Poor Nick Clegg

(Those of my readers with no interest in the UK General Election may want to move on.)

Poor Nick Clegg. He’s got two options, both of which suck.

Option 1: an arrangement of some sort with the Conservatives. They aren’t offering the voting reform he wants and has said is a prerequisite; if he picks this, his entire party will claim that he’s sold out. Given that it’s such a core LD policy, it would be a disaster for him. Is there any chance the Conservatives can offer him enough for him to save face, but not enough for there to be a chance of PR actually happening?

Option 2: a coalition with Labour. This gets him the voting reform, but they don’t have enough seats to make the magic 326 (or 324, if you note that Sinn Fein MPs don’t turn up). Together, that have 315. If you add in the 3 SDLP MPs, who take the Labour whip, you get 318. You need to add in the SNP, or perhaps Plaid Cymru and the Greens, or even all of them, to get a workable majority.

This might well mean Gordon Brown as PM – could Clegg really prop him up after campaigning on a vote for change? Or, if Brown resigned and another Labour person was appointed, the government would then be led by a politician who had not campaigned as PM for the election we’ve just had!

And after that, a fragile alliance will be forced to make severe spending cuts that none of the parties have warned are coming. They probably won’t; and the bond markets from whom we have borrowed a lot of money will get worried, and we will spiral into a fiscal black hole. When things have gone badly enough (perhaps with the IMF called in) that there’s another election, the Conservatives will sweep to power and no-one will trust either Labour or the Lib Dems for years. The Conservatives may well win even if voting reform has been rushed through in the brief period that the coalition held together (although they’d find it much harder in the future).

Neither option looks appealing for Clegg.

All this goes to show that the Conservatives would be mad to concede voting reform to the Lib Dems, but they have to make a very convincing job of looking like they want a deal.

23 thoughts on “Poor Nick Clegg

  1. I never understood why Mrs. Tatcher was so against proportional representation. I remember an old interview with her, where she fulminated against it, calling it a communist system and what not. Sigh…

  2. Jo: well, take a look at the election map (eg. http://news.bbc.co.uk/2/shared/election2010/results/ ) — most of the blue bits are countryside places. The conservatives have traditionally had a lot of support from landowners and such, and so they’re strong in the countryside and weak in the cities (with working class people, students, intellectuals, all of whom tend to be more Lib Dem / Labour / Green, generally speaking of course…). In the middle of the blue, you find little islands of yellow and red. This is particularly obvious in eg. the East of England: http://news.bbc.co.uk/2/shared/election2010/results/region/2.stm — Cambridge, Norwich, Luton and Colchester (the major population centres in the region) stick out being pro-Labour/LibDem. Point being: the landowners are / countryside is disproportionally represented without proportional representation ;-) — which suits the Tories. Also note from the main results that while Lib Dem got 23% of the popular vote, they only got 57 / 650 == 8.7% of the seats, and the Tories got 36.1% of the vote but 306 / 650 == 47.1% of the seats…

    Gerv: Your last point (about spending cuts and what this implies for the possibilities the Tories have at this point) makes it appear you don’t think the Conservatives (or anyone else, really) want to work for the good of everyone, rather than just themselves. That seems cynical/sad to me, but then I am not as familiar with UK politics as you are – are you just being realistic? :-(

  3. I hope you get some kind of electoral reform. The Lib Dems getting 75% of Labour’s vote and 20% of Labour’s seats is a real bummer. I’m really glad we moved to MMP in New Zealand. (The story of how the two dominant parties accidentally made it happen is hilarious.)

    You’re probably right about coming economic problems. This might be an election you’re better off not winning.

  4. Gijs: The seats are not allocated based on geographical area! Saying the Conservative Party is over-represented because most of the map is blue is a complete non-sequitur. In fact, in the current system, they are under-represented because the average Conservative constituency has 10,000 more voters in it than the average Labour constituency. (They have said they want to fix this.)

