Tag Archives: election

How not to reject a proposal

In last night’s Sky News “debate”, Theresa May was asked about social care. It was clear she had been given some new lines to try to convince the public that she hasn’t U-turned since the Conservative manifesto was published, but this is a difficult act to pull off.

The problem for the Tories is that their manifesto said that they were rejecting Andrew Dilnot’s 2011 proposals to put a cap on care costs, the Health Secretary went on Radio 4 and said that there wouldn’t be a cap on care costs, but now Theresa May is saying that there will after all be a cap on care costs. It looks on the face of it like the PM has changed her mind, but changing one’s mind is dangerously close to flip-flopping and has a whiff of weakness. So a decision has been made to try to convince us that no minds have been changed, that the current policy is what the manifesto always meant to propose and that to say otherwise is simply scare-mongering.

Here’s the most problematic passage of the manifesto for someone wishing to make this argument.

We believe this powerful combination maximises protection for pensioner households with modest assets, often invested in the family home, while remaining affordable for taxpayers. We consider it more equitable, within and across the generations, than the proposals following the Dilnot Report, which mostly benefited a small number of wealthier people.

It sounds an awful lot like the Tories are explicitly rejecting Dilnot’s proposals, which it is claimed “mostly benefited a small number of wealthier people” – a common (but inaccurate) criticism of the proposed cap on care costs.

But wait – this paragraph doesn’t explicitly say that they are rejecting the idea of a cap, just that they don’t like “the proposals following the Dilnot Report”. It is this chink of light that some bright spark in the Tory election campaign has tried to prise open with a new set of lines that hit our airwaves last night. In this version of events, it is not the idea of capping costs that has been rejected, but the version of a cap proposed by Andrew Dilnot. This has been fleshed out with two quite specific objections to the Dilnot proposals – so let’s see how they stack up.

1. It was going to be paid for out of general taxation

In some other countries, working age people pay into social insurance schemes so that they are protected against social care costs in their old age. In others, this transfer from our working life to our old age is made using general taxation. However, in both cases, the money is not really saved up. The current working age population pays in and the current population of older people takes out. If at some point coverage is significantly increased then there is a generation of people who are already retired and will take out more without paying in more. There is a widespread view in the UK that the current generation of retired people already have it too good and that it simply wouldn’t be fair to ask the working population to pay more to fund their social care. Whether you subscribe to this view or not, where the money comes from is an important issue to consider. So does the new Tory position on this represent a rejection of Dilnot’s proposals?

Here’s what the Dilnot Report said on how the reforms could be paid for.

The Commission believes that there are three possible ways for our recommendations to be paid for:

  • The Government may decide it wishes to raise additional revenue through general taxation. This is the way in which the current system is funded.
  • It may choose to reprioritise existing expenditure, because it places greater value on this than other spending.
  • It may decide to introduce a specific tax increase and, if it did so, it would make sense for this to be paid at least in part by those who are benefitting directly from the reforms. In particular, it would seem sensible for at least a part of the burden to fall on those over state pension age. If the Government decides to raise additional revenue, we believe it would be sensible to do so through an existing tax, rather than creating a new tax.

In making its decision on how to pay for reform, we believe the Government needs to consider the impact of any funding mechanisms on different income and generational groups.

This is, to say the least, quite vague. This was presumably tactical, since the previous attempt at reform was scuppered by the political fallout from proposals to fund it through inheritance tax, but some people have criticised the Dilnot Report for not making a clear proposal. What is clear, however, is that it is not accurate to say that the Dilnot reforms were going to be funded through general taxation. The decision was left to government.

When the Coalition accepted Dilnot’s proposals, they did in fact tackle this issue – and they did not choose to fund them through general taxation. Instead they stated that the reforms would be funded by changes to the state pension and inheritance tax, so that intergenerational unfairness would be minimised.

So how are the Tories now planning to fund their proposals? It’s not possible to answer this question definitively, since unlike the Dilnot and Coalition proposals, the Tories have refused to say at what level they would set the cap, let alone what the proposals would cost. But a significant proportion of the cost will be met by changing the means-testing rules so that people have to use the value of their house to pay for care even if they are still living in it. Is this the change that sets the Tory proposals apart from the Dilnot reforms?

