Scottish politics has turned upside down since the independence referendum

Events in Scotland illustrate how a political situation can change very quickly. Paradoxically, the real winner of the 2014 independence referendum was the SNP, who have seen a surge in membership, while Labour and the other unionist parties are floundering. Thomas Lundberg looks at the aftermath of the referendum and the puzzling situation of winners turning into losers.

People outside Scotland could be forgiven for being puzzled about recent events ‘north of the border’. After all, didn’t the Unionist cause triumph in September’s Scottish independence referendum? Since then, the Scottish National Party (SNP) and Scottish Green Party, both supporters of Scottish independence, have more than tripled their membership. The SNP has surged in the opinion polls, endangering Scottish Labour at next May’s Westminster election. Events in Scotland illustrate the importance of multilevel governance and party systems, as well as how a political situation can change very quickly.

While nearly 45 per cent of Scottish voters said ‘Yes’ to independence, the break-up of the United Kingdom was prevented by the 55 per cent who voted ‘No’. Only hours after this result was reached, Prime Minister David Cameron moved the proverbial tanks onto the Labour Party’s lawn, saying that any significant increase in the devolution of power to Scotland would require a change in voting practices so that MPs at Westminster from the 59 Scottish constituencies would no longer be able to vote on bills deemed as affecting only England. Labour Party leader Ed Miliband rejected the linkage of enhanced Scottish devolution to what is sometimes labelled ‘English Votes for English Laws’ (EVEL), proposing instead a convention to examine Britain’s constitution more broadly. Both politicians have been criticised for evading the so-called ‘vow’ to grant Scotland greater autonomy, a promise that might have persuaded some voters not to vote for independence in the expectation of having ‘the best of both worlds’, whatever that means.

It is unlikely that the Smith Commission, an all-party group investigating routes to greater autonomy, will propose significantly enhanced devolution of power to Scotland unless the May 2015 Westminster election yields a hung parliament. The Conservatives, while supporting more radical tax proposals than Labour, are probably concerned about the prospect of too much decentralisation and how that might harm the centre, while Labour worries about the potential for undermining the British welfare state and the prospect of curtailing the voting rights of MPs from outside England. The SNP, however, will seek to gain as much extra power for the Scottish Parliament as possible, trying to satisfy both independence supporters and those who want ‘devo max’, the devolution of all domestic matters (basically home rule). Recent opinion polling reveals that the SNP is so far ahead of its traditional rival, Scottish Labour, that the latter would be nearly wiped out at Westminster. Such an outcome in May would have implications beyond Scotland – it would probably deny Labour a majority, keeping David Cameron in Downing Street if he can do some kind of deal with the smaller parties that might hold the balance of power.

Labour’s problems in Scotland result from both the sudden resignation of its Scottish leader, Johann Lamont, and from the perception, held by many of its traditional supporters, that the party betrayed working-class Scotland in the independence referendum campaign, doing the Tories’ dirty work. Class was one of the biggest demographic dividing lines in the referendum, with poorer people more likely to support independence than the affluent, who would have more to lose if things went wrong. The likely replacement for Lamont, Jim Murphy, may have a higher profile, but he also comes with a lot of Blairite baggage, such as his support for invading Iraq and for maintaining Trident, the nuclear deterrent based in Scotland. Such right-wing positions, as well as the fact that he is currently a Westminster MP, may put him at a disadvantage against the SNP, soon to be led by Alex Salmond’s deputy, Nicola Sturgeon.

Governing since 2007, the SNP has managed to become a highly successful catch-all party, appealing both to independence supporters and to those who prefer greater Scottish autonomy within the Union, to all social class backgrounds and age groups, and to both women and men. While it has business-friendly policies that include cutting corporation tax, the SNP has managed to compete successfully against Scottish Labour, using its left-wing image and grass-roots campaigning to steal supposedly safe constituencies in Labour heartland areas. Despite its significant decline, Scottish Labour remains the SNP’s bitter rival, while the Scottish Conservative and Unionist Party now struggles to make an impact in polling and the Scottish Liberal Democrats scarcely register at all, with the latest Holyrood poll putting both Tories and Lib Dems behind the Scottish Greens in the regional vote part (the one usually cast for a party list) of the two-vote system. Despite the use of the mixed-member proportional electoral system for Scottish Parliament elections, the effective number of parliamentary parties in the body has dropped from a high of 4.2 after the 2003 election to 2.6 in 2011, suggesting that we should not give too much credit to the impact of the electoral system on the party system.