    I think that no party was straight with the electorate about the cuts. The Conservatives tried it, and went down in the polls, so they stopped. In other words, the British people aren’t ready to hear the truth. And we get the government we deserve. :-(( I blame the people as much as the politicians. Surveys regularly reveal wildly unrealistic expectations such as “we can fix the problem with efficiency savings” and “we only have to raise taxes for the rich”.

    Do you know what percentage of tax is paid by the bottom 25% of earners in this country? 3%. Someone like the Lib Dems who say rich people should pay more because it’s “fair” have a weird definition of ‘fairness’.

  5. Gerv: Oooh, that 3% for lowest 25% figure is interesting! Do you happen to have a source handy for it?

  6. Gerv: I’m very confused. What do you mean by “not allocated based on geographical area” ? It’s a district system! I know that (geographically) larger districts don’t get more seats, and that’s not what I was trying to say. It seems I wasn’t very clear about what exactly I was saying anyway…

    The point I was trying to make was that the blueness of the map was disproportionate(ly big) to the number of seats — that is, if you look at the map, you’d think the Conservatives got a landslide victory, which they didn’t. The fact that they’re so prominent on the map is because they get most of the rural districts (at least in England), which are (geographically) larger. I assumed that the geographically larger districts in fact have fewer voters than the city districts. This seemed very logical also given that in most modern societies (haven’t checked for Britain) more people live in cities than in the countryside. From looking casually at the BBC turnout numbers for various districts, it seems that assumption is faulty (although of course, given that I’m looking at turnout, I’m assuming that turnout (percentage-wise) is similar between various districts). So I guess I was wrong, even if it (maybe?) wasn’t in the way you thought I was. :-)

    As for cuts, that’s sad… you’d hope that whichever party ends up governing does manage to sort out the cuts, but from what you’re saying that doesn’t sound likely.

    Concerning taxes… that’s just income tax, presumably? And for comparison, can you tell me how much income is represented by those poorest 25%? That is, you’re giving a tax number for the poorest 25% of earners, but how much money do they actually make, and how much is made by the other 75%? Isn’t that going to be skewed, also?

    I tried to get similar numbers for the Netherlands, but given the data our government publishes the exact same is hard to do. However, I noticed that over 2008, 20.8% of people with income (2.6mln out of the 12.4mln) earned 10,000 euro or less. Their total income was 13.0 billion euro. The overall income was 344 billion. So 20.8% of people earned just 3.8% of the country’s money. Note that this is just income, not tax. We do have a progressive tax rate, so I wouldn’t be surprised if the bottom 25% of people paid less than 3% of our income taxes. But that’s also because they probably earn 6% or so of the country’s money (obviously the people in the higher 4.2% slice earn more per head than those in the lower 20.8%, but 6% seems a reasonable estimate).

    To me, this does not seem unfair. But then, I live in a country where the highest tax bracket is 52%, starting at the equivalent of 47,100 pounds, and I’d vote for upping that still further, so perhaps you’re talking to the wrong person. ;-)

  7. Gerv: I’m not understanding why you don’t find it fair that rich people pay more taxes, but then I also come from a country with progressive tax rate (I pay 50-something too). I really find progressive tax fair, withing limits ofcourse. Unfortunately, rich people find it easier to evade those taxes (just like big corporations) – that’s what I call unfair. I struggle to pay my taxes every year, while my neighbor doesn’t pay any (but owns 3 houses and an apartment building), having placed his money in Jersey or some other island. And he still complains about the high taxes to me, which makes me fume. His biggest complaint is that he will not receive a large pension, since his income doesn’t exist for the government.

  8. Smylers: I got it from the excellent “How to Cut Public Spending (And Still Win An Election)” from the Taxpayer’s Alliance, page 173. The full quote is:

    “Today, the top 1% of income earners contribute about 24% of total income tax, the top 10% contribute about 53% of total income tax, and the top 50% of earners pay about 88% of total income tax. The lowest 20% of earners pay less than 3% of total income tax, and have done for the last decade. The evidence weighs heavily against the idea that the ‘rich’ don’t pay their ‘fair’ share.”

