Revolutionary Liberalism

Nick Clegg, upon his election as Lib Dem leader, said that he wanted to break what he called the "cosy consensus" between Labour and the Tories that has impoverished Britain's political discourse. With Labour now nicking policies on welfare from the Tories, and both vying to be "tough on the work-shy", now is surely the time to offer a radical alternative.

It is not just their approach to benefits that is backwards in vision, but the whole assumption that "full employment" is the thing we should be aiming for. Such a policy actually highlights even more starkly the difference between being independently wealthy on the one hand and having to work for the basics of life on the other. In an era in which more and more of our tasks can be automated or even exported we should be aiming more to live off the financial assets that past productivity has created.

Liberals have, for a century, harboured the secrets of changing all that. Shamefully, over the past quarter of a century we have dropped every one of those secrets from our policy platform, presumably so we could compete in that "cosy consensus". We are only just on the cusp of really rediscovering the oldest of these...

Three key policies in particular would end this cycle of dependency once and for all. A bold claim for sure, but why not? We have gone through sixty years of the welfare state and are still arguing about the outcomes of welfare, health, housing and education, just as Beveridge was trying to address in his report.

The Single Tax - the one policy we are slowly re-engaging with. Though we seem to be stuck on the idea that LVT is simply an alternative tax, we need to get beyond that and understand that it goes to the very core of our relationship with the planet. Land, economic land that is, "everything in the material universe not created by the application of labour and capital" (so basically the things of nature that we all have to share between the 6bn of us born here), is the third factor of production. David Ricardo pointed out nearly two hundred years ago now that land, especially where it is a monopoly, such as with a physical location or site in the built environment or, say, a section of EM Spectrum that can only be used by one wireless operator at a time, tends to absorb the surplus value created by the labour and capital expended around it that makes it a popular location. Ground rent is created where there is more than one potential occupier that could make good, productive use of a site. It creates a massive transfer of wealth from those who don't own a popular site to those who do, through no effort on the part of the owner of that site.

As a non-land example, the UK government has auctioned off the part of the EM spectrum that carries the new WiMax wireless network signals to a single enterprise, Freedom4 for the whole of the UK. They now hold a monopoly on something that is a gift of nature that anyone else wanting to develop WiMAX networks have to use. They can therefore charge more or less what they like for licenses to others to use that part of the spectrum whilst doing precisely nothing to develop the services that would run on it.

Creating so called "free land" by capturing the value of these natural assets for the common wealth rather than having to tax economically beneficial processes like work and trade is absolutely essential to achieve equity. And the best time to do it would be the bottom of a property cycle. Hint. Hint!!

Citizen's Income - this is the real challenge to the "cosy consensus" that has emerged in the past few days on welfare. It was, I believe, Lib Dem policy up until around 1991. At the top of the recent property cycle there would have been enough land tax (on residential locations alone, setting aside what might be available through commercial, industrial, central business disrict or agricultural locations, airspace, EM spectrum or other forms of economic land) available to pay a citizen's income of about £100 per week per adult and a proportion of that for children depending on age. Further reforms, for example on seignorage - the extraordinary "profit" that creating money as debt gives to the banks that is rightfully part of the common wealth (since the money they "create" is denominated in our national currency) - would enable us to pay for the current health or education budgets if we wanted to, or to add around another £1,000 to the adult Citizen's Income.

People seem to have a problem with the idea of giving everyone an unconditional and non-withdrawable payment like a Citizen's Income because, they say, it will entrench the work-shy in their bad habits, maybe even create more of them. But let's face it, if Joseph Rowntree's lot reckons you need £13,400 to live a basic but comfortable life in the UK, less than half that is hardly going to be comfortable. And it's not meant to be comfortable. It is meant to be hard enough to persuade anyone who wants anything more than the basics of life to do something to earn some additional money. Minimum wage would be scrapped so people would be free to choose to accept a job for whatever they like - just to be able to top up their citizen's income to whatever level they want, but crucially, it would not be withdrawn when people start earning, so there is every incentive for all that nearly ten per cent of the population trapped on various benefit systems to work, even if only a little.

Yes, in the light of campaigns by the tabloids against "benefits scroungers" and the "something for nothing culture" it will be a difficult alternative to sell, but we should be prepared to do it. Think of it the other way around - if we all contribute to the value of locations by our activities around them, why should the dividend from that only go to those who can't work, say? Why not to all of us. It creates a cushion to fall back on in hard times and the ability, even if only for a short while, to be more choosy about the work we accept. No longer do we have to accept the lowest job just to survive. Instead of only the very wealthy gaining financial independence by privatising the collection of land rents, everyone gains a measure of financial security from the common wealth we all contribute to creating.

