Wednesday, 27 June 2018

Labour's basic presumptions are false


So as you will know by now, 'Public Policy and the Past' is no fan of the UK's ruling Conservative Party - at least in its present guise. Almost everything it tells you is just flat wrong. Philosophically, it is barren. Its policies are threadbare. The remedies it espouses - from the mythical Brexit dividend, via help for homebuyers, through expanding grammar schools and on to their vaguer and even less convincing appeal to 'equality of opportunity' - are at best wrongheaded, and at worst cruel fictions designed to fool the many at the cost of the few. They are overdue, and more than overdue, for an electoral drubbing.

So this month, we thought we'd look at the other side of the fence. What, if anything, can Labour's policy offer achieve (above)? If the Conservatives are in such trouble - and the signs of incipient civil war are there for all to see - are the official Opposition's ideas any better? We are less than convinced. The public aren't all that keen: opinion polls right now are pretty much deadlocked, with a historically unusual (albeit small) lead for the governing party as they toil unconvincingly into their ninth year of government. And, to be frank, you shouldn't be impressed either. For Labour's ideas, such as they are, are based on folk knowledge and prejudices that just don't really pass muster in detail. That being the case, British politics will have to struggle on with two sets of preconceptions that are simply not fit to bear the burden placed on them. Don't believe us? Here are four examples.

Most new jobs are on zero-hours contracts. Well, no, not really. It's a standard Left critique of Britain's puzzlingly-strong jobs market that employment growth is all in bad jobs. It's been repeated by Labour leader Jeremy Corbyn at Prime Minister's Questions. It's very misleading. For one thing, we're talking about quite a small number of jobs here - less than a million, and less than three per cent of all employment. And most job creation recently has been in full-time, permanent roles: in the last year, for instance, full-time roles have increased much faster than part-time ones. Now they haven't yet replaced the great big hole in that part of the labour market that the crisis of 2007-2008 ripped out of that part of the job market, but they're not now far away.

Labour has pledged to ban zero hours contracts. But what statistics we have show that both their absolute number, and the number of businesses using them, are now in decline after a very rapid rise in their number between 2012 and 2015. In fact, Labour is tilting at a windmill here. For one thing, lots of people - young workers or students, for instance - might quite like zero hours contracts. Her Majesty's Opposition would be much better off focusing on the world of work more widely: on the very rapid growth of self employment in particular, but also on on the whole question of supposedly full-time posts and apparently permanent contracts that seem much more likely to add up to a string of jobs rather than one simple-to-understand career. The much-heralded but very undersketched idea of a 'National Education Service' might do some of that work. But unless and until they accept that they're fixing on the wrong problem here - and one very small part of the overall jigsaw - Labour will have to go some to stand up their plans in any credible manner.

Britain has the most expensive railways in the world. Sort of, but sort of not. If you rock up at a UK mainline rail station and try to buy a peak-time ticket, you'll get fleeced compared to the prices you would pay in comparable European nations. So far, so familiar. But book ahead a bit, even a day in advance, and you're likely to do okay - especially if you want a return ticket. Don't believe us? Here's a not-so-random selection of comparisons from people who do know. Once you understand that, two key insights follow. The first? This is a highly redistributive and progressive system aimed at charging business travellers - and especially business travellers who want or need high levels of flexibility - in order to subsidise everyone else. And it's exactly the system you would expect if you were looking at an old railway, squeezed at vital bottlenecks into very tight urban areas, which is suffering from capacity constraints during a period of enormous success and passenger growth. That is, Britain's rail fares price congestion at peak times, so as to spread the load. Whoever owns them will have to do the same.