    Their footnoted source is HMRC (Her Majesty’s Revenue and Customs) ‘Shares of income (before and after tax) and income tax for percentile groups’, Table 2.4, Personal Income Survey (April 2009).

    Of course, it depends what you mean by ‘fair’. If ‘fair’ means ‘has the money’, then there’s almost no upper limit to what you could say was ‘fair’ to tax. But rich people don’t use the roads more, generate more rubbish, need more streetlighting, use more public services (I suspect they use far less), or anything like that. Yet they pay more income tax, more NI, more capital gains tax, more inheritance tax – both more in absolute terms, and more as a percentage of income. I’m not saying that ‘fair’ is a flat £1000 charge per person per year, regardless of income, but I am saying that justifying further tax rises for the ‘rich’ on the basis of ‘fairness’ is not an obvious truth.

    Gijs: I read your message as saying that geographically larger districts get more MPs, but I seem to have misunderstood you. Apologies.

    All the districts are roughly the same size but, as I said, Conservative ones are about 10-15% (10,000 voters) larger than Labour ones on average. So the geographically larger districts have more voters, not fewer, than the city ones. Turnout varies, of course, but not in a standard way.

    Jo: I think the tax burden in general is far too high, but that’s because I think government should be doing a lot less than it is at the moment. If government were a proper size, we wouldn’t even need income tax – for anyone.

  9. Whenever people argue for lower taxes, I can’t help but think it’s about greed (ha! more money for me!) and selfishness (I’m doing fine why should the poor get my money), and maybe even arrogance (I know best what to do with my money).

    Shouldn’t we be encouraging a society where greed *isn’t* good?

  10. Ah, the TaxPayers’ Alliance. They’ve always struck me as a little disingenuous: they claim to campaign for “better services and lower taxes” by eliminating wasteful government spending. However, look a bit deeper and it seems that they really want a smaller state and less public spending. Nothing wrong with arguing for that, of course, but they would strike me as more candid if they just said that, rather than claiming to represent all taxpayers. Especially when one of their directors is not a UK taxpayer. They also claim tax relief on their charitable donations, which would seem to go against their principles somewhat. (And that’s ignoring the fact that some of these donations were allegedly used for political purposes, which is illegal.)

    But rich people don’t use the roads more

    I really suspect that they do. I imagine that rich people drive more frequently and further than poor people.

    generate more rubbish

    Rich people tend to consume more, which generates more rubbish.

    need more streetlighting

    The roads on which these rich people are driving more frequently and further require street lighting. Also, rich people tend to live in larger houses, which means their streets require more lighting per capita.

    use more public services (I suspect they use far less)

    I’m not sure. It depends which public services. Rich people usually live longer, which might suggest they benefit more from pensions and health care than their poorer brethren. They’re significantly more likely to go to university too.

    Yet they pay more income tax, more NI, more capital gains tax, more inheritance tax – both more in absolute terms, and more as a percentage of income.

    This is true. Inheritance tax is an interesting example though as that’s unearned income (you talked a lot about “earned” income in your last post, so I thought this was worth mentioning).

    What about VAT? Rich people tend to spend a lower proportion of their income than poor people (rich people save), so it wouldn’t surprise me if poor people end up spending a greater proportion of their income or total wealth than rich people on VAT. Also, a higher proportion of the VAT rich people pay comes from spending on discretionary luxuries, meaning they could avoid paying it if they really so desired. (This isn’t the case with essentials such as food, for obvious reasons. Poor people spend a greater proportion of their income/wealth on essentials than rich people.)

    Then there’s Council Tax. Due to the coarse banding system used, many rich people end up paying a smaller proportion of their income (or the value of their property, which is in theory what Council Tax is based on) than poor people. If you live in England and your house was worth £325,000 in 1991, you pay exactly the same Council Tax as someone living in the same local authority area with a house worth £2,000,000 in 1991. Or £10,000,000.