You could then say that any additional "benefits" must be provided locally, through locally raised taxes and much more accountably than at present. The "parish rate" would have to be used to provide say a basic education for those who were not earning anything more than their Citizen's Income and A&E type health services. But remember, much of the illness in society is because of the sort of poverty that both the Single Tax and the Citizen's Income would eradicate. And not having to pay several taxes on incomes - employers' and employees' NI, income and capital gains taxes - would enable more people to save more of their incomes in productive financial assets for their old age reducing the reliance on a crumbling state pensions system. And, apart from say the armed forces, the troughs at Westminster could be emptied and everyone sent home (and James Purnell would have to find a real job, or discover how life is on the dole perhaps!)

Ownership for All - this third plank of Liberal "redistributive" policy came to the fore in the middle decades of the twentieth century, this is crucial to creating more financial independence for more people. I'm not talking about the sort of free for all sale of state companies as in the eighties, which became in effect a gambling opportunity for anyone who had a few quid stashed away - "Let's have a flutter on Sid" type thing. This is about creating structures in which the workers can share in the success of their employers by becoming part owners. Much more like, say, John Lewis, or, in the seventies, the National Freight Corporation. And things have moved on even since then. New corporate forms such as limited liability partnerships enable different types of partners entitled to different proportions of the profit, not just the providers of the capital.

Again, with the Citizen's Income behind them enabling people to turn down work that does not offer optimum returns to the worker, more and more employers would have to offer the sort of package of benefits that enables ordinary workers to build up a financial stake for the future. These financial assets are fairer than putting all your capital assets in the single basket of one's home, which is not really "net wealth" in any case. More liberal than both socialist style "common ownership" and ownership solely by the capitalist, such partnerships would generate real wealth that can produce an income when you no longer want to work for whatever reason.

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These three measures are, I believe, essential to a truly economic liberal platform. They share, equitably, the common wealth created by us all, and distribute more fairly the ownership of financial assets between those who provide capital and those who provide labour to an enterprise. They would reduce the cost of the basics of life by removing tariffs, subsidies and the private collection of rents and so instantly make people better off. They would leave a vanishingly small number of people genuinely unable to fend for themselves and the "parish rate" system would enable localities to support them while the work-shy would have a hard time surviving only on their Citizen's Income and those who are currently trapped on benefits have every incentive to take up even small amounts of work to top up their Citizen's Income.

It is time for such a revolution, for the Liberal Democrats and for the country. You don't have to be the first country on the planet to do this, but whoever does will instantly become the most liberal and economically just country on the planet and a magnet for international trade seeking to avoid damaging tariffs. We have gone sixty, a hundred, even, if herbert Spencer is to be believed a hundred and fifty years tinkering with redistributive policies involving moving incomes that people have worked to achieve around and still have not achieved the "greater good". The recent press coverage of the Welfare Green Paper shows that the politics of envy and "deserving and undeserving" are still alive and well. It is time to try these different strategies instead of "more of the same" attempts to be tough on the undefined undeserving.

And the biggest prize of all - it would enable us to get rid of vast swathes of bureaucracy and get those state employees into real productive work generating real additional wealth for the country instead of pushing other peoples' around the corridors of Whitehall.

The Report of the Inter-Departmental Committee on Social Insurance and Allied Services was published on 2nd December, 1942, in the depths of World War II. The committee, under its chair, the liberal economist Sir William Beveridge, had been established by the wartime government to plan ahead for the challenges of reconstruction of the national fabric after the war.

The report identified what it called the "Five giants on the road to reconstruction: Want, Disease, Ignorance, Squalor and Idleness". Each was to be enjoined in battle by a major plank of the post-war welfare state - social security, the NHS, expanded state education, the nationwide house building schemes that would produce "homes fit for heros" and Keynesian style economic stimulus programs to maintain high employment respectively. That National Health Service Act of 1946 brought into existence, sixty years ago last week on 5th July 1948, what has become Europe's largest employer, the NHS.

The Beveridge Report indeed made much of its wartime heritage. The war was a turning point in history that deserved revolutionary measures afterwards to ensure peaceful and equitable reconstruction. The battle ahead was couched in terms of a "war on want" (and the others of the "Five Giants"). But as my former university chancellor (as of Friday), news anchor Jon Snow, often says, you cannot win a "war on a noun".

