Lest we forget – in 2007 Cameron endorsed even less regulation of banks than Labour ……

Lest we forget – in 2007 Cameron endorsed even less regulation of banks than Labour …….

Advertisements

The French are right: tear up public debt – most of it is illegitimate anyway

Debt audits show that austerity is politically motivated to favour social elites. Is a new working-class internationalism in the air ?

 

Chile artist burns studetn debt

Contracts for Chilean student loans worth $500m go up in flames – the ‘imaginative auditing’ of the artist Francisco Tapia, commonly known as Papas Fritas (Fried Potatoes). Photograph: David von Blohn/REX

 

As history has shown, France is capable of the best and the worst, and often in short periods of time.

On the day following Marine Le Pen’s Front National victory in the European elections, however, France made a decisive contribution to the reinvention of a radical politics for the 21st century. On that day, the committee for a citizen’s audit on the public debt issued a 30-page report on French public debt, its origins and evolution in the past decades. The report was written by a group of experts in public finances under the coordination of Michel Husson, one of France’s finest critical economists. Its conclusion is straightforward: 60% of French public debt is illegitimate.

Anyone who has read a newspaper in recent years knows how important debt is to contemporary politics. As David Graeber among others has shown, we live in debtocracies, not democracies. Debt, rather than popular will, is the governing principle of our societies, through the devastating austerity policies implemented in the name of debt reduction. Debt was also a triggering cause of the most innovative social movements in recent years, the Occupy movement.

If it were shown that public debts were somehow illegitimate, that citizens had a right to demand a moratorium – and even the cancellation of part of these debts – the political implications would be huge. It is hard to think of an event that would transform social life as profoundly and rapidly as the emancipation of societies from the constraints of debt. And yet this is precisely what the French report aims to do.

The audit is part of a wider movement of popular debt audits in more than 18 countries. Ecuador and Brazil have had theirs, the former at the initiative of Rafael Correa’s government, the latter organised by civil society. European social movements have also put in place debt audits, especially in countries hardly hit by the sovereign debt crisis, such as Greece and Spain. In Tunisia, the post-revolutionary government declared the debt taken out during Ben Ali’s dictatorship an “odious” debt: one that served to enrich the clique in power, rather than improving the living conditions of the people.

The report on French debt contains several key findings. Primarily, the rise in the state’s debt in the past decades cannot be explained by an increase in public spending. The neoliberal argument in favour of austerity policies claims that debt is due to unreasonable public spending levels; that societies in general, and popular classes in particular, live above their means.

This is plain false. In the past 30 years, from 1978 to 2012 more precisely, French public spending has in fact decreased by two GDP points. What, then, explains the rise in public debt? First, a fall in the tax revenues of the state. Massive tax reductions for the wealthy and big corporations have been carried out since 1980. In line with the neoliberal mantra, the purpose of these reductions was to favour investment and employment. Well, unemployment is at its highest today, whereas tax revenues have decreased by five points of GDP.

The second factor is the increase in interest rates, especially in the 1990s. This increase favoured creditors and speculators, to the detriment of debtors. Instead of borrowing on financial markets at prohibitive interest rates, had the state financed itself by appealing to household savings and banks, and borrowed at historically normal rates, the public debt would be inferior to current levels by 29 GDP points.

Tax reductions for the wealthy and interest rates increases are political decisions. What the audit shows is that public deficits do not just grow naturally out of the normal course of social life. They are deliberately inflicted on society by the dominant classes, to legitimise austerity policies that will allow the transfer of value from the working classes to the wealthy ones.

French Indignants A sit-in called by Occupy France at La Défense business district in Paris. Photograph: Afp/AFP/Getty Images A stunning finding of the report is that no one actually knows who holds the French debt. To finance its debt, the French state, like any other state, issues bonds, which are bought by a set of authorised banks. These banks then sell the bonds on the global financial markets. Who owns these titles is one of the world’s best kept secrets. The state pays interests to the holders, so technically it could know who owns them. Yet a legally organised ignorance forbids the disclosure of the identity of the bond holders.

This deliberate organisation of ignorance – agnotology – in neoliberal economies intentionally renders the state powerless, even when it could have the means to know and act. This is what permits tax evasion in its various forms – which last year cost about €50bn to European societies, and €17bn to France alone.

Hence, the audit on the debt concludes, some 60% of the French public debt is illegitimate.

An illegitimate debt is one that grew in the service of private interests, and not the wellbeing of the people. Therefore the French people have a right to demand a moratorium on the payment of the debt, and the cancellation of at least part of it. There is precedent for this: in 2008 Ecuador declared 70% of its debt illegitimate.

The nascent global movement for debt audits may well contain the seeds of a new internationalism – an internationalism for today – in the working classes throughout the world. This is, among other things, a consequence of financialisation. Thus debt audits might provide a fertile ground for renewed forms of international mobilisations and solidarity.

