Friday, 21 September 2018

This summer has shaken up Welsh politics. Here's your guide to what's going on

Tomos Evans


The summer of 2018 has seen Welsh politics undergo multiple leadership elections at the same time. Four of the five parties represented in the National Assembly for Wales – Welsh Labour, Welsh Conservatives, Plaid Cymru, and UKIP Wales – have either undergone or will be holding leadership elections soon. Only the Welsh Liberal Democrats are likely to keep their current leader this year. These elections have come about for different reasons but the holding of four leadership contests at the same time is unprecedented in Welsh politics.

Welsh Labour


First, in April, the current first minister and leader of Welsh Labour, Carwyn Jones announced he would be standing down this autumn following the death of former Welsh government minister Carl Sargeant in November 2017.

Throughout the summer a number of Labour assembly members put their names forward for the leadership, but as of yet only two have secured enough nominations to run. Mark Drakeford, the current cabinet secretary for finance in the Welsh government was first to secure enough nominations to run, followed by Vaughan Gething, the current cabinet secretary for Health and Social Services.

Eluned Morgan, Huw Irranca-Davies, and Alun Davies, all announced their intention to run, though this has now narrowed to just Eluned Morgan who still requires the support of one more Labour assembly member to get onto the ballot.

Both Mark Drakeford and Vaughan Gething are running campaigns in which they advocate change. Many Welsh Labour activists are keen that the leadership contest does not turn into yet another Corbynite vs non-Corbynite battle. Nevertheless, Mark Drakeford is widely seen as the ‘Corbyn candidate’; having been supportive of Jeremy Corbyn’s election and subsequent leadership he is now backed by Welsh Labour Grassroots (Momentum in Wales).

Arguably, if Drakeford, the current favourite, does wins the leadership, and Leanne Wood retains leadership of Plaid Cymru, there will be greater opportunities for cross-party working between Plaid Cymru and Welsh Labour.

Welsh Labour has agreed to run its leadership via one-member-one-vote after a robust debate over whether the electoral college should be retained. The results of the election is expected to be announced in early December.

Plaid Cymru


Plaid Cymu’s constitution allows for a leadership contest every two years. Following much discussion within the party, Rhun ap Iorwerth and Adam Price announced their plan to challenge Leanne Wood for the leadership in in July.

The election campaign has seen many accusations about the perceived lack of successes the party has had during Leanne Wood’s leadership, as well as commentaries on which of the candidates would or would not work with the Welsh Conservatives.

The outcome of the election will be announced on 28 September. Generally, it appears that the race has narrowed into a contest between current leader Leanne Wood and challenger Adam Price – something which would no doubt be contested by the ap Iorwerth camp! Should Wood win, there is the potential for Plaid’s agenda to become more radical in challenging Welsh Labour from the left. Whereas a switch to Adam Price may well see the party become more centrist, with Price proposing a cut in income tax, for example.

Welsh Conservatives


At the beginning of September, Paul Davies won the election to succeed Andrew RT Davies as leader of the Welsh Conservative Group in the National Assembly. RT Davies resigned at the end of June following criticism he had made of Airbus’ warnings of a no-deal Brexit and the feeling that he had lost support for his leadership from other elements of his party.

Near the top of the agenda for Paul Davies as he becomes the Party’s new leader in the Assembly is the push to secure more autonomy for the Welsh Conservative party from the UK party. Alongside this is the goal of solidifying himself as the leader of the Welsh Conservatives, not solely the Welsh Conservative group in the assembly.

Nonetheless, Davies’ election does almost certainly move the Welsh Conservatives slightly further towards the centre ground of Welsh politics, and he has explicitly said that he is open to doing a deal with Plaid Cymru in the future.

UKIP Wales


UKIP Wales were the first party to announce their new leader – Gareth Bennett – whose positions on trans rights, the Welsh language, and devolution itself have seen him come in for much criticism from across the political spectrum. While already losing one AM, quite what Bennett’s leadership will do to both the party and the assembly is unclear but his anti-devolution statements have led to concern from many in both politics and the Welsh media.

After the dust settles


Generally, the changes in leadership will create new opportunities for parties to work together. The election of Gareth Bennett will most likely further isolate the UKIP group, whereas Paul Davies is certainly more to the centre than his predecessor. Assuming all signs are correct and Mark Drakeford is elected, Welsh Labour’s leader would be further to the left than current leader Carwyn Jones, which may well see the Welsh government’s policy agenda become more radical.

