The Social Ambitions of the Coalition: Soft-nosed liberalism Peter Taylor-Gooby BA New Paradigms in Public Policy Programme

Outline The Coalitions programme: –Very rapid, very large cuts, hitting most vulnerable, (esp service cuts: loc govt 27%; soc ho 80% - at £64bn, 4x benefit cuts of £17bn) –Complex restructuring, market-centred, concerned to shift responsibility Real economic, political, social risks So why? Paper considers various explanations

Cutting harder faster (State exp % gdp IMF WEO)

Collapse of growth= steeper cuts GDP per capita (US $) IMF WEO

Tax + Benefit changes regressive: Browne, J., 2010,

(Larger) service cuts regressive (depending on what you mean)

Restructuring Schools, HE, NHS, Local Govt, Work Programme, Police Outsourcing: for-profit/non-profit sectors Any willing/capable/qualified provider Competition; shift of responsibility Trajectory unclear (Suffolk, Bury, Brighton reversals, NHS, Police)

Explanations Prima facie: –We must deal decisively with our countrys record debts... and set the country on the course for recovery (2010 June Budget) + –Politics as normal (reward friends, weaken enemies, shift blame) Class Model? - politics New State Model? - economic –Permanent austerity + shifting responsibility New Growth Model? – political economy –Permanent re-balancing of labour/capital thro state engagement

1a: An exceptional problem? Net public debt: IMF WEO

And… Long-term loan finance: UK 88% 5+ yrs, av. maturity 14 yrs, Germany 6 yrs, US under 5 Interest relatively low. No serious Forex/ credit rating problem Pub sector wage bill comparable –UK 12% GDP, Sweden 15%, France 14%, Canada 13%, US 11% UK 4th lowest demog. spending increases by 2025 on health, long-term care and pensions 14 th lowest of 19 OECD countries

1b: Normal politics Cuts bear on Labour voters and areas Consummate blame avoidance Astute manoeuvring within coalition + use of media (?) Opportunities for business (party finance) Threat of rising unemployment etc Much uncertainty, but …..

A real need to cut spending on public services to pay off the very high national debt we now have… IPSOS

2. Class Conflict Model GDP loss imposed mainly on working class, women and vulnerable groups Restructuring weakens working class capacity to resist cuts by privatisation, splitting deserving/ undeserving poor In the context of shift from European to US levels of inequality Declining share of World Product to labour (Glynn etc)

But… Is the coalition that organised/ Is this part of a broader issue – see Models 3 and 4.

3: New State Model Inbuilt pressures for state expansion –Cost-disease: Baumol, Bacon, Iversen –New Politics: Pierson, Scharpf Resistance to cut-backs –Inertia: P+W, Gamble (but collapse of growth) –Previous cuts short-term: Hood Failure of cost-efficiency measures (ONS) (Rare) examplars from overseas Population ageing as an issue

State sector productivity Probs of conceptualisation/ measurement Changing working practices, better management, stronger incentives, union confrontations, decentralisation, internal markets, clinical governance, structural reorganisations, targets, efficiency savings etc, by Con/ Lab govts BUT NO net gain

Containing expansion? Education: productivity rose to 2001 (school pop. grew faster than inputs); then fell back. Health care, productivity fluctuated with a slight net fall, due most importantly to increases in the drugs bill and in labour costs. (Ayoubkhani et al 2010, Penaloza et al 2010).

Comparisons: NZ Trad. Agriculture, half to UK; EU 1975 subsidies 18% mfg. 49% agric; mfg invest. – 1980s debt, forex problems, deval 20% 1984 Rogernomics – end subsidies, free trade, float $, denat (3X Thatcher) Pub sector new managerialism, internal mkts, pension and U/E ben cuts, GST 1990: 25% ben cuts; no rent subs, competitive mkt across schools and health care Debt 0% by 2006; PE % by 1994, stable

Canada Deteriorating terms of trade thro 1990s Unsuccessful state-led mfg investment 1993 Liberal govt, cut pub sector workforce 23%, pub sector wages 5%, cut deficit 10-2% in 2 years Major state level cuts; NPM and competitive mkts introduced Spending 53-40%, debt 65-30% , stable

Canada and NZ: a success story? State exp. and net public debt %gdp IMF WEO

Impacts Poverty: –NZ: 14% to 17% to 23%, mid-1980s, -90s, -00s –Canada: 18% to 17% to 19% (OECD) Inequality: –NZ Gini.27 to.32 to.34 –Canada:.28 to.28 to.32 Generosity index: –NZ 29.3 to 25.2 to 24.5, –Canada: 23.2 to 25.1 to 24.4 (Scruggs 2011)

Much to be said, but.. Restructuring costs money (Universal Credit £1.7bn; NHS £2bn; HE unclear?) Will changes reduce spending long-term or just keep spending at trend? Perhaps more about shifting responsibility/ avoiding blame/ reframing citizenship than saving cash

4. New Growth Model Weakness of British growth model since ? Shift from mfg + Keynesianism to service + less regulated market Privatised Keynesianism? (Crouch, Hay), vulnerable to financial bubbles Wilson: corporatism; Thatcher: Schumpeterianism; Blair: investment + mkt

But… Short-term: loss of public sector contribution to demand, damaging growth and profits etc (even OECD expresses concern Economic Outlook ch 4 p 240 ) Long-term: permanent loss of state-led human capital/social investment

Soft-nosed liberalism Market sector leads Smaller, simpler state, but not a Thatcherite opposition of state and market Responsibility transferred to non-state actors (market, non-profit, local) Govt avoids blame? Values rather than attacks citizens

The Coalition programme ? Far-reaching, precipitate, but success partial? Normal politics/ cutting to cut debt + Class struggle + Shrunken state + New liberal growth model + Soft-nosed liberalism: embedding and legitimising retreat of the state?