Sharpening the Knives

The frenzied atmosphere of an election season may not seem to be the best time to try and make sense of the strange political manoeuvrings we have witnessed lately.

However, the Council and Mayoral elections taking place on May 3^rd are an important milestone for all the national parties. In a political and media world that seems obsessed with mimicking the drama and dynamism of the American system, the 2012 elections have taken on the character of the US Midterms- with important implications for how the results will be processed by those in the Westminster village.

There has been a noticeable surge in backbench unrest among Conservative MPs. Today, Nadine Dorris launched a blistering attack on the “arrogant posh boys”   (David Cameron and George Osborne) running the country, while another unnamed Tory sneered that Cameron seems to be “putting the school run ahead of the national interest.” These comments can be legitimately dismissed as the bluster of a few loose cannons, but they conceal a deeper malaise in the Parliamentary Tory Party. Badly bruised by a mishandled Budget and suffering the worst polling since 2008, some discontents have been publicly sharpening the knives in a show of defiance toward No. 10, egged on by a press eager to witness a big upset.

There is no suggestion that there will be a leadership challenge any time soon- if at all. However, it is possible that those Conservatives who have been put off by Cameron’s wishy washy social agenda and perceived capitulation to the Liberal Democrats on issues like Lords Reform and internet surveillance are trying to ‘talk down’ the party in the run-up to the elections. Why? So that they can use a bad result to force the Prime Minister down a more Conservative path, by claiming that Tory voters are deserting Cameron’s party because he is not conservative enough.

What about Labour? England’s ‘mid-terms’ will serve as a useful indicator of the party’s revival in the South.  Labour’s next majority cannot be attained without the help of at least some of those seats wooed by Tony Blair in 1997. A strong result here could act as the green light for the party to begin rolling out a more detailed policy plan and tell the nation just how it would do things differently. There have been glimpses here and there of Labour’s plans, fromenergy companies to the NHS. A resounding win on May 3^rd would give Miliband the momentum he needs to really press how Labour would govern in 2015 and beyond.

However, the knives haven’t been sheathed for him, yet, either. A failure to topple the Tories nationwide, and a Livingstone defeat in London, could throw the polling gains tortuously won over the last few weeks out of the window. The press will emphasise that even after all the Coalition’s failings, Labour are still not capable of winning back the people’s trust. Miliband himself will be blamed for failing to articulate a clear message to win back votes, and the vultures will begin circling again. One rumour doing the rounds is that a Labour defeat on May 3^rd will prompt an attempt by disgruntled MPs to push Yvette Cooper forward as Miliband’s successor. Naturally, this is all hearsay and smokescreen. What is certain, however, is that the forthcoming elections will be used by anti-Milibands and pro-Milibands alike to push their own agendas on the leadership.

Will the Council and Mayoral Elections be for Britain what the Midterms are to America- namely, a political gamechanger? Obama has certainly had to change his tune since losing the Senate to the Republicans. Perhaps Cameron will have to obey the more hardline elements in his party in the wake of a defeat. Miliband must also be wary too- a big win will place big expectations on him that he might struggle to fulfil, while a loss will bring the old naysayers out of the woodwork again. For both parties, it’s all to play for.

Louie Woodall is Assistant Editor of the Young Fabians Blog

A Scrub Up On The Budget

Last Tuesday saw Young Fabians come together ahead of the forthcoming Anatomy to talk about the important issues of the Budget over casual drinks in the City. This ‘Scrub Up’ discussion developed towards two important questions; two axis of measurement on how sound  tothe policy.

The first axis was centred around the question of whether the Budget was fair, or if it hit certain groups in a disproportional manner, and whether that remains true when looking at the overall programme of cuts by this government. Are elements such as the Granny or Pasty Tax really unfair, or should pensioners take some of the burden that has been so far felt by today’s youth? Will corporation tax change actually result in increased investment, or is Britain the logical choice to invest in anyway, with uncertainty in the Eurozone? There is the prospect of a Tobin tax in Europe, and if Francois Hollande is elected in France, an income tax top rate of 75%.

The second axis picked up on comments by Lord Layard at the recent Young Fabians event on wellbeing politics- the differences between short-run and long-run growth. The question whether changes in corporation tax infrastructure is the best course of action for Britain to take in the short term, and whether this budget will actually help society in the next year or two, is a pressing one. As is the question of whether low growth will leave an entire generation behind.

We spoke more about whether regional investment such as the northern transportation and ultra-fast broadband hubs were enough to promote growth, or whether it was London that benefited most from the Budget. Are the investments in the regions merely token supplements in relation to the massive loss of industry sustained there since 2008?

