A Touch on the Tiller

Apparently, some people are asking "What is the point of Labour?" Of course, this is a question that has been asked pretty much constantly for the last 100 years. Even during the halcyon days of the postwar Attlee government the party was roiled by existential doubt, triggered by mundane but symbolic issues such as prescription charges. A constant refrain has been that other anxious question "Is this what a Labour government should be doing?", which implies a catechism of correct policy as much as the more nebulous "Labour values" that are regularly invoked nowadays. Martin Kettle is the latest to wonder what is the point of the party, but he undermines his own analysis at the start by describing Rachel Reeves as "a traditionally social democratic, centre-left Labour chancellor". This highlights that the problem in defining the point of a Labour government is that there is no agreement on what constitutes social democracy any longer, let alone the "centre-left". Reeves' own view was expressed in 2015: "We are not the party of people on benefits. We don’t want to be seen, and we’re not, the party to represent those who are out of work. Labour are a party of working people, formed for and by working people."

Kettle's diagnosis is that "Labour is now an alliance of positions, interests and instincts rather than a party with a unifying direction or a leader who clearly articulates an overarching plan for government. As a result, Labour has become several small parties in one." But 'twas ever thus. Labour has always been a coalition of interests and factions, and its leaders have necessarily been skilled at managing the resulting tensions. Even during the New Labour years, when policy went with the grain of wider developments (neoliberalism, neoconservatism, weak communitarianism), there were substantive disagreements on social, economic and foreign policy. Kettle's real point is that the party never fully embraced the secular shift of the electorate: "The essential fact is that Britain is significantly more middle class, better educated, more outward-looking and more liberal. Yet Labour still struggles to adapt to, never mind to lead, this intricate, nuanced and continuing change." In other words, the failure of the SDP to supplant Labour in the 1980s, and the willingness of the party to return to its Labourist comfort zone after 2010, which is what Reeves' words really indicated, has left it facing in too many directions.

The chief problem with this analysis is the assumption that Labour's blue-collar electorate is fundamentally illiberal and backward-looking, which is why they have been attracted to Reform. This suggests that Kettle himself has failed to evolve his thinking since the 1980s. Even a brief glance at the opinion polls indicates that Reform have prospered primarily at the expense of the Conservatives, while Labour is losing support mainly to the Liberal Democrats and Greens, with the latter now acting as a proxy for "the left". The latter drift has been characterised as mainly among under-30s, which is probably accurate, and by what Kettle describes as Labour's "more ideologically driven supporters", code for self-indulgent, middle-class lefties, and which is likely wide of the mark. If it is true that Labour is losing progressive voters while Reform is obviously attracting Tories, this leaves you wondering where the working class has gone to. For Kettle, it simply disappeared with deindustrialiation. The sociological reality is that today's working class is increasingly made up of young, insecure renters in precarious employment. In criticising Labour, Kettle does so through a mental model - the blue to white-collar shift - that has been out of date for decades.

In this, liberal commentators of a certain age find common cause with Blue Labour nostalgists such as Julian Coman who believe that things started to go wrong for Labour when "From the 1980s onwards, the cutting edge of progressive thought became overwhelmingly preoccupied with the rights and freedoms of the individual." This is a gross misrepresentation of the history. The rise of the feminist, anti-racist and LGBTQ+ movements were collective endeavours, not the triumph of the neoliberal monad. Coman's prescription is "a collectivist politics that preserves the ethical insights of universalism, but that also foregrounds the values of social cohesion, collective obligation and communal wellbeing – and is willing to negotiate tensions that might result". Predictably, he espies this turn in both Shabana Mahmood's desire for "order and control" over immigration and in Andy Burnham's wish to overcome "the subjection of democracies to the arrogance of rootless international capital" (Burnham actually spoke of the need to "stop being in hock to the bond markets", which isn't quite the same thing and certainly lacks the whiff of xenophobia.)

