The Failure Of Austerity - A Lewisham Perspective

A few people have asked me about the speech I made during the debate on the setting of Lewisham Council’s Budget at last week’s Council Meeting. I tend not to write down my speeches so I give below my best recollection of the main points I made.

Prior to the election in 2010, Council Officers were working on three potential cuts scenarios for the 2010-14 Council administration, depending on who won that Election. The optimistic scenario involved £20m worth of savings, the middle was £40m and the pessimistic, based on a Conservative victory with its pledge to eliminate the deficit by 2015, was £60m worth of cuts. However, as was known since the 1930s, Austerity in the public services during a recession when the private sector is on its knees is self-defeating, as one man's spending is another man's income. And so it has proved to be under this government. If you want proof that Austerity has failed, look at the Council's Budget. Because the Tory-led government deficit reduction plan has failed, George Osborne has had to increase public spending cuts year after year. For Lewisham, this has meant instead of making £60m worth of cuts in 2010/15, we have had to find £93m worth. For 2015/16 we need to find a further £40m. Then, between 2016/18 we need to find another £45m. That's £178m in total, or almost three times the original amount. This is more than we spend on Adults and Children's Social Services combined. Yet despite this lamentable failure of Tory economic policy, we in the Labour Party have been made to feel ashamed of our own record of managing the economy when we were in office. We now believe the myth that the deficit was caused by our profligate spending. So, in this General Election campaign, we seem almost embarrassed to ask the electorate to vote for us. We approach voters apologetically, asking them to give us their votes because we can be trusted more on the NHS than the Tories and if they are willing to turn a blind eye to our record on the economy, we will throw in the abolition of the bedroom tax as a bonus. Rather than pouring money down the drain when we were in power, we invested wisely in our hospitals, schools and other public services, putting right years of neglect under the Tories. And it comes as a surprise to many, even in our own party, that debt as a percentage of GDP was lower in 2008 than it was in 1997. Debt was lower under Labour going into the Great Recession than it was when the Tories left office. Yet many will recall how leading Tories in the early years of the last Labour administration claimed credit for Labour's early economic achievements, claiming that they had left Labour a wondrous economic legacy. The fact is that the deficit was created not by Labour's unfunded spending plans, but by the collapse in tax receipts that followed the Great Recession, an economic disaster that was conceived, designed and built by the private sector. So let us not approach the electorate hoping that they will forgive us our past sins and take pity on us. Instead, let us fight this election with confidence, proud of our record on the economy. Let us tell the voters that a Labour government will not just build a fairer, kinder Britain, but a Britain that is dynamic and prosperous as well.

Will Austerity Cost Labour Dear?

It appears that the rise of the SNP in Scotland is going to cost Labour seats at the forthcoming General Election. Scottish voters don’t want Independence from the rest of the UK, but they appear to want to be governed by a party dedicated to bringing this about and to send its members to represent them in the Westminster Parliament. Maybe some are doing this out of guilt because they just couldn’t bring themselves to vote Yes in the referendum, even though a sense of romantic nationalism made them feel that they should have done so. If former Scottish Labour voters planned to vote SNP in May out of a combination of nationalism and guilt, they now have an added motivation. A few weeks ago SNP leader Nicola Sturgeon attacked Westminster’s ‘morally unjustifiable’ Austerity policy. Her intention was to focus the spotlight on Labour for not being anti-Austerity enough, arguing that with a hung Parliament being the most likely outcome of the Election, a strong SNP presence in Westminster was the only thing that would force Labour to break up the ‘cosy consensus’ around Austerity that existed amongst the major parties. With the SNP now campaigning on an anti-Austerity ticket, one wonders what Jim Murphy, Labour’s leader in Scotland, can do to create a Unique Selling Point for the party north of the border.

But the SNP is not the only anti-Austerity party causing problems for Labour. Although the SNP is threatening 20 Labour seats in Scotland, south of the border it’s the Greens that are the headache. A surge of support for the Green Party, Natalie Bennett’s media meltdown notwithstanding, amongst disaffected former Lib Dem voters and other left leaning people, especially the young, students and first time voters, could prevent a Labour victory in 22 seats.

