What does Britain need from the next five years?

To judge by the jumble of promises in the manifestos, more than any party is offering
April 22, 2015

Has the United Kingdom finally become “Little Britain”? You’d think so from this election campaign. The parties have largely avoided the big issues facing the country, producing micro-policies they hope will grab a day’s headlines and a few more votes, although there has been more care taken than in previous elections to make sure those make arithmetical sense. “Fully-costed” is the banner under which the parties now claim to march.

The real cost of seven years of crisis and austerity is now clear. It has given us the politics of the cash register, and politicians who struggle to explain their parties’ inspiration or to set out their vision for 2020, never mind beyond.

The Conservatives, under the slogans of “security” and “long-term economic plan,” have not made it clear what they think the point is of being Conservative. Is austerity a necessary discipline or an ideological retrenchment of the state? Only in his manifesto speech did David Cameron find the words for aspiration for Britain (and he focused more on those in work, not those without it). He also avoided talking about the referendum on Europe to which the manifesto commits him, although that could change the fortunes of the UK more than anything else in the text.

Labour has made inequality one of its big themes, although Tony Blair said so more directly than Ed Miliband. But it is uncomfortable with the constraints of the budget deficit, muddled on the conditions that foster growth, and Miliband fails to understand how he is seen as part of an unlikeable Westminster elite. Nor has it explained what it would concede to the Scottish National Party if it needed its support to govern—again, with potentially immense significance for the UK as it now is.

"The jumble of panicky promises that has emerged has left the parties in a muddle on important questions"
While Nick Clegg deserves the title of bravest man in politics, turning up every day when commentators had pronounced his political death (and colleagues had manoeuvred to achieve it), the LibDems have struggled to position themselves both to the left and right of Labour. Clegg’s pledge to inject “heart to the Tories and brains to Labour” keeps all future coalition options open (by insulting all partners equally) but blurs the party’s identity; there are still liberal policies there, such as curbs on state surveillance and the passion for education and environment, but too few.

The final days of the election in pictures:

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The SNP and the UK Independence Party have had the easier task of repeating a single, narrow message. For voters who want Scottish independence or an exit from Europe, other parties will probably seem inadequate. For the Greens, in contrast, small size has not brought more clarity. But they are right that the environment has been almost absent from the debate, as leaders quietly put cost first while pretending that green goals come cheap.

The jumble of panicky promises that has emerged has left the parties in a muddle on important questions. They would have done better to say what those are, and what genuine dilemmas they pose. Without covering the whole waterfront of the manifestos—and their bittiness is a symptom of the confusions—here is a guide to the questions that need better answers, beginning with the battleground of economics.

Austerity versus growth?

This has dominated the campaign; at its heart is the question of whether further cuts in public spending are the right way to tackle the budget deficit and national debt, or whether more investment will bring higher growth, solving the problem. This debate has been raging since the 2008 financial crisis, between the “austerians”—as George Osborne is now dubbed, and “neo-Keynesians” such as Nobel laureates Paul Krugman and Joseph Stiglitz.

It has been intensified by the persistence of exceptionally low interest rates—actually negative after taking account of inflation, meaning that the government is effectively being paid to borrow money. Why not borrow to invest now, says one school (including Anatole Kaletsky), in infrastructure or “human capital” through education? Because interest payments consume money we could spend or return to tax payers, says the other, while leaving us vulnerable to a downturn or rise in interest rates.

This should go to the heart of the difference between the Conservatives and Labour, but they have, astonishingly, been in much the same place for a lot of this parliament, and are still there. George Osborne has followed a course similar to the one that Alastair Darling, the former Labour Chancellor, appeared to offer, albeit disguised by the language of austerity. The Conservatives now, with good reason, play the economy as their trump card. Growth in 2014 was the fastest of any major economy; a record 30m people are now in work, with the creation of 473,000 jobs in 2013/14. Critics retort that many are in low-paid work—but many are not. The Office for National Statistics has showed that the largest rise has been in the professional, scientific and technical category, where 79,700 jobs were added in London between 2012 and 2013, a rise of 14.8 per cent, and 72,600 in the rest of the UK (4.9 per cent).

Britain’s position is stronger now than five years ago, reflecting many of Osborne’s decisions—not just the initial cuts, but his changes of course. It is an achievement to have halved the deficit and some welfare reforms and other savings prompted by this goal were worth making, although others were poorly judged and insensitive; the “bedroom tax” on unused bedrooms in council houses raised little new revenue and caused many people much distress. Because the coalition “ring-fenced” the NHS and other big departments, cuts fell hard on local government and other services that deeply affect people’s lives. All the same, it is too blithe of the neo-Keynesians to say in hindsight, now that the deficit has been reduced, that it needed no attention at that point.