Alas, no. It was in fact Andrew Dilnot himself that proposed this policy.

At present, housing assets are treated differently across the social care means tests (domiciliary and residential) – the result is that different care settings are not on a level playing field. Individuals who may have a preference to receive care in their own homes have a financial incentive to do so; however, local authorities have an incentive to encourage movements into residential care to increase charge revenue. In the longer term, the Government may wish to rationalise these arrangements.

We know that making such a change would be difficult. Our public research reveals that using housing assets to pay for care is a very emotive issue. However, once a cap is in place, it may be easier for people to think about such a change. Our deliberative research indicates that people may be more willing to use some of their housing assets to pay for care if they know that will not have to spend the whole amount. To support changes of this kind a universal deferred payment scheme would need to be in place.

So where does that leave us on the PM’s first claim? The Dilnot Report did not specify that the change should be paid for out of general taxation, the Coalition policy was explicitly to fund the changes in a way that targeted the older population, and the new Tory proposal to fund the changes is lifted straight from the Dilnot Report. The claim made by Theresa May last night is untrue.

2. It protected wealthier pensioners but did nothing to protect pensioners on modest incomes

The first thing to say about this claim is that it demonstrates that Theresa May doesn’t really understand Dilnot’s proposals or her own. The main focus of the debate has been the treatment of assets, not incomes. The manifesto proposal to raise the means test floor means that people who have assets of £100k or less won’t have to pay for care from their assets – but they will still have to use their incomes.

But let’s gloss over that and charitably assume that she meant people with modest assets. Did Dilnot’s proposals do anything to help them? The answer is of course yes. Dilnot recommended that the means test threshold should be extended to £100k, but that it should be tapered so that the less wealth you have the more support you get. This system is actually pretty effective at protecting people with modest assets. Here’s Dilnot’s assessment of the protection that people get from the combination of a cap on care costs and his means-test changes.

The Conservative manifesto did propose something slightly different to this. The means test would be extended to £100k – borrowed straight from Dilnot – but it would no longer be tapered, so that everyone with less than £100k in assets gets the same level of support. This is more generous that what Dilnot proposed and gives more protection to people with low levels of assets, but it is a modification rather than a rejection of the original proposals. The claim made by Theresa May last night is clearly untrue.

Despite all the lying, the U-turn policy is not bad

So we can see that, rather than rejecting Dilnot’s proposals, the Conservatives are now adopting them whole-heartedly, while going even further than Dilnot recommended on extending the means test. But they have clearly calculated that the worst possible thing would be to admit that they have changed their minds and that it is better to try to trick us into thinking that they meant this all along. In doing this they are taking the public for fools, but it may be a line they can hold until the election. However, while all the lying is not a good look, the actual policy they have ended up with is not bad – even if there is a suspicion that they ended up here by accident.

The chart below compares the impact of the policy with the previous Coalition position, which was to implement a version of the core Dilnot proposals with a £75k cap. (This chart is a little different to the one from the Dilnot Report, since I have assumed that the person has £50k in savings.)

As the chart shows the U-turn policy (with a £75k cap) is better than the Coalition policy for people with housing wealth less than £100k or so. It is worse for people with more than this (including someone who owns a median-value property) because they will pay more if they need home care, but even in the worst case scenario they will only use just over 40% of their assets paying for care. It addresses the uneven incentives between home and residential care identified by Dilnot and the additional charges paid by home care users mean that it will probably be cheap or even cost-neutral. This is a perfectly reasonable policy proposal.

But as ever, the devil is in the detail, and we have precious little of that so far. Theresa May refuses to give us any indication of where the cap will be set, preferring instead to consult on it after the election. (Presumably she is not aware that the Coalition has already consulted on this funding model.) The level at which the cap is set is important: if it is set at £75k then the maximum amount of assets that someone will use to pay for social care is around 40%, but if the cap is £150k then this goes up to 60%.

