Winner of the New Statesman SPERI Prize in Political Economy 2016

New! Lecture on 23rd May at Bush House, 44-46 Aldwych on my book 'The Lies We Were Told' with discussion from Rachel Shabi and Aeron Davis. Book here.

Tuesday, 21 May 2019

The political consequences of Nigel Farage

Nigel Farage, as leader of UKIP, was critical in making Cameron commit to an EU referendum. As a key player on the Leave side in the referendum he helped gain a narrow victory. Conservative Brexiters then turned a vote for a negotiated deal with the EU into a headbanging demand to leave without any deal at all. When that failed to be agreed by parliament Nigel Farage re-enters the picture talking about humiliation and national betrayal and demanding a No Deal exit. The political consequences of Farage have already been immense, and they do not look like they are going away. What further havoc is he likely to cause?

With the exception of the EU referendum itself, his influence has nearly always been through the Conservative party. It will be through the threat he poses to Conservatives in the future that will define his greatest influence now. Although Brexiters will never admit this, they must be hoping that Farage decimates the Conservative vote in the European elections. The Brexit party have announced no policies beyond a desire to get on with Brexit, by which they mean leave with No Deal. His support is not that surprising given the even larger support for No Deal in the polls. If you think its unusual for so many to abandon the Conservative party you are also probably still wondering how so many people could vote for Trump.

Brexiters will argue that they have to move their own party’s policy from leaving with some kind of agreed deal to leaving without a deal (perhaps after another fruitless attempt to negotiate away the backstop), otherwise Farage will seriously damage their vote in any general election. They would be correct, particularly if Labour drop their pointless desire to negotiate a Brexit deal of their own. One Brexiter has even suggested an electoral pact with Farage, where they divide up Westminster seats between them.

The candidates for the next leader of the Conservative party will be falling over themselves to appeal to a membership a majority of whom favour No Deal (see here and a recent Times/YouGov poll). That process may itself lead to some kind of commitment to No Deal and not to hold a People’s Vote. But MPs and Conservative party members will also be thinking of selecting someone who can match the charisma of Farage. If he survives the preliminary votes by MPs, Boris Johnson may seem an irresistible choice. He is currently the clear front runner in a recent poll of members.

It is possible that whoever was elected, and whatever the commitments they made during their campaign, might try and steer some kind of middle course between the two wings of the party. But Farage would always be waiting to call betrayal and attract Tory votes in the forthcoming general election. The only escape route I can see is to change the backstop back to its original form, where it only applies to Northern Ireland. Whether that option could get through parliament is unclear. As the DUP are bound to end their arrangement with the government in those circumstances, a general election would have to follow.

If instead the new Prime Minister did commit to No Deal, the issue is whether they could get that through parliament. With the current set of MPs that seems unlikely. Nevertheless they will see it as their only chance of making Farage go away. The Conservatives have dug a deep hole for themselves, and they will believe that the only way forward is to dig some more. That policy would lead to defections or resignations by some MPs, but the leadership and other Brexiters would take that as an opportunity to replace them with Brexiters in due course.

There is one possibility which in normal times we would not even think about but which unfortunately we now have to. That possibility is that the government led by someone like Boris Johnson decides to leave without any deal without consulting parliament, using the 2016 referendum to say that the people are more important than parliament. My understanding is that technically they could do so, but it would be a constitutional outrage in most MPs eyes. Parliament would almost certainly find some opportunity to give voice to their objection, but what if the government took no notice?

A major constitutional crisis like this means many things could happen. It is possible the EU would not accept the withdrawal unless it was approved by parliament. Parliament could refuse to pass any legislation associated with withdrawal. Having to worry about such things illustrates how far along the populist road (in the Jan-Werner Müller sense of the term) we have gone.

It is more likely that the government would settle for the long game, with the hope that through time and a General Election it could get enough MPs to get No Deal through parliament. If the EU loses patience and refuses an extension, the government could call an election talking about bullying from the EU and turning nationalist rhetoric to maximum volume.

Could a Conservative party pushing a no deal exit ever win a general election? If the election took place after parliament had revoked Article 50 or a referendum had chosen Remain, voters would soon decide that they really didn’t want to go through the process again. Indeed the longer we stay in Brexit limbo the more people will prefer to forget about the whole thing. That and a slim majority would put some pressure on any new leader to hold an early election.