Will pressures on housing from job growth in London see an increase in demand spiral costs even higher? Is the change on property stamp duty aggressive enough? I suggested that an alternative was to target residential property above £250,000k owned by corporate entities with 15% stamp duty- with exceptions for social enterprises- to discourage the monopoly of large for-profit property companies. What would a drop in house prices mean politically, with so many households in Britain holding the majority of their assets in their home?

With the many lines of enquiry that can be taken on the Budget, the upcoming Anatomy session will look in detail at only a few. For those who missed out on applying to join the group, the results of our investigation will be published on the blog for your scrutiny in due course.

Alex Adranghi is the Chair of the Young Fabians Future of Finance Network

The Anatomy will run at Parliament

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To find out more about the budget, you can read the official executive summery and Deloitte’s online analysis. 

Eye on Washington – Is ‘Socialism’ Where The Fnords Are?

With the Republican nominee campaigns still trundling along with Romney taking another three states this week and Santorum hanging on as expected- the Eye on Washington takes a look at the greatest profanity in the American rhetoric-handbook: Socialism.

Socialism is un-American. Socialism is un-patriotic. Socialism is the antithesis of freedom- at least that is the conventional wisdom of the American media, whether liberal or conservative. If Fnords existed, than in America they are certainly used when the word “socialism” is invoked.

Attacks on this front have intensified this year with Republican nominees warning that America will be fundamentally changed by another four years of Obama, and set on an irreversible path towards European socialism. The favourite piece of evidence the nominees are fond of waving around to support such claims is, of course, the Patient Protection and Affordable Care Act– known more widely as ObamaCare.

The repeated attacks on ObamaCare have recently turned up trumps, with a constitutional challenge to the Supreme Court by the states taking place this week. The court ruling is not expected until June, but even liberal champion Tom Goldstein of SCOTUSBlog fame shared his fear on the Daily Show this week that the ruling will not be in the administration’s favour. One element that unites all Americans is the Constitution, and if ObamaCare is seen to conflict with it, this will act as a powerful symbol of how America and Socialism are incompatible.

Socialism is only starting to be reclaimed in Britain post-New Labour, after a long time out of fashion in mainstream politics. It does not look all that bleak for the s-word on the other side of the pond either. A recent poll by Gallup shows that socialism is seen as a positive by 36% of Americans. This is a significant base to work with, and far more than you might believe from the American media. Perhaps all the rhetoric is making people look up the actual definition of Socialism, and finding it quite to their liking?

Obama has been distancing himself from the association despite high profile support from celebrity socialists. This onslaught continued in the media with help of pranksters registering socialists.com and redirecting the address to Obama’s campaign website. Obama says he is no socialist, but this is beside the point. He cannot implement socialist policies, nor can he signal his intention to do so. But for Americans that hold onto Fabian values, whatever his personal politics he is the best choice to make practical victories both by policy and politically.

Make no mistake; American politics influence our own – more so than Europe. Our own plight with socialism is heavily influenced by cultural trends. Our own long-term route to socialism will be difficult with formal and informal dependencies of the former colony. Socialism benefits the 99%, and will benefit America, and movements like Occupy. The Republican’s rhetoric needs to lead to an open reasoned discussion about this – something that the American public theatre isn’t very good at being under corporate control.

What the publicity will bring in the current climate is an even more intense debate over the pros and cons of socialism  If this creates a wider base of people sympathetic to socialism, then at the very least this will help persuade America to take a more tolerant approach to it in the long run.

Alex Adranghi is Chair of the Future of Finance Network

The GAAR – Hanging in the balance

A one-to-watch outcome of the Budget was the coalition’s announcement to start a consultation with a view to introduce a General Anti-Avoidance Rule. Osborne has not yet made his intentions clear as to whether he will follow the advice of QC Graham Aaronson (commissioned by the Treasury to report on the best GAAR structure) and introduce a simple anti-abuse measure. Two options are open to him. The first sees the new rule become a heavy-handed instrument, as recommended by Lib Dem Lord Oakshott, giving much more power to the government, and causing confusion within the tax and business community around whether standard transactions equate to avoidance. The second option conforms more to Aaronson’s advice, with the rule becoming a simple anti-abuse measure without much bite.

GAARs are often seen as controversial by tax professionals as the former version can include standard commercial transactions not intended to evade or avoid. Such transactions can affect pension schemes, or capital allowances. This outcome would result not only in unfair penalties and over-cautious tax planning, but affect the overall relationship between HMRC and taxpayers, and increase the UK’s competitive disadvantage. Though the chances of HMRC using its powers within a general rule are slim, the balance would still shift in its favour, and taxpayers and businesses would depend more on the HMRC’s discretion. This kind of uncertainty is not conducive to growth in a stagnant economy, with current perceptions of the UK tax system already branding it confusing, complex and cumbersome.