The mechanism for allowing people to use their housing wealth while they are still living in their house is also going to be crucial to the success of the policy. If, as suggested by the Tory manifesto and the Dilnot Report, local authorities are going to pay up-front costs and claim the money back from people’s estates, this means a huge expansion of their role as debt collectors. When people inevitably try to hide their assets and get away without paying, are local authorities willing and able to chase their heirs through the courts? If, on the other hand, the intention is to work with the private sector to finance care through an expansion of expensive equity release products, the political fall-out a decade down the line when financial services companies start gobbling up people’s estates could be severe.

These are difficult policy issues, but they should be surmountable. Unfortunately, the Conservative approach to social care reform to date does not inspire confidence that they have the competence and commitment to do the surmounting.

Austerity and Brexit in England

Ever since the UK voted to leave the EU, there has been a steady stream of articles and analysis trying to figure out why. Clearly there is more than one answer: different people voted for Brexit for different reasons. Nonetheless there are some patterns. By analysing the vote share by local authority, the Resolution Foundation found that areas with higher employment rates, larger student populations, more people with degrees and higher social cohesion were more likely to vote remain. Areas with more old people, more homeowners and those that have only recently seen an increase in immigration were more likely to vote leave.

But one possibility has proved controversial: was austerity partly responsible? Chris Dillow thinks it’s possible. Austerity contributed to stagnant incomes, which may have increased resentment towards “elites”, and to a decline in public services which the leave campaign blamed on immigration. Chris’ thesis received a bit of stick on Twitter from Giles Wilkes and Rupert Harrison.

In one sense, they have a point. The Resolution Foundation’s analysis looked at how average incomes in different areas were related to the share of votes for leave. While the level of income was important, recent changes were not, suggesting that the income effect isn’t related to austerity. But in another way Chris might be right. Stagnating incomes may be an indirect effect of austerity, but a rather more direct effect (which is not included in the Resolution Foundation’s analysis) is the deterioration in public services.

Austerity has led to cuts in many public services, but local councils – who take out the bins, run the libraries and provide social care – have been hit particularly hard. Local government spending power[i] in England fell by nearly 15% in real terms between 2011/12 and 2015/16, but the impact wasn’t felt equally in all parts of the country. Areas that collect a lot of council tax relative to their total spending got off lightly – Surrey’s spending power fell by less than 5% in real terms – while those that rely heavily on central government grants have been hammered – Liverpool City Council’s spending power fell by nearly 23%.

Big drops in spending power mean closing libraries, fewer bin collections and cuts to social care. It seems plausible that in areas where public services have deteriorated further, the argument that immigrants are overwhelming these services – as championed by the Faragist wing of the leave campaign – may have more traction.

The chart below shows how changes in spending power in local authorities in England[ii] between 2011/12 and 2015/16 are related to the share of votes cast for leave.

Change in local government spending power (horizontal axis) versus share of votes case for leave, upper-tier local authorities in England

Change in local government spending power (horizontal axis) versus share of votes case for leave, upper-tier local authorities in England

You might look at this and think there is no clear correlation – but the distribution is far from random. It looks to me like there are two things going on: a negative correlation for most areas, plus a cluster at the bottom left that seems to behave differently. There are no prizes for guessing where most of these outliers are located: they are London boroughs.

The next chart shows the same data with inner (blue) and outer (red) London boroughs highlighted. London voted differently to the rest of the country. Inner London (and some “outer London” boroughs such as Newham) saw big cuts in local government spending, but voted overwhelmingly for remain.

Change in local government spending power (horizontal axis) versus share of votes case for leave, upper-tier local authorities in England
Blue dots are inner London boroughs, red dots outer London

Change in local government spending power (horizontal axis) versus share of votes case for leave, upper-tier local authorities in England

Not all London boroughs followed this pattern. Havering had a relatively small drop in local government spending, but voted heavily for leave. This shows the limitations of using “London boroughs” as a sociological grouping. Havering is the most easterly London borough and surrounded on three sides by Essex. It is just a half hour’s drive from Newham, but a very different place.