Why has the Labour Party got itself into this position? Ed Balls' current pronouncements on Labour Economic Policy stand in stark contrast to his 2010 Bloomberg Speech, a speech to which the economist David Blanchflower tweeted the link a few weeks ago, hailing it as one of the most sensible things anyone has said about the Great Recession. Anyone who read that speech, entitled ‘This is an alternative’, (here, still on his own website, or here if you fancy watching the man in person delivering it on YouTube) could reasonably be forgiven for expecting a more anti-Austerity policy from Labour in Opposition when Balls became Shadow Chancellor.

Many independent commentators describe the plans of political parties to implement more cuts in the next Parliament as unfeasible. My favourite description is the one used by the blogger @FlipChartRick who says that those who believe that these proposed cuts are deliverable are living in 'LaLa Land'. I am sure this will prove to be so.

The Labour Party has made much of the fact that the Coalition has made sure that the cuts to Local Government fall disproportionately on the neediest communities, such that a list of those Councils experiencing the worst cuts reads like a roll call of the most deprived places in the country. These are, of course, Labour areas. Those of us who are elected Labour politicians tasked with delivering local services would like to know, having raised this issue, what a future Labour Government plans to do to address it?

It seems that few people in national politics know very much about Local Government finance, DCLG included. Few people understand that we are responsible for delivering the second pillar of our national care service, social services. The UK is the only country in the world where this is the case. In Lewisham, in common with many other authorities, we spend half our budget on adults' and children's social services.

In a recently published report entitled Financial Sustainability of Local Authorities, http://www.nao.org.uk/wp-content/uploads/2013/03/Local-Authority-Full-Report.pdf the NAO, with mild understatement, essentially concludes that the DCLG don’t know enough about the finances of individual Local Authorities to understand their capacity for implementing further cuts. They highlight the consequent risk of what they euphemistically refer to as 'service pressures'

The House of Commons Committee of Public Accounts goes further. In their recent report of the same name, Financial Sustainability of Local Authorities 2014, http://www.parliament.uk/business/committees/committees-a-z/commons-select/public-accounts-committee/news/report-financial-sustainability-of-local-authorities/, they say,

'Furthermore, if funding reductions were to continue following the next spending review, we question whether the Department would be in a position to provide assurance that all local authorities could maintain the full range of their statutory services.'

Lewisham Council’s Chief Executive, Barry Quirk, has an insightful take on this here, http://www.lgcplus.com/Journals/2015/01/16/y/d/s/not-even-wrong.pdf

In short, if the next government does not call a halt to the further Austerity planned for Local Government, at least in the short term, Adult and Children's Social Care Services will fall over. Pretty much everyone, it seems, working in this sector, officers and politicians alike, understand this. This will mean that elderly people will not receive the basic care they need and will not be able to provide for themselves and that children will not get the Child Protection Plans they need. I think that every Authority in the country is like a car heading towards a cliff edge. We are all desperately trying to slow down but know we can't stop. All we can hope for is that we are not the first one to go over the edge. Yet we are in the moral dilemma of wishing that one of our neighbours goes over the edge soon because this is the only way we believe that common sense will prevail and the cuts will be reversed.

Est-ce-que je suis Charlie?

In the first few days after the terrible murders at the Paris offices of the satirical magazine Charlie Hebdo, there seemed to be pressure for everyone who is against Islamic fundamentalism to show this by declaring, 'Je Suis Charlie' and calling for certain of its cartoons to be reprinted. A failure to respond in this way was seen as a failure to stand up for free speech and evidence of surrendering to terrorism. As time has gone on, thankfully, responses have become more thoughtful and measured. I say, 'thankfully' because I cannot have been the only person who felt uncomfortable with the idea that unless you declared your unequivocal support for people's right to be gratuitously offensive, then you were not standing up for freedom. Worse, such an unwillingness to stand up and be counted didn't seem to be regarded just as a failure of nerve, but as playing into the terrorists' hands. It appeared to demonstrate a lack of push-back that surrendered ground to the Jihadists in their fight to establish a Caliphate in Europe.