Could a recently appointed Conservative Prime Minister beat Labour in an early election? It is not impossible, particularly if the Labour leadership are still clinging to a belief that Brexit should take place. But I also think it is rather unlikely. Boris, like May, is a good foil for Corbyn, as this poll suggests. Those who think a Prime Minister should be serious rather than a buffoon will tend to choose Corbyn. More people would rather Remain than leave without a deal, including some Conervative voters. As John Harris points out, the young middle class of suburban England many of whom voted Remain are learning how not to vote Conservative. On non-Brexit policies Labour will win the cities hands down, and attract many in more traditional heartlands.

How did the Conservative party find itself in a position where its only slim chance of winning a general election is to embrace a policy opposed by most of business and which will inevitably have a very serious impact on the economy? The first blunder was of course the decision to appease UKIP and Tory Brexiters by promising to hold a referendum. The second was a failure to pin down the Brexiters to commit to some form of leaving before the referendum. The third was to fight a terrible campaign. But even then a wise leader would have seen the gift that having a leader of the opposition who wanted Brexit presented and gone for a conciliatory Brexit, which would have at least allowed a Withdrawal Agreement to be passed by parliament. In fact Theresa May did practically everything wrong, including adopting the fateful ‘no deal is better than a bad deal’ mantra.

The bigger picture answer is that we are seeing the consequence of what in my book I call neoliberal overreach. It was the Conservative party and its supporting press that began the long process of whipping up anxiety about immigration. It was a Conservative government that embarked on sustained austerity during the worst recession since the war that lead to the slowest recovery for centuries, and it was they who erroneously blamed immigration for the resulting collapse in public services and real wages.

When you flirt with the tools of the far right and encourage the fears the far right play on, you are in great danger of getting into bed with them. Farage’s work on the EU is nearly done, but he will be ready and waiting for the next nationalist cause he can take up, and any future Conservative Prime Minister will be too weak in electoral terms to resist his siren call. The Conservatives have only have themselves to blame for playing with fire in the first place.

Friday, 17 May 2019

Is Brexit still possible?

My last post was about how Labour should move from supporting Brexit to supporting Remain, because there is no chance that their kind of Brexit deal either being approved by parliament or attracting majority support from voters. This holds before and after any elections.

You may think Labour should support Remain simply because it is the right thing to do. I have written many posts saying exactly this. But many within Labour, including crucially Corbyn himself, do not agree. This is why we should also think about whether supporting Brexit is a feasible strategy, which is what my last post does. The post also shows why supporting Brexit will now lose Labour votes.

But the logic of that post also applies to any deal, including the government’s own. There is always a blocking group of MPs made up of a combination of Brexiters and uncompromising Remainers, and if the deal ever squeezed through parliament there would always be a large majority of voters who would hate it and take their anger out on the government.

May tried relentlessly to get her deal through without any support from the Labour leadership. I cannot see how events might conspire to help her in the period before she leaves. Indeed the success of Farage will embolden the Brexiters, particularly as they are close to getting a Brexiter as Prime Minister. Unless Corbyn wants to commit suicide on behalf of the Labour party, May’s deal is the proverbial dead parrot, with the government as the shopkeeper.

The only chance she had was to make serious compromises with Corbyn in the negotiations. Doing something that could split her party is not something she would do. Even with a joint deal the numbers look tight if there is no second referendum attached, The number of Conservative MPs who voted for her deal the first time they voted was just under 200. That rose to 277 by March, but with Farage as background and a general aversion of Tory MPs for ‘doing a deal with a Marxist’, the number could be more like the first vote than the last.

Among 246 Labour MPs, perhaps 120 would vote against a joint deal because it didn’t include a People’s Vote. That leaves around 125 who would vote for a joint deal. The majority needed is 320. It is close, but perhaps not large enough to get all the Brexit legislation through. If a People’s Vote was included that would probably be a stable majority, but in that case the deal would easily be rejected by a combination of Remainers and Brexiters.