Just as not all of London followed a “London-like” voting pattern, not all other areas followed an “unLondon” voting pattern. If we exclude London from the chart, there are still a few stray dots hanging around in that bottom left area – areas that, like many parts of London, voted remain despite large council cuts. Again, there are no prizes for guessing where these places are: successful cities like Liverpool, Manchester, Bristol and Brighton.

Change in local government spending power (horizontal axis) versus share of votes case for leave, upper-tier local authorities in England excluding London

Change in local government spending power (horizontal axis) versus share of votes case for leave, upper-tier local authorities in England excluding London

So it seems that we can divide England up into two groups: “London-like” areas, which include most London boroughs and some other successful cities; and “unLondon”, which is everyone else. Many London-like areas have seen big cuts to local services and still voted remain. But when we look only at unLondon[iii], we see a different pattern: areas with bigger cuts to local services cast a greater proportion of votes for leave.

On the basis of this, it seems quite plausible[iv] that austerity was one of the drivers of the Brexit vote – but this effect was mediated by cuts to local services, rather than stagnating incomes.

Change in local government spending power (horizontal axis) versus share of votes case for leave, upper-tier local authorities in unLondon

Change in local government spending power (horizontal axis) versus share of votes case for leave, upper-tier local authorities in unLondon

[i] Calculating trends in council funding is tricky, because responsibilities of councils change year-to-year. When responsibilities are added, extra money might be attached to them but this doesn’t ease the pressure on other services. Luckily, the Department for Communities and Local Government publishesspending powerestimates which (for any two adjacent years) try to take account of these changes. By cumulating the year-on-year changes, and adjusting for inflation, we can get a reasonable estimate of the changes over time in funding for local services.

[ii] The data are for upper-tier authorities. For two-tier areas (the shire counties) the spending power of the districts within each county has been included to make the figures comparable with unitary authorities.

[iii] For the purposes of this analysis, only Liverpool, Manchester, Brighton and Bristol have been excluded from unLondon, since they are the most obvious outliers.

[iv] There are two important caveats here. First, to believe in this correlation, you have to believe that the London/unLondon split makes sense and isn’t just a convenient choice to generate a spurious correlation. For me, the story works, but you will make up your own mind. Second, this analysis only looks at one variable, so it’s possible that the pattern is actually driven by something else, such as difference in average incomes. The Resolution Foundation’s work deals with this problem by including a wide range of variables – but nothing on cuts to local services. I’d like to see them add this to their analysis.

The problem with professional politicians

Isabel Hardman asks what’s so bad about professional politicians. She concludes that it’s basically a euphemism for “selfish politicians who are out for themselves and will mow down anyone in their way”. I’d offer a different (and perhaps slightly more contrived) answer: the problem with professional politicians is the same as the problem with professional footballers and professional bankers – they have become too good at their jobs.

This is a problem because all three groups are employed to do something that is not quite the same as the purpose that they serve in society. They operate within a set of rules and structures that are supposed to ensure that by striving to do one thing (the direct aim of their job) they also achieve another.

Take footballers for starters. A footballer, or a football manager, is paid to win matches. If they’re good at it, riches and fame are theirs, if not, they end up on the losing side away at Exeter on a rainy Saturday in February. But the purpose of professional footballers is to provide people with entertainment. Usually, the spectacle of two highly-skilled teams putting everything on the line to win is entertaining. But footballers have worked out at least two ways to improve their chances of winning that aren’t.

The first is diving. It is in the interest of footballers to fall over whenever they are touched by an opposition player, especially in the penalty area. It’s very difficult for referees to know whether a person fell over too easily or not, and winning a penalty or getting an opposing player sent off can win you the game. But diving detracts from our entertainment when, rather than try to win by playing good football, Diego Costa or Ashley Young simply flings himself to the ground to try to con the referee. We see a similar thing when Jose Mourinho, a man who knows more than most about winning football matches, parks the bus when playing away against strong opposition. This clearly works, but it is not great to watch.

