David Cameron and Nick Clegg: together for how much longer?

The results of the voting that took place on 3 May surely spell the beginning of the end for Britain’s coalition government.  (Read about the election results here.)  I am not referring to the victory for Labour and defeat for the coalition parties (with an equivalent national vote share of Lab 38, Con 31, Lib Dem 16), nor to the reaction within the Tory party to that vote share, namely calls for more right-wing policies that the Liberal Democrats could never expect.

More significant, I think, is the rejection in referendums of the proposal for city mayors.  One of the Conservative contributions to the coalition programme for government was the idea that major English cities should be led by directly-elected mayors rather than having the council leader chosen by a majority of the councillors.  This would increase popular interest in local government and strengthen local democracy.  “A Boris in every city”, said David Cameron.

But, in the nine referendums that were held, eight voted No.  Only in Bristol was there a Yes vote.  The radical reforming Conservative decentralising dream appears to have stopped before it even started.

And this is why the coalition will shortly be over.  What is there left for the Liberal Democrats to hope for?

The starting point for the coalition was to address the urgent and difficult question of the deficit, to prevent Britain from turning into Greece and losing access to the financial markets.  Leave aside whether that was a real threat in 2010, it is not a real threat now.  The more serious economic threats to the UK now are (1) a collapse of the eurozone and (2) the lack of growth in the UK.  The Liberal Democrats and Conservatives do not agree about how to deal with either of those two issues.  The Tories would take the collapse of the eurozone as an opportunity to the leave the EU altogether, which the Liberal Democrats would not accept, and the Conservative recipe for more growth is to cut regulation and public expenditure whereas the Liberal Democrats prefer an industrial policy and selective reflation.

The major legislative proposals to come from the coalition are now in law: Andrew Lansley’s reform of the health service, Michael Gove’s break-up of the state education system, and Iain Duncan Smith’s attempt to get people off welfare and back into work.  What is left is the managerial delivery of these policies and not more law on the subject.

The outstanding issue is constitutional reform, and there the Liberal Democrats will be disappointed.  That is the lesson of the voting on 3 May.

The British constitution is quite hard to change, quite properly, and those changes that have been made have been thoroughly prepared over many years and based on a considerable degree of cross-party support.  Devolution, the Human Rights Act, and even membership of the EEC in the early 1970s: these did not spring from nowhere but had been painstakingly prepared.

By contrast, the regional government referendum in the north east in 2004, the referendum on electoral reform last year, and now the creation of more mayors were all foisted upon an uninformed and ultimately unwilling electorate and therefore rejected.  None of these was as important to the public as it seemed to be to the political class.  Reform of the House of Lords will go the same way.

There is no cross-party consensus on how the second chamber should be reformed, neither in terms of powers nor in terms of composition.  Trying to change the second of these without thinking about the first is meaningless: those powers would probably change anyway as an elected body would expect to exercise more power than a previously appointed one had.  And trying to change the two together implies a more far-reaching approach to the whole question of the UK is governed than has remotely been considered so far.

The fact that all three party manifestoes at the last general election contained reference to a reformed and/or elected upper house is now history.  We learned from the referendum on electoral reform that putting support for AV in the manifesto did not mean that Labour MPs felt obliged to support it themselves.  There are plenty of reasons for Labour now to stop the Liberal Democrats trying to reform, the House of Lords, even if Labour would like to reform it too.

What this means is that there is little left for the Liberal Democrats to do in government.  They can assist in the managerial delivery of domestic policy reforms that they did not support, they can help administer an economic policy that is not what they really want, and they can waste a lot of time on a constitutional reform that has not been properly prepared.  And they may well do all these things, consoling themselves that these policies would be done even worse if left to the Conservatives alone.

But if the crisis in the eurozone suddenly gets a lot worse, for example in relation to Greece, then the Lib Dem calculation of what is in the national interest might turn out rather different.

23 May – There may be trouble ahead: the Coalition’s European policy

Europe House, 32 Smith Square, London SW1P 3EU

2.00 – 5.45 pm followed by a drinks reception

As you know, over the past six months the Federal Trust has been running a series of conferences on the British Coalition Government’s European policy. This series of conferences has been held in conjunction with the Global Policy Institute and co-funded by the European Commission in London.

The conference series is entitled ‘The Coalition’s European Policy after the honeymoon’. The objective of these conferences has been to review the European policy of the Coalition in its second year, examining in particular the growing internal and external strains upon the compromises which have until now underpinned its actions within the European Union.