This new internationalism could start with three easy steps.

1) Debt audits in all countries

The crucial point is to demonstrate, as the French audit did, that debt is a political construction, that it doesn’t just happen to societies when they supposedly live above their means. This is what justifies calling it illegitimate, and may lead to cancellation procedures. Audits on private debts are also possible, as the Chilean artist Francisco Tapia has recently shown by auditing student loans in an imaginative way.

2) The disclosure of the identity of debt holders

A directory of creditors at national and international levels could be assembled. Not only would such a directory help fight tax evasion, it would also reveal that while the living conditions of the majority are worsening, a small group of individuals and financial institutions has consistently taken advantage of high levels of public indebtedness. Hence, it would reveal the political nature of debt.

3) The socialisation of the banking system

The state should cease to borrow on financial markets, instead financing itself through households and banks at reasonable and controllable interest rates. The banks themselves should be put under the supervision of citizens’ committees, hence rendering the audit on the debt permanent. In short, debt should be democratised. This, of course, is the harder part, where elements of socialism are introduced at the very core of the system. Yet, to counter the tyranny of debt on every aspect of our lives, there is no alternative.

 

Why Northerners don’t vote Tory

by in Commentary, Editor’s picks, Front Page and Politics
Mon October 21, 2013 9:32 a.m. BST
 

YouGov President Peter Kellner on why the Conservative party’s trouble with northerners may have less than to do with economic, ideological or social factors than one might expect

Karl Marx was wrong; or, at any rate, unfair. He complained that philosophers “only interpreted the world” when the point was to change it.  The trouble is, change is likely to work only when we understand what is wrong. The Conservatives badly want to change the voting habits in the north of England; but to do so, they must first answer the fundamental question: why don’t northerners vote Tory?

Want to receive Peter Kellner’s commentaries by email? Subscribe here

Some do, of course. George Osborne (Tatton, Cheshire) and William Hague (Richmond, North Yorkshire) have safe seats. But these are rare. Just 31% of northern voters backed the Tories in 2010, 12 points less than in the rest of England.

It used not to be like that. When Winston Churchill led the Conservatives back into power in 1951, the gap was just three points (North 47%, rest of England 50%). Over the decades, the North has drifted away from the rest of the country.

The past 60 years have seen massive economic and social changes. Perhaps these explain the remorseless decline of northern Tories? The problem with this explanation is that the most obvious change should have had the opposite effect. The old coalmining, ship-building, steel-working areas have gone. The old Lowry landscapes of billowing factories have all but disappeared. One might have expected Labour’s hold over the industrial North to have weakened, and for the Conservatives to have benefited from the transition to newer, less unionised and more fragmented northern economy. And, indeed, Labour’s support is down, from 52% in 1951 to 38% in 2010. But it has not gone to the Tories. The net swing between 1951 and 2010 was 1% to Labour in the North – but 5% to the Tories in the rest of England.

There is one specific explanation for a part of the Conservatives’ long-term decline in the North. In some cities working-class loyalties used to divide along religious lines. Catholics voted Labour while Protestants voted Conservative. This was why Tories won five out of nine Liverpool seats in 1951. But by the Seventies, this effect had largely gone – yet the relative decline of the northern Tory vote continued. Today, there are no Conservative MPs in Liverpool, Manchester, Sheffield, Leeds, Bradford or Newcastle upon Tyne.

One possible explanation is that votes correlate with income. Northerners are worse off and therefore less likely to vote Conservative. However, this explanation does not wash. For a start, standards of living for typical families are actually much the same in the North and South. Overall, spending power is substantially higher in London and the South East; but these figures are heavily influenced by the minority of very higher earners in and around the capital.

If we define the South as the South East and South West regions (that is, excluding London; it is the definition of “South” used in the data for this article), then median pay rates in the North are just 10% lower than in the South. Then, when we take account of living costs (in particular rents and house prices, which are far higher in the South), then that 10% difference almost completely disappears as far as most working families are concerned.

What, though, about non-working families? Isn’t unemployment far higher in the North? Could this explain Tory unpopularity? Again, the answer is little, if at all. True, unemployment in the North (9%) is higher than in the South (6%). But unemployment in the West Midlands is higher still, at 10% – yet the Tories still managed to win 40% of the vote there three years ago.

Even if living standards are comparable, two other factors are worth examining: social class and the division between public and private sector jobs. Northerners are more likely than southerners to have manual jobs and to work in the public sector.

To examine these, I have aggregated YouGov polls from September this year. They provide data on more than 40,000 people across Britain, including more than 9,000 northerners and almost 13,000 southerners. This enables us to look in some detail at the demographic groups within both parts of Britain.

