Tuesday 30 June 2015

Public services could be more effective, less expensive

I wrote last week about the emerging new kinds of public service organisation, and got quite a response. I didn't write about it before, but I'm constantly struck by the gap between the way public services have been run since the Blair-Brown years - like assembly lines - and the lessons from the most innovative enterprises emerging in the USA, which genuinely understand their staff have something to offer beyond mere obedience.

But fascinating new research from Birmingham University seems to demonstrate something of what I've been saying about scale. They have spent the past two years studying micro-enterprises in social care.

There are opportunities under the new Care Act, one of the legacies of the coalition years, to encourage micro-enterprises, because they tend to be more innovative, more personal and more flexible.

What I hadn't realised until I read the research (thanks, Alex), was that they are also more cost effective.  This is what the research summary says:

"The distinctive contribution of micro-enterprises appears to be the ability to offer more personalised and valued care without a high price tag. Price data provided by all of the organisations in the research indicated that the hourly rate for micro-enterprises was slightly below that of larger providers. As we indicated above, this was not at the expense of quality, as responses on personal control and use of time ... were at least as positive as for larger providers. With the larger providers it was easier to identify trade-offs between price and quality: the cheapest prices were offered by those that conformed to the 15 minute care visit model, and the people who used these services reported high rates of turnover among care staff. At the more expensive end of the market, larger providers were able to match the micro-enterprise offer more closely, providing longer care visits and better staff continuity."

This is important. It is a continuing mystery that there are models available for problem areas of public services in other parts of the world, which are actually more cost-effective than the problem models that dominate the UK - yet we are only tiptoeing in that direction.  

Here are three of them:

1.  Micro-enterprises in social care. See above. They exist in ever greater numbers in the UK, but policy-makers seem somehow to overlook them.

2.  Co-operative nurseries, considerably less expensive than conventional ones, but using some parent energy and knowhow, as they do across Scandinavia and North America, but barely here.

3.  Local area co-ordination, also in social care, the informal solution from Western Australia, and working very well already in Middlesborough, Derby and some other places, but being rolled out ever so slowly.

So here's the question, and it is one I try to answer in my book The Human Element. Why, despite the austerity years, are UK public services so staggeringly stuck?  And why are big changes not even advocated by the Left or Right?

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Monday 29 June 2015

The unforgiveable sins behind the Greek tragedy

Back in 1999, an emergency IMF loan to Russia of $4.4bn disappeared completely from their central bank within hours of its arrival.  You know you're in economic trouble when that kind of thing happens.

But I was always fascinated, not so much by the failure of the Russians to rebuild their economy - which they did eventually, after all - but how the ordinary Russian people survived the banks closing and the dwindling of the money circulating around.  What Keynes once described as "a perigrination in the catacombs with a guttering candle".

They did so partly by growing their own food, and by highly complex - and highly inefficient - barter exchanges, and the fact that so many of the old Soviet era flats had district heating schemes which you couldn't turn off even if you wanted to.

The Far Eastern currency crisis, also in 1998, was faster and fiercer, with soldiers throwing hospital patients onto the street because the hospitals had run out of money.

All these now seem possible for the long-suffering Greeks.

I've no idea what kind of local economic contingency plans the Greeks have made, but you can't help wondering whether they haven't actually managed anything, for fear of upsetting the European Central Bank.

Have they got emergency plans in place to reintroduce the drachma, or a variety of regional currencies? Have the got plans for something local, on the basis of the Clubs de Truque which kept two million Argentinians alive during their debt crisis in 2000? We know they had schemes up their sleeve for a version of bitcoin which would be engineered to pay off their euro debts - can they launch it at short notice?

Because, if not, they have condemned the Greek people to the catacombs without any medium of exchange just as surely as the European Central Bank.

It is perfectly possible just to carry on writing almost ad infinitum at the failures of successive Greek governments, but there are two major wrongs visited on the Greeks by the eurozone. And they are what this post is about.