This final conference, There May be Trouble Ahead: the Coalition’s European Policy, will be the opportunity for us to launch a pamphlet summarising the discussions of the preceding conferences and offering some predictions for the future.

Our speakers are as follows: Christine Dalby, Deputy Head of Representation, European Comission in the United Kingdom, Peter Sutherland KCMG, former European Commissioner and Director General of the WTO, and Brendan Donnelly, director of the Federal Trust.

4.00 pm Registration

4.30 pm Introduction to Pamphlet

5.30 pm Questions and answers

6.30 pm Drinks reception

If you would like to attend this final event in the series, please reply to alison.sutherland@fedtrust.co.uk.

Rupert Murdoch (picture World Economic Forum)

Passing judgement on Rupert Murdoch appears to be today’s fashion, and this blog is not one to shirk a challenge.  His dislike of the EU is well-known, as are the anti-European opinions of his newspapers, as is the eurosceptic influence he has had on British politics, but those are not grounds on which to denounce him.  Anyone is entitled to an opinion, even – or perhaps especially – if those opinions are ones with which this blog disagrees.  And why should someone who owns a newspaper not put their opinions in the paper?  And why should politicians running for election not pay attention to what the newspapers are saying?

If there is a case against Rupert Murdoch here, it lies not in his opinions or behaviour, but in his scope.  His share of the news market grew too large for the health of British democracy.  But that is a criticism not of Rupert Murdoch but of the regulations and regulators that permitted it.

A healthy democracy requires pluralism of opinions in the media, and pluralism of opinions in the news reporting.  If a media company gets too large, that pluralism is threatened.  This is true of the Murdoch empire, but it would be true of any other newspaper or media proprietor, too.  Perhaps Mr Murdoch can be criticised for other aspects of the way he has run his company, in view of the widespread allegations of criminality among the journalists and editors he employed, but that would be outside the scope of this website.

What this website can criticise Rupert Murdoch for, though, is the way he has organised his company’s finances to avoid paying his fair share of taxes.  A network of company subsidiaries in offshore jurisdictions such as the Cayman Islands and the British Virgin Islands (how can any business need as many as 62 separate subsidiaries in the BVI?) shuffles his liabilities for tax around, reducing the overall tax rate to 6 per cent, or $324 million in taxes on $5.4 billion profits over a 4 year period in the last decade.  No law has been broken, but that’s the point: the law should not allow it.

On the plus side, Rupert Murdoch himself appears to agree.  Here is his tweet on 29 April: (@rupertmurdoch):

Social fabric means all. Must wake up before coming apart more. That includes closing tax loopholes for rich people and companies.

Let’s hope that he means it.

Sir Stephen Wall

The 2012 WPCT Charlemagne Lecture will be given by Sir Stephen Wall GCMG

“The British and Europe – kidding ourselves or telling it like it is?”

Wednesday 20 June at 6.30 pm in the House of Lords (Room G), preceded by a reception from 5.15 pm

Stephen Wall entered the Diplomatic Service in 1968.  From 1988-1991 he was private secretary to the Foreign Secretary and then to the Prime Minister from 1991-3.  From 1995-2000 he was Britain’s Permanent Representative to the EU, and returned to take charge of the Cabinet Office’s European Secretariat (also being EU adviser to Tony Blair at this time).  In 2008 he published “A Stranger in Europe: Britain and the EU from Thatcher to Blair”.   He was Chairman of the Wyndham Place Charlemagne Trust from 2005-2008.

To register, please e-mail wpctrust@gmail.com

Places are limited: tickets will be issued shortly before the event with instructions for security and entrance to the House of Lords.

Please note:

The WPCT is a charity with no regular income for maintaining its activities other than members’ subscriptions: donations at meetings are most welcome (suggested contribution £15).

The House of Lords

The House of Lords is a mess.  It brings together in one place party political nominees (often former MPs), acknowledged experts on particular issues, descendants of drinking buddies of long-deceased monarchs, and a smattering of Anglican bishops, to sit in judgement on legislation.  We are supposed to think that this is the exercise of democracy.

Little wonder that the Liberal Democrats in government want to change the system.  A chamber that is supposed to revise and improve legislation has in fact revised and improved very little.  We look back at a series of legislative errors – the Dangerous Dogs Act, all those changes and changes back to the structure of the NHS – not to mention a relentless centralisation of political power in Whitehall and the weakening of the ability of parliament to control the executive.  In all this, we ask, what exactly has the House of Lords revised or improved?