Social class first. As with pay rates, the differences between North and South are not massive. Using the normal definition – the job held by the head of household, 46% of northerners are working class compared with 41% of southerners. This is not enough to explain more than a fraction of the difference in voting patterns. Indeed, if we look at the Conservative share of the vote within each social class, the regional differences remain vast:

As those figures show, unskilled workers in the South are as likely to vote Conservative as managers and professionals in the North. It’s a similar story with public and private sector employment, with public sector workers in the South supporting the Tories in much the same proportions as private sector workers in the north.

To explore these, I have looked at a variety of recent YouGov surveys and also put some new questions to YouGov’s panel. The results allow us to test four possible sets of reasons why northerners don’t vote Tory.However we carve the figures, objective factors – whether economic, social or employment – account for only a small part of the gulf in Tory fortunes between South and North. It follows that most of the differences, therefore, are subjective, and relate to the way northerners and southerners think.

First, financial. Even if living standards are comparable, do northerners feel differently about their current circumstances and future prospects? The chart shows that there is no material difference on three out of four measures – how comfortable people feel today, their (low) optimism about the next 12 month and their (much higher) optimism about the long-term future.

1. Financial South % North %
Are very/fairly comfortable financially 37 35
Expect household finances to improve in the next 12 months 17 16
Workers worried that job is secure 38 44
Optimistic about “what life hold for you over the next 10-20 years” 59 60

In one respect attitudes do vary to a modest extent. Northerners in work are slightly more worried than southerners about losing their job. However, this seems to bear only a loose relationship with party loyalty. Once again, Midlands voters share similar economic numbers with the North (42% of Midlands workers feel insecure, versus 44% of northern workers) without sharing the same antipathy towards the Tories.

Second, ideology. From time to time YouGov asks people where they place themselves on a seven-point scale from “very left-wing” to “very right-wing”. Northerners and southerners show little difference, with only one in four describing themselves on “fairly” or “very” to one side or the other. At both ends of England, this minority divides evenly between left and right.

As for the role of government, the main, but again modest, difference is that northerners are more likely to have firm views one way or the other. More of them want the state to do and tax less – and more (though not many) want the state to do and tax more. Southerners are more content with the status quo.

2. Ideology South % North %

Regard themselves as very / fairly left-wing

Regard themselves as very / fairly right-wing

12

12

14

12

In long term, government should do less and tax less

In long term, government should do more and tax more

21

4

25

10

Private sector should play bigger role in delivering public services

Public sector should play smaller role in delivering public services

23

37

19

31

Think free market is best way to distribute goods and services 29 24
Would bring railways back into public ownership 61 64
Think Top tax rate should be 50% or more 49 55

In other respects, northerners are more likely to hold traditional left-of-centre views: more of them would like the private sector to play a smaller role in delivering public services; fewer of them agree that the free market is the best way to distribute goods and services and more think the top rate of tax should be raised to at least 50%. On the one explicitly socialist policy we tested, nationalising the railways, almost two-thirds of people at both ends of Britain back the idea. Overall, the small ideological gap explains a bit of the north-south party divide; but that is all.

Third, social attitudes. Here, the only difference to excite a statistician concerns welfare. Big majorities in all parts of Britain share the Conservative view that welfare benefits generally should be reduced; but southerners (79% of whom think this) outpace northerners (71%). On other issues – immigration, gay marriage, prison sentences, the EU and Syria – the differences are negligible. Whatever is driving northerners away from the Conservatives, it is not social attitudes. Like southerners, they want Parliament to get tough with immigrants, criminals and welfare recipients; and like southerners, they broadly support gay marriage and are divided on Europe.

3. Social attitudes South % North %
Want to stop all migration 48 50
Think welfare benefits generally should be reduced 79 71
Support gay marriage 53 56

More convicted criminals should be sent to prison

Fewer convicted criminals should be sent to prison

49

23

50

27

Would vote to stay in EU

Would vote to leave EU

39

43

40

41

Supported military action against Syria ahead of Commons vote

Opposed military action against Syria ahead of Commons vote

26

46

25

47

Ed Miliband is keen to present himself as a “One Nation” leader, stealing from the Tories the clothes designed by Benjamin Disraeli, who famously described England as “two nations between whom there is no intercourse and no sympathy”. Even if Disraeli’s two nations – the rich and the poor – persist in England today, they have little geographical expression. Whether judged by circumstance, experience or attitude, the striking thing about northerners and southerners is not how different they are, but how alike.

Which simply sharpens the question – if the obvious reasons for Conservative unpopularity in the North do not really hold up, what does explain why they are so disliked? The time has come to test the issue directly – attitudes towards the two main parties.

