Britain's choice Our guide to the 2017 election - The Economist
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2
Britain’s choice
JUNE 2017
Our guide to the 2017 election
BRITAIN’S CHOICE
ON JUNE 8th Britain will hold a general election. Since the last time the country
went to the polls, in 2015, it has changed dramatically. The vote for Brexit last year
has set it on a new, uncertain course; all its main political parties have changed their
leaders, who offer contrasting visions of the country’s future—and a decisive break
with its past. Voters must now decide which they prefer. During the campaign we
have published numerous articles on the election and the issues surrounding it. To
help interested readers, we have assembled a selection of them below, starting with
our leader explaining how we would cast our own vote.
Zanny Minton Beddoes, Editor-in-chief
CONTENTS
3 Our endorsement 12 Nationalising industries 18 Theresa May
The leaders of both main parties have A high short-term price and higher long- The two Theresas: one thoroughly
turned away from a decades-old vision of term cost competent, the other less so
an open, liberal country
13 Social care 19 The elderly vote
4 The background A magnificent U-turn raises questions Why the elderly are keener than ever on
British politics is being reshaped by the about Tory competence the Conservatives
collapse of the neoliberal consensus
13 Welfare 20 Online campaigning
8 Election manifestos Britain’s poor face more painful benefit Digital democracy is changing the way
The three main parties are proposing cuts whoever wins on June 8th elections are fought, for better and
very different policies. Yet they have a worse
common thread: a more intrusive role 14 Low pay
for government A plan to give Britain one of the world’s 20 Turnout
highest minimum wages Election fatigue and a big gap in the
10 Immigration polls may persuade voters to stay
The Tories’ plan to cut immigration by 15 The economy at home
two-thirds would be highly damaging With a slowdown looming, the Tories
have picked a good time for a vote 20 Ground troops
11 Education and mobility As party leaders fight for the airwaves,
Ditching tuition fees and opening 16 Scotland their activists pound the ground
grammar schools could help rich children Referendums on independence and
at the expense of poor ones Brexit have caused a realignment that
benefits the Conservatives
11 Tax
Whoever wins the next election, taxes 17 Northern Ireland
are likely to go up Yet another election will not help efforts
to patch things up
Published since September in 1843
to take part in "a severe contest between intelligence, which
presses forward, and an unworthy, timid ignorance obstructing
our progress."
Editorial office:
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Tel: +44 (0) 20 7830 7000
2 The Economist May 2017
BRITAIN’S CHOICE
would each in their own way step back
from the ideas that have made Britain
prosper—its free markets, open borders and
internationalism. They would junk a po-
litical settlement that has lasted for nearly
40 years and influenced a generation of
Western governments. Whether left or right
prevails, the loser will be liberalism.
Labour, the conservative party
Mr Corbyn poses as a radical but is the
most conservative—and the most danger-
ous—candidate of the lot. He wants to take
the railways, water and postal service back
into public ownership. He would resur-
rect collective pay-bargaining and raise the
minimum wage to the point where 60%
of young workers’ salaries are set by the
state. His tax plan takes aim at high earners
and firms, who would behave in ways his
costings ignore. University would be free,
as it was until the 1990s—a vast subsidy for
the middle class and a blow to the poor,
more of whom have enrolled since tuition
fees helped create more places.
On Brexit, Labour sounds softer than
the Tories but its policy comes to much
the same. It would end free movement
of people, precluding membership of the
single market. Mr Corbyn is more relaxed
than Mrs May about migration, which
might open the door to a slightly better
deal on trade. But his lifelong opposition
to globalisation hardly makes him the man
to negotiate one.
No economic liberal, Mr Corbyn does
not much value personal freedom either.
An avowed human-rights campaigner,
he has embraced left-wing tyrants such
Our endorsement as Hugo Chávez and Fidel Castro (a “cham-
pion of social justice”), who locked up op-
Britain’s missing middle ponents and muzzled the press. Mr Corbyn
has spent a career claiming to stand for
the oppressed while backing oppressors.
Candidate of nowhere
June 1st 2017
The Tories would be much better than
The leaders of both main parties have turned away from a decades-old vision of
Labour. But they, too, would raise the
an open, liberal country
drawbridge. Mrs May plans to leave the
B RITAIN last voted in a general election
just two years ago. Back then, the coun-
try was a bridge between the European
stagnated. Public services are stretched.
Political parties have responded in radi-
cally different ways. All have replaced their
EU’s single market, once cherished by To-
ries as one of Margaret Thatcher’s greatest
achievements. Worse, she insists on cut-
Union and Barack Obama’s America. Its leaders. Jeremy Corbyn has taken Labour ting net migration by nearly two-thirds.
economy was on the mend after years of to the loony left, proposing the heaviest Brexit will make this grimly easier, since
squeezed living standards. Scottish inde- tax burden since the second world war. Britain will offer fewer and worse jobs.
pendence had just been ruled out. Labour’s The Conservative prime minister, Theresa Even then, she will not meet the target
most controversial policy was a plan to cap May, promises a hard exit from the EU. The without starving the economy of the skills
energy prices, denounced as “Marxist” by Liberal Democrats would go for a soft ver- it needs to prosper—something she ought
the Tories, who went on to win. sion, or even reverse it. to know, having missed it for six years as
Today Britain finds itself in a different The party leaders could hardly differ home secretary.
era. The vote for Brexit has committed it more in their style and beliefs. And yet Her illiberal instincts go beyond her
to leaving its biggest trading partner and a thread links the two possible winners suspicion of globally footloose “citizens of
snuggling closer to others, including a of this election. Though they sit on differ- nowhere”. Like Mr Corbyn she proposes
less-welcoming America. The economy ent points of the left-right spectrum, the new rights for workers, without considering
has held up better than many feared but Tory and Labour leaders are united in their that it would make firms less likely to hire
growth is slowing; investors are jittery. The desire to pull up Britain’s drawbridge to them in the first place. She wants to make
union is fraying again. Real wages have the world. Both Mrs May and Mr Corbyn it harder for foreign companies to buy Brit- 1
3 The Economist May 2017
BRITAIN’S CHOICE
2 ish ones. Her woolly “industrial strategy” But against a backward-looking Labour took over. If Mrs May polls badly or messes
seems to involve picking favoured industries Party and an inward-looking Tory party up Brexit, the Tories may split, too. Many
and firms, as when unspecified “support about to compound its historic mistake moderate Conservative and Labour mps
and assurances” were given to Nissan after over Brexit, they get our vote. could join a new liberal centre party—just
the carmaker threatened to leave Britain Backing the open, free-market centre is as parts of the left and right have recently
after Brexit. She has even adopted Labour’s not just directed towards this election. We in France. So consider a vote for the Lib
“Marxist” policy of energy-price caps. know that this year the Lib Dems are going Dems as a down-payment for the future.