If it ain’t broke, don’t fix it, may be a good maxim (or, in the more parliamentary language of Viscount Falkland, “When it is not necessary to change, it is necessary not to change”), but in the case of the House of Lords, it is necessary to change.  The second chamber works neither in theory, nor in practice.

This is not to say that all changes to the House of Lords are necessarily for the better.  Particularly not when one looks at the proposals put forward by the government.  House of Lords reform is a mess, too.

The proposal from the coalition government is for a chamber of 300 members, with 240 elected and 60 appointed to serve for a single term of 15 years.  A joint committee of both houses of parliament thinks there should be 450 members, and has suggested various changes to the proposed transitional arrangements.

However, a sub-committee of that joint committee hates the government’s proposals and calls instead for a constitutional convention to think the issue through again.  In particular, the rebels are concerned to ensure that the primacy of the House of Commons remains unchallenged, and fears that an elected House of Lords will become too assertive.

Analysts fear that the parliamentary struggle to reform the Lords against all this opposition will consume so much time and eat up so much political capital as to wreck much of the rest of the coalition government’s programme.  But the Liberal Democrats, having failed to reform the electoral system for the House of Commons, are determined to press ahead.  Their commitment to democratic reform demands it.

But what their commitment to democratic reform does not demand, mind you, is a referendum on the subject.  The introduction of AV was put to a referendum – these important and potentially irreversible issues should not be decided by the political class alone.  But the latest, equally important, reform of the constitution is something for parliament on its own, even though the promise of a referendum would also rapidly cut through much of the parliamentary squabble.

I think the Liberal Democrats have learned from the experience of the AV referendum that it is easier to get people to vote against change than to vote for it, when the people who are supposed to be in favour of change are also bitterly divided among themselves.  There is no obvious and serious injustice that can be traced to the current make-up of the House of Lords (just as there was not in the case of the electoral system), just a long-running and low-level unfairness.  Corrosive to our democratic life, yes; fuel for the Yes campaign in a referendum, probably not.

This website’s proposals for reform of the House of Lords can be found here.  An indirectly-elected second chamber would satisfy the principle that no-one should hold office in a legislature without being elected to it, it would respect the primacy of the House of Commons, and it would act as a brake on centralisation.  But there is zero chance at present of the government dropping its own mistaken proposals in favour of Federal Union’s much better ones.

A constitutional convention that considered all aspects of the legislative process and the machinery of government might have reached a better outcome than the haggling between the Liberal Democrats and the Conservatives.  But such a convention was not written into the coalition agreement in May 2010 and will not be written into it now.  I think that we will simply limp through the current parliament arguing over this modest and not very well-guided reform – which might or might not make it to ratification – in the hope that a future government and parliament can propose something better.  What a mess.

Jonathan Sumption QC (picture Brick Court Chambers)

Date: Monday 14th May
Time: 6.30-8pm
Venue: Wolfson Theatre
Speaker: Jonathan Lord Sumption
Chair: Professor Martin Loughlin

Jonathan Lord Sumption was sworn in as a Justice of the Supreme Court in January 2012.

Sumption is known for his appearance as a barrister in the Hutton Inquiry on the UK government’s behalf, for his part in the Three Rivers case, for his representation of former Cabinet minister Stephen Byers and the UK Department for Transport in the Railtrack private shareholders’ action against the British Government in 2005, and for defending the government in an appeal hearing brought by Binyam Mohamed.

This lecture forms part of our Health of our Institutions Today series.

Further details can be found here.
Chair:
Professor Martin Loughlin. Having completed ‘Foundations of Public Law’ (2010), a companion volume to ‘The Idea of Public Law’ (2003), Professor Loughlin’s objective is to examine the impact of contemporary governmental developments on the practice of public law. ‘The Transformation of Public Law’ is, however, a long-term project.

This lecture is part of the British Government @ LSE events programme.

This event is free and open to all with no ticket required. Entry is on a first come, first served basis. For any queries email events@lse.ac.uk or call 020 7955 6043.

They argue that over the last twenty years discussion in this country over European issues has increasingly lost touch with reality or rationality. Even those in theory favourable to a full British role in the European Union have found it difficult to stand against this torrent of wilful ignorance, political opportunism and media manipulation.

The authors conclude that Britain’s position within the European Union is currently in greater jeopardy than is generally realised. The European Union’s supporters within the United Kingdom need fundamentally to reconsider the tactics and rhetoric they have employed to make their case until now.

