General Election 2017 - The Budget: Progressive optimism vs Tory pessimism

In the general election campaign so far, there's a determination on the Right to spread the idea that their own plans are sensible and that their opponent's are chaotic and don't add up. But that's a crudely simplistic narrative and it comes with a couple of main assumptions that need to be broken through.

On the first assumption: none of the six main parties in England, Wales and Scotland are calling for a drastic overhaul to Britain's economic system. On the second: most economic systems work on their own terms. The sums will add up, whoever is in government. The biggest difference between progressive and conservative versions is their contrasting optimism and pessimism.

While conservatives, and progressives, will try to make the management of the budget a question of competence, or a question of right and wrong answers, those are not the primary questions facing voters. The real question to consider first, is: what are you trying to achieve?

How Ideology affects Economics

All approaches to the economy are ideological: they propose a set of steps to follow, with an intended outcome - an intentional attempt at shaping society to maximise certain behaviours and to minimise others.

When looking at the pitches made by progressives and conservatives, there are two elements you should consider, one for each of the two main categories of public spending - Current and Capital.

For clarity: Current spending is the day-to-day spending on the departmental budgets, historically offset against government revenue. Capital spending is long term infrastructure investment, usually funded by government borrowing.

On Current spending, you need to consider the question of intervention vs laissez faire: do you consider government action in any given policy area to be helping or interfering?

On Capital spending, you need to consider whether to invest in the future or tackle public debt: do you consider public debt or out-of-date technology and buildings for schools, hospitals, or roads and rails for businesses, the bigger burden on the future?

These two questions are deeply connected.

How entwined they are can be illustrated by the long term plan pursued by the Tories. Planning to 'balance' the budget by having both Current and Capital spending offset by revenue, severely limits how much the government can do in the present and for the future. Even more so as they pursue a huge reduction in the proportion of Britain's GDP, the country's gross wealth, the government is spending.

Now, borrowing to fund Current spending, on the day to day department costs, would theoretically be adding to the public debt at the expense of the future (hence the Tories popular refrain about not burdening our children). But Labour - whether you take the vision for the treasury as assembled by Brown, Balls or McDonnell - has not and does not intend to do that.

Under Labour and the Liberal Democrats, the intention has been - from at least the leaderships of John Smith and Paddy Ashdown - to follow a Keynesian approach: to balance just Current spending against tax revenues, thereby not accumulating public debt to pay for the needs of the present.

This approach does, however, leave Capital spending to be funded by borrowing.

The reasoning behind this is that the longer term Capital spending behaves much differently to Current spending. For a government, borrowing is cheap and the added value created by using it for long term investment is huge - so much so that the actual cost of borrowing is ultimately offset by the increased economic growth that results, and the rise in tax revenue that follows.

How to fund investment

The progressive view of these budget questions has a particular focus on Capital spending, refusing the simplistic calculation that public debt equals a burden on the future. Public debts, within reason and where they result from investment in the future, are largely harmless.

But the negative impact of poor infrastructure, on every area of society, could be disastrous. Just look at the mess that resulted from outdated operating systems on NHS computers. But the same point extends to more mundane situations: old and crumbling school buildings, potholed and traffic strewn roads, ports with insufficient capacity, a telecommunications network that doesn't keep up with the needs of people and businesses.

There are, of course, always attempts at being clever in order to reduce borrowing for Capital projects, even when they aren't covered by tax revenues. New Labour tried something new, expanding on plans they inherited to seek out private investors for its controversial and now infamous 'Private Finance Initiatives', as a way to fund Capital spending without adding to the public debt.

The New Labour plan for private-funded public investment built hospitals - but the private sector expects returns. The PFIs left those institutions with the expectation to deliver astronomical returns on those investments - some £300bn all told - and private benefactors continue to receive interest payments from hospital trusts in the hundreds of millions.

