Dave Watson

Plus ça change

noreply@blogger.com (Dave Watson) — Sat, 09 May 2026 10:58:00 +0000

Another Scottish Parliament election, and it's plus ça change. The phrase coined by the French critic, Jean-Baptiste Alphonse Karr in 1849, suggests that despite superficial alterations or reforms, underlying fundamental issues often remain unresolved. As none of the parties in this election even attempted to address the fundamental issues facing Scotland, this seems apposite. Turnout was dismal, but no lower than pre-2021 levels, so the voters have been 'scunnered' for a long time.

It is often claimed that the Scottish Parliament's voting system was designed to stop any party from having a majority. Sadly, this is a myth. The Labour establishment at the time offered a nod of recognition of the need for some proportionality, but thought their dominance of the FPTP seats would deliver a Labour majority, or at least something close to one. They didn't envision the current circumstances, where it delivers an SNP majority.

Vote share

But what about tactical voting? Yes, that can work in a by-election when the electorate can roughly work out their options. It can also work in a two-party circumstance, such as the last general election. It doesn't work in a Scottish election when the anti-SNP vote, on constitutional or other issues, is split three or four different ways. I was delivering a tactical voting leaflet to a Tory voter this week. He was genuinely confused about the FPTP system and the outcome I accurately predicted in my constituency. He wasn't a stupid person, as the long drive and three BMWs probably meant he had earned a decent living before retirement. In fairness, if he had just said, I'm a Tory, and I am voting that way anyway, I would have understood. I have voted Labour, even when they stood no chance. As I have no strong view on the constitution, if there wasn't a Labour candidate, I would vote SNP before I voted for the Tories or their reincarnation as Reform Ltd.

The constitution may be less of an issue than it was after 2014, but it remains the default position for many voters. It is going nowhere after this election, much to John Swinney's private relief. There will be some performative noise, and then it will be back to business as usual. It is a lot easier to win elections when you can blame someone else. I was the Chair of Scottish Labour when Wendy Alexander did her 'bring it on' stunt. I thought she was right then, as it certainly shook Alex Salmond as much as it would John Swinney today. However, he can rest easy, as UK Labour will take the same position it always has. There will be no break from the constitutional logjam unless there is a viable route to a referendum. That is tactically and democratically the right approach, but it won't happen.

As one commentator put it this morning, "The SNP victory was made in Downing Street by a hapless Prime Minister." That is possibly true, although I think the UK Government gets insufficient credit for the positive aspects of its record, particularly reforms to the railways and employment rights. I voted for Keir Starmer, and although I recognised he may be a bit dull, but after Johnson and Truss, dull looked good. What I didn't appreciate was how bad a politician he would be. I expected to disagree with the new government on aspects of economic policy. I knew it wouldn't be as radical as I wanted, but I didn't think it would be politically incompetent. They are also learning that the billionaire media, which has now reached parts of the BBC, will go after a right-wing Labour leadership, nearly as much as a left-wing one. All you can do is try not to present open goals, as this government has done, just as Jeremy Corbyn did.

The same commentator also said, "Sarwar could have promised voters twenty grand each and they still would have shouted at him about the Prime Minister and voted SNP or Reform." Quite possibly, but there were major homegrown errors as well. If you are going to use the slogan 'change' when the voters have several options for change, you had better have a plan for what that change looks like. The Scottish Labour manifesto was yet another piece of managerial tinkering. This left Anas trekking the country, spouting slogans without anything to back them up. Instead of a radical plan that would distinguish Scottish Labour from the pack, it dissolved into platitudes that convinced no one. The outcome was Scottish Labour's lowest vote in the party's history as a national party, with 19.2% in the constituency vote and 16% in the list vote. The Scottish Greens won more list votes than Scottish Labour in Glasgow.

This has nothing to do with the myth that Scottish Labour policies are set by 'London'. I have been closely involved in most of the manifestos since devolution, and Westminster influence has declined in every one. The rules give Scottish Labour absolute autonomy over devolved issues, and attempts to influence that, even when there was a UK Labour government, were largely rebuffed. The best example is the rejection of a marketised NHS in Scotland, when Blair was taking England in another direction. The problem is the mindset in the Scottish Labour establishment since 2007. I was at the parliamentary group meeting after the 2007 election, and with some honourable exceptions, most of the MSPs were not prepared to shift into opposition mode. Ever since then, it has been the same. Leaders have acted as if the ministerial Mondeos will turn up the next day (Kias and Volvos today), and have gone to the electorate with bland, no-risk policy platforms.

If Scottish Labour want's to climb out of the hole it has dug for itself, it needs to become a radical insurgent party. UK Labour also needs to change as well. I am less focused on personalities than on the need for policy and strategy changes, but there is little in this morning's missives from both Labour leaders to give me much confidence that real change is likely.

Weapons not welfare is poor framing, and so is military Keynesianism

noreply@blogger.com (Dave Watson) — Tue, 28 Apr 2026 11:18:00 +0000

I was just logging on to make a presentation at a European defence workshop, when Lord George Robertson’s ‘weapons not welfare’ speech broke in the media: "We cannot defend Britain with an ever-expanding welfare budget."

Like many interested in this sector, I wasn’t expecting the attack on government defence spending to come from the man who led the defence review. When you dig into the speech, his focus was on the pace of change and the delay in publishing the 10-year investment fund. As a former Defence Secretary, he clearly recalled his battles with the Treasury, accusing ‘non-military experts in the Treasury’ of ‘vandalism’. The Treasury has long been sceptical about increasing defence spending, not on ideological grounds but on grounds of deliverability. With some justification, they point to poor defence procurement, which is some way short of ‘vandalism’.

On the warfare versus welfare argument, the Chancellor has signalled her unwillingness to raise taxes to fund additional defence spending. She has warned that ‘difficult choices’ are required to increase defence spending, and other budgets may have to be cut, including welfare. Other ministers have been more explicit, including Wes Streeting, the health secretary, who suggested that welfare cuts could be required because it was critical to deal with the ‘challenge of the world we face’. The UK has already cut international development spending to fund additional defence spending, although there is a broader policy shift towards repurposing development aid.

It may sound like a straightforward trade-off, but in public spending terms, it is more complex. Welfare budgets have mandatory elements and can be demand-led, while defence spending is discretionary. In the US, this has been called the ‘Guns and Butter’ economic model. In the UK, defence is part of ‘final’ public expenditure, funding the armed forces’ pay and the weapons and equipment they use. This consumes money that can’t be allocated elsewhere in the budget and consumes a share of national output when the government spends it. In contrast, the welfare budget consists mainly of ‘transfer payments’ that shift income between households. Alan Shipman explains this in more detail.

Tony Benn famously said, “If we can find the money to kill people, we can find the money to help people.” This leads to the concept of military Keynesianism, which offers an increasingly tempting way for governments to combine the economics of full employment with the rhetoric of national security. The UK defence review implicitly invokes this to justify defence spending, highlighting the positive impact on jobs and local economies. The European Commission has proposed exempting total defence expenditure from EU fiscal rules for four years. Germany has already begun rearmament by suspending its constitutional debt brake.

The problem with military Keynesianism is that economic growth in pre-WW2 Germany and the USA was rising before warfare drove military expenditure, and the economic multiplier depends on a range of factors – not least how much is procured in the UK rather than imported. Russia is a war economy, yet it is not benefiting from the technological gains typically associated with a war economy. Research shows that the current state of its military industry is one of regression. Production will likely have to be simplified and slowed over the coming years, while Russia will be forced to accept reduced output quality and will suffer from ‘innovation stagnation’ in its technological research and development.

The UK Government would be wise to rely less on military Keynesianism and instead focus on the most significant threats. Despite the Iran War and the growth of China’s military capacity, Russia remains the primary threat. I have just finished reading If Russia Wins by Carlo Masala. He starts with the scenario of an attack on Narva in Estonia after Ukraine has been forced into a land-for-peace deal by the USA. If this sounds fanciful, the Russian Duma has just passed a law letting Putin deploy troops anywhere on Earth to “protect Russian citizens.” Estonia and Latvia both have large Russian-speaking minorities on Russia’s border. Masala’s scenario highlights the likely impotent response from NATO, given pro-Putin governments in Europe and the USA, and the impact of hybrid warfare. Kristan Stoddart's new book, Russia's Hybrid Warfare Offensive Against the West (de Gruyter, 2025), is worth a read on this. We also need to be less reliant on the USA, which, under the current administration, is an unreliable ally.

It is a simple fact that the UK is unprepared for these threats. As Andrew Neal argues, "The country’s leaders need to spell out what these threats mean for the UK. They must also be honest about our minimal defensive capabilities." War may come whether we like it or not, and being unprepared would be reckless. The UK Government can fairly dismiss the opposition’s attacks, as many of the problems facing the UK armed forces stem from decisions made by the Tories.

Instead, the UK Government should focus on ensuring that the necessary extra spending is well spent. As Richard Norton-Taylor argues, “Mandarins in the Ministry of Defence and successive defence secretaries have failed to confront the armed forces’ top brass – senior military figures who have a vested interested in preserving the status quo and continuing to fighting the last battles, reluctant to accept new geopolitical realities and new technologies.” The defence environment is changing rapidly, as evidenced by Ukraine’s use of drones and robots. It is therefore little wonder that the Treasury is reluctant to agree to the MoD’s demands, including signing off on the defence investment plan.

This requires a radical reform of defence procurement, including training and development. The UK’s defence industry is struggling to attract and retain talent at precisely the moment it could be most needed. Almost half of all engineering and technology businesses in the UK report recruitment difficulties. The UK has an engineering and manufacturing graduate share below competitors such as Germany, Japan, Italy and France. The shortfall is costing the UK economy an estimated £1.5bn annually.

In summary, there is no alternative to additional defence spending to counter real threats to our security. However, 'weapons, not welfare' is poor framing, and so is military Keynesianism. Defence spending also needs to be delivered more effectively, along with a revised industrial strategy.

Pension Investment Conference

noreply@blogger.com (Dave Watson) — Thu, 12 Mar 2026 15:36:00 +0000

I spent some time at the Pensions UK Investment conference in Edinburgh this week. I still do some consultancy work in the sector, and I am the Chair of a pension fund investment committee. Held during Trump’s war (sorry, ‘operation’; Have I heard that before somewhere?) against Iran, there were a few nervous delegates. However, pension fund investors take a long-term view, and most funds are in pretty good shape. In particular, the much-derided Defined Benefit (DB) schemes.

It is a busy time for pension schemes, with global volatility driven by Trump’s impact on the global economy before the current conflict, the risk of an AI bubble bursting, and significant changes to pension regulation in the UK.

Responsible investing (ESG) has faced increased scrutiny, especially from political sources in the US. The sector was never fully enthusiastic about it, and many fund managers and benchmarks have a noticeable tendency towards greenwashing. However, if the conflict in Iran teaches us anything, it’s that the push towards Net Zero is fundamentally correct. The more we invest in renewables, the more we enhance our domestic energy security. There was a broad political consensus on this until the Tories and Reform Ltd diverted in a Trumpian direction. At the conference, Caroline Lucas wiped the floor with Michael Gove in a debate; Gove, who was once part of that consensus, offered less-than-convincing reasons for his shift. The conference delegates reaffirmed that pension funds should do more to address climate change. Caroline emphasised that, particularly for young people, it makes no sense to invest in ways that harm the planet.

The pensions minister, Torsten Bell, was the keynote speaker. He has had a longer tenure than most pension ministers (not that’s saying a lot), and long may that continue. He is overseeing the biggest pension reform in a generation, and it is long overdue. He made a strong case for issues such as the consolidation of pension funds and UK investment, as well as the actions the government is taking to support them. The English Local Government Pension Scheme is rapidly consolidating its pooling arrangements. Sadly, the Scottish scheme is not reforming at all. We used to lead the way, but now we are stuck in a rut at the expense of effective investment and costs. The minister was asked about this and gave the tactful reply that devolution should be about learning from each other!

