Wednesday, 9 September 2015

Social policy through the looking glass: how to make poor households poorer

Deborah Mabbett

Forty years ago, the main method for evaluating social policy changes was to devise ‘profiles’ - examples of households in different circumstances – and examine how each fared under the new policy. The problem was that profiles could easily be unrepresentative of actual households, giving rise to misleading findings. In the 1980s, a superior technique called ‘microsimulation’ was developed. It models policy changes on data for several thousand households, generated by representative sample surveys. Profiles remain valuable for explaining and interpreting policies, but microsimulation is a check on the biased selection of profiles and gives a better account of the overall impact of policy changes. So it has proved with the Prime Minister’s current favourite profile: a family with two children where both adults work full-time on the minimum wage. They will, he claims, be better off by 2020 under the government’s new policy combo of reduced tax credits and a higher living wage.[1] A quick check of HMRC statistics shows that there are just 135,000 households receiving tax credits (out of 3.3m working households) comprising a couple with children where both adults work full-time.[2] Microsimulation results from the Institute for Fiscal Studies confirm the inference that this profile is hardly representative. They show that, once the current benefit changes are fully implemented, low income households will lose some £6 billion in tax credits and another £6 billion in other benefits. The best guess from the Office for Budget Responsibility is that households will gain £4b in wage income, with up to half of that gain going to households too high up the income distribution to compensate for lost benefits.[3]

It is not easy to unpick the process whereby cuts in tax credits have been sold to the public as a step down a golden road towards higher earned incomes. It’s true that tax credits have never gained a protective mantle of popularity, which is a pity, as they have been highly effective in raising the incomes of poor families. They grew out of policies to ‘make work pay’: to enable people with relatively high out-of-work benefit entitlements to take up low-paid work, which was otherwise the province of those without dependents. The low-paid work came from the deregulation of employment contracts and the rise of the service economy, not from the tax credits. The claim that tax credits are captured by employers and lead to more low-paid employment has proved irresistable to both left and right, despite the lack of more than anecdotal evidence.[4] The argument was invoked by Labour when it introduced the National Minimum Wage (NMW) in 1998; now it has been taken up with a vengeance by the Conservatives.

To be fair to Labour, it introduced the NMW alongside a huge boost to in-work benefits, and it was conceivable that the benefit changes would be so successful that they would make any work pay: that people would be so keen to leave unemployment that they would accept any offer of work. But there are natural checks to this tendency. One is that tax credits encourage people into work, but they do not encourage them to work long hours. Indeed, part of their usefulness was that they allowed households to juggle work with other responsibilities, and thereby escape monetary poverty without falling into the trap of time poverty.

This is something that will change as the Conservative cuts to tax credits kick in. The vast majority of tax credit-receiving households do not fit the Prime Minister’s profile. If they keep their present jobs and hours and the new living wage is fully complied with, their incomes will fall substantially. Presumably, few will be able to let that happen. They will have to find more work. The government believes that too many people on tax credits are choosing to limit their hours. It emphasises the situation of the small group of tax credit recipients in full-time work because it thinks that full-time work should be the norm. This is clearly signalled by the design of Universal Credit, which will eventually take in the last remnants of tax credits. A key feature of Universal Credit is that meeting the minimum hours threshold for tax credits (which has in any case been raised) will no longer be enough to satisfy the authorities. Those on low hours will be supervised to check that they could not be putting in more work.

Why this fetish for full-time employment? The personal and social gains from working do not depend on reaching this threshold. The obvious explanation is fiscal. As the economy has recovered, the growth in income tax receipts has been disappointing. People are not earning enough, due to a combination of low pay rates and low hours. By decreeing that hours and pay should rise, the government will magic up a fiscal improvement. Actually, there will be far-from-magical savings in tax credit expenditure regardless of how employment and incomes respond. The new model is one of self-reliance. Thanks to the high threshold for personal income tax (but not national insurance), low-income workers will keep most of what they earn, but if earnings fall short of their needs, they will not be topped up.