Would a Brexiter Prime Minister make any difference? How could it? It would increase the size of the Brexiter block. The idea that the EU will substantially improve their deal with a Brexiter as PM is pure fantasy. Brexiters will play the long game: hope to gradually increase their number in parliament, and to win an election with a big enough majority to get No Deal through parliament. A Conservative party committed to No Deal is the only way the Tories have to neutralise Farage.

This all suggests that Brexit in any form based on Article 50 is just not possible. A May-Corbyn deal was the best shot, but I don’t think either side are prepared to do it at the end of the day. Yet no one will admit that Brexit is stuck with no obvious way forward. It may require a new Prime Minister to admit the inevitable. They have a big incentive to do so, as at the moment Brexit has brought normal government to a halt.

What about the EU - will they want to go on extending Article 50 again and again? At some point they will issue an ultimatum: no more extensions so agree a deal, revoke or leave without a deal. That will certainly ‘stress test’ the analysis above. Will that persuade enough MPs to agree a deal? If it does not MPs will vote to revoke. The most likely outcome of this stress test is a vote for a referendum and a request to the EU to allow time for one, which they will give. Any referendum will be won by Remain unless parliament is foolish enough to put No Deal on the ballot, because Brexiters as well as Remainers will campaign against it.

So Brexit is stuck, with no foreseeable way to successfully implement it. I have waited some time before writing a post with this conclusion. I have kept saying this is wishful thinking and something unexpected will turn up to make Brexit happen. It still could, but I suspect Farage is the final straw. It seems odd writing that Brexit is on its deathbed, in a coma but with no chance of recovery, when a year ago the Remain cause seemed hopeless. The thing everyone under estimated was the way Brexiters themselves would effectively kill Brexit.

Tuesday, 14 May 2019

Labour’s Brexit policy is long past its sell-by date

Labour cannot bring the country together with any kind of deal because a large majority will always hate the deal they have done.

Most people think about Brexit as a binary divide. While true in terms of Remaining or Leaving, this framework is misleading when thinking about any Brexit deal. A better model is to think about three different groups. The first comprise Remainers who see no value in compromising over Brexit. The second is made up of people who will be satisfied with nothing less than a complete break i.e. No Deal. Finally you have a group, that includes some Remainers, who would be prepared to accept some kind of Brexit deal that falls short of No Deal: the compromisers.

The size of the compromiser group may vary depend on how hard the deal we are considering is. As the deal becomes softer it loses some Leavers to No Deal and gains some Remainers. But in no case does this group of compromisers come close to being a majority of the population.

Exactly the same divisions apply to MPs in parliament, although the exact proportions may be different. This is why it is so hard, and perhaps impossible, to get a majority in parliament for any type of agreement. It is why any type of agreement is likely to fail It will be blocked by some combination of uncompromising Remainers and No Deal Leavers, who together will form a majority. This also applies to No Deal, which will be blocked by the other two groups. The only option that has any chance of getting a majority in a referendum is Remain, because both uncompromising and compromising Remainers will vote for it.

The reason we have these three minority groups when it comes to any deal is twofold. First the 2016 referendum did not specify the type of deal that people were voting for, and indeed the Leave side suggested a variety of deals. This is why compromising Remainers are wrong to think they ought to compromise. 2016 did not provide a mandate for any particular form of Brexit and could never amount to a blank cheque for any kind of Brexit. Leavers voted for one of the variety of deals suggested at the time, which all involved more money for the NHS and the EU giving us the benefits of membership without the obligations. They most certainly were not voting for no deal at all.

Second, the Brexiters have realised along with many Leave voters that the only way the UK as a whole can avoid being bound by EU decisions is to leave with no deal at all. Unsurprisingly, the EU will not allow the UK to stay in the Customs Union and Single Market when the UK can also decide its own tariffs and regulations. Brexiter ideas of negotiating a free trade deal with the EU has been spoilt in their minds by the EU’s (and anyone who cares about peace in Ireland) insistence on a backstop. In time I suspect they will embrace a limited Northern Ireland backstop, but for a variety of reasons they are not there yet.

