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Friday, 18th April 2014

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David Cameron's public sector credibility crunch

Last summertime, victory looked so easy for David Cameron. Brown was grumpy, and the Tory polling was high. Like his daddy, Cameron was rich, and his wife was good looking. On election day, he would rise up singing, with a sky-high Conservative majority. And until that morning, it seemed that there was nothing that could harm him, with the business community and the media standing by.

But now, as evidenced by the narrowing of his opinion poll lead, David Cameron faces a credibility problem. To rescue the Conservatives from their reputation as the 'nasty party' which was gained under Margaret Thatcher, he persuaded his party activists to swallow his emulation of the slickness and the 'caring' image of Tony Blair. Then came the economic crisis and its consequences. Along with the exposure of high finance as the bearer of fictitious economic value, a slick political image could no longer be relied on to pay the bearer its claimed worth in electoral value

But could the global crisis of the capitalist financial and real economy, which had occurred while Britain was under the stewardship of Gordon Brown, present a further opportunity for Mr Cameron? For sure, a business opportunity- given that corporations and ideological right-wingers see that the crisis offers them their chance to radically reduce workers' wages, pensions, and other employment conditions, and slash public services- which would be possible to more drastically achieve under a Conservative government.

Unfortunately for the Tories, that does not automatically translate into an electoral opportunity. As everybody has at least a vague awareness, the policies of financial deregulation and industrial decommissioning- which made the UK both a villain in the instigation of the crisis and a particular victim of its effects- are Thatcherite policies, which were merely continued by New Labour with the support of the Conservative parliamentary 'opposition'.

Be that as it may, the Conservatives argue, the British state is in debt, and that public debt is the result of allegedly profligate government spending. But where does that argument take David Cameron? His party claims a philosophical opposition to taxation, and in such policies as it has revealed, is in favour of minimising the tax burden on those who are most able to afford to pay taxes. How then, were and are our health, education, transport, waste disposal and other public services to be afforded?

This is Cameron's conundrum. He must keep on board the Conservatives' hard-line backers in the business sector and the corporate press, along with his party's MPs and activists, on the basis that he will make rapid and massive spending cuts, much quicker and deeper than those envisaged by the Labour government, and further reduce the effectiveness of public services by more privatisation, fragmentation and marketisation than Labour would be prepared to countennance. But at the same time he needs to win the votes of an electorate whose vast majority do not want to have their schools, hospitals and other services massively reduced; and as they watch the bankers bonuses rise again, and the lifestyles of the rich and infamous undented by any naive concepts of common sacrifice in the wake of the economic crisis, they remain to be convinced that such reductions are necessary.

Matthew D'Ancona, the most eloquent spokesman for the pro-Cameron wing of the Conservative Party, remarked poignantly in his column in the Daily Telegraph on 20th March:

Last week’s Ipsos/MORI poll for the RSA showed with alarming force how unconvinced the public still are of the need for big savings: only 24 per cent think that there is a need to cut spending on public services to pay off the national debt, while half do not think that cuts will be necessary. Indeed, 48 per cent still think that more could be spent.

It is into this jungle of public opinion that Messrs Cameron and [Conservative shadow chancellor] Osborne now venture: first in pursuit of power, and then, probably, as the most senior members of the new Government.

The issue of privatisation is also unfavourable terrain for the Tories. Due to bitter experience of the previous results of handing over public industries and services to capitalist firms, open promotion of the privatisation of the UK's remaining public sector would not attract the support of even a respectable minority. An opinion poll conducted in early 2009 indicated that only 6% of those surveyed were in favour of the part-privatisation of the Royal Mail, with 75% opposed; when the participants were informed that the likely buyer- as inevitably would be the case- would be a foreign company, support for privatisation fell to 3%, with opposition rising to 89%. The Conservative policy for Royal Mail- which they are understandably keeping quiet about as the general election approaches- is full privatisation.

The right man's burden

To gain more command of the public opinion 'jungle', Mr D'Ancona proposes that the Conservative leadership should continue to enlighten the masses that they do not need to rely on the state. As public services are rolled back, Tory philosophy will supposedly ensure that people take more responsibility for each other:

To do half of what they need to do, they [the Conservatives] will have to be teachers, as well as politicians, explaining retrenchment as part of a broader philosophy, in which the state does not simply withdraw and leave citizens to fend for themselves, but encourages them to take more responsibility for themselves and for their neighbours.

Spending cuts are only a small part of a vision in which, as Cameron puts it, the frontiers of society are rolled forward – in which we all do more for one another, in which decentralisation is real rather than cosmetic, in which power is genuinely devolved to community and individual.

That, in a nutshell, is the core of the specifically Cameronite 'brand', which works in attracting mass public acceptance only to the extent that is perceived as distinct from the reviled Thatcherite ideology, summed up in her arid and unappealing dictum "there is no such thing as society".