Investment bankers are employed to make as much money as possible. But their social purpose – and the reason that they are allowed to occupy such privileged positions within our economic system, with such huge potential for rent extraction – is to distribute financial investment efficiently throughout the economy. In principle, the joint disciplines of market forces and financial regulation should ensure that in trying to maximise profit they achieve this aim. But in recent years, bankers have come up with a range of ways to make stacks of money that avoid or even undermine this aim, such as packaging up mortgage debt in securities so complicated that the buyer fails to see the inherent risks. The results of this are plain to see: a massive global financial crisis that is still being felt more than half a decade later.

So what about politicians? The job of a politician is to win elections, but the purpose of politicians as a whole is to effectively manage the public affairs of a country in such a way as to improve the welfare of its citizens. Our democratic system, political institutions and free press are supposed to ensure that in order to win (or at least retain) power, politicians have to run the country fairly competently. But the last two decades have seen this diminish in importance relative to spin and soundbites.

This has reached its zenith with George Osborne, a chancellor whose primary occupation seems to be not running the economy, but trying to make the Labour Party look stupid. This doesn’t make much of a contribution to the welfare of British citizens, but it does seem to work. The Chancellor has managed to convince most voters that he is the one with the reliable economic plan, despite presiding over an economic disaster. George Osborne appears to be very good as his job, but very bad at fulfilling his purpose.

The public is at least loosely aware of this problem and this is part of the reason for Jeremy Corbyn’s popularity among Labour Party members. Here is a politician who seems to be focusing on fulfilling what he sees as the purpose of politics: to deliver his vision of better country. But this is no use if – as many in the Labour Party fear – in doing so he will fail to do his job, which is likely soon to be getting elected as Prime Minister.

If you’re a footballer and someone else wins more penalties than you, you could be stuck on the bench and unable to do anything to make the game more entertaining. If you’re an investment banker who refuses to make a profit at the expense of the rest of society, you might lose your job and become powerless to improve the morality of investment banking. And if Corbyn can’t compromise his ideals to win popularity with the press and the public, he may never be able to act on those ideals as Prime Minister.

In short, it’s not possible for one footballer, banker or politician to unilaterally reject this type of behaviour while the system rewards it. If we want to see changes, we need to fix the systems and incentives under which they operate. It is tempting to say that the answer is better rules and better enforcement, but there are reasons to be pessimistic that this will happen.

Video technology and retrospective bans for diving could make a huge difference in football. But unfortunately world football is run by a bunch of crooks and Mafioso who do little to improve the game and much to enrich themselves.

Breaking up the big banks so that they can be allowed to fail and the risk is not borne by the rest of society could change the behaviour of bankers, or at least ensure that they feel (to some degree) its consequences. But if a massive global financial crisis isn’t sufficient incentive for governments to do this, then what is?

The issue of politicians is perhaps more difficult, as there is no regulator that has power above that of Parliament. The role of keeping politicians in check and ensuring that they can’t get away with flimsy or misleading statements falls mostly to the press. But, either through partisan cheerleading or a preference for scare stories and embarrassing photos over policy and substance, it does not always do a good job of this.

The aftermath of the UK election might look a bit Canadian

David Cameron’s intention to declare victory tomorrow even if he can’t command a majority of the house, forcing Labour to join forces with the SNP to bring him down, takes us into uncharted territory as far as UK politics goes. But there is a recent international precedent for this situation with some striking similarities.

Canada’s political system is similar to the UK’s in many ways – in fact, it’s modelled on it. They have a House of Commons with 308 members, each representing one electoral district and each elected on a first-past-the-post basis. But in some ways it seems like they are further down the line in terms of the evolution of this system. While the SNP looks set to dominate elections in Scotland for the first time, the Bloc Québécois has been doing it for years in Quebec. And while the UK may be looking ahead to years of minority governments and coalitions, the Canadians have been there for a while now. So it seems that Canada might offer a glimpse of the UK’s future.

And the 2008–09 Canadian parliamentary dispute might offer a glimpse of the UK’s immediate future. Following elections in October 2008, the Conservatives formed a minority government. But when the government tried to table its budget six weeks later, a left-leaning coalition led by the Liberal Party, backed by the Bloc Québécois and the New Democratic Party, signalled its intention to hold a vote of no-confidence and bring down the government.