A better way of understanding what is the point of Labour is to ignore the vibes-based commentariat and look at the government's fiscal policy, which inevitably tells us whose interests they think they are working for. Chris Dillow makes the important point that what matters in the coming budget is not how much money is raised, or how that is done, but whether it will reallocate the real resources necessary to improve public services and to boost the long-term trends for investment and productivity. Labour's historic reputation, in the sense of justifying its existence rather than just staying in office, has been based on two periods of goverment: 1945 to 1951, and 1997 to 2010. The former was notable for a period of austerity, when consumption was deliberately depressed, in order to invest in industrial rebuilding and the securing of foreign markets for exports. This was made harsher than it needed to be by the heavy investment in defence, but it obviously succeeded in improving the fabric of the public realm. The New Labour years saw a significant uptick in public investment, funded by a benign economy, albeit one built on the insecure foundations of financialisation.

In that first period, Labour clearly advanced the interests of the industrial working class through high levels of employment and comprehensive (if not particularly generous) welfare. Social reform took a back-seat until the 1960s and foreign policy preserved too many illusions for too long. In the second period, Labour had a more national and less class-based appeal and focused largely on public services management, leaving economic policy to the markets and an "independent" Bank of England. Its reliance on outsouring and private finance has proved to be a strategic mistake, on a par with its failure to control the finance sector. If in the first period the party clearly represented the interests of labour, in the second period it conceded the government's role in the allocation of real resources to the interests of capital generally and the City in particular. That's a pretty profound change and truly remarkable in the context of the party's history. The pushback after 2008, both the return to a Labourist comfort zone under Ed Miliband and the evocation of a revivalist social democracy under Jeremy Corbyn, attempted to redress this in favour of labour. 

To date, the Starmer government has indicated a marginal preference for capital but has also tried to support labour. So in last year's budget there was a modest increase to the national minimum wage and also a rise in capital gains tax rates (though not to parity with income tax). The true significance of the rise in employer NICs, along with the higher NMW, is that it should act as a stimulus for capital-labour substitution, particularly among low-wage jobs, and thus a rise in productivity. But as with the rest of the budget, it was a half-hearted measure rather than part of a core strategy to shift real resources from consumption to investment. All the signs are that next week's budget will be more of the same: tinkering at the edges with fiscal drag providing the chief means to fund increased public spending. This suggests that the current Labour administration remains trapped in the same worldview that hobbled the Blair and Brown governments: a belief that left to its own devices capital will deliver growth and higher wages, and this in turn will generate higher tax receipts for public spending.

The pointlessness of this Labour government then is not down to Keir Starmer's lack of vision or his inscrutability ("His innermost beliefs are a mystery even to the cabinet", according to Rafael Behr), any more than it is to the inadequacies as Chancellor of the woman dismissed by her patronising critics as "Rachel from Accounts". The lack of point is the point. This is a government that was engineered by the politico-media caste to thwart the left, eject the hapless Tories before they did any more damage, and otherwise just sit tight until something turned up to give the economy a boost. Possibly AI, possibly better trade deals with the US and EU. This is a government that refuses to publicly choose between the interests of capital and labour and believes it can steer a course between the two. But each touch on the tiller simply enrages more people, now on one side, now on the other. The result is a general collapse in support. Perhaps we will all be surprised on Wednesday and the pre-budget leaks and briefings will turn out to have been a cunning diversion, but I suspect that what will see is another timid exercise that will satisfy few.

The End of the BBC

A pivotal figure in the assault on the BBC was Marmaduke Hussey. He was a pillar of the Establishment but also a Tory newspaperman: a former Chief Executive and Managing Director at Times Newspapers. As such, the ultimate call to kill the Corporation - and we shouldn't be in any doubt that what we are withessing is the latest stage in a long drawn out assassination - was made by Margaret Thatcher. She was driven by her belief that the BBC's editorial leadership was not made up of people who could be considered "one of us", like Hussey, and this made them tantamount to traitors in her eyes. Though the then Director General, Alasdair Milne, was also a pillar of the establishment, within months of taking up the role of Chairman Hussey had forced him out. Since then, the Director General has always had a target on his back (there have been no women) and appointments to the role have been deeply politicised. They have also alternated between TV "lifers" and those drawn from the newspaper industry.

