2012 Conference newsletter

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Conference Newsletter 2012

This special edition contains details of our extensive series of fringe events at the Liberal Democrat, Labour and Conservative party conferences.

At the half way point of the electoral cycle and hot on

the heels of a Government reshuffle, the three main political parties meet at their conferences amid some of

the biggest political and economic challenges for a generation.

SMF Chair Mary Ann Sieghart writes exclusively for this

newsletter on what these conferences mean for the three political parties, and why each one will face their

party faithful with everything to prove - and plenty to lose. The article The price of popular politics on page 2 is a

must-read for the conference season. Mary Ann will be

blogging for our marketsquare blog on each of the leaders’ speeches so remember to log onto

www.smf.co.uk/marketsquare to follow her reaction.

Perhaps the biggest worry hanging over the party

conference season for all political parties is the continued

lack of growth in the economy and the prospect of fighting an election in 2015 against the backdrop of yet

more cuts. On page 6 of this newsletter Ian Mulheirn takes a discursive look at the options available to the

Chancellor as the Treasury prepares to ditch its fiscal

targets in response to the continued lack of growth. This

Prospect essay is essential pre-conference train journey reading, so don’t forget to print a copy of this newsletter

and take it with you to Brighton, Birmingham or Manchester!

Once again the SMF will be making an important

contribution to the debate at the three conferences. Our wide-ranging fringe programme will welcome ministers

and senior MPs, senior journalists, and leading industry figures to discuss topics ranging from growth and

investment to higher education and welfare.

We are particularly excited to be bringing together the coalition partners - represented by Danny Alexander and

Oliver Letwin - once again this year to discuss the growth conundrum at both the Liberal Democrat and

Conservative conferences. Other top notch speakers

Once again, the SMF team will be bringing you live updates from our debates via our twitter feed

@SMFthinktank, and reaction to the policy

announcements and speeches on our marketquare blog. Remember to join in in the conversation by following us

and using our #SMF2012fringe hashtag. We look forward to seeing you at some of our party conference debates.

Contents Mary Ann Sieghart: The price of popular politics 2

Liberal Democrat Party Conference fringe programme 3

Labour Party Conference fringe programme 4

Conservative Party fringe programme 5

Ian Mulheirn: Train journey briefing: George Osborne’s Catch 22 6

Welcome to the 2012 Conference newsletter

include Vince Cable, David Willetts, Lord Freud, and Lord Adonis.




Politics isn’t always a zero-sum game. Just because one party is unpopular doesn’t mean the others will automatically be loved. As we go into the party conference season, each of the three main parties is struggling to endear itself to the electorate. Even Labour, which is ahead in the polls, knows that it should be doing better still at this point in the electoral cycle.

The deep-seated problem for all three parties is that there’s no money left. Not only are voters angry about the fall in their living standards, the loss of jobs, the lack of opportunities and the elusiveness of economic growth; the UK’s yawning deficit means that no politician can buy popularity by promising any policy that costs money. Indeed, all the party leaders can promise is more cuts and tax rises. The only argument between them is over how much austerity is needed. No wonder politicians are unloved.

And this year, each leader is heading to a conference of activists who have doubts about his competence and political direction. The Liberal Democrats are bemused by their party’s continuing low poll ratings and disappointed that yet another attempt at constitutional change – House of Lords reform – has crumbled to dust in Nick Clegg’s hands. Clegg had hoped that the Conservatives’ move to the Right and Labour’s move to the Left would open up a ‘sweet spot’ in the centre for the Lib Dems to be the only party combining economic realism with a social conscience – but sadly for him, the voters don’t seem to have noticed.

Ed Miliband at least goes to his conference with a lead in the polls, but his activists are still restive. They don’t understand why, when the coalition is so unpopular and Labour can scoop up disillusioned Lib Dem voters, their party isn’t much further ahead in the polls. They also fear

that their leader’s donnish preoccupation with political theory and abstract nouns is inappropriate for a time when ordinary people want concrete measures to improve their lives. Will ‘predistribution’ go the way of last year’s ‘predatory capitalism’?