So I was very pleased to hear a discussion of this issue on last week's edition of The Media Show on BBC Radio 4 hosted by Steve Hewlett. The programme began with Hewlett asking various representatives of a number of news organisations if they had published the controversial Hebdo cartoons or not and on what they had based their decision. I was interested by a point made by Emma Tucker, Deputy Editor of The Times, who said that the tradition of satire in France was very different from the tradition in the UK. Here, cartoon satire tended to be more about teasing and being amusing, whereas in France it is much more brutal. She went on to say that ordinarily The Times would not print the Charlie Hebdo cartoons, or anything like them at any time. The implication was that her paper wasn't in the business of going out of its way to be deliberately offensive just for the sake of it.

The call for the republication of the cartoons seemed to me to be a rather fundamentalist response in itself. What type of republication would be sufficient to prove that you were not giving in to terrorism? Should it just be UK newspapers and magazines? Some people have tweeted the images and some have used them as their profile photos, thereby making us see them if we wish to continue to follow them and compelling us to disseminate them if we wish to retweet something on a different subject that they are bringing to our attention. Why stop here? Shouldn't the state show its support for freedom? Why doesn't it fund a billboard campaign to publish the cartoons nationwide? Should every local authority in the country republish them on the side of their refuse lorries to advertise their commitment to ...er... what exactly?

There was another interesting discussion on another BBC Radio 4 programme last week. In Unreliable Evidence, Clive Anderson was talking to a number of distinguished law experts about the so-called Good Samaritan Law. In some countries, the citizen is compelled in law to give assistance if he sees someone in trouble. In others, like the UK, there is no such requirement and the citizen is permitted, like the priest and the Levite in Jesus's parable, to walk by on the other side of the road, ignoring the dying man, and face no prosecution. When asked if this situation was acceptable in today's Britain, the judge on the panel, Lord Hoffmann, drew the important distinction between what the law allows and what one's conscience permits. The fact that the law allows a person to ignore another person's dire need of help, does not prevent the moral citizen from going to his aid. He is not compelled by the law to refuse to help.

I was interested that, even today, the law looks to the Bible for understanding and explanation. As a lapsed Evangelical Christian and the son of a preacher man, I often find myself going back to the Bible to find guidance for dealing with vexed questions. In 1 Corinthians 10 v. 23, the Corinthian Christians say all things are lawful, to which the Apostle Paul responds, yes but not all things are helpful and not all things are constructive. The moral citizen cannot content themselves with what is allowable under the law because they are called to meet a higher standard. It must be the memory of this teaching that makes me feel uneasy when I hear people defending their freedom to act in a certain way. 'So far, so good', I think, 'but not really far enough'.

But what is 'far enough'? St. Paul helps us out in the very next verse where he says, 'Let no-one seek his own good, but the good of his neighbour'. Our objective should be to seek the public good. But our obligation does not end there. Writing to the Christians in Rome, who were a persecuted minority at the time, Paul encourages them to, 'If possible, so far as it depends on you, live peaceably with all' (Rom. 12 v. 18). So if you want to live in peace with your neighbours, pursue it by having regard to what's in their best interests and avoid giving any unnecessary offence.

A multicultural society will be in a very precarious place if the act of giving offence ceases to be just something that is permitted under the law and becomes the only credible evidence that you believe in 'freedom'.

Council Tax Reform: A Mansion Tax Wouldn't Go Far Enough

In recent years, the idea of having a 'Mansion' tax has gained considerable traction with both the Lib Dems and then the Labour Party picking it up. This has been criticised by some because it won't raise very much money and because it will have to be paid by elderly, impoverished ladies living in modest houses who have the great misfortune to live in the more expensive parts of London. Nine years ago, The Public Accounts Committee of Lewisham Council proposed reforming Council Tax in ways that would make it much more progressive and potentially raise more money than would the introduction of a simple 'Mansion' tax. It produced a report that formed the basis of its submission to the Lyons Inquiry into Local Government Funding. The report makes interesting reading, given the pressures on Local Government finances we are experiencing today. Below is a section from its submission which summarises its main recommendations:

The Committee supports the New Policy Institute (NPI) version reforming the council tax which includes changing the number of multipliers of the bands particularly splitting bands A and H, which are currently very wide, and sub dividing band G so that the progressivity of the tax could be improved. We believe that this system will be fairer for low income families as well as pensioners as they are, on average, more likely to pay a greater proportion of their income in council tax than average and high income families. 

