Thursday, 21 April 2011

Is David Cameron the new Stanley Baldwin?

It's easy to deride David Cameron sometimes. The touchiness about never having won an election in his own right. The uncomfortable relationship with his 'posh' background. The failure to read his briefs. Already having been swallowed up by the foreign policy obsessions that normally dog Prime Ministers in their second and third terms. Well, the list goes on and on. The intrusion of the media can reduce all party leaders to absurdity - as with the recent photographs of the Prime Minister waiting for an Ryanair flight. 'Just who the hell do you think you are kidding?' seems not to be a thought process that goes through the head of anyone at No. 10 or Conservative HQ.

But consider the strategy, not the tactics.

And the history.

When David Cameron was elected to lead the Conservative Party, they were in a parlous position indeed. They'd lost three elections in a row - very badly. Money wasn't exactly flowing like water. Organisationally and intellectually, the party hardly existed west of Swindon or north of North Yorkshire - and then only in isolated pockets. They were derided, on their own side, as the 'nasty party'. New Labour's ideas - tax credits, 'liberal interventionism', higher spending on core state services - appeared to carry all before them.

Now Cameron's party is in government, and they look likely to be there for some time to come. Granted, the Conservative Party's electoral position is still far from strong. Just a tiny swing would be required to see Labour back as the largest party - welcomed with open arms to a coalition with more left-leaning Liberal Democrats than control the party today. Prime Minister Ed Miliband is not such a fantasy as it appears.

That's why the upcoming elections are so important. A 'no' to the Alternative Vote form of electing the House of Commons is increasingly likely. The 'yes' campaign is now so behind it's unlikely to be able to catch up. And the electoral battlefield in Scotland looks increasingly full of the Scottish National Party's troops and tactics. So a Labour victory in Edinburgh on May 5 now seems pretty unlikely - a shocking conclusion given that they led the SNP by more than ten points early this year. Both these outcomes will immeasurably strengthen the Prime Minister, and justify his gambles to allow a referendum on AV and to accept and indeed deepen New Labour's devolutionist settlement in the United Kingdom's nations and regions. Nick Clegg will return to the Cabinet greatly chastened and weakened, less able than ever to prevent the Conservatives enacting their own agenda, and prevented from walking out by the electoral oblivion his team face under First Past the Post. An SNP victory in Scotland will prevent Labour from presenting any victory there as a 'verdict on cuts' - and just as importantly, head off any rapprochement or even Holyrood coalition with the Lib Dems.

So the most likely person to be chuckling to themselves on Friday May 6? Despite the likely loss of hundreds of council seats across England, it'll be David Cameron.

Without AV or a Labour administration in Edinburgh, he'll be freer than ever - and will dominate the political landscape for pretty much as long as he likes. For the inevitable outcome of the Parliamentary Voting and Constituencies Act, without the AV triggered by a 'yes' vote in May, will be to push the Conservatives closer to an overall majority in the Commons without any movement of votes towards them at all. This is because it 'equalises' and redistributes Commons seats more neatly on the basis of population. The Tories would have won 294 seats under the new constituency boundaries in 2010 - just six short of being able to govern on their own. Labour would have gone further backwards, to about 231 seats, but the Liberal Democrats would have been hit hardest as a proportion of the seats they already hold. They will also lose many of their seats in the south and west to the Tories - easily pushing David Cameron over the finishing line of an absolute majority on no more than 36 per cent of the vote.

The Prime Minister will then be in a position to (a) replace a nominal coalition with a purely Conservative government, (b) use his previous moderation to pose as the champion of 'the nation', particularly England, and lastly (c) say that he has secured a (rather anaemic) economic recovery by working across party lines. He can, in short, act as a latter-day Stanley Baldwin (above) - the man who dominated inter-war British politics by arguing that he and his party represented the country and its instincts themselves, and who was able to point to the financial crisis of 1929-31 and Labour's 1931 implosion to prove it. Witness Cameron's shared platform the other day with 'patriotic' and right-wing Labourite John Reid, and his appeal to the 'gut' rather than reasoned argument over AV. Cameron's aim then will be to govern for the best part of three whole terms and beat Tony Blair's ten years in power.

The prize is within his grasp. Can he seize it?

Monday, 11 April 2011

England's universities: uncomfortable alternatives

Well, as the fee setting continues among England's universities, the process has made the Government look deeply foolish - and foolhardy (as predicted here, of course). It's not just that politicians exhibit a really noticeable lack of knowledge about universities - as displayed today by a Prime Ministerial gaffe about the numbers of ethnic minority students at Oxford. It goes much wider than that - to a failure to really look at the alternatives before us. They might in some ways have been harder in the short run, but the narrow and winding road might have taken us to broader, more sunlit uplands in the end.