Sin #1. The technocrats have turned their backs on democracy. The Greeks have been expected to suffer over the past few years in order that the rest of the eurozone might rest easier. As fellow members of the European Union, the UK has also colluded with the ECB and the so-called Troika to keep our banks solvent at the expense of theirs. That is why they have reacted with outrage at the suggestion that the Greek people should be consulted on the terms of the next deal. We keep the Greeks imprisoned because it is more comfortable to do so for us.

Sin #2. The euro as presently constituted was a disaster waiting to happen. Even those most in favour of the euro before 2000 recognised that it would tend to impoverish the outlying areas, and benefit the central ones - which is why the original plans allowed for major regional transfers to counteract this problem. They were never put in place.

The idea that one currency, and one interest rate, could possibly suit a diverse continent like Europe was always insane. It was always liable to unleash dark and intolerant forces. It was always going to impoverish.

I take no credit for this, because lots of people raised the same concerns, but this is what I said to the Lib Dem conference in 2001:

"There is a fundamental problem at the heart of the euro that makes me fear for the future of Europe. And it’s this: single currencies tend to favour the rich and impoverish the poor.  They do so because changing the value of your currency, and varying your interest rate, is the way that disadvantaged places are able to make their goods more affordable. When you prevent them from doing that, you trap whole cities and regions – the poorest people in the poorest places – without being able to trade their way out.  That’s the danger of the euro as presently arranged, and don’t underestimate it. It means success for the cities that are already successful. It means a real struggle for the great Lib Dem cities of Liverpool and Sheffield. It means a potent recruiting ground for the next generation of fascists in the regions that no longer count."

Unfortunately, the cities of Liverpool and Sheffield are not exactly Lib Dem any more. But the fascists are on the march, and when we ignore the needs of people for some kind of economic self-determination, that's what happens.

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Thursday 25 June 2015

How to launch a new preventive service sector

I wrote a blogpost a couple of days ago about new kinds of organisations emerging in the nether world between the public sector and voluntary sector.  I used the Dorset Coast Forum as an example.

But I've had such interesting responses that I can't resist coming back to the issue.  One in particular - I haven't asked whether I can quote her so I'd better not say who it was - complained at the way that, because of the way seed funding for social enterprise works, effective new ideas tend to stay small:

"You can have great results, demonstrate traction but there is nowhere to go to develop something from a 'that's nice' to something real!"

That is quite right. There are so many innovative people working away at solving problems related to ineffective public services, only to find the funders just want 'innovation'.  The moment one of these projects proves itself, the funders lose interest.

So let me say what I think is happening.  Partly because of austerity - one of its few positives - public services are forced to think in revolutionary ways about their effectiveness.  Often they can't think further than a ten per cent cut, which just makes things worse, but that's another story.  But there are imaginative commissioners and managers out there who realise how the system gets in the way.

They ask how services might reach out upstream and 'prevent'? How do they also manage the transition from professional support to nothing?  In both cases, these are often problems of co-production - bringing in patients, their families and neighbours, and asking for their help.

So clustering around these innovative managers are projects which work on a small scale, and may well stay small scale. But you can imagine that small plus small plus small plus small amounts to something much bigger.

The problem is that they are managed as exceptions rather than integrated, and they struggle for funding and are often replaced by something identical and unproven but new.

The answer, I think, is that these clusters will begin to link to GP surgeries, hospitals, police stations, housing estates, schools as a new preventative layer of services - paid for because they work and save money by the organisation they are linking to.

This preventative infrastructure will overlap with each other. It will look untidy, because that is its nature.  It is already involving what seems to me to be a whole new co-production professional - recognisable in time banks, local area co-ordinators in social care, health champion co-ordinators, enterprise coaches, community justice panels. They use a similar set of skills and I know, from experience, that the traditional professions are not suited to it.

The big question is: why will traditional services eventually pay for this, given that they resist doing so now, even when these semi-services are effective?

I think what can shift this is quite simple, though far-reaching. There needs to be a change in the agreements with all public services contractors, inside the public sector and outside.