Still, Britain should be glad Osborne did not try to eliminate the deficit entirely even though Labour goads him on breaking this promise. He relaxed targets when recession caused revenues to come in below predictions, and didn’t cut spending further. Critics accuse him of cutting the size of the state as a matter of ideology, but that charge hardly fits his actions—or inconsistency. December’s Autumn Statement had such ambitious targets for returning to surplus that Conservative candidates winced, but the Budget in March eased them—an apparent admission that they were too tough. This is a better position to take—there is a lot of force behind the case now for more investment rather than obsessing about the budget deficit. But the changes, and the contradiction between words and deeds make it hard to work out where he intends to go next.

The same for Labour, though. It distinguished itself well from the Tories after the Autumn Statement  but its targets seem now not much different, although as Paul Johnson, Director of the Institute for Fiscal Studies (IFS), has pointed out, we don’t really know; there is a £18bn zone of ambiguity in there.

And the letter now signed by more than 100 business leaders has, rightly, been damaging to Labour. Some object to the pledges to end zero-hours contracts, to raise the minimum wage to £8 an hour or to freeze energy prices; “it is no good simply pointing at a price and saying he thinks it too high or low without understanding why it is there,” said one. Others feel Miliband is uninterested in business and offers it little but support for the European Union.

In the long term, we’re all broke

None of the main parties has much coherent to say on long term threats to national finances, although these are as much a problem as recovery from 2008. One of the best reasons for cutting the deficit now is that Britain faces a demographic headache, as an ageing population queues up for the entitlements which successive governments have promised older citizens. Yet both Labour and Conservatives have seen pension savings as a pot to raid, not a practice Britain needs to encourage—although Osborne’s liberation of pensioners from the poor returns of compulsory annuity schemes was rightly welcomed. But even there, too little has been considered about advice; worrying stories are trickling into the personal finance pages.

On healthcare, the Conservatives have echoed Labour in pledging more money now with little thought of what the NHS should aim to do—and not do. The lack of care for dementia and mental illness compared to cancer, for example, is now attracting comment; on this, the leaders have had much to say—Nick Clegg in particular—except what they would change. The pressure on its budgets will only get worse.

The coalition has made big changes to benefits, where the Lib Dems can claim real impact on the detail. But none has dared broach the necessary message in Prospect’s last cover—“Working till 70”—that an extension of normal working lifetimes, and a deferral of state benefits for the elderly, will be necessary to preserve the ability to pay for the other things people expect.

Productivity and infrastructure

Britain’s biggest economic problem (again, Anatole Kaletsky agrees) is arguably the way that productivity (the value produced per worker) has stalled, and with it the hope that wages and living standards will rise. There are no short cuts, but investment and better education are necessary, if not enough, yet the parties show deep confusion in this area.

Britain’s energy policy is a nonsense; politicians refuse to tell voters that energy supplies cannot be at the same time secure (in the sense of keeping the lights on), green and cheap. Miliband’s policy of freezing bills was inevitably popular—and there are good reasons for a hard look at whether competition is working. But as Malcolm Grimston, research fellow at Imperial College, has argued at Prospect roundtables, bills will have to rise to pay for new power stations. Voters don’t want to hear that—or that some of those will have to be built near them. They don’t seem at the moment to prioritise green concerns either; if politicians want to argue, ahead of the Paris climate change talks later this year, that they should do so, they should tell them the true cost.

Meanwhile, the inability to decide whether and where to build high-speed rail and airports reflects a confusion about when Westminster should take these decisions, when they should be passed to local government or the private sector, and how to calculate the value.  It is meaningless to blame banks for not supplying the finance, as parties have done for five years. They say the money would be there, if the decision were ever made.

Much the same is true of housing. The Conservative proposal to extend the “right to buy” scheme to housing associations seems a mistake. It does nothing for those who rent or cannot afford to buy, is likely to leave many housing associations short of stock, and plays to the national obsession with owning your own home, tying up personal wealth in just one asset class. No party has wanted to get to grips with the problems of London’s property boom, with the constraints of green belts around cities, and with the overall shortage of homes.


Those are some of the lumpy problems of economic policy which have dominated the manifestos. But the campaign has also brought out big, symbolic themes which people feel tells them something broader about the state of Britain. Leaders have so far struggled to find good words, but there is still in their attempts a recognition of the scale of social change underway.

One of those themes is inequality, now a staple of conversation (as Paul Collier writes). Labour has rightly tried to make this its territory, even if its policies are unlikely to raise the tax revenue it predicts. As Collier argues, most people feel strongly about the extremes, but theorists (and, so far, Labour prescriptions) tend to target the upper-middle more successfully than the very top or bottom.

Parties might do better to start by saying why it matters and what they are trying to do.  There are, as Martin Wolf, the Financial Times columnist, puts it, three main reasons. Inequality offends a basic sense of fairness; Gordon Brown tended to abuse that view, reckoning that merely by deploying the word “fairness” he should end any argument, but a desire for it still underpins the sense of a social contract.