David Cameron has perhaps the hardest task of all. He has eased it slightly with a reshuffle designed to tickle the tummies of his activists. But he still heads to Birmingham with two big problems. His mission to sort out the economy has so far failed: the deficit-cutting hasn’t worked and growth has gone into reverse. Meanwhile, his pet project, the Big Society, is barely mentioned any more. Voters are justifiably starting to wonder: what is the Prime Minister for?

We are exactly halfway through the electoral cycle and a lot can change before 2015. But political preconceptions often take years to shift, and if any of the three party leaders is to recapture voters’ imagination in time for the next election, he needs to come out with fresh and exciting ideas now. Trouble is, he has to make sure they don’t cost anything.

Mary Ann Sieghart is a writer & commentator and Chair of the Social Market Foundation

The price of popular politicsThe price of popular politicsThe price of popular politics Mary Ann SieghartMary Ann SieghartMary Ann Sieghart

Look out for Mary Ann Sieghart’s reaction to the three leader’s speeches on the SMF blog at www.smf.co.uk/marketsquare




Laying the foundations for prosperity and growth The Pavilion, The Grand Hotel, Brighton ● 18.15-19.30 Rt Hon Danny Alexander MP (Chief Secretary to the Treasury), Rt Hon Oliver Letwin MP (Cabinet Office Minister), Frances O’Grady (TUC) and Ian Mulheirn (SMF). Chaired by Philip Collins (The Times).

Delivering a sustainable savings deal for UK consumers Glyndebourne Room 1, Holiday Inn, Brighton ● 08.00-09.00 Steve Webb MP (Pensions Minister), David Nish (Standard Life), Neil Carberry (CBI) and Owen Walker (schemeXpert.com). Chaired by Ian Mulheirn (SMF).

What is a liberal education? Glyndebourne Room 1, Holiday Inn, Brighton ● 13.00-14.00

Christopher Cook (FT) and Kevin Courtney (NUT). Chaired by Gerard Kelly (TES).

A brave new world? What will the new Higher Education landscape look like? The Gloucester Room, The Hilton Brighton Metropole ● 18.15-19.30 Simon Hughes MP (university access tsar), Nicola Dandridge (Universities UK), and John Gill (Times Higher Education). Chaired by Mary Ann Sieghart (SMF).

Switched on customers: Improving competition in banking Glyndebourne Room 1, Holiday Inn, Brighton ● 18.15-19.30 Baroness Kramer, Adrian Kamellard (Payments Council), Pula Houghton (Which?) and Hilary Osborne (Guardian). Chaired by Dr Nigel Keohane (SMF).

Has the penny dropped? Preparing for welfare reform Glyndebourne Room 1, Holiday Inn, Brighton ● 08.00-09.00 Stephen Lloyd MP (Work and Pensions Select Committee), Maria Heckel (Circle), Deven Ghelani (Centre for Social Justice), Katie Lane (Citizens Advice) . Chaired by Dr Nigel Keohane (SMF).

Social mobility and welfare reform Victoria Terrace, The Grand Hotel ● 18.15-19.30 Duncan Hames MP (invited), Nancy Kelley (JRF), Dr David Hall Matthews (Social Liberal Forum) and Sarah Neville (FT). Chaired by Dr Nigel Keohane (SMF).

Can auto-enrolment work for middle-income savers? Glyndebourne Room 1, Holiday Inn, Brighton ● 18.15-19.30 Steve Webb MP (Pensions Minister), Patrick Heath-Lay (B&CE Benefits), Joanne Segars (NAPF), Ian Smith (schemeXpert.com). Chaired by Ian Mulheirn (SMF).

Clearing the path to prosperity: How can we get companies investing? Glyndebourne Room 1, Holiday Inn, Brighton ● 15.00-16.00 Rt Hon Vince Cable MP (Business Secretary), other speakers tbc. Chaired by Ian Mulheirn (SMF). Places are strictly limited. Contact [email protected] to book.

