2012 Conference newsletter by Leonora Merry

Social Market Foundation | Conference Newsletter | Page 1

Conference Newsletter 2012 Welcome to the 2012 Conference newsletter This special edition contains details of our extensive series of fringe events at the Liberal Democrat, Labour and Conservative party conferences.

At the half way point of the electoral cycle and hot on the heels of a Government reshuffle, the three main political parties meet at their conferences amid some of the biggest political and economic challenges for a generation. SMF Chair Mary Ann Sieghart writes exclusively for this newsletter on what these conferences mean for the three political parties, and why each one will face their party faithful with everything to prove - and plenty to lose. The article The price of popular politics on page 2 is a must-read for the conference season. Mary Ann will be blogging for our marketsquare blog on each of the leaders’ speeches so remember to log onto www.smf.co.uk/marketsquare to follow her reaction. Perhaps the biggest worry hanging over the party conference season for all political parties is the continued lack of growth in the economy and the prospect of fighting an election in 2015 against the backdrop of yet more cuts. On page 6 of this newsletter Ian Mulheirn takes a discursive look at the options available to the Chancellor as the Treasury prepares to ditch its fiscal

targets in response to the continued lack of growth. This Prospect essay is essential pre-conference train journey reading, so don’t forget to print a copy of this newsletter and take it with you to Brighton, Birmingham or Manchester! Once again the SMF will be making an important contribution to the debate at the three conferences. Our wide-ranging fringe programme will welcome ministers and senior MPs, senior journalists, and leading industry figures to discuss topics ranging from growth and investment to higher education and welfare. We are particularly excited to be bringing together the coalition partners - represented by Danny Alexander and Oliver Letwin - once again this year to discuss the growth conundrum at both the Liberal Democrat and Conservative conferences. Other top notch speakers include Vince Cable, David Willetts, Lord Freud, and Lord Adonis. Once again, the SMF team will be bringing you live updates from our debates via our twitter feed @SMFthinktank, and reaction to the policy announcements and speeches on our marketquare blog. Remember to join in in the conversation by following us and using our #SMF2012fringe hashtag. We look forward to seeing you at some of our party conference debates.

Contents Mary Ann Sieghart: The price of popular politics

Liberal Democrat Party Conference fringe programme

Labour Party Conference fringe programme

Conservative Party fringe programme

Ian Mulheirn: Train journey briefing: George Osborne’s Catch 22

www.smf.co.uk │@smfthinktank Social Market Foundation, 11 Tufton Street, London, SW1P 3QB

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The price of popular politics Mary Ann Sieghart Politics isn’t always a zero-sum game. Just because one party is unpopular doesn’t mean the others will automatically be loved. As we go into the party conference season, each of the three main parties is struggling to endear itself to the electorate. Even Labour, which is ahead in the polls, knows that it should be doing better still at this point in the electoral cycle. The deep-seated problem for all three parties is that there’s no money left. Not only are voters angry about the fall in their living standards, the loss of jobs, the lack of opportunities and the elusiveness of economic growth; the UK’s yawning deficit means that no politician can buy popularity by promising any policy that costs money. Indeed, all the party leaders can promise is more cuts and tax rises. The only argument between them is over how much austerity is needed. No wonder politicians are unloved. And this year, each leader is heading to a conference of activists who have doubts about his competence and political direction. The Liberal Democrats are bemused by their party’s continuing low poll ratings and disappointed that yet another attempt at constitutional change – House of Lords reform – has crumbled to dust in Nick Clegg’s hands. Clegg had hoped that the Conservatives’ move to the Right and Labour’s move to the Left would open up a ‘sweet spot’ in the centre for the Lib Dems to be the only party combining economic realism with a social conscience – but sadly for him, the voters don’t seem to have noticed. Ed Miliband at least goes to his conference with a lead in the polls, but his activists are still restive. They don’t understand why, when the coalition is so unpopular and Labour can scoop up disillusioned Lib Dem voters, their party isn’t much further ahead in the polls. They also fear