What might those alternatives have been? Well, there are only two really. The present system has many elements in common with Ed Miliband's favoured graduate tax, since it sees the Government stumping up the money to begin with, and contributions then flowing in some years for now. It just brings forward those contributions, because graduates start paying back rather more than they would under a 'simple' tax system which would see them shelling out 2-3 per cent of their taxable income for the rest of their lives. The slice of 9 per cent over 30 years is more 'front-loaded' as it were. But it's safe to say that the Cable-Willetts solution has many elements in common with a graduate tax. So I'm excluding that as an 'alternative'. Whisper it softly in both Labour and Conservative HQs!

In contradistinction to this rather messy 'centre ground', two elements might have worked rather better in the long term:

1. The 'I wouldn't start from here' solution. There is no doubt that overall state spending would be falling less quickly were Ed Balls Chancellor - at about half the rate of its present drops, if Labour's pre-election statements are taken at face value. Balls might even have wanted to reduce the pace still further. This would mean that instead of the HEFCE teaching grant falling by 60 per cent, it would have gone down by 25-30 per cent. Had Labour privileged Higher Education funding, rather than clobbering it - and many countries round the world have done just that during the present economic crisis - that figure might have been perhaps 20 per cent. That would have allowed the system as it pertained between 2003 and 2011 to have continued, albeit with a 'cap' of £4,500 - £5,000 rather than £3,350. There would have been less cost to the Exchequer, but rather more to graduates. HE numbers might have been allowed to drift up rather further if and when central government felt more generous. This is a minimum impact scenario, frightening no-one with massive change - dependent on government revenues picking up before the financial markets move in for the kill, but relatively sustainable if things go well. Certainly it wouldn't have involved a massive loss of political capital in Whitehall and Westminster, a huge controversy about access, and a big taxpayer-funded black hole (caused by ten per cent spending increases in this Parliament) that no-one knows how to fill.

2. The big bang. On the other hand, one could lift all restrictions. Yep, you read that right - just say 'okay, charge what you like, let parents pay up front without fines, subsidise loans, but not to the extent that either the 2003-2011 status quo nor the Cable-Willetts scheme promised'. While cutting state funding to the same extent as cental government is doing now. This is the much more radical option - undesirable from the point of view of most graduates and parents, who would face truly steep fees, but welcome to the taxpayer and to university Vice-Chancellors. What would have happened? Well, a real range of fees - from over £20,000 a year for Oxbridge science subjects, down to the £6,000 or so charged by some Colleges of HE. A much greater range of what universities are trying to do or aim at. More 'needs blind' admissions on the American Ivy League model, because universities charging top dollar can now afford to be more generous with bursaries and fee waivers. And the real pay-off? Higher, not lower, student numbers, because governments could then take the numbers cap off and allow any institution to recruit whomsoever they pleased. It's no wonder that this 'solution' is attracting some attention in Oxbridge Colleges right now.

Why do I spend time analysing these counterfactuals - imaginary worlds that will never transpire? As you can tell, I'm very doubtful that the second is even a runner. The answer: because they help us see what's wrong with the Coalition's strategy for England's universities, that fatal mix of massive and unparalleled government spending cuts with two funding caps, one of which is just ignored and one of which prevents new investment and new income coming in. And neither of which stops the Government tinkering around with a fragile system it just doesn't really understand.

Both 'fewer cuts' and 'big bang' would be very hard politically. And difficult to sell to voters. But the alternatives outlined here would work, at least economically. The present system won't. That's the difference.

Wednesday, 6 April 2011

The difference between a debt and a deficit

It's fairly well established now in the public mind that 'there's a massive debt, we've maxed out the credit card, we've got to cut back'. And there is a little bit of truth in that. However, it's a totally mishapen grain of truth in a sea of a familiar effluent - muddled thinking, poor comparisons, nonsensical imagery and above all similes that make no sense at all.

For one thing, the Government is able to justify cutting so quickly because it's taking advantage of public guilt and fear over household debt - a potent and a toxic threat to both efficient economic policy and equality, as Danny Dorling has pointed out in his most recent book Injustice: Why Inequalities Persist. In short, the most recent transfers of wealth from the poorest to the richest have partly been facilitated by lending to individuals who're not able to bear even the payments on their debt.

But as I've pointed out again and again, states - especially the British state - are nothing like households. For one thing, they are exceedingly unlikely to go bust. There was, in the UK case, a vanishingly unlikely threat of a default or even of a sovereign debt crisis. I was at a conference with Jim Tomlinson, Professor of Economic History at Dundee, the other day. He made the very good point that while recessions are technically defined and observable, 'crises' are political constructs that are for the most part given shape and meaning by self-interested politicians. 'Never let a good crisis go to waste', Rahm Emanuel, one of Barack Obama's key advisers, once said. The Coalition is taking this advice to heart - just as New Labour swallowed 'it's the economy, stupid', in its entirety.

Anyway. The reason Britain never looked likely to have a soverign debt crisis - or really that government debt would put pressure on interest rates - is down to the difference between a debt and a deficit.

Gordon Brown as Chancellor spent the first years of his reign at No. 11 paying off debt - which he then let rise from about 2003. Even so, it had reached only in the low 40s as a percentage of Gross National Product by the start of our present financial crisis in 2007. That's why the stock of total British national sovereign debt is so low - not so high.