In a way, New Labour's approach resembles the Coalition plan for funding higher education - shifting a public debt, weighing on the Current budget, onto citizens as private debt. In a stroke, a chunk of Current spending and public debt was privatised.

But like the burdens that were shifted onto the backs of hospital trusts, the treasury saw a clever accounting trick,  not the social impact of burdensome debt - though at least more limitations were put in place to protect students than the hospital trusts received with PFIs. In either case, the financial burden ends up on the public books anyway.

The Conservatives plan was to oppose borrowing and fund both Current and Capital only with tax revenues. From a progressive view this was reckless, as it would result in one of two outcomes: it would mean slashing spending on people's wellbeing in the present, while still having them pay tax to fund Capital projects that will never bear fruit for them, or it would mean slashing both to endlessly pay off mostly harmless debt.

The underlying motivations for conservatives to pursue this path is as simple as 'faith' in the market. A belief that private schemes are better than public action - seeing public action as interference that just distorts outcomes. Instead of taking the advantage of scale provided by the collective public option, where resources are pooled to maximise their use, conservatives prefer personal private schemes of insurance to pay for services.

How the government finances stand

The overriding aim of this privatising conservative mentality is to fight against 'dependence'. But to pursue that low tax, low interference, approach, that promotes private action, is not compatible with maintaining well funded public services. At some point, something will have to give. To emphasise the point, consider how the public finances stand after seven years of Tory government.

Current spending stands this past year at around £720 billion to £740 billion in revenue, while Capital spending sits at around £80 billion. As the Tories combine Current and Capital spending to calculate the deficit, the public debt increased by about £59 billion.

That will mean, in the coming years - helped perhaps if revenues rise due to economic recovery or growth - 'balancing' the budget will still require a combination of tax rises and budget cuts, to both Capital and Current spending, amounting to over £60 billion a year - and perhaps more, if the aim is to produce a surplus with which to pay down the public debt.

We know that some £22 billion is to come from the NHS, through the finding of 'savings'. Another £3 billion is coming from schools, thanks to recent funding changes. More will come from the welfare freeze. There is clearly an intention to clear some of the cost of social care off the public books by making middle class homeowners pay with their assets. But that still leaves a lot of cuts.

As for the Liberal Democrat and Labour plans, both are actually fairly similar and neither are that tremendously radical. In fact, they're downright sensibly Keynesian. Both intend to balance the Current, day-to-day departmental, spending against tax revenues - with modest tax rises, mostly on the rich, making more room for manoeuvre.

And here is something interesting. On the measure of balancing the Current budget: it's already balanced. In fact it's in surplus. By some £20 billion. It is projected to be in surplus by about the same amount next year. The previous year the Current budget was only £3 billion in deficit. If the job was to rebalance government spending and revenue, the job is nearly three years done.

With their commitments fully costed, either Labour or the Lib Dems would come into government with a very positive outlook on the public finances - seeing the public books as being in a healthy state. The positivity of either of these parties would alone be a drastic turn around from the doomsaying Tories, who promise nothing but ever more cuts.

It is remarkable the affect that optimism and positivity alone can have in economics, particularly in contrast to the Tories doom and gloom and neverending warnings. But the renewed public investment, called for by all progressive parties, could provide a huge long term boost to Britain. From the mass building of new homes to long term support for innovative new industries - particularly in green energy - there would be a lot to be optimistic about.

How we frame debt matters

As for the deficit and debt? Well, how these are drawn up may have to change when the Tories are eventually ousted, because the way we frame these matters. Conservatives have been very successful at getting into circulation the idea that fiscal credibility means opposing public debt. Progressives must counter that narrative by reframing the ideas.

If the value added by Capital spending vastly outweighs its cost - thus removing it as a factor in balancing a budget - it might well be worth starting to calculate it separately from the deficit and debt which results from the Current budget. That means separating out public debt into two categories: productive Capital debt and unproductive deficit debt.