We also support the NPI’s proposal for sub national variation (regional banding) so as to take into account the house price divergence throughout the country. Also this would prevent a redistribution of central government resources from areas with relatively high house prices to regions with low house prices. Regional banding would work well in this system, however, we are concerned about the ‘cliff edges’ debate which was discussed at the Balance of Funding Review where taxpayers in a neighbouring region are paying different council tax levels for houses of the same value. This problem could arise if the neighbouring borough to Lewisham, Bromley, which is an outer London borough compared to our status being an inner London one could potentially pay different levels of taxation despite having similar house prices. We also believe that revaluation should be more frequent (10 yearly) as to give integrity to the system. 

An important aspect that the Committee urge the enquiry to look at is the whole scale reform of the council tax benefit system. The stigma of take up must be removed. This can be done by turning it into a credit, as to appeal to pensioners. The complexity of filling the application is another reason why people are put off it.

It’s a shame that the debate on the whole issue of the iniquitous regressiveness of the current system of the Council Tax has been driven up the cul de sac of a Mansion Tax proposal. The calls for a Mansion Tax, although well intentioned, have framed the current debate in terms of those who want to protect vulnerable old people in expensive houses paying more tax and those who want to pursue the class war by bashing millionaires. We need to broaden out the discussion to explore ways of making the Council Tax more progressive and fairer. Creating more bands at both the top and bottom would seem to be an easy way of doing this, as it would not necessitate a wholesale national revaluation of properties. It is disappointing that in the nine years or so since this report was published, the issue of root and branch reform of Council Tax has disappeared into the long grass. Sadly, I wonder whether it will ever re-emerge.

Immigration. A Free Market Response At Last.

It is well known that those on the right argue that markets should be allowed to work as freely as possible, because free markets solutions maximise profits and production, minimise prices and therefore generate the most benefit to society. What I don’t understand is why those who advocate most vociferously for the free movement of capital across national boundaries can also be those who are most against the free movement of people across national borders, or immigration, as it is more pejoratively described. Surely, if you believe markets work, then they work. What is sauce for the goose must be sauce for the gander. So three cheers for the free market think tank, the Adam Smith Institute, which put up two pro-immigration posts last week entitled, Almost Everything You Need To Know About How Immigrants Affect Britain’s Public Finances and 9 Reasons To Want A Lot More Immigration. They point out some inconvenient truths for the anti-immigration lobby, some of which have been picked up in the mainstream press. Chief amongst them is that immigrants pay more in taxes than they cost in benefits, unlike UK nationals and that if we did not have them the Government deficit would be much higher. They also point out that they do not steal native jobs, they create them, countering this idea that the economy is a ring-fenced pie where there is only a fixed number of jobs to go around and some can only have more if someone else has less. Emphasising this point, immigrants tend to be much more entrepreneurial than the natives. Immigration is also much more effective than overseas state aid, as foreign workers send three times as much money home to their families as the developed world gives in aid, and this money is going straight into the pockets of the people that really need it. The most challenging reason given for wanting more immigration is that if we had a free market for labour, allowing everyone to go where ever they wanted for work, then global GDP would probably more than double.

Although all of this may come as a surprise to the general public, this will not be the case for many business people. In my small business we employ two immigrants, both of whom are brilliant and have been crucial to us being able to expand and develop over the last few years. One is American, has a Masters Degree and sadly has to leave the UK because her Visa is running out. Replacing her is going to be extremely difficult. The other is Ukrainian. She speaks three languages and, as one of my colleagues said to her the other day, ‘you are the most qualified of all of us in this office’. She can stay in the UK because her husband is Romanian and, funnily enough, he is not a beggar, Big Issue seller or criminal, but a Ph.D. student and lecturer at a prestigious London university. This employee has helped transform our business by managing our website redesign and engagement with social media. We would be lost without her and she has a crucial role in our future plans for taking the business forward. In short, immigrants have helped us generate more revenue which means earning more money for our artists, and paying more tax to the government.