that their leader’s donnish preoccupation with political theory and abstract nouns is inappropriate for a time when ordinary people want concrete measures to improve their lives. Will ‘predistribution’ go the way of last year’s ‘predatory capitalism’? David Cameron has perhaps the hardest task of all. He has eased it slightly with a reshuffle designed to tickle the tummies of his activists. But he still heads to Birmingham with two big problems. His mission to sort out the economy has so far failed: the deficit-cutting hasn’t worked and growth has gone into reverse. Meanwhile, his pet project, the Big Society, is barely mentioned any more. Voters are justifiably starting to wonder: what is the Prime Minister for? We are exactly halfway through the electoral cycle and a lot can change before 2015. But political preconceptions often take years to shift, and if any of the three party leaders is to recapture voters’ imagination in time for the next election, he needs to come out with fresh and exciting ideas now. Trouble is, he has to make sure they don’t cost anything.

Mary Ann Sieghart is a writer & commentator and Chair of the Social Market Foundation Look out for Mary Ann Sieghart’s reaction to the three leader’s speeches on the SMF blog at www.smf.co.uk/marketsquare

www.smf.co.uk │@smfthinktank Social Market Foundation, 11 Tufton Street, London, SW1P 3QB

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Liberal Democrat Party Conference Fringe Programme Laying the foundations for prosperity and growth The Pavilion, The Grand Hotel, Brighton ● 18.15-19.30 Rt Hon Danny Alexander MP (Chief Secretary to the Treasury), Rt Hon Oliver Letwin MP (Cabinet Office Minister), Frances O’Grady (TUC) and Ian Mulheirn (SMF). Chaired by Philip Collins (The Times).

Delivering a sustainable savings deal for UK consumers Glyndebourne Room 1, Holiday Inn, Brighton ● 08.00-09.00 Steve Webb MP (Pensions Minister), David Nish (Standard Life), Neil Carberry (CBI) and Owen Walker (schemeXpert.com). Chaired by Ian Mulheirn (SMF).

What is a liberal education? Glyndebourne Room 1, Holiday Inn, Brighton ● 13.00-14.00 Simon Wright MP ( PPS to the Education Minister), Mary Ann Sieghart (SMF), Christopher Cook (FT) and Kevin Courtney (NUT). Chaired by Gerard Kelly (TES).

A brave new world? What will the new Higher Education landscape look like? The Gloucester Room, The Hilton Brighton Metropole ● 18.15-19.30 Simon Hughes MP (university access tsar), Nicola Dandridge (Universities UK), and John Gill (Times Higher Education). Chaired by Mary Ann Sieghart (SMF).

Switched on customers: Improving competition in banking Glyndebourne Room 1, Holiday Inn, Brighton ● 18.15-19.30 Baroness Kramer, Adrian Kamellard (Payments Council), Pula Houghton (Which?) and Hilary Osborne (Guardian). Chaired by Dr Nigel Keohane (SMF).

Has the penny dropped? Preparing for welfare reform Glyndebourne Room 1, Holiday Inn, Brighton ● 08.00-09.00 Stephen Lloyd MP (Work and Pensions Select Committee), Maria Heckel (Circle), Deven Ghelani (Centre for Social Justice), Katie Lane (Citizens Advice) . Chaired by Dr Nigel Keohane (SMF).

Clearing the path to prosperity: How can we get companies investing? Glyndebourne Room 1, Holiday Inn, Brighton ● 15.00-16.00 Rt Hon Vince Cable MP (Business Secretary), other speakers tbc. Chaired by Ian Mulheirn (SMF). Places are strictly limited. Contact nsadler@smf.co.uk to book.

Social mobility and welfare reform Victoria Terrace, The Grand Hotel ● 18.15-19.30 Duncan Hames MP (invited), Nancy Kelley (JRF), Dr David Hall Matthews (Social Liberal Forum) and Sarah Neville (FT). Chaired by Dr Nigel Keohane (SMF).