The progressive aim will be responsibility with productive Capital debt and credibility in tackling and avoiding the unproductive Current deficits and debt. Consider: In the three years between 2015 and 2018, there will have been a Current budget surplus of £47bn. The deficit in that period, that Tories use to justify austerity, is the result of £233bn in Capital spending - investment in long term projects.

That means, at the end of that three year period, around 12% of our total public debt is just from that productive long term investment. When you consider the long term, positive impact of that Capital spending, it makes the public debt a lot less intimidating. It also resets priorities.

How we move forward

To be a progressive is to be an optimist - to be believe that people have the power to change things for the better. While government spending is not the be-all-end-all mechanism for that, progressives argue that it has an important role to play and is currently being poorly utilised.

There are huge challenges to face and most them require sturdy long term commitment. Poverty needs to be addressed with affordable housing and energy, and with compassionate welfare that gets people back on their own feet.

Britain's imbalanced economy needs restructuring around innovative new industries and businesses, spread out across the regions, with green energy power them and the technical skills to run them.

The public sector is able to deliver that long term investment in a way private finance has not yet been able to match. It is part of the solution. The next step is to grasp that idea and to pursue it with positivity and energy. Progress is possible and austerity not inevitable.

Junior doctors strike ballot exposes reality of human cost behind Tory laissez-faire

Junior Doctors at Castlefields Arena in October, taking part in the People's Assembly Take Back Manchester protest march that was held in parallel with the Conservative Party Conference.

Last week ended with news that ballots had been sent out a for vote on whether doctors should go on strike (The Guardian, 2015). The decision follows the latest developments in the dispute between junior doctors and Conservative Health Secretary Jeremy Hunt (The Economist, 2015).

With Prime Minister's Questions as a back drop, Hunt attempted to see off possible strike action with an offer of higher pay to junior doctors (Campbell, 2015). Yet his offer of an 11% rise was heavily criticised for being massively offset by the redefining of working hours to run longer into the evening - cutting what could previously be defined as out-of-hours pay during anti-social hours.

A vote for industrial action will surely reignite the tense clashes between government and unionised public servants that have been so much a feature of the Cameron ministries. As with the tube strikes, fears over long shifts worked during anti-social hours have led to stand offs and tense meetings between public sector union leaders and Conservative government ministers (BBC, 2015; Cooper, 2015).

For the Conservatives, their response has been consistent. They have refused point blank to see the human impact of political and economic decisions. The approach of the Right over the last five years has been to simply dismiss or condemn public servant strikes as "irresponsible" and inappropriate (BBC, 2011; Wardrop, 2011; Evening Standard, 2015).

Yet Conservative decisions are having profound affects upon the lives of many people, not least public servants. There have been public sector and private sector job losses, a more frightening prospect for many as unemployment support has also been cut and restricted, and invasive pressures have been put upon public servants.

From doctors to tube workers, to low pay workers, the balance between work and life is being drastically tipped by a lurching grasping attempt by the market to snatch up the personal time of citizens (Jeffries, 2014; The Guardian, 2015). Hours are running longer and later, more temporary and more insecure. Refusal runs the risk of dismissal in favour of someone who will accept the conditions.

On the Conservative part, there is a denial of responsibility. As Conservatives shift the duties and burdens onto the individual, they stand by their laissez-faire position that it is not the place of the state to 'interfere' with how markets are shaping people's lives.

Yet the Conservative use of the laissez-faire approach does not seem to reflect its liberal origins. The difference between laissez-faire in the hands of the Liberals of old and the Conservatives of today, is that the Liberals saw work as a means to personal self-improvement and liberation.

In pursuit of those aims, of ensuring that "individual men and women may have life, and that they might have it more abundantly", Liberals moved away from laissez-faire - towards a more interventionist approach - when the realities of exploitation and poverty where exposed. The ideological and economic ground they abandoned has been occupied by the Conservatives.