And though she is in a different class nowhere. But the whirlwind unleashed by Our hope is that they become one element
from Mr Corbyn, there are also doubts Brexit is unpredictable. Labour has been on of a party of the radical centre, essential
about her leadership. She wanted the elec- the brink of breaking up since Mr Corbyn for a thriving, prosperous Britain. n
tion campaign to establish her as a “strong
and stable” prime minister. It has done the
opposite. In January we called her “The-
resa Maybe” for her indecisiveness. Now
the centrepiece of her manifesto, a plan to
make the elderly pay more for social care,
was reversed after just four days. Much
else is vague: she leaves the door open to
tax increases, without setting out a policy.
She relies on a closed circle of advisers
with an insular outlook and little sense of
how the economy works. It does not bode
well for the Brexit talks. A campaign meant
to cement her authority feels like one in
which she has been found out.
It is a dismal choice for this newspaper,
which sees little evidence of our classical,
free-market liberal values in either of the
main parties. We believe that, as it leaves
the EU, Britain should remain open: to busi-
ness, investment and people. Brexit will
do least damage if seen as an embrace of
the wider world, not simply a rejection
of Europe. We want a government that
maintains the closest ties with the EU while
honouring the referendum, and that uses
Brexit to reassert the freedom of Britain’s The background
markets and society—the better to keep dy-
namic firms and talented people around.
In their different ways, both Labour and
The summer of discontent
the Tories fail this test.
No party passes with flying colours. But
the closest is the Liberal Democrats. Brexit
is the main task of the next government
June 1st 2017
and they want membership of the single
market and free movement. (Their second British politics is being reshaped by the collapse of the neoliberal consensus
referendum would probably come to noth-
ing, as most voters are reconciled to leaving
the EU.) They are more honest than the To-
T HE Germans have a word for it: Ge-
schichtsmüdigkeit, a weariness of his-
tory. The British were weary enough when
circumstances. The next government will
also have to re-examine domestic policies
on everything from financial regulation to
ries about the need to raise taxes for public Theresa May called a surprise general fisheries as Brussels’ writ comes to its end.
services; and more sensible than Labour, election on April 18th. It is just two years But there is more. For the past 40 years
spreading the burden rather than leaning since the country’s previous general elec- Britain has been dominated by neoliberal-
only on high-earners. Unlike Labour they tion, and less than a year since the divi- ism, a creed that sought to adapt some of
would reverse the Tories’ most regressive sive referendum that saw it decide to quit the tenets of classical 19th-century liberal-
welfare cuts. They are on the right side the EU; in 2014 a referendum in Scotland ism to a world in which the role of the state
of other issues: for devolution of power also put the future of the United Kingdom had grown much larger. It emphasised the
from London, reform of the voting system to the vote. A monumentally dispiriting virtues of rolling back that state through
and the House of Lords, and regulation of campaign has only deepened the weari- privatisation, deregulation and the reduc-
markets for drugs and sex. ness. Tedious as it all is, though, history tion of taxes, particularly on the rich; of
Like the other parties, they want to fid- is being made. embracing globalisation, particularly the
dle with markets by, say, giving tenants Brexit is the obvious reason. Whether globalisation of finance; of controlling
first dibs on buying their property. Their it is Theresa May, the Conservative in- inflation and balancing budgets; and of
environmentalism is sometimes knee-jerk, cumbent, who started from a position of allowing creative destruction full rein.
as in their opposition to new runways and strength but has campaigned poorly, or Jer- At this election, for the first time since
fracking. The true liberals in the party jostle emy Corbyn, the left-wing Labour leader, the 1970s, that philosophy has no standard-
with left-wingers, including Tim Farron, the winner will be forced to reshape Brit- bearer. Jeremy Corbyn loathed it through-
who is leading them to a dreadful result. ain’s place in the world in highly adverse out its ascendancy. Mrs May launched her 1
4 The Economist May 2017
BRITAIN’S CHOICE
2 manifesto by attacking “the privileged tricity being rationed, and the “winter of
few”, denouncing “rip-off energy prices” discontent” in 1979, when a range of public One-and-a-half horse race? 2
and proclaiming that “it’s time to remem- services were paralysed by industrial ac- Britain, average of polls, to May 29th, %
ber the good that government can do.” tion, Butskellism passed over the horizon. 2015 EU referendum 2017 election
Both Mr Corbyn and Mrs May feel like The second post-war landscape was election campaign campaign
throwbacks to times before its ascendancy: that of neoliberalism. Margaret Thatcher 50
Mr Corbyn to the militant activism of the confronted the unions instead of negoti-
Conservative
1970s and Mrs May to the constrained if ating with them, denounced “industrial
comfortable conformity of the 1950s. But strategies” as nonsense and privatised 40
their antediluvian stances resonate. They three-quarters of Britain’s state-owned
appear to address problems that neoliber- companies. She embraced globalisation, 30
alism allowed to fester, such as inequality then hardly a word: capital controls were
and social disintegration—problems which abolished; the “Big Bang” re-established Labour
explain, in part, why the country embarked London as the world’s financial centre; 20
on Brexit in the first place. and Britain led the reforms that created UKIP
In the decades following the second Europe’s single market. 10
world war, the British political landscape These reforms were brought at a cost: Lib Dem
Green
was one of “Butskellism”—a term this unemployment topped 3m in the early ?
newspaper contrived from the names 1980s (see chart 1) and many smokestack 0
2015 2016 2017
R.A. Butler, a moderate Conservative, industries were reduced to ruins. But by
Sources: Britain Elects; The Economist
and Hugh Gaitskell, a moderate Labour- the late 1980s there was also a palpable
ite, two supposedly opposed chancellors sense of a corner turned: the City boomed, Interactive: Economist.com/UKPollTracker17
who had much in common. Butskellism entrepreneurs such as Richard Branson
rested on four pillars: Keynesian demand- thrived, the south-east prospered. Ailing as “picking winners”. In 1942 William Bev-
management designed to avoid slumps; social democracies such as Sweden began eridge, a liberal academic, committed the
a welfare state to provide people with a to look to Thatcher’s Britain as a model. government to slaying “five giant evils”
combination of opportunities (though edu- Tony Blair and Gordon Brown built a in the report that laid the foundations
cation) and security (through health care broader programme of liberal modernisa- for the post-war welfare state. Mrs May’s
and pensions); consensus between poli- tion on this landscape. Their “New Labour” manifesto evokes his spirit by referring to
ticians, businesses (including many that pursued constitutional reforms in which “five giant challenges”: the economy, Brexit,
were owned by the state) and trade unions; Mrs Thatcher had had no interest, made social divisions, an ageing society and tech-
and an “industrial strategy” to shape the a point of using the proceeds of growth to nological change. “We do not believe in
direction of the economy. compensate the losers, and embraced the untrammelled free markets,” it claims. “We
The Butskellite economy grew rapidly EU. As Stewart Wood, a former adviser to reject the cult of selfish individualism. We
(though not as rapidly as America, France Gordon Brown, puts it: “One of Margaret abhor social division, injustice, unfairness
or Germany did). The welfare state suc- Thatcher’s great achievements was to turn and inequality.”