There were a few sessions on UK and place-based pension fund investment. An agenda is progressing in England, but much less so in Scotland. It is vital that more of our pension funds invest in the UK economy, where we live and work. Pursuing global investment returns is fine, but we all want to retire into a functioning economy and communities with a high quality of life. There are many examples of good local investment that also generate decent returns. In fact, overseas pension funds are investing in UK infrastructure, so why can’t we? One example is social and affordable housing, which provides stable, long-term investment opportunities that match the stable returns pension funds seek. I did some work on this with Scottish housing associations, which would be a win-win for them and pension funds. There has been some use of this in Scotland, but nowhere near the scale seen elsewhere. Declaring a housing crisis is all very well, but some action would be better.

It's encouraging to see such a bold pension reform in the UK. Some in the sector advocate for a slower approach, but I would encourage the minister to move more rapidly. I also wish we were as bold in Scotland regarding reserved pension policy.

The Good Society

noreply@blogger.com (Dave Watson) — Tue, 17 Feb 2026 11:00:00 +0000

I was at an event last year where I was asked to list three books that have most influenced my thinking. One of those was The Spirit Level (2009) by Professor Richard Wilkinson and Professor Kate Pickett.

The Spirit Level sounded the alarm on the corrosive effects of economic injustice. At a time when only a few academics were exploring this issue, it provided a comprehensive analysis linking the negative effects of inequality to a wide range of social ills. It revolutionised the way we looked at, measured and understood the impacts of inequality. Fifteen years on, its warnings ring truer than ever, exacerbated by years of austerity. The authors have published a report, "The Spirit Level at 15, " which highlights many of these issues.

Kate Pickett has also written a new book, The Good Society, which takes her analysis to the present day.

She starts with a (long) definition of a good society. Essentially, a society where everyone's physical and mental health is as good as it could be, by focusing on levelling inequality. Prevention before cure and ensuring the wellbeing of future generations. If those are not your priorities, you will struggle with this book. She argues that society is not improving because a few people are becoming fabulously rich. Tackling poverty and inequality benefits our society as a whole.

This is a book of two halves, not just because I read it on a long train journey to a football match! The first half outlines the blueprints for a good society, focusing on health, care, education, the environment, and justice. The second half explains how to build a good society.

As you would expect, almost every argument is referenced with evidence, and often illustrated with real-world examples. For example, in the city I was born in, Liverpool, half of the children born in 2009 and 2010 had been referred to children’s services by the time they were five. Many of her facts come from well-resourced, government-commissioned reports, with comprehensive recommendations that are repeatedly scuppered by another election, and put on a shelf to gather dust. A story we know only too well in Scotland, with the Christie Commission being just one pertinent example of this theme. Like The Spirit Level, it draws on international examples to show that another world is possible.

Her solutions are not simply about income, vital though that is, but about engagement. She suggests participatory budgeting, citizen assemblies and the strengthening of trade unions, alongside a National Institute for Social Change, for “ongoing proper assessment of the effectiveness of proposed social policies, their cost effectiveness”, so that the “then government could act on those things”. Where I part company with her is on the establishment of 'National' services for everything, unless they are limited to frameworks.

In interviews, Pickett has been critical of the incoming Labour government, "Given their mandate for change, I think they could and should have been bolder and faster.” New reviews are fine "unless they sit on the shelf, gathering dust, like so many other government reviews." It would be hard to disagree with that. Jonathan Portes has criticised the book as a "whistle-stop tour of the greatest hits of progressive social policy." Yes, there could be more depth, but that would make the book unreadable and just another report gathering dust on the shelf. The purpose of a book like this is to educate and inspire. On some of his specific criticisms, such as the evidence on Universal Basic Income, he has a point.

It is inevitable that a follow-up book will not be as influential as the original. However, it is important that the case for tackling inequality is refreshed. And this book does just that.

Scottish Budget 2026-27 - patch and mend

noreply@blogger.com (Dave Watson) — Tue, 13 Jan 2026 16:41:00 +0000

The Scottish Government has published its draft budget for the coming year. I wrote a pre-budget briefing for the Jimmy Reid Foundation outlining the challenges facing the Finance Secretary. I also penned an opinion piece in The National, setting out what I, and Tax Justice Scotland, hoped to see in the Budget. The extra cash in the UK budget meant that the Scottish Government could patch and mend the Scottish Budget this year - at least for resource funding. However, the looming deficit means that we need to start putting Scotland’s finances on a sustainable footing. We need a longer-term view, particularly on tax.

"We’ve patched, postponed, pretended. Now Scotland must choose: keep letting services quietly crumble, or invest properly in the people and places that make this country tick. That requires an open debate on our willingness to pay for the country we want. And the really big question is whether, in an election year, our politicians are willing to have it."

God loves an optimist, but hoping for tough choices in an election year was probably too much to ask for. Not unlike the UK Budget, what we got was patch-and-mend. This is my quick take.

Not that there are no welcome patches. Breakfast clubs, a bit for housing and college funding; not enough, but some relief for a hard-pressed sector that has been discriminated against for years. The Scottish Living Wage for social care workers is always welcome, but it will take more than that to address staff shortages in the sector. Equally important, there is little sign that the government understands the link between social care and hospital capacity, as set out in yesterday's SHA survey and Audit Scotland report. The increase in the Child Payment is welcome, if insufficient, and at least demonstrates a willingness to address child poverty.

The capital budget is struggling, although, in fairness, this largely reflects the Scottish Government's inadequate borrowing powers. Promises to deliver projects long into the future will convince no one. A two per cent 'real-terms' increase in council funding will hardly touch the sides of the demands on local government services, so difficult tax decisions have just been outsourced to councils. This chart from the SFC highlights the problem.

There are also some positive tax measures. Taxing private jet departures is something many of us have argued for. Raising the thresholds on basic and intermediate income tax rates retains the progressivity of the Scottish approach and allows the government to claim that 55% of Scots will pay less income tax than the rest of the UK, sustainable or not. The Scottish version of the Mansion Tax won't raise much revenue (nothing next year), and it is a long way from the Council Tax reform the SNP promised as far back as 2007. More patch and mend there.

Instead of a proper review of business rates and the weak Small Business Bonus scheme, we have another patch, unlikely to satisfy many on either side of this debate. And £1.5bn savings from public service reform - that will be right! The Scottish Fiscal Commission's forecasts don't make great reading either, on the economy, tax, or public finances.

SFC, "Overall, the additional funding available to the Scottish Government for both resource and capital relative to June 2025 is small compared to the size of the Budget and the scale of the fiscal challenges identified by the Scottish Government in its MTFS in June 2025." If the wishful thinking reform savings don't materialise, and most are from health and social care, this could get very serious. As the SFC says, "The progress towards achieving these targets for recurring savings to date, and the number of health boards not breaking even, suggest that it could be challenging for the Scottish Government to deliver the efficiency savings it has incorporated into the Health and Social Care portfolio spending plans."

Overall, this is a classic election-year budget. A few eye-catching sweeteners, a little cash spread around to placate as many people as possible, and promises of great things in years to come. The tough decisions are deferred to the next government.

Water and wastewater reform

noreply@blogger.com (Dave Watson) — Mon, 01 Dec 2025 18:20:00 +0000

Let’s talk about water and wastewater. A subject that is rarely discussed in Scotland for two main reasons. Firstly, it rains a lot, so we don’t think there is a water scarcity issue. Secondly, with a public water service, we have avoided the shambles of the privatised system in England and Wales. However, both of these assumptions are misleading.

While we are better placed in terms of water use than many countries (2 million people worldwide die annually due to water-related causes), water scarcity is a growing problem, particularly in the east of Scotland. The chart below shows that half the population will face water scarcity by 2050, with drought conditions occurring every 3 years instead of every 20. The population is rising (13% p.a.), we have large rural areas that often rely on poor private supplies, and there is growing industrial demand caused by developments, including large data centres.

In response to this, we need to use water more efficiently. Water consumption in Scotland is higher than in other European countries, partly driven by cultural assumptions about abundant water and by very limited household metering.

Scottish Water has a big investment programme (£886m last year) to strengthen the ageing water and wastewater infrastructure. However, this is only 40 per cent of the need, so they prioritise. There is also the cost legacy of the Private Finance Initiative (£170m p.a.). New household design developments are increasing water run-off, with 2300 properties at risk of sewer flooding (up 60% by 2050). Scottish Water has limited monitoring of outflows compared with England, although progress is being made.

To reduce investment costs, we need to use water more efficiently. That includes reusing water as recommended by a World Bank report. This could save 50-80 litres of water a day in a typical household. We also need to invest in green infrastructure (green roofs, permeable pavements and retaining gardens), mandating some of these through the planning system. Modern data and computer models make this more achievable. All of this requires replacing the outdated legislation, as the EU is currently doing. The Scottish Government has consulted on this, but progress has been glacial.

That leaves reforming our current public service structure. I set out much of this in a paper for the STUC, based on research commissioned by the University of Strathclyde. This essentially involves abolishing the costly and unnecessary regulatory model, which is identical to the failed English model. As the recent scandals have highlighted, the Water Industry Commission is no longer fit for purpose, if it ever was. This model has also driven the stealth privatisation of Scottish Water, which now has 400 private contractors (2,000 staff) delivering around half the service. Some 45 per cent of wastewater treatment was privatised using PFI, and the entirely unnecessary non-household marketisation has created additional costs for businesses.

A public service model would enable a better industrial relations approach, with a worker director and a partnership structure based on the NHS Scotland model. It is hardly surprising that Scottish Water increasingly looks like a failing English water company (with managerial bonuses to match), when most of its board comes from the privatised sector. There is also a case for greater decentralisation, including better community engagement on water solutions.

As a country, we need to better understand the issues surrounding water and wastewater, and a Citizens’ Assembly approach might help. We may be in a better position than England and Wales, but that won’t last much longer unless we act now.

Keep Britain Working

noreply@blogger.com (Dave Watson) — Tue, 11 Nov 2025 17:25:00 +0000

Keep Britain Working is the final report of the Mayfield Review into the issues surrounding ill-health and disability in the workplace. Earlier this year, I wrote, with Ian Tasker of Scottish Hazards, a paper for the Jimmy Reid Foundation, Tackling the Causes of Working Age Ill Health, covering similar ground.

We share a common understanding of the problem. As the report says, "Over one in five working-age adults are out of the workforce, substantially because of health problems. Mental ill-health among young people is rising sharply. Older workers are leaving too early. Disabled people remain locked out of work at twice the rate of non-disabled people." It is also true that other countries do better.

We also have common ground in diagnosing the problem. He found three persistent problems:

a culture of fear, that is felt by employees and, differently, by employers, especially line managers. This creates distance between people and discourages safe and early disclosure, constructive conversations and support just when they are needed most
a lack of an effective or consistent support system for employers and their employees in managing health and tackling barriers faced by disabled people. This lack of support is sometimes compounded by a ‘fit note’ system that is not working as intended
structural challenges for disabled people, creating barriers to starting and staying in work. Compared to international comparators, the UK lacks systemic levers to support disabled people in work, leaving them disproportionately excluded and talent wasted.

The Mayfield solution is "a fundamental shift from a model where health at work is largely left to the individual and the NHS, to one where it becomes a shared responsibility between employers, employees and health services." This includes a recognition that employers need to do more. This was the core message in our paper. Sadly, the Mayfield Review paints too rosy a picture of existing occupational health provision. As we pointed out, very few employers (as low as 3%) invest in the wider range of services that occupational health professionals can provide. For too many employers, the solution to ill health at work is increasingly punitive absence management systems and dismissal. The review also almost entirely ignores the role of safety in the workplace and cuts to the HSE.

