Thursday, 9 December 2010

Hello; Anyone Out There?

Six months into the Coalition and it might be a good moment to examine how Labour has reacted to it. Or it might be, if any reaction could be discerned for even after electing a new leader who promised a new start, Labour has just disappeared. Some from EB’s office suggest that this is part of a grand strategy to let the Coalition hang itself from the hook of public expenditure cuts and that no reaction apart from kneejerk condemnation is needed. Others suggest that EB is proving to be a hopeless leader, has no idea of what to do and will be dumped in a year or so in good time for an election in 2014 under someone new.

But both rest upon a false assumption; that Labour has plenty of time to get its act together. This is a fallacy not because the hope that the Coalition will soon fall apart is justified. Every passing month shows that both LibDems and Conservatives recognise that they have to hang together for the full five years. There will be quite public rows over exactly what course to steer and what concessions each must make. There will be a few defections from the LibDems and, maybe, from the Conservatives but not enough to alter the balance of power. LibDem councillors, in particular, will be decimated next May and the tuition fee debacle will cause huge strain . But both parties see that they must shift the existing electoral advantage to Labour more in their favour by adjusting constituencies and they must weather the impact of public expenditure cuts and hope next to go to the polls on an economic upturn. For both they need the full five years.

No, the reason that Labour has got to find its voice rests upon two likely issues over which it soon has to make radical policy decisions.

The first of these is the banks. It remains one of the two great mysteries of Brown’s government that in 2009, it did nothing about the banking collapse apart from bailing them out with some £200 billion of public money. (Or was it £200 gadzillion? It still remains largely opaque as to just how much was poured into the banks and how much of it will ever come back) In 2009, remember, taxing the banks, even breaking them up would only have partially assuaged public anger. Issuing deportation orders to all non-EU bankers, especially Americans working for Goldman Sachs, and taking them, shackled, on board planes bound for Luanda with three huge private-sector security guards to sit on them; now that would have been more like it. But Darling, no doubt under direct orders from Brown, essentially did nothing. He refused even to order the banks we own not to pay bonuses. Action, almost any action commensurate with the damage the bankers inflicted, would have gone a long way towards Brown winning the election. Yet, effectively, he did nothing.

This is not just a matter of history, of how apparently sane and politically-astute politicians just lose the plot. Nor is it just a matter of giving Cameron an easy ride though it does mean that the minor changes Cable eventually come up with will look like a revolution in comparison. The key point is that it seems very likely that another financial crisis is on the way if one takes the words of Strauss-Kahn, the IMF boss, seriously which is probably wise. Osborne is not committing billions to the Irish banks out of a soft heart nor to save the Euro. He is doing it because of the exposure of British banks to loans to these Irish banks which are likely to go pear-shaped if they go bust. In effect, another few billions are going to prop up British banks and more will be required when the bond-markets turn to another weak link.

Not are weak European bank the only problem. The Chinese banking system is only kept afloat by the huge influx of dollars financing the US trade deficit. Once this flow is cut — and there is every sign that the US will have to act soon — these banks will start to tumble as the Chinese experience the consequences of their very own property bubble. And then HSBC, an offshore bank now effectively owned by the Chinese, will come under extreme pressure because of its exposure to duff Chinese loans. Expect the usual signals of the ‘we are too big to fail’ kind to begin flowing. (Don’t believe the claims that HSBC together with Barclays sailed through the last crisis unscathed. They lapped up the cheap money provided by the Bank of England then effectively sold themselves to the Chinese and Abu Dhabi respectively).

If these crises do come about then Labour will need a policy to distance themselves from the Coalition and it ought to be a fairly radical one, not an ‘us-too but not quite so much’ which has characterised its response to most recent Government policy initiatives. (On this topic, quite the most stomach-churning of these has been Ed Balls sneering that the new immigration controls were not tough enough and would do little to meet Conservative targets. Come back Phil Woolas. At least it was obvious that you were a racist).

