Social Murder?: Austerity and Life Expectancy in the UK

Life expectancy has increased in the UK more or less constantly for more than a century. Around 2012, this all stopped, and among poorer populations, it actually went in reverse. In some parts of the UK, the change to premature mortality rates (death under the age of 65 years) has been nothing short of astonishing. This is the starting premise of David Walsh and Gerry McCartney's new book, Social Murder? Austerity and Life Expectancy in the UK. 

The authors, from the University of Glasgow, demonstrate how evidence shows that these extraordinary changes to life expectancy and mortality rates have been mainly caused by UK government policies implemented in 2010 by the Conservative-Liberal Democrat coalition. This is all carefully evidenced, showing what happened, when it changed and who was most affected. While we often bandy around the word austerity, the scale of the cuts to UK government spending is poorly understood. By 2019, annual spending was down by around £91 billion compared to pre-austerity levels. To put that in context, that’s more than the GDP of entire countries like Croatia, Bulgaria and even Oman. Over the period 2010–19, the cuts add up to a total reduction of approximately £540 billion. These are changes on an extraordinary level.

While the authors provide a mass of statistical and other data to make a case that was downplayed by many public health organisations, they also tell the stories of how austerity impacted individuals through case studies. These also show how the coalition government introduced a policy of vilification and demonisation of people in receipt of social security benefits. One case study highlights the impact on so many, "Moira was now terminally ill. But even that was not enough to satisfy the DWP. One of her daughters, Nichole, was told in a ‘cruel and heartless’ phone call that they would not believe Moira was terminally ill unless they were told by a doctor that she only had a few weeks left to live. They had requested evidence from the general practitioner (GP), they said. The GP told Nichole they had received no such request. In August 2015, one month after her cancer diagnosis, Moira died. She was 61 years old."

There are also startling non-public health statistics that illustrate the arguments. For example, in 2010/11, the Trussell Trust, the largest food bank provider in the UK, had only 35 food banks across England; by 2019/20, they had almost 1,300.

They don't deny the impact of other factors on life expectancy, such as COVID-19, obesity, and inflation. However, they point out that the trends pre-dated COVID-19 and the cost-of-living crisis - austerity made them worse. As with the title from an apt Friedrich Engels quote, they don't mince words, "Put more bluntly, poverty kills. And austerity has increased poverty levels in the UK." Austerity kills through physical and mental illness, and children are impacted the most. The book also looks at the international evidence, showing that the greater the austerity implemented by those governments, the worse the life expectancy and mortality trends. They also criticise public health agencies – most notably PHE and the WHO, for not raising the alarm that austerity policies were causing life expectancy to stop improving overall and causing it to fall rapidly in the most deprived communities, which they argue 'is a dereliction of duty', and lessons need to be learned.

If mortality rates are to improve, the new UK Labour government and other governments worldwide must understand the evidence, quickly reverse the erosion of public services and social security systems and protect those at greatest risk. The authors conclude, "If poverty in a wealthy country is a political choice, as Philip Alston so eloquently pointed out, then so too is no poverty. It is not only within the gift of our political leaders to achieve this: it is surely their moral obligation." It is not just governments; we all have a responsibility: "To really change our politics we need to be active citizens: building campaigns and protests; creating and supporting institutions and organisations that can help."

The recent budget was a start, as the impact analysis below is the reverse of the austerity years. However, as I argued in my Budget blog, this direction change must be sustained. If you want the evidence, look no further than this excellent book.

Europe after Trump

I participated in a European foundation workshop last week, which examined the impact of a Trump presidency on Europe. While European leaders politely congratulated Trump and emphasised long-standing links, the policy community is less sanguine.

As you might expect, there was a lot of emphasis on the need for Europe to be less dependent on the USA. However, other strains of thought saw developments within Europe, making it more challenging to develop a coherent European response. When Trump was last in power, he faced a reasonably united Europe led by centrist moderates. Today, Europe has its own populist leaders who have a deep-seated scepticism of the EU and a desire to erode it from within. Many of these leaders also welcome Trump's return, although wary of his policies, particularly trade tariffs and the consequent dumping of China's overproduction on Europe. Add to that the political uncertainty in France and Germany, and Europe looks anything but united.

Despite Brexit, the EU remains Britain’s biggest trading partner, representing about 40% of UK exports. However, the US is the UK’s largest trading partner as an individual country, accounting for about a fifth of all exports and worth more than £190 billion a year. If it's an either/or, re-establishing ties with the EU is in Britain’s financial interest. Neither option is good news for the Chancellor's growth strategy.

My presentation was on the implications for defence. A Trump presidency means Europe and NATO must get serious about their defence. European defence policy has traditionally been heavily reliant on US support, without it NATO will be diminished, While there are some traditional Republican policy voices in his cabinet picks, we also have Pete Hegseth running the Pentagon and Tulsi Gabbard at national intelligence. Having a Putin apologist within the Five Eyes intelligence alliance is a frightening prospect, particularly for Ukraine, which could lose funding and the vital intelligence assets, mainly high-end satellites, that are essential to its defence.

The following two months could be critical for Ukraine as Russia intensifies its offensives to strengthen its bargaining position. Biden's missile decision helps Ukraine, but it's not a silver bullet. Trump's buffer zone plan is doomed to failure, as the UN peacekeepers in Lebanon would tell you. Putin will simply use the time to regroup before his next aggression. Front-line European countries identified this more than others at the workshop.

The silver lining is that it could galvanise the UK and the EU enough to take action on UK-EU security and defence cooperation. Germany, in particular, needs to develop a new defence policy with funding to match, ending reliance on the USA for protection and supporting Ukraine. To date, the average German military support for Ukraine represents approximately 0.1% of Germany's GDP annually. According to projections by the Kiel Institute, ceasing support for Ukraine could lead to costs ranging from 1% to 2% of annual GDP over the next five years.