The adverse effects of this might be covered up, at least for a while, if the economy continues to grow and jobs are created at higher wages. Wages do indeed seem to be in something of a low-level trap, but not because tax credits are keeping them there. Most people in low-paid work do not receive tax credits, because they are too young (under 25) or do not have children. The main reasons why wages have stayed so low lie elsewhere: the erosion of unemployment benefits, the lack of financial support for students, the elastic supply of labour from elsewhere in the EU, the government’s own pay policy for public sector workers and, of course, the decline of collective bargaining. In the space between the minimum people are willing to work for and the maximum employers are willing to pay, wages have gravitated towards the lower bound.

The NMW went some way to correcting this. The new Living Wage will go further, but its intended beneficiaries may come to curse it. The living wage age limit of 25 has been chosen with reference to the tax credit system, not by considering how effectively someone aged 23 or 24 will be able to compete by accepting a lower wage. In any case, the withdrawal of tax credits will not help make jobs available at higher wages: on the contrary, it will hinder the process, as the primary effect of the changes will be to push people to seek longer hours of work, intensifying competition for jobs and providing ample incentives to evade the new wage, notably through the growth of already-rampant phoney self-employment.

How did we end up in this looking glass world, where policies are sold as a package when they will actually work in opposite directions? If a Labour government announced that wages and employment were about to rise by decree, it would be mocked for its Alice-in-Wonderland economics. The Conservatives have managed to turn this improbable story into an attractive message to voters with the aid of two false friends from the left. One is the idea that the policy cracks down on employers who exploited tax credits to pay low wages. Former No 10 policy adviser Paul Kirby has promoted a ‘Nixon goes to China’ interpretation[5]: only the Conservatives, it seems, have the political capital to tackle those dastardly employers. But the claim that employers captured a subsidy from tax credits is doubtful in theory and lacking evidence in practice, while the idea of ‘cracking down’ ignores the structural power of employers. Unlike workers, they can reduce employment or shut up shop.

The other false friend is the concept of a living wage. It is rather sad to have to admit the limitations of this idea, which has proved so effective in creating a social movement for higher wages. But the living wage has always been a mixed blessing. In the mid-twentieth century, it stood in the way of child benefits and equal pay. At that time, it was a ‘family wage’, based on the profile of a man supporting a wife and children. Nowadays, a lot of work goes into generating living wage estimates for a variety of household circumstances, but the result is a dog’s breakfast of calculations which has left the government free to choose from the numbers and bestow on its preferred value the moniker of a living wage.

One of the fundamental problems with the concept is the ambivalence of its proponents about the role of in-work benefits such as tax credits. Some living wage campaigners explicitly want to reduce workers’ reliance on benefits, while others see contributions from social security to the income of working households as normal and desirable. Yet others think that income tax and universal benefits should be taken into account, but not means-tested benefits. The sober social policy researchers who do the living wage calculations for London and the rest of the UK have taken the view that the results should reflect the tax and benefit system that exists. Thus tax cuts result in lower estimates for living wages on their calculations, while cuts to tax credits increase them.

This leaves the living wage vulnerable to being hijacked by the government, and, sure enough, it has been. It allows the government to frame the living wage as a by-product of tax and social security decisions, instead of providing a basis from which campaigners can defend not only wages but also social security. A more robust approach to the living wage would have been to take a stand on the appropriate role for in-work benefits. For example, the living wage could have been set to ensure that a single person in full-time work could make a living without needing benefit top-ups, and estimates of the additional costs faced by those with children could then have been used to make the case for adequate child benefits and childcare provision. The available data suggest that the living wage estimated in this way would be above the new minimum coming into force next April, but potentially similar to the headline figure of £9 by 2020. On this basis, it would be crystal clear that low-income families with children need support from the state even when a living wage is paid, and that increases in minimum wages do not substantially alter this fact.