Perhaps paradoxically, the real winner of the 2014 independence referendum was the SNP. The party has emerged energised, larger, and better connected to the public. It now stands head and shoulders above its Unionist competitors. While the SNP finds itself in an enviable position, it must avoid complacency. The party began its ascent in 2007 by being seen as potentially more competent than Labour, and its performance running a minority government was rewarded in 2011 with a majority of seats; academic research has shown that public support for independence (typically among only about a third of the electorate in recent years) explains only a portion of the SNP’s support. Sturgeon must be careful to maintain her party’s image for competent management of Scotland’s affairs while appealing to the broad majority of Scots (even those who rejected independence) as their advocate when it comes to dealing with the UK government and the likelihood of further spending cuts after the 2015 election.

The big increase in the SNP’s membership following the referendum could pose challenges to the party’s leadership. The recent membership surge from some 25,000 to over 80,000 in the weeks following the referendum could make the party more difficult to govern. Many of the new members (perhaps alienated Scottish Labour members or voters) are likely to hold left-wing views and this could put pressure on what has been a remarkable effort to keep the party unified. Those disappointed or unimpressed with the SNP, however, could instead look to civil society, which has also been jolted by the referendum. The Yes Scotland campaign evolved into a social movement, with a range of organisations working together; aside from political parties, groups like Women for Independence, Business for Scotland, and the Radical Independence Campaign represented a wide spectrum of the public, and the movement included prominent individuals not associated with any party.

The aftermath of Scotland’s independence referendum resembles an upside down political situation: losers turned into winners and members of the public – including many from modest backgrounds – refusing to go ‘back into their boxes’. The supposed winners – the Unionist parties and privileged classes – must be just as puzzled as those living outside Scotland.

About the Author

Thomas LundbergThomas Lundberg is Lecturer in Politics at the University of Glasgow.

The idea that there is a welfare-dependent underclass is wrong

A new book by John Hills explores key issues in the current debate about ‘welfare’ and the welfare state. The debate contrasts a stagnant group of people benefiting from it all with the rest who pay in and get nothing back – ‘skivers’ against ‘strivers’. John explains how, because people’s lives and circumstances change, most of us get back something at least close to what we pay in over our lives towards the welfare state.

Twenty-five years ago Granada television and my colleague in LSE’s social policy department, Julian Le Grand, came up with a novel way of presenting the effects of social policy. Instead of graphs, tables and talk, they used a TV game show between two families – the Ackroyds, from Salford in Greater Manchester, and the Osbornes, from Alderley Edge in Cheshire – to illustrate who got what out of the welfare state of the time. Which of these stereotypical working-class and middle-class families were the true ‘Spongers’ of the show’s title, most ‘dependent on government’ in current formulations, if one could look over their whole lives?

As it happens, the longer-living, university-educated, opera-loving middle-class Osbornes turned out to be the winners, getting more than the working-class Ackroyds. A follow-up programme which I helped with, Beat the Taxman, two years later looked at which family had done best as a share of income out of the tax reforms of the Thatcher years. Perhaps less surprisingly, the Osbornes won that one too.

What was special about these families was that, in the words of the game show host Nicholas Parsons, “we’ve invented them”. A quarter of a century later I’ve gone back to those families and their (newly invented) children and grandchildren to explore key issues in the current debate about ‘welfare’ and the welfare state.

Good times bad times [FC]In my new book, Good Times, Bad Times: The welfare myth of them and us, I present the results of research over the last decade or more in LSE’s Centre for Analysis of Social Exclusion (CASE) and elsewhere using large datasets, our own surveys, government statistics, and the results of computer simulations.

But the continuing lives of the Osbornes and the Ackroyds may bring home some of its key points. There are Gary and Denise Ackroyd, whose incomes vary widely from month to month as his hours as a van driver change and her work in a school only brings in pay only in term-time, contrasting with the stable and predictable incomes of people like young civil servant Charlotte Osborne (and of many academics).

Over the 2000s, the circumstances of the Osborne parents, Stephen and Henrietta changed a lot, particularly after Stephen’s heart attacks and decision to down-shift his accountancy work, but they still remained in the top 2 per cent of the income distribution. By contrast, the changes in the size of their family and the effects of Jim Ackroyd losing his job in 2006 meant that he and his wife Tracy bounced around the income distribution – close to being in the poorest tenth in two years, but just above the middle by the time they were empty nesters in 2010.

The book also looks at the life chances of the newest grandchildren, George Ackroyd and Edward Osborne, born at the same time in July last year. If we knew nothing about them apart from where they were born, we would already expect Edward to live nearly four years longer. And although some of the educational gaps have closed in the last decade, the chances are that Edward will be doing better at school from the very start, leave with better qualifications, go to a better university, earn much more and build up a far higher level of wealth. There’s nothing predetermined about that, and George Ackroyd might buck the trend – it’s just that he starts with the odds against him.