ceeded in its basic aims—providing free a fundamentalist faith in free markets into
health care and old-age pensions for eve- the hallmark of moderate centrism for the After Butskell, after Blair
rybody and free university education for next generation of leaders.” Manifestos are limited documents: in 1979
the brightest. But by the 1970s almost half One generation on, the landscape is the Conservatives’ manifesto provided
of Britain’s national income was devoted changed again. The Conservative mani- hardly an inkling of the revolution to come.
to public spending. Growth slowed; infla- festo reintroduces ideas that Margaret But they are still indicative. Nicholas Timo-
tion soared. In 1976 Britain became the Thatcher regarded as beyond the pale: thy, Mrs May’s co-chief of staff and the
first advanced country to go to the IMF for price controls for energy markets; more main author of the manifesto, wants to
a loan. Between the three-day weeks of council houses; industrial policy of the sort update the party for the age of populism
1974, when a miners’ strike led to elec- that free-marketers reflexively denounce and economic stagnation. So where Mrs
Thatcher, a former education secretary, of-
fered opportunity, Mrs May, a former home
1
Before and after Thatcher secretary, offers security. Mrs Thatcher saw
Britain aspirational conservatism as a way to ap-
Inflation rate, % Unemployment rate, % peal to working-class voters. Mrs May’s
20 20 protective conservatism seeks to expand
15 15 the party base by shielding the just-about-
10 10 managing from global markets.
Labour’s manifesto is even more hostile
5 5
to markets. It wants to take the railways
0 0
1970 75 80 85 90 95 2000 05 10 16
and electricity companies back into pub-
Government parliamentary majorities, at year end election leader change
lic ownership and give power back to the
PM HEATH WILSON THATCHER MAJOR BLAIR CAMERON
unions. It wants to restore the “basic princi-
Lib Dem 200 ples” of the welfare state by abolishing the
CALLAGHAN MAJOR BROWN coalition MAY fees for university students that Mr Blair
100
+
brought in, scrapping the private-finance
* * * * 0– initiative with which Mr Brown was much
50 taken and removing all internal markets
1970 75 80 85 90 95 2000 05 10 17† from the National Health Service (NHS).
Sources: Rallings and Thrasher; House of Commons; The manifesto would have been redder
“British Electoral Facts 1832-2006”; Bank of England *Minority governments †To June 8th
yet in tooth and claw if Mr Corbyn had had 1
5 The Economist May 2017
BRITAIN’S CHOICE
2 his way. The MP for Islington North is argu- boasted 57 MPs then, they now have just the hearts and votes of a majority of the
ably the most left-wing leader the party has eight. They are unlikely to add many on party’s members as well as of tens of thou-
had. He is certainly more left-wing than June 8th, despite theirs being the only party sands of new “supporters” who, thanks to
Michael Foot, the leader in 1980-83, who promising to try to soften Brexit and to offer a rule change Mr Miliband had favoured,
never had any truck with Marxism. Mr the possibility of rejecting it. were allowed to vote in the leadership elec-
Corbyn defied his party’s whip 428 times tion provided they contributed £3 ($4) to
under Mr Blair and Mr Brown, opposing, Unforced errors party coffers. When his leadership was
among other things, private-finance for the It would be wrong to see only an ideo- challenged after the Brexit referendum Mr
NHS, anti-terrorist legislation and the inva- logical shift at play here; political misjudg- Corbyn could no longer get even 15% of
sion of Iraq. His inner circle is even more ments played a big part in getting Britain the party’s MPs to nominate him. But the
hard-line. John McDonnell, his shadow to its current impasse. When, having lost courts ruled that this did not preclude his
chancellor, is an admirer not only of Marx the election, Ed Miliband stepped down running, and he won again. He thus held
but also of Lenin and Trotsky. as Labour leader in 2015, all candidates on to the leadership of his party despite
Abandoned by the two main parties, to succeed him needed nominations from the fact that three-quarters of his colleagues
neoliberalism has no redoubt elsewhere. 15% or more of the parliamentary party. in Parliament think that he is unfit for the
After years in which it looked as if Britain’s Mr Corbyn would not have been able to job and many leading MPs refuse to serve
two-party system was fragmenting, things surmount that barrier had it not been for in his shadow cabinet.
have gone into reverse. The two main par- some centre-right MPs feeling that, though Then there was Mr Cameron’s misjudg-
ties currently have a combined share of he had no hope of winning, his candidacy ment. He believed that he could get the
80% of the polls, compared with just 67% would broaden the debate. Margaret Beck- Eurosceptic monkey off his back by propos-
in the 2015 election. The Liberal Democrats ett, previously a caretaker leader of the ing a referendum which, if he remained
have paid for the neoliberal enthusiasm party, said that she nominated him “so that in coalition, he would never be able to
that took them into coalition with David the left would have some representation”. call and which, if the Conservatives won
Cameron’s Conservatives in 2010; having Given this opportunity, Mr Corbyn won a majority in Parliament, he would easily
win. The British—and global—establish-
ments were united in favour of Remain
(Mrs May was among them, though the
effort she put into campaigning for the
cause was studiously slight). Eurosceptic
ranks were thick with what Mr Cameron
described as “swivel-eyed” lunatics.
The campaign proved Mr Cameron’s
assessment wrong. Having earlier said he
would be happy to leave the eu if it were
not reformed, his claims that Britain had to
remain rang hollow. Mr Corbyn, who like
most of the Labour left has been deeply
Eurosceptic in his time, campaigned for
Remain with less vigour than any other
Labour leader since Michael Foot would
have. A group of canny activists led by
Douglas Carswell, Daniel Hannan and
Dominic Cummings seized control of the
Leave campaign and sought to marginalise
both UKIP’s Nigel Farage—whose anti-im-
migrant populism turned many voters off,
but whose supporters would vote Leave
regardless—and old-school Tory Euroscep-
tics like John Redwood. Instead they kept
the focus on more plausible voices such
as those of Boris Johnson and Michael
Gove. Mr Hannan argues that, had Down-
ing Street been able to frame the debate
as a choice between Mr Cameron and Mr
Farage, Mr Cameron would have won at
a walk. Instead he lost.
