was for Herbert Morrison. The willingness to wrap every possible idea that Labour is currently now interested in – from environmentalism to gender equality, from opposing Scottish devolution to housing policy – under the One Nation blanket is irresistible, the inevitable consequence of sloganisation. But it has a deadening effect on ideological clarity nevertheless.

The other is that, underneath all that, the Labour leadership actually has a very clear sense of mission, for which One Nation Labour is its given name. This is to build what Stewart Wood, Miliband’s chief intellectual adviser, here describes as ‘a new settlement’, a fundamentally reformed configuration of the British economy and the society it supports. Citing Margaret Thatcher’s willingness to challenge the post-war economic order as the model which Labour in office will need to follow, Wood sketches a set of potentially far-reaching responses to the deep economic and social challenges Britain faces over the next decade. Implicit in his prospectus – and explicitly in the writings of other Labour thinkers such as Maurice Glasman – is the idea that Britain needs to move towards a more German-style economy, with (for example) a regional banking system geared to supporting the real economy, stronger middle-sized firms, trade union representation on corporate boards and strong vocational education and training.

(So admiring are current Labour leaders of the German economic model that there are times in this debate when one could be forgiven for thinking that there is indeed such a thing as One Nation Labour, and that nation is Germany.)

Yet as Mark Wickham Jones points out, none of this is actually new. Not only did Tony Blair frequently adopt the Disraelian rhetoric of ‘One Nation’, but the central economic ideas now being developed by Miliband’s team are remarkably similar to those which emerged from Neil Kinnock’s policy review process in the late 1980s and early 1990s. This does not make their present reincarnation any the less appropriate, but it does offer warning of the difficulties Labour will have in developing them into an electorally convincing and politically implementable package.

Given the focus in contemporary politics on the personality of the party leader, most of that task will inevitably fall onto Miliband himself. In their detailed account of the development of Labour’s ideology and rhetoric since Miliband’s election in 2010, John Gaffney and Amarjit Lahel offer an intriguing narrative framework through which to understand this process. Tim Bale, meanwhile, explores the hard stuff: the difficulties Labour is already facing in translating the rhetoric of One Nation into concrete policy towards reform of the welfare state, at a time when the coalition government is taking an axe to cherished Labour values, and appears to be winning the battle for public opinion.

One Nation Labour remains a work in progress. But its success or failure will be clear in less than two years.

Monday, 15 July 2013

After the Party?

Tony Wright

One of the central facts of recent British politics has been the decline of the political party. Fewer people are voting for them; memberships have collapsed; and strength of attachment has fallen away. The only party currently prospering, UKIP, is doing so because it has successfully exploited the prevailing ‘none of the above’ sentiment. Why has this decline happened? Does it matter? And what, if anything might be done about it?

It is easier to see why it has happened than it is to frame a coherent response. The great motors of the modern party system – class and ideology – have ceased to function in the way they once did. For much of the twentieth century politics in Britain was organised on the basis of a struggle between socialism and anti-socialism (however defined) and this structured the two-party dominance of the post-1945 world. That era has now ended; and with it the leading role of the main protagonists. If politics is conducted on broadly similar terrain then it is inevitable that much of the old motive power that fuelled party adherence is diminished. For some new passions fill the gap (getting Britain out of the EU, getting Scotland out of Britain), but for most there is a turning away from party politics of the traditional kind.

The result is a problem of party funding, as big donors displace mass memberships; but even more crucially a problem of representation, as party politicians increasingly become a political class without a popular base. This in turn nourishes varieties of anti-politics (or non-politics). The parties continue as the monopolists of access to political careers and to political office, but in a context in which 99 per cent of citizens now do not belong to a political party. This is a recipe for a crisis of legitimacy.

There are two sorts of responses to this decline of party, both coherent but pointing in different directions. The first response is to try to ‘reinvent’ parties by making them looser, opening them up, reducing barriers to participation and generally making them more attractive. Ed Miliband’s recent initiative in relation to trade unionists is an example of this approach, as is the introduction of primary elections for the selection of candidates (much touted after the parliamentary expenses scandal but neglected since). So far this approach has not had much success and has its own difficulties (not least the fact that if party membership does not bring the exclusive right to select candidates then this might further depress any incentive to join). However this reinvention approach is certainly worth pursuing if parties want to show that they are at least trying to respond to the diminished position in which they find themselves.