When Margaret Thatcher uttered that phrase, what she was attacking was the idea, hitherto broadly accepted since World War Two, that the entire community which comprises the nation has a responsibility to the welfare of its citizens, and that the primary collective vehicle through which this responsibility should be effected is the state. Thatcher's claim that society does not exist was a double repudiation, both of the responsibility of all of us to each of us, and of the state as the key means of organising social welfare. Instead, she asserted rugged individualism and the primacy of self-interest:

There are individual men and women, and there are families. And no government can do anything except through people, and people must look to themselves first. It's our duty to look after ourselves and then, also to look after our neighbour.

And we all know where that led- not merely to mass unemployment, homelessness and crumbling schools and hospitals alongside a resurgence of corporate and financial profits; but, in the wake of the withdrawal of state support for industries and services, to the fracturing of the non-state mutual supports, local communities and families. There was also mass solidarity, as printers, miners, and hundreds of thousands of other workers whose occupations were demolished fought to save their livelihoods and their communities. But de-restricted capitalism was on the way up, and socialism, social democracy and the working class were on the way down. They fought and were defeated.

Eventually rejecting the course of social breakdown, the electorate gave the fresh and charismatic Tony Blair a huge majority in the 1997 general election. New Labour kept on with deregulation and privatisation, and implemented many other policies which were akin to those of the Tories.

But Blair's caring image was not merely a superficial appearance- it relied on a reliable mechanism, that of state legislation and provision. His government introduced the minimum wage, brought in the family tax credit system, and raised public spending; thereby maintaining services, increasing employment and reducing abject poverty. During the economic boom period, that was a highly successful formula which the mainstream of the corporate community and the press did not oppose; because at the same time the rich, no matter how filthy they were, were getting richer and richer.

Now the boom is over, and the Labour government has started making cuts; if (as still seems a rather unlikely prospect) it is re-elected, it will carry out more wide-ranging cuts. The Tories throw at Gordon Brown the charge that he is being imprudent by proposing to delay the worst of the cuts, and dishonest by avoiding the issue of where the cuts will fall and how extensive they will be. But that does not necessarily put Brown at an electoral disadvantage, because it reinforces the impression that he is reluctant to cut and will make only the minimum cuts, as befits a necessary evil.

Adventures in philanthropy

The Conservatives on the other hand, while they are also so far refusing to disclose what precisely they will cut, are conveying the accurate impression that they regard state provision itself as the evil, and will therefore cut to the greatest extent that the political climate will allow. How to do that without repudiating society, and while appearing to care for its 'less fortunate' members? Cameron's solution, ably espoused by Matthew D'Ancona, is to redefine society in a way which excludes the welfare functions of the state, implying that state provision is an alien imposition which prevents the "community and individual" from being empowered to "take more responsibility for themselves and their neighbours". Thus rolling back the state becomes, as Cameron put it in two speeches he made in 2006, "to roll forward the frontiers of society". In place of state organised welfare, the voluntary sector including charities and 'venture philanthropists' will provide for the needy.

While denying any that he was proposing to privatise the public services, Cameron gushed about the spirit of entrepreneurialism in the private sector and declared that it should be applied to 'revolutionise' the provision of social welfare:

I believe that this generation could see a revolution in our social economy comparable to the revolution in the commercial economy in the 1980s. That is the revolution that I want to lead. Think of what great commercial entrepreneurs have done to revolutionise the way we live, the way we work, the way we take our leisure. In these areas we take the incredible transformative power of enterprise for granted. But why stop there? Don’t we need the same transformation in the social sphere that we have seen in the economic sphere? Why should social enterprise not also transform the most important thing of all, the communities we live in?

It’s already happening. The voluntary sector means more than charity in its old-fashioned sense. It includes venture philanthropists, like New Philanthropy Capital or the Impetus Trust, set up by commercial entrepreneurs who want to bring their flair for spotting success to the field of social action.

The provenance and nature of venture philanthropy is much as one would guess from its name. The website of Philanthropy UK, which describes itself as "the leading resource for free and impartial advice to aspiring philanthropists who want to give effectively", explains it as follows:

Venture philanthropy (VP) is an approach to charitable giving that applies venture capital investment principles – such as long-term investment and capacity-building support – to the voluntary and community sector. It is a form of ‘engaged’ philanthropy.

Modern forms of VP emerged in the USA in the mid-1990s, and spread to Europe about five years ago.

It is worth remarking at this point that the charity industry, in terms of percentage donations, is not in general a means by which the rich give to the poor. Even in the USA, the poor donate a much higher proportion of their income to charity than rich people do. As K.J. Mullins noted in an article in the Digital Journal in July 2009:

The poor donate more than the rich when it comes to giving at their capacity. A homeless person is more likely to feed another than the richest man in the harshest of economic times.