In a way, though, he succeeded in his
original aim. The Tories had been split over
Europe since the mid-1980s; the division
helped topple Mrs Thatcher, hobbled her
successor, John Major, and weakened op-
position to New Labour. Now the breach
is mended: the Eurosceptics won. And this
has provided an electoral bonus. Tories
who abandoned the party for UKIP can now
return—and Labour voters who went for
She was the future once UKIP, or voted Leave in the referendum, 1
6 The Economist May 2017
BRITAIN’S CHOICE
2 seem winnable, too (see chart 3). The To- But the financial crisis did not just en- public against globalisation. Immigration
ries have calculated that if they could add trench distrust and anger. It also laid bare is a more emotional subject than other
80% of the votes UKIP got in 2015 to their longer-term problems in the economy. Brit- forms of free movement because it in-
own tally from that year, their working ain’s flexible labour market has been good volves issues of culture and competition
majority in Parliament, currently 17 seats, at generating jobs. That is one reason the for resources such as school and hospital
would be over 100. They have campaigned admission of eastern European countries places. It also divides opinion on class
vigorously in Labour strongholds in the such as Poland to the EU led to a surge lines: richer Britons are more likely to re-
Midlands and the North that voted for in immigrants in the mid-2000s, one that gard immigration as a good thing; poorer
Brexit: Mrs May launched her manifesto in New Labour welcomed; concerns over Britons to see them as competitors for jobs
the Yorkshire town of Halifax, where 56% their presence was one of the factors that and state resources.
voted Leave and Labour’s paliamentary delivered a Leave vote at the referendum. That division was made more poisonous
majority is under 1,000. But despite the influx, the unemployment by the fact that the elite did very well in the
rate is one of the lowest in Europe. neoliberal years. In 1980 the average CEO
The darkness drops again If the neoliberal dispensation was good of a company on the FTSE All Share index
The appearance of Mr Corbyn’s name on at producing jobs, though, it was no great earned 25 times more than the average
labour’s leadership ballot allowed thou- help in guaranteeing their quality. Almost employee. In 2016 the bosses earned 130
sands of angry people to vote for a leader a million Britons are on “zero-hours” con- times more. Between 2000 and 2008 the
who broke with the past. Mr Cameron’s tracts that provide no assured revenue, index fell by 30% but the pay for the CEOs
decision to hold a referendum allowed mil- up from 108,000 in 2004. Britons work running the firms on the index rose by 80%.
lions of people to express their frustration longer hours than their French and Ger- Privatisation has fed resentment too.
with the status quo. And these angry deci- man counterparts, and, in the south-east, Labour’s promise to re-nationalise the
sions have proved to be mutually reinforc- spend more time and more money getting railways, which would have been unthink-
ing. Mrs May’s decision to accept the result to work. Britain’s productivity (output per able ten years ago, is popular today: thank
of the Brexit vote has produced a defini- hour worked) briefly exceeded the EU-15 high fares and private profit. The bits of
tively post-Cameron Conservative party; average in the early 2000s but now stands the public sector that stayed public did
the only Tory voice of note raised against at just 90% of the average. The OECD notes pretty well by their overseers, too. Mark
her is that of George Osborne, once an that a higher proportion of British 18- to Thompson, then the director-general of
impeccably neoliberal chancellor, now the 24-year-olds suffer from low literacy and the BBC, saw his pay soar from £609,000
editor of London’s local paper, the Evening numeracy than their equivalents in France, in 2005-06 to £788,000 the next year and
Standard. Mr Corbyn’s relatively successful Germany, Italy or Spain. £834,000 the year after that. The average
campaign has demonstrated that espous- Britain also has the most capital-centric pay of a university vice-chancellor is now
ing socialist opinions is not necessarily the economy of any major country apart from more than a quarter of a million pounds.
kiss of death. South Korea. Per-person GDP in London is Many British politicians also did very well,
The anger that turned those mistakes almost two-thirds higher than the national and not just through their expenses. Politi-
into a seismic shift is itself grounded in the average; it is almost two-and-a-half times cians such as Mr Blair, Peter Mandelson
failures of neoliberalism. The biggest factor higher than in Wales. The house-price-to- and Mr Osborne have made millions by
was the 2008 global financial crisis. It hit earnings ratio in London has risen from offering advice to banks, making speeches
Britain particularly hard because financial seven times average earnings in the early and otherwise transforming themselves
services play an outsized role in the coun- 2000s to 13 times today, so that London from gamekeepers into poachers.
try’s economy, generating 8% of its GDP, and vies with New York and Tokyo as the most Mr Carswell, who having left first the
because of its “light touch” regulation. The expensive place to live. The capital is also Conservatives and then UKIP is now retir-
crisis made Britons significantly poorer: the most expensive place in the world for ing from Parliament, goes too far when
British workers saw their wages (adjusted startups to rent offices. he says that the problem with today’s
for inflation) fall by 10% in 2008-14, and It was against this background that im- neoliberals is that they “are on the side
are unlikely to see them reach pre-crisis migration came to play its pivotal role in of Davos Man, not the demos”. Succes-
levels until at least 2020. It played havoc turning significant sections of the British sive politicians have made serious attempts
with the public finances: faced with large to address Britain’s over-centralisation, for
deficits the coalition government chose to example. Mr Blair and Mr Brown allowed
cut back on public spending. A Brexit bonus 3 Scotland and Wales to vote on devolution.
The crisis also undermined the public’s Britain, 2017 voting intention Mr Cameron and Mr Osborne created six
faith in their rulers. That faith had already by vote in 2015 election, % powerful regional mayors, including ones
taken some knocks. Mr Blair’s decision to 2015 vote 2017 intention for Britain’s second and third cities, Bir-
back George Bush in removing Saddam mingham and Manchester. But this return
Hussein from power in 2003 ended up of control to the people has proved insuf-
doing much to discredit him, especially in Conservative Where 45 ficient. Many wanted more, and believed
UKIP votes
the eyes of his own party. The only Labour are going, % that by voting to leave the EU they would
prime minister ever to win three elections 46 get it, particularly when it came to borders
in a row became a pariah in his own coun- and immigration. In doing so they changed
try. More parochially, in 2009 the Daily Tel- things profoundly. A poor government can
egraph revealed that MPs routinely abused Labour be voted out. Misguided plebiscites are not
their expenses to do up homes that they 34 so easily reversed.
sold on at a profit, as well as for sundry 24 Whether that attempt to seize control
other ill-judged and absurd outlays such as UKIP 3 leads to the creation of a plausible new
the renovation of moats and the housing 8 political landscape, not just the levelling
22
of ducks. Six cabinet ministers resigned, Lib Dem 4 of the old one, depends to some extent
9
several MPs ended up in prison and the Source: ICM poll, May 30th 2017
6 other on the result of the election. A devastating
political class was tarnished defeat for Mr Corbyn might allow moder-
7 The Economist May 2017
BRITAIN’S CHOICE
2 ate Labour MPs to reassert control over the plunged the Tory campaign into chaos is taming the populist revolution by co-
party, sparking a centrist revival. A big win by adding an ill-thought-out measure opting it; in fact, she may end up hostage
for Mrs May might allow her to negotiate a to oblige elderly people to pay for their to a revolution already in retreat.