The second sort of response is sharply different. This is to recognise that the age of the mass party is simply over and that new structures of representation and participation have to be embraced instead. The task is not to reinvent parties but to replace them. This means accepting that politics is now the preserve of a professional political class, but surrounding it with a dense network of scrutiny, transparency and accountability from a whole variety of groups and organisations. It might also mean developing mechanisms of direct democracy such as the referendum to by-pass the representational hold of the moribund political parties. On this view parties are part of an old model of politics that now needs replacing.

This second approach has analytical merit, but it also glides over the central function that political parties have in organising political choice in a reasonably coherent way (which is why they are ubiquitous in political systems) and in enabling political power to be held to account. They may be imperfect in all kind of ways, but the role they perform is nevertheless fundamental. We should therefore be careful about waving them goodbye. The decline of party will only be beneficial to those sources of private power which want to escape from the disciplines of political accountability. It is clearly necessary to take up the representational and participatory slack that party decline has produced, and to do so in new and innovative ways, but this does not mean that parties have ceased to matter.

Where does all this leave us? It means combining a recognition of the continued centrality of party for democratic politics with a further recognition that the decline of party brings implications for the conduct of politics. It might suggest a certain modesty of approach on the part of party leaders aware of their diminished following. More important still, it involves an acceptance that while party necessarily structures political life this does not mean that it should dominate it. In all sorts of ways party should press less heavily than it currently does, not least because the monopoly of party on public life excludes the vast majority of citizens from effective participation. There should be more spaces where the party writ does not run, or runs less completely.

This is the case for opening up party selections to a wider electorate, with a wider spread of candidates and where party service is not the main requirement. Political recruitment is too important to be left to the often tiny (and doubtfully representative) group of party activists who now make up what is left of many constituency parties. One of the disappointments of the new police commissioner elections was their failure to bring forward good candidates beyond the familiar party faces. So too with the slow progress towards elected city mayors, where the prospective candidacy of significant local figures outside the party machines failed to materialise and thus helped to kill off any enthusiasm for the idea.

It is perfectly possible for parties to continue to structure political life and offer accountable political choice without also being the monopolists of political power. This means having more spaces where party presses more lightly; but also provides the justification for more public interest regulation around the activities of parties. Parties have to learn to share power; but those who want to bury parties need to learn why it is important to keep them alive.


Wednesday, 8 May 2013

Tax and Spending (Again)

Michael Jacobs

The depth of the spending cuts now being implemented by Whitehall departments and local authorities across the UK is unprecedented in postwar Britain. With health, education and overseas aid protected, most departments’ budgets are being reduced by around a fifth between 2010 and 2015-16. Local councils will see spending fall by over a third. A significant slice of the cuts is being borne by the non-pensions social security budget. Inevitably, this means that the poorest and most vulnerable are being dealt most of the pain. The 4% real terms cut in all benefits and tax credits over the next three years; the cap on individual benefits; the housing benefit penalty being applied to those with a spare room; the localisation of council tax benefit; the abolition of the social fund; the conversion of disability living allowance into personal independence payments with more restrictive eligibility criteria; the removal of legal aid for welfare benefits advice; the paring back by most councils of basic social care services – the impact on the lives of those who already have least is desperately severe, and will only grow harsher over the next three years.

The reason for all this is well known: the Government is determined to reduce the budget deficit and pay down the public debt. But while Labour has focused its criticism on the overall speed with which this being done, and the now evident truth that austerity is economically self-defeating (the deficit is not being reduced, and the debt continues to rise), the proximate cause has been largely overlooked. It is not just the overall speed of deficit reduction, it is the method the Coalition has chosen. In any such austerity plan a division must be made between spending cuts and tax rises. The Government has chosen to fund around three quarters of its deficit reduction plan from spending cuts, and only a quarter through tax rises. This is a greater bias towards spending cuts than it originally announced in 2010, when the planned split was 70% / 30%, and considerably greater than that proposed by Alistair Darling (67% / 33%) in Labour’s pre-election plans.