And looking at the recent past, the poorest of the families, lone mother Michelle Ackroyd, working 16 hours a week on a low wage, turns out to have lost 6 per cent of her income from tax credit and benefit cuts and austerity tax rises since May 2010. By contrast the most affluent of the families – Stephen Osborne with £97,000 per year earnings and his wife with £9,000 from her part-time teaching, plus significant investment income – have lost slightly less in weekly cash than Michelle, and only 0.7 per cent of their income.

Twenty-five years on, more than ever, the debate around ‘welfare’ contrasts a stagnant group of people benefiting from it all, while the rest pay in and get nothing back – ‘skivers’ against ‘strivers’; dishonest scroungers against honest taxpayers; families where three generations have never worked against hard-working families; people with their curtains still drawn mid-morning against alarm-clock Britain; ‘Benefits Street’ against the rest of the country; undeserving and deserving; them against us. We are always in work, pay our taxes and get nothing from the state. They are a welfare-dependent underclass, pay nothing to the taxman, and get everything from the state.

But we don’t need made-up examples to know that arid picture of unchanging lives is wrong. We know from our own experiences, those of our families – and from TV soap operas and nearly every novel – that people’s lives and circumstances change, and what we get out and put in changes over our lives.

It remains true that people starting advantaged remain much more likely than others to end up advantaged, and those who start poorer are more likely to end up poorer. But there is considerable variation and uncertainty around such average differences in life trajectories. This does not just include the long-term changes over the life cycle that we all go through, but also other variations and changes, from at one end the rapid variations many people experience in circumstances and need for support from week to week to, at the other end, the factors that affect the life chances of our children and our grandchildren.

As a result of all this variation in circumstances over our lives, most of us get back something at least close to what we pay in towards the welfare state. When we pay in more than we get out, we are helping our parents, our children, ourselves at another time – and ourselves as we might have been if life had not turned out quite so well for us. In that sense, we are all – or nearly all – in it together.

Good Times, Bad Times: The welfare myth of them and us is published by Policy Press. For further information, follow this link: Good times, bad times

About the Author

John HillsJohn Hills is Professor of Social Policy and Director of the Centre for Analysis of Social Exclusion (CASE) at the London School of Economics.

The increasingly close ties between leading politicians and journalists in Britain have been to the detriment of the public interest

The British press, from the Sun to the Telegraph and most points in between, were quick to castigate the Crown Prosecution Service for its attacks on the ‘free press’ after the acquittal of Rebekah Brooks and despite the conviction of Andy Coulson. There are no winners in this case, writes Mick Temple. Neither the press, police nor politicians emerge well from the hacking trial.

So now we know. The ‘wicked witch’ was not wicked after all – just ignorant. Rebekah Brooks was so unaware of  the methods employed by journalists under her command that we shall have to reassess the well-founded stereotype of the all-knowing editor with their fingers on the pulse of their newspaper. Innocent of the charges against her, are we to conclude that she was merely one of the most incompetent editors Fleet Street has ever seen?


Apparently unaware of this reading of events, Rebekah Brooks left court feeling, in her own words, ‘vindicated’ by the jury’s decision that she was innocent of hacking telephones, perverting the course of justice and conspiracy to pay public officials. And our national newspapers felt equally vindicated.


Despite former News of the World editor Andy Coulson being found guilty of conspiracy to hack voicemails, the British press, from the Sun to the Telegraph and most points in between, were quick to castigate the Crown Prosecution Service for its attacks on the ‘free press’. The Daily Telegraph’s editorial trumpeted that Brooks’ not guilty verdict was a ‘devastating blow’ to those who have attempted to ‘besmirch’ all newspapers with the bad practices of some journalists.


The Sun’s front page proclaimed a ‘Great Day for Redtops’. But for most of us long-term observers and supporters of the British press – and I must add, opponents of press regulation – there was little to celebrate. In addition to Coulson, let’s not forget that a number of people employed by the News of the World have already admitted or been found guilty of phone hacking, and that two dozen journalists, mostly from the Murdoch press, are still awaiting trial on comparable charges.


Image: Duncan C (CC BY-NC)


The press also made a lot of the huge cost of the trial, at the expense of ‘terrorist’ and ‘paedophile’ investigations. For the Daily Mail, this ‘disproportionality’ of the police response was led by ‘the left-leaning Guardian’ and a ‘handful of tabloid-hating celebrities’. The result was that the ‘public purse has paid the most outrageous price for politicking and expedience’.


In truth, neither the press, police nor politicians emerge well from this trial. The police directed unprecedented resources at this case, for their critics far beyond an appropriate level. Their own wrongdoing appears to have been largely swept under an increasingly grubby carpet.