Britain also needs a new defence strategy to end the myth that we can do everything. The British Army cannot deploy a whole division for combat. The Royal Air Force struggles to defend its airfields, especially against missile attacks, and the Royal Navy lacks enough crew for its remaining ships. In a sustained Ukraine-style conflict, our ammunition supplies would quickly run out. We should not forget that the so-called independent nuclear deterrent almost entirely relies on US technology. These were highlighted in a House of Commons Defence Committee report, and the new UK Government is developing a new strategic defence review. 

Since the Second World War, Britain has acted as a supporting player to the US, pursuing global goals without the means to sustain them. The last government's 'tilt to the Pacific' and 'Global Britain' rhetoric was just the latest iteration of this delusion. As Frank Ledwig put it recently, "The UK must decide: is it a global power or a regional force in the Euro-Atlantic area? It cannot be both."

Autumn Budget 2024

 I am sadly old enough to remember when budget purdah was a thing. Clearly, no more, with relatively few surprises in today's budget, which hadn't either been formally announced or at least briefed in advance. That doesn't mean it wasn't a massive shift in direction, arguably transformational. I would highlight three in particular.

The first is the distributional analysis. After 14 years of the Tories rewarding the rich, this looks like a proper socialist budget. This point is reinforced by specific measures such as changes in Capital Gains Tax, Inheritance Tax, and, the one I particularly enjoyed, private jet passenger duty.

Second, there will be a big increase in spending for devolved administrations. An extra £1.5bn for the Scottish Parliament this year and an increase of £3.4bn next year. As Stephen Boyd points out, this doesn't end all the Scottish Government's long-term challenges, but if I were Shona Robison, I would sleep better tonight. 

Third are the fiscal rule changes, which many of us have been shouting about for weeks. This means more significant public investment in rebuilding our public services. As the OBR highlights, this alone won't boost GDP in the medium term, but it does start to fix the foundations of the economy after many years of neglect. Some of us would argue it could have been more significant and, as the OBR also highlights, must be sustained. The historical record shows (below) that it is not the 1960s and 70s, but greater than the manifesto implied and a move in the right direction. The OBR assessment of the impact on inflation, debt, and the bank rate is marginal. 

Other excellent announcements include the above-inflation increase in the minimum wage and reserved spending on defence, although this is still below where we need to be as a proportion of GDP. Hopefully, the Defence Review will address the huge threats to our national security. Confirming the ending of VAT exemptions for private schools thankfully showed the absurd lobbying failed. I was also pleased to see action on the mineworkers' pension scheme. 

If there is one big disappointment, it is the failure to increase fuel duty. I filled up my car on the way home yesterday, and when I left the petrol station, I thought it would not likely be that low for some time. However, Fuel Duty was frozen, and the 'temporary' 5p cut was kept. For a government that cares about climate change, this is bonkers, particularly when increasing the cap on bus fares. Some economic downsides around household incomes and employment have to be acknowledged. Increasing Employer NICs is not a free lunch.

Overall, I was very impressed with this budget. Of course, there are actions I would have liked to see that are missing, and she could have gone further with others. Serious tax reform is still needed, particularly on wealth. However, this was a step change in direction, and you can't do everything at once. There is still some headroom against fiscal rules, so there is scope for further structural changes.

Great Britain? How We Get Our Future Back

 If you are interested in economic policy, I recommend reading Torsten Bell’s new book, Great Britain? How We Get Our Future Back. In it, he provides a detailed analysis of the key economic challenges facing the UK today and proposes policies to return the country to economic and social prosperity. Torsten Bell is best known as the chief executive of the Resolution Foundation, whose economic and social policy analysis is always worth reading. Before that, he was a Treasury civil servant and now a Labour MP.

His analysis of what's gone wrong is trenchant and well-argued but not new to anyone who follows the Resolution Foundation's work. He argues that the austerity economics pursued by the Tories was economically damaging and socially disastrous. A toxic combination of high inequality and low growth left the UK exposed to Brexit, a global pandemic and the biggest inflation shock for a generation. In particular, this negatively impacted both poorer and middle-class Britain. He also highlights the breakdown of the intergenerational contract, ‘The young are earning lower wages than their predecessors, in more insecure jobs, while renting smaller properties for longer, as their aspirations to homeownership sail out of view.’

Bell points to a productivity gap that has doubled in the UK compared to France and Germany despite the well-publicised challenges those countries face. British workers produce in five days what their competitors produce in four, resulting in stagnant real average wages. Rising property prices and rents mean the average family spends twice as much of their income on housing costs compared to 1980. The cost of housing in the UK is the second highest out of 38 OECD countries. 

For the degrowthers (the theory that growth is undesirable), they’ve got what they wanted. Anyone thinking the problem is that we have had too much growth has missed the news that we haven’t had any. This is not normal, even after recessions.

There is much more about what's wrong, but the vital part of the book is how to put it right. I suspect not all his views will be universally accepted. For example, he opposes a Universal Basic Income (UBI), arguing, ‘an affordable UBI would be inadequate, and an adequate UBI would be unaffordable.' I agree, but many on the left don't. He is not opposed to directly elected mayors (I am) but argues that they have been tasked with providing economic leadership without the means to deliver it. He is absolutely right about the need to build up a smaller number of larger pension funds, but that is being resisted, including by many councils in Scotland.

The core of his prescription is investment, public and private. Britain has had some of the lowest investment spending of countries in the OECD; consequently, we have substandard water systems, transport, and road infrastructure. He argues that Britain should adopt a 'golden rule' level of investment of 2.5%- 3% of GDP every year, pointing to the opportunities for investment in the necessary decarbonisation of the economy.