This distribution of deficit reduction makes it inevitable that the poor will bear the greatest burden: most spending goes on those on lower incomes, while most taxes are paid on higher incomes. But the situation is in fact even more acute than this, since the Government has actually been cutting key taxes. Fully £24bn will be spent by 2016-17 on the raising of the personal income tax threshold, the reduction in corporation tax and the real terms cut in fuel duty. This is almost twice the revenue gained from the 2011 increase in VAT. The Liberal Democrats trumpet the £10,000 personal income tax threshold as a redistributive measure, but that is disingenuous: most of the benefit goes to people paying higher rate tax, while those at the bottom of the income distribution gain little or nothing because they don’t earn enough to use the tax-free allowance. For such people, rather, the effective marginal tax rate can be up to 85% through the clawback of tax credits and housing benefit as their earned incomes rise. It is no surprise that the Government’s own analysis shows that by 2016 600,000 children will have been pushed into poverty since 2010: the Government’s welfare reforms are projected to result in the poorest tenth of households losing the equivalent of around 38% of their income.

The choice to focus most of the deficit reduction plan on spending cuts has had another effect, also inadequately noticed. By 2018 the proportion of discretionary departmental spending is set to drop to its lowest level since 1998. The Coalition, in other words, is doing what the Conservative Party has long wanted: it is shrinking the state. Coupled with the step-change now under way in the marketisation of the NHS and other public services, it suggests that, so far from being the compromise many anticipated, the Coalition Government is proving as ideologically radical as those of Thatcher and Attlee.

That this has caused so little reaction from the Labour Party is regrettable, though understandable. Cowed by the constant charge levelled by the Coalition that its own leaders were responsible for causing the economic crisis, and the relentless demonisation of welfare claimants by Conservative-supporting newspapers, the Opposition has felt unable, or at least unwilling, to fight any kind of ideological corner. It remains to be seen whether a combination of trade unions and civil society organisations will mobilise enough protest to render the human impact of austerity publicly visible.

For this is by no means the end of it. In its analysis of the Budget, the Institute of Fiscal Studies pointed out that the Government’s overall planned spending cuts to 2018 are still unfunded: to achieve the plans, around £23bn still has to be found, either from yet larger spending reductions, or from tax rises. Even if departmental spending continues to be cut at around 2.4% a year, that will still leave £9bn in welfare spending cuts or tax rises. It is not hard to see what the Chancellor is planning for the next election: a campaign in which the Conservatives promise to cut welfare spending even further, while forcing Labour either to back them, or to admit that they will have to raise taxes in the next Parliament. ‘Labour’s tax bombshell’, in other words, is the goal. As with gags, so with election slogans: the oldest are the best.

There is a third way, of course, which Labour will seek to chart: a temporary increase in borrowing which avoids both spending cuts and tax rises. But this is not much more politically saleable, and if Labour focuses all the extra borrowing on productive capital spending (as it currently suggests), it will not solve the problem. Increasing such borrowing is the right policy – with interest rates at record lows, borrowing for investment is entirely rational, and will gradually stimulate sufficient growth to improve the public accounts. But in the short term this will not help close the current account deficit.

At some point Labour – and the Liberal Democrats too, if they are thinking at all about how to govern in a centre-left coalition after the next election – will have to acknowledge the truth that dare not speak its name. Taxes in Britain are too low, not too high. It is simply not possible to provide adequate public services in a modern society if total public spending is held at under 38% of GDP. Since in the long term borrowing is not the answer, the only solution is for the public to pay for the services they expect.

Taxation is the most fundamental relationship between government and citizens; its level determines the kind of public services we have, and its incidence the fairness (or otherwise) of how we pay for them. Yet it seems impossible now to debate the subject of taxation coolly. Any hint of a tax increase of any kind is seized upon by the media as an evil without parallel: almost always a ‘stealthy’ one, even where government is entirely open about what it is doing. Indeed, every cost is today labelled a ‘tax’ in order to give it negative connotations – whether this is a consumer levy to pay for green energy or a proposal to allow the elderly to charge the cost of social care to their estates after death. Even Labour is driven to this, describing the new benefit penalty as a ‘spare room tax’ without any thought of the wider consequences of so doing. The result is a wholly unhelpful sense among the public – and therefore politicians – that taxation is always and everywhere bad.