The living wage campaign caught on partly because campaigners felt that the minimum wage recommended by the Low Pay Commission was too low. But the Commission had good reason to be cautious. It wanted a wage that would be self-enforcing, in the sense that any informed worker would feel able to insist upon it. The infrastructure for legal enforcement is minimal, and would be no match for the pressures for noncompliance that would come with high unemployment. This does not mean that the minimum wage is not binding: on the contrary, it seems to have been very important to have a well-publicised benchmark. There was also no harm in trying to push the benchmark up through social pressure, as the living wage campaign has done. But the Low Pay Commission was realistic about what could be achieved by government decree on this side of the looking glass. It might be thrilling to travel to the other side, but this will wear off, especially when you notice that it is George Osborne, not Jeremy Corbyn, who is there with you.

[1] Cameron’s claim, at Prime Minister’s Questions on 15 July 2015, was that they will be £5050 better off by 2020.
[2] HMRC Child and Working Tax Credit Statistics, April 2015, Table 4.2. The figure of 135,000 is the number of families where the main worker is working 35 hours a week or more, the partner is working 30 hours or more, and there are children present. There are 1.5m working couples with children receiving tax credits.
[3] A full review can be found in Resolution Foundation (2015) ‘Higher ground: Who gains from the National Living Wage?’, available at See in particular Figure 7, p.30.
[4] See eg
[5] Paul Kirby (2014) ‘For a historic increase in the Minimum Wage, we need a Nixon in China moment….’ at

Friday, 19 June 2015

After the Election: Where Now?

Tony Wright

We are now all being wise after the event. It seems so obvious that this was an election that the Conservatives were likely to win, a fact only obscured by those misleading opinion polls suggesting it was too close to call. Able to claim credit for economic recovery, and having cleverly pinned the blame on Labour for the crash, the Conservatives had a winning platform. By contrast, Labour struggled with both its message and its messenger. The Scottish Nationalists also contributed powerfully to the outcome, not only by routing Labour in Scotland but also by enabling the Conservatives to play the English card to telling effect south of the border. Instead of ‘locking the Tories out’, the SNP helped to put them in.

So obvious now, it was nevertheless a remarkable outcome. A consensus of commentary had established that a fragmented electorate would ensure that majority governments were a thing of the past and that coalition-making was the pattern of the future. Yet, despite the fragmentation, a majority government still managed to emerge. Some looked at the mismatch between votes and seats and found new reinforcement for the case for electoral reform. Yet, on another view, it made the case more difficult. The central pillar of justification for the existing electoral system was that, despite its disproportionality, it delivered majority governments (‘governments that can govern’). When it ceased to perform this function (as in 2010) the justificatory pillar collapsed, seemingly beyond repair. Yet this year it was restored, if only just.

Does this mean that people prefer single party majority government to its alternative, if they can still get it? It is certainly possible. Among the reasons for the electoral massacre of Liberal Democrats was their proclaimed assumption that they would henceforth be in permanent office as part of a coalition, which went down badly with the electorate. Yet it equally possible that people are well disposed towards coalition government if they can be sure it will govern coherently. The problem at present, on display in the election, is that an adversarial political culture has not caught up with the fact that antagonists may also be putative coalition partners. The electorate seems to like the idea of politicians finding common ground and being prepared to work together, but if this is not the culture of politics then they might prefer to settle for one lot running the show.

The danger after any election is to read too much into the result. Sweeping conclusions are advanced and futures are confidently described. The first casualty is any kind of historical perspective. So it is this time too, above all in relation to the fortunes of the major parties. Had the polls been accurate, the Conservatives would be in turmoil, their leader probably gone, with both party and pundits agonising over the gloomy future of a party that had been unable to win an electoral majority in nearly a quarter of a century. The fact that this did not happen does not alter the fact that it seemed a real possibility; and it provides a necessary corrective to those accounts now describing a very different future for the party. The political facts on the ground are what matter, and these are as uncertain after the election as they were before.

