The Social Ambitions of the Coalition: Soft-nosed liberalism Peter Taylor-Gooby BA New Paradigms in Public Policy Programme
Mar 28, 2015
The Social Ambitions of the Coalition:
Soft-nosed liberalism
Peter Taylor-GoobyBA New Paradigms in Public Policy Programme
Outline• The Coalition’s programme:
– Very rapid, very large cuts, hitting most vulnerable, (esp service cuts: loc govt 27%; soc ho 80% - at £64bn, 4x benefit cuts of £17bn)
– Complex restructuring, market-centred, concerned to shift responsibility
• Real economic, political, social risks
• So why?
• Paper considers various explanations
Cutting harder faster(State exp % gdp IMF WEO)
35
40
45
50
55
60
2008 2009 2010 2011 2012 2013 2014 2015 2016
Canada
France
Germany
UK
US
Collapse of growth= steeper cutsGDP per capita (US $) IMF WEO
30,000.00
35,000.00
40,000.00
45,000.00
50,000.00
55,000.00
60,000.002005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Canada
France
Germany
United Kingdom
United States
0
1
2
3
4
5
6
Poorest 2 3 4 5 6 7 8 9 Richest
2012-13
2014-15
Tax + Benefit changes regressive:Browne, J., 2010, http://www.ifs.org.uk/publications/5313
Value of services equal to cost, estimates (IFS O'Dea 2010)
0
1
2
3
4
5
6
7
Poorest 2 3 4 Richest
Services (Treasury)
Services (+IFS)
Total
(Larger) service cuts regressive (depending on what you mean)
Restructuring
• Schools, HE, NHS, Local Govt, Work Programme, Police
• Outsourcing: for-profit/non-profit sectors
• Any willing/capable/qualified provider
• Competition; shift of responsibility
• Trajectory unclear (Suffolk, Bury, Brighton reversals, NHS, Police)
Explanations• Prima facie:
– We must ‘deal decisively with our country’s record debts ... and set the country on the course for recovery’ (2010 June Budget) +
– ‘Politics as normal’ (reward friends, weaken enemies, shift blame)
• Class Model? - politics• New State Model? - economic
– Permanent austerity + shifting responsibility
• New Growth Model? – political economy– Permanent re-balancing of labour/capital thro’ state
engagement
1a: An exceptional problem?Net public debt: IMF WEO
0
10
20
30
40
50
60
70
80
90
France
Germany
United Kingdom
United States
And…• Long-term loan finance: UK 88% 5+ yrs, av.
maturity 14 yrs, Germany 6 yrs, US under 5• Interest relatively low.• No serious Forex/ credit rating problem• Pub sector wage bill comparable
– UK 12% GDP, Sweden 15%, France 14%, Canada 13%, US 11%
• UK 4th lowest demog. spending increases by 2025 on health, long-term care and pensions 14th lowest of 19 OECD countries
1b: Normal politics
• Cuts bear on Labour voters and areas
• Consummate blame avoidance
• Astute manoeuvring within coalition + use of media (?)
• Opportunities for business (party finance)
• Threat of rising unemployment etc
• Much uncertainty, but …..
‘A real need to cut spending on public services to pay off the very high national debt we now have…’ IPSOS
30
35
40
45
50
55
60
Agree
Disagree
2. Class Conflict Model
• GDP loss imposed mainly on working class, women and vulnerable groups
• Restructuring weakens working class capacity to resist cuts by privatisation, splitting deserving/ undeserving poor
• In the context of shift from European to US levels of inequality
• Declining share of World Product to labour (Glynn etc)
But…
• Is the coalition that organised/
• Is this part of a broader issue – see Models 3 and 4.
3: New State Model
• Inbuilt pressures for state expansion – Cost-disease: Baumol, Bacon, Iversen– New Politics: Pierson, Scharpf
• Resistance to cut-backs– Inertia: P+W, Gamble (but collapse of growth)– Previous cuts short-term: Hood
• Failure of cost-efficiency measures (ONS)• (Rare) examplars from overseas• Population ageing as an issue
State sector productivity 1996-2008
• Probs of conceptualisation/ measurement
• Changing working practices, better management, stronger incentives, union confrontations, decentralisation, internal markets, clinical governance, structural reorganisations, targets, efficiency savings etc, by Con/ Lab govts
• BUT NO net gain
Containing expansion?
• Education: ‘productivity’ rose to 2001 (school pop. grew faster than inputs); then fell back.
• Health care, productivity fluctuated with a slight net fall, due most importantly to increases in the drugs bill and in labour costs.
(Ayoubkhani et al 2010, Penaloza et al 2010).
Comparisons: NZ
• Trad. Agriculture, half to UK; EU• 1975 subsidies 18% mfg. 49% agric; mfg invest.
– 1980s debt, forex problems, deval 20%• 1984 Rogernomics – end subsidies, free trade,
float $, denat (3X Thatcher)• Pub sector new managerialism, internal mkts,
pension and U/E ben cuts, GST• 1990: 25% ben cuts; no rent subs, competitive
mkt across schools and health care• Debt 0% by 2006; PE 45 - 35% by 1994, stable
Canada
• Deteriorating terms of trade thro’ 1990s• Unsuccessful state-led mfg investment• 1993 Liberal govt, cut pub sector
workforce 23%, pub sector wages 5%, cut deficit 10-2% in 2 years
• Major state level cuts; NPM and competitive mkts introduced
• Spending 53-40%, debt 65-30% 1996-2006, stable
Canada and NZ: a success story?State exp. and net public debt %gdp IMF WEO
-10
0
10
20
30
40
50
60
70
Can pub ex
Can net debt
NZ pub ex
NZ net debt
Impacts• Poverty:
– NZ: 14% to 17% to 23%, mid-1980s, -90s, -00s– Canada: 18% to 17% to 19% (OECD)
• Inequality:– NZ Gini .27 to .32 to .34– Canada: .28 to .28 to .32
• Generosity index:– NZ 29.3 to 25.2 to 24.5, 1983 - 1995 - 2002– Canada: 23.2 to 25.1 to 24.4 (Scruggs 2011)
Much to be said, but..
• Restructuring costs money (Universal Credit £1.7bn; NHS £2bn; HE unclear?)
• Will changes reduce spending long-term or just keep spending at trend?
• Perhaps more about shifting responsibility/ avoiding blame/ reframing citizenship than saving cash
4. New Growth Model
• Weakness of British growth model since ?
• Shift from mfg + Keynesianism to service + less regulated market
• ‘Privatised Keynesianism’? (Crouch, Hay), vulnerable to financial ‘bubbles’
• Wilson: corporatism; Thatcher: Schumpeterianism; Blair: investment + mkt
But…
• Short-term: loss of public sector contribution to demand, damaging growth and profits etc (even OECD expresses concern Economic Outlook 89 2011 ch 4 p 240)
• Long-term: permanent loss of state-led human capital/social investment
Soft-nosed liberalism
• Market sector leads
• Smaller, simpler state, but not a Thatcherite opposition of state and market
• Responsibility transferred to non-state actors (market, non-profit, local)
• Govt avoids blame?
• Values rather than attacks citizens
The Coalition programme ?
• Far-reaching, precipitate, but success partial?
• Normal politics/ cutting to cut debt +• Class struggle +• Shrunken state +• New liberal growth model +• Soft-nosed liberalism: embedding and
legitimising retreat of the state?