This is deeply unhealthy for political debate and proper political choice. If the possibility of tax increases is simply ruled out as beyond the possibility of political discussion, we foreclose almost every option of a more social democratic society. For those on the right, this is just fine; but for Labour and the Liberal Democrats it is not. Given current Government spending plans, and the facts of an ageing society, a refusal to discuss the possibility of raising the overall level of taxation as a proportion of national income is to abandon the centre-left’s historic mission to create a society of greater social justice and public good.

There are two practical ways in which an electorally careful Opposition might address this. The first is to focus on the taxation of wealth. For it is not entirely true that all taxation is unpopular. The 50% higher tax rate which Labour imposed on those earning more than £150,000 a year was supported by a very large majority of those who did not have to pay it; and the Government’s subsequent cut to it is a source of continuing public disaffection with the Coalition. The wealthy are a small minority of the population; yet over the last two decades they have taken an increasing proportion of both national income and total national wealth, much of it through a combination of house price inflation, low rates of capital taxation and the entirely legal avoidance of inheritance tax.

As Labour’s tentative forays into this field have shown – in its proposal for a ‘mansion tax’ on homes worth more than £2m – there is public support for greater taxation of wealth. Unfortunately that particular modest proposition will not generate additional revenue for deficit reduction, since Labour has chosen to use it all on a reintroduction of the 10p starting rate of tax, targeted at the very same middle income households who will gain most from the £10,000 personal allowance. But this is by no means the only form of wealth taxation which Labour can explore. A reform of inheritance tax, turning it into an accessions tax on the recipients of unearned wealth and getting rid of the seven year exemption, is an obvious possibility. Land value taxation, though difficult to design within our planning system, is another option worth exploring.

The second approach to opening up the debate about taxation is hypothecation, or the earmarking of specific tax revenues for specific spending purposes. More than ten years ago the Fabian Commission on Taxation and Citizenship proposed the introduction of a hypothecated health tax, a proportion of income tax specifically earmarked for spending on the NHS. The rationale was simple: public attitude surveys showed that a majority of voters were willing to pay more tax only if they knew where it was going. It was lack of trust in government to spend money wisely or transparently that undermined more general support for taxation. The NHS is under immense financial pressure, with ever-increasing demand and rising costs from new drugs and technologies. A hypothecated health tax would enable governments to ask taxpayers whether they wanted to see more money going to the NHS, and if so whether they were willing to pay for it. It would not solve the general problem of consent for higher taxes for other purposes; but it might at least enable the rising cost of the NHS and social care to be accommodated without an ever-tightening squeeze on the rest of public services. It is an idea which deserves debate.

The wider case here is more fundamental. Because of the unwillingness to address the question of taxation, the Government’s spending cuts have brought ever increasing numbers of British citizens to rely on voluntary food banks. Councils are now giving claimants vouchers redeemable only against certain shopping items at named supermarkets. Longstanding London council tenants are being moved to distant towns with which they have no connection in order to comply with the housing benefit cap. Taxation, it has been said, is the membership fee we pay for living in a civilised society. How long will it be before others look at Britain and ask whether it should still be called one?

Monday, 25 March 2013

Osborne v. Growth. The Chancellor and the new green economy

Michael Jacobs

The most telling comment on last week’s Budget came from the Government’s very own Office for Budget Responsibility. It acknowledged that the Chancellor’s measures would have no impact on growth: on the contrary, it now forecasts this to be just 0.6% in 2013, half the figure it was predicting only three months ago. We knew that George Osborne could not publicly abandon ‘Plan A’. But his populist tax cuts, paid for among other things by a little-noticed £5bn raid on contracted-out pensions, will actually yield no net stimulus to the economy at all.

Unwilling to assist growth himself, you would have thought the Chancellor would welcome it wherever it could be found – and particularly in the manufacturing sector, whose weak performance in recent years has kept the UK mired in trade deficit. Yet remarkably, just before the Budget, Osborne was accused of actively preventing the creation of tens of thousands of British manufacturing jobs. The episode illustrates the extraordinary role which this most political of Chancellors is now playing.