Our newspapers, and not just the redtops, have suffered a considerable blow to their already dreadful public image. The press, still resisting the post-Leveson calls for statutory press regulation from pressure groups such as Hacked Off, have retreated to the ‘few bad apples’ defence which was formerly the exclusive property of our police force.  As some of us predicted in the immediate wake of Leveson, don’t hold your breath waiting for press regulation. It won’t happen now.


But perhaps it is the image of politicians, and in particular that of the prime minister, that has fared the worse. And our newspapers have been quick to try and swivel the spotlight onto political malpractice. On the day after Ms Brooks was found innocent and Coulson guilty, the increasingly critical Daily Mail focused on the consequences for David Cameron: as its front page headline starkly put it, the verdict on Coulson was ‘Humiliation for Cameron’.


Adding further to the pressure on him, the Guardian’s Nick Davies alleged last week that David Cameron had misled the Leveson Inquiry with his account of the appointment and vetting of Andy Coulson. Mr Cameron has also been publicly criticised to an unprecedented degree by the trial judge. The prime minister’s apology for believing Andy Coulson’s lies to him when he appointed him as chief spin doctor was made while the jury was still deliberating on charges of conspiracy against Coulson.


To coin a cliché, there are no winners in this case. Despite their triumphant response to Rebekah Brooks’ innocence, a section of the press has been exposed as even more vicious and sleazy than we suspected. Our police have been exposed as at best incompetent and at worse corrupt. And our politicians, most damagingly of all, our prime minister, have been clearly shown to lack essential judgement. Despite many warnings from those who knew, the prime minister allowed a corrupt and mendacious journalist into the heart of government.


While I concur with The Economist’s judgement of the Leveson Report as decidedly ‘mediocre’, Leveson’s central message was clear and indisputable. The relationship between British politicians and journalists needs to change. Senior politicians have for too long responded like Pavlov’s dogs to the temporary obsessions of newspapers like the Sun and Daily Mail, and are so afraid of powerful press barons like Rupert Murdoch that they openly court their approval and support in return for policy pay-offs. Our politicians maintain a belief in the king-making powers of the British press, whose influence on the public is in all probability far less than frequently claimed.


The evidence presented to Leveson showed a relationship corrupted by mutual suspicion and cynicism in which the public have been the chief losers. In a democracy, the exchange of information between journalists and politicians is both necessary and inevitable but the increasingly close ties between leading politicians and journalists in Britain have been to the detriment of the public interest. The public sphere has been poisoned by a ‘daily drip-feed of falsehood and distortion’, as Nick Davies so aptly puts it.


If we believe that an informed population is essential to democracy, then public trust in our press is crucial. If the electorate’s perception of both the press and politics is predominantly of worlds inhabited by the devious, ill-informed, corrupt or incompetent, they are unlikely to believe political news reporting and far less likely to engage in any meaningful political activity. Declining electoral participation rates, falling party memberships and unprecedently low levels of public trust in both politicians and journalists do not suggest a thriving political public sphere. Although our newspapers are only one factor, they have contributed to the decline.


But perhaps the biggest danger to our public institutions is not the aura of sleaze that the last few years have fostered. The appearance of incompetence is potentially far more damaging. For example, Bill Clinton’s competence turned out to be more important to the American public than his somewhat sleazy personal life.


We appear to have an incompetent political class, exemplified by the inappropriate appointments and friendships of David Cameron and his knee-jerk response to the trial; an incompetent police force whose failure to investigate the original allegations of press (and police) corruption contributed to an even bigger scandal; and an incompetent press where the owners, executives and editors of some of our major newspapers seemed unable to comprehend the corruption within their own empires.




Mark Carney is saying invest your money, but there are still risks

Governor has given the green light with continued low interest rates, but markets, inflation or a housing bubble bring caution

Larry Elliott, economics editor
The Guardian, Wednesday 7 August 2013 14.25 BST

Mark Carney, governor of the Bank of England at the quarterly inflation report.

Get out there and spend. Feel free to take the plunge and buy that house. Go ahead with plans for new investment mothballed since the recession.

That, in short, was the message from the Bank of England to consumers, property hunters and entrepreneurs on Wednesday. Why? Because unless something unexpected happens, official interest rates are staying where they have been since early 2009 until 2016 at the earliest.

Such a long period of cheap money would be unprecedented. The Bank of England has never had interest rates this low in its 319-year history and is on course to keep them pegged at 0.5% for longer than it took the allies to win the second world war, longer than the French Revolution between the storming of the Bastille and the topping of Robespierre, and longer than it took the Beatles to record everything from Love Me Do to Abbey Road.

Quite a period, and evidence of just how fragile Threadneedle Street thinks the economy remains following the deepest recession and the slowest recovery in recorded history.