softer Brexit than Eurosceptics like Mr Red- social care without putting a cap on the The third is Brexit itself. Negotiating it is
wood want to see. But neither is that likely. amount that they would spend. Labour’s likely to prove all-consuming; policymak-
manifesto is a compromise between what ers will have no energy left over for serious
Slouching towards Maidenhead Mr Miliband offered two years ago and attempts to tackle problems such as poor
The main opposition to the left in the what Mr Corbyn wants, with a profusion productivity growth. And all the while
Labour Party comes from the old right, of specific proposals that seeks to distract Brexit will be hurting the economy. Even
led by Tom Watson, Mr Corbyn’s deputy, from its fundamental flaws. Brexiteers concede that Britain will suf-
not from Blairites; the right has contempt The second is that the populist wave has fer short-term shocks as it renegotiates its
for Mr Corbyn because of his havering broken badly for Britain. In the post-war relationship with its single biggest market.
on the IRA and Hamas and his long his- era, and again in the 1980s, Britain was in Most independent experts predict long-
tory of rebellion, not because he seeks to the forefront of a worldwide revolution. term harm as well. According to the most
nationalise industries. Mrs May, neither The Beveridge report was translated into recent estimates from the Centre for Eco-
easy to read nor very resolute, might just 22 languages (two German copies dropped nomic Performance at the London School
as likely use a big victory as proof that she by the RAF were found in Hitler’s bunker). of Economics, a hard Brexit would reduce
has public support to negotiate the hardest Mrs Thatcher’s agenda of deregulation and GDP per head by 2.6% over ten years, while
of Brexits. Alternatively, the weakness she privatisation found imitators across the a softer Swiss- or Norwegian-style Brexit
has shown in the campaign might yet see world: between 1985 and 2000 western would cut it by 1.3%.
her deposed if colleagues decide the nego- European governments sold off some The result is likely to be a partial reprise
tiations are going in the wrong direction. $100bn-worth of state assets. of the 1970s. Politics will be paralysed—
Beyond this, there are three reasons for Today Britain is out on a limb. Donald this time by negotiating Brexit rather than
thinking that it will be very hard to fashion Trump, the only major figure overseas to fights with unions. The economy will stag-
a new political landscape either quickly have exalted in the Brexit result, is erratic, nate thanks to a mixture of uncertainty
or well. The first is a lack of preparatory crisis-prone and toxic. Emmanuel Macron and business flight. Public services will
spadework. Beveridge published his out- won the French presidency by promising be squeezed. The roiling discontent that
line of the welfare state in 1942; Thatcher- to embrace a Blairite mixture of liberal re- produced Brexit will find new targets. In
ite think-tanks busied themselves drafting forms, including deregulation, and cosmo- the 1970s, though, Britain edged its way
blueprints for privatisation throughout the politanism. Angela Merkel looks as if she towards solving the problems of its former
1970s. Today’s populist conservatism looks is going to win a third term easily. Some dispensation. It is much harder to see it
amateurish and improvised: Mr Timothy Conservatives have argued that Mrs May doing the same this time round. n
Really?
8 The Economist May 2017
BRITAIN’S CHOICE
as the deficit has fallen, so has its political
salience. Yet given the risks associated with
Brexit, and fears of a possible future reces-
sion or another market crash, a continuing
large deficit and a public debt of 90% of GDP
ought to be of greater concern than they are.
A second is how little appetite there is
for cutting taxes, rolling back regulation and
lightening burdens on business. All three
parties seem, instead, to want to increase
the state’s role in the economy. None of
the three leaders seems to be a true eco-
nomic liberal, including the nominally lib-
eral Tim Farron. They appear to share the
notion that markets need more curbs, not
more freedoms. As one observer puts it,
this week’s manifestos show that all have,
to some degree, reverted to a pre-Thatcher
way of thinking about the economy and
free markets.
This is most obvious in the case of Jer-
emy Corbyn, Labour’s leader. His manifesto
does not just propose a lot more spend-
ing, but also an extensive programme of
renationalisation, including Royal Mail, the
railways and the water companies. For all
Labour’s insistence on fiscal responsibil-
ity, there is little sign of how to pay for
all this: a current budget balance is not a
budget balance, and there are good reasons
to question the revenues likely to be gen-
erated from higher income and corporate
taxes. Labour also proposes new rights for
workers and trade unions and measures to
Election manifestos curb top salaries, including an “excessive
pay levy” on companies that have very
The state is back highly paid staff.
This is the most left-wing manifesto that
Labour has proposed since Michael Foot’s
notorious “longest suicide note” of 1983,
even if many details are less loony than
May 20th 2017
then: no import or capital controls, for
The three main parties are proposing very different policies. Yet they have a
instance. Oddly for a leader whose main
common thread: a more intrusive role for government
interest is foreign affairs, Mr Corbyn is strik-
A S THE old saw has it, nobody reads par-
ty manifestos. Most voters have made
up their minds, and undecideds choose on
lock” for state pensions. The Lib Dems are in
the middle: more spending than the Tories,
less than Labour.
ingly moderate in this area. His manifesto
pledges to maintain the nuclear deterrent,
supports NATO and promises to stick to the
the basis of leadership, not election pledges. Policy differences exist also over educa- target of spending 2% of GDP on defence,
Yet manifestos matter, for two reasons. One tion, health and social care (for which the all policies that contradict what Mr Corbyn
is that they count in government, especially Tories propose to make the rich elderly pay himself has stood for in the past.
when, as now, there is no majority in the more), as well as on Britain’s exit from the Yet it is Theresa May’s manifesto that is
House of Lords (by convention, the Lords European Union. Here Labour makes its most interesting, and not just because she
do not oppose manifesto commitments). priority the economy and jobs. The Tories’ is on course for victory on June 8th. For it
The other is that manifestos are a guide to emphasis is on controlling immigration and reveals a Tory leader whose instincts are
parties’ philosophy. escaping the European Court of Justice. And more interventionist than any predecessor
The first impression from this week’s La- the central plank of the Lib Dem manifesto since Edward Heath in 1965-75. To deal with
bour, Liberal Democrat and Conservative is a second referendum on a Brexit deal, complaints about energy prices, she joins
manifestos (the third emerged as we went with continuing EU membership as a clear Labour in proposing price caps. She prom-
to press) is of clear blue water. Labour is alternative. In this election, in short, voters ises a new generation of council houses,
proposing big spending increases, financed can hardly complain that they do not face although she is cagey about how to finance
mainly by sharp rises in taxes on compa- genuine choices. it. She also backs a higher minimum wage,
nies and the rich (defined as earning above Yet, beyond the headlines, what emerges albeit smaller than Labour’s.