The charge is levelled in an extraordinary letter sent to Osborne (along with Business Secretary Vince Cable and Energy Secretary Ed Davey) by six of the world’s largest energy manufacturers earlier this month. These companies – Alstom, Mitsubishi, Doosan, Areva, Vestas and Gamesa – between them already employ over 12,000 people in the UK. For the past few years they have all been developing investment plans, collectively worth hundreds of millions of pounds, to build factories in Britain to supply the country with low carbon energy equipment, in fields such as offshore wind, nuclear power, energy efficiency and carbon capture and storage. But in their open letter they warn that these investments, and the jobs they will create, will not go ahead if the Government does not commit to a long-term low carbon electricity target in its Energy Bill now passing through Parliament. And it is no secret that it is Osborne who is blocking that commitment.

Energy policy can be an arcane affair, but this issue is pretty straightforward. Since Labour’s pioneering Climate Change Act in 2008, UK energy policy has been on a long-term trajectory to cutting greenhouse gas emissions by shifting supply towards renewables (particularly wind), along with some nuclear, and gas fired power stations fitted ultimately with carbon capture and storage. As a result, global manufacturers in these fields have been looking to build factories in Britain to supply the required equipment – with at least six companies developing sites on the east coast to manufacture offshore wind turbines alone. But over the last six months uncertainty has suddenly crept in, putting these investments at risk. And the reason is George Osborne.

At present the UK only has an energy policy out to 2020. But investors need a longer timeframe than that – anything they plan now will barely be in operation by then. So the policy they are calling for is a legal limit to the emissions which the electricity sector will be allowed by 2030. This will give certainty to energy companies and their suppliers about the technologies to be installed. There is remarkable unanimity around the need for such a ‘decarbonisation target’ – last month 35 companies, NGOs and other organisations signed a joint statement in support. It is well known that Ed Davey, the Lib Dem Energy Minister, wanted such a target in the Energy Bill, but George Osborne objected. Hence the very pointed addressing of the letter from the six global manufacturers this week to the Chancellor as well as to Davey.

The wider context here is rather remarkable. The British economy now produces far more jobs in green industries than it does in brown or dirty ones. Last year the CBI produced a report, The Colour of Growth, estimating that over a third of the UK’s economic growth in 2011-12 came from green business. Now worth £122bn annually to the UK economy, the environmental sector has been growing (despite the recession) at over 2% a year for the last five years. It employs just under a million people and is taking an increasing share of a rapidly growing global market, so also reducing Britain’s trade deficit. These facts have in turn made CBI into a rather remarkable cheerleader for stronger environmental policies.

So why is Osborne setting himself against one of the few job-creating sectors of the otherwise flatlining British economy? (He has also interfered to obstruct new regulations enduring that new homes are low-carbon.) The answer appears to be entirely political. Fired up by rural opposition to onshore windfarms and a more general anxiety about rising energy bills, and backed by an increasingly strident campaign in the Daily Telegraph and Daily Mail, a revolt against low carbon policy has developed among a number of backbench Tories, and it’s their support that Osborne is now after.

His alternative energy policy is the so-called ‘dash for gas’, for which he gave generous tax incentives in the budget. In the US the exploitation of cheap shale gas has revolutionised energy supply, displacing coal, and this has led to hopes that the same might happen in the UK. But there is no evidence that we have anything like the reserves found in the US, and being part of a competitive European market there is no guarantee that they would be cheap. On the contrary, a report by the IPPR this month showed that relying on volatile gas markets would cost the economy more than the decarbonisation target if gas prices rise in line with market expectations – and much more if gas prices are higher. It is high wholesale gas prices which have been responsible for almost the entire rise in energy bills over recent years, not green policy.

But Osborne is now under pressure. For the Tory Chairman of the Energy Select Committee, Tim Yeo, has tabled an amendment to the Energy Bill inserting a 2030 decarbonisation target. Labour have committed to supporting it. Now six Liberal Democrats, defying agreed Coalition policy, have done the same, with the party’s president, Tim Farron, indicating that he too will vote for it. It will take only a few more Lib Dems to break ranks in support of their own party policy and the government will be facing defeat.

This may come down to the increasingly abrasive relationship between Nick Clegg and David Cameron. Buoyed by the Eastleigh by-election, the newly assertive Lib Dem leader faces intense pressure from his own party to tell Cameron that he must finally make good on his tattered promise to lead ‘the greenest government ever’. But in doing so the Prime Minister knows that he would have to defeat his own Chancellor.