Can auto-enrolment work for middle-income savers? Glyndebourne Room 1, Holiday Inn, Brighton ● 18.15-19.30 Steve Webb MP (Pensions Minister), Patrick Heath-Lay (B&CE Benefits), Joanne Segars (NAPF), Ian Smith (schemeXpert.com). Chaired by Ian Mulheirn (SMF). www.smf.co.uk │@smfthinktank Social Market Foundation, 11 Tufton Street, London, SW1P 3QB

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Labour Party Conference Fringe Programme Delivering a sustainable savings deal for UK consumers Exchange 4-5, Manchester Central ● 08.00-09.00 Gregg McClymont MP (Shadow Pensions Minister), David Nish (Standard Life), Doug Taylor (Which?) and John Greenwood (Daily Telegraph). Chaired by Ian Mulheirn (SMF).

Reclaiming the reformist crown: How can Labour improve schools? Exchange 8, Manchester Central ● 13.00-14.00 Kevin Brennan MP (Shadow Schools Minister), Mary Ann Sieghart (SMF), Russell Hobby (NAHT), and Peter Wilby (The Guardian). Chaired by Gerard Kelly (TES).

A rosy outlook: Can Labour foster a sustainable Higher Education market? Exchange 1, Manchester Central ● 13.00-14.00 Shabana Mahmood MP (Shadow Universities Minister), Nicola Dandridge (UUK), Liam Burns (NUS) and Tom Clark (The Guardian) -tbc. Chaired by Ian Mulheirn (SMF).

Switched on customers: improving competition in banking Exchange 6, Manchester Central ● 17.30-18.30 Cathy Jamieson MP (Shadow Economic Secretary), Adrian Kamellard (Payments Council), Doug Taylor (Which?) and Robin Taylor (The Co-operative Banking Group). Chaired by Ian Mulheirn (SMF).

Accounting for nothing: are local taxpayers getting value for money? Exchange 7, Manchester Central ● 18.00 -19.00 Clive Betts MP, Gillian Fawcett (ACCA), Cllr Steve Reed (Lambeth Council) and David Walker, (The Guardian). Chaired by Dr Nigel Keohane (SMF).

Has the penny dropped? Preparing for welfare reform Exchange 2-3, Manchester Central ● 08.30-09.30 Rt Hon Stephen Timms MP (Shadow Employment Minister), Maria Heckel (Circle), Sir Brian Pomeroy CBE, and Patrick Butler (The Guardian). Chaired by Ian Mulheirn (SMF).

Will tackling corporate short-termism rejuvenate capitalism? Exchange 7, Manchester Central ● 13.00-14.00 Lord Adonis, Simon Walker (Institute of Directors), Otto Thoresen (ABI) and Nicola Smith (TUC). Chaired by Dr Nigel Keohane (SMF).

From getting by to getting on: where next for welfare reform? Exchange 6, Manchester Central ● 13.00-14.00 Lord Knight, Stephen Evans (Working Links), Nancy Kelley (Joseph Rowntree Foundation) and Sir Robin Wales (Mayor of Newham). Chaired by Ian Mulheirn, (SMF).

Can auto-enrolment work for middle-income savers? Committee Room 3, Manchester Town Hall ● 18.00-19.00 Gregg McClymont MP (Shadow Pensions Minister), Jamie Fiveash (B&CE), Joanne Segars (NAPF) and Josephine Cumbo (Financial Times). Chaired by Dr Nigel Keohane (SMF). www.smf.co.uk │@smfthinktank Social Market Foundation, 11 Tufton Street, London, SW1P 3QB

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Conservative Party Conference Fringe Programme Delivering a sustainable savings deal for UK consumers Soprano, Hyatt Regency Birmingham ● 08.15-09.30 Sajid Javid MP (Economic Secretary to the Treasury -invited), David Nish (Standard Life), Malcolm Small (TISA) and Jeff Pestridge (Mail on Sunday). Chaired by Dr Nigel Keohane (SMF).

Schools for sale? Education and the for-profit sector Room 112, Jurys Inn ● 12.30-14.00 Damian Hinds MP (Education Select Committee), Mary Ann Sieghart (SMF), Natalie Evans (New Schools Network), Dr Mary Bousted (ATL) and Toby Young (West London Free School). Chaired by Gerard Kelly, (TES).

