History shows that cutting taxes for the wealthy does NOT produce growth

There has been much spinning lately from the Conservative party and the media that the 50% rate is harmful for the economy. The argument goes that getting rid of this – and bringing in a 10% tax cut for those on incomes of over £150,000 – will somehow contribute towards growth.

Historians often accuse politicians of ignoring the lessons of history – and this is another example.

In 1979, the first budget of the Thatcher government saw the top rate reduced from 83% down to 60%. In 1988, the top rate was reduced further to 40%. Now if we are to believe what we are told, these reductions should have brought in a period of growth and prosperity. But, on the contrary, the subsequent years saw the economy sink into recession – the 1980s saw a period of mass unemployment and industrial decline, and the unemployment returned in the early 1990s as a ‘price worth paying’ during another recession.

Now, of course, the top rate being reduced did not cause those economic difficulties – but it does prove the point. A tax cut for the top rate has no effect at all on growth – it simply gives more money to the wealthy. It is exactly what it says on the tin.

I agree however that the 50% tax rate is too high - we can all look forward to the day when it can come down. But that should be at a time of prosperity, once the recession is over, when we can all enjoy tax reductions. That is not the case now. I work in the public sector, where we are in a three year pay freeze, having pensions taken away, and going through redundancies of 20% of our staff. The private sector struggles too.

Who was it who said to make the rich work harder you pay them more and threaten them less, but to make the poor work harder you pay them less and threaten them more?

I must confess I am not so sure about a mansion tax or a tycoon tax, although cracking down on tax avoidance is always morally justified. The 50% rate is simple and straight forward. If there is any spare cash for tax cuts, it should be put towards raising the tax threshold to £10,000, ideally even higher.

If millions of people have more cash, they will spend it and businesses will get the boost they need. Raising the tax threshold is the ultimate pro-growth measure.

There are of course other pro-growth measures which can be considered – even Labour’s idea of a National Insurance holiday should be looked at. But I am not convinced that being Robin Hood in reverse will help the economy.

Now where does that leave the Liberal Democrats? We can’t blame the Tories for wanting to protect privilege, help the wealthy and privatise public services – after all, that is why they are here. But it does leave us in a difficult position.

Fairness of taxation was one of our four main manifesto pledges – it is at the top on the front cover. It was also our most popular policy. So it does concern me if we are abandoning this. The argument that we have closed tax loopholes won’t fool anyone. The wealthy will just find a tax loophole somewhere else and people know that.

To be honest, I don’t have the answer. We have gained much from the coalition to help people and modernise our politics – I have outlined many of these in previous entries – and when I read angry comments on Conservative Home and in the Daily Telegraph then I know we must be on the right lines. It would be a shame to lose these benefits by the risk of allowing a pure Tory government to run free.

Let’s hope it is all media speculation and see what George says this week. We may be pleasantly surprised.

The Shame of Kemsley

The below letter appeared in the Sittingbourne News Extra - 14 March 2012

On 8 March, the people of Kemsley had their opportunity to express a view on their local politics and the actions of their Council. The local branches of all four parties worked very hard over several weeks, bringing their respective and distinctive messages to the voters as they had to decide who should represent their interests in the council chamber.

And what was the result? A 23% turnout! Despite various arrangements which make voting easier than ever, despite plenty of literature coming through the letter box, despite many of us knocking on doors to ask opinions, more than three out of four people could not even be bothered to vote – and they now have a Councillor chosen by less than 9%. These statistics shame Kemsley.

I can hear two main responses. Firstly, ‘you are all the same, so why bother?’ – well, anyone who has read the leaflets can see clear differences that the parties have put forward – and of course we want to hear from people too. How can we listen if you don’t speak? Secondly, Kemsley has been ‘ignored for many years’ – yes, this is true as local parties don’t have the resources to campaign everywhere – but now the people of Kemsley had our undivided attention – and decided they didn’t want it!

While many people around the world are risking their lives and liberties in campaigning for basic freedoms, and British armed forces have fought and are continuing to fight in order to protect our right to vote, it seems more and more people in this country would rather not bother. Kemsley is not alone in this apathy, and this strengthens the case for the introduction of compulsory voting. After all, it comes to something when you have to force democracy to people!

But I must finish by thanking the 23% of people in Kemsley who voted. Whoever you voted for, it is appreciated.

The NHS, the Thompson Twins and The Three Degrees

With reference to the debate about the future of the NHS, my own recent experiences had made me constantly think of two pop songs from my younger days – ‘Doctor Doctor’ and ‘When Will I see You Again?’

In early February I got a cold. Nothing unusual about that, of course, many people get colds at that time of year, and the icy weather did not help. This cold has persisted, however, and, to coin a phrase, gone ‘on .. and on.’