It is the reality of these three minority groups that Labour’s current Brexit stance fails to recognise. They cannot bring the country together with any kind of deal because a large majority will always hate the deal they have done. This is the basis for my argument that they could never get agreement for any kind of Brexit if they were the government. They would be opposed by Conservatives and many of their MPs in parliament and in any referendum (which parliament would force on them if they didn’t choose to have one themselves) they would lose badly. The only possible (but unlikely) exception to this rule is a deal between Labour and the government without a public vote attached that might just scrape through parliament. Even in this case the deal would be hated by most people in the country and both parties would be punished for it.

The upshot of all this is that no one, including Labour, can enact Brexit. Their current policy is simply a non-starter for very good reasons. Their policy did make much more sense in 2017. At that point it was not clear that the Brexiters themselves would scupper any kind of deal. But during 2018 that became clear, and at that point Labour should have acknowledged reality and changed its policy to embrace not just a People’s Vote but also the Remain cause.

The main excuse for Labour supporting something that cannot happen is to keep the votes of Leavers. The argument goes that if they supported Remain they would lose seats in the old Labour heartlands. Embracing Remain might win them a few votes, but in seats they have comfortable majorities in already. At the end of the day most Remainers will vote Labour whatever its Brexit policy because they want the other things a Labour government would bring.

In 2016 and 2017 that argument had some force. However it is no longer valid. Let’s take the Remain side first. There is CHUK which explicitly aimed to capture disaffected Labour voters on the Remain side. The fact that CHUK contains former Conservative MPs will limit their appeal to Labour voters, but they do pose a threat to the Liberal Democrats. The LibDems are as a result likely to stress their more radical side, which makes them more appealing to Labour voters. The days when their history as part of the Coalition government was a millstone around their neck are dying, as recent polls show. Finally you have the Greens, who are likely to look increasingly attractive as the perceived threat of climate change grows.

In it certainly true that if Labour embraced Remain they would lose some voters who support Leave. But comparisons with voting patterns in 2016 are now out of date, because more Leave voters have changed their minds than Remain voters. Crucially, minds have changed predominantly among Leave voters who find their financial situation difficult, who are also likely to be Labour voters. This was confirmed by a recent UCL study.To quote
“Of Labour voters who chose Leave in 2016, fully 18% have changed their minds and say they now prefer Remain as their top outcome. In contrast only 4% Conservative Leave voters have changed their mind. One reason might be differences in economic circumstances between Leave voters in the parties.”

Peter Kellner now estimates that in Leave areas Remain supporters now outnumber Leave supporters three to one. That is a huge margin. It means that seats that voted Leave in 2016 are more vulnerable to switching Remain supporters than if Labour loses Leave supporters.

None of this would matter of it was only Leave supporters who were likely to forsake Labour, with Remain voters staying loyal. But poll after poll has shown the opposite is true. To quote from the UCL study again:
“For Labour, at least a fifth of their voters in every region say they are going to vote for a different party – and in every region defecting voters are overwhelming plumping for parties holding a definite Remain position (assuming the bulk of the “Other” vote is likely to be Green, particularly in London and Scotland). Only in Wales is Labour losing significant voter share to UKIP and the Conservatives, and even that is outnumbered by those switching to Plaid Cymru, the Lib Dems and Others. The picture is particularly stark in Scotland where almost half of Labour voters are intending to vote for a different party, mostly the SNP. In London too, the Labour vote could be hit hard by a shift to the Liberal Democrats and the Greens.”

This is confirmed by polling analysis after the council elections.

Does the rise of the Brexit party change any of this? In fact it reinforces it. It splits the Leave vote, which reduces the impact any switching from Labour by Leave supporters as a result of adopting a Remain position would have.

Would Labour lose too much face if it moved to support Remain? I don’t think so. The story they should tell is that the 2016 referendum has been respected because all the government’s resources, and Labour’s energy, have been devoted to trying to find a form of Brexit that a majority could accept, but it has become clear that a feasible deal does not exist. In particular there is no possible way of getting parliament or the country to support the kind of Brexit Labour prefers. As a result, Labour will now unconditionally support the Remain side.

The logic of the argument I have put forward would also be as, if not more, consistent with revoking Article 50. That would avoid the anger at not including No Deal in any referendum question. No Deal cannot be an option. To make it so learns nothing from the 2016 referendum. One of its lessons is don’t put to the people options that MPs know would be a disaster for the country, and with a rabid Brexit press and broadcasters that balance facts with lies we cannot trust the people not to vote for this disaster. The argument for revoking is that the country has already wasted too much time because Leavers cannot decide on the Brexit option they want, and we need to move on.