If this need for perspective applies to the Conservatives, it applies even more to Labour. Here the prognostications are little short of apocalyptic in their gloominess. It was certainly a miserable defeat, provoking another of those bouts of ‘whither Labour?’ soul-searching that the party has regularly engaged in at difficult moments in the past, but it does not mean that it will never win again. After the Conservatives had snatched victory from expected defeat in 1992, it was widely asserted (by those who should have known better) that the party’s electoral dominance was now so established that Britain had become a ‘dominant party’ state, with Labour consigned to permanent opposition. Five years later came the New Labour landslide, the beginning of more than a decade of political dominance. Of course the world is not the same now, but the ability of politics to surprise is undiminished.

In fact it is not difficult to envisage a set of circumstances in which Labour’s fortunes are revived. Governments become unpopular and opposition parties start to prosper. The EU referendum will intensify Conservative divisions and deprive UKIP of its reason for existence. In Scotland the SNP record will come under closer scrutiny and challengers to one-party rule will appear. None of this guarantees that Labour will be the beneficiary, but it does indicate a political opportunity if the party equips itself with a persuasive leader and a plausible programme. Yet something more will be required too, at least if it aspires to be more than simply an office-seeking party that provides an alternative set of politicians when people tire of the Conservatives.

It will need a compelling narrative, a story that shows an understanding of how the world is and what kind of change is possible. The battle of ideas is not an optional extra but a condition for political success. At present this battle is being won by the Conservatives, defining the terms of debate on the economy, public finances, welfare and the size of the state, leaving Labour to snipe at the edges but without any developed alternative. For as long as this remains the case, it will be a fatal weakness. For all his limitations as a leader, Ed Miliband understood this and tried to put together the basis for a social democratic politics in hard times. His failure to convert this into a convincing narrative does not mean that such a project should be abandoned, but rather that the effort should be renewed.

This, after all, is what New Labour did. It did not just master the art of winning elections, or trade off the skills of a persuasive leader, but for a long period altered the terms of political debate. It commanded the narrative. That is also the task now, although in different circumstances. It could start by conscripting Adam Smith for a crusade against markets in which corporate power works against consumers, and by standing up for user against producer interests in both public and private sectors. It should stand for the little people against the big people, enhancing life chances and unblocking the routes to opportunity. It should stand for a kind of capitalism that does not strip workers of basic protections and securities, but which invests in people and skills. If such a project has an insurgent character to it, then so much the better, as that fits the times.

Saturday, 4 April 2015

Business and Labour

Deborah Mabbett

In the run-up to the election, senior business leaders have launched an attack on Labour’s policies. No-one should be surprised at this criticism. Labour presumably hopes to get its votes primarily from people who are not exceedingly wealthy. If Labour offers policies to attract the votes of the non-wealthy, the wealthy are not likely to be favourably impressed. That’s just how partisan politics works.

Nonetheless, criticisms from business might reasonably make voters uncomfortable if they associate the standard descriptor ‘business leader’ with entrepreneurship and job creation. Then the criticisms would suggest that people with deep knowledge of economic affairs have reservations about Labour’s policies, and those who feel that they lack that deep knowledge could pick up the cue. The difficulty for voters is that meaningful messages from business about the impact of policies are overlaid with self-interested babble. There may be important things to say about the effect of policies on economic activity: inadequate plans for infrastructure projects and housebuilding, for example, would be legitimate targets for business criticism. But the babble component is high: much of the critical comment has been about Labour’s tax plans. Claims that these will be a dampener on ‘business’ are the self-interested objections of wealthy people.

The difficult reality for Labour is that the era in which it could comfortably bridge class divides and occupy a middle ground that combined business-friendliness and redistributive ambitions has ended. In its New Labour variant, business-friendliness meant at least a partial embrace of ‘trickle-down’ economics: what was good for business was good for the country. It was a comfortable position for its proponents, who could engage in great deal of glad-handing and prawn cocktail consumption, and save themselves from some of the more vitriolic attacks that might otherwise come from the right-wing media. But now that we live in the era of ‘trickle up’, where the wealth of the few grows at the expense of the many, this stance is no longer tenable.