The financial crisis has left deep scars on the UK. This was an economy, after all, which became chronically dependent on the casino activities of the City and an over-heated property market. Matters have been made worse by the debt crisis in the eurozone, which has hit exports, and by the government’s deficit reduction plan.

That has left the Bank of England with responsibility for keeping the economy going and, fearful that recent signs of green shoots could be nipped in the bud by unwarranted suspicion that it would soon tighten policy, the Bank provided guidance on how it intends to play things.

Monetary policy is now unashamedly pro-growth and deep into uncharted waters. It has raised the inflation target to 2.5% in all but name and is effectively operating the sort of twin mandate system used by the US Federal Reserve in which growth and price stability carry equal weight.

Having experimented with quantitative easing, the Bank is now trying forward guidance: sending messages out about how it intends to conduct policy in the future. Unemployment as measured by the internationally agreed labour force survey measure of joblessness, will have to come to 7% before the monetary policy committee will even consider raising interest rates or starting to sell back to the financial markets the £375bn of government bonds it has bought under the QE scheme.

Unemployment on the LFS measure is currently 7.8%, and according to the Bank’s forecasts will not hit 7% until 2016. Conveniently for George Osborne, that means well after the next general election. Carney was hand-picked by Osborne to replace Mervyn King and the chancellor must have been well pleased with his first big public outing.

The new governor made it clear that he considered the strong data in recent weeks no big deal: “There is understandable relief that the UK economy has begun growing again. But there should be little satisfaction.”

Even after raising its forecast for growth this year to 1.4% (from 1.2%) and to about 2.5% next year, the outlook is for weak post-recession expansion by historic standards.

The MPC wants to see this recovery fully embedded and believes that there is plenty of scope for expansion while keeping inflation to 2%. But the plan to keep monetary policy ultra-loose is not a hard-and-fast promise and there are three circumstances (or knockouts) in which the MPC would consider action before the 7% threshold is reached.

The first would be if inflation 18-24 months ahead was expected to be more than 0.5 percentage points above its 2% target.

This, though, is much less of a “knockout” than it looks. The Bank invariably says inflation will be back to 2% within two years, and did so even when it was running above 5%.

The second knockout – that action would be contemplated if medium-term inflation expectations slip their anchor – is also a bit fuzzy since it will depend on the subjective judgment of the MPC.

Finally, the MPC would rethink its policy stance if it thought an abundance of cheap credit was fuelling an asset-price boom that could not be controlled by the bodies charged with regulating the City – the financial policy committee and the Prudential Regulation Authority. Even so, it would probably want to see whether imposing specific capital requirements for lending to certain sectors of the economy (such as real estate) would work first.

So, in reality policy is not going to change anytime soon, despite the risks.

The Bank believes there is plenty of spare capacity in the economy following the slump but it doesn’t know exactly how much. If there is less than it thinks, faster growth will quickly feed through into higher inflation. Nor does it really know whether there is a stable relationship between inflation and unemployment in the UK, in the way there appears to be in the US.

Nor can it confidently predict how the financial markets will respond to the news that monetary policy will remain unchanged for another three years at a time when other central banks – the US Federal Reserve for example – will be tightening. Sterling looks vulnerable to a tumble on the foreign exchanges, thereby stoking imported inflation.

Finally, there is the risk that when policy is tightened it will need to be tightened aggressively. Britain’s predilection for booms and busts in the past 40 years means that a good, old-fashioned housing bubble, with its attendant balance of payments deficits, cannot be ruled out.

The Bank, though, considers this to be a risk worth running. It has plenty of experience of recessions caused by over-heating and knows how to deal with them. But the slump of 2007-09 was different. Normal policy tools weren’t effective in a downturn caused by global financial systems failure. That’s why exceptional measures were deemed necessary. And are still deemed necessary, whatever the side effects may prove to be.

LSE British Politicast Episode 2: Austerity Economics and Central Banking

LSE British Politicast Episode 2: Austerity Economics and Central Banking

Posted: 31 Jul 2013 04:00 AM PDT

In this episode, we focus on austerity economics and the role of central banks in times of financial crisis. The UK coalition government embarked on a programme of spending cuts when it came to power in 2010. Since then many economists and academics have argued that the intellectual justification for austerity has crumbled and it is a self-defeating strategy in bad economic times. Mark Blyth, Professor of Political Science at Brown University in the US, takes this view in his new book Austerity: The History of a Dangerous Idea. He discusses why he thinks austerity is merely a form of self-harm. We also hear from Claire Jones, economics reporter at the Financial Times about the role of central banks, particularly that of the Bank of England, in the age of austerity.LSE British Politicast Episode 2: Austerity Economics and Central Banking.