After three weeks, and with all the various medicines having absolutely no effect, I thought it might be best to consult a doctor – maybe he/she could prescribe something stronger. Now my local surgery has two ways of being contacted– you can either telephone when the phone will ring ad infinitum and not get picked up – or you can turn up in person to be told there are no appointments, so please go away and try again (not those exact words, but that is the gist of it – I should add that the reception staff are very polite). Sure enough, I got the latter but was offered a telephone call from a nurse. Thinking this was better than nothing, I accepted, she called later and, after a discussion about my symptoms, said I wasn’t ill enough!!

A fortnight later, and still coughing and sneezing, I had a couple of days booked off work to help in a local by-election. As I had the days free, I thought I would try again at my local surgery. Any appointments on those two days? No, sorry, please try again.

I considered changing surgeries and contacted a few others. 'Sorry, we are not taking new customers - our books are full'. So this is not an issue confined to one place.

It is remarkable that I have now been ill for well over a month and that I can’t see anyone to ask for help. The continual coughing gives me chest pains, not to mention making it difficult to watch TV or travel on the coach, and I frequently feel very weak. And I think everyone has by now forgotten what my voice used to sound like.

Of course, there is a serious point. I will eventually get better one day. But if this was someone who was 75 or 80 years old, with a persistent but minor illness, it could well finish them off. You could not say a visit to the doctor or any prescription would make any difference – I could still be ill for over a month – but I do wonder how the difficulty of such access has affected some people.

The obvious problem is that there are not enough GP surgeries to satisfy demand. We need more doctors and more GP surgeries.

Here in Swale, there has been much development of new housing estates, and while new housing is very laudable, you must have the facilities to match. The most common complaints we hear from these new estates are the lack of doctors and dentists, public transport, post offices, schools, roads, even a post box or a small shop to buy a pint of milk. More estates are in development as I type, but no addition to local facilities, so this will be a problem which will only get worse.

So my only question on any NHS reforms is – will it be easier for someone to see a doctor for a non-emergency consultation within a convenient and reasonable time? Or will they, like me, continue to hear those familiar words – ‘no appointments available, please try again'.

'Oh Doctor Doctor -- when will I see you again?'

Kemsley by-election: the result

I will soon be posting our story of the Swale Council, Kemsley by-election campaign - which concluded yesterday - but here is the result.

Mike Whiting (Conservative) - 384 - 33.7% (-16.6%)
Richard Raycraft (Labour) - 312 - 27.3% (-0.5%)
Derek Carnell (UKIP) - 279 - 24.5% (+10.5%)
Berick Tomes (Liberal Democrat) - 166 - 14.5% (+6.6%)
Turnout: 23.2%

Some points which immediately jump out.

1. All four parties worked very hard on this by-election. However the turnout was extremely disappointing - over three out of four could not be bothered to vote. The winner was chosen by less than 9%!

2. Labour were, by far, the busiest party - they were out leafleting and canvassing in the cold and snow, and had large teams of activists from all over the south east. I was impressed by the bodies they got out on the streets. However, they must be very disappointed by the fact that their share of the vote barely moved.

3. A fall in the Conservative share was expected - but this was almost a collapse. The swing to UKIP was 13.5% - which must give the Tories some cause for concern, especially considering they were reluctantly forced into some activity.

4. UKIP are probably the happiest - a surprising but good result which stands well for the continuing development of their local party.

5. As for us, I was disappointed to remain 4th, with an excellent local candidate and a hard working team. One consolation is that, like UKIP, we increased our share of the vote and ate into the share of the Tory vote, which is a good sign for Tory-Lib Dem marginals throughout the country.

My own involvement was somewhat limited by ill health and other commitments but I did find time for much activity. Also canvassing remained a pleasure with some mixed responses on the doorstep. More soon.

Liberalism to the Common Man

Every party has a number of smaller factions within itself – with members aiming to influence the policy and direction of the party as a whole. And so it is with us in the Liberal Democrats.

This week saw the launch of Liberal Left to the excitement of some in the media for its anti-coalition line. We have all heard of the ‘orange book-ers’, we have the Social and Liberal Forum, and this week I received an email from Liberal Reform. Such groups are to be welcomed as it encourages internal debate and discussion about the future of our party and of Liberalism both in this country and abroad.

Also I would far prefer those who are disgruntled with the party and its leadership to stay in the party and fight their corner – as often happens in the other two – instead of doing a runner and thus weakening the case for those who may hold the same views. (My previous posts have been critical of those who have left the party since the coalition, and also of Lib Dem Voice and the Liberal Democrat newspaper – both of which I feel are very party line.

Political debate is always entertaining – but it is my view that we must keep our minds to the bread and butter. We are now a serious party of real political power – it is not inconceivable that we may be part of the UK government for another ten years. I want us to develop, not as a protest party or a forum for theory, but as a genuine political force with our own policies and views – and I hope one day we see the Lib Dems as the biggest party in parliament – with a Liberal Democrat Prime Minister.