Aaronson had a hand in much of the construction of the General Anti-Avoidance rule, by setting up an independent advisory panel (which could be heavily biased towards the tax profession), narrowing down its scope to particular transactions, and laying the burden of proof at HMRC’s door. Aaronson himself admitted that further along the line, the intentions behind the rule could ultimately be watered down by these safeguards. However, Osborne has hinted that he will err on the side of Aronson’s recommendations. With tax avoidance in the headlines on a daily basis, the government would benefit from a public perception that is tough on avoidance.

Given the success of the disclosure rules, some have voiced that the GAAR could be a needless measure adding extra complexity, introduced to pacify the Lib Dems. The result of the consultation needs to be a proposal that avoids the potential pitfalls of a heavy-handed, red-tape heavy regime, making it easy to invest and build business in the UK, whilst at the same time generating revenue from deliberate contrived schemes to avoid paying what is owed.

Legislation on a GAAR is due to be included in the Finance Bill 2013.

Melissa Higgs is a member of the Young Fabians Future of Finance Steering Group

We’re Watching You

The uproar surrounding government plans to extend the state’s ability to ‘snoop’ on the public’s email and social media communications will certainly prove damaging to the Conservatives- but it poses political hazards to the leaders of the other parties as well.

The proposed legislation- expected to be unveiled during next month’s Queen’s Speech- will allow authorities real time access to internet traffic, enabling officials to determine who you contact online and what sites you visit.

The government will inevitably have to weather a storm of protest from the powerful civil liberties lobby, who have an impressive campaigning record when it comes to citizen’s rights. In September 2010, the pressure group Liberty scored a major victory when the government announced it was to launch an independent review into Britain’s extradition laws.

On this weekend’s government statement, Liberty’s press team announced that:

“The Coalition agreement explicitly promised to ‘end unnecessary data retention’ and restore our civil liberties. Do they still believe it? At the very least we need less secret briefing and more public consultation if this promise is to be abandoned.”

The Coalition leadership will have a PR disaster on their hands if this policy becomes the focus of a public campaign. Characters like Shami Chakrabarti, Liberty’s Director, are impressive television performers and could embarrass ministers on the media circuit.

The plans also open the Tories up to accusations of another u-turn. A Conservative pamphlet published in 2009 entitled ‘Reversing the Rise of the Surveillance State’ savaged Labour’s record on web surveillance and promised that “A Conservative government will take a fundamentally different approach…[by recording] fewer personal details.” Those MPs who had a hand writing this will be angry that the government frontbench is now making a mockery of their promises, as will those party members who look to the Tories as the ‘small state’ party who traditionally keep their noses out of private people’s business.

For the Liberal Democrats, the outlook is even worse. Earlier this month, the party’s spring conference voted unanimously in favour of a motion to uphold and extend British civil liberties, with Dr. Jenny Wood arguing that:

“We don’t give police blanket permission to enter every home in the land without a warrant, just on the off-chance a crime is being committed inside, so why should we monitor the communications of every citizen, just in case they do something wrong?”

The proposed legislation looks set to push Lib Dem members to the limit. In a sign that the party recognises the threat to its image, Lynne Featherstone emailed all members today reassuring them that “The content of your communications is currently, and will always be, protected by tough rules.” However, she fell short of admitting that the legislation will massively expand the government’s ability to monitor who you talk to and what sites you visit.

Just about the only thing left the Liberal Democrats are recognised to stand up for is civil liberties, so if a policy like this is mishandled, it could undermine their ‘nice party’ image for good.

However, the problems facing the Coalition parties do not give Labour a reason to celebrate- and, unsurprisingly, the party’s response to the plans has been relatively muted. Yvette Cooper blogged today that “National security and personal privacy are too important to be left to rumours and rows,” but did not dare claim the government was violating civil liberties. After all, New Labour’s record on such matters is patchy to say the least, and current media coverage of the plans are quick to refer to the party’s own scheme in 2008 to track phones, texts, emails and internet use through a central database.

The party would be well advised to stay quiet on this issue and let the media do the work of attacking the government for it, or risk cries of ‘hypocrisy’ rising from the government benches.

Ultimately, what this issue demonstrates is that the public gets agitated when a government publicly announces it will increase surveillance over its own people. We hear on a regular basis how autocratic regimes in Syria and Iran violate the rights of their citizens by invading their internet privacy, and congratulate ourselves that we live in a country where this doesn’t happen. This legislation will not put our government on a similar footing as these dictatorships, but it certainly makes it look like it could in the future. Expect a storm ahead.

Louie Woodall is Assistant Editor of the Young Fabians Blog

You can read more about Liberty in the latest edition of Anticipations, which features an essay by Shami Chakrabarti