Second, over more than a decade and a half, people have seen no increase in real wages. For some, there has been a fall. This deprives people of the sense that they can prosper, and their children too.

Third, the point at which Thomas Piketty has launched himself, is the capacity of those who have emerged at the economic heights of society to use its institutions to fortify their position. In this model, economic inequality leads smoothly to political and social inequality. Rentiers capture politics to protect their businesses, as they have in the US Congress. They secure the access of their children to the best education.

That phenomenon should not be exaggerated; British society has not become as immobilised by money as some portray it. It has changed hugely in 50 years, as David Butler says. The old English class system has dissolved to a previously unthinkable degree (even if, reading the New York Times sometimes, you might think the country was still all lords, butlers and foxhounds). The role of women, recent immigrants, and people who are openly gay in public life and in business has changed beyond recognition. And as sociologist John Goldthorpe has written, there is more downward mobility than up, even if politicians don’t advertise the fact; as Peter York wrote for us in his widely-read piece (“Fall of the Sloanes,” in March), a social cadre has been dislodged.

But there has been a deep distortion from the extremes of wealth, from the resurgent financial sector, and from the dominance of London within the UK. Ed Miliband’s attack on non-dom tax status was shrewd, tapping into widespread anger. The Tories were never likely to make this their strongest suit, but Cameron has done so little to counter the charge that the party is run by “posh boys” that it seems he does not recognise its force.

However, Miliband’s words are better than his policies, and it is significant that Piketty, who has been studying this for a quarter of a century, has failed to suggest any workable solution. His global wealth tax is not in the land of possibility. Stiglitz has argued for land value taxes, and Miliband has moved towards this kind of approach with the mansion tax, as have the Lib Dems, late in the day. On the other hand, his confusion about economic policy for a party of the left is reflected in Labour’s support for quantitative easing, which pushed up values of assets, disproportionately benefiting those who held them.

There is much to be said for the principle of shifting taxes from income to assets, and this is ground any of the parties could fruitfully explore (although property taxes alone do not do much about the wealth of those right at the top as not much of their assets will be in that form). But the arbitrary £2m threshold of the mansion tax has provoked justified attack, in creating distortions and setting London and the southeast against the rest of the country.

An extension of council tax bands, as the Lib Dems first considered—seems more promising as well as overdue; it might well raise more revenue and be more widely accepted. If Britain had a more rational system of property taxes, it might be able to scrap the stamp duty on purchases; this is a bad tax, discouraging mobility.


It was refreshing that the Lib Dems put “world class education” at the heart of their manifesto. The other parties had much to say on the subject, of course; but while the manifestos were ambitious, the question is whether they are achievable. Clegg pledged to maintain funding for 2-19 year olds in line with inflation; the independent IFS pronounced the Lib Dem commitment more generous than that of the other main parties.

The Conservatives promised to ensure a good primary school place for every child; to turn “every failing or coasting secondary school into an academy”; to “make Britain the best in the world for developing maths, engineering, science and computing skills” and to create three million apprenticeships and ensure there is no cap on university places. Even if cost were not a constraint it is not clear how they could.

Labour focused on raising “the standard and status of technical and vocational education” and further education colleges; it is right to try to broaden the lamentable range of further education. But it has made a mess of its policy of cutting university tuition fees from £9,000 a year to £6,000; vice-chancellors say this is unaffordable and will even reduce access for the poorest students.

The pledges did, more directly than in many previous elections, explicitly recognise the problems that have dogged Britain: grotesque differences in access to high-quality schools, not just the state-private divide, but across the country; the neglect of further education and training other than university, and Britain’s performance in maths and science compared to other countries.

There have been, though, been real successes in the past 15 years, and Cameron—and Miliband, given Labour’s role in them—could have made more of them. The rapid improvement of London schools is one; the next government needs to see how to extend this across the country. Michael Gove, when Education Secretary, did much to begin to shatter Britain’s inflexibilities by creating new schools. It is clear that those need closer monitoring than his team first thought, but clear too that Britain needs more schools, and that gives a chance to break down some of the old rigidities.

Society and constitution

It is unfortunate that Cameron has jettisoned his Big Society language of 2010, a notion that may have been indistinct and easily parodied but still tried to say something about how people could feel a sense of a common project. The Conservatives have also said remarkably little about two of the coalition’s real achievements in office—increasing the number of adoptions from 3,100 in 2011 to 5,050 in 2014, and passing legislation to enable same-sex marriage. Cameron could have added more about how crime rates have fallen while police forces have suffered cuts.