Quite where Plaid Cymru ends up really depends on who ends up winning the leadership. A Wood victory could see more red-green working but a victory for Price or ap Iorwerth could open the door to a closer relationship with the Welsh Conservatives. This summer has shaken up Welsh politics. Quite what politics in the Senedd will look like when the dust settles will not be known until early next year.

Tomos Evans is a PhD student at the University of Bath

Monday, 17 September 2018

A surprisingly simple way to deal with corporate tax avoidance

David Sanders

Last month, the BBC reported that Amazon’s UK tax bill had fallen despite a significant increase in its profits to public outcry. Many people are infuriated by the fact that multinational corporations avoid paying taxes in countries where their turnover is considerable and where they make huge profits.

The main legal device that multinationals use to minimise their tax exposure is to locate their official, tax-declarable headquarters in a country with a low corporate tax rate. Here, they pay the legally required corporate taxes. They can thus make a legal case, recognised in international law, that they are paying an appropriate amount of tax in their chosen country of tax residence. Yet at the same time they contribute little or nothing to tax revenues in the countries where they make most of their profits.

By implication, they make a disproportionately small contribution to the economic and legal infrastructures in the countries where they operate. Amazon, Apple, Google and Starbucks are frequently cited as examples of companies that deploy this sort of strategy. There are doubtless many others.

Suggestions that ‘something ought to be done’ to make multinationals pay ‘fair’ amounts of corporate tax are typically met by the response that concerted international action would be necessary to curb multinationals’ ability to avoid paying tax. And, as we all know, achieving coordinated tax policies across national borders is extraordinarily difficult, especially in an era when economic nationalism appears to be reasserting itself.

I am not convinced that we need to rely on international agreements to force multinationals to contribute properly to tax revenues in the countries in which they operate.

One proposed solution is that multinationals that pay no corporate taxes in, say, the UK could be taxed on their UK sales – thus compensating the UK Exchequer for the lack of corporate taxes paid. The problem with this approach is that it can be argued to be discriminatory against multinational companies that are paying all the taxes that are legally required in the UK. It is argued in consequence that if a Tax on Sales – paid by the Seller – were to be introduced in the UK, then all companies, whether or not their tax headquarters are in the UK (and whether or not they are making profits), should be expected to pay it.

In order to avoid such accusations of discrimination, I propose a modified version of the Tax on Sales (paid-by-the-Seller) idea. If a multinational has its tax-declarable headquarters in a country with the same or a higher rate of corporation tax on profits than the UK, then its Tax on Sales levy would be zero. However, if its tax-declarable headquarters were located in a country where corporate taxes were lower than in the UK, then its UK sales would be subject to a Tax on Sales at a level that would bring its UK tax liability to a figure that represented the difference between two measurable figures:

(a) the corporation tax that would have been paid in the UK had the company been obliged to declare the profit on its UK operations in the UK; and

(b) the amount of corporation tax paid by the company on its UK operations in its tax-declared country.

UK corporate tax law could easily be configured to require all overseas tax-domiciled companies that operate in the UK to reveal both (a) and (b) on an annual basis. If companies failed to provide the appropriate information in a timely way, HMRC could be empowered to calculate (a) and (b) based on reported tax paid in the tax-declarable country and the company’s average turnover figures for the UK and globally.

It would be a simple matter to calculate the difference between them. Thus, for example, if a company that was tax-declarable in Ireland paid only 12.5 per cent tax to the Irish government on its corporate UK profits, given a UK corporate tax rate of 19 per cent, it would be expected to pay a UK Tax on Sales amount equivalent to 19-12.5=6.5 per cent of the profits on its UK operations. On a sliding scale, where the difference between (a) and (b) was large, a relatively high Tax on Sales rate would be applied; where small, the Tax on Sales rate would be relatively low.

The object in all cases would be to bring the total corporate tax burden on multinational companies that operate in the UK into line with UK-based companies that tax-declare in the UK; to level the corporate tax paying field. A minimum UK turnover or sales threshold could be employed to ensure that HMRC’s activities were concentrated on the most egregious cases.