If you had to list modern great political thinkers you might include – Anthony Crosland, Keith Joseph, Roy Jenkins, Enoch Powell, Tony Benn and Michael Foot. All highly intelligent men. You would take these people on at your peril! However, think of successful politicians, and immediately Harold Wilson, Margaret Thatcher and Tony Blair come to mind – with ten general election wins between them.

Whatever you think of this very different threesome, the main reason they were so successful was that they knew how to appeal to the man and woman in the street. Start a conversation about market economics or liberal philosophy and many will drop off, but talk about the more basic instincts and desires of people – jobs, prices, schools, the health service, communities, public transport and services – and you would get a more lively response.

One episode long ago has always stayed with me. At the SDP conference of 1988 (this was the ‘Owen-ite’ SDP which had declined to join the merged Social and Liberal Democrats), a young chap addressed the conference and said the party must not talk down to people over a glass of port but instead should be out on the streets – of Bristol, of Liverpool, of Birmingham – putting the case to the people that matter. He got a standing ovation and he was quite right.

In an earlier entry, I pointed out that, in coalition, the Liberal Democrats have done much to help and protect the poor – from tax cuts and the pupil premium to increased state pension and opportunities for mobility. We should develop and build on this.

My father said to me that he did not understand all the newspaper talk about the health and social care bill (and after over 150 amendments, who now does?) How the NHS works or is built is of no interest to him. He just wants to see a doctor when he needs to, receives any medication that is required, and, should he go to hospital, that he is treated quickly and professionally at a high quality level.

That is my main point. We must follow Wilson, Thatcher and Blair and develop a connection for what the ordinary person wants and cares about. People want to know how can we create growth and jobs, how can we improve the quality of education in our schools, how we can protect standards of living, how we can ensure top level quality health care, how can younger people receive the opportunities to progress as far as their talents allow, and how we can protect the most vulnerable within our society. And they want to know in words of plain English.

This is the movement we should be working towards. The great minds amongst our party could discuss how to convey our message, put these ideas across and conduct a dialogue with people.

What shall we call it – Common Liberalism? Listening Liberalism? Well, that is a debate for a start!

Remembering the Lib-Lab Pact 1977-78

Two parties working together at a time of economic crisis? An arrangement meeting scorn and abuse from the media? A new Prime Minister accused of dominating his junior partner? One party attempting and failing to achieve electoral reform? Yes, this is not 2010 – it is 1977, the year of the Lib-Lab Pact.
In 1976, the country was in economic and political crisis. Inflation ran at 25%, the country was in huge deficit, unemployment continued to creep upwards, and spending cuts were installed as a condition of a loan from the IMF. The Labour government had lost its' majority in parliament. The Conservative Party, under the leadership of Margaret Thatcher, was riding high in the polls. It was not a good time for Jim Callaghan to enter Number 10 as the successor to Harold Wilson.

The new Liberal party leader, David Steel, had worked with various Labour members on the EEC referendum campaign the year before and, using these contacts, his views were sought regarding some sort of deal to sustain the government in office. At this stage, after two general elections in 1974, the Liberal party were every short of cash and did not relish yet another election – especially as it seemed likely to send Mrs Thatcher into power with a landslide.

Like one of his successors, Steel emphasised the importance of providing a stable government at a time of economic uncertainty. For their part, the Labour cabinet generally approved the idea with some misgivings. Both sets of party members were unsure but gave the suggestion a cautious welcome.

After final negotiations, the Pact was declared in March 1977. The 13 Liberal MPs would vote with the government for the rest of the parliament in return for various policy initiatives. Mrs Thatcher immediately tabled a motion of no confidence, which the government won by 20 votes.

The media absolutely hated the Pact. The popular press hurled abuse at both parties – Steel was portrayed as a puppet in awe of his master (not for the last time!) – both leaders were accused of being scared to face the electorate. Indeed, in 1977 and 1978, local election results for both parties were very poor with many hundreds of councillors losing their seats.

For the Liberals, while a few policies were in place, there was no direct involvement in the government, apart from some cabinet committee places. The main prize of proportional representation for the first European parliament elections of 1979 was frustrated and was not achieved until 1999.

Economically, the Pact was a big success. Inflation rapidly came down, the balance of payments significantly improved, unemployment had steadied, and with Labour riding high in the polls in the autumn of 1978, the PM was widely expected to call an election. Callaghan and Steel had even discussed continuing with the Pact after the election should the result be unclear.

However Callaghan lost his nerve, the moment passed, and hence the Pact came to an end in October 1978. The winter of discontent with its' industrial unrest, was followed by the no confidence vote of March 1979 and the Liberals voted against the government - which fell by one vote. At the subsequent general election Mrs Thatcher became Prime Minister and the rest, as they say, is history.