Nothing has happened since the financial crisis to reverse the well-documented picture of rising inequality in the UK. Each year since 2009, growth in average weekly earnings has not kept pace with inflation; only in 2015 is this expected to change. The median hourly wage in 2014, a princely £11.85, was 12% below its 2009 peak in real terms. While incomes have stagnated, wealth has soared, thanks in no small part to monetary policy. Bank of England estimates in 2012 suggested that quantitative easing (QE) had boosted UK households’ net financial wealth by £600b. Since the the top 5% of households have 40% of the financial assets of the household sector, the effect was highly unequal. An update by Ben Chu of the Independent estimated that the top 10% of households benefited from QE by an average of nearly £350,000 each. (Aficionados of data on the super-rich will recognise that within the top 10% there is still more inequality: the top 1% have probably benefitted by another order of magnitude again.)

The political implications of the rise in inequality are distressing. In the US, the political power of wealth has been evident in innumerable policy changes, often too small to be noticed by the general public, but adding up to substantial gains, particularly in reducing the tax paid by the most well-off. Mercifully, many of the strategies that have proved so successful in the US Congress are not available in the UK: there is less wheeling and dealing in ‘omnibus’ measures and fewer opportunities to insert obscure clauses in committees. At least the wealthy in the UK do pay taxes, although this creates its own paradoxical pressures. Stuart Adam and Barra Roantree at the Institute for Fiscal Studies have drawn attention to the very high concentration of income tax receipts: half of revenue comes from just 3% of adults. As they remark, ‘[i]ncreasing reliance on a very small number of taxpayers for revenue.. leaves the public finances more vulnerable to changes in their behaviour.’ The ominous subtext is that governments have to handle the wealthy with kid gloves, or they will exit for Monaco. The less reactionary implication is that governments have to tackle these concentrations of income and wealth at their source if they are not to be held hostage by the top 1%.

In any case, the primary difficulty for Labour in formulating policies that reflect strong public preferences for combatting inequality is not the threatened mobility of the tax base. It is the belief that the party must demonstrate ‘economic competence’ to win elections. Since the court for judging economic competence is rigged by powerful economic actors, policies that challenge their interests are quickly condemned for failing to accept economic realities.

There is a lot of slippage between the idea of the ‘business leader’ who might be engaged in innovation and entrepreneurship, and the person who is merely rich. The distinction emerges rather strongly in recent research on the United States by Martin Gilens and Ben Page. They found that the preferences of the wealthy are not well-correlated with those of business interest groups. The wealthy tend to have stronger ideological objections to state intervention, and ‘prefer lower levels of government spending on practically everything’ while business groups often lobby for regulation or spending in specific sectors. These differences, while rarely identified so clearly, are not surprising. Businesses need public goods to function; the wealthy can exit to their private domains.

This suggests that the outcry from ‘business’ could be muted by a strategy of division. Ed Miliband took a step in this direction by proposing a distinction between ‘predators’ and ‘producers’. This got a cool response in the media, perhaps because the country’s newspaper barons tend to fall on the wrong side of the line. It is a hard line to draw. There is an illuminating discussion in Thomas Piketty’s Capital in the 21st Century about the ‘moral hierarchy of wealth’ which locates the entrepreneur above the heir and the oligarch. Piketty argues that these distinctions, vital as they are to our willingness to listen to business, are futile. ‘Every fortune is partially justified yet potentially excessive. Outright theft is rare, as is absolute merit.’ Piketty exemplifies the point with a comparison of Bill Gates, ‘a model of a meritorious entrepreneur’, and Carlos Slim, a Mexican tycoon widely believed to have gained his wealth from monopoly rents obtained through government favours. Gates, he points out, has also profited from monopoly rents, as well as drawing on the unpatented basic research of engineers and scientists, much of it funded from the public purse. To develop policies towards wealth and income inequality with a clear head, we have to refrain from trying to assess the merits of individuals, and instead recognise that fortunes grow regardless of merit. Moral hierarchy in the tax code has brought about such absurdities as ‘entrepreneur’s relief’, a product of New Labour moralizing (introduced in 2008) and much loved by tax avoidance planners.