Don't expect new state-owned Train Operating Companies to start slashing fees where they are relatively high, because if they do, they'll be letting high-end businesses off the hook and choking our railways to death. Now we could go on and on about this, but the mental picture so common among Left-wing Britons - of profiteers gouging passengers - just isn't true. They are highly regulated. They make very low profits, as these things are measured (which is one reason why they struggle to make the whole thing work). Other problems are more complex than they appear. Old-fashioned ticketing systems? Mandated by the very Department for Transport that would be in control of nationalisation. Inadequate capital spending, broken points and out-of-the-ark signalling? Already nationalised. Now you could nationalise the Train Operating Companies. There would probably be some gains to integration. Would it change all that much? Probably not.

Inequality is getting worse, and has been getting worse for years. Now this one is pretty contentious, and the big-ticket answer is 'it depends what you mean by inequality, and it definitely depends on how you're measuring it'. Overall, the headline Gini Coefficient measure of inequality, which looks at the income of top earners against those of the less well-off, shot up in the early- to mid-1980s, before reaching a plateau in the early 1990s and then gently drifting slightly downwards during the years of John Major, New Labour and the Coalition. So far, so not-particularly-controversial. Slightly more controversially, and little noted among the 2010-15 government's many failings, it did actually continue to fall under Chancellor Osborne too - partly due to strong real income growth towards the end of his tenure, and partly because behind his cut to the highest rate of Income Tax he stealthily made things rather less comfortable for higher-middle earners (via income tax thresholds), as well as asset-rich landlords, investors and the like.

To some extent this highly counterintuitive picture might be a little bit of a statistical artefact, because it's quite hard to capture the earnings of the really wealthy (especially when they move around), and if we delve into thismore closely, it might be that inequality has been at best stable, and at worst rising slightly. There's no sign of that in terms of wealth inequality, which we'd have expected to rise if that was the case - this has been held down by pension auto-enrollment, accruing capital for ordinary people - but it might be that inequality has been bumping along at about the same level it's been at for years. Even so: here again, Labour is really not homing in on the real problem. Inequality isn't surging. Anger and confusion over the boundaries and function of the job market are. If you're in work, low inflation, tax credits and lower income tax (via rising thresholds) have at least helped you regain your ground by now. Where the pain is really acute is at the margins of the working world, for instance for those people who the Department for Work and Pensions imagine will be 'encouraged' (read: pushed) into working under 16 hours a week by the inception of Universal Credit (opens as PDF: see page eight). Or for those people with lots of problems who are nevertheless being moved into jobs and are going to find it very, very challenging to manage the constant to-and-fro of employment and benefit changes. That's where the real attention needs to head - as soon as possible.

University fees are deterring working-class kids from getting on. Again, this is at least arguable, and it's certainly not an open-and-shut case given that the number of undergraduates from poorer backgrounds have definitely been rising in recent years. Labour's Shadow Education Secretary Angela Rayner (usually a rather impressive politician in many ways) has gone out of her way to single out fees as the reason universities' social profile is still so narrow - and been forced into at least a partial retreat. It's hard to be sure, because there is no one accepted yardstick for who is from a 'disadvantaged background' and who isn't, but it does seem as if lower-income youngsters have closed the gap just a little bit on better-off students in recent years. Certainly that gulf hasn't widened. The percentage of students who used to claim free school meals has gone up a bit. Those coming into English universities from poorer postcodes has also increased a little bit more quickly than those entering HE from other districts (though if we look at a wider basket of indicators, the picture is quite static).

Against most of our instincts, and probably yours too, the tripling of fees in 2010 hasn't actually made things worse. Now you could build a counterfactual in which numbers from non-traditional backgrounds went up even faster if tuition was free, but it's hard to be sure - and there are some good reasons to believe that they wouldn't. In fact, countervailing the undoubtedly daunting debt numbers has been the fact that fees have allowed the cap to come off student rolls, facilitating an expansion that is letting more students in than ever before. Given that Labour will want 'value for money' if and when it's paying for everything in Higher Education again, we wouldn't give you much chance that the cap won't come back when they're in charge - something that will throttle working-class life chances more than anything, as we've already seen in Scotland.