The coalition commanded a majority in the house and the Conservatives would certainly have lost this vote, so they were keen to avoid it. The Prime Minister approached the Governor General – the Queen’s representative in Canada – to grant a prorogation of parliament. This means shutting down parliament for a period of time without dissolving it (which would trigger new elections), and in this situation it would allow the government to temporarily avoid a vote of no-confidence while they tried to find a way to hold onto power more permanently.

According to Wikipedia, the Governor General granted the request amid concern that if she didn’t, and instead allowed vote of no-confidence to go ahead, then:

the Conservative Party would launch a public campaign painting the new government and, by extension, the actions of the Governor General as illegitimate, creating “a crisis of confidence in Canada’s political system.”

Sound familiar? It gets better. After the prorogation was granted, the Conservative Prime Minister went on TV to address the nation and

outlined the steps the government had taken to address the economic crisis and attacked the Liberals for forming a coalition with the Bloc Québécois. [Prime Minister] Harper said: “at a time of global economic instability, Canada’s government must stand unequivocally for keeping the country together. At a time like this, a coalition with the separatists cannot help Canada. And the opposition does not have the democratic right to impose a coalition with the separatists they promised voters would never happen

Did I hear someone say con trick? I have to say I am finding this a bit spooky, almost like the Tories are modelling their approach on what happened in Canada. And why not? In the end the Liberal Party had a change of leadership during the prorogation and agreed to support the Conservative budget, in exchange for some concessions.

Could a hung parliament in the UK pan out like this? There are a number of differences that suggest it might not be an exact parallel.

First, the Canadian dispute arose six weeks after the election when the Conservatives had already been allowed to form a government and take power. I imagine that the dispute in the UK would be more immediate.

Second, while I am not an expert on these matters, I am not sure that the Queen herself would grant a prorogation in the UK case*. According to the Parliament website:

Queen Victoria prorogued Parliament in person regularly between 1837 and 1854, after which she ceased to attend, allegedly because she disliked the ceremony.

This was the last occasion on which the Sovereign prorogued Parliament or gave the Royal Assent in person, and was also the last time the Speaker made a speech at prorogation.

And third, the Canadian situation was resolved when the main opposition changed its leader and agreed to work with the minority government, which in turn agreed significant concessions in its budget. I find it hard to imagine Labour voting for a Tory budget or the Tories making significant concessions to Labour. But then again, we are heading into uncharted territory.

An afterthought

One final extract from Wikipedia gives us an idea of what Canadians thought about all this. A poll just after the prorogation was granted found that

40% of respondents agreed with the statement “The Conservative party does not deserve to continue in government,” while 35% agreed with “The Conservative party deserves to continue in government,” and 25% were “not sure.” On the question “Should the opposition parties get together and topple the Conservative minority government headed by Stephen Harper?”, 41% responded No, 36% Yes, and 23% not sure. If the government was defeated in a no-confidence vote, 37% of respondents would support a coalition of opposition parties taking power, 32% favoured holding a new election, 7% favoured an accord rather than a coalition among opposition parties, and 24% were not sure.

So Canadians thought (by a slim majority) that the Conservatives shouldn’t be in power, but also thought (by a slim majority) that no one should do anything about it. Although if they did do something about it, they should be allowed to take power without another election. So that’s clear then.

* Although today’s Times takes a different line.

Why lefties shouldn’t vote Green

Chris Dillow is voting for the Green Party and he gives some good reasons for doing do. As he points out:

The Greens are opposed to fiscal austerity. Labour’s promise to “cut the deficit every year” unconditional on the state of the economy is a capitulation to mediamacro deficit obsession. Granted, they might well be insincere in this – but there’s a danger that lies become the truth.

Fair enough. Labour has caved into the nonsense that the government talks on public finances and this alone makes it reasonable to prefer the Greens, even if, as Chris says, some of their policies are questionable and their leader has failed to inspire.