The Healthy Working Cycle recommended in the report is fine, as far as it goes. The major failing in the report is the lack of a structural change to ensure it actually happens. His solution is "the development of a Workplace Health Provision (WHP) which is built from the range of existing provision but looks to amplify, expand and improve the availability of it."

The report's delivery option is "a flexible, market-led solution, with employers funding the provision and choosing certified providers that meet their needs. Providers will be assessed against national standards – possibly stewarded by government – giving employers access to a wide range of trusted options." There is very little stick and a marginal carrot in this solution, other than "Over time we would expect that this provision would be formalised and certified." The question any reasonable person would ask is, when we look at where we have got to under the current arrangements, what makes you think employers and their totally inadequate occupational health providers will change?

I don't disagree that employers should fund improved occupational health, as it is their statutory duty, albeit one that is little enforced. However, we recommended "An integrated approach to working-age health, underpinned by including occupational health and vocational rehabilitation in mainstream health care, which no longer relies on inadequate private sector providers." This could be funded in a similar way to the Apprenticeship Levy, which ensures that all employers, regardless of their performance, contribute.

The Mayfield Review claims its changes are ambitious. Sadly, they fall well short of that. Having correctly diagnosed the problem, their recommendations are a hope that employers will change their ways. The cultural change that is needed should have a statutory underpinning; otherwise, in another ten years, we will be asking the same questions, with thousands more workers excluded from work due to ill health. The taxpayer will be picking up the bill, with economic growth a pipe dream.

Defending Democracy

noreply@blogger.com (Dave Watson) — Wed, 08 Oct 2025 16:29:00 +0000

I was speaking at an EIS conference last Saturday on the challenges facing our democracy. It prompted me to examine the evidence more closely.

Democracy

Let’s start with the state of our democracy. Polling by NCSR highlights the scale of the challenge. They conclude, ‘All in all, it appears that people’s trust in governments and politicians, and confidence in their systems of government is as low now as it has ever been over the last fifty years, if not lower.’

Similar polling by ERS found that a massive three-quarters (76%) of the public feel that politics needs to improve significantly. Lower for Tory voters, higher for Reform voters, and the average for Labour, Lib Dems, and SNP. Politicians command lower levels of public confidence than members of any other profession, even estate agents! This is particularly unfair. I have dealt with hundreds of politicians over the years, and very few meet the ‘in it for themselves’ stereotype. They may get it wrong, but their motives are generally positive. Having said that, I do think the professionalisation of politics is a problem. It shouldn’t be a career in the traditional sense, and politicians should gain broader experience before seeking elected office.

One consequence of declining trust is an increase in support for electoral reform. Sixty per cent now favour changing the UK electoral system to proportional representation, with only 36% opposed. This represents a notable shift over the past few years. Here's a worrying statistic: Reform could secure a majority in Westminster with just 30% of the vote.

Another shift in my lifetime has been the decline of voting differences by social class. Age is now the biggest dividing line. However, those who believe young people will save us may be indulging in wishful thinking. A University of Glasgow survey found 63% of young people believe democracy is ‘in trouble’ while 27% say they’d rather live in a dictatorship. In Spain, 40% of men aged 18 to 34 report planning to vote for Vox, a far-right party.

There is also little comfort to be had in Scottish exceptionalism. There are slight differences in polling on progressive policies, but it isn’t huge. At least on economic issues, Scotland remains socially conservative. Even on immigration, 56% of Scottish voters think it is too high. And that’s even though the Scottish economy and public services would suffer significantly without immigration. There is some comfort in the fact that actual voting is more progressive so far.

This isn't just a Scottish or British issue. Oppressive and often violent authoritarian forces have successfully tipped the international order in their favour in many countries, exploiting both the advantages of non-democratic systems and the weaknesses in ailing democracies.

Disinformation

So, what’s behind this shift in attitudes towards liberal democracy? There are economic reasons, including a fall in real wages and a drop in the standard of living. However, you only need to listen to the irritating vox pop interviews on the TV to realise that disinformation is widespread.

It begins with basic misinformation, such as questions about which services are devolved. I wasn’t brave enough to blame teachers at an EIS conference, and my wife was a modern studies teacher. Like the attainment gap, these issues are societal in nature, and schools cannot address them alone. When even mainstream (supposedly neutral) broadcasters like the BBC uncritically promote Reform, it’s unfair to place the blame solely on schools.

Disinformation is nothing new, but social media has made it easier to spread inaccurate information widely. Research shows that people may be more likely to believe disinformation if it aligns with their existing beliefs, triggers an emotional response, originates from a trusted source, or if they encounter it repeatedly. Believing in conspiracy theories is not a harmless eccentricity. It signals a fundamental failure of judgment. People who embrace such beliefs show they cannot evaluate sources, weigh evidence, or think critically about the world around them.

Disinformation is actually encouraged by the ’reward systems’ on social media. A Yale University study found that the issue was systemic, not just individual. Fact-checking has been largely abandoned by technology companies, citing freedom of speech, even when it involves dangerous disinformation on topics like vaccines. As President Macron says, "We have been incredibly naive in entrusting our democratic space to social networks that are controlled either by large American entrepreneurs or large Chinese companies, whose interests are not at all the survival or proper functioning of our democracies."

Countries are adopting different strategies, including regulation (Digital Service Legislation), countering bots (in California), robust public information schemes (UN Verify), and fact-checking (BBC Verify or The Ferret in Scotland). A free and diverse media is also vital, as is fostering digital literacy in schools. A University of Birmingham study found that 9- to 11-year-olds can be taught to help identify fake news.

Political Parties

Political parties have adopted one of three strategies: ignore, adversarial, or co-option. A European study showed a tendency towards what they called ‘responsiveness’ while remaining aligned with the party’s policy goals. The UK Labour Party has been adopting this approach, despite polls indicating that its voters are shifting to left-wing parties, rather than Reform Ltd. However, for social democratic centre-left parties, academic research is clear: do not move towards the populist radical right on policy.

What is clear is that strong policy arguments alone are insufficient. This can be somewhat discouraging for think tank directors like me! Policy effectiveness is not the same as democratic legitimacy, ‘voice of the people’, or the strategies adopted by the far-right. Politicians like Trump and Farage see blatant lies as a legitimate strategy.

I have drafted two political party manifestos and contributed to many more. There is an inherent conservatism in their approach, believing that people vote against policies, not for them. The problem is that they sound bland and say nothing that connects with the real-world experiences of voters. Today, I attended the Tax Justice Scotland conference, and the responses from the political panel were generally predictable. The traditional economic analysis by the IFS, OBR, and Fiscal Commission tends to reinforce this groupthink. I disagree with Richard Murphy that all parties are the same, but there are some common themes.

Conclusion

In conclusion, a problem exists, and democracy is in danger. Disinformation is a key issue that must be addressed alongside new strategies to tackle the challenges faced by Western democracies. Political parties have yet to develop an adequate response, and civil society more broadly must step up and be part of the solution.

Making Defence an Engine for Growth

noreply@blogger.com (Dave Watson) — Mon, 15 Sep 2025 13:00:00 +0000

Following the publication of its new Defence Strategy, the UK Government has now released its Defence Industrial Strategy, titled 'Making Defence an Engine for Growth'.

This is undoubtedly the most significant defence policy reform in decades, and something many of us have argued for. In 2023, I wrote a paper for Prospect on defence procurement in which I concluded,

“Without a thriving defence industry, the UK puts at risk its freedom to act in defence of the country’s interests at home and abroad. And the armed forces risk losing their technological advantage over actual and potential enemies. Achieving these aims requires a commitment to sustain and strengthen national defence design, manufacturing and support capabilities in a partnership between the MoD and industry. The UK by default.”

At the Westminster launch of the paper, the then shadow minister said a future Labour Government would prioritise sovereign capacity in defence procurement. So, how does the new strategy match up?

There is to be a 10-year Defence Investment Plan, although we will have to wait a few months for the details. This is vital, as defence industrial capacity cannot be switched on and off quickly. The sector needs certainty, and the commitment to increase defence spending to 2.6% of GDP by 2027, with a trajectory towards 3% in the next parliament, and 5% by 2035, is also vital to the strategy.

The priority outcomes all tick the right boxes:

1. Making Defence an Engine for Growth

2. Backing UK-based businesses

3. Positioning the UK at the leading edge of defence innovation

4. Developing a resilient UK industrial base

5. Transforming procurement and acquisition systems

6. Forging new and enduring partnerships

The strategy promises £250 million of public funds for the creation of five new “Defence Growth Deals” in the UK. Investment will initially be provided in Plymouth, South Yorkshire, Scotland, Wales and Northern Ireland. Ministry of Defence spending already provides more than 11,000 jobs in Scotland, and the UK Government hopes these growth deals will 'unleash potential' from businesses and research institutions in Scotland. This is in addition to the £10 billion deal, which will see warships for the Norwegian navy built in Glasgow, and possibly more from Denmark.

In structural terms, they have established a new partnership with the industry, through the Defence Industrial Joint Council, with a welcome involvement of trade unions and other stakeholders, beyond the usual suspects. This places a strong emphasis on people and skills, something that was previously lacking in strategies.

The details of procurement reform are less clear. The Procurement Act enables many of the recommendations outlined in my 2023 paper, including direct awards and the consideration of social value in procurement. This is something the Scottish Government needs to act on. The Scottish procurement legislation predates Brexit and is in urgent need of reform. However, it remains to be seen whether the segmented approach to procurement and the tighter timescales will be successfully implemented. There is more work to be done here. I would also have liked to see more on Fair Work and other local procurement benefits.

There is also a bit of spin on the concept of ‘military Keynesianism’. I think we should be cautious about this, as jobs and other economic spin-offs are simply a welcome by-product. Different forms of public spending deliver higher economic multipliers. Increasing defence spending is necessary given the threat from Russia and Trump's foreign policy. It therefore makes sense to maximise the economic benefits from this necessity, rather than suggesting it is the best way to drive growth.

Overall, this new strategy is moving in the right direction, but there is still more work to be done.

Outdated and Unfair: The Case for Council Tax Reform

noreply@blogger.com (Dave Watson) — Wed, 06 Aug 2025 08:29:00 +0000

I have been working with the Tax Justice Scotland campaign on the case for Council Tax reform. This week, we have published a briefing that throws down the gauntlet to Scotland’s politicians, demanding they end decades of inaction and commit to replacing the unfair and outdated Council Tax in their 2026 election manifestos.

There is cross-party agreement that Council Tax is unfit for purpose, and a broad consensus amongst the policy community, supported by several reviews, on the solution. It is now a decade since the 2015 cross-party Commission on Local Tax Reform concluded that ‘the present Council Tax system must end.’ The problem is a lack of political will – moving implementation from the ‘too difficult’ tray. We are therefore calling for concrete manifesto commitments to:

Abolish Council Tax and replace it with a fair, modern property tax.
Launch a national revaluation of property as a first step in the next Parliament.
Ensure the new system is local, proportional, and protects those on low or fixed incomes, while ensuring effective transition support is in place.

It is beyond absurd that properties are still valued for tax purposes as if it were 1991. I recall giving evidence to the Scottish Parliament Local Government Committee in the mid-2000s, pointing out that it was then 15 years since a valuation, and asking how much longer? 20, 25, 30 years? Well the answer was even more than that! The uneven distribution of house price increases has also led to many properties with similar 1991 values having wildly different values in 2025. The Institute for Fiscal Studies says that over half of properties are in the wrong Council Tax band relative to where they would be if valuations were brought up to date. This has further entrenched the regressive nature of Council Tax, with the burden falling most heavily on people in less valuable properties.