I imagine that the parents of my two immigrant colleagues are delighted that their children have been able to go to another country, to pursue their life adventure and that they have found jobs in places where they are welcomed and appreciated for who they are and what they can do. As the parent of two teenage boys, I find myself feeling a great affinity with these strangers. If I am honest, I want my sons to have the opportunity to go anywhere they want in the world to study, work and make a life for them and their families. This is doubly so now that getting a university degree in the UK means taking on a vast debt and the chance of buying a home of their own can only be a slightly more likely than the odds of winning the lottery. Those of us who want sauce for our little goslings have a moral duty to argue that others get it too. Thanks to the Adam Smith Institute, and an increasing number of other researchers and informed commentators it has to be said, this should be a much easier task, as we are shown the truth that open markets for people deliver benefits just like open markets for goods and services.

London - Ukip's Waterloo.

Ukip's victory in the Clacton by-election has made it clear, if it wasn't before, that our membership of the EU and immigration are going to be key issues in the run up to next year's General Election. This may well be a good thing. Many commentators have bemoaned the fact that Nigel Farage and his party have so far had a rather easy ride from the media, being portrayed more as a particularly amusing British eccentricity, rather than a serious political party capable of governing the country. Consequently, they don't seem to have been subject to the same critical scrutiny as other parties. Post Clacton, I have noticed more articles appearing that set out the positive case for EU membership and immigration. Perhaps I just haven't been paying attention, or maybe now more people really do see Ukip as a threat and want to do what they can to stop them in their tracks. If there is a new-found willingness to take on Ukip, I hope this extends to an enquiry into what their stance is on issues other than Europe and foreigners speaking foreign languages on trains, rather like my family and I did on a recent trip to Barcelona, at least that is how the other Spanish travellers would have seen it. What is there view on Austerity, dealing with the Budget Deficit and the NHS funding black hole, for example? The Deficit is running at around £100bn a year and growing and the NHS is facing a funding shortfall of around £30bn by 2021, according to figures released this week. By contrast the UK's net contribution to the EU budget is about £6bn a year. It's not clear how withdrawal from Europe and stopping immigration will deal with these rather pressing matters, particularly as immigrant workers seem to be keeping the NHS going. Yet Ukip spokespeople don't get asked these questions in interviews. If Ukip think they are a serious political party capable of running the country, rather than just another special interest pressure group, it would be nice if the media started treating them as such.

But it would appear that Ukip's anti-immigration message is gaining traction everywhere. Except, that is, in the area that has arguably experienced the most immigration of any place in the UK. Who can forget the rather sulky, petulant reaction of former Tory councillor Suzanne Evans who defected to Ukip and then lost her seat in the recent local government elections. Whilst polling around 25% in the local elections nationally, Ukip only managed 7% in London. She put her new party's lack of success down to London's 'cultural elite', who were young and 'more media savvy and educated' than the rest of the country and therefore couldn't understand the heartache felt by the rest of the country.

I think many of us Londoners found this explanation rather bemusing. Anyone who has lived in London for any length of time will know that there is more to this world city than The City of London, the Westminster Village and the West End. Lewisham is just as much a part of London as Mayfair, and you don't have to go far from the richer parts to see that London is still very much a working class town. I doubt very much if anyone considering the whereabouts of the capital's metropolitan elite would begin their search in Catford, New Cross or Deptford. A far more plausible explanation for London's rejection of Ukip is the fact that London is a multiracial town at peace with itself and the fact that it has been so for a long time, especially in its poorer areas. The schools I went to in Lewisham in the 1970s and into the early 1980s were ethnically mixed. They had a large number of West Indian pupils, mainly Jamaican, with a sprinkling of Asians and Cypriots. The Nigerians starting arriving towards the end of my school days. Later generations of Lewisham school children could talk about the arrival of the Vietnamese, the Somalis and others from the world's trouble spots. My children have grown up during the time of the arrival of the Eastern Europeans.