So how has the NHS, and the other key planks of the welfare state mentioned, fared in this "war"? It seems obvious that we have not, sixty years on, beaten any of those giants:

Want: we have a society in which the least well off are dependent on the state. If you believe such things matter, and I do, still a fifth of children grow up in relative poverty and the gap between the wealthiest and poorest is larger than ever. Not only that, but as as with "idleness" many are actually trapped in that dependency, facing the highest penalties if they actually manage to find themselves work that might remove them from that dependency in the form of punitive benefits withdrawals rates. None of the myriad benefits in the system are sufficient on their own to sustain life (particularly the pension, now in its hundredth year), so people are often on multiple benefit regimes.

Disease: whilst quite obviously the range of ailments that are now routinely cured or treated is a huge step on from 1948, there is still a six month waiting list for almost any kind of surgery, hundreds of people denied drugs even their own NHS doctors believe may help them, and the whole headless structure is running around trying to meet centrally set targets, which are fundamentally opposed to the founding principles of the NHS - that it should be responsive to particular local needs. In parts of Glasgow East constituency male life expectancy is lower than in some developing countries for example, which, whether it is an improvement on the state of play in 1948 or not is a pretty terrible indictment.

Ignorance: the state education system has become more comprehensive and more centralized. Students are of course now paying for tuition fees in tertiary education, and we see a constant stream of stories from universities and business leaders saying that many people leaving school are functionally illiterate. The most well off are still using private education and the least well off, as Nick Clegg has constantly complained about, seem condemned to inner city sink schools often with little aspiration planted in their heads.

Squalor: this one was primarily about housing. Sure, we had a post-war building boom but now that's looking quite hollow. In fifty years, the UK's housing has become smaller; the only developed nation on the planet where that is the case - elsewhere increased affluence has seen larger, more comfortable homes. If you are stuck on a sink estate, you probably have as much chance as in 1948 of escaping it. Even the right to buy has often failed to give people who were persuaded that buying their fifties built prefabricated type semi (such as the Orlits design currently being demolished all over Oxford) a meaningful asset. And we are in a situation where those who aspire to ownership currently have little hope of being able to afford it.

...and finally Idleness: it is very difficult for work to help the poorest when getting a job can mean lots of hassles with your various benefits and a punitive regime of clawing back those benefits such that you are often effectively earning very little indeed for all the effort of getting a job in the first place and going out to work once you have. And actually I would argue that we want more "idleness". I realize that in the report "idleness" is something either down to the laziness of the individual, or more likely a state enforced on one by lack of work opportunities in the economy. However as we get closer to the ideal of having many menial jobs and tasks done for us by machines, the idea that the only way of gaining purchasing power with which to participate in the complicated world economy is through work should be rethought in any case. It is nothing to crow about that people still have to remain wage slaves in order to achieve some measure of financial security.

So, on a purely cursory glance, these five "wars" are not going well sixty years on. Some battles have been won, and clearly some things are better in so many ways than it would have been at the end of World War II. But some of the problems are as intractable as ever, others are almost victims of their own successes; for example some of the problems of the NHS of course stem from them now being able to treat far more problems than previously and so creating more demand for itself. But I'd go one step further, and say that the weapons deployed in these various wars have in fact entrenched dependency, reduced choice, stifled innovation and competition. Not only that, but they are hugely expensive, now between them consuming not far off half of all our national income and may be suffering from the law of diminishing returns.

It is time we realized that the approach is itself wrong. That, as Einstein said, "We can't solve problems by using the same kind of thinking we used when we created them".

...so, what can we do ...?

This posting has been a very long time in the making. In fact, as is usual, I've been more than normally ponderous about our political system since the local elections and it has prevented me doing anything else. I wanted to be careful about what I say, lest I be seen simply as having sour grapes at having lost - but I hope you will see that far from it, I am hopeful of achieving more, and for others moreover, outside the formal government structure than inside it.

I have fallen out of love with democracy; at least the corrupt, broken, power-hungry, centralizing, suffocating, nanny state, infantilizing political game we seem to have wandered into at some point.

Whether it's Labour's desperation to beat me that made them put out a leaflet that can only have been intended to damage my personal standing and reputation negligible though it may be already, the various tit-for-tat accusations that ran right through the Crewe by-election and the London mayoral elections, Westminster's divorce from the rest of the country as regards how much they get to spend of our money feathering their personal nests and how much we should know about it, it stinks.

I was watching again the "Open Minds" interview with Milton Friedman the other day and when it was put to him, as in J S Mill's formulation, that democratic government is the way in which we put good, ungreedy and unselfish people in charge to prevent bad, greedy and selfish people from taking over his response was simple: "government is an institution whereby the people with the greatest drive to get power over their fellow men get into the position of controlling them".