The consequences of the failure to reform can be seen in every community, with councils raising charges for services or cutting them entirely, which most negatively impacts those least able to afford them. The regressive and inflexible nature of Council Tax makes it difficult for councils to use it as an effective tool for funding public services. A prolonged period of nationally imposed Council Tax freezes in Scotland further restricted local councils’ already limited financial autonomy relative to comparable countries. Think of taxes like paying into a pot we all draw on: it’s how we keep our schools and libraries open, our care homes running, reduce the cost of public transport, and keep our streets safe. It’s about paying for the foundations (the social infrastructure) that make our society one that we all want to live in.

The briefing explains why successive studies have agreed that a reformed property tax is the best solution. A reformed tax on property recognises that property is a major source of wealth in Scotland, but one that is glaringly unequal. That is particularly true on a generational basis, with rates of property ownership among younger generations much lower than among older ones, even at comparable points in their lives. Taxes on property are also more difficult to avoid or evade. A reformed property tax must be set locally and be based on a percentage of property value. It must be periodically reviewed and flexible to household circumstances. While it remains the most important local tax, action is also needed on business rates and other levies that could also make a significant contribution to funding essential local services.

We’ve had consultations, commissions and countless commitments, but little has changed. Decades of delay on Council Tax reform have deepened the crisis facing local services and locked in inequality. The 2026 election is the moment for Scotland’s leaders to move beyond words and commit to the fair, modern and proportionate tax system our communities deserve.

UK Strategic Defence Review in a changing world

noreply@blogger.com (Dave Watson) — Tue, 03 Jun 2025 10:12:00 +0000

The much-trailed UK Strategic Defence Review (SDR) was published yesterday. It was timely for me as I was participating in a European seminar on how Europe should respond to the new strategic situation.

There is a lot of narrative (some have called it a think piece) in the Defence Review, rather than detailed plans. It's undoubtedly a coherent read, probably the best I have read, and for the critics who focus on detail, the hint is in the title - it’s strategic. It will inform further plans. The commitments include:

· £1.5bn to build six new factories to enable an "always on" munitions production capacity.

· Building up to 7,000 long-range weapons, including missiles or drones.

· A "cyber and electromagnetic command" to boost the military's defensive and offensive capabilities in cyberspace.

· £1.5bn to 2029 to fund repairs to military housing.

· £1bn on technology to speed up the delivery of targeting information to soldiers.

There was no commitment to significantly increase the number of full-time soldiers, which is sensible given the need to concentrate on meeting the current targets. The same certainly applies to the Royal Navy, which is struggling to staff the surface fleet. Improvements in pay and conditions, as well as the investment in service housing, are crucial to meeting those targets.

Unlike previous defence reviews, there was less emphasis on shiny new equipment. Even the headlines, such as the latest attack submarines, are primarily about replacing existing weapon systems. However, there are still some tough decisions to be made if the UK is to bridge the gap between policy rhetoric and strategic reality. For example, as a recent University of Exeter study asks, “Does an aircraft carrier or a defunct amphibious force with limited air and aviation assets really deter adversaries from acting against the UK or its allies?” Ukraine’s Operation Spider Web has rightly been described as “a defining moment in modern warfare.” One of the big ideas in the SDR, the integrated force with a digital targeting web, is a recognition of the need for change.

Everyone in Europe has woken up to the need for stockpiles, a problem I highlighted last year and one that dates back to the Cold War. Hopefully, the ‘just in time’ era is finally over. The investment in munitions manufacturing is crucial, as at present, we barely produce as much ammunition annually as Russia fires off in Ukraine each day. Strengthening our industrial base is something I highlighted in a paper on defence procurement for Prospect, which has broadly welcomed the SDR. Britain cannot afford to rely on uncertain supply lines during a war. The section on defence procurement is a move in the right direction, but we need to see what this means in practice in the later plans. The detailed emphasis on skills, workforce planning and people is very welcome.

There is a bit of spin on the concept of ‘military Keynesianism’. Jobs and other economic spin-offs, not least R&D, are a welcome by-product, but other forms of public spending deliver higher economic multipliers. However, not as egregious as the Scottish Government pulling the plug on a high-tech training and research centre, led by Rolls-Royce, which has rightly been described as industrial sabotage. Or the excitable performance from the Tory Shadow Defence Minister in the Commons, who has forgotten that this review is starting to tidy up the mess they left behind.

The SDR gives a credible and detailed breakdown of the threats facing the UK. There is a welcome shift from the imperial strategy of the Johnson Government. It also reflects a much stronger relationship with our European partners. This was evident in the seminar I participated in, where most countries reported similar policy shifts. However, almost everyone indicated that this is not a massive shift – the proposed changes are relatively modest, relying on Russia’s need to rebuild after the Ukraine war. For example, the spending commitments in the UK and Europe are not huge and are spread out over many years. In the UK, 20% of the MoD budget is spent on Defence Nuclear Enterprise, which, whatever position you take on those weapons, is a big chunk out of conventional capacity. Even the much-vaunted German policy is not quite as substantial as the spin. Current and immediate funding plans won’t do much more than paper over the cracks caused by 30 years of underinvestment. Lord Dannatt’s comment may be a little harsh, but he has a point.

There was a concern at my seminar, particularly from countries in Eastern Europe, that this may be misguided. The Russian economy has been militarised to an extent that is not fully appreciated in the West. If a peace deal is agreed, then they would be in a position to attack the Baltic states reasonably quickly. Putin, like Netanyahu, is in a political cycle that almost requires continuous war. The PM is also doing his best to ‘strengthen our bridge to the US’. However, there are few people in Europe at present who regard the USA as a reliable partner, at least while Trump is in office. The PM’s ‘sovereign warhead programme’ may be a tacit recognition of that reality, along with new delivery options. The SDR is typically vague on these issues for the usual reasons, but it ducks the issue of just how independent our nuclear deterrent is.

The Prime Minister claimed his defence blueprint would deliver “A battle-ready, armour-clad nation with the strongest alliances, and the most advanced capabilities – equipped for the decades to come.” I’m not convinced that the UK, or our European allies, are at that stage, but there has been a welcome and significant gear shift.

Political change has to be more than a slogan

noreply@blogger.com (Dave Watson) — Thu, 08 May 2025 20:45:00 +0000

The elections in England ought to be a wake-up call to political parties, particularly about the disillusionment many voters feel about our politics. The warning signs were present in the opinion polls and surveys from ERS; others have highlighted the need to rebuild trust in politics. The More In Common think tank reported that their focus groups were brimming with a level of “anger, despondency or misery about the state of Britain that doesn’t feel sustainable”. It is not an accident that in the local elections, 61% of the most deprived wards were previously held by Labour. Now, roughly 85% are held by Reform.

Some take a more relaxed position, arguing that many voters treat politics like buying a new soap powder. Reform is just the latest shiny brand; after all, we have been here before with UKIP. The ‘red wall’ seats are often viewed as a barometer of opinion, but as academic interviews have shown, the dissatisfaction in these areas goes much deeper. People interviewed generally loathed politics, “They don’t [do] what they say, they don’t keep to what they say they’re going to do. They tell lies.” Roughly one-third of the residents interviewed understood politics largely or predominantly through the frame of corruption. From the expenses scandal, Boris Johnson partying during the pandemic, to the current government ministers accepting donations and Taylor Swift concert tickets. This is one of the reasons that action on political donations is so necessary.

I don’t believe the soap powder analysis works because broader attitudes are in play, and Reform is doing much better than UKIP ever managed. I was in Romania two weeks ago, meeting researchers I had worked with for a European think tank. They were understandably focused on their elections and the growing strength of the far-right Alliance for the Union of Romanians, which subsequently took 40% of the vote in the presidential elections. They pointed to surrounding states, with leaders like Orban and Vučić, taking similar populist positions. These leaders are also starting to make territorial claims. You don’t need to be a historian of the Balkans like me to know where this leads. The hope that Germany would be a stabilising influence is gone, while Chancellor Merz attempts to ape the far-right Alternative für Deutschland (AfD) party.

You might argue that Mark Carney’s Canada win and Anthony Albanese's victory in Australia prove that there is an alternative narrative. However, these were wins based on a nationalistic response to Donald Trump, which won’t be available to all centralist politicians. Having said that, a new poll found that voters regard Donald Trump as a bigger threat to the UK than terrorists, so linking Farage’s blind obedience to Trump might be part of a strategy. Nothing beats the Trump administration when it comes to corruption. 62% of all Brits, including 60% of Labour-Leave voters and 53% of Labour-Reform Switchers, back joining forces with the EU over the US.

For UK Labour, the usual post-election honeymoon was very short. Keir Starmer is now the most unpopular PM in recent history after a series of policy decisions that, if not avoided, could have been mitigated. The many good things the new government has done, including employment rights, minimum wage, trade deals and funding for public services, are being drowned out by some poor and politically inept decisions. Many of us suggested thresholds for the Winter Fuel Payment at the time, along with different approaches to WASPI compensation. However, listening is not something this government does well, and No.10 has rejected changes, and internal debate has been closed down. The benefit cuts may not be as electorally unpopular, but the consequences will play out over years.

Aping Reform won’t work, as one of the ‘Red Wall’ voter interviews said, “Sometimes I just think, these people, they say what they think we want to hear. And I find that quite annoying. That, I find, that as if they think we’re thick.” In any case, Labour is probably more at risk from the left, with the Greens and Liberal Democrats doing well in the elections. If Labour seeks to ape Reform, voters will largely opt for the real deal and vote for Reform, while alienating supporters who despair at the party adopting Reform-like positioning. A study by Persuasion UK found that of potential Labour switchers, only 11% said they would consider voting for Reform. By contrast, 29% would consider the Greens, and 41% the Liberal Democrats. If all of the ‘Reform-curious’ abandoned Labour for Reform (many won't because they don’t support Reform polices), Labour would lose 123 seats, but they would keep a parliamentary majority. On the other hand, if the Liberal Democrats and Green Curious switched, Labour would lose 250 and the election.

So, what about Scotland? Some argue that we are different and Scottish voters won’t buy Farage and his snake oil. However, polling and actual votes tell a different story. Some ultra-nationalists are salivating at the thought of Prime Minister Farage, hoping that this will get independence over the line. In fairness, while rightly calculating that Reform will likely do more damage to the Tories and Labour, John Swinney still understands the broader risks to our politics.

Welsh Labour has long adopted a more detached strategy from UK Labour than the Scottish Labour Party and has achieved better results, although that may be waning. Eluned Morgan has said she will pursue a left-wing “red Welsh way” and draw a clear dividing line between Welsh Labour and the national party.

Scottish Labour is struggling to differentiate its message from the unpopularity of the UK government. With independence further down the voters' priorities, focusing on the SNP’s poor record on public service delivery is a fair attack line. Again, I think the Scottish Government has done many good things, but consistently prioritised process over delivery. However, good attack lines are not enough. If anyone in Scottish Labour thinks trading pledge cards on waiting lists and GP appointments is enough, they are seriously deluded. Scottish Labour also needs a positive message to differentiate itself from the SNP. My suggestion is to devolve real power to communities. This combines how to respond to the far-right while contrasting Scottish Labour’s support for localism with SNP centralism. Even UK Labour is likely to have second thoughts about their centralisation of local government in England, with huge Tory/Reform-leaning populations blocking government policy. Suddenly, directly elected mayors have all the downsides that many of us have highlighted for years.

Scotland has some of the largest councils in the world, with an average population of 170,000, against a European average of just 10,000. It’s time to give real powers to actual communities of place. Giving them the resources to fix their high streets, fill the potholes, reopen the libraries and sports centres, and clean up our public spaces. These are the issues that mattered to voters last week.