Liberal Democrat Party ConferenceLiberal Democrat Party ConferenceLiberal Democrat Party Conference Fringe ProgrammeFringe ProgrammeFringe Programme

Simon Wright MP ( PPS to the Education Minister), Mary Ann Sieghart (SMF),




Labour Party ConferenceLabour Party ConferenceLabour Party Conference Fringe ProgrammeFringe ProgrammeFringe Programme

Delivering a sustainable savings deal for UK consumers Exchange 4-5, Manchester Central ● 08.00-09.00 Gregg McClymont MP (Shadow Pensions Minister), David Nish (Standard Life), Doug Taylor (Which?) and John Greenwood (Daily Telegraph). Chaired by Ian Mulheirn (SMF).

Switched on customers: improving competition in banking Exchange 6, Manchester Central ● 17.30-18.30 Cathy Jamieson MP (Shadow Economic Secretary), Adrian Kamellard (Payments Council), Doug Taylor (Which?) and Robin Taylor (The Co-operative Banking Group). Chaired by Ian Mulheirn (SMF).

Exchange 7, Manchester Central ● 18.00 -19.00 Clive Betts MP, Gillian Fawcett (ACCA), Cllr Steve Reed (Lambeth Council) and David Walker, (The Guardian). Chaired by Dr Nigel Keohane (SMF).

Has the penny dropped? Preparing for welfare reform

Will tackling corporate short-termism rejuvenate capitalism?

Exchange 2-3, Manchester Central ● 08.30-09.30 Rt Hon Stephen Timms MP (Shadow Employment Minister), Maria Heckel (Circle), Sir Brian Pomeroy CBE, and Patrick Butler (The Guardian). Chaired by Ian Mulheirn (SMF).

Exchange 7, Manchester Central ● 13.00-14.00 Lord Adonis, Simon Walker (Institute of Directors), Otto Thoresen (ABI) and Nicola Smith (TUC). Chaired by Dr Nigel Keohane (SMF).

From getting by to getting on: where next for welfare reform? Exchange 6, Manchester Central ● 13.00-14.00 Lord Knight, Stephen Evans (Working Links), Nancy Kelley (Joseph Rowntree Foundation) and Sir Robin Wales (Mayor of Newham). Chaired by Ian Mulheirn, (SMF).

Can auto-enrolment work for middle-income savers? Committee Room 3, Manchester Town Hall ● 18.00-19.00 Gregg McClymont MP (Shadow Pensions Minister), Jamie Fiveash (B&CE), Joanne Segars (NAPF) and Josephine Cumbo (Financial Times). Chaired by Dr Nigel Keohane (SMF).

Reclaiming the reformist crown: How can Labour improve schools? Exchange 8, Manchester Central ● 13.00-14.00 Kevin Brennan MP (Shadow Schools Minister), Mary Ann Sieghart (SMF), Russell Hobby (NAHT), and Peter Wilby (The Guardian). Chaired by Gerard Kelly (TES).

Accounting for nothing: are local taxpayers getting value for money?

A rosy outlook: Can Labour foster a sustainable Higher Education market? Exchange 1, Manchester Central ● 13.00-14.00 Shabana Mahmood MP (Shadow Universities Minister), Nicola Dandridge (UUK), Liam Burns (NUS) and Tom Clark (The Guardian) -tbc. Chaired by Ian Mulheirn (SMF).




Conservative Party ConferenceConservative Party ConferenceConservative Party Conference Fringe ProgrammeFringe ProgrammeFringe Programme

Delivering a sustainable savings deal for UK consumers Soprano, Hyatt Regency Birmingham ● 08.15-09.30 Sajid Javid MP (Economic Secretary to the Treasury -invited), David Nish (Standard Life), Malcolm Small (TISA) and Jeff Pestridge (Mail on Sunday). Chaired by Dr Nigel Keohane (SMF).

Schools for sale? Education and the for-profit sector Room 112, Jurys Inn ● 12.30-14.00 Damian Hinds MP (Education Select Committee), Mary Ann Sieghart (SMF), Natalie Evans (New Schools Network), Dr Mary Bousted (ATL) and Toby Young (West London Free School). Chaired by Gerard Kelly, (TES).