A new banking crisis may not, in the event, happen even if probable. That cannot be said of the alternative vote (AV) referendum, a crisis for Labour policy which is fast coming down the tracks now that desperate attempts to delay it have failed in the Lords. An AV system is, remember, a Labour manifesto commitment something dreamed up by Brown’s policy advisers notably one Edward Miliband who was responsible for drafting it. The reasons they went for this option are, again, a political mystery. It was obvious for some time before the election that a commitment to proper constitutional including electoral reform could win Labour the election. It was not just outside analysts who believed this. Apparently all the Labour focus groups reported just this. Yet, as with banking reform, the dim Oxford minds who formulate these things felt that too radical a reform would alienate important interest groups, in one case the bankers, in this one the Neanderthal wing of Labour going under the generic name of Prescott’s Mates. So they plumped instead for the Alternative Vote system which they hoped would sound like electoral reform to the stupid electorate whilst actually boosting Labour results in an even more unfair way than first-past-the post.

The basis for this reasoning was that LibDem voters, seen as soft guardianistas who didn’t agree with the Iraq war, would nearly all put Labour as their second preference. In any election with three main parties, the AV system pivots around the second preferences of whatever party comes third so Labour could be expected to pick up gains from the Tories in all those seats where the LibDems come in third. And on a virtual re-run of the May election, with the LibDems going 80% for Labour, this expectation is fully justified with Labour picking up 285 seats (258 in real life), the Conservatives just 250 (306) and the LibDems jumping up to 85 seats (57). Still a hung Parliament but with Labour now in the driving seat and expecting to be the government either as a minority or in coalition with the LibDems. All this, remember, with the assumption of the May voting in which Labour received barely 29%, which just serves to show how wildly disproportional AV can be.

However with the Coalition set for a full term and the prospect of some form of electoral deal to sustain it afterwards, the horrid thought is that perhaps the LibDems may not be so cuddly and that they might switch their second preference solidly to the Tories. If a split of 60% Conservative and 40% Labour is assumed then the Tories trot home with 328 seats, Labour slumps to 208 seats and the LibDems still go to 85 seats. A tiny majority for Cameron, probably reduced to minority by a different slant in Scotland and Wales. And if the split were to be 80% Tory then they romp home with 369 seats whilst Labour drop to 166.

The result of such calculations is that Labour has gone decidedly wobbly on AV with some of its old brutes, Prescott, Reid and Blunkett just for starters, coming out firmly against it. Already they have tried diversionary tactics which began with Jack Straw’s ridiculous claim that the proposed boundary changes would be ‘gerrymandering’. Certainly they will favour the Tories but only to balance out the existing Labour bias in the electoral system. Then there came the claim that having a referendum on the same day as the English local and the Scottish and Welsh national votes was in some way undemocratic for reasons that remain quite unclear. Finally EB has tip-toed into supporting the Yes to AV campaign but only whilst declaring that Labour’s main emphasis next spring will be on the local elections. Understandable, given the almost certain decimation of the LibDems in these, but also a clear case of bullet in foot if they fail to deliver real support for the AV campaign.

The problem for EB is that many in the Labour Party are opposed to AV just like they are opposed to any kind of constitutional change. This is an old Labour habit. The alliance between Michael Foot and Enoch Powell to defeat any reform of the House of Lords is just the most despicable of the knee-jerk reaction of Labour to any suggestion that the system we have needs any kind of reform. Just why this is so is obscure. In the early years of the Labour Party, it actually supported proportional representation, only for this to disappear once they can close to power. It may be that somewhere in the DNA of yellow-dog Labour is the feeling that any constitutional reform is just a trick by the ruling-class to deprive the workers of their rightful position as the country’s ruler. Or it may just be the kind of supine aversion to any kind of radical change which has so dogged its leaders for decades and which finally delivered the obsessive triangulation of Blair. And which doomed the Brown regime.

Whatever. If Labour weasels out of full commitment to the tiny reform represented by AV then it risks loosing popular support just when it will need it most, in the final two years of the Coalition. As the Labour pressure group, Compass, has finally perceived, coalition politics has arrived in Britain and will retain a lasting popularity. Labour needs to grasp this fact and accept that AV will require a long-term commitment to forming a new, radical coalition. If it retreats into a position that only a Labour majority in everything is acceptable then it will totter into electoral defeat in 2015.