Generations of white Londoners have grown up living amongst and going to school with other Londoners who were different to them, yet who were in many ways exactly the same. They have eaten with them, drunk with them, played football with them, chatted up their sisters and fancied their brothers. They have taken the mick out of them and been the butt of their jokes. For many ordinary Londoners, a negative attitude towards immigration would be a denial of their own history and experience. Now I am not suggesting that ordinary Londoners are living their lives trapped in some kind of perpetual performance of that song and dance number, 'We're all on this together', from High School Musical. Rather, I think that their everyday mundane experience of life has left them inured to the notion that immigrants, and by implication the EU, are the nation's bogeymen and to the idea that we would be a lot better off if we could return to a Britain that racially looked like it did in the 1950s.

PS Can I be the only person who thinks of Toad of Toad Hall when he sees Nigel Farage?

Can Public Services Be Sustained In London If House Prices Continue To Rise?

As far as the sustainability of public services in London is concerned, there seems to be a number of non budgetary factors at work, many of which are related to the affordability of housing, or rather the lack of it. In Lewisham we have started to notice that schools are finding it difficult to recruit Head Teachers. I think this has been a problem in the past across the country, but this was due to teachers not wanting to take on the extra responsibility and stress. Now it seems that part of the issue is that suitable candidates are not applying because they know that they couldn't afford to move here if they were successful. My sense is that this has been an issue for recruitment to senior posts in public services in London for some time.

But house prices are not just preventing good people from coming to London to further their careers, they are also pushing people out. People are leaving London because they can't afford to buy a house here, even though they are in good jobs with good career prospectives. Even those who own their own homes are having to move away because they can not afford to trade up and buy a property big enough to raise a family. People are willing to endure a 90 minute to two hour commute each way, in order in keep their job in London, but also have a modest family home, while their partners give up their London job and look for something local. Others leave the London job market completely. The other force pushing people out is the desire of those lucky enough to have a family home, to cash in on what they consider is a housing market bubble. They have seen the price differential between London properties and those elsewhere expand so far that the trading opportunity is just too good to pass up. I have seen both forces at work in Lewisham.

The good thing about churn at the top of the job market is that it provides opportunities for those lower down to move up, and the more the churn, the more opportunities there are. During the time I visited the primary school that my sons went to in Lewisham, I was struck by how many very young teachers there were by the time the youngest left, compared to when the eldest started. In the couple of school visits I have made since becoming Lewisham's Cabinet Member for Children & Young People, I noticed how many young teachers there were. I don't think this is just a false perception brought on by my own ageing! I know from the people in their twenties who I work with at Hales Gallery, that these young workers are Generation Rent. They tend to be living in rented accommodation with their partners and/or friends and they are childless. I don't know the data on the age profile of employees in public services in London and how it may have changed over the years. However, I suspect that there are an awful lot of Generation Rent employed in our schools, our social services and the NHS. What will happen when this cohort decide to have children? Will we see a slow motion, mass exodus of young doctors, nurses, social workers and teachers from the Capital in the coming years? Who will care for and teach those who remain?

I, of course, am particularly worried about the effect that our dysfunctional housing market is going to have on our schools in the coming years, especially as the situation is being exacerbated by increasing numbers of children needing places and budget reductions. However, I think the situation in adult care may be much worse. We know that the number of elderly people is going to increase in the coming years, and their needs will also increase as they live longer. Thankfully, they have been spared Iain Duncan Smith's welfare reforms so they are not being forced to move to Chatham or Broadstairs to escape the bedroom tax. So in London we are going to have growing demands on adult health and social care that will have to be met by a NHS whose funding was effectively capped at 2010 levels of need, and the social services departments of local councils whose budgets are been drastically cut. And all this will be happening at the time of a possible recruitment crisis.

As I say, I don't have all the data and am just extrapolating and speculating. However, I think the bottom line is that you have to question the viability of a City where a modest family home is out of the price range of young professional people working in the public sector.