None of this is exactly radical economic thinking, but has the Chancellor read his book?  The signs are mixed. Some reports indicate a possible change to the fiscal rules, and others say the Chancellor is demanding cuts to infrastructure spending of around 10%. There has been some more positive news today. The Chief Secretary to the Treasury, Darren Jones, has announced a 10-year infrastructure strategy at the full spending review next year, which includes housing and schools as key economic growth drivers and will be overseen by a new body. But note, that is ‘next year’. 

And don’t expect the private sector to come to the rescue. Non-government investment in almost every other G7 economy is in a narrow range from 16.8 to 18.7 per cent of GDP, but in the UK, it's not even 15 per cent. Foreign ownership has increased from just over 10 per cent in 1990 to over 55 per cent in 2020, with no pressure to make long-term investment decisions. Bell points to the evidence that worker representation on company boards boosts investment levels and productivity. A policy that even Tories from Macmillan to May have supported – so let's do it!

Returns from higher investment in the form of increased productivity and growing real wages will take some time to realise - outwith the political cycle. However, short-term cuts could damage the economy and Labour’s electoral credibility. It may be early in the UK administration, but Scottish Labour has an election next year.

Bell concludes, ‘We must reclaim the confidence that progress is possible… it is politically and economically possible for the UK to escape from its union of slow growth and high inequality.’ Knock, knock – let’s hope the Chancellor is reading this book.

New Local Democracy for Scotland

I was in Edinburgh today, speaking at the launch of the New Local Democracy for Scotland Declaration.

Building a Local Scotland is a group of academics, trade unionists, former council leaders, and journalists who have launched a campaign to tackle the creeping centralisation that has left Scotland as one of the least locally governed countries in the world. You can read more on our website: https://buildlocal.scot.

In my contribution today, I argue that while the Scottish Parliament has brought democracy closer to Scotland, it hasn’t created the promised local democracy for our communities. Instead, we still have some of the largest basic council units in the world, and public services have been centralised.

Despite initiatives between COSLA and the Scottish Government, several commissions and numerous reports, we are no closer to achieving the principle of subsidiarity. In practice, powers have been stripped from councils and services such as police, fire, further education, and water have been centralised. Three-quarters of public spending is directed by Scottish Ministers, including around £23 billion spent by unelected quangos.

I have been involved with most of those initiatives. The Commission on Strengthening Local Democracy (2014) is a good starting point for understanding why local democracy matters. I was an expert advisor to the Christie Commission, which recommended, ‘A first key objective of reform should be to ensure that our public services are built around people and communities.’

The Jimmy Reid Foundation has published several reports on this issue. In Building Stronger Communities (2020), I argued that the starting point is subsidiarity, building integrated public services from the bottom up and sharing where appropriate. The role of central government should be to set the strategic direction based on outcomes – rather than trying to direct services from Edinburgh. In a paper published last week, Building the Local Economy, we highlight the impact of centralisation on the local economy.

However, a country the size of Scotland cannot justify duplication and difference for its own sake. Therefore, we need public service frameworks that allow local services to focus on what matters to achieve positive outcomes. Even where decentralisation is not viable, services should still be required to cooperate locally more effectively than currently. 

It sometimes feels that the only discussion around local government comes from those advocating directly elected mayors or provosts. These top-down initiatives have yet to produce a strong sense of local empowerment. Instead, they centralise power in a single individual, which could lead to unaccountable, authoritarian leadership.

There will be trade union and workforce concerns over creating a larger number of councils and other public bodies, along with cost concerns over duplication. This is where national frameworks are essential. Local decision-making should be focused on what’s important to communities, such as service design that reflects local needs. We do not need a hundred-plus procedures, different terms and conditions, contract documents, etc. Neither do we need a bureaucratic infrastructure of senior managers. This is an opportunity to explore the concept of a single public service worker on standard terms and conditions with joint introductory training for all jobs – both envisioned by the Christie Commission.

In an era dominated by austerity economics, local services continue to face the brunt of budget cuts. Successive administrations have ducked the reform of local government finance despite credible proposals in the Burt Report (2006) and The Commission on Local Tax Reform (2015). The Council Tax accounts for less than 20% of council expenditure. In European countries, the equivalent councils have between 50% and 60% of income raised locally. Local election turnout is generally significantly higher in countries with greater devolved taxation. Smaller councils on the European model also enable local people to engage with local democracy. The many initiatives to improve citizen engagement and participatory practices in Scotland have failed to engage working people because they haven’t put real power in the hands of recognisable communities. 

I view the Declaration as a starting point for a new conversation about genuine local democracy in Scotland and how we deliver public services. We must put right the forgotten aim of devolution - to disperse power not just from Westminster to Holyrood but onwards to communities. A comprehensive reform plan built up from communities not imposed from the centre. If you agree, please sign the declaration.

Defence Review

 The new Labour Secretary of State for Defence has announced a defence review. This is not just a routine action for new governments, but a crucial and urgent step given the changes in threats since the last review. The review, with its broad and unsurprising parameters such as NATO, nuclear deterrent, Ukraine, etc., is of utmost importance. The final report is due in the first half of 2025. 

I was recently asked to prepare a briefing for a European client looking at changes in defence policy across the continent. Most of our allies are also reviewing their defence strategies. The most apparent change in threat level relates to the Russian invasion of Ukraine. July's NATO summit showed the extent to which Russia's recent aggression in Ukraine and its transition to a war economy have completely transformed NATO's focus.

The Defence Review should refocus UK defence policy away from Boris Johnson's 'Global Britain' to Europe and the need to ensure our convention forces have the equipment and the supplies to fight a war in Europe. That doesn't mean abandoning the delivery of the AUKUS partnership with the US and Australia or ignoring the Gulf and the Middle East. However, we need to focus on the immediate threats to UK security. This Chatham House paper is a good assessment of Russia's challenges in upgrading each of the main armed services.