They all need to set out how they will do the following:
  • Use their beneficiaries as equal partners in the delivery of services.
  • Reduce demand during the lifetime of the contract.
The answer is to broaden and deepen the objective of each service. Often, the most convincing way of explaining how they will do this is to reveal which aspects of the preventative infrastructure they are building partnerships with.

There might be an objection that, by sub-contracting aspects of their work, services will cost more to run.  This is true in the narrow sense, though they are doing it already - especially when they are aware that they can't have the personal impact they need without local organisations.

It is true that while these projects are funded because they are 'nice' then there is more than a possibility that sub-contracting will simply be exploitative.  It depends how seriously those contractors will be held to their assurances that they will reduce demand.  If they have to do that, and are paid accordingly, then they need to nurture the preventative infrastructure very seriously indeed.

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Wednesday 24 June 2015

My top ten irritatingly shared policy delusions

I heard Professor Alison Wolf this morning (0830am) confronting politicians with a perennial truth. So sensible was she about the numbers of apprenticeships we need that it slightly took the breath away.

But of course she's right.  David Cameron's target of three million apprenticeships - building on the pioneering work of Vince Cable - is automatically undermined just by setting a challenging target.

It means, the government's obedient machine being what it is, that there will be three million empty opportunities for cheap labour.  Even 300,000 worthwhile apprenticeships, with genuine and accredited training at their heart, would be better than that.

When Harold Macmillan set a target of 300,000 new homes a year, he built new slums. When the Pentagon set kill targets in the Vietnam War, they killed terrifying numbers of civilians but still lost.  See more in my book The Tyranny of Numbers.

Most people seem to understand the corrosive effects of numerical targets, except - it seems to me - politicians. It is part of the Westminster sickness, of course, and it unites Labour and Conservative.

So it occurred to me that this might be the moment when I should list some more of these fantasies that are shared, at least in the UK political system, by right and left alike.  Here we are.  My top ten.

Fantasy #1. The banks don't want to lend to small business.  It's true they don't lend, and they collude with this little fantasy, which - for reasons I might go into another time - it suits them too. The truth is they are no longer geared up to lend to SMEs. Right and Left in any case believe that somehow banking isn't that important, or they would act to build institutions that can lend.

Fantasy #2. House prices are so high because there aren't enough homes. It's true that there aren't enough homes, but the reason house prices are so high is because too much money is going into the property market. Zoe Williams was spot on in the Guardian this week.

Fantasy #3. Banks lend out money that is deposited to them. In fact, these days, they largely create new money in the form of interest-bearing loans. That's where money comes from.

Fantasy #4. If you spend more money on public services, they will improve. The Gordon Brown years should have cured us of that one. Staggering sums were spent on new systems of control, which has rendered many services inflexible, ineffective and far more expensive than they need to be.

Fantasy #5. We need to be more evidence-based in our policies. It's always a good idea to be informed by the evidence, but 'evidence-based' is a term increasingly used by governments to justify their failure to act on issues for which there can never be evidence - and there is sometimes no evidence for new ways of doing things until you do them. I notice it is also used in the wider political world to mean 'I wear my atheism as a badge of pride'.

Fantasy #6. We want to replace targets with systems that pay contracts by results. This is nonsense. Payment by results contracts just involve targets with money attached. They are therefore more likely to be distorting.

Fantasy #7. When the Bank of England creates money, it creates inflation. Since banks create money all the time (see fantasy #3), this can't be the case. It is only the case when too much money is in circulation for the work going on in the economy, or in that part of the economy - regional or sectoral.

Fantasy #8. Big organisations are more effective. Let's look at the 'evidence' on this one - which is that shared services and merged institutions very rapidly allow economies of scale to be overwhelmed by diseconomies of scale. See how this affects the evidence on big schools.

Fantasy #9. Systems work without the human element. Actually this is the big Blairite fantasy, but the machinery of government has always believed that organisations and services work better if you exclude human variability - forgetting that the human element is also the only guarantee of success.