To order

By post: Please send a cheque for £10 made out to “Brendan Donnelly” at 61 Leopold Road, London N2 8BG (plus £2 postage if outside the UK)

Online: with a credit card or by PayPal here

Daniel Hannan MEP (picture Mises Youth Club)

A familiar argument from the anti-Europeans is that Europe is the wrong choice, that the rest of the world is a better economic bet from Britain than the EU.  For example, here is Daniel Hannan in this week’s Spectator (£):

In the year we joined, western Europe accounted for 38 per cent of world GDP. Today it’s 24 per cent, and in 2020 it will be 15 per cent. Far from joining a prosperous market, we shackled ourselves to a corpse.

But it is wrong to say that Europe is in decline, but rather that it is not growing as fast as the rest of the world.  But that is expected.  There is more scope for less-developed economies to grow more rapidly because they can learn from the experience of richer countries, adopting their technologies and their methods of organisation to catch up, economically.  This is why so-called emerging markets are attractive to investors.

In particular, countries such as China and India have opened up their economies to market forces and international trade, and are growing very fast as a result.  This is something to be welcomed, not criticised.  As a result, we can say positively that it is a good thing that the developed world’s share of world GDP is in decline.

And let us go further.  Look at things from the Indian or Chinese perspective.  Not only is the western European share of world GDP in relative decline, so is the British share.  It was 4 per cent in 1973, today it’s 3.5 per cent and in 2020 will be 2.5 per cent.  Daniel Hannan is asking China and India to shackle themselves to the British “corpse”: why should they do that?

For the answer, we follow the trail to Luxembourg, where Amazon has its European headquarters.  In Luxembourg, Amazon generates revenue of €7.5bn (£6.5bn), produced by a staff of 134.  In the UK, however, 2,265 people produce a revenue of only £147 million, which amounts to 0.13 per cent of what their Luxembourgeois colleagues each manage.

The reason is not that the workers in Luxembourg are more than 700 times more productive, but that Amazon has organised its corporate structure in such a way as to ensure that the profits are declared in the lowest-tax jurisdictions.  This is legal, but it can’t be right.

This website argues that profits should be declared (and taxed) where they are earned and not where tax lawyers can contrive them to end up.  That way, different countries can set their own tax rates, preserving a national power rather than creating a European one, without stealing tax revenue from each other.

There is an argument that tax rates should be harmonised, which appeals to people who want to avoid the possible downward effects of tax competition, but which also creates a centralised decision about tax rates rather than a decentralised one.  What both of these arguments have in common is that they reject the notion that taxation is a matter of national sovereignty, recognising that taxation of cross-border companies is something that different countries have to address together.

If we don’t do this, and insist instead on retaining the notion of national sovereignty in the context of tax, the people who benefit are the people who run those international companies.  They can manipulate their corporate structures to transfer profits from one jurisdiction to another, thereby gaining a competitive advantage over companies that are loyally based in one country only.  And the people who want to cripple small domestic businesses in this way have the cheek to call themselves patriots!

Ed Davey tells it like it is (picture DECC)

An interview with Lib Dem cabinet minister Ed Davey in the New Statesman this week has provoked an astonishing reaction.  He comments on the experience in government of dealing with the EU and with the other member state governments within it:

“In due course this government might well turn out to be seen to have been more constructive, more engaged and indeed more pro-European than its Labour predeces.  It’s not just Liberal Democrat ministers but Conservative ministers who are really engaged with their European counterparts.  Some of the relationships that he [Cameron] is building are very important. What the coalition government is showing time and again is that by engaging with Europe you actually look after Britain’s national interest more effectively.”

The two points he makes here will be familiar to regulars on this website: that engaging in the EU makes more sense than standing outside it; and that the last Labour government’s pro-Europeanism fell far short in practice of what it promised in theory.  So far, so uncontroversial.

But if we turn from the New Statesman to its weekly, right of centre rival, the Spectator, we find it reported that Conservative ministers in the coalition government are angry.  They want William Hague to slap him down.  But why?

It is a reality that government ministers have to engage with their European counterparts (they would have to do so, even if Britain were not a member of the European Union).  The upset can only be that they don’t like this being pointed out.  They are appealing for votes from that portion of the British public who don’t like the EU and would rather comfort those voters in their delusion that Britain can do without it than confront them with the truth.  It has been pointed out before that for the Tories to chase after UKIP voters is a dead-end, but the message has evidently not yet got through.