Has the penny dropped? Preparing for welfare reform Fortissimo, Hyatt Regency Birmingham ● 12.30-14.00 Lord Freud (Minister for Welfare Reform), Mark Rogers (Circle Housing Group), Sir Brian Pomeroy CBE and John Bingham (The Telegraph). Chaired by Ian Mulheirn (SMF).

Choppy waters? Navigating the new Higher Education market Room 112, Jurys Inn ● 17.30-19.00 David Willetts MP (Universities Minister), Professor Eric Thomas (Universities UK), Haroon Chowdry (IFS) and Camilla Cavendish (The Times). Chaired by Mary Ann Sieghart (SMF)

Switched on customers: Improving competition in banking Fortissimo, Hyatt Regency Birmingham ● 12.30-13.45 Andrew Tyrie MP (Treasury Select Committee - invited), Adrian Kamellard (Payments Council), Anthony Thomson, (Metro Bank) and Teresa Perchard (Citizens Advice). Chaired by Nida Broughton (SMF).

Over to you: Universal Credit and personal responsibility Fortissimo, Hyatt Regency Birmingham ● 17.30-19.00 Lord Freud, (Minister for Welfare Reform), Mark Lyonette (ABCUL), Sir Brian Pomeroy CBE (Treasury Financial Inclusion Taskforce) and Rafael Behr (New Statesman). Chaired by Dr Nigel Keohane (SMF).

Planning for retirement Room 112, Jurys Inn ● 17.30-19.00 Harriett Baldwin MP (Work and Pensions Select Committee), Jamie Fiveash (B&CE ), Chris Curry (PPI) and Jeff Prestridge (Mail on Sunday). Chaired by Leonora Merry (SMF).

Laying the foundations for prosperity and growth Soprano, Hyatt Regency Birmingham ● 19.30-21.00 Rt Hon Oliver Letwin MP, (Cabinet Office Minister) Rt Hon Danny Alexander MP (Chief Secretary to the Treasury) Frances O’Grady (TUC) and Ian Mulheirn (SMF). Chaired by Daniel Finkelstein (The Times - invited).




Train journey briefing: Train journey briefing: Train journey briefing:

George Osborne’s Catch 22George Osborne’s Catch 22George Osborne’s Catch 22 Ian MulheirnIan MulheirnIan Mulheirn

It is crunch time for the Coalition. Back in May 2010, eliminating the deficit in the public finances was its raison d’être, but the economy is not following the script. There has been no growth since the Government came to power, and the outlook is deteriorating rapidly. As the Coalition passes the half-way mark of the parliament, the governing parties are faced with the shocking prospect of going into the next election with an economy that is smaller than it was seven years before.

The politics of getting the economy moving are perilous. But the Chancellor can act, and he must. Unless he can rise above the politics, we’re all set to lose.

The Chancellor’s dilemma Independent growth forecasts now suggest that the economy will be almost two per cent smaller by the end of next year than the Office for Budget Responsibility predicted just six months ago. As a result, tax revenues have disappointed, and on its current spending plans the Government looks set to break George Osborne’s second fiscal rule: to have national debt falling by 2015-16.

Unless the Chancellor can rise above the politics, we’re all set to lose.

The reasons for the absence of growth are the source of much debate. To be fair to the Government, it is far from clear that its plan was doomed from the outset. Rising global commodity prices have squeezed household incomes, weighing on consumer spending. Apparently unending stagnation in the Eurozone has damaged exports. Both have undermined investment, as businesses lack confidence that there are consumers out there who would buy their wares.

Nevertheless it is now clear that the programme of cuts implemented by the Chancellor has not allowed the growth necessary to meet the fiscal rules on which he staked the Government’s credibility in the June 2010

budget. The OBR’s autumn assessment this year therefore seems sure to set up the most important decision that the Chancellor will take this autumn, and perhaps of his entire time at Number 11. The choice is clear: either the June 2010 spending plan or the debt rule must go. How should he respond?