As the BBC had always loyally reflected the interests of the state, as mediated by the government of the day, what this antagonism between Hussey and Milne reflected was not some leftwing drift at Broadcasting House but the growing gap between the Conservative Party and Establishment sentiment in the early to mid-1980s (the views of those disparagingly referred to at the time as "wets"). That gap closed over the years, not least because of the "commercial" turn of the Corporation during the regimes of Michael Checkland and John Birt, and because of New Labour's appointment of sympathisers, such as Greg Dyke, who it expected to stay "on side", most notoriously over the David Kelly affair. Since then, the BBC has been beset by repeated "scandals" centring on editorial judgement and the accusation of cover-ups, while the licence fee remains a perennial issue for rightwing newspapers, a fact that has less to do with concerns over the Corporation's funding and more to do with its very existence as a public service broadcaster.

There is an irony in the fact that as the Tory party has fallen apart as a political force since 2015 so its grip on the BBC has tightened, notably with the appointment of Robbie Gibb to the BBC board under Boris Johnson. Farage and his various understrappers have always been happy with the Corporation, though they'd never publicly admit it. They get disproportionate, indulgent coverage and little in the way of probing scrutiny. It's the Tories who remain the BBC's implacable foe, as they have been since the launch of commercial television in the 1950s. You could say that this reflects the reality that the Conservative Party has only ever been a front for the rightwing press and associated commercial interests, but then we have to acknowledge that those powers are waning too under the impact of the Internet, social media and streaming, so why is their grip tightening now? Is this merely the ebbing tide of the politicised appointments of the 2010-24 era?

One plausible answer is that any sign the BBC is becoming popular, particularly with the young, must produce a reaction to force it into becoming more conservative and narrow in its appeal. In other words, this is a defensive manoeuvre in the face of growing calls for the BBC to be genuinely impartial, not just over issues such as Gaza but in its coverage of emerging voices on the left, such as Zack Polanski. The bias that the BBC is encouraged to show, from sneering at trans people to kow-towing to Donald Trump, is less about enforcing a conservative worldview and more about minimising its potential audience. The history of the many calls for impartiality levelled at the Corporation makes it clear that what is really being demanded is silence and thus irrelevance. Just as the BBC should leave sport and entertainment to ITV, so it should recuse itself from any political analysis and leave the exposés of the malignant antisemitism and traitorous indulgence of Islam by the far-left to GB News and others.

According to Polly Toynbee, "Its enemies hate the BBC with the same venom they detest the NHS, as publicly owned and popular social endeavours." But the parallel between the two isn't particularly helpful, and not just because nobody on the right is seriously suggesting the NHS can be converted to an ad-driven model. The Tory ideal is for the BBC to withdraw from popular entertainment and focus on higher culture (albeit of a very conservative stripe, e.g. the Last Night of the Proms) and uncontentious public service broadcasting (essentially middle class programmes like Countryfile and Gardeners' World), leaving the bulk of the linear TV field to commercial broadcasters. In the case of the NHS, the ideal is to reduce it to a basic safety net for the poor. Viewed as positional goods, these are at opposite ends of the wealth/status spectrum: a high culture backwater and the return of pauper wards. Inasmuch as the BBC and the NHS have a similarity, it is in the lack of true democractic accountability, something that doesn't seem to bother Toynbee overly much.

A better way of understadning the animus against the BBC is to consider the role of youth. Political engagement among the young, unless channelled via respectable routes in the traditional parties, is habitually derided as naive or the product of brainwashing. Likewise, and despite her venerable age, Auntie is routinely accused of following fashionable nonsense and of being obsessed with "reaching a younger audience". This isn't without foundation - a steadily ageing audience will inevitably lead to the end of the licence fee model - but it is exaggerated as part of the persistent campaign to undermine the Corporation's claims to represent the entire nation. This is why there is such an emphasis on the idea that the BBC is indulging the radical young over issues such as trans rights and Palestine, and also explains why if any leftwing voices are to be allowed on the channel they must ideally be young and excitable, all the better to be dismissed as young and excitable. Owen Jones and Ash Sarkar probably only have a few more years in the limelight before they are considered worringly "grown-up". 

The elevation of Jeremy Corbyn to the Labour leadership presented a major challenge to the BBC precisely because of his age. He couldn't simply be patronised as a young fool. The initial response, beyond dismissing him as a old fool, was to use his supporters as a proxy, focusing on his success in attracting and energising younger voters, hence the prominence given to Momentum. But this ran into the brick wall of the general election in 2017, which proved that Corbyn's attraction went well beyond the young and clearly included many of the older Labour voters that Westminster opinion was convinced had been lost to the anti-EU right. This led to a switch in focus, first to the old standby of traitorous disloyalty (e.g. the attempt by Newsnight to link him to Moscow after the Salisbury poisoning in 2018), and then to the claims of institutional antisemitism (culminating in the infamous John Ware Panorama report in 2019). 