As Tom Kabasi argues, a campaign based on making Brexit about priorities rather than about staying in the EU or leaving is likely to be a winning strategy. People are fed up with Brexit, and they do not want it to dominate politics for years ahead. If Remain supporting Labour could convince voters that Brexit will be never ending and that we need to move on they can win the debate.

Will Labour move towards a position where it supports Remain of its own accord. The logic I set out has been clear for some time yet they look unmoved by it. That is why many Remain supporting Labour voters will continue to vote for Remain supporting parties into the indefinite future. The hope is that Labour, if it will not move through analysis of the true situation, will do so because of the fear of losing Remain supporting votes.

Saturday, 11 May 2019

Lecture on The Lies We Were Told

Too busy to write a post today, but I thought I’d take the opportunity to publicise my forthcoming lecture and discussion on my book. Its at Kings College, Bush House, 44-46 Aldwych, London at 7pm on 23rd May. I’m lucky to have Rachel Shabi, contributor at the Guardian and Professor Aeron Davis, Deputy Head of Media, Communications and Cultural Studies at Goldsmiths University of London to lead the discussion. The lecture is organised by The Progressive Economy Forum, and further details are here.

In the lecture I want to focus on three big lies told by politicians but also aided and abetted by the media. By big I mean lies that led to profound changes in most peoples lives or how we are governed. The first was austerity, where most of the media ignored mainstream economics and pushed the nonsensical idea that we should reduce the deficit in the middle of a recession. The second was the 2015 election, where the slowest recovery for centuries and unprecedented falling real wages were sold as a strong economy. The third was immigration, where scare stories in the right wing press fueled fears in parts of the country that had seen very little immigration. Together with similar disinformation about the EU, this culminated in Brexit, where one part of the media acted as propagandists and the other part balanced truth with lies.

These lies did not come out of nowhere. They were part of what I call neoliberal overreach, by which I mean using political deceit on a grand scale to pursue neoliberal ideas. William Hague when leader of the opposition talked about the UK becoming a ‘foreign land’. Neoliberals had no interest in curbing immigration beyond its ability to capture votes. Once in government you had austerity, which used deceit about the imperative of reducing the deficit to shrink the state. I discuss the extent to which even Brexit can be included as neoliberal overreach. Deceit requires lying to the public in a major way, which was only made possible by the support of the right wing press and the broadcast media turning a blind eye.

It is free (of course) but you do need to book your ticket here Hope to see you there, .

Tuesday, 7 May 2019

Why are we governed by incompetents?

In 2016 Boris Johnson and Michael Gove narrowly won the referendum on EU membership. It turned out they had no idea how to turn their victory into a concrete policy. They had dismissed every potential difficulty as just more ‘Project Fear’, and it became clear they were not just doing this just because it was effective rhetoric. They had not throught through any of the major problems that implementing Brexit would create. They looked rather shocked when they won, realising that these problems airily dismissed would now have to be resolved.

Cameron resigned, and the Conservative party needed to choose a new Prime Minister whose main preoccupation would be negotiating the terms of our exit. Their choice was Theresa May, who was known from her previous job as being non-collegiate, slow to adapt but obstinate in the views she held. These were almost the exact opposite of the qualities needed in any negotiation with a more powerful neighbour. Perhaps knowing this, she chose David Davis to handle the details of negotiation, a man who had the charm that May lacked but who had no interest in the details, in part because he clung on to the belief that the EU would cave at the last minute.

If we cross the Atlantic, then the story is the same but more so. The hard part is thinking about an issue or decision where Donald Trump has displayed any competence. Most recently he tried and failed to appoint two people, Stephen Moore and Herman Cain, to the board of the central bank, where their main qualifications were, respectively, that their predictions were always wrong, and they ran a Pizza company.

You could perhaps put all this incompetence down to the exceptional peculiarities of Brexit and Trump. But May also appointed as Northern Irish secretary someone who didn’t realise voters there voted along sectarian lines. Chris Grayling, after his disastrous privatisation of the probation service, then awarded a Ferry contract to a company that had no ferries, and so on. A key campaign theme of the Republican party in 2016 was to repeal Obamacare, but once Trump was elected and they had control of Congress it turned out they had no idea what to replace it with.

