Wednesday, 12 August 2015

General Election 2015 - what really happened?

It is now just over three months since the General Election result and the political landscape has been transformed.  From a position of a virtual dead heat the Conservatives are now the dominant force in British politics with no serious opposition, the Labour Party are disintegrating, the LibDems have been reduced to a pile of rubble, no-one quite knows where UKIP are, and Scotland is virtually a one party state.  

In these last few months I have had time to read a lot, think about what has happened and look at the stats.  Not least, I have had a look at some of the things the British Election Study has identified about the motivations of the electorate.  Before the myths and legends of election 2015 take root I wanted to jot down a few things I believe to be true in understanding the drivers for the electorate at this election and where I think our politics are at.

A crucial thing to understand about General Election 2015 is that the Conservative Party did not see a significant increase in their support and there was not a return to 2 party politics.  Nor was there a significant reduction in Labour support from 2010 over the country as a whole.

The key dynamics were in fact the disintegration of LibDem support, the SNP landslide in Scotland and a large anti politics UKIP vote, although to negligible electoral effect. The Greens also had a larger vote than in previous elections, although less than they might have hoped.

 Source: Electoralcalculus

The Labour result was in fact a disaster saved only by defecting Liberal Democrats. This was made worse by the realisation that they were the opposition to not altogether popular government after five years of austerity in a financial crisis struck world.

One of the main features of election 2015 was the SNP tidal wave in Scotland where they won nearly all the seats and 50% of the vote.  The 2010 Labour voters who went over to the SNP were the most concerned by cuts in public spending, the least convinced about the need for deficit reduction, and felt that if we did have to address public spending it needed to be by tax rises and not cuts.

For left of centre inclined voters, the most effective thing to do in terms of electoral positioning was to be apparently centrist, anti-austerity, and economically competent.  This worked well for the SNP.  For Labour on the other hand, having a position which seemed to be austerity-lite did not work.  They probably needed to appear anti-austerity while economically competent to be more successful. 

In Scotland, Labour particularly lost out on not seeming anti austerity enough and the nationalist / anti politics sentiment grew.  

A paradox in Scotland that sealed the SNP rout of unionist parties was that a segment of Independence Referendum No voters voted SNP to take their popular vote to an unprecedented 50%.  This crucial group were partly looking for an anti-austerity proposal and were particularly beguiled by the prospect of a Labour minority administration given what they perceived as back-bone by the SNP. A smaller group were disappointed as they perceived there were not enough new powers for Scotland on offer when in fact significant powers had been brought forward and precisely according to the timetable promised.

In the election campaign there were a mass of contradictory claims, seemingly badly costed, confusing and complex.  Therefore, it was impossible to discern what the best deal was.  When the voting public is hit by conflicting claims of an unclear message they fall back on other simpler things to make up their minds. This means their view on the party leaders.  This was crucial.

The view of party leaders in comparison with Ed Miliband helped David Cameron.  It was also another factor which helped the SNP. 

What the LibDems were offering or what they were even for had become unclear and people had stopped listening to their leader some time before election.

The Greens fell back from a promising pre-election position because of this compounded by credibility of economic competence which unravelled somewhat for them during the campaign.

The Conservatives stuck very narrowly to a mantra of having a long term economic plan.  Economic competence, at least in contrast to Labour and their leader being relatively well thought of, again in comparison with Labour helped the Conservatives maintain and very slightly increase their 2010 support.  While this was not that impressive given 2010 was a disappointing result for the Conservatives as they failed to gain a majority after 13 years of Labour and an economic crisis, it was impressive given the rise of UKIP collecting anti politics support to their right.

The Conservatives were able to tactically cannibalise LibDem seats and squeeze enough LibDem voters and UKIP voters in key seats to win a majority under our First past the Post system.

The British Election Study found limited evidence of a fear of a Labour-SNP coalition driving votes to them.  However, both the Conservatives – who operated some very sophisticated voter modelling – and the LibDems found movement at the end of the campaign in LibDem seats to the Conservatives on this very fear tipping key seats into the Conservative column and ensuring the LibDem meltdown.