In Conservative hands the high aims of laissez-faire look more like propaganda. The economy, as they're managing it, is hugely unequal. Their 'apparent' prosperity is built around the statistical distortion caused by the concentrated wealth of the 1% - through property and other assets holding inflated value - and through "competitiveness" - where investors and employers can be guaranteed cheap labour, from workers who live increasingly fragile and temporary lives filled with stress and anxiety.

This is laissez-faire within a strictly hierarchical, deeply unequal, conservatism organisation of society. A society where free time is treated as the privileged reward of success in a system based around wealth, assets and property. That system locks out the poor and the unfortunate, who have no chance of owning property at grossly inflated prices and for whom social progress requires some combination of debt, nepotism and extreme good fortune (Mason, 2015).

What the junior doctors are campaigning for affects all citizens. Safely run services and respect for the rights of citizens to lives outside of work. It isn't unreasonable to put alongside to those demands the right to some sort of security & consistency, and a guarantee against poverty, as demands on workers become greater and the safety nets to protect them become thinner.

The market may have competition but it is not fair, particularly in a society suffering from massive inequality. For a government to choose to stand by as people are stretched thin, used up & exploited, or cast recklessly adrift by market forces is for it to neglect its duty to social welfare. Whether they like it or not, Conservatives have to face to fact that the state has a duty to interfere and that it can do so for the common good.

Intervention doesn't have to mean state ownership. There are decentralised alternatives like co-operatives and a citizen's income that could empower workers and make them more secure. But what it does mean, is that a government has to be prepared to act and to look beyond the appearance of prosperity, as reflected in short term profits, to find better alternatives.

Osborne's Fiscal Charter: Keynes argued both a surplus and deficit should have a clear purpose in a balanced economy

George Osborne has succeeded in getting his charter of fiscal responsibility through Parliament, though it has faced opposition. Photograph: The Chancellor with guests at Port of Tilbury on 1 April 2014 by HM Treasury (License) (Cropped)

On Wednesday night, George Osborne succeeded in passing his Fiscal Charter through the Commons - in theory committing governments to achieving a fiscal surplus in 'good times' (BBC, 2015). Labour, after some twists and turns and with some abstentions, opposed the charter alongside other opposition parties as simply being a parliamentary tactic rather than a commitment to the principles under discussion (BBC, 2015{2}).

The move to introduce the charter has faced criticism, in particular from Green MP Caroline Lucas. Lucas has argued that a surplus simply siphons money out of the economy, that is then patched over with private debt, and that borrowing to invest could stabilise an economy by increasing jobs and tax revenues (CarolineLucas.com, 2015; Sparrow, 2015).

As for the economic theory behind the move? Well, John Maynard Keynes may have had something to say about that.

Keynes clearly agreed with the idea that a national debt was a major obstacle to a healthy economy, with an impact so wide that creditor countries aught to think very carefully about the level of repayments they insist upon (Miller & Skidelsky, 2012). However, he also believed that creditors, as well as debtors, aught to settle their accounts (Inman, 2012).

While not wanting to weaken the commitment of debtors to honouring their debts, Keynes believed that pressure needed to be applied to creditor countries to not build up excessively 'positively' imbalanced trading accounts - even going so far as to suggest large interest payments be paid, into an international investment bank, on a trade surplus.

Keynes' ideas have implications for the broader economy beyond the fiscal, and the obscure world of international trade relations.

The OECD has stressed that income inequality damages an economy, strangling growth by vampirically draining wealth from circulation in the broader economy (OECD, 2014). The money extracted in the accumulation of wealth needs to be replaced. That can lead to the ever accelerating pursuit of economic growth and to an obsession with making an economy 'competitive'. It can also lead to escalating private debt.