Has the penny dropped? Preparing for welfare reform Fortissimo, Hyatt Regency Birmingham ● 12.30-14.00 Lord Freud (Minister for Welfare Reform), Mark Rogers (Circle Housing Group), Sir Brian Pomeroy CBE and John Bingham (The Telegraph). Chaired by Ian Mulheirn (SMF).

Choppy waters? Navigating the new Higher Education market Room 112, Jurys Inn ● 17.30-19.00 David Willetts MP (Universities Minister), Professor Eric Thomas (Universities UK), Haroon Chowdry (IFS) and Camilla Cavendish (The Times). Chaired by Mary Ann Sieghart (SMF)

Switched on customers: Improving competition in banking Fortissimo, Hyatt Regency Birmingham ● 12.30-13.45 Andrew Tyrie MP (Treasury Select Committee - invited), Adrian Kamellard (Payments Council), Anthony Thomson, (Metro Bank) and Teresa Perchard (Citizens Advice). Chaired by Nida Broughton (SMF).

Over to you: Universal Credit and personal responsibility Fortissimo, Hyatt Regency Birmingham ● 17.30-19.00 Lord Freud, (Minister for Welfare Reform), Mark Lyonette (ABCUL), Sir Brian Pomeroy CBE (Treasury Financial Inclusion Taskforce) and Rafael Behr (New Statesman). Chaired by Dr Nigel Keohane (SMF).

Planning for retirement Room 112, Jurys Inn ● 17.30-19.00 Harriett Baldwin MP (Work and Pensions Select Committee), Jamie Fiveash (B&CE ), Chris Curry (PPI) and Jeff Prestridge (Mail on Sunday). Chaired by Leonora Merry (SMF).

Laying the foundations for prosperity and growth Soprano, Hyatt Regency Birmingham ● 19.30-21.00 Rt Hon Oliver Letwin MP, (Cabinet Office Minister) Rt Hon Danny Alexander MP (Chief Secretary to the Treasury) Frances O’Grady (TUC) and Ian Mulheirn (SMF). Chaired by Daniel Finkelstein (The Times - invited). www.smf.co.uk │@smfthinktank Social Market Foundation, 11 Tufton Street, London, SW1P 3QB

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Train journey briefing: George Osborne’s Catch 22 Ian Mulheirn It is crunch time for the Coalition. Back in May 2010, eliminating the deficit in the public finances was its raison d’être, but the economy is not following the script. There has been no growth since the Government came to power, and the outlook is deteriorating rapidly. As the Coalition passes the half-way mark of the parliament, the governing parties are faced with the shocking prospect of going into the next election with an economy that is smaller than it was seven years before.

budget. The OBR’s autumn assessment this year therefore seems sure to set up the most important decision that the Chancellor will take this autumn, and perhaps of his entire time at Number 11. The choice is clear: either the June 2010 spending plan or the debt rule must go. How should he respond?

Osborne’s response to the impending OBR downgrade

The politics of getting the economy moving are perilous. There are four basic options. Three of these are But the Chancellor can act, and he must. Unless he can suicide. The fourth will take political courage and resolve rise above the politics, we’re all set to lose. in larger quantities than we’ve seen from the Government in recent months.

The Chancellor’s dilemma

Independent growth forecasts now suggest that the economy will be almost two per cent smaller by the end of next year than the Office for Budget Responsibility predicted just six months ago. As a result, tax revenues have disappointed, and on its current spending plans the Government looks set to break George Osborne’s second fiscal rule: to have national debt falling by 2015-16.

Unless the Chancellor can rise above the politics, we’re all set to lose.

First he could review his spending plans and cut faster between now and 2015 in order to try to meet the rule. That would chime with the views of many on his own backbenchers, such as David Davis, who have been arguing for quickening the pace for some time. But sacrificing the spending plans to the fiscal rule is no credible growth strategy. With the economy operating well below its potential level and unemployment around a million higher than normal, further cuts now would tip the economy deeper into recession. That would undermine bondholders’ confidence in the Government’s strategy to close the deficit. Indeed it’s hard to see such calls as anything more than small state ideology – a sideshow to the growth question everyone else is struggling with.