£80,000, or $104,000, a year). The Tories are more strikingly are the common themes. Mrs May is promising not just to retain
more frugal, though they are dumping their One is the absence of much mention of the all EU rights for workers after Brexit, but to
commitment not to raise income tax and budget deficit. Torsten Bell of the Resolution add to them. Her manifesto includes sev-
national insurance contributions; they are Foundation, a think-tank, points out that in eral digs at business, including demands for
also alone in not guaranteeing the “triple 2010 and 2015 this was the central issue; more transparency on executive pay and 1
9 The Economist May 2017
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In today’s world of political and economic change, the one thing that’s certain
is uncertainty. Make sense of it all with clear thinking on global affairs.
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introductory offer and enjoy access across print, online, audio and via our apps.BRITAIN’S CHOICE
2 some form of worker representation on ternalism, no longer aiming to reduce the will be tricky. Mrs May now plans to
boards. As Paul Johnson of the Institute for reach of the state but instead pursuing an charge firms higher fees for hiring skilled
Fiscal Studies, another think-tank, notes, interventionist strategy. foreigners. Not only would this hurt busi-
the biggest example of her interference What is oddest about this is not its break nesses, it would make it harder to secure
in the market concerns immigration. She from the past, but its timing in relation post-Brexit trade deals. India, for example,
restates the target of cutting the net figure to Brexit. Mrs May is pursuing a “hard” has already made clear that any trade
below 100,000, from almost three times Brexit that involves leaving the EU’s single agreement would have to include some
that today, and she makes clear that the market. If business is to thrive and new concessions on migration.
cost of policing lower EU migration must investment to be attracted in the uncertain Why stick to this foolish target? Rob
fall on employers. world that this will create, a more logical Ford of the University of Manchester sug-
In part what Mrs May is doing is merely move would be to reduce intervention, cut gests three reasons. First, Mrs May might
tactical. On Brexit and immigration, she red tape and lower taxes. To choose this worry that abandoning the commitment
wants to mop up voters who formerly moment to move closer to a continental could jeopardise her chances of hoover-
backed the UK Independence Party. On European model of more regulated markets ing up the votes of one-time supporters
social and employment policies, she hopes is not just perverse but risky. No wonder of the anti-immigration UK Independence
to steal Labour moderates. Judging by the business is lukewarm about Mrs May’s Party. Second, voters do not trust the gov-
polls, she is doing well on both fronts. Yet manifesto—and about its own prospects ernment when it comes to immigration
her manifesto also reveals a new Tory pa- in a post-Brexit Britain. n (two-thirds think it unlikely that the To-
ries would reduce net migration by very
much). The prime minister may worry
Immigration that, implausible as her goal seems, drop-
ping it would erode that trust still further.
A promise worth breaking Third, Mrs May has invested time and la-
bour in the issue, having grappled with it
for six years as home secretary.
A fourth possibility is that she envis-
ages a deep post-Brexit recession, which
would cause immigration to dry up.
May 20th 2017
The target might be fudged. Tailored
The Tories’ plan to cut immigration by two-thirds would be highly damaging
visa programmes for particular industries
T HE uncertainty created by Brexit
makes it hard to draw up concrete
policies in many areas. But Britain’s im-
in 2010 in an effort to win an election. The
ploy worked—but he got nowhere near
meeting the target. Mrs May is only slight-
could exclude crowds of migrants from
the figures, if they were rejigged to look
only at long-term stayers. Four-fifths of
minent departure from the European ly more likely to succeed. Until now the Britons would be happy for doctors from
Union has changed the context for one Conservatives have been able to blame the EU to be given special visas, accord-
issue in particular: immigration. Labour’s the EU, whose rules on free movement ing to an Ipsos MORI poll. (Only two-fifths
manifesto is cautiously vague, promising mean that much immigration to Britain would award them to bankers.) But with
“fair rules” and reasonable management. is beyond the control of the government. the government apparently unwilling to
But Theresa May has reiterated one long- After Brexit, cutting migration from Eu- discount foreign students from the sta-
running Conservative promise: to bring rope will be possible. But even if Britain tistics, despite the public’s affection for
net migration (immigration minus emigra- banned all immigration from the EU— them, carve-outs for particular industries
tion) to below 100,000 a year. This com- which would be ruinous—net migration seem unlikely.
mitment, and the party’s ongoing failure would remain above 100,000 (see chart). If the prime minister fails on her pledge,
to fulfil it, has hurt the Tories in the past. Cutting the numbers from the rest of trust in her and her government could
That makes their dogged adherence to it the world has proved difficult. Recent erode. Mrs May’s claims to have got the
all the stranger. court rulings mean that tightening the best Brexit deal might be met with scepti-
David Cameron introduced the pledge restrictions on family visas and refugees cism from Brexiteers, many of whom see
reducing migration as the main reason for
leaving the EU. Disappointed former UKIP
Who goes there? voters could even be seduced by nastier
Britain, long-term international net migration*, ’000 political forces.
By nationality By reason for entry Yet the graver danger is that Mrs May
400 100 succeeds. The economic damage would
Taking up EU
EU2 a job Non-EU 50 be considerable, not least in the impact
EU8† 300 0
on the public finances. The current mi-
EU15 gration flow works in Britain’s favour.
100
200 Joining Non-EU The country exports expensive pension-
family 50 ers and imports mostly young, healthy,
EU
Non-EU
100 0 taxpaying foreigners. The government’s
+
200 fiscal watchdog reckons that by the mid-
0 Studying 2060s, with net migration of around
British 150
– Non-EU 100,000 public debt would be about 30
100 100
percentage points higher as a proportion
EU 50
of GDP than if that number were 200,000.
200 0
2006 08 10 12 14 16 2006 08 10 12 14 16
Of all the prime minister’s promises, Brit-
Source: ONS *Twelve-month moving rate †Plus Cyprus and Malta
ons must hope that her vow to cut im-
migration is one she is willing to break. n
11 The Economist May 2017BRITAIN’S CHOICE
Education and mobility There are ways to increase the number
of poor pupils at grammar schools: from
Old school creating entrance tests that are harder to
prepare for to mandating a certain num-
ber of places for children on free school
meals. But those children who failed to
make the cut would still do worse than
May 20th 2017
they would under a comprehensive sys-
Ditching tuition fees and opening grammar schools could help rich children at the
tem. Studies have demonstrated that se-
expense of poor ones
lection at 11 does not improve overall re-
T HERESA MAY and Jeremy Corbyn do
not have much in common. Yet both
are offering education policies focused on
poor students has narrowed since the gov-
ernment tripled the amount that universi-
ties were allowed to charge in 2012.
sults: it merely changes the distribution of
good grades.