Fantasy #10. In the UK, we are free to say what we believe. I fear not. In fact, I measure our freedom of speech by the number of times I censor myself in this blog, for fear of the inevitable Twitter storm from offended people. Which is increasingly often (this may be middle age, of course).

That's my top ten, and they are all pretty irritating - and even more irritating that they seem not to be a matter for political debate.  What's yours?

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Tuesday 23 June 2015

A whole new kind of organisation emerging

Something peculiar is happening to organisations at the moment.

On the one hand, they are becoming bigger, increasingly complex and decreasingly effective, juggling multiple objectives and tens – sometimes hundreds of target figures and KPIs.  On the other hand, there is a sense – which I think most of us will recognise – that we can’t go on like that.

That something new is beginning to emerge. Not just organisations that suit human beings, but organisations that are considerably more effective.

In days gone by, the business of presiding over the environment, for example, fell to ministries, local authorities and a number of strange Whitehall quangos.  Directives came from on high. People jumped. Or didn’t jump.

They still do to a large extent, but conflicting interests stay unresolved - and often the job isn't done.  Those with enthusiasm were excluded, and they assume nobody needed them.

But look around you and you'll find new kinds of organisations - time banks, local area co-ordinators, friends of parks, coastal forums - and they are a glimpse of the future.

They are multi-stakeholder to use the jargon. Flat, non-hierarchical. Seeking out people’s energy and using it. The bottom line for me is that they are human.

I think this is how you recognise these new organisations:

1. They are generalist not specialist.

2. They are facilitators. They don’t tell people what to do – they start from what people around them want to achieve and help them do it.

3. They are non-hierarchical

That, at least, is what I said on Portland Bill last week at the celebration of 20 years of the Dorset Coast Forum.

And it turns out that the Dorset Coast Forum is a prime example of what I was talking about. It is a collaborative venture, owned by all the different organisations which deal with the coastline – from tourist ventures and fishing businesses to the RNLI.

They were proposed by the government as a 'forum of consensus' two decades ago, aware that they might not be able to resolve tensions between rival uses - but they could at least make sure they got a clear idea of the others' points of view.

Other projects have emerged since, involving people who want to be in the business of keeping the beaches clean - using the energy that's out there.  It is also hugely influential abroad - and it is being copied from the Dolomites to the South China Seas.

The conference was in an impressive place and I learned a huge amount, and have begun to alter my own opinions about the direction organisations are going in as a result.  It did set out some of these ideas in principle back in 2011 in The Human Element, but I realise now that it was actually happening already - and underneath my nose!

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Monday 22 June 2015

The most obscure leadership election ever?

Years ago, when the Democratic party in the USA began using computerised push-polling, I read a fascinating magazine in one of those many American political magazines.

It quoted a defeated Democrat candidate for nomination who had lost a leadership battle against an opponent who had been using computerised push-polling against him.

I should briefly explain that push-polling means that you use polling techniques to remind supporters of the other side about the weaknesses of their candidate. But this particular example went further than most.

When this candidate’s supporters were asked who they were supporting, and they replied with his name, the computer was programmed to say: “Why are you supporting him? He’s a jerk.”

Needless to say, you can’t fight that kind of computer and he lost.

Now, I went to the London leadership hustings last week, where the two Lib Dem leadership candidates slugged it out – and a good deal more gently and with more charm than the Labour leadership candidates. It was a strange, dreamlike experience, but completely obscure about the issues of contention.

Even so, I was surprised to hear that one side had been accused of push polling against the other - not like the example above, and not using computers, but still using a poll (they deny it was a 'push poll').

And here I’m reminded that political activists are sometimes the last people who should run political campaigns, because they sometimes can’t see the wood for the trees.

Political activists are always hyper-aware of the small weaknesses in their opponents that might possibly give their side an edge. Both candidates in this election have narrow vulnerabilities, but actually they are completely irrelevant to the business of finding the right leader for the Lib Dems.