When looking to build an economy, the key word to take from Keynes is balance. For Keynes, both a surplus and a deficit should have a clear purpose and an idle commitment to either would be a reckless course to take. Keynes would have agreed with the idea of budgetary and fiscal responsibility, but he would have included within that remit a government using deficit spending to rebuild or improve the economy - rather than the strictly austere contraction of government that the Chancellor is pursuing.

Labour and the Lib Dems talk of reclaiming the 'Centre' - but what do they mean?

The UK general election made it abundantly clear that the Labour Party and the Liberal Democrats did not have the confidence of voters. In the face of that defeat, the respective parties have begun their own internal debates over their future. One of the questions that both parties will be asking is whether either of them need to claim the political centre ground to recover their electoral fortunes.

Labour leadership candidate Yvette Cooper has already made it clear that she won't back a 'lurch' to the Left or Right (Gayle, 2015), and the Lib Dems are also being cautioned against straying from the 'liberal centre' in search of the more radical liberalism for which they built their pre-Clegg reputation in opposition (Tall, 2015).

What isn't necessarily clear for many observers is what exactly is meant by the 'centre'.

There are, in essence, two of them. The first is the position of compromise between the grand historic ideological positions of liberalism, democracy and conservatism. The other represents a shifting point which acts as the 'centre' of a space shaped by the dominant voices of the day on the main issues - usually the media outlets with the broadest audience and the main political parties.

The Historic Centre

The historic centre represents a kind of Roman ideal, holding the space where the interests and sections of society are brought together - where the Romans were seen to have built a polity that incorporates elements from all of them. It is the place of mixed government, mixed economy and compromise between the grand polemic ideological positions - which represent ideals like individualism and communitarianism, progressivism and conservatism, libertarianism and authoritarianism.

While the shifting centre depends upon parties each appealing to a perceived majority opinion, the historic centre is the both the result of the development of distinct ideological positions and a place of compromise between the sections of society these ideologies have been seen to represent.

In Nineteenth Century Europe, the stranglehold of monarchist conservatism found itself challenged by radical new ideas. The enlightenment ideas of reason and progress - that had played a significant role in the American and French revolutions - had led to the formation of political groups and associations of radicals, republicans and reformers.

That new republican Left-wing of politics was broadly composed of two separate ideological groups: the liberals and the democrats. During the revolutionary struggles of 1848 the dividing lines between the two became apparent. While the liberals had been content to reform the old system slowly - accepting limited concessions in the form of a constitution, small extensions of suffrage and more freedom for merchants and burgeoning industry to open up a free trading free market - the democrats had wanted more.

The democrats wanted control placed in the hands of the people. During the strife of 1848, the democrats decisively split from the liberals and from amongst them came the early developments of socialism - including the works of Karl Marx. That division between the liberals and democrats, on the road to their own versions of progress, allowed the conservative establishment to survive. A counter-revolution followed, but what that reaction could not suppress was the emergence of these three broad positions, two upon the Left and one upon the Right, which were seen as each representing broad progressive sections of society.

Between these positions - each with their own distinct, historical priorities: the democrats for equality, community and the workers; the liberals for opportunity, the individual and the professional and merchant classes; and the conservatives for tradition, security and the traditional hierarchy - there lies a centre ground balanced in a compromise between these positions and sections.

The use of that place has been ascribed to the Roman system of mixed government, referred to and interpreted by renaissance thinkers as civic humanism. The primary concern at this centre was to avoid tyranny of all kinds, of any ideological or sectional type, by creating a society that balanced the various parts of society within the establishment's institutions. In Roman terms that meant singular monarchical figures in the form of term-limited Consuls, the aristocratic wealthy interests in the form of the Senate, and democratic participation in the form of direct democracy and civic assemblies.

The Shifting Centre

Though it may not feel like it, what with all of their similarities, Britain does still have three main parties representing these three grand historic ideologies - Labour, the Liberal Democrats and the Conservatives. Their connection to these distinct historic positions has however been weakened by their competition over the Centre ground - in the name of chasing the power to govern.