Interestingly, the Conservatives had some success moving UKIP supporters their way in key seats.  This did not happen in the north where UKIP were Labour facing.  However, this meant that while UKIP did well they only won one seat even though nearly 4 million voted for them.

So in short, an election where Labour lost on perception of economic competence and their leader but also for positioning themselves as austerity lite.  An election where the Conservatives won no ringing endorsement but won a majority under our system by a narrow message of competence or at least having a plan and a very effective tactical squeeze of LibDems and UKIPers in key seats.

But overall an election where the key dynamics were actually the destruction of the LibDems and the irresistible rise of the SNP.

I leave you with a question.  Is there a parallel between Scottish Nationalists and the Irish Nationalists of 1874 who came from nowhere to get 60 seats and it never went back?

Tuesday, 7 July 2015

The SNP's double paradox

    It has been interesting to see those celebrating the Greek vote on their financial crisis are a mixture of various nationalists, and the hard left and Greens.

    This highlights a paradox as far as the SNP are concerned.

    The SNP are not a hard left party and their anti-austerity line has been no different than social democrats'.  In fact their anti-austerity line has been more talk than action.

    There is also a paradox with regards to Europe.  As nationalists maybe their belief in Europe is more convenience than conviction.  The thinking of many of the supporters of the SNP is muddled at least.

EVEL is a terrible idea

My gut instinct is that David Cameron is foolish on devolution and that EVEL (English Votes for English laws)  is a terrible idea.

Ever since he made that ill judged speech on the morning of 19 September 2014 he has been playing fast and loose with Britain.  I like devolution.  I think decentralisation is good and that Britain is particularly well suited to it.  It is the natural order of things.

Indeed the natural conclusion of all this is devolution in some shape or form throughout the UK with Westminster becoming the national parliament.  The federal parliament if you like.

Some sort of devolution or decentralisation within England would be best for this to work and to be sustainable otherwise we just become England with some semi-detached add-ons like Scotland or Northern Ireland.  

Yes - EVEL creates 2 tiers of MPs and it makes it unlikely that a Scot or Welshman could ever be PM or a senior minister.  It turns Westminster into the English Parliament, which it is not.  And all this increases the chances of independence.

What then is the way forward?  I accept that the development of a full federal structure will not happen overnight but there are already some ideas on parliament, to work with as an interim step, within the Mackay Commission.   Developing wider decentralisation within England probably has to start with developing localism, regional structures like 'Northern Powerhouse' and empowering county authorities.  But that is so British.  Quirky and organic developments.

The Smith Commission and the Scotland Bill making its way through parliament gives us a strong devolved Scotland. Stronger even than German Lander and very much as promised during the Referendum campaign, however the nationalists try to spin it.  

The key for devolution to work within the United Kingdom is getting the UK level right and getting devolution right for England.  But EVEL is a terrible idea and the Conservatives are clueless about how the union and further devolution can work together.

Monday, 8 September 2014

You're thinking of voting yes? Seriously?

As I write we are 10 days away from the Independence Referendum which will decide whether Scotland leaves the United Kingdom, and becomes an independent country or not.  The polls have narrowed and the result seems uncertain.  The Yes campaign has made up ground and seems to have gained some traction, in particular based on scare stories about the future of the NHS.

I believe the Yes case is actually a rather weak one, driven by nationalists who have always wanted independence simply because that is what they have always wanted - opportunistically taking advantage of a malaise across the western world of global financial crisis and disillusion with political establishments.

And the Nationalists have been joined in this enterprise by some from the left and a hotch-potch of idealists looking for change.  A disparate group.  The problem is everyone is projecting their own dreams onto Independence. It can't be about all of them.

In fact the Yes case seems to be not much more than this:  Bad things happen.  Westminster is to blame.  Vote for independence and bad things won't happen anymore.