In the end, Tim Farron’s Christian faith is completely irrelevant to the leadership election, except that I respect him for it. It is a sign of commitment and depth and, personally, I find myself leaning his way whenever I’m reminded of it.

In the same way, Norman Lamb’s record on collective responsibility for the coalition as a minister is irrelevant too, except in so far as that it demonstrates loyalty and shows he can get things done.

Anyone who might think they can swing the leadership election one way or the other by harping on about either are missing the point.

The point isn’t their beliefs, or their previous compromises, which we all have to make, heaven knows – but their strengths and their core messages.

Which brings us to the key problem. The parliamentary party of the Lib Dems has been reduced to a rump of eight MPs, yet the hall at London University was packed with over a thousand expectant people for the hustings. The venue had to be changed to accommodate them.

Also about a quarter of them were new members.

I’m not sure what this means, but a closer examination of the audience revealed it to be extraordinarily like Londoners. Perhaps this isn’t surprising.

It was an overwhelmingly white audience, and might be older than previous Liberal gatherings might have seemed in the past. To me, at least, there seemed few 20-somethings and a very great number of 30-somethings.

There were more ear-rings in evidence too than you might have predicted at Liberal events in years gone by. In fact, it reminded me a great deal of the first SDP gatherings in 1981 and 1982. Polite, enthusiastic, restrained, articulate, and overwhelmingly middle class.

As you might expect from the author of Broke, I don’t regard this as a criticism.

It is a peculiar feeling, like the long-awaited Kitchener battalions in the First World War. We know these people have arrived but we don’t really know what they will do or what their impact will be on the battle.

The fact is that nearly a third of the paid up Lib Dems have joined the party within the past few weeks. It is in many ways a new party, with enthusiastic new people who are unsure what to expect – but clearly expect to be involved in debate in a way that the long standing members have not been.

Here’s the question then: how are they expected to make a decision on the leadership when the issues remain so obscured?

The press were excluded from the London hustings, which was strange, The two candidates were also excluded from each other’s presentations. Perhaps the highlight of the evening was hearing Norman Lamb’s Gordon Brown moment with his radio mike still on, in the far recesses backstage, asking if there was a lavatory anywhere.

The odd thing was that both candidates were brilliant and, although they didn’t hear each other’s addresses, they used almost exactly the same words and phrases, but in a slightly different order.

My immediate sense was that both Norman Lamb and Tim Farron would make excellent leaders. Tim won on style but Norman won on substance.

But when the message is so subtle, it is hard for new members to hear what is being said. Lib Dem leadership elections are famously obscure and often you don’t realise the point at issue until long after the polls have closed.

So let me say what I think the issue is, though you would have to read between the lines in the most subtle ways to understand this as an outsider.

It seems to me to be about how much the party needs to be turned upside down in order to win again. The Farron message appears to be that the key missing ingredient for the party is self-confidence. And that inspiration comes from articulating the traditional mantra more excitingly.

The Lamb message seems to me to be that the key missing ingredient is depth and breadth. And the inspiration comes from understanding Liberalism in new ways.

The Farron camp implies that the moment the great mistake was made was in 2010 when the party’s message was blunted. The Lamb camp implies that the moment was a decade or so before that when the party stopped thinking.

The Farron camp implies that we can reach back to our core vote before and that we need to remake the party as it was before the coalition. The Lamb camp implies that we need a new core and therefore have to reach out beyond the party.

The Farron rhetoric harks back to the Kennedy years. The Lamb rhetoric harks back further to the Grimond years, and the intellectual energy he brought to the party which drove it through the next four decades.

All these overstate the difference, and I will no doubt enrage both sides.

There are other subtle differences about their attitudes to austerity, though not really to public spending. Paradox? Not necessarily, but more on that another day.

I use the word ‘implies’ because neither of them say this precisely. This is a pity and perhaps it tempts close supporters to start seeking out the negatives instead.