For Scottish Labour to shift the dial, three things have to happen. First, the UK government has to change its approach to some key voters' concerns. Second, there has to be outright confrontation against the far right, with no more appeasement. Third, Scottish Labour’s positive vision should be about empowering communities. When politics has become detached and alienated from people’s lives, we must return our politics to them.

And a few more ideas in this new book.

It's health inequalities stupid!

noreply@blogger.com (Dave Watson) — Wed, 12 Mar 2025 11:47:00 +0000

Benjamin Franklin famously said that ‘nothing is certain except death and taxes’. Well, it used to be pretty certain that this generation would live longer than the last – but no more. Life expectancy was improving until 2011 when it started to decline in Scotland.

This was my opening pitch when moving the Socialist Health Association Scotland motion on health inequalities at the recent Scottish Labour Party conference. The key point is that as health inequalities underpin most of the challenges facing our health and care systems, political parties should put radical action on health inequalities at the heart of their manifestos.

Let's start with why we should be concerned that life expectancy in Scotland is no longer rising. While deaths relating to COVID-19 play a part in explaining recent falls, the deviation from the long-run trend dates back to the early 2010s. More people in Scotland are in relative poverty, more are likely to be inactive due to long-term illnesses, and food insecurity, homelessness, and fuel poverty are all higher than they were. The SHERU report found that key outcomes related to health and inequalities are not significantly improving and are, in some cases, worsening. The biggest difference in female healthy life expectancy is between the Orkney Islands (77.5 years) and North Ayrshire (54.0 years) – over 23 years difference.  A gap that applies to almost all the leading causes of death.

This isn't an easy debate for political parties. The health debate in Scotland focuses almost entirely on the NHS, partially driven by a less than edifying parliamentary scrap each week, but it reflects how the public thinks about health. Health equals the NHS. It is of course vital that we continue to make the case for the NHS when you have Farage and his Reform private company arguing for privatisation. The US healthcare corporations who have created the most expensive and inefficient healthcare system in the world are rubbing their hands with glee – and they have Trump to press their case through trade deals.

However, the actual pressure on our health and social care system comes from poor health outcomes caused by inequalities. When household income is too low to afford essential goods and services like food and warm homes, participation in everyday social activities leads to greater social isolation. This is not about behavioural factors – it’s about the big issues like income support, wages, employment rights, housing, air pollution, crime and fuel poverty. I remember running a fuel poverty course for health visitors who vented their frustration at returning time and time again to the same families with the same health problems caused by cold, damp housing.

We have many strategies in Scotland, beautifully laid out in glossy documents. What we rarely have is measurable action and outcomes. We have some isolated initiatives, like the excellent Scottish Child Payment, but no comprehensive plan to fully meet the statutory target of 10% of children in relative poverty by 2030/31. As the SHERU report and others have highlighted, there is limited evidence that current policies have effectively reduced inequalities.

All of this was highlighted by the Christie Commission over 13 years ago. I was an expert advisor to that Commission, and we calculated that 40% of all public spending was related to failure demand - putting right the impact of inequality. So, when ministers and others talk about public service reform, the solution isn’t going to be found in efficiency targets and the like. It requires preventative spending that tackles inequality before creating the failure demand, which costs much more. I remember talking to a lecturer running a pilot course for single mothers, helping them to keep their children out of care. The course was successful, but no one could fund the £450 per head to continue it. It can cost over £5,000 per week to place a child in a private care home. How bonkers is that!

Despite our economic challenges, we are a rich country, but the investment in preventative spending has to be paid for. This is spending to save, so we need to look at ways of increasing current spending and how long-term investment can be financed. In the short to medium term, the work of Tax Justice Scotland is essential. In the longer term, we might look at what the EU, with the UK, is considering with bonds to pay for increased defence spending. Now, I am all for financing the defence of Ukraine and the rest of Europe against Putin and his useful idiot Trump. But if we can spend to save for that eventuality, we should be able to do the same for health inequalities. This is an investment in our country’s future.

Public Private Partnerships – surely not again!

noreply@blogger.com (Dave Watson) — Wed, 12 Feb 2025 17:58:00 +0000

I thought I wouldn’t need to write about PPP ever again. However, as the Chancellor is considering private finance for new infrastructure projects, a new generation of politicians and officials must be reminded of this bonkers idea.

A Public-Private Partnership (PPP) is a funding model for public infrastructure projects. It is an umbrella term for schemes like the Private Finance Initiative in the UK. It encompasses schemes such as the Hub programme and the Non-Profit Distributing (NPD) model in Scotland. The Tories invented PPP, although the Blair/Brown governments massively expanded it. The SNP came to power in 2007 and committed to ending these schemes but simply rebranded them through the work of the Scottish Futures Trust. Even the Tories abandoned them for new projects in 2018.

The Chancellor is considering such models because of the fiscal pressures the UK is currently under. They are proposing to tweak the model with the introduction of ‘value-for-public-money’ clauses. This test looks similar to those in the old model, which was easily circumvented. PPPs claim to offer a way to avoid tax rises (in the immediate) and break fiscal rules. However, whilst PPPs provide a way to get around short-term budgetary rules, they simply push expenditure forward and pressure revenue budgets. New Labour era ministers promote the model despite admitting it ‘is not without its shortcomings’. The industry is already salivating over the prospects of easy profits while claiming they have learned the lessons of PFI.

The evidence against using PPP is extensive. This briefing sets out the major problems and risks the UK has encountered through its extensive experiment with PPPs, including how they have:

· Cost the government more than if it had funded the public infrastructure by borrowing money itself

· Led to large windfall gains for the private companies involved at public expense

· Enabled tax avoidance through offshore ownership

· Led to declining service standards and staffing levels

· Hollowed out state capacity to design, build, finance and operate infrastructure

· Eroded democratic accountability

This is not just about historical costs; the price continues to be paid. PPP projects in Scotland typically run for 25-30 years, and you can view the cost for each legacy project here. In the UK, over 700 projects have been built using PFI since the early 1990s, worth around £60 billion. They distributed £300 million in dividends to investors from £1 billion in profits between 2005 and 2022. As NIESR points out, “We are spending far more in PFI repayments than the value of the assets and are locked into these contracts for decades to come. Most households wouldn’t take out loans on terms like this, so why did the public sector?”

A study of parliamentary inquiries into PPP scandals examined a consistent pattern of wrongdoing. Over the past decade and a half, billions of taxpayers’ funds have been unaccounted for. This appears to be mainly because private interests have been prioritised over public needs. Other findings showed that companies regularly reduced the quality of a service to maximise profits. Companies sometimes breach the terms of their public-private contracts because it’s in their economic interest. This even has a name – economists call it ‘efficiency breach’. As many of these contracts come to the end of their life, buildings are being handed back with huge maintenance bills.

Successive opinion polls show that the public wants essential public services to be nationalised, not handed over to private companies to make rip-off profits. The hard lessons of the past should not have to be relearned. We already know that taxpayers and consumers will pay the price.

ScotRail: public ownership is not enough

noreply@blogger.com (Dave Watson) — Mon, 27 Jan 2025 17:27:00 +0000

The Herald has been running a series of articles on ScotRail since it was taken into partial public ownership as the ‘operator of last resort’. As is often the case, the headlines don’t always reflect the content, which is generally good, and the usual suspects have claimed it shows public ownership doesn’t work.

Last September, I wrote a briefing for the Reid Foundation, All Change on the Railways, which looked at ScotRail and the UK Government reforms. This was a warm-up for Mick Lynch's lecture at the Jimmy Reid Memorial Lecture in October 2024. It is worth remembering that under the Tories, only 85.5% of trains ran on time, and many more failed to run at all, not least because industrial disputes were deliberately left unresolved, wasting £1.25bn of taxpayers' money. This was also the case with Abellio in Scotland. Fragmentation, waste and bureaucracy beset privatised rail. While welcoming the decision to bring ScotRail into public ownership, I highlighted several challenges. These included driver shortages, ageing rolling stock, retiring engineering staff, passenger safety, and the need for an integrated transport and ticketing system. These all reflect years of mismanagement, which cannot be fixed in under three years of partial public ownership. ScotRail still operates under the failed franchise model, which has additional costs baked in.

The usual suspects have focused on increased costs, pointing to the grant increase from £446m pre-pandemic (2019/20) to £737m. However, we also know that Abellio was running at a loss above £100m, which they, or another operator, would insist on to keep the franchise running. Then, there is the need to settle the pay disputes, record inflation rates, and other costs associated with the mess Abellio’s desperate cost-cutting caused. Some of us can remember the shambles of the 2018 winter timetable, with months of cancellations and service disruption. So, while it is right to question any cost increases, they must be contextualised.

There is a lot of confusing data in the articles about passenger satisfaction based on different surveys over varying timelines, with some highly subjective questions. For example, what is the difference between 'sometimes' and 'rarely' in relation to delays and cancellations? However, overall performance and passenger satisfaction continue to be better than the GB average and trains in Scotland are more likely to arrive on time. As someone who regularly uses the train, I have to agree. Much was made of cancellation costs (still better since public ownership), but these are anyway mainly outwith the control of ScotRail, either due to the weather or Network Rail issues. A public service operator should ensure that passengers get home, which often means expensive taxis because coaches are not always available. I can recall several lengthy disputes with Abellio, who fiercely resisted paying the actual cost of their service failures - no MSP to complain to then!

ScotRail is also running 75% more services, and while that is slightly down on the pre-pandemic figures, other rail companies have not achieved similar pandemic recovery numbers. There has been a significant shift to home working, which has been encouraged in Scotland, with no Jacob Rees-Mogg leaving cards in civil service offices!

It is no surprise that passengers think rail fares are too high – they are. The peak rail fares pilot scheme boosted demand for ScotRail services by around 6.8%, short of the 10% target. However, this criterion ignores the policy's wider benefits, including two million car journeys taken off our roads.

So, in three years of partial public ownership, services have improved marginally as the Abellio shambles have been patched up. However, that is only part of the story; as Transform Scotland says, a clear, coordinated strategy and long-term investment are needed to ensure railways are a “national success story rather than a symbol of missed opportunity". They criticise the ending of the peak fares scheme and point to the need to adapt services to evolving work and leisure patterns, with greater cohesion between improving rail services and facilitating traffic reduction. The Scottish Government has committed to spending over £6 billion on new road capacity on the corridors from Perth and Aberdeen to Inverness. Yet no similar ambition exists for the parallel rail routes. We have an ageing rail infrastructure and one of the oldest train fleets in Britain. If this sounds familiar to ferry users, it should. Transform argues that the strategy should include simplifying fares, prioritising user experience, improving service reliability, and investing strategically.

As I argued last September, the key to the future of our railways and climate change is to get us out of our cars and onto the train. Rail is in a unique position to accommodate transfer away from the car. To achieve that, we need a radical policy shift and investment. Public ownership is an essential step on that journey but not enough.

Social Murder?: Austerity and Life Expectancy in the UK

noreply@blogger.com (Dave Watson) — Mon, 09 Dec 2024 16:19:00 +0000

Life expectancy has increased in the UK more or less constantly for more than a century. Around 2012, this all stopped, and among poorer populations, it actually went in reverse. In some parts of the UK, the change to premature mortality rates (death under the age of 65 years) has been nothing short of astonishing. This is the starting premise of David Walsh and Gerry McCartney's new book, Social Murder? Austerity and Life Expectancy in the UK.

The authors, from the University of Glasgow, demonstrate how evidence shows that these extraordinary changes to life expectancy and mortality rates have been mainly caused by UK government policies implemented in 2010 by the Conservative-Liberal Democrat coalition. This is all carefully evidenced, showing what happened, when it changed and who was most affected. While we often bandy around the word austerity, the scale of the cuts to UK government spending is poorly understood. By 2019, annual spending was down by around £91 billion compared to pre-austerity levels. To put that in context, that’s more than the GDP of entire countries like Croatia, Bulgaria and even Oman. Over the period 2010–19, the cuts add up to a total reduction of approximately £540 billion. These are changes on an extraordinary level.