Had the election taken place in the autumn of 1978, had Labour and the Liberals continued to work together, had Mrs Thatcher been kept out, then the subsequent years, indeed society today, could have been very different.

What lessons can we learn from that experience? The main problem the Liberals had at the time was, despite 25% of the votes at the election, its' lack of parliamentary presence. With only 13 seats there was little scope for any talk of ministers. Hence the emphasis became building up seats, not votes. Equally the fact that the two main parties had combined to frustrate any ideas of voting reform was remembered. And also the Liberal party failed to get across their own specific achievements to the electorate. But this was the only example of different parties with different beliefs working together in the national interest between 1945 and 2010.

It is said that history is written by the winners. For this reason, the Lib-Lab pact has gone down in history as a failure – the Thatcher government and the media successfully hammering home this myth throughout the 1980s – whereas in fact it was a success – by reducing the political uncertainty and providing a stable government, the markets were steadied and the country rapidly began to recover.

So while we are now again in a situation we may be reluctant to accept, we must remember to learn the lessons, hold our nerve, and emphasise the benefits we are providing by our role in providing a stable government.

(This article originally appeared in the Sittingbourne and Sheppey Liberal Democrats Members' and Supporters' Newsletter - November 2011).

Be loud and be proud. The Liberal Democrats are the party of the poor.

In the old days it was simple, you had two political parties, representing two different views and classes, at two ends of the political spectrum – a clear choice to make.

The Conservative party were the party of the wealthy, the privileged, the gentry, the business leaders, the chief executives and the managers. They believed in small government, low taxation, low public spending, the free market, sink-or-swim, privatisation and, above all, nothing should ever change.

Meanwhile the Labour party were the party of the poor, the workers, the pensioners, the unions, the sick. They believed in big government, high taxation, high expenditure, interventionism, subsidising industries, nationalisation – an active administration creating jobs and building houses. Aiming for a more just society

But times have changed. The Conservatives have not, of course. They still back their vested interests as much as ever. But since the days of Tony Blair, Labour have moved away from their traditional beliefs, ditching nationalisation and Clause Four, and moving towards traditional Tory ground – they now talk of the ‘squeezed middle’ and matching Tory economic policies.

The traditional choice that voters had is gone – but all is not lost. In my view, it is the Liberal Democrats who are now the party of the poor. It is the Liberal Democrats to whom the workers and the disadvantaged can look to for help. Low income households, pensioners, children in poorer areas, are all now benefiting from having the Liberal Democrats in government. We should say it loud and say it proud – the Liberal Democrats are now the party of the poor.

For example, let us look at what the Liberal Democrats have brought into the coalition government, and ask ourselves in each case – who does benefit from this?

The threshold at which tax starts will be £10,000 (and hopefully higher) by 2015 – taking a million out of tax completely. Main beneficiaries: those on lower incomes whom pay less tax or no tax at all..

The pupil premium puts money aside specially for disadvantaged areas. Main beneficiaries: children and schools in poorer areas.

The pensions to earnings link has been restored – with a ‘triple lock’ system to ensure pensions never fall behind again. Main beneficiaries: anyone, present or future, on a state pension.

A green investment bank to invest in projects and create jobs. Main beneficiaries: the unemployed and those who care about the future environment.

We are fond of saying that these and other measures would never take place under a Conservative government. But we have to also ask, had Gordon Brown won the election, would these measures take place under a Labour government? I am not so sure. The pensions link, for example, was never restored in 13 years – and it took us a week.

Would the next Labour government continue to raise the tax threshold and take the poorest out of paying tax? Would they retain the annual pupil premium? Would they continue Lib Dem efforts to improve social mobility? We await Ed and Ed’s answers to these questions.

But, I hear you ask, what about the tuition fee raise and the abolition of the EMA? Do these measures not hit the poor? Well, I would agree, and have said much on this elsewhere. But in coalition you can’t get everything you want – clearly under a Liberal Democrat government these measures would not have happened.

And what do we hear Cleggy talking about recently? Measures to improve social mobility – campaigning for interns to get a wage so that they are open not only to wealthy families – abolishing school names on application forms to avoid the old school tie syndrome – pushing for workers to have shares in companies and being able to decide on the salaries of directors and chief executives. He is constantly coming up with the sort of ideas and proposals that should have come from the Labour party – but they will no doubt line up alongside the backbench Tories in opposing them.

Our record is quite good considering the small role we have in government. The media obviously won’t thank us – they have never forgiven Nick for winning the first debate or for getting in the way of a Conservative majority.

So it is up to us to get the message out there, to be loud and to be proud. The Liberal Democrats are now the party of the poor – and while we are in government, we will continue to look out for their interests.