Lamb and Farron share the same ambition – a Liberal government representing a Liberal movement. Their actual policies, green and devolved, seem to me to be identical. They describe those ambitions in precisely the same way, one with style and one with a bit more substance.

Style is important, especially these days, but I’m looking for the candidate who will shake us intellectually, and who will take the party out of its rhetorical comfort zones.

Full transparency. You can't really take this as a disinterested account of the differences because I'm backing Norman Lamb. It isn't a reliable guide because of that, but it is as honest a one as I can manage in the circumstances...

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Wednesday 17 June 2015

There are no parallels between ISIS and the SNP. Except one.

Some time ago, I wrote an essay in Duncan Brack's book Reinventing the State. I'm not sure it was quite what the editors expected or intended. It was the only essay in the book which was as much about theology as it was about politics.  I called it 'Liberalism and the search for meaning'.

I thought about it today, given that practically every morning there are other stories about teenagers, families and now nine children, who have given the authorities the slip to go and fight for ISIS and build what they claim is an Islamic state.

I took a little swipe in the essay at Richard Dawkins, then riding high, because of his disapproval of symbolism and myth (he has since rather clarified his position on fairy tales, so this might be unfair). This is what I said:

This knockabout stuff is actually rather puritanical, and therefore dangerous. When people are encouraged to believe that the only things worth saying are scientific – deriding any truth but the literal – they don’t just deride symbolic, philosophical, moral or historical discussions. They don’t just limit how we can talk about life. Nor do they just bang the drum for atheism, as they believe they intend. They encourage a creeping fundamentalism in all areas. They are lining up behind those who peddle a similar kind of narrow, intolerant religious truth.

I still believe the basic issue: that scientific fundamentalism, like economic fundamentalism, encourages religious fundamentalism.  All exclude the human element.

But I realise that market fundamentalism, and the kind of arid postmodernism that sometimes looks a little like liberalism (but isn't), encourages religious fundamentalism in other ways too.

If all we can aspire to in life is to spend more money - if every other shibboleth and religious hope has been swept away - you can  see why people yearn for some other meaning.

This isn't enough of an explanation of the lure of a death cult like ISIS, but it is a clue.  So is the sheer romance of nation-building.

The apotheosis of the SNP hasn't got much in common with ISIS (except beheading of course - I refer, in case of objections, to the peculiar movie Highlander, where beheadings were pretty copious).  But there is this: nation-building is a hugely romantic, thrilling and worthwhile business, filled with meaning and purpose.

You can see why people might reject the assurances offered by establishment figures, who warn us that our comfort blankets may shrink a little if we try to build a nation from scratch.  Think of the risk to our investments, good lord.

The implication of this, if there is one, is that people need meaning. They are starved of it by most politics and virtually all economics, at least as presently constituted. The vacuous kinds of liberalism on offer around the world (and there are many of these) offer a kind of rootless, vacuum of identity consumption (at best) and, at worst, a corrosive emptiness and soullessness

The other implication is that we can, perhaps, borrow a little more of that nation-building into our politics here - a sense that we can make a difference, build things, make things happen, before health and safety regulations kick in.

This is what I wrote in the essay:

The language of Us and Them, which is used so often by progressive politicians about the religious world, is tantamount to backing ourselves into a corner of secular unbelief. It threatens to hand the fundamentalists a monopoly of spiritual values. Liberals should reserve the right to be a spiritual force themselves and to start recognising and addressing the need for meaning among their potential supporters in the electorate, and to distinguish, not so much between religious and secular values, but between good and bad religion...

Maybe I wouldn't put this quite like that now, but I think I was right. It is time politicians began to look again at the search for meaning - and start trusting people to build nations again...

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Tuesday 16 June 2015

Magna Carta isn't as English as we're told it is

Englishness has always been a kind of rag and bone shop of the heart, a subject I'll be returning to when my book How to be English comes out next month.  You only have to look through the gamut of English peculiarities to find it - umbrellas and queues (French), marmalade (Spanish), tea (Chinese) and so on.