This highlights the need to increase defence spending. The Labour Party's Manifesto committed the Government to “set out the path to spending 2.5 per cent of GDP on defence.” That will be addressed in the Autumn Budget Statement. Given the Chancellor's talk about 'black holes' in the budget, which is unhelpful and inaccurate in my view, immediate progress along this path may be challenging. She has already delayed expensive infrastructure projects - a well-travelled Treasury route to balance the books. The IFS ripped into the previous Government's 'smoke and mirrors' on defence spending. The new Government can expect similar treatment.

Our armed forces' problems have remained the same since my last briefing. Britain's defence spending is inflated by a fifth of the defence budget spent on nuclear weapons. If you take nuclear out of the equation, defence spending is about 1.75% of GDP, around the middle of the European league table. This means that the armed forces need help to keep existing equipment running. Even the Royal Navy, seen as a gainer in recent spending rounds, must decommission ships because it doesn't have enough sailors. The Army is in even bigger trouble. When the Tories came to power in 2010, the British Army was over 100,000-strong. It is now due to fall to 72,500. 

Given the resurgent Russian threat, I found it pertinent to revisit Kenton White's book 'Never Ready: Britain's Armed Forces and NATO's Flexible Response Strategy, 1967-1989'. His use of newly available documents from the archives to show the failure of the flexible strategy is a stark reminder of the importance of learning from history. The concept was compromised by the failure of the Alliance members to provide one of the main legs of the conventional deterrent – sustainability. In particular, the highlighted limited ammunition reserves, a problem recently faced by Ukraine. We should learn the lessons from history on this, as they are crucial for a well-informed and effective strategy.

In an uncertain world, the government cannot afford to be weak on defence or create a glossy strategy that doesn’t address the underlying problems. As the head of the army has warned, we must be ready to fight a war in three years. The Defence Review should be comprehensive, including replacing the weapons sent to Ukraine and reversing Tory cuts, laced with more traditional Labour policies on support for veterans and ending failed outsourcing. I have previously set out how defence procurement should be reformed. My German colleague pointed to how the German government might take a stake in arms-makers and defence projects. This also points to the need for a detailed and comprehensive strategy that addresses all aspects of defence and security, including rebuilding our relationships in Europe.

The considerable uncertainty is the US elections. While the Trump campaign is imploding, there is a long way to go, and the result will likely be tight. Trump has said he is likely to be less supportive of funding for NATO and European security. It is reasonable to conclude that European powers will need to ramp up their investment in security. As Robert Dover puts it, “Trump’s tactics should not be seen as a surprise. They need to be planned for, financed, and procured for. Pretending they are surprising because they are uncomfortable is not a plan.”

The Defence Review claims that it will ensure that Defence is central to the security, economic growth, and prosperity of the United Kingdom. It needs to deliver on that commitment.

Pensions reform - time for action

 Pensions reform usually gets little political attention, so it's good to see the new UK government prioritising it. The Pension Schemes Bill, announced in the King's Speech, is taking forward measures announced by the previous administration, although hopefully with more urgency. As someone who advises on pensions and is a pension fund trustee, I have attended too many conferences only to be told there has yet to be progress on consolidation and the pensions dashboard.

More significantly, the new government has announced a pensions review with more radical aims. A first draft of the review is expected before the autumn budget, and new rules could be in place as soon as next year. Reforms are necessary because the current combination of 8 per cent minimum contributions, the £10,000 earnings trigger and the lower earnings limit on qualifying earnings produce inadequate savings for most UK workers. When you couple that with one of the lowest state pensions in Europe (38% of the EU average), we are storing up serious problems for the next generation of pensioners, particularly women and the low-paid.

A vital challenge for the taskforce of industry executives and ministers will be to propose ways to cut costs and improve investment options. The aim is to allow retirement scheme managers to boost pension pots by up to £11,000. Private pension funds currently impose massive charges on most pension products in pursuit of their profits. Expanding auto-enrolment without tackling charges will simply pour pension savings into the coffers of the City of London. You only need to look at what countries like The Netherlands have achieved to understand that there is a better way.

Another aim of the review is to ensure that pension funds are invested in the real UK economy. Most pension cash isn’t invested in any meaningful sense; it is gambled on shares, doing very little for the economy. Buying UK rather than overseas shares doesn’t change that, although it is absurd that only 2% of pension funds are gambled on British companies. In fact, some argue that pension saving damages the economy because it takes spending away from consumption. The UK has six and a half trillion pounds worth of pension fund money - roughly two and a half times our annual income. That money is not used creatively to invest in the UK economy.

Will Hutton correctly identifies a key problem – we have 30,000, often small, pension funds. There are around £225bn of stagnating surpluses, and the 2,000 very small, closed defined-benefit schemes should be merged into the highly successful Pension Protection Fund. He says, ‘Britain needs fewer and much larger funds than the smorgasbord of tiny, ­underperforming funds whose trustees guard their independence so jealously that property market nimbyism looks tame.’ The solution is larger funds, at least over £100bn, that can diversify risk sufficiently to invest more in productive UK assets.  

We should be starting with public sector pension schemes. Reeves has announced that the taskforce will push ahead with a merger of the 87 individual pension schemes in the Local Government Pension Scheme (LGPS) covering England and Wales. The LGPS is the seventh largest pension fund in the world, managing £360bn worth of assets, and spends £2bn on fees. Pooling the assets in the LGPS would enable the funds to be invested in a broader range of UK assets. 

We should be doing the same with the devolved Scottish LGPS. When I was the joint secretary of that scheme, we started looking at the options for consolidation and merger to cut costs and better invest the £36bn of assets. However, the project has moved at a glacial pace since 2018, primarily because of resistance from the small regional pension funds – the nimbyism Will Hutton was describing. 