The reasons for the absence of growth are the source of much debate. To be fair to the Government, it is far from clear that its plan was doomed from the outset. Rising global commodity prices have squeezed household incomes, weighing on consumer spending. Apparently The choice is clear: either the June 2010 unending stagnation in the Eurozone has damaged spending plan or the debt rule must go. exports. Both have undermined investment, as businesses lack confidence that there are consumers out there who The second option is for the government to sacrifice the would buy their wares. fiscal rule and leave current spending plans unchanged. This is the ‘do nothing option’ and avoids short-term Nevertheless it is now clear that the programme of cuts political pain. But more of the same won’t do anything to implemented by the Chancellor has not allowed the drag the economy out of the mire – it will only defer the growth necessary to meet the fiscal rules on which he problem, making it worse in the meantime. It will also do staked the Government’s credibility in the June 2010 serious damage to the Government’s fiscal credibility: www.smf.co.uk │@smfthinktank Social Market Foundation, 11 Tufton Street, London, SW1P 3QB

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there is little point in self-imposed rules if they can be so lightly cast aside when they become inconvenient. Where would it leave the Government’s much vaunted credibility to be forced into a redesign of their fiscal framework by the failure of their own plan?

and explain why it has changed course so dramatically.

It would have been one thing for the Chancellor to have advocated cuts that were more responsive to the economic outlook from the start, but becoming a convert to that view only through necessity and the ignominious The first two options then, are politically feasible but will failure of Plan A is a rather different proposition. Ed Balls would have a field day and it is hard to see how such a do nothing for growth. To date, monetary policy, in the volte-face could ever occur without the government form of rock-bottom interest rates and quantitative easing, has been the mainstay of the growth strategy. And falling. it is thought to have had a big impact. The Bank of The economics of a deficit-funded fiscal stimulus might England research suggests that QE may have added as be sound. But the politics are simply impossible. So what much as three per cent to output since March 2009, of option four? Is there a growth option that doesn’t relative to what would otherwise have happened. But far involve a career-stopping U-turn for the Chancellor? There from indicating that monetary policy action is a sufficient is, and it might just work. response to the crisis, that serves only to underline just how bad things would have been without it. And it seems The Fourth Way likely that further QE will suffer from diminishing returns. The Chancellor can stick to his spending plans and boost The first two options then, are politically growth through altering the composition of government taxation and spending. By axing measures that have little feasible but will do nothing for growth impact on output and recycling the cash into Unsurprisingly, therefore, agreement is building among infrastructure investment that can boost GDP directly, he many economists around the need for fiscal action. can create employment and increase the long-term Indeed, no lesser institution than the International potential of the economy. Let’s call it ‘The Fourth Way’. Monetary Fund – the very embodiment of fiscal rectitude So what would such a plan entail? As the IMF coyly puts it, – recently suggested that the Government should respond with fiscal policy if the latest monetary measures ‘better targeting of transfers on those most in need’ code for gory measures like axing give-aways to better-off fail to stimulate growth. Here the Chancellor has two pensioners and cutting higher rate tax relief on pension growth options. The problem is the politics. contributions - would be one way to find funds for The most commonly discussed alternative is for the investment. Similarly, some kind of property tax of the Government to ditch Plan A, instead adopting a plan B by type recently proposed by Nick Clegg would raise cash to borrowing more and slowing the pace of the cuts. inject into growth-friendly projects, without letting up on Although this would break the debt rule, a judicious the pace of deficit reduction. investment boost would raise demand and strengthen This growth plan would enable the Chancellor to claim confidence, crowding in private sector investment. that, despite breaking his rule, he’s sticking to Plan A while Indeed the Chancellor already appears convinced by the providing a fiscal stimulus – a neat and perhaps careereconomics of taking some limited fiscal action. Recent saving trick. But while the overall story is an easy sell to announcements have deployed the public balance sheet voters – who doesn’t want to have their fiscal cake and to guarantee private investment in things like housing eat it? – the political problems lie in the details of what construction. Here the Chancellor is taking on fiscal should be cut or what taxes raised. It’s hard to see many liabilities in a way that’s economically almost Conservative MPs supporting cuts to pension tax relief, a indistinguishable from borrowing to fund direct public new property tax or a U-turn on the prime ministerial investment. promise to protect Winter Fuel Payments.

