Dennis Smith
That speech of Johann Lamont’s has fair set the cat among the pigeons (perhaps pigeon among the cats would be a better metaphor).
Contemporary political discourse is hard to navigate, a tangled swamp of obfuscation and subliminal dog-whistle signals. Why this choice of words? Why now? Whose back is the knife going into? Lamont’s speech is a prime candidate for Kremlinological analysis.
It may help to start a long way back, with a principled distinction between liberalism and socialism as expressions of individualism and collectivism respectively. (This is too simple but it does catch a real and important difference.) On a philosophical level I think both individualism and collectivism are misguided, if not plain wrong: human beings cannot escape their complex fate of being persons in society. But that is an argument for another time and place.
On the level of economics the conflict between liberalism and socialism reappears as an opposition between free markets and government regulation and planning. Again, neither extreme is plausible. Few liberals want to deny government any role at all. After the events of 2008 few people still have absolute faith in the foresight and benevolence of unregulated markets. Equally, following the collapse of communism few socialists advocate central planning with no role at all for market freedoms.
In short, just about everyone now believes in a mixed economy with some role for both markets and government. The dispute is about finding the best point on a continuum. It is not a matter of principles but of balancing competing and possibly incommensurable values. This pragmatic belief in a mixed economy, falling between the extremes of liberalism and socialism, can fairly be described as social democracy. In this sense most of us, including mainstream Tories, are now social democrats.
Like many others David Torrance (2 October) has hailed Lamont’s speech as a breakthrough: Scottish Labour now recognises the reality that all governments need to balance their budgets. But where exactly is the breakthrough? Few would argue that governments can spend indefinitely: budgets must indeed be balanced, over some timescale. The question is: over what timescale, and using what methods? The Keynesian policy of counter-cyclical public spending to ease unemployment and smooth out boom and bust has been out of fashion for the past 30 years. But it is not clear that Keynes’s arguments have actually been disproved. Robert Skidelsky, for one, has interpreted the 2008 crisis as a vindication of Keynes, showing that he had a better grasp of market realities than the idealised models of his neo-liberal successors.
An interesting debate might be had about the role of deficit financing in Scotland. But there is not much point given that the devolved Scottish Government lacks the powers to develop its own macroeconomic policy (and will still lack them even when the Scotland Act 2012 kicks in). Only full fiscal autonomy (or of course independence) would enable the Scottish Government to match its expenditure to its own raised revenues, over whatever timescale it considers prudent.
Lamont did not discuss the pros and cons of either full fiscal autonomy or Keynesianism. Instead she related the question of balanced budgets to a choice between universal and means-tested benefits and how best to help the worst-off. This is a totally separate issue: it is perfectly possible to combine universal benefits with a balanced budget if benefits and taxes are set at the right levels. And this can be done without glaring unfairness (like free bus travel for the elderly rich) so long as you also have appropriately progressive taxation. This is the so-called Nordic model. It is also, broadly speaking, what British governments, both Labour and Conservative, aimed at for three decades after 1945.
Progressive taxation, like Keynes, has had a hard press lately. Globalisation now allows transnational corporations and the mega-rich to choose where (if anywhere) they pay tax, so states feel compelled to buy their allegiance by competitively lowering taxes. Partly because of this, economic inequality has grown rapidly in recent years. It is doubtful if this can continue indefinitely.
Adair Turner, chairman of the Financial Services Authority and hardly a raving revolutionary, has noted that ‘inequality probably matters quite a lot to human happiness, and problems created by inequality cannot be swept away by growth’. We may yet see pressure to close tax loopholes and draw existing tax havens into a more integrated global financial community. Rumours of the death of progressive taxation may prove premature.
There is probably no one optimal mix of universal and means-tested benefits. Politicians and civil servants, some of them intelligent and well-meaning, have struggled with this conundrum for decades, as Iain Duncan Smith still does with his plan for universal credits. Universal benefits may be expensive and unfair. But they need not be, if properly planned. And they certainly do not amount to ‘something for nothing’, in Lamont’s foolish phrase.
Many of those who receive ‘free’ benefits have already paid for them through a lifetime of taxes, and means-testing is hardly a panacea. It is expensive to administer and regularly produces anomalies and perverse disincentives which require further tinkering, and so on ad infinitum. But the fundamental objection to means-testing – and to Lamont’s rhetoric – is that it stigmatises those in genuine need along with the chancers. Some people really cannot pay and really do need ‘something for nothing’. They deserve the sympathy and help of society, not to be classed as scroungers and thrown to the wolves of the popular media. It is striking how widely Lamont’s speech has been praised in the right-wing press.
But perhaps the most intriguing thing is the speech’s constitutional implications. The universal benefits singled out for inspection were free tuition for students and free bus travel and personal care for the elderly – all signature achievements of the devolved Scottish Parliament. The implication seems to be that Scottish policy needs, for economic reasons, to be brought back into line with England. If so, what is the point of having a Scottish Parliament? Is this a sign of Scottish Labour backing away from the whole devolution project?
Certainly, among the unionist parties, Labour faces unique problems. In terms of attracting new voters the Tories have effectively written Scotland off. The Liberal Democrats are in theory (if rarely in practice) a federal party and therefore relaxed about local diversity in policy. Only Labour has to square the circle of promoting incompatible policies at Westminster and Holyrood. Labour certainly needs to extricate itself from the hard place where it now finds itself. But given the widespread public support for more devolution, not less, Lamont’s apparent direction of travel deserves the epithet that many commentators have awarded it – brave.
Dennis Smith was formerly curator of modern Scottish collections at the National Library of Scotland