None of this is said in any way to belittle the English, and at least half my genes are English too - so why would I - but it does mean that when people claim that Englishness is something exclusive, isolated, unique and unblemished, you need to be a little bit suspicious.

I'm not accusing anyone in particular, but yesterday's Magna Carta-fest springs to mind.  So does David Starkey.

There is an argument, carved from the Whig View of History, with an added Tory tinge, that Magna Carta was distinctively English and marked the beginning of the attachment to liberty enjoyed exclusively by the English.

There are obviously elements of truth about this.  But Magna Carta would have been quite impossible without the Pope - a medieval and archaic version of the European Commission - and certainly without the invasion of England shortly afterwards by the heir to the throne of France.  It was also written in Latin.

As it was, King John rapidly repudiated the document and it required an Anglo-Norman, with a less than English name (Simon de Montfort) to use it as a bargaining chip against Henry III two generations later.

I can't quite escape the embrace of the Kipling View of History either ("The Saxons are not like us Normans"), and believe it myself to some extent - but there's no doubt that we are not English because we hold ourselves apart. We are at our most English when we understand the forces from outside that are involved in our development.

There is another blog to be written here about the way the BBC European Service during the Second World War became the prototype for post-war European co-operation - and quite deliberately so, thanks to its Liberal Director of European Broadcasts, Noel Newsome.  But not now.

It is enough to say: be careful with the hype about Magna Carta - especially when the forces that threaten our liberty are as much internal these days, as they are external.  Try phoning the Tax Credits Helpline next time you think that England is a idyll of liberty.

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Monday 15 June 2015

Compass asks whether Labour is dead. The answer is...

15641I have huge respect for Compass, and those who have given it depth over the past decade or so, like Neal Lawson.  It is much more than a Labour think-tank and it doesn't beat around the bush.

They have just published a pamphlet called Is Labour Dead?

This can't have pleased Andy Burnham and his rivals, who are running for the leadership at just this critical moment. It also struck a fascinating and powerful balance between pessimism and optimism - along the lines of Churchill's "I have nothing to offer you but blood, tears, toil and sweat".

Sometimes the only way you can see clearly, and sweep away the illusions - which get depressing in the end - is to articulate the depth of the problem.

Lawson and his colleagues have an objective. They want a much more loosely affiliated alliance of progressives to remake the left. They may be right. But the question in the title demands an answer, and the answer has to be - yes, nearly.

Throughout its history, the Labour Party has been an alliance between middle class Fabians - technocrats steeped in welfare economics - and trade unionists.  They never really meshed together, but the alliance had a kind of momentum. Once you begin to separate the party into its constituent parts, you realise the seriousness of their predicament.

1.  Fabians. The old utilitarian approach to poverty and services reached its apotheosis under Tony Blair, the most utilitarian prime minister since the demise of Bentham, but has always proposed redistribution as the solution - allowing the economy to continue and then intervening to redistribute afterwards. In an economy designed to manufacture billionaires, this is now pointless.

2. The working classes. They have been in decline since 1945, and play a decreasing role in UK economic life. No party can form a government just by representing them.

3. The trade unions.  They may be needed more than ever, but they have a declining role and have been unable to make the leap from the shop floor to new working arrangements.

4. Socialism. The basic ideas behind socialism of central control and a centralised welfare state which redistributes wealth are in decline nearly everywhere. I don;t see many socialists left in the UK.

Given that there are almost no socialists left, there are no intellectual roots for Labour. No basis for discussion. And where they are talking about solutions which seem to have some life to them - the kind of mutualism discussed by leadership contender Liz Kendall, she sounds more like a Liberal.

And it is worse than that. The kind of public service solutions put forward by the last Labour government, a kind of turbo-charged utilitarianism, have rendered those institutions unresponsive and ineffective.

There is the core of the problem: Labour has no organising idea behind them, and are associated everywhere with bureaucracy.