I am more optimistic than some commentators that Rachel Reeves is serious about reforming our pension system. Getting these assets working properly for future pensioners and the broader economy is crucial to her growth mission. As the Scottish LGPS experience shows, she must push hard to get past the vested interests holding Britain back. 

It's Manifesto Time!

 It’s manifesto time. As someone who has drafted and haggled over a few in my time, I enjoy this part of an election campaign while recognising that this makes me a less-than-typical voter.  

You might think in a snap election that manifestos are hastily put together. However, in practice, the core policies will have been written months ago and tested on focus groups and polling, leaving just some updating before putting them into whatever governance arrangement the political party has. In broad terms, the manifesto is the opportunity to set out the details of party policy, rare in an era of sound-bite campaigning. It also provides a script for candidates and supporters. Some are more detailed than others, but there is pressure to say something about every policy area to avoid the accusation that the party is ignoring an interest group. Issues that are controversial, at least internally, have to be fudged to get agreement. 

 

It is legitimate to question the purpose of a manifesto in a rapidly changing world. This has been even more noticeable since devolution when most UK policy areas don't apply other than the knock-on spending commitments. There is also a strong case for more independent scrutiny of manifestos to at least reduce the dafter claims and counter-claims for the benefit of voters.

 I am only going to look briefly at the Conservative and Labour manifestos. I'm sure there are lots of interesting ideas in the Lib-Dem, SNP, and Green manifestos, but they are not going to be the next UK government. They also know that, so don't worry too much about their policies adding up. They make daft claims like the SNP on NHS privatisation and oil jobs. Only if we get a hung parliament, do they get interesting.

 

This really is a topsy-turvy election when the Tory manifesto is attacked for rash, uncosted spending commitments. The Tory tax cuts will cost £17.2bn a year by 2029-30, paid for by cracking down on tax avoidance and slashing the welfare bill by as-yet uncertain means. IFS and other think tanks warned there was a big risk the sums would not add up. 

I suspect the Tories decided they won't have to implement it, so let's chuck in many policies that appeal to their core vote to minimise the defeat. Examples are the triple lock plus, which provides a tax cut for pensioners - even if they only need one because the Tories have frozen the tax threshold. An analysis of the tax changes by the Resolution Foundation said that while the 20% of the wealthiest households would gain £1,300 a year on average, someone who paid £30,000 would see their tax bill fall by just £170. It’s not hard to see the target demographic here.

 In contrast, Labour constantly repeats the mantra that all policies are costed and funded. However, they have yet to go as far as 1997, when the party committed to Tory spending plans, even if, as the IFS points out, they are not far off that. Even Ken Clarke admitted that he had no intention of keeping to them. Gordon Brown later opened the taps, but he had a more robust economy and fiscal position to play with. I suspect Rachel Reeves is going to find it more challenging. 

 

I'm afraid I have to disagree with Keir Starmer's comparison of the Tory and Corbyn 2019 manifestos. I worked on that manifesto, and it was fully costed, with John McDonnell's Grey Book going into more detail than I have ever seen in a manifesto supplement. Peston and others make this point well. 

 

The Labour manifesto reflects a cautious fiscal approach to the election. Given the state of the public finances, this is understandable, but it is storing up problems for an incoming government. Reform can do some of the work, but the heavy lifting of putting the country back on its feet requires investment. Plugging a few loopholes is fine, but the anomalies around Capital Gains Tax need to be addressed, as does a tax on wealth.

 

I like the focus on long-term solutions – the mission-driven government. Short-termism has plagued our country in politics and business, and a new emphasis on industrial and infrastructure strategies, working with employers and trade unions, is the right approach. The early focus on national security is good, even if I want to see more urgency in getting to 2.5% of GDP. Particularly as we are wasting too much of the equipment budget on Trident. However, there is a welcome commitment to reform defence procurement, if little detail. Bringing the railways into public ownership is the right transport policy, and there are ways of doing the same with other vital infrastructure without breaking the bank.

 

The New Deal for working people is an important way forward as is bringing the cost of living into the minimum wage calculation and ending age discrimination. Consulting on implementing the plans is normal government, and practical issues over zero-hours contracts, in particular, need to be addressed. There is plenty in the energy section to like, even if it could be bolder. I doubt the 'broken energy market' will be fixed through more robust regulation. The English public service proposals will bring Scotland £470m of additional resources to tackle some of our problems. There is at least an understanding of the need to reduce health inequalities and that requires cross-cutting action.

 

The offer on the constitution is limited, an opportunity missed given that they can be radical at minimal cost. The failure to grasp the opportunities of further devolution, particularly going back on employment law, risks rebounding on Scottish Labour in 2016. After 18 months of financially constrained government, those soft SNP voters may decide they have only lent their vote. The polling for the Scottish Parliament elections is much tighter than Westminster, and the dial hasn’t shifted on support for independence.

 

Re-setting our international relationships is absolutely vital. While I would like to see stronger commitments to rebuilding relationships with the EU, that section gives a few hints that a new approach is possible without reopening Brexit. Getting Britain back on the world stage on issues like climate change is crucial.

Under devolution, UK manifestos have a limited impact on the issues that matter most to voters in Scotland. However, there is plenty to like on reserved issues like employment rights, defence, and international relations. The weakness is fiscal caution and the constitution, both areas where Labour needs to be bolder. As the IFS says, ‘delivering genuine change will almost certainly also require putting actual resources on the table’. Stability is vital after the chaos of recent years, but we will need more than managerial competence to tackle the deep-seated problems facing the UK.

Devolution and the quango state

This week is the 25th anniversary of the first elections to the Scottish Parliament. Commentary typically focuses on how the Parliament has performed and how its procedures can be reformed. While I agree with many of the criticisms, the Scottish Parliament remains the most crucial democratic intervention in Scotland for a generation and more. For those like me who remember the pre-devolution position, the Scottish Parliament remains an outstanding institution. And despite the fractious politics of recent years, the public agrees. In the most recent Scottish Social Attitudes Survey, 63 per cent said that having a Scottish Parliament gives ordinary people more of a say in how Scotland is governed, while a similar proportion said it gives Scotland a stronger voice in the UK.