According to the U.S. Bureau of Labor Statistics' latest survey of consumer expenditure... the poorest households in the United States gave on average 4.3 percent of their income while the richest fifth gave just 2.1 percent of their income.

But the concept of ‘engaged’ philanthropy is especially designed to appeal to the wealthy. The rich people who donate the money remain involved with how the money is used, and hold their recipent charities to account, against 'the achievement of measurable goals'. Thus VP allows the wealthy donor to spend a proportion of his or her spare cash in a way that makes them feel like a VIP. The Philanthropy UK website continues:

UK and other European venture philanthropists have adapted and evolved the American model to reflect differing socio-political and funding environments. For example, most American venture philanthropy is grant-based, whereas in Europe there is a broader spectrum of financing, such as loans and surplus sharing mechanisms, often used in combination with grants. Europeans also typically are more open to investing in initiatives that are not registered charities – such as social enterprises, social businesses or individuals – in part stemming from the varying legal forms of organisation and charitable tax relief in different countries. European VPs also are more likely to actively seek to work in partnership with other funders or government to advance their mission.

Despite its rapid growth over the last 10 years, VP still remains a small percentage of total grant-making, even in the USA. Venture Philanthropy Partners found that – compared to the 50,200 charitable foundations in the USA making a total of $27.6 billion in grants in 2000 (Foundation Center) – in 2001 there were only 42 “high-engagement” VP organisations, together making grants of about $50m, less than 0.2% of total foundation grant-making.

Yet whilst VP remains limited in size, its influence continues to grow as larger, ‘traditional’ grant-makers adopt some of its key principles.

In other words, 'VP' is a US-based model which has failed to take off in terms of increasing the resources available to address social needs, raising only a miserable $50 million even in its home country; but nevertheless, it has been influential in persuading existing charitable foundations to operate on more capitalist principles.

Hey, small spender

At the October 2009 Tory conference, Cameron returned to his theme of 'social responsibility' versus the state: is the big argument in British politics today, put plainly and simply. Labour say that to solve the country’s problems, we need more government.

Don’t they see? It is more government that got us into this mess.

Why is our economy broken? Not just because Labour wrongly thought they’d abolished boom and bust. But because government got too big, spent too much and doubled the national debt.

Why is our society broken? Because government got too big, did too much and undermined responsibility.

Why are our politics broken? Because government got too big, promised too much and pretended it had all the answers...

Do you know the worst thing about their big government? It’s not the cost, though that’s bad enough. It is the steady erosion of responsibility. Our task is to lead Britain in a completely different direction.

So no, we are not going to solve our problems with bigger government. We are going to solve our problems with a stronger society. Stronger families. Stronger communities. A stronger country. All by rebuilding responsibility.

However, few people take this kind of discourse very seriously. In December 2006, the ToryDiary blog noted regretfully that "David Cameron recently admitted to The Telegraph that he was frustrated that his big idea of social responsibility hadn't really taken off". Over three years later, the concept has still failed to gather much momentum, and there are good reasons for this. History and international comparisons offer no evidence for the contention that the provision of state-organised services is what causes the destruction of community and family solidarity, or for the idea that charity and individual acts of responsibility can substitute for the welfare state.

The early and mid-Victorian era, during which there was no state welfare apart from the workhouse, was a time of appalling social and family breakdown; the Tory philanthropy of that period had little effect on the widespread destitution, deaths by starvation and preventable diseases, or on the tens of thousands of abandoned children, left to fend for themselves on the streets of the big cities. It was the expansion of state provision and regulation that eventually began to address these problems.

And while presenting it as an argument in favour of increased philanthropy in Britain and continental Europe, the Philanthropy UK website presents information which demonstrates an inverse relationship in the modern developed Western world between the amount of charity giving and the level of social cohesion and well-being. It records:

Giving in the UK was 1.1% of GDP in 2006, half that of the USA, but higher than giving in other European countries. The largest share of American giving (32.8%) went to churches and religious organisations. An important factor is the role of the state in social welfare provision.

The Philanthropy UK webpage adds:

In continental Europe, the state typically plays a stronger role in social welfare provision than in the UK, with fewer, if any, tax incentives to encourage philanthropy. In the USA, private philanthropy plays a more prominent role than it does in the UK.

To back this up, the webpage cites the following statistics for the GDP percentage given to charity in four countries:

USA                2.2%

UK                  1.1%

Netherlands   0.9%

Germany        0.7%

It also adds another statistic, showing that the USA is a considerably more unequal country than is Britain. The top 10% in the United States own 70% of the nation's wealth, whereas in Britain the top 10% possess 56% of the wealth. Germany and the Netherlands, though their respective figures on this are not included in the webpage, have a more equal wealth distribution than Britain.