    I’m not saying that ‘fair’ is a flat £1000 charge per person per year, regardless of income

    I seem to recall the last tax based around a flat charge had a positively riotous effect.

  11. Forgot to mention tax relief on pension contributions. 60% of all the money spent on tax relief on pension contributions goes to higher rate taxpayers and 25% goes to the top 1% of earners. That’s an example of government spending benefiting the rich far more than the poor.

  12. The fact that after a general election, the person who is PM did not get the most votes, or the most seats is bizarre. And that it could also soon be someone who wasn’t even standing for PM as you mentioned is even more bizarre! The fact that Brown wasn’t voted in as PM in the first place is a different point…

    I haven’t read up on PR systems, but I agree that the Lib Dem votes aren’t reflected in seats. In a simple percentage of votes = percentage of seats system, the BNP would have 12 MPs. And how do you assign MPs to geographical areas? I think the main problem is having to work out how to make one vote at your polling station work best for you locally and nationally. What if your local candidate for your preferred party is not the best person for you locally?

  13. TW: Of course we should. The question is: should that society be compelled by threat of prison via taxes, or should people’s generosity be voluntary?

    Is it really arrogant to think that I know what’s best to do with my money? Surely it’s more arrogant for you or anyone else to claim that you know what’s best to do with my money?

    Alex: OK, let’s say for the sake of argument that rich people (however you define it) use the roads 3x as much (although they use light cars not heavy buses, which damage them less), create 2x as much rubbish, need 2x as much street lighting per capita (although many live in villages where the streets are not lit at all). But they significantly more likely to have private health insurance, thereby paying twice for their healthcare provision and burdening the NHS much less. They are also more likely to have a private pension, relieving the government of the need to provide for them. (Incidentally, that’s why governments give people tax relief on pension contributions; the fewer people who have to depend on the state pension, the (slightly) less trouble we are going to be in, in 20 years time, with paying for them all. It’s not a ‘tax break for the rich’, it’s governments being smart.)

    Even if we take the 2x or 3x more use figure, it doesn’t even come close to making “the rich need to pay more tax” an obvious argument, given the figures on how much they pay already that I just gave. Also, raising taxes on the rich can easily be counter-productive. As someone said, they can just leave. And the reason they are rich is because they are successful – mostly because they start and build businesses. Are those the sort of people you want going to live in another country, when your economy is in trouble? Thatcher reduced income tax, ‘to reward hard work and innovation’ (or some quote like that). If she was right, what does raising it do?

    Inheritances are certainly not untaxed income. The money was taxed when it was earned. Taxing it again because someone has died is double taxation. If I give you a gift, it’s not subject to income tax for you, quite rightly.

    Yes, VAT is regressive, although quite a bit of the regressiveness is taken out by the fact that a lot of basic goods, such as food, are VAT-exempt.

    I agree the Council Tax system isn’t great either, because no government has had the guts to do the necessary regular reassessments of house value. But also, the value of someone’s house is not necessarily a good proxy for their wealth. Many poor, old people live in reasonably-sized houses they’ve just finished paying off the mortgage on, after 25 years.

    Dan: One big argument against total proportional representation is that there is no way to assign MPs to geographical areas – the “constituency link”, and therefore MPs can’t be booted out by an unhappy populace. Get a good safe place near the top of your party’s list, and you are in for life. I don’t think that makes MPs more reponsive to the people.

  14. Surely it’s more arrogant for you or anyone else to claim that you know what’s best to do with my money?

    So you know best how to pay for the NHS, public transport, education, the economy and everything else? Departments especially set up for the purpose? And you know what’s best? Has every citizen taken an extensive study of public funding, or is it just you? Don’t hide your light under a bushel: get in there, once they realise it’s you they’ll worship the ground.

    No denial of arrogance, selfishness or greed though? Maybe you should worry less about money, just render unto Caesar what is Caesar’s?

    Or move to Texas.