The UK does not need to negotiate internationally to adopt such a policy. It could just do it. Other countries could do exactly the same if they thought it was sensible. All countries might then start to realise that the race to the bottom of reducing corporate tax rates is good for no-one, since it reduces the global funds available to governments for the renewal of economic and social infrastructure. It might also begin the process of eliminating the tax havens that criminals, tax-avoiders and tax-evaders have relied upon for so long to protect and extend their narrow sectional interests.

David Sanders is Emeritus Professor at the Department of Government, University of Essex. 

Image by Christian Wiediger.

Friday, 14 September 2018

Is France having a moment? Emmanuel Macron and the politics of disruption


Helen Drake



On 19 June 2018, at a joint press conference with German chancellor Angela Merkel, French president Emmanuel Macron proclaimed that Europe, the EU and each of its member states had reached a moment of existential truth: unite or implode.

Europe probably is facing exceptional challenges, but political leaders routinely deploy the language of crisis to make their points. Crisis and drama sell in a political age of rapid-fire social media and emotional exchange, and the visuals of politics – particularly of summitry – raise expectations of momentous change.

The meaning of Macron (I)


For his part, President Macron’s position is specifically designed to accommodate personal power, and he has shown every intention of deploying this arsenal to the full.

A combination of good luck, timing and tactics won him the 2017 French presidency in an unprecedented manner, lending him an air of exceptionality. In power he is an iconoclast, ducking those who seek to pigeonhole him using customary labels of left, right, liberal, or other.

In the 2017 contest, Macron fought off the notorious populist, radical right politician Marine le Pen with his own brand of positive populism. Campaigning from the grassroots up, he side-stepped and wrong-footed traditional political parties. He picked policy issues that trend – gender equality, energy transition, artificial intelligence. Nothing is off his radar; nothing, it appears, is sacrosanct, although he is no outsider, nor stranger to French political culture.

It is hard enough to capture political leadership using the standard tools of academic analysis in normal times, let alone when a Macron (or a Trump) brings something novel to the spreadsheet. The human factor simply defies scientific rigour, however hard political scientists try to classify and categorise individual traits.

We shy away from the ‘great man’ theory of leadership, for obvious reasons, and ‘heroic’ leadership is rarely attainable in democratic systems where leaders are contained, and deliberately so, by institutional checks and balances. Any sensible approach to understanding leadership must avoid claims to read leaders’ minds, and set the personal against the institutional (the political system), the conjuctural (the immediate context and its challenges), and the structural (the wider environment).

However hard the task and however imperfect the results, analysing political leadership matters, if only to offer up something to temper popular expectations of individual leaders that are unrealistically high, and opinions that are correspondingly and predictably low when fast results fail to materialise (president Macron’s ratings, by the way, dipped sharply in the summer of 2018).

The idea of disruption


One notion that has found its way into daily conversations about politics in general and leaders in particular is that of disruption. Pascal Perrineau, veteran analyst of French party politics, entitled his edited volume on the 2017 French elections, no less, Le vote disruptif – the vote of disruption.

Earlier the same year, I compared and contrasted Macron’s election as French president with the UK’s 2016 vote by referendum to leave the EU as moments of political disruption. The comparison was inspired by a BBC Radio 4 trio of short conversations with disruptor and disruptee (those disrupted) alike in three of the UK’s infamously hidebound markets: property, banking and death. In each case (getting a mortgage and buying a property; opening and managing a bank account; planning a funeral, respectively) , the disruptor emphatically rejected business as usual. In each case, the disrupted (the mortgage brokers, the estate agents, the high-street banks, the funeral directors) had a choice of how to respond to the challenger. Sometimes, business turns out to be usual for a reason, and disruption could harm the customer; sometimes not, and technological innovation can only improve matters.

Disruption theory comes to us from the academic literatures of business management and merits a closer look if we are to use it to get a handle on political leadership. The theory distinguishes market incumbents from new entrants. Incumbents’ ability to correctly diagnose genuinely disruptive innovation is crucial to their survival: there are win-win scenarios, when markets expand. There are also unseemly crashes. New entrants’ chances of truly up-ending the status quo reside in the novelty of their business model: disruption is primarily process, not merely product (or service). Disruption has come to connote success in the business world, but it can just as equally fail: high risk is built into the very nature of disruption. Successful disruptors target the ‘overlooked’: the customers who the incumbents have, for one reason or other, neglected.