Nor did this incompetency suddenly emerge out of thin air in 2016. David Cameron implemented a policy of cutting public spending in the middle of the worst recession since WWII, leading to the slowest recovery in centuries. He allowed his minister for health to implement a fundamental reorganisation of the NHS that turned out to be a disaster, at the same time as his austerity policy starved the service of funds. Of course it was also David Cameron who made a commitment to hold the EU referendum in the first place under terms that were most favourable to the Leave side. .

Simon Kuper, in a brilliant article in the Financial Times, has an interesting explanation for this epidemic of incompetence. He writes how leaders like Macmillan, George HW Bush or Clement Attlee had their formative experiences in fighting WWII, while Lyndon B Johnson, Bill Clinton, and John Major had a visceral experience: of poverty. They knew in their bones that government mattered. He goes on
“But both countries have now fallen into the hands of well-off baby boomers, born between 1946 and 1964 - the luckiest members of the luckiest generation in history. These people had no formative experiences, only TV shows. They never expected anything awful or unknown to happen. They went into politics mostly for kicks.”

I’m sure Kuper is right that if our current leaders had had the strong formative experience of living with poverty or living through WWII their behaviour would have been different. In particular they might have thought twice about using populist tropes like ‘the will of the people’. But surely being ‘the luckiest members of the luckiest generation in history might be a necessary but not sufficient condition for being incompetent.

An interesting example here is Tony Blair The son of a barrister, he attended a school in Edinburgh that is sometimes described as Scotland’s Eton *** and went to Oxford University. Together with Gordon Brown he presided over an administration that championed evidence-based policy. A clear example was the decision in 2003 not to enter the Euro. The Treasury spent a year researching the pros and cons of joining the Euro, consulting widely with outside experts. The 18 background studies that effort produced are excellent examples of literature reviews or, in some cases, applied research. Although Blair was predisposed to favour entry, he was content to allow the evidence the Treasury produced to persuade him not to join.

There is of course one glaring exception to this record, and that is Iraq. The war was the idea of Bush Jr, and it was a nonsensical response to 9/11. Most of the evidence at the time suggested that there was no connection between Iraq and al-Qaeda, and that although the war could be won keeping the subsequent peace would be very difficult. Blair followed Bush because of a simple but tragically incorrect idea, that the close UK-US alliance had to be preserved at all costs. He ignored domestic advice about the problems any post-war period would create.

The Labour government of 1997 to 2010 was not flawless by any means, but it terms of competence it is clearly better than what came later. It is hard not to see that evidence based policy protects you from many, but not all, policy mistakes. Cameron made the commitment to a referendum in 2013 because the political imperative was to stop the rise of UKIP and possible defections from the party. The evidence were opinion polls at the time, which suggested that Leave could easily win. At a deeper level he should have realised the influence a very pro-Brexit press could have, and also that his own immigration missed targets and the rhetoric that he himself had used to justify them would beat economic forecasts in voters minds..

An ideology is a collection of ideas that can form a political imperative that overrides evidence. Indeed most right wing think tanks are designed to turn the ideology of neoliberalism into policy based evidence. It was this ideology that led to austerity, the failed health reforms and the privatisation of the probation service. It also played a role in Brexit, with many of its protagonists dreaming of a UK free from regulations on workers rights and the environment. It is why most of the recent examples of incompetence come from the political right.

A pluralist democracy has checks and balances in part to guard against incompetence by a government or ministers. That is one reason why Trump and the Brexiters so often attack elements of a pluralist democracy. The ultimate check on incompetence should be democracy itself: incompetent politicians are thrown out. But when a large part of the media encourage rather than expose acts of incompetence, and the non-partisan media treat knowledge as just another opinion, that safegurd against persistent incompetence is put in danger.

Postscript 08/05/19 It has been pointed out to me that at the age of 10, Blair's father had a stroke and lost the power of speech for over 2 years, meaning he could not work and his family fell on hard times. So here too Kuper's point may apply.