Just as the liberal press routinely occludes 2017, so the BBC will ignore its role in undermining the Labour Party and indulging the Conservative government under Boris Johnson in 2019, and will insist that it is and always has been politically neutral, despite the abundant evidence to the contrary from the 1926 General Strike through the Battle of Orgreave to today. In comparison, its questionable editing  of Donald Trump's 2021 Capitol Hill speech is a triviality. The real significance of the moment is that the UK's national broadcaster is being threatened by the head of a foreign government, and one with a track record of bullying media companies into agreeing sales to his own backers. The fear from the 1980s onwards was that the BBC would be broken up and replaced by components of the Murdoch empire, or at least placed ever more firmly under the thumb of newspapermen, but it's now more likely that it will be arm-twisted into a subservient relationship with the new media conglomerates centring on Silicon Valley. As in so much of her policy, Margaret Thatcher paved the way for the americanisation of British life.

Reforming the Tax System

The framing of the budget due on the 26th of November has largely focused on two aspects. First, the government's fiscal "black hole", i.e. the assumption that taxes must rise and/or public spending must be cut to minimise borrowing and thus satisfy the bond market; and second, the need to stimulate growth so that future revenues may provide the means to reverse those tax rises and/or spending cuts. The metaphor is meant to be terrifying, a forbidding gravity well that will drag us to our doom, but it actually works best in the sense that no information can escape from this conceptual void, most notably the actual size of the hole itself. This currently lies, depending on who you believe, somewhere between £20 and £50 billion.There has also been a change in the term used to describe the government's operating contingency, from "fiscal space" to "headroom". What the language indicates is that the technical analysis of the state's finances has adopted a more emotional register, even if planetary extinction and bumping your head are not on the same level. The consensus is that as the public's tolerance for spending cuts has reached its limit, tax rises are now inevitable.

While there may be profit to be made speculating on the Chancellor of the Exchequer's plans in the financial markets, there is little point wondering about the budget's political economy. Rachel Reeves' speech will, I confidently predict, not mark a radical departure from the neoliberal consensus of the last 50 years. Both tax and welfare will be presented as necessary evils. There will be more parsimonious benefits and tighter sanctions. More funding will be announced for the NHS, with the quid pro quo of more "reform". Growth will be invoked in the abstract, but the concrete measures will be pitiful when not delusional. No doubt there will be more funding to make the UK a "leader in  AI". If the rumours are to be believed, there may be a penny on income tax and the same off NICs, green levies cut to lower energy bills, and the abolition of stamp duty. Or maybe these are all distractions intended to leave us relieved that she hasn't changed much at all.

It is in this context that a number of UK think-tanks have come together to present a series of proposals to reform the tax system. These reforms can, they say, be revenue-neutral. Rather than increasing receipts, the idea is to make the tax system more efficient and remove anomalies and disincentives, which should encourage growth. You don't have to go to the extremes of a flat tax or the Laffer Curve to understand the ideological link between tax "simplicity" and rightwing economics, but that is not to say that complexity is necessarily good. The question as ever is cui bono?, and you can get a pretty good sense of that by considering the think-tanks involved. The group is presented as spanning the "political spectrum", from the Adam Smith Institute to the New Economics Foundation, but the centre-right bias is pretty obvious, down to including Labour Together, which is more known for factional plotting in its namesake party than developing economic policy. 

The proposals are none-the-less interesting because of what they tell us about the presumed limits of the possible. Some will have been watered down for palatability, and to avoid any one proposal crowding out the rest. For example, a land-value tax (LVT) would be supported by a genuinely wide spectrum of economists (as would a UBI), but that is replaced here by the abolition of stamp duty (SDLT) and a revaluation of Council Tax bands. That the reform of property taxes is the first item on the agenda is indicative both of the dysfunction of this area but also of the propertarian assumptions of the think-tanks. There is no suggestion that the amount of capital wrapped up in domestic property is a problem for the economy and a reason why domestic investment in production is low. The second proposal is to extend VAT to more goods and services but lower the headline rate. It's typical of the report, which is only 8 pages long and has little in the way of evidence or justification, that it doesn't explain why VAT only applying to half of all spending is a problem. There's also a whiff of naivety in suggesting that we add VAT to food and kids clothes in the midst of a cost-of-living crisis.