He also has missed a chance to talk about immigration (consistently high in voters’ concerns) in a more positive way, while he has not explained how to keep to the target cap which Theresa May, Home Secretary, insisted the manifesto include. Instead, he focused on why young Muslims “leave Britain and all it offers” to go to Syria—a powerful part of the speech, but a narrower problem. There was nothing in it either that might form the basis of a future appeal to Scotland to stay part of the union—a pitch that he or his successor will have to make. Nor was there much on how to share out power—and money—between the regions and cities.

These issues have been the subject of our Blueprint for Britain series (do download the Prospect e-book if you have not yet read it); they remain unresolved. In that series, we have made the case for shifting more power—and money—to regions and cities, for more mayors, and for cutting the size of the House of Lords.

Osborne has only recently pulled together his ideas for a “northern powerhouse,” one of the most imaginative things he has done as Chancellor, giving Manchester new powers to raise taxes and to run itself. It has, though, barely had a chance to get going.

Miliband has been stronger in talking about British society, but more limited on Britain’s constitutional arrangements. It is to his discredit that he showed no interest in the imaginative programme of local democracy that Jon Cruddas recommended, as an antidote to Britain’s extreme centralisation, and to public anger about the narrowness of the Westminster elite. Labour’s fear of losing votes from its Scottish MPs inhibited it at the start of the debate about “English votes for English laws” and other exploration of the appetite for sharing out power. Given the SNP’s continuing strength, it looks as if it will lose those MPs anyway.

Britain abroad

The biggest silence in this campaign has been over foreign policy. At the manifesto launch Cameron did finally mount a defence of Britain’s role in solving the world’s problems on his watch. It’s fair to claim a big role (although stretching over 13 years) in bringing Iran to the table over its nuclear programme, both through sanctions and through negotiations. Cameron’s intervention in Libya was one of his best decisions—but then not followed up. Britain had the capacity to help steer Libya and Yemen off the course of disintegration into which they have now settled.

However, relations with the US are worse than for decades—and should Miliband lead the next government, they might get worse still, as Labour’s vote not to intervene in Syria caused a deep rift with Washington of its own. The bitterness of the Iraq and Afghanistan campaigns is one central reason; the US military felt let down by UK assurances that it had the force to handle Basra and Helmand, which as became painfully clear, it did not. The threat that Britain will lose Scotland and exit from Europe is a bigger one; so is the steadily diminishing size of its military. Cameron has mystified allies, notably the US and Germany, by pushing hard for a commitment to spend 2 per cent of GDP a year on defence at the Nato summit in Newport last year—and then wriggling out of it himself. (Officials say the only plausible explanation is that the target then seemed easy for the UK to meet, before the recovery had picked up, and that too little thought was given to it.)

Ukip aside, there has essentially been silence about Europe. Blair managed to talk about it—although aroused anger by suggesting people should not have a vote on it; part of his legacy is that people intensely dislike leaders who lead them where they do not want to go, without asking. Two years after Cameron pledged to negotiate a new deal, we have no idea what he means beyond withholding some benefits from immigrants, and no idea how he might get other concessions, given that Jean-Claude Juncker, European Commission President, has ruled out any such discussion until some time after 2017, the date by when Cameron is committed to a referendum.

It isn’t too late for Britain to rediscover its role in the world. It can make an important contribution on Russia, militant Islam, and financial regulation in the wake of 2008. It has pledged to contribute 0.7 per cent of its GDP to development aid, although it fails to get the credit for this as it channels so much through the World Bank and the EU. Leaders would do better to divert some of it to Britain’s foreign and defence policy once more.

Reasons for hope

British politics, other than in war, does not lend itself easily to the big words of hope, confidence, the future, or national identity. In the mouths of most politicians, they sound silly; the best that Labour has been able to make of Miliband’s “Hell, yes” bravado when interrogated by Jeremy Paxman is a T-shirt.

The Tories have sounded apologetic for austerity and defensive about the recovery; it is only late in the day that Cameron has tried to describe a hopeful society and to claim that he is acting on behalf of all British people, not just the richer half. The Lib Dems are still tangled in their claims for what they have achieved in this coalition and what they might bring to one of the future. Labour seems frankly muddled about what it is to be a party of the left when national finances are tight. That is a great pity. This campaign was a chance to say so much more, and comes at a time when the strength of the SNP has cast the identity and borders of the UK into doubt.

Party leaders have not just failed to be radical; they have failed to be ambitious or to recognise the strength of their position. Britain faces great challenges, but is also doing far better than many other developed countries—which is why so many people want to live in it. Life expectancies are rising, yet it has one of the youngest populations in the industrialised world. The emergence of the City, the quiet abolition of hereditary peers, the change in the kind of people who make up the workforce, what amounts to a revolution in social values in a quarter of a century, all show that a country which has been caricatured as wedded to the past is capable of embracing immense change. The successful continuation of a coalition government for five years, come to that, is a sign of how much Britain has changed.

There are good reasons to be confident of its place in the world. If only it produced politicians who would still say so.