My concern is I have seen very little, if any, serious analysis of why we have had an economic crisis and austerity, and I have seen no solutions offered up by the Yes side.  There is much said about poverty and inequality but no serious discussion about how we can tackle these issues.

What we have instead is plenty of faux anger and overstated argument.  Plenty of demonising and othering of scapegoats - mostly summed up by the concept of 'Westminster'.

The Yes campaign see themselves as the real change makers, the catalyst for a thousand lights of radical thought to make a better nation.  They believe they are civic nationalists building something new and good.  Civic nationalism of course takes its inspiration from enlightenment thought and the American Revolution of the 18th century. One of its great writers was Tom Paine. His seminal work "Common Sense" would resonate with many a Yes supporter almost as much as it inspired the revolutionaries of 1776.  In it he wrote, “We have it in our power to begin the world over again".

But here's the thing.  The Scots are in truth quite conservative.  The future that is on offer through independence, far from being progressive about how we can take forward a modern free market welfare state adapted for the 21st century, seems rather more likely to be a regressive step back to the 1970s.  This is a vision that if realised would be unlikely to achieve the results hoped for.

The challenge for Scotland remains, whether we vote Yes or No, how do we spread the prosperity we undoubtedly enjoy in the East to central and western Scotland, and how do we improve our health issues.     

But don’t take it from me.  The nationalists' case is disingenuous and a false one and there are many good reasons to remain part and parcel of Britain.  I have set many of them out below each with some background should you want to read further.

1.  It's not just about the numbers 

It's not about the numbers (Kevin Hague in Chokka Blog)

Why our shared values matter

"At the heart of Britain there is a fusion of Scottish principles of solidarity, egalitarianism and civil society entwined with English values of liberty, tolerance and pragmatism that has created a union for social justice where we pool and share risks and resources across the entire United Kingdom."

(Gordon Brown Labour)

We are not just part of Britain, we made Britain (Ruth Davidson Conservative)

I will vote No because I love Scotland (Ming Campbell Liberal Democrat)

Head and Heart (Archie McPherson)

2.  More Powers

The argument is that Scotland already enjoys the best of both worlds - we have a strong Scottish Parliament, with full control of the NHS, schools and policing, and also the strength and security of being part of the UK.

And each of the three political parties supporting Better Together has, over the last two years, considered developed and published thought through proposals for more powers and further ‘federalising’ the UK.  The three parties have made a public and joint commitment to work together to deliver more powers after a No vote.  Parties working together originally delivered devolution in 1999.  The parties have now delivered a detailed timetable about how they will move swiftly to implement this after the referendum.

Labour’s proposals

The Conservative proposals

The LibDem proposals

3. The economy

Scotland could go it alone but is better as part of the UK (The Economist)

66% of the Scottish economy is in the private sector.  About 40%, or 859,000 jobs, are dependent on trade and ownership links to the UK, while the remaining 26% are linked to the wider world economy. (Prof Ashcroft Strathclyde University - Scottish Economy Watch)

Our economy within the UK is highly interlinked and London is actually (on balance) an asset to the Scottish economy. 
(Prof Ashcroft Strathclyde University - Scottish Economy Watch)

The effect of having a border - trade flows, migration flows and capital flows are significantly lower across international borders than within a unified country. 
(Prof Ashcroft Strathclyde University - Scottish Economy Watch)

Scotland's exports to the rest of the UK accounts for 70% of our 'exports'
(Prof Ashcroft Strathclyde University - Scottish Economy Watch)

Small countries are neither more or less successful than large ones but are more volatile.  (Prof Ashcroft Strathclyde University - Scottish Economy Watch)

Some small states can do well out of independence in some ways. 
(Prof Ashcroft Strathclyde University - Scottish Economy Watch)

The greater tax receipts we have received as a result of oil were invested for the people of Scotland, creating jobs and investing in public services.  We have in effect had our oil fund all along.
(Prof Ashcroft Strathclyde University - Scottish Economy Watch)

We would not be £8.3bn better off under independence.  This is untrue. 
(Kevin Hague in Chokka Blog)

A summary of some other key talking points (Kevin Hague in Chokka Blog)

- Companies in Scotland that trade with the rest of the UK would probably be damaged and suffer job losses by the effect of establishing a border.