The Centre the parties compete over today is not, however, a true compromise between each ideological viewpoint and sectional interest of society. The contemporary Centre has been shaped by the times. Tony Blair's Third Way social democracy, David Cameron's attempt at a warm and fuzzy conservatism, and David Laws' Orange Book liberalism all represent responses to a Centre that shifted to the Right, deep into Conservative territory, due to the drastic changes to the balance of power between sections of society that took place in the 1980s and 1990s.

All three accepted the possibilities created by the flimsily founded wealth generated by the aggressive speculative capitalism of the 1990s and 2000s. All three accepted deregulation and light touch management, only interfering as much as was needed to ensure a small amount of wealth redistribution to serve those social purposes prioritised by the party ideology - broadly speaking equality, opportunity and security, for Labour, the Lib Dems and the Tories, respectively. All three accepted that the balance of power had shifted significantly into the hands of wealthy vested interests and so adjusted their approach accordingly.

That has, however, proved a dangerous game. The question that many will have asked over the last twenty years is: what is the point of having power if you have lost what makes your use of it distinct?

Disillusionment with the tripartite status quo, where the big three parties appear to have become indistinguishable, has fragmented the old system. Even though the Conservative Party managed to just about squeeze out a majority, it is a narrow lead on a poor mandate - less than 25% of eligible voters - which, by prizing a majority to the Conservatives, has done little to re-establish the legitimacy of the old system. If anything, it may simply accelerate its collapse.

A Decision to Make

The trouble for Labour and the Lib Dems is that to 'win' an election, under the present system, means receiving votes from the broadest groups of voters, not simply representing a section of society. That has led both parties to make compromises with the dominant social attitudes of the day in order to appeal, not to the historic centre, but to the shifting centre - first in the 1990s and 2000s with the wealth created by an economic boom, however shaky its foundation, and then in the 2010s with the growing cynicism towards welfare, free movement and immigration.

The big decision now ahead of both parties is whether to return to a purer form of the party ideology, with the risk of becoming little more than a sectional voice for a particular interest, or to embrace the chase for the votes at the shifting centre, with the risk of alienating more idealistic supporters in order to gain the support of those whose views have been formed from the dominant attitudes of the times. That decision comes with a lot of questions to answer.

Should the parties give up their distinct arguments to appeal to as large an audience as possible, in order to gain the power to implement their vision? What would then make any party distinct from another? Would there be something dishonest in that approach?

Or, should the parties be up on a platform, making their distinct arguments heard and trying to convince people of the merits of their ideals, each representing a small portion of voters? And where society remains divided in the aftermath of an election, place trust in coalition government?.

There are no simple answers. It is, however, worth considering a few things: whether we believe or not that people are fixed entities, with definite and fully formed views, bound to the narrow interests of their section of society; whether we believe or not that ideologies can offer a broader civic vision, in which people from all parts of society can find merit, without a party having to give up its distinct ideals; whether we believe that it is the justly democratic act to attend to the dominant social attitudes of the day, regardless of the evidence, or if we can or should challenge that popular consensus with idealism and evidence.

The popular consensus of today has pulled the shifting centre far into conservative territory. The voices advocating for business, for low taxes and for nationalist priorities like restricting immigration are writing the contemporary political narrative. To deviate too much means risking being seen as an idealistic extremist. To play for votes from the midst of that consensus means progressive parties straying a long way from their idealistic alternatives.

What stands before those who have to make the decision is a choice between a pragmatic path to the power to govern and a, potentially, politically impractical pursuit of idealism. The path each party has chosen won't be known until their newly elected leader begins to shape new policy ideas. But it is to be hoped that a decision to tread a practical path can still find space for presenting visions of alternative societies outside of the present limitations and boundaries. That there might be included the aim of changing minds and reconstructing social norms, values and structures so that in the future we might see our ideals represented rather than sacrificed on the road to political office.