The meaning of Macron (II)


President Macron has not just divided attention: he has provoked remarkably bilious criticism that on occasions can come across as hatred or prejudice. Bile currently runs close to the surface in politics, and not just in France: we are living in sensitive times and the stakes, domestic and geopolitical alike, are uncomfortably high.

Emmanuel Macron’s election manifesto promised a Révolution. Perhaps the incumbents of French politics should have taken him at his word. He was a new entrant in the literal sense, forming his Obama-like political movement En Marche! only a year before the 2017 campaign, and to the surprise of the incumbent parties. He notably outplayed the other would-be disruptors of the French political scene, Jean-Luc Mélenchon and Marine le Pen, in both cases partly by luck. France’s traditional, incumbent parties lay in tatters once the political typhoon of 2017 was spent, their resilience now depending on a correct diagnosis of the nature of the threat of this new entrant.

If Macron is to be a successful disruptor of French politics, then his constitutional reform will have to stick, his party La République en Marche (LREM) will have to cohere, his policies will need to bear fruit, and the ‘overlooked’ will need to consider themselves better served by the new kid, and commit their support.

Even where the levers are accessible to president Macron, the signs are not good, and own goals have already been scored in this first half of the 2017-2021 presidency. The parliamentary discussion of the constitutional reform bill was postponed while the French presidency scrambled to contain the Benalla affair. That scandal raised ethical questions about the conduct of the presidential inner circle, damaging Macron’s self-image as a president with integrity.

LREM is showing its cracks, including over the content of the proposed constitutional reform itself. Macron’s government has seen resignations and departures, and a reshuffle is imminent at the time of writing. Macron has been explicit that policy reform is a slow burn process, and that his eyes are fixed on a 10-year horizon, but today’s politics demands the instant fix, and his mandate is a short five years.

Macron has succeeded in passing certain labour law reforms but is struggling to shake off an image as elitist and friend of the rich. Those who felt overlooked by the system and who turned their backs on the established parties are not all Macron fans: far from it. He barely squeaked into the second round of the presidential election ahead of Mélenchon and le Pen, and his voters in the second round run-off are a disparate collection from across the generations and social classes, not a stable electoral base.

Not only incumbents but also disruptors can misread the ‘market’ – the political climate. Perhaps Macron is ahead of his time, or perhaps he is a fake disruptor in the first place, a one-man machine for the sort of hypermasculine occupation and projection of political power that is all too familiar to us. And perhaps the theory of disruption has no place in politics. Voters are not consumers, nations are not markets, and political parties are not businesses. Politics is a human endeavour at heart, and political leaders are flawed humans. These flawed humans must, in today’s democracies at least, operate alongside substantial organisational inertia.

A rival theory from the business world argues that successful disruption requires ‘architectural innovation’ – the remaking of the organisation itself. Contemporary France – the ‘organisation’ in question here - is a country with a very strong narrative of self, making the stakes of disruption particularly high. Perhaps an early lesson from the case of Macron is that in politics, disruption will fail, absent a Révolution.

Helen Drake is Director of the Institute for Diplomacy and International Governance, Loughborough University London.


Image by Ecole polytechnique Université Paris-Saclay.

Friday, 7 September 2018

Review: Yemen in Crisis: Autocracy, Neo‐Liberalism and the Disintegration of a State, by Helen Lackner

Thanos Petouris


In spite of its important geopolitical position, Yemen has remained one of the least studied countries of the Middle East, so Lackner's contribution to its scholarship is a welcome one. Her publication does not pretend to be an exhaustive dissection of contemporary Yemeni history and politics, but rather it focuses on specific historical episodes as well as some of the more important political and social challenges the country has faced since the unification of North and South in 1990.

The Yemeni civil war has already entered its fourth year. The latest report of the United Nations’ Office for the Coordination of Humanitarian Affairs (UNOCHA) on conditions in the country makes dismal reading. In no uncertain terms, Yemen has been characterised as ‘the world's largest humanitarian crisis’ with two‐thirds of Yemenis facing starvation.