While the authors provide a mass of statistical and other data to make a case that was downplayed by many public health organisations, they also tell the stories of how austerity impacted individuals through case studies. These also show how the coalition government introduced a policy of vilification and demonisation of people in receipt of social security benefits. One case study highlights the impact on so many, "Moira was now terminally ill. But even that was not enough to satisfy the DWP. One of her daughters, Nichole, was told in a ‘cruel and heartless’ phone call that they would not believe Moira was terminally ill unless they were told by a doctor that she only had a few weeks left to live. They had requested evidence from the general practitioner (GP), they said. The GP told Nichole they had received no such request. In August 2015, one month after her cancer diagnosis, Moira died. She was 61 years old."

There are also startling non-public health statistics that illustrate the arguments. For example, in 2010/11, the Trussell Trust, the largest food bank provider in the UK, had only 35 food banks across England; by 2019/20, they had almost 1,300.

They don't deny the impact of other factors on life expectancy, such as COVID-19, obesity, and inflation. However, they point out that the trends pre-dated COVID-19 and the cost-of-living crisis - austerity made them worse. As with the title from an apt Friedrich Engels quote, they don't mince words, "Put more bluntly, poverty kills. And austerity has increased poverty levels in the UK." Austerity kills through physical and mental illness, and children are impacted the most. The book also looks at the international evidence, showing that the greater the austerity implemented by those governments, the worse the life expectancy and mortality trends. They also criticise public health agencies – most notably PHE and the WHO, for not raising the alarm that austerity policies were causing life expectancy to stop improving overall and causing it to fall rapidly in the most deprived communities, which they argue 'is a dereliction of duty', and lessons need to be learned.

If mortality rates are to improve, the new UK Labour government and other governments worldwide must understand the evidence, quickly reverse the erosion of public services and social security systems and protect those at greatest risk. The authors conclude, "If poverty in a wealthy country is a political choice, as Philip Alston so eloquently pointed out, then so too is no poverty. It is not only within the gift of our political leaders to achieve this: it is surely their moral obligation." It is not just governments; we all have a responsibility: "To really change our politics we need to be active citizens: building campaigns and protests; creating and supporting institutions and organisations that can help."

The recent budget was a start, as the impact analysis below is the reverse of the austerity years. However, as I argued in my Budget blog, this direction change must be sustained. If you want the evidence, look no further than this excellent book.

Europe after Trump

noreply@blogger.com (Dave Watson) — Mon, 18 Nov 2024 17:13:00 +0000

I participated in a European foundation workshop last week, which examined the impact of a Trump presidency on Europe. While European leaders politely congratulated Trump and emphasised long-standing links, the policy community is less sanguine.

As you might expect, there was a lot of emphasis on the need for Europe to be less dependent on the USA. However, other strains of thought saw developments within Europe, making it more challenging to develop a coherent European response. When Trump was last in power, he faced a reasonably united Europe led by centrist moderates. Today, Europe has its own populist leaders who have a deep-seated scepticism of the EU and a desire to erode it from within. Many of these leaders also welcome Trump's return, although wary of his policies, particularly trade tariffs and the consequent dumping of China's overproduction on Europe. Add to that the political uncertainty in France and Germany, and Europe looks anything but united.

Despite Brexit, the EU remains Britain’s biggest trading partner, representing about 40% of UK exports. However, the US is the UK’s largest trading partner as an individual country, accounting for about a fifth of all exports and worth more than £190 billion a year. If it's an either/or, re-establishing ties with the EU is in Britain’s financial interest. Neither option is good news for the Chancellor's growth strategy.

My presentation was on the implications for defence. A Trump presidency means Europe and NATO must get serious about their defence. European defence policy has traditionally been heavily reliant on US support, without it NATO will be diminished, While there are some traditional Republican policy voices in his cabinet picks, we also have Pete Hegseth running the Pentagon and Tulsi Gabbard at national intelligence. Having a Putin apologist within the Five Eyes intelligence alliance is a frightening prospect, particularly for Ukraine, which could lose funding and the vital intelligence assets, mainly high-end satellites, that are essential to its defence.

The following two months could be critical for Ukraine as Russia intensifies its offensives to strengthen its bargaining position. Biden's missile decision helps Ukraine, but it's not a silver bullet. Trump's buffer zone plan is doomed to failure, as the UN peacekeepers in Lebanon would tell you. Putin will simply use the time to regroup before his next aggression. Front-line European countries identified this more than others at the workshop.

The silver lining is that it could galvanise the UK and the EU enough to take action on UK-EU security and defence cooperation. Germany, in particular, needs to develop a new defence policy with funding to match, ending reliance on the USA for protection and supporting Ukraine. To date, the average German military support for Ukraine represents approximately 0.1% of Germany's GDP annually. According to projections by the Kiel Institute, ceasing support for Ukraine could lead to costs ranging from 1% to 2% of annual GDP over the next five years.

Britain also needs a new defence strategy to end the myth that we can do everything. The British Army cannot deploy a whole division for combat. The Royal Air Force struggles to defend its airfields, especially against missile attacks, and the Royal Navy lacks enough crew for its remaining ships. In a sustained Ukraine-style conflict, our ammunition supplies would quickly run out. We should not forget that the so-called independent nuclear deterrent almost entirely relies on US technology. These were highlighted in a House of Commons Defence Committee report, and the new UK Government is developing a new strategic defence review.

Since the Second World War, Britain has acted as a supporting player to the US, pursuing global goals without the means to sustain them. The last government's 'tilt to the Pacific' and 'Global Britain' rhetoric was just the latest iteration of this delusion. As Frank Ledwig put it recently, "The UK must decide: is it a global power or a regional force in the Euro-Atlantic area? It cannot be both."

Autumn Budget 2024

noreply@blogger.com (Dave Watson) — Wed, 30 Oct 2024 16:35:00 +0000

I am sadly old enough to remember when budget purdah was a thing. Clearly, no more, with relatively few surprises in today's budget, which hadn't either been formally announced or at least briefed in advance. That doesn't mean it wasn't a massive shift in direction, arguably transformational. I would highlight three in particular.

The first is the distributional analysis. After 14 years of the Tories rewarding the rich, this looks like a proper socialist budget. This point is reinforced by specific measures such as changes in Capital Gains Tax, Inheritance Tax, and, the one I particularly enjoyed, private jet passenger duty.

Second, there will be a big increase in spending for devolved administrations. An extra £1.5bn for the Scottish Parliament this year and an increase of £3.4bn next year. As Stephen Boyd points out, this doesn't end all the Scottish Government's long-term challenges, but if I were Shona Robison, I would sleep better tonight.

Third are the fiscal rule changes, which many of us have been shouting about for weeks. This means more significant public investment in rebuilding our public services. As the OBR highlights, this alone won't boost GDP in the medium term, but it does start to fix the foundations of the economy after many years of neglect. Some of us would argue it could have been more significant and, as the OBR also highlights, must be sustained. The historical record shows (below) that it is not the 1960s and 70s, but greater than the manifesto implied and a move in the right direction. The OBR assessment of the impact on inflation, debt, and the bank rate is marginal.

Other excellent announcements include the above-inflation increase in the minimum wage and reserved spending on defence, although this is still below where we need to be as a proportion of GDP. Hopefully, the Defence Review will address the huge threats to our national security. Confirming the ending of VAT exemptions for private schools thankfully showed the absurd lobbying failed. I was also pleased to see action on the mineworkers' pension scheme.

If there is one big disappointment, it is the failure to increase fuel duty. I filled up my car on the way home yesterday, and when I left the petrol station, I thought it would not likely be that low for some time. However, Fuel Duty was frozen, and the 'temporary' 5p cut was kept. For a government that cares about climate change, this is bonkers, particularly when increasing the cap on bus fares. Some economic downsides around household incomes and employment have to be acknowledged. Increasing Employer NICs is not a free lunch.

Overall, I was very impressed with this budget. Of course, there are actions I would have liked to see that are missing, and she could have gone further with others. Serious tax reform is still needed, particularly on wealth. However, this was a step change in direction, and you can't do everything at once. There is still some headroom against fiscal rules, so there is scope for further structural changes.

Great Britain? How We Get Our Future Back

noreply@blogger.com (Dave Watson) — Thu, 10 Oct 2024 16:35:00 +0000

If you are interested in economic policy, I recommend reading Torsten Bell’s new book, Great Britain? How We Get Our Future Back. In it, he provides a detailed analysis of the key economic challenges facing the UK today and proposes policies to return the country to economic and social prosperity. Torsten Bell is best known as the chief executive of the Resolution Foundation, whose economic and social policy analysis is always worth reading. Before that, he was a Treasury civil servant and now a Labour MP.

His analysis of what's gone wrong is trenchant and well-argued but not new to anyone who follows the Resolution Foundation's work. He argues that the austerity economics pursued by the Tories was economically damaging and socially disastrous. A toxic combination of high inequality and low growth left the UK exposed to Brexit, a global pandemic and the biggest inflation shock for a generation. In particular, this negatively impacted both poorer and middle-class Britain. He also highlights the breakdown of the intergenerational contract, ‘The young are earning lower wages than their predecessors, in more insecure jobs, while renting smaller properties for longer, as their aspirations to homeownership sail out of view.’

Bell points to a productivity gap that has doubled in the UK compared to France and Germany despite the well-publicised challenges those countries face. British workers produce in five days what their competitors produce in four, resulting in stagnant real average wages. Rising property prices and rents mean the average family spends twice as much of their income on housing costs compared to 1980. The cost of housing in the UK is the second highest out of 38 OECD countries.

For the degrowthers (the theory that growth is undesirable), they’ve got what they wanted. Anyone thinking the problem is that we have had too much growth has missed the news that we haven’t had any. This is not normal, even after recessions.

There is much more about what's wrong, but the vital part of the book is how to put it right. I suspect not all his views will be universally accepted. For example, he opposes a Universal Basic Income (UBI), arguing, ‘an affordable UBI would be inadequate, and an adequate UBI would be unaffordable.' I agree, but many on the left don't. He is not opposed to directly elected mayors (I am) but argues that they have been tasked with providing economic leadership without the means to deliver it. He is absolutely right about the need to build up a smaller number of larger pension funds, but that is being resisted, including by many councils in Scotland.

The core of his prescription is investment, public and private. Britain has had some of the lowest investment spending of countries in the OECD; consequently, we have substandard water systems, transport, and road infrastructure. He argues that Britain should adopt a 'golden rule' level of investment of 2.5%- 3% of GDP every year, pointing to the opportunities for investment in the necessary decarbonisation of the economy.

None of this is exactly radical economic thinking, but has the Chancellor read his book? The signs are mixed. Some reports indicate a possible change to the fiscal rules, and others say the Chancellor is demanding cuts to infrastructure spending of around 10%. There has been some more positive news today. The Chief Secretary to the Treasury, Darren Jones, has announced a 10-year infrastructure strategy at the full spending review next year, which includes housing and schools as key economic growth drivers and will be overseen by a new body. But note, that is ‘next year’.

And don’t expect the private sector to come to the rescue. Non-government investment in almost every other G7 economy is in a narrow range from 16.8 to 18.7 per cent of GDP, but in the UK, it's not even 15 per cent. Foreign ownership has increased from just over 10 per cent in 1990 to over 55 per cent in 2020, with no pressure to make long-term investment decisions. Bell points to the evidence that worker representation on company boards boosts investment levels and productivity. A policy that even Tories from Macmillan to May have supported – so let's do it!