Now we know that there's a risk of setting up a series of straw men here. Not everything that left-wing Labour types hold close to their hearts is wrong. Britain's public sphere is - literally - crumbling, with local government services in particular having been made to take the strain of nearly a decade of cuts that's leaving the cupboard bare for any more. Simply put, there's not much else to cut before you lop off a limb: one of the reasons for the support Labour is marshalling among middle-income and middle-aged Britons worried about their local roads, libraries, parks, high streets... and, most of all, what on earth they are going to do if their elderly parents need looking after. The privatisation of core non-commercial functions of the British state (such as the prison service) has been a disastrous failure. And even if inequality as a whole has not been rising, the level of egregious cruelty meted out by the Conservatives' welfare 'reforms' is at such a pitch that most people can tell you a bleak and tragic story of an uncaring or unwilling state that simply isn't there for anyone any more.

But putting those very real problems into the mix with a more general (and mythic) critique blurs the focus. Everywhere you look, it's just misrepresentation after illusion after distortion. You know that 'youthquake' that was supposed to be a key part of Labour's surge upwards at the 2017 election? It didn't happen. Remember all those empty homes in London, bought up by rich foreign investors and left empty, to the detriment of everyone else looking for a home? Outside of some upscale hotspots, we're talking pretty small numbers here, and very few even of those are actually empty. Heard of that Private Finance Initiative that's bankrupting public services? It peaked twelve years ago, and it never constituted more than fifteen per cent of capital formation in the public sector.

This kind of dross actually lets the Government off the hook, and diverts us from thinking about real world structures and solutions. Labour's surge was actually powered by the middle aged and the middle class. Young people's housing woes are caused by an ageing society and a ridiculously tight planning system. The NHS has been tanked by tiny real real terms funding increases, not really by its building costs. And so on. Take those four examples we've highlighted here. What would constitute actually-relevant answers to our true problems?

You can probably guess the thrust from the discussion above, but here's some thoughts. Banning short-term contracts is probably going to cause more problems than it solves (as many tasks are driven underground): more sophisticated labour market regulation is usually better than binary yeses and noes to anything. Nationalisation is unlikely to be more than a palliative or a short-term boost for Britain's railways, while medium-sized wodges of government cash could lift capacity constraints and ease bottlenecks better than rebadging things ever could. Big increases in public service spending and tax changes should be focused on areas and groups where most can be done, rather than sprayed around indiscriminately; while bringing back grants and reforming fees for students from low income backgrounds, and above all focusing on part-time education, would be much more likely to change the mix in English HE than simply abolishing fees altogether.

At the moment, British voters are faced with an unpalatable menu that amounts to what we've elsewhere called 'Brexit versus nationalisation'. The Right is busy kidding itself that it can reinvent the 1950s. The Left seems to be bodging up a faux 1970s. Labour's members, and to a lesser extent the new white-collar electoral alliance they reflect, understand the world through a particular prism: one in which Britain is failing because it is not settled enough, not organised enough, not equal enough, and not educated enough. While there's some truth to that - and has long been truth to that -  there's little evidence that the remarkable break-point in the UK's productivity record experienced at the time of the Great Recession (and at the heart of so many of our problems) has its roots in any of those long-term structural failings. Otherwise, the country's productivity would have stagnated in the 2000s just as much as it has in the 2010s. Reader, it didn't.

There are some good ideas on the Left. The new Centre for Towns has some. Shadow Chancellor John McDonnell's nascent co-operative agenda - far, far more likely to do good and stick than some of his bizarre Ministry of Works-style organigrams - is another good place to start. But overall Left Britain is living in a bit of a narrow comfort zone. More and more, its ideas look like a cluttered mantelpiece of tat, with a Post-It here, a battered Wally Dog there, and a load of pens in coffee-stained mugs everywhere else. A trail that tells a story: but not a coherent one, and not really an appealing one either.

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