4. The parties. The data need to be viewed with care. It is only to be expected that Conservative supporters will give “pro-Tory” and “anti-Labour” answers to attitudinal questions about the two parties – and vice versa for Labour supporters. Moreover, it’s hard to tell whether a pro-Tory response is a cause for, or a consequence of, supporting the party.

What we can do is look at how the differences between North and South vary. Where views are pretty similar, it is reasonable to suppose that these do NOT explain the gulf in party loyalties; rather, we are looking for the big differences in view.

4a. Conservatives South % North %
Big Differences
Conservatives care more about the rich and affluent than ordinary people 62 73
Cameron out of touch 32 42
Cameron doing well as PM 45 36
Think coalition is bad ‘for people like you’ 51 59
Cameron has no clear principles 39 47
Modest differences
Think state schools would improve if Conservatives win next election 28 21
Think economy would grow stronger if Conservatives win next election 40 34
Small differences
Think Conservatives have taken tough but necessary decisions 52 48
Think coalition is good ‘for people like you’ 24 22
Conservatives have changed for better since their time in opposition 35 34
Think immigration would fall if Conservatives win next election 28 28
4b. Labour South % North %
Big differences
Think economy would grow stronger if Labour wins next election 19 30
Miliband doing well as Labour leader 26 35
Small differences
Miliband out of his depth 48 46
Miliband too willing to give in to unions and left-wing 49 47
Labour has seriously lost touch with ordinary people 59 59

This process helps us to rule out a number of explanations. It’s not that northerners are significantly less likely to think that the coalition is “good for people like you”, that the Conservatives “have changed for the better since their time in opposition” or that they “have taken tough but necessary decisions” to turn round Britain’s economy. Nor do they have less faith in the Tories’ ability to control immigration – few people in any part of England think this.        

On the other side of the political ledger, northerners and southerners share similar views on whether Ed Miliband is too left-wing or out of his depth. A clear majority of southerners, 59%, think Labour “has seriously lost touch with ordinary people”; the proportion of northerners who think this is exactly the same.

There are modest differences when voters consider the practical consequences of Conservative rule. Southerners are slightly, but only slightly, more hopeful that a future Tory government would improve the economy or run state schools better.

Which brings us, finally, to the big differences. Northerners dislike David Cameron. They are significantly more likely to say he is out of touch and lacks clear principles, and much less likely to say he is doing well as Prime Minister. And despite the comparable living standards and levels of optimism, northerners are much more likely to think the coalition “is bad for people like you”. The widest gap of all, eleven points, concerns the proposition that the “Conservatives care more about the rich and affluent than ordinary people”. Big majorities in all parts of Britain think this, but the sentiment is especially intense in the North.

Not that the Tories have all the problems. Labour has parallel troubles in the South, where few voters think that Miliband is doing well or that the economy would grow stronger under Labour. The party has lost much of the respect, both for its leader and its competence, that it enjoyed under Tony Blair. Labour’s “southern discomfort” is alive and ill and living in towns and cities from Kent to Cornwall.

But the focus of this analysis concerns the North. The Tories’ problems did not start with Cameron, but neither have they lessened under his leadership. Rather, he reminds many northerners just why they dislike the Tory Party. It’s not because they are poorer, or more pessimistic, or further Left or more reliant on the state for their job: they aren’t – or, at any rate, not enough to explain their reluctance to vote Conservative. Nor is it because of what the coalition has actually done in the past three years – at most, this explains a fraction of the difference.

In the end, the Tories’ problem is not what they do; it’s what they are. Their trouble is their brand. They lost Scotland because they lost their reputation as a unionist party and came to be seen as an English party. They are losing the North because they are seen increasingly as a Southern party. This need not stop them winning a future election: there are enough constituencies in the Midlands and the South which, when added to the Tories’ isolated seats in the North, can give them a parliamentary majority. But few, even on the Conservative benches, would regard that as a wholly healthy prospect.

Leading Conservatives often admit they need more women and non-white faces on their benches. This analysis suggests that they also need many more people with regional accents. On its own, this won’t suddenly make the Tories popular on Merseyside or Tyneside; but as part of a long-term strategy to revive the Tory brand north of the Wash, it would be a start.

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
guardian.co.uk, 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.

Alex Salmond and David Cameron’s incoherent referendum plans mean that they are unlikely to get what they want for either Scotland or the UK

Posted: 06 Feb 2013 06:00 AM PST
An independence referendum is due to be held in Scotland in 2014, with another referendum being pledged by UK Prime Minister David Cameron on the country’s relationship with Europe in 2017. Jo Murkens and Peter Jones argue that in both referendums the options put before the electorate are likely to be exceptionally vague. The UK’s proposed new relationship with Europe is still largely unknown, and it is unclear what the precise nature of an independent Scotland would involve.