Friday, 3 May 2019

Labour Remainers can no longer trust Corbyn not to do a deal with May

I have argued in an earlier post that it is highly unlikely that Labour could get Brexit through parliament after winning an election, because the Tories will unite to oppose it, and they together with Labour Remain MPs would defeat it. The NEC recently agreed they want a People’s Vote on any Brexit that the Labour leadership disagree with. So the only way that Labour’s current policy might allow Brexit without a People’s Vote is if the Labour leadership come to some accord with Theresa May and her government.

The general expectation has been that a deal between May and the Labour leadership on Brexit is pretty unlikely. With many senior ministers focused on who will succeed May as Prime Minister, any deal with Labour is likely to see May’s cabinet collapse. The same should apply to the Labour side. The Tories are suffering because they are totally split and take the blame for not delivering Brexit. Why would Labour want to take joint ownership of this toxic project? Even if May and Corbyn could agree, the chances of any deal getting through parliament without a People’s Vote also attached are slim.

But May has nothing to lose, and unfortunately the reality as a result of Tuesday’s NEC decision is that Labour Remainers cannot trust Corbyn over Brexit. The argument before the 2017 election that Corbyn’s stance was just triangulation, or an attempt to shift the debate on to ground where Labour have an advantage, no longer holds because opinion has shifted to Remain, and a recent UCL study shows the switchers are predominantly Labour voters. The same study shows that for Labour, at least a fifth of their voters in every region say they are going to vote for a different party – and in every region defecting voters are overwhelming plumping for parties holding a definite Remain position. As Peter Kellner points out “Labour voters in Leave areas now back Remain by a margin of more than three to one.”

The excuses for Labour’s equivocation have therefore melted away. It looks more and more that Corbyn wants to avoid an unqualified commitment to a People’s Vote because he wants the path clear to do a Brexit deal with the government. That is obviously not in the interests of Remain voters. It is also a huge hit to his brand: the leader of principle who will give power back to Labour members. Remain voters' obvious response is to vote for one of the clear Remain parties. This is what seems to have happened in the local election today, and it will happen again in the elections for the European parliament.

There are two objections to Labour voters doing this. The first, and more powerful, is that seats in the European Parliament matter, and the more left leaning MEPs there are the better. If Corbyn is unsuccessful in doing a deal with the government, or if that agreement collapses, then this is a real cost. The second argument is that not voting Labour makes it more likely Farage will win the election. But as I have argued elsewhere, its votes not seats that matter in that election. Labour voters are going to keep forsaking their party as long as their commitment to People’s Vote is less than 100%.

Tuesday, 30 April 2019

Buses are about redistribution, productivity and a greener future

Labour’s policy for buses is a key part of reversing the impact of neoliberalism on transport since the 1980s. It is redistributive: it helps those who cannot afford to drive to work. Nearly half of all bus journeys are taken by those who have no car, and two thirds of those who travel on buses have an annual income below £25,000 per annum. But it is also a brave policy. By far the most popular mode of transport is by car (or van), and the policy will be portrayed by opponents as putting road building at risk. .

The money recently promised by Labour will mainly go to undoing another impact of austerity. Outside London fares on commercial routes are set by bus operators. Local authorities can provide subsidies for routes that are socially important but not commercially viable. Local authority-supported services outside London have halved in vehicle mileage since 2009 as austerity has squeezed local authority budgets.

But Labour also plan to change the way buses are run outside London. Bus operation was privatised by Mrs Thatcher in 1986. Yet privatisation has in most cases failed to bring the benefits of competition. Largely as a result of a long-term process of consolidation through merger and acquisition, the UK bus industry is highly concentrated with three businesses (Arriva, FirstGroup, and Stagecoach) dominating the sector. Head-to-head competition between operators is uncommon, producing what is effectively a monopoly.

The market failure in this case may be the ability of a large bus operator to stifle any competition by temporarily cutting prices or increasing frequency. That makes the routes unprofitable for a time for the large bus company, but it is also unprofitable for the new entrant. As the financial resources available to the big company are much greater, they have the ability to kill off or take over any competition.There is no regulator preventing this kind of unfair competition.