Nonetheless, Labour has succeeded in identifying some policies that divide productive from exploitative business. Wages and working conditions are a good target. While wealth can accumulate without merit, it is possible for business to demonstrate some merit by sharing the gains with the workforce. The minimum wage has enjoyed a reasonable level of business acquiescence because it protects better employers from undercutting by rogues. However instinctively business may bridle against interference, it needs the government in such situations to impose common standards and regulate competition. There are other examples where business interests are divided. While the utility companies have the resources to complain loudly when tougher rules threaten, the lives of many business people are made miserable by poor utility services. Ditto the banks, highly unpopular with small business as well as the general public. Adding to ‘business’ numbers, there has been a huge rise in the number of people who are self-employed since the financial crisis. Many struggle on relatively low incomes and are vulnerable to exploitation by big business suppliers and customers.

There is no denying that it is difficult to hold out against criticism from those who self-identify as business leaders. The influence of the wealthy extends a long way down the income scale: middle class people often share their preferences. This could be because the middle class believe that policies to tax the wealthy heavily are liable to creep down the scale, as Helen Thompson noted in her discussion of the mansion tax in the previous issue of PQ. It also reflects the cultural dominance of the rich. They are admired for their lifestyles and their power. Admiration shades into identification: many hope to be like them, and resist having their hopes dashed. But while some voters found New Labour’s ease with big business reassuring, there were others who found it alienating. New Labour gained a friendlier press at a high cost in its relationship to its core electorate.

If Labour is serious about tackling inequality, it is in for an uncomfortable time. It has to destroy the pleasant illusion cultivated by New Labour, that there are no fundamental conflicts of interest in a successful capitalist economy. Not only will this bring political opprobium from the rich down on the heads of the party’s leadership, but also it is a message resisted by many people who will never be rich. Nonetheless, it is the message that has to be conveyed, especially now that Labour can be undermined by voices from further left, at least in Scotland. Weathering the storms that can be whipped up by the rich and powerful is tough. Even the Financial Times, loved on the centre-left for its acerbic criticisms of the City, has shown its family loyalties by criticising Miliband. But there is no way of avoiding a bad press from business if Labour is to offer an alternative to the Tories. The easy times of the prawn cocktail circuit have gone for good.

Monday, 2 February 2015

The Mould Broken

Tony Wright

A long generation ago, in 1979, Roy Jenkins announced in his Dimbleby lecture that the time had come to break the mould of British politics. It has taken a long time, and some false starts along the way, to get there, but in this election year it is clear that the mould has finally broken. Politics in Britain can no longer be fitted into its traditional shape. Some will lament this, or pretend it is not happening, but it would be more sensible to see it as a moment of exceptional fluidity and opportunity on a range of fronts.

This is certainly so in the case of territorial politics. Scotland may have decided (just) to stay in the union, but it has opened up the whole question of what kind of union it will now become. This could, and should, be the moment when the routine denunciation of a top-heavy centralism becomes a real political project. Nowhere is this more urgent than in England, which properly demands a share of the devolutionary action and whose great cities outside London rightly look to reclaim a lost civic inheritance of power and energy. Whatever the future of the union holds, it will manifestly not be business as usual.