This article was first published on LSE’s EUROPP blog

Countries that are used to referendums on constitutional matters use them sparingly. The UK has no such constitutional requirement, but faces the possibility of having to deal with two such referendums within the space of a few years. The first referendum could see Scotland break away from the United Kingdom, the second could see the United Kingdom(which by then may or may not include Scotland) break away from the European Union.

The common issue to both Scottish First Minister Alex Salmond, and UK Prime Minister David Cameron, is political sovereignty. They both want more of it; Salmond wants to claim it from the UK, Cameron wants to claim it from the EU. In that narrow sense, they are both nationalists: Salmond a Scottish one, Cameron a British one. Both also want, they claim, to be good European citizens but have to contend with the problem that the European club they want to be members of has rules which conflict with their visions of the idealised version they imagine it should be. And the promotion of this idealised vision to their voters leads them both to political positions which are incoherent.

Scotland’s difficult road towards independence and EU membership

Scotland’s First Minister Alex Salmond and UK Prime Minister David Cameron Credit: Scottish Government (Creative Commons BY NC)

For the Scottish National Party (SNP) which was, until the advent of devolution in 1999, a minority fringe party, the ‘Independence in Europe’ policy was never subjected to serious examination. It was not much more than a political slogan used in political debate to counter the separatist charge levelled by opponents. The most that was done to develop this policy was to locate sympathetic European luminaries who gave the SNP helpful quotes asserting that upon independence,Scotland would move seamlessly into EU membership. It became an article of SNP faith that Scotland would be warmly welcomed into the happy European family, effectively countering ‘separatist’ accusations. So cemented into SNP ideology is this belief that Nicola Sturgeon, deputy first minister, told the Scottish Parliament’s European and external relations committee in December 2007: ‘It is the clear view of the Scottish National Party and the [Scottish] government that Scotland would automatically be a member of the European Union upon independence.’

The automaticity proposition founders on the rather obvious point that while the people and territory of Scotland may already be in the EU, the Scottish government is not. And the Scottish government being in the EU requires its votes in the European Council and other entitlements to be written into EU treaties, which can only be done with the unanimous consent of all other member states. This remains the case. The SNP, however, refuses to acknowledge this point because it raises the vision of Scotland being outside the EU and having to bang on the door begging to be allowed in out of the cold, bringing the separatist bogey back into play.

The battle against the separatist charge has had to be fought on another front – within the UK. Unionists have alleged that independence will mean that families with members on either side of the border will become fragmented, that they and commercial trade will have to negotiate border controls at Berwick and Gretna Green, that Scotland will lose access to popular BBC shows such as East Enders and Strictly Come Dancing and so on. To counter this, the SNP has devised a new strategy – that while the political union of the UK will come to an end, the social and civil union will continue and prosper. Thus families will be just as united and able to jointly celebrate such things as the Queen’s birthdays and anniversaries as she will still be the titular head of state in an independent Scotland.

Harsh economic realities, however, have forced the extension of this soft unionism into harder areas. The stresses and strains that the euro is under have made it as unattractive to Scots as it is to the English. The SNP decided some time ago that it would stick with sterling as its currency until such time as there are economic benefits to joining the euro, which would only occur after a referendum. As some 60 per cent of Scottish trade is with the rest of the UK, it makes little sense to erect a currency barrier to that trade while tearing one down to benefit the 20 per cent of Scottish trade that is with the Eurozone.

The travails of the euro and the proposed deeper integration remedies, however, demonstrate that such a currency union would erode Scotland’s fiscal independence. Proposed tax changes and government budgets would have to come under the tutelage of the (by then) foreign institutions of the UK Treasury and the Bank of England. Various unionist politicians, such as Treasury chief secretary Danny Alexander and former chancellor Alistair Darling, have argued either that the UK government simply could not countenance such an arrangement, or that the arrangements would be so restrictive as to nullify the claimed gains from political independence.

The SNP’s counter to this has been to assert a rather crude truth, that as sterling is a fully tradeable currency, the UK cannot stop Scotland from unilaterally adopting the pound. This, however, looks unsatisfactory from the point of view of independence. It leaves monetary policy, the determination of interest rates, and the operation of quantitative easing in the Bank of England’s hands. The SNP also claim, rather more vaguely, that the fiscal stability pact necessary for a currency union need not be so restrictive when, in fact, the lesson of EU struggles to stabilise the euro point to tighter rather than looser centralised fiscal controls.

This puts Salmond in the odd position of being, simultaneously, a Scottish nationalist, a European federalist, and a British unionist. He wants Scotland to have untrammelled use of its own credit card to dine at the same time in the British and European restaurants, but refuses the table d’hôte menu and insists on picking from two à la carte menus, which neither chefs seem willing to offer.