Conservative claims about benefits are not just spin, they’re making it up

Government ministers like Iain Duncan Smith and Grant Shapps are misrepresenting official statistics for political gain

Declan Gaffney and Jonathan Portes, Monday 15 April 2013 15.32 BST

Conservative minister Grant Shapps has quoted a misleading statistic about the number of people on incapacity benefit dropping their claims as evidence of a broken welfare system. Photograph: Richard Sellers/Allstar/Sportsphoto Ltd
In the past three weeks, readers of mainstream UK newspapers have learned a number of things about the UK social security system and those who rely on it. They have learned that 878,000 claimants have left employment and support allowance (ESA) to avoid a tough new medical assessment; that thousands have rushed to make claims for disability living allowance (DLA) before a new, more rigorous, assessment is put in place; and that one in four of those set to be affected by the government’s benefit cap have moved into work in response to the policy. These stories have a number of things in common. Each is based on an official statistic. Each tells us about how claimants have responded to welfare policy changes. Each includes a statement from a member of the government. And each is demonstrably inaccurate.

When we say inaccurate, we are choosing our words carefully. Politicians are inevitably selective in the data they choose to publicise, picking the figures that best suit whatever story they want to tell. This can mean that stories that are technically accurate can nonetheless be potentially misleading. Within reasonable limits that is in itself neither improper nor unethical: indeed, it is virtually unavoidable. But here are some examples that are not just misleading: they assert that official government statistics say things they do not.

First, the claim that “more than a third [878,000] of people who were on incapacity benefit [who] dropped their claims rather than complete a medical assessment, according to government figures. A massive 878,300 chose not to be checked for their fitness to work [our italics].” For the Conservative party chairman, Grant Shapps, the figures “demonstrate how the welfare system was broken under Labour and why our reforms are so important”.

In fact, every month, of the roughly 43,000 people who leave ESA, about 20,000 have not yet undergone a work capability assessment (WCA); a number that over four years or so adds up to the headline 878,000. There is no mystery about this: there is an inevitable gap between applying for the benefit and undertaking the WCA. During that time, many people will see an improvement in their condition and/or will return to work (whether or not their condition improves). DWP research has shown that overwhelmingly these factors explain why people drop their claims before the WCA; it also showed that it was extremely rare for claimants not to attend a WCA. In stating, in effect, that official figures showed the opposite of this, the story was simply wrong.

Iain Duncan Smith’s assertion about a surge in DLA claims turns on the fact that DLA is being abolished for new claims and replaced with a new benefit, personal independence payment (PIP), for which most claimants will require a face-to-face assessment (for DLA, other forms of medical evidence could be used to support claims). He said: “We’ve seen a rise [in claims] in the run-up to PIP. And you know why? They know PIP has a health check. They want to get in early, get ahead of it. It’s a case of ‘get your claim in early’.”

Some very specific figures were cited: “In the north-east of England, where reforms to disability benefits are being introduced, there was an increase of 2,600 in claims over the last year, up from 1,700 the year before, the minister told the Daily Mail. In the north-west, there were 4,100 claims for the benefits over the past 12 months, more than double the 1,800 in the previous year, he said.”

But these figures, to be found on DWP’s website, in fact represent the change – successful new claims minus those leaving the benefit – in the total DLA caseload from August 2011 to August 2012, crucially including pensioners and children who are not affected by the change from DLA to PIP. They do not constitute even indicative evidence of a DLA “closing down sale”. So what happens if we look at new claims, or indeed the total caseload, for those (between 16 and 64) who will be actually affected by the change? In fact, both fell, in both regions, between those two dates. These falls – well within the normal quarterly variation – tell us little, except to show conclusively that Duncan Smith’s statements are supported by no evidence that he has offered whatsoever.

Finally, the coalition’s flagship “benefit cap”. On this occasion, not only did Duncan Smith misrepresent what his own department’s statistics meant, but he chose to directly contradict his own statisticians, claiming: “Already we’ve seen 8,000 people who would have been affected by the cap move into jobs. This clearly demonstrates that the cap is having the desired impact.”

But the official DWP analysis, from which the 8,000 figure is drawn, not only does not say this, it says the direct opposite: “The figures for those claimants moving into work cover all of those who were identified as potentially being affected by the benefit cap who entered work. It is not intended to show the additional numbers entering work as a direct result of the contact [their emphasis].”

As DWP analysts know only too well, people move off benefits into work all the time. Unless it is shown that these flows have increased for those affected, and by more for them than for other claimants – and no such analysis has yet been published, either by DWP or anybody else – we know nothing about whether the policy has had any impact (this claim is now being reviewed by the UK statistics authority).