An earlier version of this piece first appeared in the Staggers blog of the New Statesman

Monday, 11 February 2013

Gove is all around: exams, public services and EU competition law

Michael Jacobs

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Michael Gove’s retreat on his plan to reform GCSE examinations has provided an object lesson in the perils of political hubris. If the Secretary of State hadn’t announced the creation of a new English Baccalaureate Certificate before he was actually in a position to make a decision (ie before he had consulted anyone in the field) he would have avoided the predictable headlines of a ‘humiliating U-turn’. But amidst the general political schadenfreude (which, to his credit, Gove handled graciously in the Commons) an even more important feature of his climbdown has been overlooked.

One of the reasons, it was reported, that Gove could not go through with his plan to create a single exam board for each subject, which he hoped would end the competitive pressures between boards which it is alleged in the present system leads to grade inflation, was that this would fall foul of EU competition law. Gove was apparently warned that the exam boards would sue the Department of Education for breach of procurement rules.

If this is true, it is further evidence of an extraordinary conflict which now lies at the centre of public service provision, between democracy and the EU single market. The organisation of school examinations is part of the core business of government. If in order to raise educational standards a democratically elected government wishes to institute a single examination board it should surely have the right to do so. EU competition rules designed for commercial markets should not be relevant here.

And indeed they weren’t, before government first instituted a market in examination provision. Before that decision was made, EU law would have regarded examinations as a ‘social’ purpose carried out ‘not for profit’; and therefore not subject to procurement rules. But now that a market exists, EU law prevents that decision being repealed, since it would breach the market rights of the present players.

This flouts an important democratic principle. A government which makes a decision to create a market in public services should have the right to reverse such a decision, so long as due process is followed (such as giving market players time to adjust). If it cannot, this means that in making the initial marketisation decision, Government was effectively transferring sovereignty over this area of public provision from Parliament to EU competition law.

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This issue is most acute in the NHS. Through the concept of ‘any qualified provider’, the 2012 Health and Social Care Act explicitly brings much of the provision of health services within the scope of EU competition law. Many people have objected to marketisation on health provision grounds – that it will lead to the fragmentation of integrated health services, that the private sector will cherrypick profitable functions leaving the public sector to pick up the rest, and so on. But the democratic objection is that once marketisation has been established, the new system will become legally irreversible. If a future democratically elected government decided that marketisation hadn’t worked, or was wrong in principle, it could nevertheless not repeal it, because this would then infringe the market rights of the commercial businesses which had by then entered the market.

The same prohibition would occur if a future Government sought another possible reform – a requirement that all market providers in the NHS or in education were non-profit. Given that much of the risk in marketisation lies in the distortion of the public interest from the operation of the profit motive, this might be regarded as a sensible safeguard. But it too would be illegal under EU law, once market procurement of any kind had been instituted.

The problem here lies in EU competition law. It is obviously right that businesses in commercial markets face a level playing field when competing for public business. And EU law does recognise that social purpose allows public services to be exempt from competition and procurement law. But it does not currently allow the reversal of public decisions to create market competition. It should.

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Strangely, you won’t find this proposal in the Government’s or Conservative Party’s plans to opt out of various aspects of EU law. The single market is the one aspect of the EU they like: its use to entrench the marketisation of public services is an added bonus. But this should be in the Labour and Lib Dem prospectuses for European reform.

In his masterful study of ‘the strange non-death of neo-liberalism’, Colin Crouch shows how the creeping marketisation of public services over the last two decades has undermined the very basis of the public sphere, creating an effect he calls ‘post-democracy’. Michael Gove has unwittingly revealed its further advance.

Friday, 18 January 2013

Whitehall at War?

Tony Wright

Copyright D Kivlin
The recent exposure of serious tensions between ministers and civil servants has once again highlighted this most sensitive of constitutional relationships. It follows hard on the heels of the fiasco surrounding the franchise award for the West Coast main line rail service, which will be long remembered in accounts of Whitehall failures.

Here were government ministers who provided false reassurances that the contract process had been conducted properly. The doctrine of ministerial responsibility will never look quite the same again. Nor will the doctrine of the non-accountability of civil servants.