Returns from higher investment in the form of increased productivity and growing real wages will take some time to realise - outwith the political cycle. However, short-term cuts could damage the economy and Labour’s electoral credibility. It may be early in the UK administration, but Scottish Labour has an election next year.

Bell concludes, ‘We must reclaim the confidence that progress is possible… it is politically and economically possible for the UK to escape from its union of slow growth and high inequality.’ Knock, knock – let’s hope the Chancellor is reading this book.

New Local Democracy for Scotland

noreply@blogger.com (Dave Watson) — Mon, 09 Sep 2024 11:00:00 +0000

I was in Edinburgh today, speaking at the launch of the New Local Democracy for Scotland Declaration.

Building a Local Scotland is a group of academics, trade unionists, former council leaders, and journalists who have launched a campaign to tackle the creeping centralisation that has left Scotland as one of the least locally governed countries in the world. You can read more on our website: https://buildlocal.scot.

In my contribution today, I argue that while the Scottish Parliament has brought democracy closer to Scotland, it hasn’t created the promised local democracy for our communities. Instead, we still have some of the largest basic council units in the world, and public services have been centralised.

Despite initiatives between COSLA and the Scottish Government, several commissions and numerous reports, we are no closer to achieving the principle of subsidiarity. In practice, powers have been stripped from councils and services such as police, fire, further education, and water have been centralised. Three-quarters of public spending is directed by Scottish Ministers, including around £23 billion spent by unelected quangos.

I have been involved with most of those initiatives. The Commission on Strengthening Local Democracy (2014) is a good starting point for understanding why local democracy matters. I was an expert advisor to the Christie Commission, which recommended, ‘A first key objective of reform should be to ensure that our public services are built around people and communities.’

The Jimmy Reid Foundation has published several reports on this issue. In Building Stronger Communities (2020), I argued that the starting point is subsidiarity, building integrated public services from the bottom up and sharing where appropriate. The role of central government should be to set the strategic direction based on outcomes – rather than trying to direct services from Edinburgh. In a paper published last week, Building the Local Economy, we highlight the impact of centralisation on the local economy.

However, a country the size of Scotland cannot justify duplication and difference for its own sake. Therefore, we need public service frameworks that allow local services to focus on what matters to achieve positive outcomes. Even where decentralisation is not viable, services should still be required to cooperate locally more effectively than currently.

It sometimes feels that the only discussion around local government comes from those advocating directly elected mayors or provosts. These top-down initiatives have yet to produce a strong sense of local empowerment. Instead, they centralise power in a single individual, which could lead to unaccountable, authoritarian leadership.

There will be trade union and workforce concerns over creating a larger number of councils and other public bodies, along with cost concerns over duplication. This is where national frameworks are essential. Local decision-making should be focused on what’s important to communities, such as service design that reflects local needs. We do not need a hundred-plus procedures, different terms and conditions, contract documents, etc. Neither do we need a bureaucratic infrastructure of senior managers. This is an opportunity to explore the concept of a single public service worker on standard terms and conditions with joint introductory training for all jobs – both envisioned by the Christie Commission.

In an era dominated by austerity economics, local services continue to face the brunt of budget cuts. Successive administrations have ducked the reform of local government finance despite credible proposals in the Burt Report (2006) and The Commission on Local Tax Reform (2015). The Council Tax accounts for less than 20% of council expenditure. In European countries, the equivalent councils have between 50% and 60% of income raised locally. Local election turnout is generally significantly higher in countries with greater devolved taxation. Smaller councils on the European model also enable local people to engage with local democracy. The many initiatives to improve citizen engagement and participatory practices in Scotland have failed to engage working people because they haven’t put real power in the hands of recognisable communities.

I view the Declaration as a starting point for a new conversation about genuine local democracy in Scotland and how we deliver public services. We must put right the forgotten aim of devolution - to disperse power not just from Westminster to Holyrood but onwards to communities. A comprehensive reform plan built up from communities not imposed from the centre. If you agree, please sign the declaration.

Defence Review

noreply@blogger.com (Dave Watson) — Wed, 14 Aug 2024 10:45:00 +0000

The new Labour Secretary of State for Defence has announced a defence review. This is not just a routine action for new governments, but a crucial and urgent step given the changes in threats since the last review. The review, with its broad and unsurprising parameters such as NATO, nuclear deterrent, Ukraine, etc., is of utmost importance. The final report is due in the first half of 2025.

I was recently asked to prepare a briefing for a European client looking at changes in defence policy across the continent. Most of our allies are also reviewing their defence strategies. The most apparent change in threat level relates to the Russian invasion of Ukraine. July's NATO summit showed the extent to which Russia's recent aggression in Ukraine and its transition to a war economy have completely transformed NATO's focus.

The Defence Review should refocus UK defence policy away from Boris Johnson's 'Global Britain' to Europe and the need to ensure our convention forces have the equipment and the supplies to fight a war in Europe. That doesn't mean abandoning the delivery of the AUKUS partnership with the US and Australia or ignoring the Gulf and the Middle East. However, we need to focus on the immediate threats to UK security. This Chatham House paper is a good assessment of Russia's challenges in upgrading each of the main armed services.

This highlights the need to increase defence spending. The Labour Party's Manifesto committed the Government to “set out the path to spending 2.5 per cent of GDP on defence.” That will be addressed in the Autumn Budget Statement. Given the Chancellor's talk about 'black holes' in the budget, which is unhelpful and inaccurate in my view, immediate progress along this path may be challenging. She has already delayed expensive infrastructure projects - a well-travelled Treasury route to balance the books. The IFS ripped into the previous Government's 'smoke and mirrors' on defence spending. The new Government can expect similar treatment.

Our armed forces' problems have remained the same since my last briefing. Britain's defence spending is inflated by a fifth of the defence budget spent on nuclear weapons. If you take nuclear out of the equation, defence spending is about 1.75% of GDP, around the middle of the European league table. This means that the armed forces need help to keep existing equipment running. Even the Royal Navy, seen as a gainer in recent spending rounds, must decommission ships because it doesn't have enough sailors. The Army is in even bigger trouble. When the Tories came to power in 2010, the British Army was over 100,000-strong. It is now due to fall to 72,500.

Given the resurgent Russian threat, I found it pertinent to revisit Kenton White's book 'Never Ready: Britain's Armed Forces and NATO's Flexible Response Strategy, 1967-1989'. His use of newly available documents from the archives to show the failure of the flexible strategy is a stark reminder of the importance of learning from history. The concept was compromised by the failure of the Alliance members to provide one of the main legs of the conventional deterrent – sustainability. In particular, the highlighted limited ammunition reserves, a problem recently faced by Ukraine. We should learn the lessons from history on this, as they are crucial for a well-informed and effective strategy.

In an uncertain world, the government cannot afford to be weak on defence or create a glossy strategy that doesn’t address the underlying problems. As the head of the army has warned, we must be ready to fight a war in three years. The Defence Review should be comprehensive, including replacing the weapons sent to Ukraine and reversing Tory cuts, laced with more traditional Labour policies on support for veterans and ending failed outsourcing. I have previously set out how defence procurement should be reformed. My German colleague pointed to how the German government might take a stake in arms-makers and defence projects. This also points to the need for a detailed and comprehensive strategy that addresses all aspects of defence and security, including rebuilding our relationships in Europe.

The considerable uncertainty is the US elections. While the Trump campaign is imploding, there is a long way to go, and the result will likely be tight. Trump has said he is likely to be less supportive of funding for NATO and European security. It is reasonable to conclude that European powers will need to ramp up their investment in security. As Robert Dover puts it, “Trump’s tactics should not be seen as a surprise. They need to be planned for, financed, and procured for. Pretending they are surprising because they are uncomfortable is not a plan.”

The Defence Review claims that it will ensure that Defence is central to the security, economic growth, and prosperity of the United Kingdom. It needs to deliver on that commitment.

Pensions reform - time for action

noreply@blogger.com (Dave Watson) — Tue, 23 Jul 2024 11:25:00 +0000

Pensions reform usually gets little political attention, so it's good to see the new UK government prioritising it. The Pension Schemes Bill, announced in the King's Speech, is taking forward measures announced by the previous administration, although hopefully with more urgency. As someone who advises on pensions and is a pension fund trustee, I have attended too many conferences only to be told there has yet to be progress on consolidation and the pensions dashboard.

More significantly, the new government has announced a pensions review with more radical aims. A first draft of the review is expected before the autumn budget, and new rules could be in place as soon as next year. Reforms are necessary because the current combination of 8 per cent minimum contributions, the £10,000 earnings trigger and the lower earnings limit on qualifying earnings produce inadequate savings for most UK workers. When you couple that with one of the lowest state pensions in Europe (38% of the EU average), we are storing up serious problems for the next generation of pensioners, particularly women and the low-paid.

A vital challenge for the taskforce of industry executives and ministers will be to propose ways to cut costs and improve investment options. The aim is to allow retirement scheme managers to boost pension pots by up to £11,000. Private pension funds currently impose massive charges on most pension products in pursuit of their profits. Expanding auto-enrolment without tackling charges will simply pour pension savings into the coffers of the City of London. You only need to look at what countries like The Netherlands have achieved to understand that there is a better way.

Another aim of the review is to ensure that pension funds are invested in the real UK economy. Most pension cash isn’t invested in any meaningful sense; it is gambled on shares, doing very little for the economy. Buying UK rather than overseas shares doesn’t change that, although it is absurd that only 2% of pension funds are gambled on British companies. In fact, some argue that pension saving damages the economy because it takes spending away from consumption. The UK has six and a half trillion pounds worth of pension fund money - roughly two and a half times our annual income. That money is not used creatively to invest in the UK economy.

Will Hutton correctly identifies a key problem – we have 30,000, often small, pension funds. There are around £225bn of stagnating surpluses, and the 2,000 very small, closed defined-benefit schemes should be merged into the highly successful Pension Protection Fund. He says, ‘Britain needs fewer and much larger funds than the smorgasbord of tiny, underperforming funds whose trustees guard their independence so jealously that property market nimbyism looks tame.’ The solution is larger funds, at least over £100bn, that can diversify risk sufficiently to invest more in productive UK assets.

We should be starting with public sector pension schemes. Reeves has announced that the taskforce will push ahead with a merger of the 87 individual pension schemes in the Local Government Pension Scheme (LGPS) covering England and Wales. The LGPS is the seventh largest pension fund in the world, managing £360bn worth of assets, and spends £2bn on fees. Pooling the assets in the LGPS would enable the funds to be invested in a broader range of UK assets.

We should be doing the same with the devolved Scottish LGPS. When I was the joint secretary of that scheme, we started looking at the options for consolidation and merger to cut costs and better invest the £36bn of assets. However, the project has moved at a glacial pace since 2018, primarily because of resistance from the small regional pension funds – the nimbyism Will Hutton was describing.

I am more optimistic than some commentators that Rachel Reeves is serious about reforming our pension system. Getting these assets working properly for future pensioners and the broader economy is crucial to her growth mission. As the Scottish LGPS experience shows, she must push hard to get past the vested interests holding Britain back.

It's Manifesto Time!

noreply@blogger.com (Dave Watson) — Thu, 13 Jun 2024 16:57:00 +0000

It’s manifesto time. As someone who has drafted and haggled over a few in my time, I enjoy this part of an election campaign while recognising that this makes me a less-than-typical voter.

You might think in a snap election that manifestos are hastily put together. However, in practice, the core policies will have been written months ago and tested on focus groups and polling, leaving just some updating before putting them into whatever governance arrangement the political party has. In broad terms, the manifesto is the opportunity to set out the details of party policy, rare in an era of sound-bite campaigning. It also provides a script for candidates and supporters. Some are more detailed than others, but there is pressure to say something about every policy area to avoid the accusation that the party is ignoring an interest group. Issues that are controversial, at least internally, have to be fudged to get agreement.