David Cameron is asking the impossible of Europe

Cameron is in only a slightly less strange place. He wants to trade heavily on his British nationalism with his domestic audience, but waves his European unionism when on the other side of the English Channel. Both audiences are, however, able to see what is being presented to the other and thus he runs the high risk of undermining his message to one by his contrary calls to the other.

In his much publicised speech on 23 January 2013, David Cameron set out his intention to renegotiate the UK’s relationship with the EU and put the terms of that changed membership to the British people in an ‘in/out’ referendum by the end of 2017, subject to the Conservatives winning an outright majority in the general elections in 2015. His speech received global attention and a mixture of praise (e.g. those who agreed that the EU ‘needs to be reformed’) and criticism (e.g. those who disagreed with the‘language of unilateral negotiations and the threat of withdrawal’). Much of the commentary, indeed much of the speech itself, is based on the dubious premise that the UK is a major player in the European Union.

On one level, the UK undoubtedly sits at the top table: it has the third largest population and the third largest economy in the EU. However, the UK already has a different relationship with the EU than the other member states. It gets a significant rebate on its financial contributions to the EU budget; it has external borders with other EU member states; it has its own currency; it did not sign the fiscal stability treaty which requires budget prudence and introduces a debt brake for the 17 Eurozone states; and it will not (unlike 11 Eurozone states) impose a financial transaction tax which is designed to discourage speculative trading. Moreover, the UK limited the applicability of the Charter of Fundamental Rights and the way in which it may be interpreted. And its red-lines approach at the IGC in 2007 means that the UK can itself decide (by 31 May 2014) whether to implement all the European measures on police and justice (which will be subject to the jurisdiction of the Court of Justice of the European Union) or whether to opt out of all the measures and then adopt individual measures on an ad hoc basis (subject to the consent of the other member states). Although how exactly the latter option ‘cuts red tape’ is anyone’s guess.

If this isn’t à la carte, then what is? What more does Cameron want to renegotiate? No one knows, and no one has yet produced a checklist, although the government will be working on one until the autumn of 2014. For the time being, the Working Time Directive, the European Arrest Warrant, and a better deal on fisheries keep coming up in debate. Is it realistic to argue that powers in those areas can be returned to the member states? The practical options are the following. Either the UK tries to tackle the matter from above by reducing the law-making powers of the EU institutions (that option would require a treaty change and the unanimous agreement of the other member states which is, currently, unrealistic). Or the UK tries to negotiate a better ‘deal’ for itself (e.g. through opt outs and protocols that are attached to the Treaty). But is it credible that the other member states would grant the UK special treatment when every member state is subject to aspects of EU law of which it disapproves? Overall neither option seems workable.

On a more fundamental level it seems baffling that British Euroscepticism would appear to hinge on a handful of powers that need to be ‘repatriated’. It doesn’t, and it is ludicrous to suggest that the Europhobes in the Conservative party will be placated if junior doctors work longer, and UK nationals who are wanted on charges abroad cannot be extradited (whereas, of course, UK nationals who have committed a crime in the UK but fled to another EU member state will immediately be brought back home). On fishing, where the real issue is depleted stocks through overfishing, the Commission is already transferring decision-making powers to the member states in an attempt to decentralise fishing policy and tailor it to local conditions. As Douglas Alexander put it: ‘The gap between the minimum the Tories will demand and the maximum the EU could give is unbridgeable’. These are not the fundamental issues, and any self-respecting Europhobe will not rest until the UK has exited the Union and re-attached itself to the single market like a dingy to a supertanker.

So if Cameron’s speech does not stand up to scrutiny from a European perspective, maybe its intended target was closer to home. Almost all foreign and domestic observers noted that the speech was driven primarily by domestic party politicking (the United Kingdom Independence Party – UKIP) and internecine party struggles (Bill Cash). Cameron is trying to unify a fractured party in the run-up to the general elections in 2015, and UKIP and the Tory backbenchers forced his hand. But even domestically Cameron may have dealt himself a bad hand. The offer of a referendum on renegotiated membership after the next general election is subject to two unknowns: i) the outcome of the 2015 elections; ii) the outcome of the negotiations. It is presently far from clear whether he will be successful with respect to either or both.

Until then Cameron will be seeking, not so much nouvelle cuisine as cuisine impossible, just like Salmond: untrammelled UK access to the European single market restaurant, refusal of the table d’hôte menu and insistence on the à la carte menu which is not on offer. And then he will have the nerve to ask for a rebate (i.e. other member states subsidising his dining) when presented with the bill.

Two Incoherent Policies

Cameron’s policy on the EU is just as incoherent as the SNP’s policy on continuing EU membership on current terms. Cameron assumes he will win the next election, just as Alex Salmond assumes that Scotland will automatically be an EU member state. Cameron claims that he can walk into the room and negotiate a new deal. Salmond claims that he can secure Scotland’s place in Europe on current terms: i.e. by inheriting the UK’s opt outs on the euro currency and the Schengen free travel area, which is illusory.