That said, Chris, and I imagine many other people who are planning to vote Green, prefers Labour to the Tories and “very much wants Ed Miliband to be our next PM”. But since he lives in a safe Tory seat his vote won’t affect the number of MPs each party has, so he assumes it won’t affect Miliband’s chance of being PM and he is free to use it to “express [his] disdain for how Labour has kowtowed too much to economic illiteracy and reactionary prejudice”.

But with David Cameron announcing that his intention to  declare victory if he gets the most votes and/or seats – even if he can’t command a majority in the House of Commons – this assumptions looks a little shaky. Cameron’s plan is presumably to force Labour to team up with the SNP to bring him down, then spend the next five years denouncing the Labour government as illegitimate, lacking a mandate and stooges of the Scottish nationalists. Even better, this prospect may be so terrifying to Labour that they bottle it and decide to endure a Tory minority government.

This is a novel strategy to say the least, and sounds almost like an admission of defeat. But while political insiders recognise that this strategy has no constitutional or legal basis, a majority of the public seems to think otherwise. If Cameron (and Tory-supporting sections of the press) can create a strong enough case that he is the only legitimate winner, then Miliband taking office might be an unpopular move.*

This strategy is unlikely to work, though, unless the Tories get both more seats and more votes than Labour. If Labour can respond to Tory claims of legitimacy on the basis of having the most MPs by pointing to their larger share of the popular vote, then the Tory case begins to look weak. And every vote cast for the Greens instead of Labour increases the chances of the Tories getting the largest vote share. Even if this doesn’t affect Miliband’s chances of entering number 10, it could weaken his position once he gets there.

It’s not ideal that we have a voting system in which it is so often rational to vote tactically, rather than for the party you prefer. But given the system we have, lefties like Chris should vote for Labour on Thursday, even if they live in a safe seat.**

* What we are seeing here is the gap between how our voting system actually works and how most people think it works beginning to impinge on reality. We have been brought up on a diet of two-party politics where there is a winner and a loser, and the winner becomes Prime Minister. This time, in part because of the nationalist bias in our electoral system, there will not be a winner – but the public is still looking for one. This allows politicians to play off public opinion against legal and constitutional facts. A system that relies on these sorts of games is one without clear and objective rules, leaving voters confused and disenfranchised. If hung parliaments are going to become the norm in future elections then either our voting system, public opinion or both need to change.

** It goes without saying that potential UKIP voters who prefer Cameron to Miliband should take the same advice and vote Tory, even if they live in a safe seat.

UPDATE: while Cameron’s strategy might be novel to Brits, it is old hat in Canada.

How to draw public finances

Here’s a chart from the OBR that I really don’t like:

Total public sector spending and receipts (OBR)

The OBR's chart showing UK government spending and receipts

I don’t mean to attack the OBR here, which I think generally does decent work. I’ve seen this sort of chart reproduced by all sorts of otherwise reputable people. But it is horribly misleading. It’s not that there is anything wrong in the chart. It’s just that the way it’s constructed and the patterns that jump out at you feed a narrative that is both wrong and pervasive.

Try looking at the chart without reading any of the text. What do you see? A blue line and a yellow line that jump around a lot but sort of follow each other; and two points where the blue line shoots up. And what’s that blue thing that shoots up? Public spending.

Except public spending didn’t actually shoot up. These two points are the biggest recessions in modern history, and while recessions do lead to increased spending thanks to automatic stabilisers, they mainly lead to lower GDP. That’s kind of the definition of a recession.

The chart shows the ratios of spending and receipts to GDP. In many situations this is the best way to think about spending and receipts, but in this case it leads to a visual representation of the right data that tells the wrong story. The blue line shoots up even though spending doesn’t; and the yellow line stays the same even though tax receipts have collapsed.

This may sound obvious and, of course, the people who make these charts know all of this. But when the government and large sections of the media are pushing a narrative that public sector spending was and is out of control, communicating the facts clearly is important.

So how could we do this better? Something along these lines would be a good start:

UK public finances and GDP

A better way to draw the UK's public finances

This chart shows spending, receipts and GDP in real terms (13/14 prices), as well as total public debt as a share of GDP[i]. This shows three important things about the recent financial crisis that we can’t easily get from the OBR chart.