The biggest failure of devolution has been the absence of decentralisation to communities, a vision set out by the Constitutional Convention that has yet to be delivered. The woes of local government are well understood, but another aspect of centralised control, the quango state, is largely ignored. Rather than extending the principle of devolution within Scotland, the Scottish Government has retained all the transfers from Westminster and, in addition, has taken away functions from Local Government. Three-quarters of public spending is directed by Scottish Ministers, including around £23 billion spent by quangos.

This week, the Scotsman is running a welcome series on quangos, which may help shine some much-needed light on these institutions. The early easy targets are management salaries and the usual suspects who serve on them. However, we should ask if this centralised control over many of our public services is the best form of governance. The Scotsman started by struggling to define what the quango state consists of, settling on around 120 bodies. They include Executive Agencies, Non-Departmental Public Bodies (NDPB) and public corporations like Calmac and Scottish Water. They range from small advisory boards to substantial service delivery organisations like Skills Development Scotland and Scottish Enterprise. They include NHS Scotland, but the democratisation of the NHS is a more complex and different debate. The governance models vary, but typically, a board of around 14 people appointed by ministers runs them. 

In 2007, the Scottish Government undertook to simplify the public sector landscape by reducing the number of Scottish public bodies under its control. Like previous governments, they found the 'bonfire of the quangos' difficult to deliver. Ministers often find it useful to have arms-length bodies to deny operational responsibility for poor decisions, which I have previously called the 'not me guv' school of government. The problem is that in the absence of democratic accountability, the public often says, 'It is you guv'. The difficulty is that ministers need more time to scrutinise them, and the sponsoring departments adopt a light touch. The recent Water Industry Commission scandal demonstrates that clearly.

Relationships between NDPBs and their sponsoring departments can also be challenging. A National Audit Office study of English equivalents found that the arm’s-length bodies sector remains ‘confused and incoherent’. Audit Scotland has occasionally forayed into quangos with similar conclusions. Their 2010 paper concluded, ' The make-up of boards and their role has evolved over time rather than as a result of any objective evaluation of the best model for public accountability.’

Suggestions that they could be broken up and delivered locally are resisted because they allegedly benefit from economies of scale or are too specialised to spread the limited expertise around the country. Even attempts to minimise duplication by creating common bargaining structures have been opposed by the agencies and government. 

Options for reform include:

• Identifying all or parts of the services that could be delivered locally while retaining a national framework.

• Greater scrutiny by Parliament.

• Direct elections.

In my paper, Public Service Reform for the Reid Foundation, I set out some principles that should underpin this work. I developed them in a subsequent paper, Building Stronger Communities. The starting point is subsidiarity, building integrated public services from the bottom up and sharing where appropriate. The role of central government should be to set the strategic direction based on outcomes – rather than trying to direct services from Edinburgh. However, a country the size of Scotland cannot justify duplication and difference for the sake of it. Therefore, we need public service frameworks that allow local services to focus on what matters to achieve positive outcomes.

Even where decentralisation is not viable, services should still be required to cooperate locally more effectively than currently. The somewhat loose duties placed on quangos to collaborate in community planning have no effective teeth.

Scotland is one of the most centralised states in Europe. Until we address this centralisation of power, the devolution project will remain unfinished. Reforming the quango state is complex but necessary.

Ukraine and the 'Johnson thwarted peace' myth

I was involved in a panel discussion about defence expenditure this week. A trade union activist I greatly respect justified his argument against providing military aid to Ukraine by invoking a Putin-propagated myth. The essence of this conspiracy theory is that Boris Johnson thwarted efforts to achieve a negotiated peace in April 2022. There are few politicians that I have more contempt for than Boris Johnson, so I can understand how anyone can believe such a thing was possible. My surprise was that this myth has not only been debunked in mainstream fact-checks but also in left-wing media sources like Novara Media. The Kremlin and their useful idiots propagate it in a few media sources.

Let’s start by remembering that these events happened after the Russian invasion and the initial discovery of Russian war crimes, including the Bucha massacre. It was also after Russian State media, with the explicit support of the regime, including Dmitry Medvedev, deputy chair of the Security Council of Russia, published the genocidal statement ‘What Russia Should do with Ukraine’. The author argues that Ukraine's existence is "impossible" as a nation-state, and after the war, forced labour, imprisonment, and the death penalty would be used as punishment. None of this sounds like a country seriously interested in peace.

https://www.hrw.org/news/2022/04/21/ukraine-russian-forces-trail-death-bucha

And they weren’t even close, as objective analysts closer to the talks confirmed. While the negotiators agreed upon some broad principles, as anyone with negotiating experience knows, deciding on principles is much easier than agreeing on the details. 

These details included a Russian demand that Ukraine cap its armed forces at 85,000 troops, 342 tanks and 519 artillery pieces, which would be around a 60-70 per cent reduction of Ukraine’s military strength. Ukraine was understandably sceptical about signing away its capacity to defend itself, given that it had just been invaded by Russia weeks beforehand. And given Putin’s track record on keeping agreements, feared this would be a temporary pause to reorganise and launch another, better-prepared invasion. The Russian initial plan was disintegrating at this time, and Putin needed a breather.

The other essential requirement was not NATO membership, which wouldn’t happen, but rather that undefined Western nations would provide security guarantees but with no bases in Ukraine. It was this that Boris Johnson rightly pointed out was unrealistic. Few, if any, European countries would give such a guarantee outside the NATO military alliance. The Russians could sweep across Ukraine and sit on the Moldavian, Hungarian and Polish borders. That would require a massive offensive to dislodge the Russians who would dig in, as they have in eastern Ukraine. There is neither the capacity nor the political will to do that. Anyone with a rudimentary grasp of history will grasp that Putin is using the Hitler Czechoslovakia playbook.