It is legitimate to question the purpose of a manifesto in a rapidly changing world. This has been even more noticeable since devolution when most UK policy areas don't apply other than the knock-on spending commitments. There is also a strong case for more independent scrutiny of manifestos to at least reduce the dafter claims and counter-claims for the benefit of voters.

I am only going to look briefly at the Conservative and Labour manifestos. I'm sure there are lots of interesting ideas in the Lib-Dem, SNP, and Green manifestos, but they are not going to be the next UK government. They also know that, so don't worry too much about their policies adding up. They make daft claims like the SNP on NHS privatisation and oil jobs. Only if we get a hung parliament, do they get interesting.

This really is a topsy-turvy election when the Tory manifesto is attacked for rash, uncosted spending commitments. The Tory tax cuts will cost £17.2bn a year by 2029-30, paid for by cracking down on tax avoidance and slashing the welfare bill by as-yet uncertain means. IFS and other think tanks warned there was a big risk the sums would not add up.

I suspect the Tories decided they won't have to implement it, so let's chuck in many policies that appeal to their core vote to minimise the defeat. Examples are the triple lock plus, which provides a tax cut for pensioners - even if they only need one because the Tories have frozen the tax threshold. An analysis of the tax changes by the Resolution Foundation said that while the 20% of the wealthiest households would gain £1,300 a year on average, someone who paid £30,000 would see their tax bill fall by just £170. It’s not hard to see the target demographic here.

In contrast, Labour constantly repeats the mantra that all policies are costed and funded. However, they have yet to go as far as 1997, when the party committed to Tory spending plans, even if, as the IFS points out, they are not far off that. Even Ken Clarke admitted that he had no intention of keeping to them. Gordon Brown later opened the taps, but he had a more robust economy and fiscal position to play with. I suspect Rachel Reeves is going to find it more challenging.

I'm afraid I have to disagree with Keir Starmer's comparison of the Tory and Corbyn 2019 manifestos. I worked on that manifesto, and it was fully costed, with John McDonnell's Grey Book going into more detail than I have ever seen in a manifesto supplement. Peston and others make this point well.

The Labour manifesto reflects a cautious fiscal approach to the election. Given the state of the public finances, this is understandable, but it is storing up problems for an incoming government. Reform can do some of the work, but the heavy lifting of putting the country back on its feet requires investment. Plugging a few loopholes is fine, but the anomalies around Capital Gains Tax need to be addressed, as does a tax on wealth.

I like the focus on long-term solutions – the mission-driven government. Short-termism has plagued our country in politics and business, and a new emphasis on industrial and infrastructure strategies, working with employers and trade unions, is the right approach. The early focus on national security is good, even if I want to see more urgency in getting to 2.5% of GDP. Particularly as we are wasting too much of the equipment budget on Trident. However, there is a welcome commitment to reform defence procurement, if little detail. Bringing the railways into public ownership is the right transport policy, and there are ways of doing the same with other vital infrastructure without breaking the bank.

The New Deal for working people is an important way forward as is bringing the cost of living into the minimum wage calculation and ending age discrimination. Consulting on implementing the plans is normal government, and practical issues over zero-hours contracts, in particular, need to be addressed. There is plenty in the energy section to like, even if it could be bolder. I doubt the 'broken energy market' will be fixed through more robust regulation. The English public service proposals will bring Scotland £470m of additional resources to tackle some of our problems. There is at least an understanding of the need to reduce health inequalities and that requires cross-cutting action.

The offer on the constitution is limited, an opportunity missed given that they can be radical at minimal cost. The failure to grasp the opportunities of further devolution, particularly going back on employment law, risks rebounding on Scottish Labour in 2016. After 18 months of financially constrained government, those soft SNP voters may decide they have only lent their vote. The polling for the Scottish Parliament elections is much tighter than Westminster, and the dial hasn’t shifted on support for independence.

Re-setting our international relationships is absolutely vital. While I would like to see stronger commitments to rebuilding relationships with the EU, that section gives a few hints that a new approach is possible without reopening Brexit. Getting Britain back on the world stage on issues like climate change is crucial.

Under devolution, UK manifestos have a limited impact on the issues that matter most to voters in Scotland. However, there is plenty to like on reserved issues like employment rights, defence, and international relations. The weakness is fiscal caution and the constitution, both areas where Labour needs to be bolder. As the IFS says, ‘delivering genuine change will almost certainly also require putting actual resources on the table’. Stability is vital after the chaos of recent years, but we will need more than managerial competence to tackle the deep-seated problems facing the UK.

Devolution and the quango state

noreply@blogger.com (Dave Watson) — Wed, 08 May 2024 10:50:00 +0000

This week is the 25th anniversary of the first elections to the Scottish Parliament. Commentary typically focuses on how the Parliament has performed and how its procedures can be reformed. While I agree with many of the criticisms, the Scottish Parliament remains the most crucial democratic intervention in Scotland for a generation and more. For those like me who remember the pre-devolution position, the Scottish Parliament remains an outstanding institution. And despite the fractious politics of recent years, the public agrees. In the most recent Scottish Social Attitudes Survey, 63 per cent said that having a Scottish Parliament gives ordinary people more of a say in how Scotland is governed, while a similar proportion said it gives Scotland a stronger voice in the UK.

The biggest failure of devolution has been the absence of decentralisation to communities, a vision set out by the Constitutional Convention that has yet to be delivered. The woes of local government are well understood, but another aspect of centralised control, the quango state, is largely ignored. Rather than extending the principle of devolution within Scotland, the Scottish Government has retained all the transfers from Westminster and, in addition, has taken away functions from Local Government. Three-quarters of public spending is directed by Scottish Ministers, including around £23 billion spent by quangos.

This week, the Scotsman is running a welcome series on quangos, which may help shine some much-needed light on these institutions. The early easy targets are management salaries and the usual suspects who serve on them. However, we should ask if this centralised control over many of our public services is the best form of governance. The Scotsman started by struggling to define what the quango state consists of, settling on around 120 bodies. They include Executive Agencies, Non-Departmental Public Bodies (NDPB) and public corporations like Calmac and Scottish Water. They range from small advisory boards to substantial service delivery organisations like Skills Development Scotland and Scottish Enterprise. They include NHS Scotland, but the democratisation of the NHS is a more complex and different debate. The governance models vary, but typically, a board of around 14 people appointed by ministers runs them.

In 2007, the Scottish Government undertook to simplify the public sector landscape by reducing the number of Scottish public bodies under its control. Like previous governments, they found the 'bonfire of the quangos' difficult to deliver. Ministers often find it useful to have arms-length bodies to deny operational responsibility for poor decisions, which I have previously called the 'not me guv' school of government. The problem is that in the absence of democratic accountability, the public often says, 'It is you guv'. The difficulty is that ministers need more time to scrutinise them, and the sponsoring departments adopt a light touch. The recent Water Industry Commission scandal demonstrates that clearly.

Relationships between NDPBs and their sponsoring departments can also be challenging. A National Audit Office study of English equivalents found that the arm’s-length bodies sector remains ‘confused and incoherent’. Audit Scotland has occasionally forayed into quangos with similar conclusions. Their 2010 paper concluded, ' The make-up of boards and their role has evolved over time rather than as a result of any objective evaluation of the best model for public accountability.’

Suggestions that they could be broken up and delivered locally are resisted because they allegedly benefit from economies of scale or are too specialised to spread the limited expertise around the country. Even attempts to minimise duplication by creating common bargaining structures have been opposed by the agencies and government.

Options for reform include:

• Identifying all or parts of the services that could be delivered locally while retaining a national framework.

• Greater scrutiny by Parliament.

• Direct elections.

In my paper, Public Service Reform for the Reid Foundation, I set out some principles that should underpin this work. I developed them in a subsequent paper, Building Stronger Communities. The starting point is subsidiarity, building integrated public services from the bottom up and sharing where appropriate. The role of central government should be to set the strategic direction based on outcomes – rather than trying to direct services from Edinburgh. However, a country the size of Scotland cannot justify duplication and difference for the sake of it. Therefore, we need public service frameworks that allow local services to focus on what matters to achieve positive outcomes.

Even where decentralisation is not viable, services should still be required to cooperate locally more effectively than currently. The somewhat loose duties placed on quangos to collaborate in community planning have no effective teeth.

Scotland is one of the most centralised states in Europe. Until we address this centralisation of power, the devolution project will remain unfinished. Reforming the quango state is complex but necessary.

Ukraine and the 'Johnson thwarted peace' myth

noreply@blogger.com (Dave Watson) — Tue, 09 Apr 2024 17:58:00 +0000

I was involved in a panel discussion about defence expenditure this week. A trade union activist I greatly respect justified his argument against providing military aid to Ukraine by invoking a Putin-propagated myth. The essence of this conspiracy theory is that Boris Johnson thwarted efforts to achieve a negotiated peace in April 2022. There are few politicians that I have more contempt for than Boris Johnson, so I can understand how anyone can believe such a thing was possible. My surprise was that this myth has not only been debunked in mainstream fact-checks but also in left-wing media sources like Novara Media. The Kremlin and their useful idiots propagate it in a few media sources.

Let’s start by remembering that these events happened after the Russian invasion and the initial discovery of Russian war crimes, including the Bucha massacre. It was also after Russian State media, with the explicit support of the regime, including Dmitry Medvedev, deputy chair of the Security Council of Russia, published the genocidal statement ‘What Russia Should do with Ukraine’. The author argues that Ukraine's existence is "impossible" as a nation-state, and after the war, forced labour, imprisonment, and the death penalty would be used as punishment. None of this sounds like a country seriously interested in peace.

https://www.hrw.org/news/2022/04/21/ukraine-russian-forces-trail-death-bucha

And they weren’t even close, as objective analysts closer to the talks confirmed. While the negotiators agreed upon some broad principles, as anyone with negotiating experience knows, deciding on principles is much easier than agreeing on the details.

These details included a Russian demand that Ukraine cap its armed forces at 85,000 troops, 342 tanks and 519 artillery pieces, which would be around a 60-70 per cent reduction of Ukraine’s military strength. Ukraine was understandably sceptical about signing away its capacity to defend itself, given that it had just been invaded by Russia weeks beforehand. And given Putin’s track record on keeping agreements, feared this would be a temporary pause to reorganise and launch another, better-prepared invasion. The Russian initial plan was disintegrating at this time, and Putin needed a breather.

The other essential requirement was not NATO membership, which wouldn’t happen, but rather that undefined Western nations would provide security guarantees but with no bases in Ukraine. It was this that Boris Johnson rightly pointed out was unrealistic. Few, if any, European countries would give such a guarantee outside the NATO military alliance. The Russians could sweep across Ukraine and sit on the Moldavian, Hungarian and Polish borders. That would require a massive offensive to dislodge the Russians who would dig in, as they have in eastern Ukraine. There is neither the capacity nor the political will to do that. Anyone with a rudimentary grasp of history will grasp that Putin is using the Hitler Czechoslovakia playbook.

In simple terms, no credible deal was on the table, so the only option was to fight on. A decision overwhelmingly supported by Ukrainians in polling after the Bucha massacre. Ukrainians understand this is not a manageable conflict in which you can exchange a bit of land for peace. Putin wants nothing less than the obliteration of Ukraine. They are the frontline against the new fascist menace, and the West should support them and prepare for the worst if they fail. There is a respectful exchange of left-wing positions on the war in the Scottish Left Review.

I fully appreciate the desire for peace and the opposition to less than productive defence spending. I just come from a different left-wing political tradition. The most important influence on my teenage political thought was a former Welsh miner who fought in Spain against fascism. He would have recognised Putin as he did Hitler and understood that appeasement is a strategy doomed to failure.