None of this should be taken as comment on the merits of the policies in question. But these misrepresentations of official statistics cross a line between legitimate “spin”, where a government selects the data that best supports its case, and outright inaccuracy.

Public cynicism about official statistics is often misplaced – the UK, like most democracies, strictly limits the ability of governments to influence the production and dissemination of official data, often, no doubt, to the frustration of ministers. These restrictions on what government can do with official data are an unsung but essential element in modern democratic governance. When government seeks to get around these limitations by, in effect, simply making things up, this is not just an issue for geeks, wonks and pedants – it’s an issue for everyone.

• This article was amended on 19 April 2013. The original said 130,000 people leave employment and support allowance every month; that is in fact how many people leave ESA each quarter.

Measuring Leviathan: Big Government and the Myths of Public Spending | Whitehall Watch

Posted on January 14, 2013 by Colin Talbot

The political debate about public spending in the UK is bedevilled by myths and spin about how much we actually spend. So I thought it was time for a little myth-busting primer, with some pretty diagrams, about how we should be discussing public spending….

There are three main ways of measuring public spending, each of which has advantages and disadvantages.

Nominal (Cash) Spending

The first is in what is technically called the “nominal” amount spent – that is in actual cash that goes out of the Treasury coffers. Because of the effects of inflation, this nearly always rises (see Figure 1). Only twice in the past half century has the cash amount fallen – in 2000-01. It is forecast to fall again, for one year only, in 2012-13.

This is useful to some who want to argue that the State spends too much – for example some right-wing Conservative politicians and think-tanks currently claim that we are not experiencing “cuts” because the actual amount of cash being spent by the government continues to rise. Figure 1 makes it look like the State is an ever-increasing devourer of resources. But if inflation in prices is taken into account, things look a bit different.

Figure 1 Public Spending in ‘nominal (cash) terms 1965-66 to 20214-15 (£ billion)

Fig 1

Source: based on HM Treasury[i]

Real-Terms Spending

Real-terms spending is the amount spent with inflation taken into account.

Figure 2 Public Spending in Real-Terms (2011-12 prices)(£ billion)

Fig 2

Real-terms spending shows a far less dramatic increase than nominal spending, and some periods where spending levelled-off or even decreased. It shows, for example, a significant (mainly forecast) decrease in real-terms under the current Coalition government.

Again though, this way of looking at public spending can make it look like the State is a more-or-less ever expanding beast soaking up more and more of the nation’s wealth. This may, or may not be true – but the only real way of knowing is by seeing how public spending compares to nations wealth.

Spending as a proportion of GDP

Gross Domestic Product (GDP) is the main measure used by governments and others to estimate how wealthy countries are. There are many criticisms of GDP measurement, which we won’t go into here, but it’s the best we have at the moment for tracking growth (or lack of it) in our won economy and comparing our economic performance with other countries.

Public spending as a proportion of GDP has thus become the main, and most useful, way of tracking how much our national wealth we devote to public activities as opposed to private enterprise.

It’s main fault is obvious: because it is a ration of public spending and GDP a sudden change in GDP can easily look like a sudden change in public spending. Thus, for example, it looks like public spending suddenly sky-rocketed in the last three years of the last Labour government (see Figure 3) – whereas in fact (in real-terms – see Figure 2) it only increased slightly. The sudden change from 40.7% of GDP to 47.3% was almost entirely due to the recession the UK experienced as a result of the Global Financial Crisis (GFC).

Figure 3 Public Spending as a percentage of GDP (1965-66 to 2014-15)

Fig 3

Public spending as a proportion of GDP has averaged just under 43% of GDP (42.76% to be more precise) for the past 50 years.

It has swung between as high as 50% (under Labour 1975-76) and as low as 35% (also under Labour in 2000-01).

But what a detailed analysis of these figures shows is that some of mythology that passes for political “facts” in Britain is just that – myth.

The first is that Labour is always the “tax and spend” Party whereas the Conservatives are far more thrifty with the public’s money.

The facts are rather more mixed (see Figure 4). It is true that the 74-79 Labour Government spent on average more, as a proportion of GDP, than any other government in the past 50 years – but this is not true for the other periods of Labour government, when Labour spent less, on average, than the Conservative (or Conservative led) governments.

In particular the widespread myth that the last “New” Labour government spent vastly more is just that – a myth. On average, even including the effects of the GFC, the last Labour government spent the least of the Governments since 1965. The myth has grown up because both Labour and their opponents wanted to promote the idea Labour spent lots. And because, especially between 2000 and 2005, Labour did rapidly increase spending – especially on health and education – but only after a period of unprecedented low spending between 1997 and 2000.