- GDP per head does not tell you how rich a country is - an independent Scottish economy would be a middle ranking economy with high levels of foreign ownership.

- Scotland would face some significant hurdles to EU membership and any terms on which we joined.

- The start up costs for an independent are probably close to £2.5bn after analysing the range of estimates.

- Business for Scotland does not represent business in Scotland and is not a serious think tank in any way.

4.  The NHS

The Nationalists are lying about the NHS to gain electoral advantage. (Dr Gregor on the BBC)

Health service spending in England is increasing in real terms, there is more spending per head of population on health in Scotland under devolution, the Scottish Government makes extensive use of private firms to provide healthcare, there is no political party proposing ending the NHS in England - it would be political suicide to do so.  What political arguments there are in England are over the best way to provide healthcare with an ageing population and increasing costs of technology - not over taking away free healthcare.  

5.  Poverty

The SNP's record on poverty is not a good one.  In 7 years in government in Scotland, despite having full control of health and education the SNP have not introduced a single redistributive policy - not one!

6   The EU

An independent Scotland would start her life outside the EU; even thereafter Scotland would enjoy EU membership on terms far less beneficial and generous than those enjoyed now by the UK.  (The definitive guide to the process to joining the EU following leaving the UK by Prof Adam Tomkins, Glasgow University)

7.  Pensions

Pension schemes operating between Scotland and the remainder of the UK would be classed as ‘cross-border’ under EU law if Scotland votes ‘yes’.  This means EU solvency requirements would have major cost and cash flow implications for employers with cross-border pension schemes.  This would be a major financial challenge for employers. (ICAS report)

Scotland faces a challenge to provide pensions after independence for both state pensions and private pension schemes.  (Malcolm MacLean, Pensions expert writing in Money Marketing)

Scotland faces a pensions timebomb due to our ageing population. Pooling resources across over 60m people to provide pensions is one of the big advantages of the UK.  (Daily Record)

8.  Financial Services and bailing out the banks

An independent Scotland would have seriously struggled to bail out the banks in the crash of 2007/08.  In this it is vital to understand the the distinction between giving distressed banks short-term liquidity help and bailing them out. During the crises, UK banks were, for instance, given short-term liquidity help from both the UK government and other governments where they were operating, such as the US government. The bail-out of UK banks, however, came from the UK government, to the sum of somewhere in the vicinity of £66 billion, or over half of Scotland’s GDP in 2010 (which stood at about £110 billion).  (Brad MacKay, University of Edinburgh "The Future of the UK and Scotland")

9.  The advantages of being part of the UK

If you are serious about looking into how Scotland works within the UK and the benefits to Scotland of being in the UK, and there are many, read the Scotland Analysis papers from the UK treasury.

Some of the key advantages of the UK to Scotland include

- Being part of the UK energy market

- The pooled resource across a union for social justice in pensions

- Being part of an integrated single market and currency union

- Science, research and our universities sector within the UK.

- Our financial services industry and banking within a UK sector which due to regulation, tax and currency would have to fragment after separation.

-  The value of UK Defence industries and military shipbuilding to Scotland

10.  The Nationalists' questions

Is there a democratic deficit in Scotland? (Effie Deans blog)

The McCrone Report myth - the extent of North Sea Oil was never a secret.

The Wee Blue Book from extreme nationalist website Wings over Scotland is erroneous in many of its details or deliberately misleading as it is written with an agenda of nationalist propaganda.  Consider this evidence. (Kevin Hague in Chokka Blog)

Business for Scotland do not represent businesses that employ anyone or that deal cross border.  They have no credibility.  The detail (Kevin Hague in Chokka Blog)

It's not about the SNP - yes it is! (Effie Deans blog)

Wings over Scotland is an extreme nationalist blogsite with an agenda of nationalist propaganda.  It is homophobic and mysoginistic.  It also has a consistently angry and outraged tone aiming poisoned articles at its targets.  This is negative and provokes needless hate and division and as such has no place in the debate over Scotland's future. (Edinburgh Eye)

Think again - (Nupateer.Com)

Friday, 20 June 2014

The identity and the future of the nation

Last night I watched Prof Tom Devine, one of Scotland's greatest living historians, on TV.