And who can argue, in the system we now have. The prize is enormous. Whoever lies his or her way to number 10 has the prospect of controlling nearly half of our entire national income. The mechanism of getting the top jobs is a sham - none of them in my opinion are competent to claim more wisdom than sixty million others of us that makes them able to take such a responsibility and they're only ever elected by a few thousand of those sixty million. Even in local government, tied up as it may be in red tape and Whitehall edicts, still the unscrupulous seem to make it to the top - look at Oxford Labour's own little lotacracy.

Tony Blair seemed to think he was virtually messianic, and now he believes apparently that he can solve all the world's problems now that he is no longer encumbered with such a small salary as the UK Prime Minister and the petty problems of Britain. But it doesn't matter who it is, Blair may have brought it to a head but neither Brown, Cameron, Clegg, Blair or whoever else may come next, has the capacity or competence to decide so much for so many.

And I don't think that I can suffer under this system much longer. If I was a young Muslim I'd probably be rounded up and accused of being "radicalised". Well I am radicalised. Radicalised and angry. It's a good job they've imposed a ban on unauthorized demonstrations outside of parliament, else I would hire a bunch of JCBs and lead a crowd to dismantle the Palace of Westminster stone by stone and cast its occupants into the river and hope they all wash up somewhere halfway up the Amazon where they would not be found for half a millennium - well actually I probably wouldn't, because I don't have that sort of courage, but I curse Guy Fawkes for having failed his opportunity!

In the local elections, nearly 70% of people did not vote. Even in generals, nearly 40% didn't vote last time. The Libertarian Party believes that this is a vast pool of voters who would readily switch to their, and my, image of a new Britain, with renewed freedoms and less state intervention. But I'm a Liberal, if not especially a Democrat, and my party is one of the three larger parties the LPUK blames for the lack of imagination in political discourse that has created this situation. And indeed, our regular flirtations with vaguely socialist redistribution policies rather than liberal level playing field policies, do seem to make us bed-pals with the two conservative parties trying to maintain their duopoly. Do I have to make that leap into the unknown of the Libertarian Party in order to have some hope for change? Or can I pursue change, with a reasonable hope of getting it, through a party so deeply embedded in the political "game" as the Lib Dems?

In 1745 David Hume suggested that one day we may come to the conclusion that our current system of government needs complete overhaul. I for one have reached that point. And David Hume's prescription in the "Idea of the Perfect Commonwealth" seems to me to be vastly superior to the decrepit institutions and structures we currently have to endure. I'm not sure any of the current setup is salvageable. That current setup is coercive, corrupt and centralized. It is now clear, more than ever before, as Rousseau said, "The English think they are free. They are free only during the election of members of parliament."

ID cards, the surveillance state, the lost war on drugs, the uneven playing field allowing monopolization and exploitation, drinking on the tube, detention without charge, foreign wars in support of oil hungry allies, petty bureaucrats spying on our every move, raiding our bins, taxing us through the nose. Is this what J S Mill was suggesting? Our parliamentary system was created in times when communications were difficult. Yet even then they took less power to themselves than now, when we are all a phone call or internet connection away from forging links with millions of other individuals on this planet.

The time has come for mutualism instead of representative government. People getting together either locally or in geographically dispersed interest groups focussing on particular problems in those communities. Refusing to accept that all the answers can come from a clunking fist in London or his puppets in the Town Hall.

But how do we do that, without turning spin into revolution?

As many of you will know, tomorrow at noon is the deadline for conference motions for autumn Federal conference. I've been a bit behind the game recently, but would like to submit the following motion. If you are a conference rep and feel you can support this (I'll accept friendly amendments too - via the comments if you like) could I ask you to let me have your details (email address, name, membership number and local constituency) as soon as possible. I need nine more before tomorrow - it is being circulated in other forums as well though.

Unfinished business: the Liberal reform agenda post-1909

Conference celebrates:

1. the recent hundredth anniversary of the development of the old age pension
2. the recent sixtieth anniversary of the birth of the National Health Service

which were the inspiration of Liberal thinkers, economists and politicians, even if not always implemented by Liberal governments.