Figure 4 Public spending as percentage of GDP under different Governments (1965-2015)

Fig 1

This analysis only covers one aspect of public finances – spending – which is itself only one measure of how big the State is. But I hope it will help people to explain, and explore, some of the real issues about public spending rather than trading in myths and spin.

[i] All the figures used in this analysis are based on Public Expenditure Statistical Analysis (PESA), published annually by HM Treasury. The figures for 1971-72 to 2014-15 are taken from PESA 2012. For 1965-66 to 1970-71 are taken from PESA 2003. Some of the calculations are my own, based on the HMT figures.

via Measuring Leviathan: Big Government and the Myths of Public Spending | Whitehall Watch.

Someone tell David Cameron that tax avoidance starts at home

Cameron’s Davos speech was long overdue. But the very corporate tactics he condemns abroad, he enables in the UK

Richard Murphy, Thursday 24 January 2013 14.40 GMT

After a decade of campaigning for tax justice it was gratifying to hear David Cameron endorse much of what we have called for at Davos this morning. Unfortunately, as just a few examples show, the prime minister has a long way to go before he walks the talk.

Tax avoidance

Cameron’s said “There are some forms of avoidance that have become so aggressive that …. it’s time to call for more responsibility and for governments to act accordingly.”

When delivering the message he added: “Companies need to wake up and smell the coffee, because the customers who buy from them have had enough”. It could not have been more obvious that he has Starbucks in mind. He’s set the bar on this issue at a point where it must be tackled.

And yet Cameron faces a massive domestic credibility problem as a result. The government’s much trumpeted General Anti-Abuse Rule, which will be enacted this year, which Cameron says targets tax avoidance, will deliberately not go near targeting the sorts of tax avoidance undertaken by Starbucks, Google and Amazon. Legislation put forward by Michael Meacher MP and written by me that would let HM Revenue & Customs challenge their sort of tax avoidance has also been rejected by the government.

It’s all very well for Cameron to say that tax avoidance must be tackled internationally. His difficulty is that he could do it at home as well and has chosen not to do so. He’s correctly assessed that there is real political anger on this issue now; he’s got his assessment of what people want seriously wrong if he thinks his government’s proposals will satisfy those demanding reform.


Cameron said: “The third big push of our agenda is on transparency, shining a light on company ownership, land ownership and where money flows from and to.” I’m delighted he said this, but I am disappointed he added that “this is critical to developing countries” as if somehow this is a problem for Africa but not for us.

Opacity permits corruption everywhere. Accounts that fail to account meaningfully hinder effective economic decision-making. Limited liability companies, existing in a void with no apparent owners who accept responsibility for their decisions, blight economies and permit massive tax dodging. And nowhere is that more true than in the UK.

At present a multinational company trading in the UK does not have to publish a separate profit and loss account for this country so we can see how much tax it pays in the UK. Nor does it have to do so for all the tax havens in which it operates. If Google, Starbucks and Amazon had been required to do that we’d have seen their tax avoidance a lot earlier. So yes, we need transparency for developing countries, but we need it too in the form of full country-by-country reporting.

Despite that, just a couple of days ago David Gauke, the Conservative exchequer secretary, under Labour questioning showed his continued indifference towards country-by-country reporting.

That’s also true on beneficial ownership. There is no legal requirement to disclose beneficial ownership of a company in the UK at present, and our company registry is a near perfect example of appalling company regulation on this and other issues, striking off hundreds of thousands of companies a year rather than demand that they comply with their legal obligations.

If Cameron wants to show the world the way on beneficial ownership he can begin at home by making Companies House into a regime fit for the 21st century. He should follow up with the land registry – riddled as it is with anonymous offshore companies – and then demand that our tax havens put beneficial ownership on public record just as we should.

Automatic information exchange

Cameron said: “If there are options for more multilateral deals on automatic information exchange to catch tax evaders, we need to explore them.” I agree, wholeheartedly. It’s just a shame he said this the month the UK’s appalling tax agreement with Switzerland comes into force that guarantees tax evaders anonymity, lets them off most of the tax they owe, and preserves Swiss banking secrecy in the process. Germany’s parliament rejected such a deal to hold out for full automatic information exchange with Switzerland. The UK harmed the cause by going ahead alone.

And that’s the problem with this whole speech. The talk is great. I welcome it. As Cameron said: “After years of [tax] abuse, people across the planet are calling for more action and most importantly, there is gathering political will to actually do something about it.” He’s right. But Cameron’s pretending the solution lies outside the UK. It doesn’t. It starts at home. And some of the biggest obstacles to be overcome require some serious rethinking of his own government’s agenda on tax, accountancy, regulation, transparency and tax havens, all of which could change without the need for any outside co-operation. We’ve still got a long way to go to win this debate.