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Public Spending: Whom Should we Believe?

Friday 19th December: As the debate over 1930s spending ratios looks set to dominate the New Year’s political debate, Dr Sheila Lawlor introduces Politeia’s new analysis by the distinguished economist, David B. Smith, of the substance behind the spin.

As the year draws to a close, the economy continues to hog the headlines, and it’s likely to do so until the 2015 general election. Fresh battle lines have been drawn over the main parties’ spending plans. Labour, if returned to power, now promises to cut the deficit every year of the next parliament. The Conservatives, at least since the Chancellor’s autumn statement in early December, have been ‘accused’ of cutting more than is necessary for ‘ideological’ reasons. Britain, it is alleged, will be returned to the hair shirt levels of the 1930s. The line, perpetrated by the media, is evocative of dole queues, cloth caps and a country scarred by unemployment.

Reform or Renegotiation?

Friday 12th December: As Greece prepares to elect its next president, Brussels has put its money on the safe pair of hands, Stavros Dimas, a former commissioner and ‘convinced European’. But in a year when voters across the EU sent a strong Eurosceptic message to Brussels, Lord Howell of Guildford explains that if the EU is to survive and prosper, more, the old Europe must be left behind.    
 
‘Renegotiation with a Reformed EU’ is now the declared British way forward out of the EU tangle. Ideas and shopping lists abound about the issues needing renegotiation - from the technical to the fundamental. Many of them would require changes in the EU Treaties.
 
But what about the reform part of the strategy? Where and how is that going to start?  
 
Rather than becoming bogged down in sterile, bilateral and ultimately divisive arguments about Britain's relations and powers vis-a-vis the rest of the EU (a situation towards which events are currently fast slipping),  Britain should take the initiative in reforming (i.e. changing the direction of) the EU as a whole.
 
The British need to make and win the case for a better sort of Europe, more attuned to the 21st century and the digital age - and do so in a manner which wins over allies throughout the EU. It must be shown, as so many across the EU privately acknowledge, that the integrationist doctrine has reached its limits and goes flatly against the powerful trends of modern technology and that a more sustainable model is available.

Go Global - Lower taxes, less borrowing & the smaller state - are the way to grow

Friday 5th December: George Osborne’s Autumn Statement has helped bring some key issues to the fore; on growth, fiscal policy and the future role of the state. Though the recovery is underway, too much spending is fuelled by borrowing, while productivity and skills remain low. As Dr Lyons writes:
 
The first key message is that the economy is recovering strongly but there is scepticism about how sustainable such growth is. In some respects patience is needed, not only for wages to recover but also for confidence to increase. Yet, at the same time any recovery will likely expose some of the fundamental flaws we have seen in the past, namely too much of personal spending is driven by borrowing and that rising house prices are as much of a problem as a solution. The UK cannot get rich by selling houses to itself, or to foreigners.
 
We need to keep thinking globally, and it is only by doing so, that we will remain focussed on the need to reposition the economy through higher investment, more innovation and increased exports. Domestic demand needs to be strong, too. People need more money and the Chancellor is right to think that lower taxes are part of the solution, but so too is the need for higher wages based on improved productivity. UK productivity is low, due to many factors, including low skills and a lack of prior investment. But also some of the factors explaining low productivity include the high numbers in work and a lack of demand, as in a service sector economy it requires spending to rise for productivity gains to be seen.

Hard-Edged’ Partnerships - Whose education benefits?

Friday 28th November: This week Tristram Hunt MP, Labour’s Shadow Education Secretary, proposed that Labour would, if returned to government, legislate to remove business-rate relief from independent schools that do not enter into partnerships with schools in the state sector. At present, independent schools that are charities, benefit from business-rate relief (under the Local Government Finance Act, 1988) on account of their charitable status. Under the proposal, business-rate relief for an independent school would be conditional on entering into a ‘hard edged partnership’ with a state school. By way of example, Mr Hunt said that, as a bare minimum, all private schools should provide qualified teachers to help to deliver specialist subject knowledge to state schools, and should run joint extra-curricular programmes ‘where the state schools is [sic] an equal partner.’  He also proposed that all secondary private schools should assist with expertise to help get ‘disadvantaged state school kids’ into top class universities, including Oxbridge.

Free Movement: time to think again?

Friday 21st November: Dr Sheila Lawlor writes. British Euroscepticism notched up another victory at Rochester when Mark Reckless, who resigned as a Conservative MP to join UKIP, was re-elected to parliament on 42.1 per cent of the vote. The Conservatives came second with 34.8 per cent and Labour third with 16.8 per cent. Not only was immigration a central issue for UKIP and the Conservatives, Labour too focused on some of the questions it raises for this country.
 
The problem UK leaders face is the EU principle of free movement. From Germany Mrs Merkel is reported as saying she would rather see the UK leave the EU than compromise on free movement. From Helsinki, the Nordic leaders reiterated this month that free movement was not negotiable. But voters, from the North Sea to Gallipoli, no longer believe the EU has the solution. Though their rulers may hold out for unlimited free movement, many voters, especially in the founder western countries and Britain, concerned with the consequences of open benefits, open labour markets and open access to housing, schools and health services, see things very differently.
 
Even where the leaders appear to be on the side of voters, they seem powerless to win against the EU. The recent Luxembourg court ruling, which limited unemployment benefits  to those migrants genuinely seeking work, may seem to be an exception, and it seems to have appeased some voters. But it is questionable whether this judgement amounts to very much in practice, since the burden of proof is on the court to prove a claimant was not genuine about seeking work. Usually, EU court rulings do not even have the semblance of supporting the interests of individual countries – as with the EU’s prohibition of the UK from deciding its own rules for bankers’ bonuses. As UKIP’s leader put it: you never win with the EU.
 
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