Osborne’s response to the impending OBR downgrade There are four basic options. Three of these are suicide. The fourth will take political courage and resolve in larger quantities than we’ve seen from the Government in recent months.

First he could review his spending plans and cut faster between now and 2015 in order to try to meet the rule. That would chime with the views of many on his own backbenchers, such as David Davis, who have been arguing for quickening the pace for some time. But sacrificing the spending plans to the fiscal rule is no credible growth strategy. With the economy operating well below its potential level and unemployment around a million higher than normal, further cuts now would tip the economy deeper into recession. That would undermine bondholders’ confidence in the Government’s strategy to close the deficit. Indeed it’s hard to see such calls as anything more than small state ideology – a sideshow to the growth question everyone else is struggling with.

The choice is clear: either the June 2010 spending plan or the debt rule must go.

The second option is for the government to sacrifice the fiscal rule and leave current spending plans unchanged. This is the ‘do nothing option’ and avoids short-term political pain. But more of the same won’t do anything to drag the economy out of the mire – it will only defer the problem, making it worse in the meantime. It will also do serious damage to the Government’s fiscal credibility:




there is little point in self-imposed rules if they can be so lightly cast aside when they become inconvenient. Where would it leave the Government’s much vaunted credibility to be forced into a redesign of their fiscal framework by the failure of their own plan?

The first two options then, are politically feasible but will do nothing for growth. To date, monetary policy, in the form of rock-bottom interest rates and quantitative easing, has been the mainstay of the growth strategy. And it is thought to have had a big impact. The Bank of England research suggests that QE may have added as much as three per cent to output since March 2009, relative to what would otherwise have happened. But far from indicating that monetary policy action is a sufficient response to the crisis, that serves only to underline just how bad things would have been without it. And it seems likely that further QE will suffer from diminishing returns.

The first two options then, are politically feasible but will do nothing for growth

Unsurprisingly, therefore, agreement is building among many economists around the need for fiscal action. Indeed, no lesser institution than the International Monetary Fund – the very embodiment of fiscal rectitude – recently suggested that the Government should respond with fiscal policy if the latest monetary measures fail to stimulate growth. Here the Chancellor has two growth options. The problem is the politics.

The most commonly discussed alternative is for the Government to ditch Plan A, instead adopting a plan B by borrowing more and slowing the pace of the cuts. Although this would break the debt rule, a judicious investment boost would raise demand and strengthen confidence, crowding in private sector investment.

Indeed the Chancellor already appears convinced by the economics of taking some limited fiscal action. Recent announcements have deployed the public balance sheet to guarantee private investment in things like housing construction. Here the Chancellor is taking on fiscal liabilities in a way that’s economically almost indistinguishable from borrowing to fund direct public investment.

The Chancellor already appears convinced by the economics of taking some limited fiscal action

But this approach is limited compared to a real Plan B. And having convinced most people of the apparently water-tight – if misleading - argument that ‘you can’t borrow your way out of a debt crisis’, it would be impossible for the Government to actually borrow more

and explain why it has changed course so dramatically.

It would have been one thing for the Chancellor to have advocated cuts that were more responsive to the economic outlook from the start, but becoming a convert to that view only through necessity and the ignominious failure of Plan A is a rather different proposition. Ed Balls would have a field day and it is hard to see how such a volte-face could ever occur without the government falling.

The economics of a deficit-funded fiscal stimulus might be sound. But the politics are simply impossible. So what of option four? Is there a growth option that doesn’t involve a career-stopping U-turn for the Chancellor? There is, and it might just work.

The Fourth Way The Chancellor can stick to his spending plans and boost growth through altering the composition of government taxation and spending. By axing measures that have little impact on output and recycling the cash into infrastructure investment that can boost GDP directly, he can create employment and increase the long-term potential of the economy. Let’s call it ‘The Fourth Way’.

So what would such a plan entail? As the IMF coyly puts it, ‘better targeting of transfers on those most in need’ - code for gory measures like axing give-aways to better-off pensioners and cutting higher rate tax relief on pension contributions - would be one way to find funds for investment. Similarly, some kind of property tax of the type recently proposed by Nick Clegg would raise cash to inject into growth-friendly projects, without letting up on the pace of deficit reduction.