    Or maybe not deal in money at all like this guy: http://www.bbc.co.uk/iplayer/episode/b00scd6z/How_to_Live_a_Simple_Life_Episode_1/

  15. OK, let’s say for the sake of argument that rich people (however you define it) use the roads 3x as much (although they use light cars not heavy buses, which damage them less)

    Per capita, buses cause less damage to roads than cars. When was the last time you saw 100 people in a car?

    But they significantly more likely to have private health insurance, thereby paying twice for their healthcare provision and burdening the NHS much less.

    They choose to buy private health insurance. They don’t have to.

    They are also more likely to have a private pension, relieving the government of the need to provide for them.

    Most of those with private pensions also claim the full state pension.

    Even if we take the 2x or 3x more use figure, it doesn’t even come close to making “the rich need to pay more tax” an obvious argument, given the figures on how much they pay already that I just gave.

    I was neither arguing for or against the need for the rich to pay more tax.

    And the reason they are rich is because they are successful

    Really? I know several people who are significantly richer than me (orders of magnitude richer) but have never worked a day in their life.

    What is the definition of “successful”? You seem to be equating it to “have amassed a large sum of money”. That can be down to something as arbitrary as good fortune.

    mostly because they start and build businesses

    Starting businesses generally requires capital. Rich people not only have more capital than poor people but they are also more able to bear the cost of potentially losing this capital if the business fails.

    Excluding access to capital, there are other reasons why some people may be better placed to start a business than others. Some of these, such as a good education, are quite closely correlated to wealth. Others, such as intelligence, particular skills/talents or personality traits (not everybody has the get-up-and-go to form a company) may come from genetics, environmental factors or life experiences. Most of these are essentially entirely arbitrary and may have even been determined before the person is born.

    If one possesses the necessary resources to start and build a business and become “successful”, does that make one inherently better than someone less fortunate?

    Inheritances are certainly not untaxed income.

    I didn’t say “untaxed”, I said “unearned”.

    The money was taxed when it was earned. Taxing it again because someone has died is double taxation.

    OK, so let’s imagine I inherit some money from someone who made their fortune working for a widget factory. The money gets taxed when I inherit it and, as you say, was taxed when the person who died earned it. So that’s double taxation. However, the money the widget factory paid their employees came from widget sales, which were taxed in the form of VAT (our widgets are not VAT-exempt). So, that’s triple taxation. The customers who purchased the widgets did so with money they earned. Which was taxed. So now we’re up to quadruple taxation.

    Money isn’t taxed once when it’s created. It’s predominantly taxed when changes hands. That’s not the only model, however: some countries have a wealth tax, where one pays a percentage of the value of one’s assets every year or whatever (this is usually in addition to more familiar system of taxing income, expenditure and profits).

    Yes, VAT is regressive, although quite a bit of the regressiveness is taken out by the fact that a lot of basic goods, such as food, are VAT-exempt.

    Not all food is VAT-exempt. I just grabbed a receipt from a recent visit to a supermarket. I bought seven items, all food. Only two were VAT-exempt. Should have stuck to Jaffa Cakes (c.f. United Biscuits (UK) Ltd v The Commissioners of Customs and Excise).

    Whether an item is or is not VAT-exempt is frankly bizarre at times. Books are VAT-exempt, adult clothes are not. At a push, I could live without books. I would have trouble living without clothes.

    But also, the value of someone’s house is not necessarily a good proxy for their wealth.

    For most people who own their home outright, the house they live in is by far their most valuable asset and makes up the majority of their wealth. Of course, not everybody who pays Council Tax meets this criteria: there are those with mortgages and those who own no property and rent.

    Many poor, old people live in reasonably-sized houses they’ve just finished paying off the mortgage on, after 25 years.

    If you are old (or young) and own a house worth, say, £500,000, you still have assets of £500,000. Whether or not such a person is “poor” is a matter of debate.

  16. Gerv,

    With the caveat that I haven’t read all the comments here in detail, I find it hard to accept that government should be as small as is advocated by that blog article that you link to. For example, I am very glad that we have a National Health Service which is, for most things, free at the point of need, and would find it pretty scary if in a modern society people who can’t afford health insurance couldn’t get treated. Ditto education.