Is there a way back? Well, there could be because - along with much of the European left - Labour has a big vacuum where they ought to have a rival bundle of ideas designed to promote prosperity.

Not re-distributing prosperity (they that might be important too). Not relabelling mainstream business policies and claiming to be more effective at promoting them.

There is no chance of revival unless they can put forward a new, convincing approach to creating wealth. In fact, the world is waiting for just this, as they realise - a little more every day  - that the old bundle of ideas has not worked.

So the race is on. Can Labour shape this or will the Lib Dems get there first? It will come down to who is listening the most, who is debating with the most open minds, who is most seeking after the truth?

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Thursday 11 June 2015

How to prevent the RBS sale

Shredded, Hardback bookI was a little surprised about the decision to flog Royal Bank of Scotland, but you'll have to bear with me while I explain why.

It seems to me inconceiveable that the Treasury or the Bank of England haven't conducted a recent review into the solvency of RBS. If it had been solvent under the coalition, they would have tried to sell it. They didn't. Ergo: it isn't.

My understanding from those who know about such things is that the bank was so dysfunctional, only a few years ago, that there was no discernable 'good bank' from the debts. RBS was a basket case, hopelessly indebted, with skeletons in most of their cupboards.  It almost certainly still is.

I explain this as a commentary on George Osborne’s decision to try and sell the bank back to the City investors at a hefty loss, which in recent days has been rumoured to be around £13 billion.

It is true that Williams and Glyn’s has been hived off, so it may not be quite the giant walking disaster it was, but it is no less of a walking financial disaster.

The question is what we should do about that. Osborne is taking the boneheaded Treasury solution which is simply to throw it back from whence it came, washing their hands afterwards. It is the path of least imagination, given that they are bound to lose the £13 billion anyway. Or so they believe.

But there is an alternative.

One which appears to be emerging across the political divide is to do something useful with it – to use it as the basis for the effective local lending infrastructure that the UK so badly needs, and which the rest of Europe already has.

The track record of RBS on small business is patchy and corrosive. Spewing the bank out again just as dysfunctional as it was implies a sort of lassitude, a kind of lazy hopelessness, about rebalancing the economy. Perhaps they don’t want to any more.

I know the Treasury's view on local banking: that the market will innovate. I also know the view of BIS: that the challenger banks are already emerging.

These are both correct, but they are emerging to support only one kind of business. There will always be space for challenger banks to cover the wealthy areas, or for peer-to-peer lenders to provide finance for fast growing high growth potential start-ups.

But what about the rest, the ordinary small businesses that are the backbone of local economies over most of the regions? These are the places that are least well served by the handful of mega-banks we rely on for nearly everything in the UK - and which no longer want SMEs as clients. Because they no longer have systems that can assess their risk effectively.

It isn't the financial problem. They are no longer set up to tackle the information problem that SMEs represent.

Yet here is RBS, useless, indebted and dysfunctional, and available to reshape into the beginning of the network of banks with boots on the ground, which practically every other developed nation has. 

How do we achieve that?  First, prevent such a wasteful, unimaginative sale?

Here are my three suggestions:

1. Ask the Treasury to reveal the results of their evaluations about alternatives to a fire sale.  They must have done them - and if they haven't - they should do so immediately.

2. Encourage investigative journalists to build on the work the brilliant Ian Fraser (author of Shredded) to reveal the true state of RBS.

3. Make sure potential investors are clear they are being offered a struggling dinosaur from another age, and that they also demand that the Treasury reveal everything they knew about the reality of RBS debts.

Nobody should suggest that RBS should stay permanently in government ownership.  This isn't a privatisation issue. It is about using the power of information and the market to make sure we don't just return to the pre-2008 position and waste this opportunity.

The campaign has to be led from inside Parliament.  It requires one of this myriad of leadership contenders to announce that they will use Parliamentary privilege to prevent the sale.

It is bold, so that may rule out the Labour Party. But they can reasonably claim that they are acting in the interests of the vast majority of businesses in the UK, who need a functioning banking network - and don't currently have one.

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