However, the term ‘humanitarian crisis’ hides a multitude of afflictions that the Yemeni population has been subject to even before the war started. Outbreaks of disease, child malnutrition, lack of basic medication for common health problems, destruction of terraced farmland, and worsening of environmental conditions are just a few of the visible effects of the current crisis that have damaged Yemen's future for generations to come.

In response to Yemeni internal political developments, in March 2015 Saudi Arabia and the United Arab Emirates gathered an assemblage of military forces with some contributions from a number of Arab countries, and even including mercenaries from as far afield as Colombia.

The ostensible mandate of the Saudi‐led coalition, as it has become known, is to restore the legitimate government of president Hadi, who had to flee to Aden and thence to Saudi Arabia. At the same time, the different direct and indirect participants in the conflict – whether local or international – have been pursuing their own political agendas. This further complicates attempts at a negotiated cessation of hostilities.

Helen Lackner's assertion that “none of the players involved demonstrated the slightest concern for the welfare of the 27 million Yemenis, most of whom suffered worsening conditions on a daily basis”, is perhaps the most poignant summary of the conflict and a harsh indictment of the so‐called international community's response to the plight of the Yemeni people.

In Yemen in Crisis Lackner sets out to explain the reasons for the country's chronic political, economic and social problems, which the current war and its attendant humanitarian crisis have thrown into sharp relief. A long‐term researcher of Yemen, Lackner has lived and worked in both the former Yemen Arab Republic (North) and People's Democratic Republic of Yemen (South) for fifteen years. This allows her not only to speak with authority about the country, but also to enhance her narrative with the nuance of her first‐hand experiences.

Although the book’s brief historical summary tends to reproduce conventional understandings of the modern political history of Yemen, without challenging prevailing narratives, in the subsequent four chapters Lackner delves deeper into the specific social and political phenomena that have defined Yemeni politics over the past two decades. 

The two regional movements that developed in the Zaydi north and former socialist south during Salih's presidency (1990–2012), the Huthis and al‐Hiraak, are very different in their ideological and social makeup. Nevertheless, they have both emerged during the current war as major political players in Yemeni politics and will be indispensable in the search for a final settlement. Equally, there is a sensible, balanced assessment of tribalism and Islamism, both routinely picked out as defining characteristics of Yemen's political and social life.

It is in the latter three chapters, which focus on questions of natural resources, the economy, and local development, that the author's expertise shines through. Lackner pulls no punches in criticising the neoliberal agenda pursued in Yemen not just by the Bretton Woods financial institutions but also by international NGOs.

Her discussion of the Local Development Associations, community‐based organisations specific to North Yemen, offers a characteristic example of how external involvement—even in the form of developmental aid—can reinforce the role of the state and deprive communities of control over decisions on local matters. Water and oil/gas are resources that are key for the future development and stability of the country. One is left without any doubt that any viable solutions to the ongoing conflict will only be sustainable to the extent that political expediency is paired up with a serious, overarching reconsideration of the country's developmental model.

To sum up, Yemen in Crisis is an excellent introduction to the country and its major socio‐political characteristics and problems. It will serve as a good entry point for anyone wanting to understand how the optimism of Yemeni unification a quarter of a century ago has become the suffering of today.

Thanos Petouris is doctoral student at the Department of Politics and International Relations, School of Oriental and African Studies, London and Researcher on contemporary Yemeni politics at the School of Global Studies, University of Sussex. 

This article is adapted from a longer piece in the Political Quarterly journal.

Monday, 3 September 2018

Is Obamacare really doomed?

Daniel Béland, Philip Rocco and Alex Waddan



The Patient Protection and Affordable Care Act (ACA), better known as Obamacare, is the most significant US social policy reform in half a century. It is also the most politically fractious.

Since the law was signed by President Obama, Republicans have mobilised against it, using courts and state governments to undermine the implementation of the legislation, which was set to unfold gradually over a nine‐year period.

The beginning of the Trump presidency in January 2017 marked a turning point in the politics of Obamacare. In his first address to Congress after a widely unanticipated victory in the 2016 election, President Donald Trump called on Congress to “repeal and replace Obamacare … with reforms that expand choice, increase access, lower costs, and at the same time, provide better healthcare”.

The repeal and replacement of was supposed to be the signature accomplishment of the Trump administration's first term. Yet, despite the ACA's weak political support structure, Republican attempts at repeal have failed. An unending political war is still being waged over ACA. Is Obamacare really doomed?