I like Tom Devine and I like what he has to say. He has as fine an understanding of Scotland and what it is to be Scottish as anyone. Talking about the Independence Referendum we take part in, in three month's time he said, "This is about the identity and the future of the nation". I agree with Tom Devine on this.

He described how a collective sentiment of 'the people of Scotland as a nation' exists. He also described how our sense of Scottishness and Britishness changes over time too. For it is a duality that we have, and it is elastic and adaptable to different times. But nonetheless it is a duality of identity.

I believed 2 years ago and believe today that this referendum is a head and heart thing. That while there are many factors for each of us to consider, it is at root about two things - the practicalities of economics and our identity as a nation. Are we simply Scottish or is that duality of Britishness and Scottishness still relevant?

I believe that that duality is still relevant and therefore a devolved settlement with a structure that is as federal as possible is the way forward. For me independence is not the way. It is not a solution that is either practical or best reflects who we are.

Friday, 19 July 2013

Pensions killed Detroit

I originally posted this in 2011 (from a British perspective).  Tonight, as Detroit files for bankruptcy it seems worth revisiting it.

At a time where public sector pensions have been at the heart of our national debate its worth thinking about what happened in the United States.  Why? Because expensive and outdated pension schemes have destroyed the auto manufacturing industry in Detroit and with it the city!
Detroit is a city built around the car manufacturing industry.  It used to be dominated by the big 3 auto companies – GM, Chrysler and Ford.  In recent years the industry and the city have collapsed.  In the 1950s 1.8 million people lived in Detroit.  Today it is less than 800,000.  There has been a 25% decline in population in the last 10 years alone.  At the root of this has been the decline and fall of the car manufacturers at the heart of the economy.
Why have the big 3 auto companies declined?  Well, they had been relying too much on SUV sales and not making enough small and hybrid cars and they have been dogged by poor quality.  However, the biggest single reason has been the massive cost of their employee benefits and pensions programme.
Between 1993 and 2007, GM poured $103 billion into funding their pensions and healthcare scheme.  Over the same period they could only afford to pay out $13 billion in dividends.  GM also had to work hard to play catch up as funding payments into the scheme fell behind.  At the start of the 2000s it had to pay an additional $20 billion to catch up payments and agreed to pay a further $30 billion to fund future healthcare liabilities.  Note I am talking billions here, not millions!
The point is the pensions and benefits schemes totally starved GM of investment and made a massive contribution to GM falling behind developments in the US car market.  Chrysler and Ford had similar stories.
Many other car companies based in southern or mid western states have been able to come in with far cheaper operating costs and beat the big 3 Detroit firms in competition.  Notably Nissan whose costs per worker in the US were more than 40% cheaper – largely because of the costs of the employee benefits package.
The Big 3 employee benefits package had been set up in 1950 in a deal arranged by the Union of Auto Workers UAW that became known as the Treaty of Detroit.  In a time of full employment and little competition the industry committed itself to open ended final salary arrangements with fixed guarantees.  As the workforce has grown and aged and as workers have lived longer these have become more and more expensive than ever envisaged and the companies have found themselves locked into open ended arrangements where they cannot control the costs.
Detroit and the car companies have been not alone in their pension schemes causing catastrophic loses. A huge pension liability created a budgetary nightmare for New Jersey and the city of Vallejo in California actually filed for bankruptcy because it couldn’t handle the costs of police department pensions.
Roger Lowenstein wrote about this further in his 2008 book “While America Aged:  How pension debts ruined General Motors, stopped the NYC subways, bankrupted San Diego and loom as the next financial crisis.”
Change is unavoidable in the UK
The UK faces similar issues.  Through the 50s and 60s – a time of effective full employment - there was a massive growth in Final Salary pension schemes.  The UK developed a parallel system of occupational pensions provision for those in the public sector and larger companies along with growing state provision.