Both Mrs May and Mr Corbyn say that
improving the chances of children from Shifting funding from the state to stu- a desire to improve social mobility lies at
poor families. Mr Corbyn’s Labour Party dents enabled the government to remove the heart of their education policies. In
manifesto includes a promise to abolish limits on the numbers universities could fact, they risk doing just the opposite. n
tuition fees, levied by most universities at admit. The resulting increase particularly
£9,000 ($11,600) a year. Mrs May plans to benefited poor students. In Scotland,
introduce new grammar schools, which where tuition is free and a cap on student Tax
are allowed to select pupils at 11 on the numbers remains, the growth in univer-
basis of scholarly talent. sity attendance in deprived areas has Let me tell you
Both policies will win votes: polls been slower. In England loans are avail-
suggest that people quite like grammar able to pay for tuition and are paid back how it will be
schools and greatly dislike tuition fees. only once a graduate earns more than
That is partly because both ideas hark £21,000 a year. Since outstanding debts May 20th 2017
back to a post-war golden age of social are forgotten after 30 years, almost three- Whoever wins the next election, taxes
mobility, in which bright, poor children quarters of graduates will probably never are likely to go up
could take the 11-plus entrance exam to fully repay their loan. Thus the abolition
win entry to a good school, before pro-
ceeding to a free university and, later, a
career in business, government or science.
of tuition fees would mostly benefit high
earners. The Institute for Fiscal Studies,
a think-tank, estimates the policy would
T O FINANCE the many costly prom-
ises in its manifesto the Labour Party
would need to increase taxes significantly.
Yet, in truth, the post-war years of up- cost £8bn a year. It has promised a steep rise in corpora-
ward mobility had more to do with the Likewise, children from well-off fami- tion tax and a higher rate of income tax
changing structure of the labour market lies are the main beneficiaries of Britain’s for those earning more than £80,000
than educational institutions. And the 163 existing grammar schools. According ($104,000) a year. The Liberal Democrats
evidence suggests that both policies will to research published last year by the Edu- want to add one percentage point to each
probably fail to improve social mobility. cation Policy Institute, another think-tank, band of income tax to pay for extra spend-
Take fees first. The Labour manifesto children at grammars score one-third of a ing on health care.
argues that there “is a real fear that stu- grade higher in each of their GCSE exams, The Conservatives, by contrast, like to
dents are being priced out of university which are taken at 16, than do those at portray themselves as the party of low
education”, but provides flimsy evidence comprehensive schools. Yet few poor chil- taxes. On the campaign trail Theresa May
to support the claim. Although, as it notes, dren pass the entrance tests: just 2.5% of has talked of her low-tax “instinct”. But
the number of students has fallen this children at existing grammars receive free she has left the door open to higher taxes,
year, that reflects a fall in the 18-year-old school meals (a proxy for poverty), com- in contrast to her party’s promise in 2015
population, Brexit’s deterrence of foreign pared with 8.9% at nearby state schools. not to increase income tax, VAT or nation-
applicants and the abolition of bursa- And those at comprehensive schools near al insurance contributions (a payroll tax
ries for those on nursing and midwifery grammars do worse than their peers else- which Philip Hammond, the chancellor
courses. The reality is that the gap in high- where, partly because grammars attract of the exchequer, is keen to raise).
er education attendance between rich and the best teachers. Regardless of the parties’ manifestos, a
look at Britain’s accounts makes one thing
clear: whoever wins on June 8th and
whatever promises they make now, in the
coming years the tax burden is likely to
rise to its highest level in decades.
When the Conservatives came to pow-
er in coalition with the Lib Dems in 2010,
the government was running a budget
deficit worth 10% of GDP. As ministers
went about reducing the deficit in the
parliament of 2010-15, most of the adjust-
ment was borne by cuts to public spend-
ing rather than by tax rises.
A number of departments, such as
health, education and international devel-
opment, have been largely spared the axe.
But others, such as work-and-pensions and
Going up in the world transport, saw real-terms cuts of more than 1
12 The Economist May 2017BRITAIN’S CHOICE
Nationalising industries knew that they had no chance of holding
Declare the pennies on your eyes on to them, they would surely curtail in-
Britain, total government spending and receipts
Fiscal years ending March 31st, % of GDP
Ministers as vestment.
More costly than the initial price of
50 managers buying back these industries would be the
FORECAST long-term damage done to them by plac-
45 ing them back under public management.
Spending May 18th 2017 National ownership in the past was char-
40 A high short-term price and higher long- acterised by chronic underinvestment and
term cost inefficiency. A paper from the World Bank
L
35 ABOUR’S manifesto is as long as it is pointed out that investment flooded into
Receipts ambitious. Over 123 pages of some- Britain’s water industry after it was priva-
30 times dense prose, the party promises to tised in 1989. Even on the railways, which
1979 85 90 95 2000 05 10 15 18 “upgrade” the economy and “transform passengers readily complain about, satis-
Source: OBR
our energy systems”. This would involve faction is higher than in most of Europe.
the nationalisation of the water system, Yet Britain’s utilities are far from perfect.
the energy-supply network, Royal Mail On international rankings of infrastruc-
2 a third in 2010-16. Real spending on public and the railways. Britain’s infrastructure is ture quality the country has slipped in
services has fallen by 10% since 2009-10, indeed due for an upgrade. But Labour’s recent years. Energy firms take advantage
the longest and biggest fall in spending plans would be costly—both in the short of consumers’ unwillingness to switch
on record. This brought the budget deficit and long term. supplier, by charging steep prices to their
down to 4% of GDP in 2015-16. The first challenge would be to move most loyal customers. Water bills have
Departments can make efficiency im- privately held firms back into public own- risen sharply in real terms since privatisa-
provements up to a point, but eventually ership. The government might ultimately tion, in part to pay for higher investment.
ever-smaller budgets make it difficult to need to fork out over £60bn ($78bn) for A number of factors make Britain’s util-
provide core services. From prisons to the the water industry, a similar amount for ities work less well than they could. The
National Health Service, measures of per- National Grid (which runs electricity- and current system, where a “super-regulator”
formance started to go south from around gas-transmission networks) and £5bn or (the Competition and Markets Authority)
2014, according to a recent report from the so for Royal Mail. Borrowing such large shares competences with sectoral regula-
Institute for Government, a think-tank. amounts would put upward pressure on tors (such as Ofgem and Ofwat), creates
The rate of child poverty, which fell during government-bond yields, which would confusion. Regulations are complex; util-
the 2000s, is now rising sharply, in part be- ripple through the economy into mortgag- ity firms hire senior staff less for their abil-
cause of big cuts in working-age benefits. es and corporate-borrowing costs. ity to think creatively and more because
Since the election in 2015 the govern- Nationalising the railways, by contrast, they can navigate the rules.
ment has subtly adopted a new approach might not be especially costly. Network There is a need for fresh thinking on
to austerity: less emphasis on spending Rail, which manages the track, is already how to solve these problems. But Labour
cuts, more on tax rises. In the average in public hands. The train companies has simply exhumed policies that were
budget or autumn statement since then, have time-limited franchises. Once these buried decades ago for the good reason
the government has called for tax rises have expired, the government could take that they did not work. The party’s leader,
four times as big as the average in the par- back control at little cost. However, many Jeremy Corbyn, is often described as a
liament of 2010-15. Granted, the personal of the franchises do not expire until the radical. In fact his programme is in many
allowance for income tax has risen. The 2020s. And if the operating companies ways a conservative manifesto. n
headline rate of corporation tax has been
cut. Yet increases in less-noticed charges
such as environmental taxes, stamp duty
(a levy on property transactions) and
insurance-premium tax (levied on every-
thing from holiday to vehicle insurance)
have more than compensated.