The case raises questions about the capacity of civil servants, especially when departments are under staffing and resource pressures, to manage complex contracting matters when dealing with powerful and well-resourced private interests. It also raises questions about whether civil servants should have to account far more to Parliament and public for their actions and inactions rather than sheltering under the combined umbrella of the accounting officer role of permanent secretaries and the political accountability of ministers.

These are not straightforward issues, even if they might seem to be. Although ministerial responsibility may often be a fiction, glaringly so in the case of this rail franchise, it may nevertheless be a politically useful fiction. At least it enforces a brutal line of responsibility and keeps ministers on their toes. Similarly, the protection of civil servants from public and parliamentary scrutiny does underpin their disinterested service to ministers, without the defensive need to watch their own backs in case things go wrong and they get hung out to dry. Everyone might be in favour of accountability, but different kinds of accountability produce different kinds of behaviour, not all of which may be desirable in terms of good government.

This suggests the need for caution in overturning established relationships. But caution is not the same as inaction. The whole thrust of public administration in recent decades has been to move away from monolithic structures, define particular responsibilities more clearly and have more effective measures of performance (often linked to reward). It is consistent with this development that the traditional accountability relationship of civil servants should be reviewed. Those senior civil servants who preside over programmes and projects should expect to be held to account for their performance in a far more explicit and public way. If done sensibly, there is no reason why this should undermine ministerial responsibility or effective government. Indeed, it might enhance it.

This is a modest proposal, involving more holding to account of the most senior officials. There are those who want to go much further in shaking up the Civil Service, either by putting it on a contract basis with ministers or by importing politically appointed people to run it. There are good arguments behind both these propositions; but even better arguments against them. Such measures would alter the fundamental character of the Civil Service; whereas a modest increase of accountability would not (just as the arrival of special advisers has generally helped to protect the independence of the Civil Service rather than erode it).

When the Gladstonian reform of the Civil Service in the nineteenth century swept away patronage and established a system of appointment on merit there were twin objectives: first, to ensure propriety and, second, to promote efficient administration. The former objective is taken for granted but stands as a considerable achievement. It is central to the international reputation of the British Civil Service for disinterested administration, a beacon of integrity and bulwark against corruption.

A nice example of what this means is given by John Major who, in his memoirs, describes why he was sure that ministers were not implicated in the case of illegal arms sales to Iraq: ‘The main reason was that government simply does not work like that. The symbiotic relationship between ministers and civil servants, working along parallel lines of authority and accountability, does not permit such things to occur. If ministers had conspired to let innocent men go to prison the Whitehall machinery would have sounded the alarm, the Cabinet secretary would have been alerted, and he would have been in to see me immediately.’ The good reason for the politicisation of the Civil Service is the promise of dynamic commitment; but this is trumped by the better reason for maintaining an independent Civil Service, which is the maintenance of propriety.

The relationship with the other objective, that of efficient administration, has proved more contentious. It lies at the heart of recurrent tensions between ministers and civil servants. Ministers tend to think that civil servants are preoccupied with process rather than delivery; and civil servants tend to think that ministers are prone to cut corners and pursue unworkable policies. In many ways such tensions are necessary and beneficial. Keeping the ship of state afloat, and sailing it in a desired direction, are both required. Reforming governments in particular want the sailing to be more energetic and proficient, which is why they embark upon programmes of Civil Service reform. Thus Tony Blair’s conclusion that ‘the problem with the traditional civil service was not obstruction, but inertia’; and his belief that it needs ‘a totally different skill set today from thirty years ago, far more akin to that of the private sector’.

The Coalition government, led by Cabinet Office minister Francis Maude, has embarked on its own reform plan for the Civil Service. As well as the usual stuff about improving delivery skills, it had new ingredients. There would be more robust performance appraisal, more ‘contestable’ (in other words, bought-in) policy advice, more role for ministers in choosing permanent secretaries and more short-term contracts. The proposal about external policy advice is the most direct threat to a core Civil Service function. It threatens to deprive departments of institutional memory and policy capacity, both already weakened. And if externally contracted policy goes wrong, who is accountable then? Governments are right to want to make the Civil Service as efficient as it can be in meeting the challenge of new times. But this should not mean forgetting about babies and bath water.