This growth plan would enable the Chancellor to claim that, despite breaking his rule, he’s sticking to Plan A while providing a fiscal stimulus – a neat and perhaps career-saving trick. But while the overall story is an easy sell to voters – who doesn’t want to have their fiscal cake and eat it? – the political problems lie in the details of what should be cut or what taxes raised. It’s hard to see many Conservative MPs supporting cuts to pension tax relief, a new property tax or a U-turn on the prime ministerial promise to protect Winter Fuel Payments.

Fighting over the pie The Chancellor is therefore faced with one fiscal growth plan that’s politically infeasible and another that’s merely politically very difficult. That difficulty stems from the distributional effects the latter would entail: the losers from individual policy decisions will shout loudly. For example, the benefits of recycling the tax currently foregone in savings incentives into infrastructure




investment are diffuse, while the costs are very immediate to a relatively small but powerful section of the electorate. Who knew that pasty eaters and caravan owners were such a formidable lobby?

For the plan to work, the Chancellor needs to re-convince the electorate that our economic destinies are intertwined – that when it comes to national prosperity we really are all in it together. He needs to explain that we can fight over the slices of a shrinking national pie, or we can work together to increase the overall size of the pie. He needs to convince us that we should focus first on the absolute, before we think about the relative. And to do this credibly he will need to make some of his own voters squeal.

Fatalism about growth is not warranted, and the Government has time to act.

He could soften the blow by telling a clearer story about the distributional impacts of policy decisions already taken to address the crisis. Rock-bottom interest rates have, for example, benefited debtors at the expense of creditors. Quantitative Easing is estimated to have transferred some £600bn to people with financial assets, most of this vast windfall going to the richest 10% of households in the country. Yet these huge distributional effects tend to slip under the political radar.

Low interest rates might sustain house prices, but a

property tax would recover some of that transfer; QE boosts equity values, while a reduction in pensions tax relief for the higher earners would reduce the advantage. Such measures run counter to Mr Osborne’s political instincts. But they now offer the best chance for him to restore his fortunes: will his deeper instinct for political survival kick in?

Hamstrung by the politics, the Coalition has so far shown little appetite for reengineering its June 2010 plan to support the economy. As a result that plan is looking increasingly bereft of credibility and devoid of purpose. Fatalism about growth is not warranted, and the Government has time to act. But making the right decision this autumn will entail a greater degree of statesmanship and political courage than has been evident to date.

This article appears on the Prospect website.

Ian Mulheirn is Director of the Social Market

Foundation and author of Osborne’s Choice, an SMF

paper outlining a new fiscal strategy

Laying the foundations for prosperity and growth │ Liberal Democrat Conference The Pavilion, The Grand Hotel, Brighton ● 18.15-19.30 Rt Hon Danny Alexander MP (Chief Secretary to the Treasury), Rt Hon Oliver Letwin MP (Cabinet Office Minister), Frances O’Grady (TUC) and Ian Mulheirn (SMF). Chaired by Philip Collins (The Times).

Laying the foundations for prosperity and growth │ Conservative Party Conference Soprano, Hyatt Regency Birmingham ● 19.30-21.00 Rt Hon Oliver Letwin MP, (Cabinet Office Minister) Rt Hon Danny Alexander MP (Chief Secretary to the Treasury) Frances O’Grady (TUC) and Ian Mulheirn (SMF). Chaired by Daniel Finkelstein (The Times - invited).

SMF keynote events on growth and the economy

For a third year in a row we are bringing the coalition partners together to discuss the most pressing issue facing the Government. Our keynote event, held in partnership with the TUC, will see Chief Secretary to the Treasury Danny Alexander and Cabinet Office Minister Oliver Letwin debate how to get the economy growing.

“The SMF is playing a very important role in bringing the Coalition partners together to have an open debate about the issues facing our economy” Chief Secretary to the Treasury, Danny Alexander

2012 Conference newsletter

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