Moreover, a referendum (if one is to be had) needs to set out two clear choices beforehand. The in/out referendum on the EU or the Yes/No referendums on Scottish independence do not offer sufficient alternatives. What will come after EU membership? A free trade (all pay and no say) agreement with the EU like Norway? The Commonwealth? The USA? NAFTA? The global market? Splendid isolation?

Likewise, Salmond promises continuity when any EU lawyer, politician, and bureaucrat will tell him that there is no automatic right to membership of the European Union. So, what if membership is not automatic? Will Scotland stay outside the EU? Have its application fast-tracked? Join the queue of applicant states? He also promises currency continuity within a skeletonised British union, when there are an array of economists and Treasury politicians past and present saying it either will not work, or will render the gaining of political independence pointless. So what will happen then? Freelance use of the pound? Enforced joining of the euro? Invention of a Scottish currency?

The à la carte menus offered by both are, in reality, a dog’s dinner.

Note: This article gives the views of the author, and not the position of the British Politics and Policy blog, nor of the London School of Economics. Please read our comments policy before posting.

About the Authors

Jo Murkens is Senior Lecturer in Law at the LSE. Dr Murkens was previously a researcher at the Constitution Unit, UCL, where he led the research on the legal, political and economic conditions and consequences of Scottish independence. Jo has taught at University College, King’s College, and Queen Mary College (all in London), and was called to the Bar in 2006.

Peter Jones is a freelance journalist, writing on Scottish current affairs for The Economist, the Times and The Scotsman. He is also, with Jo Murkens, a co-author of Scottish Independence: A Practical Guide, EUP 2001.

The less well-paid you are when you enter the labour market, the more your degree will now cost

Posted: 22 Jan 2013 06:00 AM PST

Ron Johnston argues that much of the debate on tuition fees is misleading. Not only is the size of the debt incurred by students persistently understated but the repayment system is itself regressive. The greater your rewards from studying for a degree the less you pay for the opportunity. This has profound consequences for postgraduate education and recruitment to the professions. 

On 6 January 2013 The Independent on Sunday reported that a number of UK university vice-chancellors and other senior academics had expressed great concern about the absence of financial support for, and thus problems of recruitment to, taught masters’ courses – many of which provide necessary training for a range of (mainly) public-sector professions rather than introductions to fundamental research. On the same day, The Observer carried a major article by Will Hutton (Principal of Hertford College, Oxford) on that issue, rightly associating those difficulties with the amount of debt students will have accumulated at the end of their undergraduate degrees. Unfortunately, like so many  others, he did not fully address the nature and extent of such debts, nor the misleading representations of the repayment system from both the politicians who implemented it and many subsequent commentators.

The details needed to make a full assessment are readily available from the ‘student loans repayment calculator’ on a government website. Although it makes some pragmatic assumptions, such as at what rate individuals’ post-graduation incomes increases and future rates of inflation, the information provided is sufficient to generate a clear conclusion: the extent of the debts students graduating from 2015  onwards will be carrying is not only often understated but in addition the repayment system is regressive according to income and not progressive, as frequently claimed.

Take, for example, a student who reads for a three-year degree at a fee of £9,000 per annum, but does not take up the available maintenance loans. Because interest is charged during the three years of study at the rate of inflation (RPI – assumed to be 3.6%) plus 3%, the debt on graduation is not £27,000 but £30,723. Repayments only commence when the graduate earns more than £21,000 per annum, and are at the flat rate of 9% of the difference between gross income and £21,000 – so that someone earning £25,000 repays 9% on £4,000.

The smaller the amount that you earn, the less you pay in any one year, but as you continue to be charged interest on the outstanding amount (at the rate of inflation if you earn £21,000; at the rate of inflation plus up to 3% depending on your income if you earn £21-41,000; and by the rate of inflation plus 3% if you earn more than £41,000) the size of your debt continues to increase – for nine years if your starting income was £21,000. As a consequence our student whose course fees were £27,000 will take 23 years and 4 months to pay off the loan, at a total cost of £67,743.

The larger your starting salary above a threshold, however, the less you pay back in total – and in a shorter time. According to the ‘student loans repayment calculator’, somebody who ‘borrowed’ £27,000 for the fees and whose starting salary is £25,000 repays a total of £57,526 over 17 years and 8 months; with a starting salary of £30,000, the repayment period is 13 years, 9 months and the total repaid is £50,943; and for a starting salary of £40,000, only £44,354 is repaid – over a period of just 9 years and 9 months. The conclusion is clear: the less well-paid you are when you enter the labour market, the more your degree costs, both relatively and absolutely – and not the other way round.