With new entry unlikely to happen because of the possibility of such threats, the large bus companies can do what every unregulated monopoly does: raise fares and reduce services. That is good for profits and dividends, but bad for passengers. The large bus companies make good profits, and the passenger gets a more expensive or less frequent service. Since 2009, for example, the average price of riding a bus has increased in real terms by over 15%, while the cost of using a car in real terms has hardly changed.

There is a vicious circle here. The cost of running a bus is largely independent of how many people use it, so if usage declines firms put prices up, which in turn discourages passengers. But one important area has seen bus use rise rather than decline, and that is London.

The system in London is rather different from the rest of the country. Contrary to common belief, Transport for London does not own its buses. What it can do that local authorities elsewhere cannot is set routes and fares, with private companies bidding to run each route. That avoids the high fares that come from monopoly, and it also makes it easy to establish a common ticketing system which is absent in places like Manchester. The system used in many European countries for their bus services is similar to London. An important advantage London has is that there is effective competition between bus companies to bid for tenders on routes, which helps keep costs down and maintains efficiency that might be lost in a completely nationalised system.

The success of London compared to most other areas of the country suggests the neoliberal ideal of a bus system free from government ‘interference’ does not work, and local control over routes and fares can provide a better service. It is a classic example of where economics, which recognises the social costs of monopoly, beats a neoliberal ideology that is often blind to the dangers of monopoly. This is why Labour also plan to encourage areas outside London to re-regulate bus services, and support the creation of municipal bus companies that are publicly run.

While a comparison between London and elsewhere shows the dangers of private monopolies charging too high a price for services, is there not a danger that if local government can set fares it will tend to set fares too low? I don’t think this is likely to be a major issue because of two other problems (what economists call externalities) with a profit-based bus service. If people use many cars rather than a single bus this increases congestion and pollution.

Anyone familiar with large towns and cities during rush hour will know what a nightmare congestion can be. Buses can reduce congestion by persuading people not to use their cars. Basic economics tells us that the congestion externality justifies subsidising bus travel or taxing cars. Exactly the same point applies to CO2 emissions and pollution. In this respect underpricing bus travel can be advantageous.

Unfortunately the experience of UK cities suggest that cheap fares alone may not be enough to prevent congestion. In addition congestion outside London may be having a serious impact on the productivity of our cities, as well as increasing pollution and CO2 emissions.

Tom Forth writes about a recent study that starts with a puzzle. In many countries large cities tend to be more productive than small cities, and economists explain this by talking about agglomeration effects. However this pattern does not seem to be true for the UK if you exclude London. Another way of putting the same point is that UK cities outside London are not as productive as they should be.

The study then looks at transport times to the centre of Birmingham, where the transport system is mainly based on buses. At peak times, when congestion is high, bus journey times into work can double on bad days, and anyone using a bus route has to plan for bad days. So if we think about the effective size of Birmingham in terms of a reasonable time to get to the centre, the city shrinks substantially.

This study shows that as long as cars are free to come into the centre those travelling on buses also suffer. Birmingham is using this study to target investment in bus lanes, which provides a partial answer. Park and ride schemes can help too. Another approach is to again follow London and introduce a congestion charge, but this will only be politically feasible if alternatives are easy, cheap, frequent and reliable.

If we look at cities in France, the big difference with UK cities is metros. Lyon has 4 lines, while Lille and Marseille have two lines each. Birmingham and Manchester have none. Last week I visited the French city of Rennes, population 215,000, that has one metro and is building another. Manchester has a good tram network similar to Lyon, but Birmingham has just one and Leeds none (compared to three in Marseille and two in Lille).

In short, cities outside London lack the transport infrastructure that can make them work productively, but also in a way that reduces CO2 emissions and other forms of pollution. One difference with France is how money is provided. In France every city larger than 100,000 people has a ten-year transport plan, with significant national investment in five-year allocations with ten-year strategies. In the UK cities are good at the strategies and visions but cannot secure funding to realise them.

Once you have well functioning cities you need to provide easy connections to nearby towns. Towns flourish when they are well connected to dynamic cities. Many will argue that this kind of local investment is money better spent than HS2, but I don’t think we should think of these as alternatives. Cities that link quickly to other cities are likely to be more productive, and France’s TGV network puts the UK to shame. The UK has underinvested in non-road transport infrastructure outside London for decades, and we need to make up for this quickly to create a more prosperous and greener future.