In simple terms, no credible deal was on the table, so the only option was to fight on. A decision overwhelmingly supported by Ukrainians in polling after the Bucha massacre. Ukrainians understand this is not a manageable conflict in which you can exchange a bit of land for peace. Putin wants nothing less than the obliteration of Ukraine. They are the frontline against the new fascist menace, and the West should support them and prepare for the worst if they fail. There is a respectful exchange of left-wing positions on the war in the Scottish Left Review.

I fully appreciate the desire for peace and the opposition to less than productive defence spending. I just come from a different left-wing political tradition. The most important influence on my teenage political thought was a former Welsh miner who fought in Spain against fascism. He would have recognised Putin as he did Hitler and understood that appeasement is a strategy doomed to failure. 

Defence in an Independent Scotland

The Scottish Government has published the latest policy paper in its Building a New Scotland series, An Independent Scotland’s Place in the World. This paper sets out its vision for an independent Scotland's foreign, defence, and security policy. If you don’t fancy reading the whole paper, SPICe has done a good job of summarising the key points.

In the defence section defence, the key proposals include:

• Joining NATO and keeping defence spending at 2% of Gross Domestic Product (GDP).
• Working with neighbouring members in defence of the North Atlantic and High North region, with a likely focus on the strategically important Greenland–Iceland–UK (GIUK) Gap.
• Provide conventional forces to NATO operations in support of Treaty objectives and participate in joint exercises. However, these would need to be in accordance with the United Nations Charter.
• Scotland’s Joint Forces Headquarters would be based at Faslane. 
• Working with the UK for a transitional period and a timetable for UK forces to gradually draw down their presence in Scotland.
• Nuclear weapons should be removed from Scotland in the safest and most expeditious manner possible following independence.

The media headlines predictably focused on removing nuclear weapons and the impact this might have on joining NATO. The Scottish Government reasonably points out that “only a minority of NATO members host nuclear weapons.” I doubt the so-called British independent deterrent worries Putin much, given that it relies on US missiles and has anyway failed its last two tests. However, the timetable for removing nuclear weapons looks optimistic. NATO partners must cooperate, and there is some evidence that the US, in particular, might veto Scotland's application if we disagreed on a reasonable timetable. NATO is, after all, a nuclear alliance, and even non-nuclear armed states can carry battlefield nuclear weapons. 

While I think NATO would eventually welcome Scotland, the idea that we would be essential to protecting the northern flank is fanciful. NATO can do everything from bases in Norway and Iceland. Scotland would add to that, but it's not vital.

My problem with the paper is more with the conventional defence plans, or the lack of them, and the absence of any costings. The paper ignores the practical challenges Scotland would face when establishing a conventional army, navy and air force. These challenges include:

• I have previously highlighted the absence of any recognition of the defence industry in the First Minister's speech on industrial policy. UK ships and other defence equipment will be built in UK sites (the paper is frankly delusional to argue otherwise), and Scotland cannot provide a similar pipeline of work. There is also the issue of access to sensitive electronic equipment, which is crucial to modern armed forces. Some people, opposed to the defence industry in principle, may not regard the loss of a defence industry as a big loss. However, it certainly will be to the 33,500 workers and their families at a time when the post-Indy Scottish economy will face many other challenges. The defence sector contributes £3.2 billion to the Scottish economy.
• The infrastructure and support contracts that keep defence equipment running are linked to the defence sector. Ships need regular refits, aircraft need specialists to keep them running, and a substantial Ministry of Defence to pull all of this together. Scotland will also need munitions stores and specialists to maintain them.
• Ensuring Scotland retains the skilled personnel required to run modern defence forces. At best, Scotland will inherit a random collection of transferring service personnel rather than a coherent military force. 
• Those gaps would need to be filled by a training programme. That would be a long and complex process with new officer and technical training establishments to be established with none of the economies of scale the UK brings.
• The UK will be unlikely to share intelligence with an independent Scotland. Given the approvals required for the most sensitive equipment and software, it will take many years to build up the necessary systems, if at all.  

None of the above are impossible to deliver, albeit with costly investment. My concern is that there is no evidence from this paper that any serious thought has been given to the detail. As others have pointed out, it reads like “some of the pro-Brexit material at the time of the referendum – trying to reassure people that nothing will really change, all will be well and frankly we’re better off without that lot anyway.”

This paper is a political gloss that has rightly not impressed those who understand the defence sector. If the Scottish Government is serious about defending an independent Scotland, it needs to get serious about planning for it.

Defence and security in an uncertain world

Everyone is suddenly talking about defence. Britain’s Chief of the General Staff, General Sir Patrick Sanders, discussed a ‘citizen’s army’. This has sparked nostalgia for National Service in some quarters (which Sanders rejected) and a more serious debate about defence spending in an uncertain world elsewhere. The prospect of a Trump presidency adds fuel to the discussion in Europe.

This week, I participated in a research workshop for a European client, building on a briefing note I wrote for them last year. I also presented on international defence procurement policy based on a paper I wrote for Prospect. I always find these discussions fascinating, as getting the countries' perspectives directly is much more helpful.

Colleagues in Poland, Estonia, Sweden and Finland have a genuine focus on the Russian threat, not to mention Putin’s not-so-little helper in Belarus. Other countries are also focused on what is happening in the Red Sea and Gaza, with the associated military and economic impact. With Pakistan and Iran kicking off as well, the Middle East risks a broader conflict, with ten countries now caught up in the fighting. For the first time, a Turkish colleague joined us, bringing another perspective to the discussion. He was more optimistic that the various players in the Middle East could reach a deal which would get the region back from the brink. Others were more sceptical that the Israeli Government would move on freezing settlements on the West Bank, an essential part of any long-term peace deal.