Conference notes that:

1. in the next few months we will be celebrating the hundredth anniversary of Lloyd-George's 1909 "People's Budget"
2. in the century since then the dominant ideological and political battles have been between socialism and corporate welfarism
3. Liberals have throughout promoted distinctive and superior alternatives such as:
   i. shifting the burden of taxation away from economically productive and beneficial processes such as work and trade and onto the unearned advantage gained through monopoly, externalities and the exploitation of finite natural resources, including land
   Ii. the post-war "ownership for all" policies which emphasized that it was through a more equitable distribution amongst workers of the capital assets they help to create that the problems of poverty are most likely to be defeated
4. many of the problems that Asquith, Lloyd-George, Beveridge and others sought to address appear to be as intractable as ever
5. successive Labour and Conservative governments, through their respective socialist and class warfare or corporate welfare and protectionist policies, have signally failed to address the root causes of inequity and deprivation at home or abroad so begun by our Liberal forebears a century ago.

Conference therefore:

1. reaffirms the superiority of the Liberal tradition of political economy in offering uniquely sustainable mechanisms to address the ongoing root causes of poverty and deprivation whilst allowing the maximum freedom for individuals to pursue their ambitions and achieve their fullest potential on a level playing field.
2. calls on Liberal Democrat policy makers to rediscover if necessary and embrace the still very relevant ideas and policies of that Liberal economic tradition and to work towards the completion of the "work in progress" begun by the Asquith's pioneering government a century ago frustrated by the vested interests that continue hold considerable influence today to the detriment of the majority.

Conference is coming, and I'll have an opportunity on Saturday evening to share a platform with Vince Cable and James Graham at the ALTER fringe event, entitled "Economics as if People Mattered" (Saturday, 18:30, Arena Hall 2n, for anyone interested - note the change of venue from the conference program). My task is to set out some more details of the book of essays we propose to publish in time for the Autumn Conference, entitled "The Liberal Alternative". And since I shall also be seeing Vince tomorrow evening at the Oxford East constituency dinner, I thought I ought to prepare what I am going to say on Saturday so I can let him have a copy tomorrow night. So here goes with a first draft...

Tough on poverty, tough on the causes of poverty!

By the next time most of us get together again at Bournemouth in September we will have celebrated the sixtieth anniversary of the National Health Service and the centenary of the legislation that gave us the first Old Age Pension. Both of course were the triumph of political economists steeped in a tradition of liberal economics and concern for the least well off in society.

So we've decided that for our big project for the year, and to prepare for next year's centenary of David Lloyd-George's great 1909 People's Budget, we're going to publish a book of essays investigating some of the problems they faced both at the turn of the last century and in the widespread domestic poverty after World War Two that Beveridge sought to address through his "war on the five wants".

We want to show that despite throwing ever increasing resources at tackling the unequal outcomes of our economic system, successive socialist and conservative governments have completely failed to address the causes of inequality that Lloyd-George, drawing on that long tradition started to attempt in that budget.

And we want to persuade you, and the party more widely, that that tradition, never really given the chance to show its potential since then - a whole century ago, is just as relevant today. That it remains a precondition to creating an economically and therefore socially equitable society.

Prevention, in economics as much as in health, is always better than trying to cure or treat the symptoms once a malaise has taken hold. For as the cures become ever more expensive, and consume ever more of our productivity, so they also become steadily less liberal.

We are more, not less, dependent on the decisions of politicians where they deliver monopolistic public services. And the more of our labour they appropriate to pay for those services the less we are able to make our own choices anyway.

Talking of "choice", I know that some of us seem instinctively to shy away from choice, because we feel that it excludes the least well off. But I'll bet we all deep down believe that choice, unlimited choice, would be great if only we could ensure everyone was able to afford to participate in such a market place.

Well that's what we want to show you can happen when we address the central inequities of the economic system we have inherited. Taxing income and productive investment slows the creation of wealth for all of us. Failing properly to tax land allows those who happen to own or have inherited the best locations to absorb much of the value of our labour and productive investment, and especially the labour of the poorest. The wealthiest grow fabulously rich off the back of the labourer through land. And even, in this era of widespread home ownership, as it's called, many benefit unfairly, while paying, through their other taxes, for the attempts to relieve the poverty this system sustains!

If we took that tax shift seriously, our economy could be as much as a third bigger, and distribute that extra wealth more equitably according to what we put into it - our work and our savings. We would be better able to compete with the newly emerging economies of the world without retreating into hiding behind protectionism. We would be able to allow people more choice over their lives and the services that sustain them, whether that be health and education, housing, or basic needs like food.

I want to end with a brief quote from Herbert Spencer, who, writing in 1851 said:

"To mitigate distress appearing needful for the production of the “greatest happiness,” the English people have sanctioned upwards of one hundred acts in Parliament having this end in view, each of them arising out of the failure or incompleteness of previous legislation. Men are nevertheless still discontented with the Poor Laws, and we are seemingly as far as ever from their satisfactory settlement."

I suggest that 150 years later, we are still tinkering with law