Mr Hammond is fast gaining a reputa-
tion as a tax-grabber. In his first budget in
March the chancellor pencilled in a reduc-
tion in the tax-free allowance for dividend
income from £5,000 to £2,000. He also
proposed an increase in the national-in-
surance contributions paid by the self-em-
ployed—though this was hastily, and em-
barrassingly, withdrawn after an outcry
from newspapers and Tory backbenchers.
In all, following recent revisions to offi-
cial economic forecasts, it is now expected
that in 2018-19 the tax burden, expressed
as a percentage of GDP, will be at its high-
est level since the mid-1980s. Mrs May’s
“instinct” may well be to lower taxes, but
she cannot help being bound by Britain’s
unforgiving fiscal arithmetic. n Privatised Pat and his black and white fat cat
13 The Economist May 2017BRITAIN’S CHOICE
luck. A sprightly person who died sudden- care. The manifesto is silent on plans for
ly might be able to pass on millions, since income tax (most people suspect that in-
their care costs would be zero. Someone creases are on the way). And there is no
unlucky enough to endure a long illness acknowledgment that the pledge to cut
with complex, expensive needs could lose net migration by nearly two-thirds would
everything except £100,000. For a govern- have big fiscal costs. It is a blank cheque
ment that has resisted raising inheritance from a party in little doubt that the public
tax, this was a strange inconsistency. will sign it. n
Mrs May’s emergency “clarification”
helps fend off criticism of a health lottery.
The new plan adopts the recommenda- Welfare
tion of a review in 2011 by Sir Andrew
Dilnot to introduce a cap on how much Money where
a person pays for care. (The manifesto
had dismissed his proposals as “mostly your mouth is
benefit[ing] a small number of wealthier
people”.) Sir Andrew suggested a cap of
JUNE 3rd 2017
around £40,000 in today’s prices. Mrs
Britain’s poor face more painful benefit
May has not specified a level.
cuts whoever wins on June 8th
The higher the cap, the less the state
Social care
will have to fork out. Sir Andrew’s pro-
posal might have cost about £2bn a year.
George Osborne, the previous chancellor,
L ABOUR and the Tories do not agree
on much, but they both recognise that
Britons feel squeezed. Average real wages
had promised to implement a £72,000 cap are lower than before the financial crisis
The four-day from 2020, at a cost of around half that. of 2008-09. Perhaps a million people, in-
In an era of squeezed public spending the cluding nurses and teachers, have drawn
manifesto temptation will be to raise the cap to an on food banks in the past year. Theresa
even higher level. May, the prime minister, wants to help “or-
The introduction of a cap not only pro- dinary working families” with caps on en-
May 27th 2017
tects the unlucky few from exorbitant care ergy prices. Jeremy Corbyn, Labour’s lead-
A magnificent U-turn raises questions
costs. It also limits the liabilities of private er, talks of policies “for the many, not the
about Tory competence
insurers, making it more attractive for few” and promises a £10 ($13) minimum
“N OTHING has changed. Nothing
has changed!” insisted Theresa
May. But it had. Four days after the launch
them to cover social care. At present, the
market for social-care insurance is tiny. If it
were to develop, elderly folk would worry
wage. Yet since neither party breaks from
the regressive changes to benefits policy
that are in the pipeline, the poorest Brit-
of the Conservatives’ manifesto on May less about funding their care costs out of ons seem certain to suffer big income cuts.
18th, the prime minister reversed its sig- their estate. Britain’s welfare state has been on a
nature policy, a proposed reform of the Yet there is reason to be sceptical that diet for some time. As the coalition gov-
funding system for social care for the el- such a market will bloom. British insur- ernment of 2010-15 set about reducing the
derly, which had come to be known as the ance companies have watched American budget deficit, welfare spending fell by
“dementia tax”. Mrs May insisted that the firms get their fingers burnt as conditions one percentage point of GDP, with work-
change was merely a clarification. But Sir like dementia have become more com- ing-age families bearing the brunt. The re-
David Butler, a nonagenarian psepholo- mon. Despite the ageing population, by forms squeezed the incomes of the poor,
gist at Oxford University, noted on Twitter 2014 sales of long-term care insurance in yet falling unemployment cushioned the
that in the 20 general-election campaigns America were two-thirds lower than they blow.
he has followed, “I can’t remember a had been in the early 2000s. It is also an Since 2015, however, the Tories have
U-turn on this scale.” The about-face is open question whether, under the new turned a hard-nosed welfare policy into a
welcome, but leaves the social-care sys- rules, elderly Britons would be all that punitive one. George Osborne, the former
tem underfunded and has fed a growing interested in private insurance. With the chancellor, used cuts in working-age ben- 1
perception that the manifesto was not cost of care to be capped and no one
thought through. needing to pay anything until they die,
The Tories’ original plan was to intro- would many bother taking out a policy? Welfare or unfair?
duce a new funding formula for social Following the tweak, the Conserva- Britain, long-run change in net income caused
care, whereby an elderly person would tives’ plan for social care looks similar by planned personal tax and benefit measures
By income decile, %
on their death be liable for all of their care to what was already legislated for before
costs, until only £100,000 ($130,000) of the manifesto was launched, points out 2
Liberal Democrat +
their estate remained. (The state would Sir Andrew: a cap on costs, plus a means 0
cover any further costs.) That is higher test. This does little to address the fund- –
2
than the existing threshold, but includes ing shortfall faced by social care. Between Labour
the value of the person’s home, which 2009 and 2019, funding per person is 4
the existing means-test does not for most expected to shrink by around 5% in real 6
people. terms. Conservative
8
The policy was not expected to raise The social-care proposal is not the only
much money, but it was progressive: part of the manifesto which looks a bit 10
wealthy oldies would end up contributing half-baked. There is no detail on the ex- 1 2 3 4 5 6 7 8 9 10
Poorest Income deciles Richest
most. It earned its unfortunate nickname tent of proposed cuts to winter-fuel allow-
Source: IFS
because it introduced a big dollop of blind ance, which are supposed to fund social
14 The Economist May 2017You can also read