I pointed out that Britain’s defence spending is inflated by the fifth of the defence budget spent on nuclear weapons. If you take nuclear out of the equation, defence spending is about 1.75% of GDP, around the middle of the European league table. This means that the armed forces are struggling to keep existing equipment running. Even the Royal Navy, seen as a gainer in recent spending rounds, must decommission ships because it doesn’t have enough sailors. The Army is in even bigger trouble. When the Tories came to power in 2010, the British Army was over 100,000-strong. It is now due to fall to 72,500. Chatter about a ‘citizen’s army’ is not going to plug that gap anytime soon, and neither is the much-vaunted technology. As the Economist’s defence editor puts it, ‘Far too often, penny-pinching and short-termism have resulted in Britain buying high-end kit and then economising on the things that make it work properly.’

I was asked what a Labour Government might do – a frankly perilous speculation these days! I am impressed with Labour’s defence team’s approach, which appears to have a good grasp of the issues, including the need for procurement reform. The problem is that Rachel Reeves seems no more likely to challenge the Treasury’s short-termism, given her spending caution. Delaying expensive projects is a well-travelled Treasury route to balance the books. While Labour is comfortably ahead in the polls on most issues, they trail the Tories on defence and security by four points (YouGov poll below), although the gap is narrowing. 

I suspect this reflects a traditional view that Labour is not strong on defence. In an uncertain world, this is something Labour cannot afford to be weak on. If European security worsens later this year, the risk is that voters may put this issue at the top of their list of concerns. James Rose has pitched a package of policy ideas to help Labour seize the agenda on defence that I largely agree with. These include replacing the weapons sent to Ukraine and reversing Tory cuts, laced with more traditional Labour policies on support for veterans and ending failed outsourcing. To this, I would add the proposals in my paper for Prospect on defence procurement, a concern reinforced by the Westminster Defence Committee. This package would also have economic spin-offs and would be welcomed by the defence trade unions.

There is an adage that it is the first responsibility of government in a democratic society to protect and safeguard the lives of its citizens. Labour’s leadership would do well to remember that.

Tough political decisions

 It could be a long political year if today's election pitches are anything to go by. 

Anas Sarwar was making a pitch to Yes voters in Rutherglen. It is a smart move given that despite the SNP's woes, the dial has barely moved on support for independence. However, a call for change alone may not be enough to firm up these voters for Labour. Anas needs to think further about what a serious offer on the constitution might look like to shift these voters at the UK General Election and, equally important, for the next Holyrood election if he wants to be First Minister. Lending votes to get rid of the Tories is only a short-term strategy.

I was at the University of Glasgow today, listening to the First Minister set out what an industrial strategy might look like post-independence. The media spin was more about the increase in household income independence might bring. This reinforces the recent soundbite script from SNP MPs, which puts the cost of living crisis before constitutional change. This reflects where the voters are, even if less popular with some activists. He further reminded some of those activists that Yes supporters should not simply shout "independence ever louder" but help set out an "alternative path: one that leads to a renewed sense of possibility”.

I was less interested in the political guff than what he had to say about industrial strategy, something grossly neglected in Scotland and the UK. Other small European countries have successful industrial strategies that have helped raise living standards. However, this didn't magically happen because they are independent; it resulted from a positive strategy.

There was a predictable and essentially correct analysis of the failings of the UK Government over many years. He argues it isn't a short-term crisis but the result of long-term failure, ‘creating a poor society with pockets of rich people’. His challenge to Labour is how they would change this given Keir Starmer’s cautious policy approach to the Green New Deal.

He proposed three pillars to an industrial strategy: joining the EU, a new ministry for industrial policy, joining up action across government, and public investment. He highlighted the success of public investment worldwide to 'crowd-in' private investment, particularly in the USA and China, with an albeit more modest response from the EU. It is less clear how an independent Scotland would develop the fiscal and monetary policy to finance a similar approach. He also highlighted EU strategies on CCS and hydrogen, which Scotland is well placed to contribute.

A crucial industry for Scotland is shipbuilding, although the FM didn't mention it in his long list of successful Scottish industries. Probably because on the civil side, the problems of ferry building have not helped the sector, with ships now being built in Türkiye. There should be opportunities for support ships in the renewables sector, but turning renewable energy prospects into supply chain jobs has been challenging.

Defence spending remains a vital part of the Scottish economy, providing 33,500 jobs and contributing £3.2 billion to the Scottish economy. It also provides high-wage jobs that provide income tax revenue, as Graeme Roy highlighted in the Herald today. Each percentage point of earnings growth in Scotland delivers around £25m more revenue than would be generated by the equivalent UK tax policy. 

For Scotland, a big chunk of defence investment and employment comes from naval shipbuilding on the Clyde and at Rosyth. The FM needs to clarify if an independent Scotland would pursue a Scotland First procurement strategy that considers the social value of procurement. The UK government has drifted away from this by awarding the Fleet Solid Ships contract to an overseas consortium. The more difficult question is how defence spending in an independent Scotland will sustain our defence shipbuilding industry. Some 24 warships will likely be built in Scotland between 2015 and 2035. It is hard to see how a Scottish Navy will need more than a handful of warships. Exports will be challenging given the global move to favour home-built procurement, or at least substantial offset, which Scotland may find challenging to offer.

Few would disagree with the ambition and vision the First Minister set out to achieve an industrial strategy that normal countries follow. However, the transition to a high-growth, low-inequality country is a long-term process that will require actions on a scale that will be challenging. In fairness, the FM didn't claim it would be achieved overnight, but his industrial strategy needs more detail and has to address difficult issues like shipbuilding. He and Anas Sarwar would be more credible if they faced up to the complex political issues.