Its the deficit that's high This is the difference between state income and outgoings every year. And this has been at a peacetime high over the last year or so - though it's not peaked as high as everyone feared, and it would now be on a downward track whoever won the 2010 General Election.

But the balance on your credit card - the image that the Government invokes again and again - is a debt, not a deficit. Your personal deficit every month is what adds to it, and what puts you in danger of losing your home and your ability to borrow. The British Government was never really subject to that constraint - though the American federal government might be, and the Portuguese, Irish and Spanish states certainly are.

Want to know what to do? Look at the problem in front of you. Don't use a dodgy comparison.

Tuesday, 5 April 2011

Defending the 'Haldane Principle'?

You may not have heard, but academics are warring over something called the 'Haldane Principle'. This is the concept that governments stump up the cash for research, but they shouldn't interfere with how its spent, instead working 'at arms length' to the academics actually using the money. The name in its title referes to Richard Haldane (above), whose 1918 report of the University Grants Committee is thought to have recommended just this idea. Otherwise, it's always been said, politically-motivated Ministers and officials could ask for congenial findings and useful agendas that would both compromise academic freedom. Why fund universities at all if they're not to engage in 'blue skies' thinking that the private sector - usually through no fault of it own - will not or cannot?

Now that embattled Universities Minister David Willetts has announced that ideas of the 'Big Society' will be one theme for the Arts and Humanities Research Council (AHRC), there's been a lot of angry talk that the body is getting to keep its £100m a year budget in return for some form of Danegeld. The head of the Royal Historical Society has called this new definition 'absolutely gross'; Tristram Hunt, the historian and Labour MP, used the word 'disgraceful'. Mary Beard, the Cambridge Classics don who has been teaching at Jamie's 'Dream School' on TV, has called the change 'truly disastrous'. 69 academics have written to The Observer to condemn the idea; one has resigned from the AHRC's grants panel; 1,600 other academics have signed an online petition against the idea. Free marketeers have countered that the whole idea is 'eminently reasonable'. Why not, asks the Adam Smith Institute, when the taxpayers are picking up the tab in the first place? In his defence, the head of the AHRC, has vigorously rebutted all of these allegations.

I think we need a bit of perspective and a bit of history here.

For one thing, the famous Report of Haldane's Committee certainly did not contain that principle. Quintin Hogg, that wily Conservative laywer (later Lord Hailsham) invented the concept in order to oppose Labour's setting up of a Ministry for Science in 1964-65. Both the Select Committee looking into this, and Labour's own Universities Ministers, questioned the 'myth' of Haldane while they were in power, and argued that governments could set 'broad agendas' for research while universities and staff worked out the detail. That, to be honest, is how it's always worked. Labour asked for the 'Third Sector' - its own Big Society agenda - to be worked over in the early years of this century. It's just that now there's a particularly egregious example that academics don't like. 'Civic engagement and values' - the actual title of the AHRC's 'Big Society' theme, isn't that far from this agenda.

For another, the Research Councils do not fund most of British research in any subject. Universities do that, both from their own funds, through benefactions, or from the 'Quality Related' (QR) funding that's won or lost through the Research Assessment Exercise or now the Research Excellence Framework. Good and bad (often bad), these structures ensure a good deal of independence whatever the Research Councils do. It is meant to work that way: this 'dual funding mechanism' means that 'top' universities get loads of QR cash, while newer or less prestigious places can still apply for Research Council funding in their own right.

One of the main challenges facing universities at the moment isn't so much an attack on 'Haldane', that historical fiction, but rather the massive overall state funding reductions and concentration agenda that the Department for Business, Innovation and Skills is imposing on the sector. Research Councils are being asked to 'cluster' their money together to ensure 'impact' and 'efficiency' - as if it matters where a few hundred thousand pounds is actually spent in the age of the internet and the mobile phone. So the Economic and Social Research Council has just announced a round of bidding for PhD funding that gave not a single penny to post-1992 institutions.

But is there anything that should stop, say, Hertfordshire's historians putting in a big bid with UCL, or Warwick with Coventry, or Sussex with Brighton (apologies for those geographical clusters, but you know what I mean)? The answer? Er, no. But the concentration agenda would posit that there is, or should be - incidentally, helping to drive a coach and horses through the Government's absurd student loans scheme, by encouraging new universities to charge the maximum to make up for both this and the new visa regime. More of those two misguided adventures anon, but for now it's important to say that both 'Haldane' and a truly vibrant, variegated and competitive sector go together. At the moment they're both in doubt. That's worse than if the Research Councils were asking for present-minded research alone.

This twin agenda might well be as much of a challenge to academic freedom as the regrettable erosion of freedom contained in the AHRC's 'directions'. They're both directed by central government; they both make life harder for some researchers, and easier for others, on an entirely arbitrary basis; they're both part of the generally anaemic opposition academics have offered to their marginalisation; they're both subject to fashionable reversal.

I have a hunch that, like me, you'll think that this isn't the best way to make policy.