To consider how the United States, the UK, Germany and the Netherlands rate on the issue of social breakdown, various measures could be cited; but they would all show the same thing- the USA is by far the worst, followed by Britain, with the continental European countries showing the least effects of social breakdown. Two examples will suffice- teenage pregnancy and the prison population. Britain has the highest teenage pregnancy rate in Western Europe- more than twice that of Germany, and seven times that of the Netherlands. The US has a teenage pregnancy rate which is almost double that of the UK.

The contrast in the numbers incarcerated for criminal offences follows a similar pattern. In the Netherlands, 93 people per 100,000 are in prison. The corresponding number in Germany is 96 per 100,000, and in Britain it is 139 per 100,000. In the USA, 686 per 100,000 of the population are in prison.

Of course, charitable activities are not the cause of social breakdown; they are merely a symptom of that process. Where the state fails to ensure social welfare provision, and linked to that, where there is rising inequality, people attempt- sadly with only minor positive effects- to alleviate the resultant social problems by means of charitable works.

Ideology versus efficiency

In the still very likely event that the Tories are elected, the complications will begin to emerge in respect of the other aspects of Cameron's drive to roll back and break up the public sector, the two most promoted examples of which are the the proposal to introduce the 'Swedish model' of education vouchers and 'free schools', and the proposal to turn public sector institutions into 'worker co-operatives'.

Sweden implemented its free market-style school voucher system in 1992; since then, parents have been allocated an annual sum of money for the education of each child, and anybody can set up a school and seek to attract pupils. But while this system has obvious attractions for British Conservatives, it has failed to improve educational standards in Sweden. In fact, as Swedish web magazine The Local noted on 31st January, pupil performance in Sweden is in serious decline:

Swedish pupils still perform above average in the majority of international studies conducted over the last 20 years, the Swedish National Agency for Education (Skolverket) has concluded.

But performance has declined and Swedish pupils are falling behind.

"The development is comprehensively negative," the agency has concluded in a new study compiling results from both international and national studies completed in recent decades.

The new survey broadly confirms the analysis made by the education minister, Jan Björklund. His interpretation of the agency's statistics has been questioned by opposition politicians and led to him commissioning a comprehensive study...

The reason behind Sweden's relative decline with regards to results is not only due to improvements in the performance of pupils in comparable countries, the agency explained.

"Sweden's results in the surveys are declining," according to the agency. The period under consideration is from 1991 to 2007.

This fall in the relative attainment of Swedish children has been accompanied by a rise in social segregation, as Liz MacKean of the BBC's Newsnight programme reported on 8th February:

The Conservatives... state in their report that since the Swedish system was changed "standards have risen across all state schools".

But that is not what Per Thulberg, Director General of the Swedish National Agency for Education, the man who runs Sweden's schools, told me:

"This competition between schools that was one of the reasons for introducing the new schools, has not led to better results," he said. "The lesson is that it's not easy to find a way to continue school improvement."

It was noticed a few years ago that standards across all schools were slipping.

Perplexed, the Swedes carried out international comparative studies, as well as detailed national research, which confirmed the decline.

It is not understood why, but the slide began at around the time the schools were introduced.

"The students in the new schools they have in general better standards, but it has to do with their parents, their backgrounds. They come from well-educated families," Mr Thulberg said.

So, not only are standards generally down, there are strong indications that the new schools have increased social segregation.

Cameron's 'worker co-operatives' proposal has an ideological appeal for the Tories, because it would result not merely in the fragmentation of what they regards as 'big government' institutions, but also in intensified competition for contracts between the various fragments. This aspect would also be useful in practical terms for a government seeking to reduce the pay and pensions of public sector workers. Instead of the government directly imposing worse conditions on the staff, thus risking confrontation with the trade unions, the workers in each unit would be under pressure to cut their own salaries and employer pension contributions, in order to lower the prices at which they can bid for contracts; and when they lose contracts, the workers will have to make themselves redundant.

But there is no particular reason to expect that the scheme would have any better results than that of the Swedish school model in terms of service performance. Contrary to the claims of Tory ideology, the chaos of fragmentation and internecine competition is less efficient than central and devolved planning, and economies of scale are an important factor in the public sector just as they are in the private sector. Thus the overall and long term effect of Cameron's "revolution in our social economy" will be not only to reduce the quantity and quality of services, but also to increase the cost of each unit of service delivered.

And as state provision retreats in expensive disarray, charities will increase their activities; but not to a level that can cope with the rising levels of social breakdown which will ensue both from the lack of state services and from the likely high and rising level of long-term unemployment, itself swelled by the reduction in public sector jobs. At best, charity is a sticking plaster on the festering wounds of society. David Cameron himself is also a sticking plaster: a flesh-coloured piece of plastic put in place to conceal the yawning gap between what most people in Britain want, and what the Conservative Party has in store for them. Although he is not yet Britain's prime minister, he is already starting to come unstuck around the edges.