The proposal on income tax is about smoothing the cliff-edges that occur with marginal rates and the withdrawal of subsidies, such as for childcare. This is certainly a real problem, though the idea that it disincentivises people from taking pay rises or coming off benefits is questionable. There's certainly evidence for the latter, but that simply highlights the poor design of the benefits and the reliance on means-testing. At no point do the report's authors suggest that benefits could be made universal in a revenue (and expenditure) neutral way, which would certainly simplify the system and do away with most of the sanctions regime. The fourth proposal is to "Tax all income from work equally", which translates into merging NICs with income tax. Few would object to this, but the report's shallowness (apart from a reference to the 2010 Mirrlees Review) obscures the significance of that "from work" qualifier. The major issue in not that NICs become regressive for salaries over £50k but that there is a lower tax rate on dividends and capital gains, which leads to disguised employment.

The fifth proposal returns to property with the suggestion that landlords should be able to fully expense mortgage costs, which they can only do today by setting up a company, and to levy NICs on rental income. In other words, this is directed at petty landlords, in particular the buy-to-let variety who are mortgaged to the hilt. The separate packages are meant to be standalone, but clearly if both #4 and #5 were implemented, the net result would be a tax cut (through 100% mortgage relief) for petty landlords. How that is meant to help GDP growth is not at all clear. Perhaps the most amusing part of this is the revenue neutrality rider: "This would be through adjusting headline Income Tax rates in whichever direction is appropriate." There's an obvious conflict here with package 4 ("Adjust Income Tax rates to achieve revenue neutrality"), inasmuch as the same adjustment is unlikely to to achieve neutrality for both income from work and income from rent. A choice would have to be made between the interests of landlords and those of the working population. Less than 5% of the population are landlords, while 13% of MPs are. 

The sixth proposal continues the property theme, but here in the form of equities and other financial assets. The package includes a capital gains allowance to offset fluctuations in interest when borrowing to invest; an end of "rebasing" on death for CGT calculations to disincentivise people holding onto assets rather than passing them to others who may make better use of them; and (the highlight in the press) the application of an exit tax (aka "settling-up") that would require CGT to be paid on domestic assets when leaving the country for good. The revenue neutrality rider for this package is: "Headline CGT rates should be adjusted in whichever direction is appropriate for revenue neutrality", which is worth noting because it emphasises that this group of think-tanks presumably do not agree that capital gains (along with inheritances) should be treated as income and taxed as such. The differential between income tax and CGT rates (and Dividend Tax rates too) will remain.

The final package concerns Corporation Tax. The proposals are to allow full expensing of all up-front business spending (not just capital expenditure on fixed assets) and to remove the limits on loss deductions, "with appropriate safeguards against abuse". This would certainly simplify matters, but as that last clause hints, it would require a new raft of regulations and checks to ensure that businesses won't simply defraud the Exchequer, or criminals pose as business owners. The experience of the Covid-19 pandemic does not inspire confidence. There are good arguments that capital expenditure should get tax relief to encourage investment in productive capacity, but the idea that we should have no qualification rules for the sake of simplicity seems naive. Offsetting the cost of new technology on the shopfloor may help improve productivity, but it's less obvious that fully-expensing company cars will do so given that their usage won't change.

What this report suggests is that the think-tankers who routinely applaud themselves for thinking radical thoughts aren't expecting much in 3 weeks time, but they will be ready to go on TV and explain why if only the Chancellor had been brave enough to adopt their suggestions long-term growth would be assured. The subtext is that Reeves needs to be more generous to business and to investors, for they alone are the wealth-creators. For all the emphasis on revenue-neutrality, the packages taken together would probably be implemented in a way that shifted more of the tax burden onto consumers and less on savers and (domestic) investors, despite secular trends requiring the opposite (fewer working-age adults, more well-off pensioners, greater wealth inequality). And they are probably justified in thinking that both Reeves and Starmer will be sympathetic to that tilt, just as they have shown themselves to be sympathetic to watering down employment rights and green levies under similar pressure from business.