Under fire from all sides


There are several problems with the ACA. Ultimately, it fell short of guaranteeing the universal health coverage that some Democrats hoped for. Both its success and its structure were contingent on pragmatic legislative bargains negotiated by congressional Democrats and unorthodox manoeuvres to guide the legislation through a snarl of committees and procedural obstacles. As a result, the benefits of the ACA were often far from obvious to the public.

Furthermore, opponents found an easy target in the so‐called ‘individual mandate’, which stipulated that those who did not purchase insurance would have to pay a penalty. Finally, in June 2012, the Supreme Court ruled that states are also allowed to opt out of one of Obamacare's most visible and tangible benefits: the expansion of the Medicaid programme to cover individuals up to 138 per cent of the Federal Poverty Line. In total, more than 15 Republican-controlled states have refused to expand Medicaid in protest of the Act.

Because Democrats based their design of the ACA on a fundamentally conservative, market‐based policy template, they have fractured the Republican coalition for repeal. Yet, though it is still alive, the ACA is under fire from all sides – from voters who support more comprehensive reform; from political moderates in Congress who lack confidence in the complex insurance arrangements; from conservative opponents of the ACA in both the White House and in the states have devised ways of weakening the ACA that are more insulated from immediate public disapproval, including weakening consumer protections and introducing work requirements in the Medicaid programme.

The future of Obamacare


Although most of the ACA survived the first year of the Trump presidency, its long‐term future remains uncertain. Four main, interlocking, factors account for this uncertainty.

First, the policy flaws that undermined the ACA's capacity to build a broad‐based self‐sustaining constituency of support largely remain in place. In particular, the prospect of increasing premiums and higher deductible payments in the individual insurance market still looms.

Second, while their legislative efforts to repeal and replace the ACA largely failed, Republicans have proved much more effective in pursuing a ‘death by a thousand cuts’ strategy aimed at gradually undermining the reform. For instance, the Trump administration has used executive authority to withhold payments to insurers; to restrict advertising of ACA‐covered insurance plans; to reduce time for open enrolment; and so on.

Third, although the popularity of the ACA had increased at the beginning of the Trump presidency, the public remains divided over health care reform, and amongst self‐identified Republicans in the electorate, opposition to the ACA remains strong. Hence, the failure to ‘repeal and replace’ in 2017 does not mean that political battle over the future of health care arrangements in the US is over. President Trump himself has predicted that the ACA will implode and that the necessity for a Republican driven reform will then arise.

Finally, there is some political movement trying to shift health care politics in a very different direction. On the left of the Democratic Party, the focus is less on stabilising the ACA than on further expanding coverage, either through a single payer approach or, for more moderate Democrats, via a ‘supercharged’ public option called Medicare Extra. Associated with Senator Bernie Sanders (Independent–Vermont) and his supporters, this push for universal coverage through more direct government intervention is at odds with both Republican policy preferences and the market-oriented policy design of the ACA.

The ACA thus offers a profound lesson about how new policies create a new politics. Even when major social reforms provide benefits to pivotal constituencies (many millions more Americans were insured because of Obamacare: by 2015, the uninsured rate had dropped to 9.4 per cent, compared with 15.1 per cent in 2009), they may also unleash political forces that are difficult to predict and even more difficult to control.

While Democrats believed that a moderate, market‐based reform would pre‐empt Republican attacks while satisfying proponents of more radical change, the ACA only seemed to intensify those hostilities. Eight years after its passage, the law remains a ‘transitional’ policy—built on a market‐oriented base but committed, albeit vaguely, to inclusive and redistributive goals.

What the ACA will transition into remains unclear, but considering the strong ideological and partisan divergence over health care reform, the debate over the future of the ACA is likely to remain on the agenda in coming years. Democrats anticipate that the public will come to see the Trump administration and Republicans as ‘owning’ any further emerging problems, meaning that Democrats will once again be the party called on to fix health care.

Daniel Béland is a Canada Research Chair in Public Policy at University of Saskatchewan.

Philip Rocco is an Assistant Professor of Political Science at Marquette University.

Alex Waddan is an Associate Professor in the Department of Politics at the University of Leicester.

This article is adapted from a longer piece in the Political Quarterly journal.

Image by Robbie Wroblewski.