David Willetts and others have claimed that the repayment system is, in effect, better than a graduate tax: on page 18 of BIS’s June 2011 White Paper Students at the Heart of the System, for example, we are told that the proposed system of graduate contributions ‘preserves a careful balance between the interests of higher and lower earners, by requiring higher earners to make a fair contribution to the costs of the system as a whole’ and that because ‘all graduates will pay less per month than under the old system, … higher education [will be made] more affordable for everyone’! Furthermore, the better-paid (and those from wealthier backgrounds) can pay off their debt immediately on graduation, at no cost – a further regressive element to the system; or they can pay the full fees upfront.

All this is built on assumptions regarding not only the rate of inflation (the higher it is, the larger your debt) but also increases in the graduate’s income over time, plus any change in the repayment threshold. A graduate with a starting salary of £21,000 is assumed to be earning £41,000 thirteen years later, with increases of up to 15% in the early years, falling to about 5%. (The source for the government website’s calculations is an Office for National Statistics analysis of Labour Force Survey data) If income grows more slowly, the debt accumulates even more, the repayment period is longer, and the total repaid also increases – which again disadvantages the lower-paid. Another website  allows further experimentation with varying rates of salary increase and inflation; the conclusions developed here do not change, only the inflexion point in the graphs discussed below.

These calculations all assume that the student doesn’t take out a maintenance loan – a maximum of £7,675 per annum for those living away from home and studying in London. If you also take out that loan for three years (and do not qualify for any support because of low parental income), the government’s calculations show that for graduates with a starting salary of £21,000 the initial debt is £56,924 (not the £50,025 ‘borrowed’). It grows until the 26th year of continuous earning (when it stands at £101,976); repayments stop after 30 years (after which any remaining debt is wiped), by when the full sum remitted has been £114,418. Someone whose starting salary is £30,000 has a peak debt of £67,457 after 10 years; the full amount is paid off after 23 years and 9 months, with the total costs of the package being £135,914. And the graduate with a starting salary of £40,000 makes repayments totalling just £104,105 (23% less than that for the person whose starting salary is £10,000 lower), completing the process in only 16 years and one month.

Those whose starting salaries are low are protected, therefore. The government assumes a minimum income once the graduate enters the labour force of £15,795: somebody earning that amount who takes out loans for both fees (£9,000) and maintenance (£7,675) repays £56,041 over 30 years, by which point the amount owed has increased from the initial sum of £56,924 to £136,304 – when it is wiped out. The system is progressive in its impact for those with the lowest starting salaries, therefore, but above £21,000 it becomes regressive because of the single ‘tax rate’ (and despite the link between income and a varying interest rate on the accumulating debt): so, the greater your rewards from studying for a degree the less you pay for the opportunity (or, as the Institute of Fiscal Studies concluded in its 2010 evaluation of the government’s proposals: the scheme ‘does benefit poor students, [but] it does not benefit poor graduates’).

The graph above shows just how large the differences are, especially for students who take out loans not only for fees but also for the maintenance grant: it contrasts a student who has a fees-only loan for three years and another who in addition takes out the maximum maintenance loan for studying in London. Starting incomes from £16,000 to £44,000 are shown; all of the data are taken from the ‘student loans repayment calculator’. If a student takes out a fees-only loan, then the total amount repaid falls once the starting income exceeds £18,000. For the student studying in London who also takes out a maintenance loan, the amount repaid increases with the starting salary until that reaches £26,000, and then begins to fall; somebody with a starting salary of £44,000 pays back less for the same amount ‘borrowed’ (£50,025) than somebody with a starting salary just above £20,000.

No wonder that Vice-Chancellors are worried about the future market for postgraduate masters’ degrees. Even if loans were available for those courses, how many students would avail themselves of such opportunities, given the debts they are carrying from their undergraduate education – especially if they want to work in the relatively poorly-paid professions like social work? Society as a whole should share their concern – where are the next generations of entrants to many of our (under-rewarded) professions to come from given this unfair burden?

(With many thanks to Rich Harris, Kelvyn Jones, Dan Lunt, David Manley and Ed Thomas for illuminating discussions of these issues.)

Note: This article gives the views of the author, and not the position of the British Politics and Policy blog, nor of the London School of Economics. Please read our comments policy before posting.

About the Author

Ron Johnston is Professor of Geography in the School of Geographical Sciences at the University of Bristol. His academic work has focused on political geography (especially electoral studies), urban geography, and the history of human geography. 

You may also be interested in the following posts:

  1. The government’s plans to place a levy on early student loan repayments will change little and add an unnecessary layer of complexity to the system
  2. Efforts to strengthen and promote the role of universities in the UK often ignore the European dimension, to their cost
  3. Book Review: Creating the Market University: How Academic Science Became an Economic Engine by Elizabeth Popp Berman