    Alan

  17. PS I suspect based on past comments that you may reply that the biblical pattern is for the church to have much more of a role in helping the poor. I’m not sure it’s as simple as that. Clearly Christians are meant to be concerned about the poor, and in the time of the early church the state generally didn’t seem to care about the poor, so those who didn’t have the support of family (e.g. widows) ended up very needy and the appropriate thing for a concerned church to do was to help them. But if the state has already put in place a system whereby some core needs of the poor such as healthcare are being met out of a taxation system which is structured so as to be affordable, then I can’t for the life of me see why some Christians would want to dismantle it. The church is always going to have a hard job helping people as systematically as the state can, without some people still falling through the gaps, nor will it necessarily have sufficient resources to do so, so I think it is appropriate for concerned Christians to be supportive of what the state is trying to do in this area. There seems to be far too much of a mantra these days that taxes are bad, with political parties forever competing to offer the greatest tax cuts (or at least, the most visible tax cuts), and I think we need to remember that it is right to “render unto Caesar” – yes even to nasty secular idolatrous Caesar…

  18. To those who asked about how a proportional system works, the answer is that it varies a lot with the system chosen, and tends to be more complicated. The system New Zealand uses is called Mixed-Member Proportional (MMP) – the short version is that about half of the parliament are elected from a geographic electorate, and the rest come from a per-party list in order that total numbers match the proportion of the vote each party achieved. That’s a simplified answer, but it covers the basic idea.

    As to how well it works out, I don’t think the system has ever resulted in a single party with an outright majority – it’s always been one of the two major parties, forming a coalition with one or more minor parties. In practice, the smaller parties may end up with disproportionate influence by holding the balance of power, but it’s been working well enough for the past 15 years, I think…

  19. Two things:

    Gerv: “…there’s another election, the Conservatives will sweep to power and no-one will trust either Labour or the Lib Dems for years.”

    Of course, if PR is introduced before the next election, it is incredibly unlikely that the Conservatives will get over 51% of the vote, and thus won’t sweep to power.

    There are plenty of countries with PR that form stable governments with viable fiscal regimes (e.g. Germany), so that can’t really be an argument against it.

    Gijs: Actually both Labour & Conservatives got about 10% greater share of seats than they did of votes, Lib Dems got 15% less. And if people felt that their vote wasn’t going to be wasted (due to living in a safe seat for instance) they might be able to vote for (and get) who they really wanted. (And thus the share of votes each party would get under PR would be different)

  20. I think NZ’s MMP system works very well. Simon explained it well, I would just add that there is a threshold to keep out tiny parties: you need either at least one electorate MP, or at least 5% of the vote, to get any seats.

    It’s true parties can put “lifers” in on the party list who then don’t get directly elected. But in first-past-the-post you get something similar anyway — the lifers are put in “safe seats” instead. Our MMP lists are published well ahead of the election and if they’re full of dead wood, the parties will be penalized at the polls.

    One thing we found in NZ is that it took a little while for politicians to learn the ropes. In the first MMP election, the minor “NZ First” party tried to play kingmaker for all it was worth, squeezing the major parties for all the concessions they could get. Voters didn’t like this at all and NZ First was hammered in the next election. Political leaders learned their lesson.

    I do allow that things may be different in other countries — Israel’s system doesn’t work too well as far as I can tell — but I think of the UK as being a lot like NZ politically. Maybe that’s wrong.

    It might not even be so bad if the BNP got some seats. Let racist thugs make fools of themselves. It’s hardly likely that any major party would risk allying with them.

  21. @Robert – yeah, that’s true. I think that after a few elections under MMP, all the parties have worked out how to make things work smoothly. I was particularly impressed with National’s coalition choices at the last election – picking *two* smaller partners when they only needed one for a majority. Gives them a bit of a broader appeal to both left and right, and prevents either of them from being too demanding…