13% of the population had been in occupational schemes before the war – mostly in the public sector.  By the end of the 1960s this figure was 53%.  However, in 1961 life expectancy for men was 68 years and just under 72 years for women.  In 1908, when the first state pensions were introduced they kicked in at 70, an age many failed to ever attain!  Today life expectancy in the UK is 77.9 for men and 82 for women - and growing every year.
Longevity – the fact that we are living longer is making pensions provision more and more expensive.  There are of course other factors like salary inflation but this factor alone is at the root of the problem.  After the war people were retiring at age 65 and expected to live on average about 5 years or so in retirement.  Today people, in pension schemes are retiring at 60 and can expect to live to 80 on average – 4 times longer than envisaged when the pension schemes were conceived.
Private sector Final Salary pension schemes in the UK are therefore dead!  They have been for the last 5 – 10 years.  While existing members are still in the schemes, they are all closed to new entrants.  Companies can no longer afford them and given that the benefits are fixed and guaranteed they are an open ended and growing commitment.  They are no longer commercially tenable and are a risk to the business.  That is why they are dead.
One pensions commentator, I think it was Tom McPhail, said last week that we will probably all have to spend a little less, save a little more and work a little longer to fund our retirements in future.  I think this is sound and reasonable advice and actually one of the most intelligent things I heard last week.
Final Salary pensions continue in the public sector – unfunded by investment and paid for by general taxation.   Yes, their projected costs are set to fall with CPI rather than RPI indexation and workers make a contribution.  But the projected fall in costs are because of these small reforms already in the pipeline.  They are still hugely expensive.
Pensions are in fact deferred pay.  Today, because of the current pensions position it often pays far more working for the public sector than for the private sector.  This means the wider population are being asked to fund pensions which are far more generous than anything available to them.  This means funding something akin to our entire defence spending budget.    And no economy is going to last for very long where it is more attractive to work for the public sector than for the private sector!
Ros Altmann, the Director General of Saga and something of an expert on UK pensions, argues that Final Salary pensions are actually fundamentally unfair as they disproportionately award high flyers being based on one year’s salary at the end of their career rather than taking into account, say, a lifetime of service and contributions.  It is right to reward high flyers when they are working – maybe not to continue to do so often for many years longer than they actually worked for their employer!
The true costs of final salary schemes are unsustainable to fund as the private sector has discovered.  Employers can’t underwrite unquantifiable, open-ended commitments for decades in the future.  Neither can the state or future tax payers – change is unavoidable.    
What to do?
It seems to me that the real issue here is that our occupational pension infra-structure – both private and public is broken.
The government is introducing auto enrolment so that everyone will have a modest occupational pension.  This will help a little with the many who are not in any pension scheme at all.
However, it is very modest provision.  In the second half of the 20th century companies fulfilled a social welfare function providing generous pensions – using tax advantages to provide deferred salary in effect.
With jobs for life long gone and guaranteed final salary schemes for life long gone, companies don’t do social welfare anymore – nor can we really count on them to do so.  Unfortunately, many employers have been replacing old generous schemes with much less generous ‘money-purchase’ schemes with no guarantees and all the investment risk is with the employee.  The new auto enrolment provisions, while welcome for some, just accelerates this levelling down affect.
I’m told both the USA and Australia have been much more effective than the British at replacing old unsustainable pension schemes with new money purchase provision.
I think the public sector unions have a real opportunity here.  They need to be constructive.  Accept the old pensions are unsustainable and come up with some good alternatives.  If they are sustainable and something new that provides decent pensions takes its place, market forces in the labour market could lead the way to improvements in the private sector too.
We all need to save more and we all need something that is more sustainable!