At the same time the fracturing of the old party system, and its electoral supports, opens up new electoral and governing possibilities. Far from being an aberration, coalition politics of one kind or another looks like the future. This brings with it unavoidable implications for the conduct of politics. Nowhere is this more obvious than in relation to the electoral system. The referendum rejection of the alternative vote promised to kill off electoral reform for years to come, but this already looks rather different now. The justification for the first-past-the-post system was that, whatever its representational deficiencies, it delivered majority governments with the ability both to govern and to be held clearly to account to the electorate for its actions. Once this ceases to be the case, either because a winning party commands such a diminished share of the popular vote that its legitimacy is eroded or because the lack of a majority winner requires a coalition, then this traditional justification falls away.

We are at that point now. We are left with all the disadvantages of the present electoral system in representational terms, not the least of which is the damaging geographical segregation of party which it now brings with it, without the core advantage traditionally claimed for it. It is for this reason that arguments about electoral reform are no longer abstract and theoretical but become pressing and practical. When Roy Jenkins was asked by Tony Blair to come up with an electoral reform proposal, Labour had just won a thumping majority and there was no political appetite to change a system that had delivered this result. The situation is now quite different. A changed political landscape requires an electoral system to match. A successor to the Jenkins commission should be put to work and, unlike the alternative vote referendum, used to promote a genuine civic conversation about the kind of electoral system we want.

The conversation might also extend to the wider constitutional terrain as we try to put assorted developments into a more coherent shape. Already there interesting questions being aired, more interesting than such familiar questions as whether a written constitution is to be desired. For example, might the House of Lords find a new role as the federal senate of a new union? Should England have its own parliament elected by proportional representation? These and other questions provide fertile material for the deliberations of a constitutional commission or convention if this is established after the election. As the Scottish referendum showed, there need be nothing boring about constitutional questions.

Yet in many ways these matters are not the most challenging of the new opportunities being opened up by the contemporary political fluidity. There is an intellectual and ideological opportunity that is even more significant. The current election debate in Britain can feel flat, predictable and visionless. Certainly it is a bad time to be a politician, when the choice on offer to voters can seem rather like the choice between having your leg amputated above or below the knee. Parties are always desperate to have a ‘narrative’ that will convince voters to believe what they are saying, but there is a difference between the kind of narrative that genuinely derives from a body of ideas and analysis and one that is merely confected for transient electoral consumption. The latter is currently more in evidence than the former.

However it is the former that is most needed, and where the opportunity is greatest. The collapse of old ideological positions, on both left and right, along with new entrants, opens up real intellectual possibilities. On the left, social democracy is still struggling to come to terms with its post-1970s exhaustion, the limitations of tax and spend when capitalism hits trouble and the money runs out, which is why there is new interest in what is sometimes called ‘supply-side socialism’. But this remains work in progress. On the right, market fundamentalism has had its foundations undermined by both the financial crash and the compelling evidence of the accelerating inequality that mocks its assertions about wealth trickling down and all boats being lifted by a rising tide. What this means is that both left and right are being required to think freshly about their ideas, and what this means for a political programme, while from other directions issues about sustainability and identity add new elements to the mixture.

In other words, it is the coincidence of a fractured political landscape and the need for new ideas on all sides that opens up the most promising possibilities. This may not be apparent in the dogfight that is an election campaign, but it is what lurks beneath the surface. Just as the electorate no longer sits in the old party bunkers, so it is with ideas. They flow from many directions and from different political traditions. Social democrats, one-nation conservatives, liberals and greens all have something to contribute to rethinking the terms of the relationship between capitalism and democracy that is the perennial challenge for modern politics.

This is difficult in a political system which institutionalises adversarialism. It is the fact that this system is now breaking down which opens up new possibilities. Sharing power makes it easier to share ideas. Political cooperation invites intellectual cooperation. Real arguments can replace bogus ones. The terms of a new progressive alliance begin to be glimpsed. None of this is certain, because it requires cultural as well as structural change, but nor is it now merely fanciful. There has been much talk over the years about the need for a new kind of politics in Britain, but never a better opportunity to bring it about. Current attention may focus on the mould that is broken; but the shape of its replacement is what matters.