The Chancellor already appears convinced by the economics of taking some limited fiscal action But this approach is limited compared to a real Plan B. And having convinced most people of the apparently water-tight – if misleading - argument that ‘you can’t borrow your way out of a debt crisis’, it would be impossible for the Government to actually borrow more

Fighting over the pie The Chancellor is therefore faced with one fiscal growth plan that’s politically infeasible and another that’s merely politically very difficult. That difficulty stems from the distributional effects the latter would entail: the losers from individual policy decisions will shout loudly. For example, the benefits of recycling the tax currently foregone in savings incentives into infrastructure

www.smf.co.uk │@smfthinktank Social Market Foundation, 11 Tufton Street, London, SW1P 3QB

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property tax would recover some of that transfer; QE boosts equity values, while a reduction in pensions tax relief for the higher earners would reduce the advantage. Such measures run counter to Mr Osborne’s political instincts. But they now offer the best chance for him to For the plan to work, the Chancellor needs to re-convince restore his fortunes: will his deeper instinct for political the electorate that our economic destinies are survival kick in? intertwined – that when it comes to national prosperity Hamstrung by the politics, the Coalition has so far shown we really are all in it together. He needs to explain that we can fight over the slices of a shrinking national pie, or little appetite for reengineering its June 2010 plan to support the economy. As a result that plan is looking we can work together to increase the overall size of the pie. He needs to convince us that we should focus first on increasingly bereft of credibility and devoid of purpose. Fatalism about growth is not warranted, and the the absolute, before we think about the relative. And to Government has time to act. But making the right do this credibly he will need to make some of his own decision this autumn will entail a greater degree of voters squeal. statesmanship and political Fatalism about growth is not warranted, courage than has been and the Government has time to act. evident to date. investment are diffuse, while the costs are very immediate to a relatively small but powerful section of the electorate. Who knew that pasty eaters and caravan owners were such a formidable lobby?

He could soften the blow by telling a clearer story about the distributional impacts of policy decisions already taken to address the crisis. Rock-bottom interest rates have, for example, benefited debtors at the expense of creditors. Quantitative Easing is estimated to have transferred some £600bn to people with financial assets, most of this vast windfall going to the richest 10% of households in the country. Yet these huge distributional effects tend to slip under the political radar. Low interest rates might sustain house prices, but a

This article appears on the Prospect website. Ian Mulheirn is Director of the Social Market Foundation and author of Osborne’s Choice, an SMF paper outlining a new fiscal strategy

SMF keynote events on growth and the economy For a third year in a row we are bringing the coalition partners together to discuss the most pressing issue facing the Government. Our keynote event, held in partnership with the TUC, will see Chief Secretary to the Treasury Danny Alexander and Cabinet Office Minister Oliver Letwin debate how to get the economy growing.

Laying the foundations for prosperity and growth │ Liberal Democrat Conference The Pavilion, The Grand Hotel, Brighton ● 18.15-19.30 Rt Hon Danny Alexander MP (Chief Secretary to the Treasury), Rt Hon Oliver Letwin MP (Cabinet Office Minister), Frances O’Grady (TUC) and Ian Mulheirn (SMF). Chaired by Philip Collins (The Times).

Laying the foundations for prosperity and growth

│ Conservative Party Conference

Soprano, Hyatt Regency Birmingham ● 19.30-21.00 Rt Hon Oliver Letwin MP, (Cabinet Office Minister) Rt Hon Danny Alexander MP (Chief Secretary to the Treasury) Frances O’Grady (TUC) and Ian Mulheirn (SMF). Chaired by Daniel Finkelstein (The Times - invited).

“The SMF is playing a very important role in bringing the Coalition partners together to have an open debate about the issues facing our economy” Chief Secretary to the Treasury, Danny Alexander www.smf.co.uk │@smfthinktank Social Market Foundation, 11 Tufton Street, London, SW1P 3QB