  1. Although spending rose a bit relative to trend when the financial crisis hit, the much more pronounced effect was that receipts collapsed. This was a more important cause of the deficit.
  2. The reason for the collapse in receipts was a collapse in GDP. Receipts broadly follow GDP, since government policy pretty much directly sets what proportion of total output is collected in taxes. Spending policy (at least in the short term) is set in pounds, so it doesn’t follow GDP as closely.
  3. Public debt was a lower proportion of GDP on the eve of the financial crisis than it was a decade earlier when Labour came to power.

This stuff is all pretty basic, but this narrative is largely missing from the mainstream media and instead confined to economics blogs. Maybe this is because of media bias or ignorance. But maybe it’s also partly because we aren’t doing a good enough job of presenting the data that we have.

[i] As I said, it’s usually a good thing to think about public finances as a share of GDP, except when it’s not.




An electoral system that favours nationalists

One of the supposed merits of the UK’s first-past-the-post electoral system is that it delivers strong governments – that is, it gives disproportionate representation to bigger parties, which until 2010, tended to ensure that one of them had an overall majority.

This is why smaller parties don’t like it. The Liberal Democrats have always been against it and as part of the coalition agreement in 2010 they secured a referendum on switching to an alternative vote (AV) system. After some quite strident campaigning against this change from the Prime Minister among others, the public voted pretty decisively against, condemning smaller parties to many more years of under-representation.

But not all smaller parties. There is one smaller party that is set to get a huge bonus in May thanks to first-past-the-post, ending up with twice as many seats as it would under a proportional system. That party is the SNP.

According to the latest projections on may2015.com, the nationals are set to get 4.08% of the vote in Great Britain, but claim 55 seats, or 8.46% of the total. This is because first-past-the-post doesn’t just favour big parties – it also favours those that are more geographically concentrated.

We can see how this works by building a simple model that distributes a given vote share across different geographical areas, with some random fluctuations and a fixed victory threshold. The chart below shows the number of seats that the model predicts for parties concentrated on Great Britain, England and Scotland, compared with the projected results of the major parties. Although the model is crude, it matches up pretty well with these projections.

How many seats a party would win for a given share of the Great Britain vote, by geographical coverage, and the latest projections from may2015.com for the main parties

First past the post favours nationalists

With votes spread evenly across the whole of Great Britain (think Labour and the Conservatives) you need quite a large share before you are likely to win any seats at all. If you are concentrated in England only (think UKIP) the threshold is a bit lower, but it’s still looking tough with anything less than 20% of the vote. Smaller parties mainly focused in certain areas of England (like the Lib Dems) do a bit better. But if you are entirely concentrated in Scotland, you can get a decent number of seats in Westminster with a tiny proportion of the total vote.

The SNP presumably like the first-past-the-post system now, but ’twas not always thus. In 2011, in the run-up to the AV referendum, a party spokesperson said:

Faced with a choice between the fundamentally unfair first-past-the-post system and a step towards a more democratic system, the SNP’s National Executive has agreed that the SNP will support a Yes vote in the AV referendum.

At that time the SNP were small even in Scotland and had just 6 seats. But now they are big in Scotland – they are projected to get 48% of the Scottish vote – and are forecast to cash in with a whopping 55 seats. Will they use their newfound influence to continue their push for electoral reform?

Contrast this with the fortunes of UKIP, who command much greater support overall and are expected to win more than three times as many votes as the SNP, but will walk away with a measly 5 seats. All of which goes to show that you don’t need to be a big party to reap the benefits of the first-past-the-post system, you just need to be big somewhere.

If the SNP do go on to win this number of seats, and if the Union and our parliamentary system survive the arrival of the Nats in Westminster, could this have consequences for other regions? If localised parties can secure a good share of the vote in one region, they can secure disproportionate representation in parliament and use it to push local issues / sabotage the union from within / whatever else they want to do. The London Party anyone? (We are the richest region in Europe and it’s time we stopped subsidising the rest of the country!) Or perhaps the Cornish Assembly, or the People’s Front of Tyne and Wear?