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The ‘Fairness Insurance’ opportunity for Clegg

By Guest
February 28th, 2011 at 4:18 pm | 4 Comments | Posted in Liberal Philosophy, Tax

Liberal Democrats policies have made their mark on the Coalition. The most significant being the AV referendum, raising the income tax threshold, introducing the pupil premium, and “green investment”.

However, these items seem thin  by comparison with Conservative reforms such as academies, NHS decentralisation, and the universal welfare credit.

Nick Clegg needs similar major achievements to his name in 2015 if he wishes to maximise Liberal Democrat chances of success in the election.

‘Alarm-Clock Britain‘ has not caught on. Cameron’s vision of the “Big Society”, appears to drive Coalition strategy for now. It’s time for Clegg to initiate his own radical vision and big ideas.

One potential area might involve reforming National Insurance and the State Pension; the Liberal Party’s greatest achievements in the 20th century.

With the introduction of the Universal Credit the system is in flux, leaving National Insurance and the State Pension open for reform. NI was originally based on the contributory principle, and provided in the event of unemployment, ill health, accidents, injuries, or loss of a spouse.

However, a recent CPS report has shown how NI contributions have become a stealth tax on earned income. They inhibit job creation, penalise low income earners, and fail to fund the state’s pension liabilities. NIC’s will lose all justification if Steve Webb’s plan for a flat rate pension is introduced.

If Clegg could address this issue then we would see a clear demonstration of Lib Dem influence and a significant achievement to be proud of in 2015.

An alternative “Fairness Insurance” could replace NIC’s with a voluntary flat rate National Insurance Tax set at 10% income, with a 10% cut to the basic rate of income tax to compensate for low income earners. This would effectively integrate National Insurance into Income Tax and shift the burden onto individuals, rather than employers, as the CPS proposed.

If an individual chose to pay the tax then the revenue would go into a Personal Savings Account (PSA) which could then be used by the individual to insure for unemployment, healthcare, and other savings. This would simplify the system by abolishing the National Insurance Fund and the complicated method of collecting NIC revenue.

In addition to this, the new Citizen’s Pension should be based on a more sustainable basis as proposed by the recent IEA paper “Sharing the Burden”. This would restore the contributory principle, tackle the problem of pension liabilities, and provide a safety net for the poor.

However, an individual who chooses not to pay the National Insurance Tax would be able to organise their own private insurance plans, retirement funds, and savings.

Such a reform to National Insurance would be a bold stroke by Clegg. Thus far, Clegg has used ambitious rhetoric with his call for “the biggest shake up of our democracy since 1832”. Yet the Protection of Freedoms Bill has failed to live up to expectations, especially with its failure to scrap control orders, and the cost of living has continued to rise drastically.

Clegg has to have policies to match the rhetoric he has been using, otherwise he risks ridicule. This will show in 2015 if he has few major achievements. David Cameron’s rhetoric has also been overblown but he will likely be credited with a balanced budget, economic growth, and significant reforms.

The tuition fees debacle, failure to scrap Trident, and support for spending cuts has alienated the Liberal Democrats’ largely social democratic/protest vote/local interest electoral base. Clegg has started to pursue the C1’s and C2’s (i.e. “Alarm-Clock Britons”) who elected Thatcher.

If he is serious about expanding his party’s electoral base then reforming National Insurance will be a crucial first step as it will demonstrate his influence, secure economic growth, and establish a reputation as a champion of the less well off. This will help tackle the disillusionment which has accompanied Clegg’s Deputy Premiership.

 Guest post from David Cowan, an intern at the Institute for Economic Affairs, writing in personal capacity


Women on boards and traffic regulations

By Simon Goldie
February 26th, 2011 at 10:28 am | Comments Off on Women on boards and traffic regulations | Posted in freedom

In a fascinating discussion on Five Live, Victoria Derbyshire talks to several female contributors about how to get more women on company boards.

I should declare an interest here,   Michelle McDowell, one of the contributors, is a friend.

The contributor from Iceland suggests that to make sure more women get on boards we need something like traffic regulations. She argued that this is because the rules on traffic helps us all behave in a better way.

That reminded me of the video below and made me wonder if her supposition is correct. It may be counter intuitive, but would women have a better chance to be on boards if certain rules were removed instead of more targets being imposed, just as people’s behaviour seemingly gets better without traffic lights?


Nick Clegg’s liberal moments

By Simon Goldie
February 25th, 2011 at 4:25 pm | Comments Off on Nick Clegg’s liberal moments | Posted in Liberal Democrats

First Nick Clegg said you shouldn’t trust governments.  Next he forgets he is in charge.

His opponents were quick to criticise the latter comment, particularly as British citizens are struggling to leave Libya. Of course, there have been many politicians who are very clear about being in charge and still fail to deliver what the public, or they, want.

If we sidestep the day-to-day political arguments and look at what the deputy prime minister has been saying for quite a while now, it would seem that he would rather trust people than institutions, prefer individuals to control their lives and not have them guided centrally by a group of people who think they know better.


The grey terror that shuffles amongst us

By Andy Mayer
February 24th, 2011 at 2:59 pm | 1 Comment | Posted in Intergenerational Justice

First they came for the squirrels now it’s granny’s free bus pass… Or that is the hope of the Institute of Economic Affairs… in respect of the whether the baby boomer generation most responsible for the national debt, should fairly share the responsibility for paying it off.

The economics of the IEA case are quite sensible; broadly state pension reform, and removing a series of universal benefits and age-related tax exemptions. Over £15bn per year could be saved. More if we include public sector pension reform. Where poverty is an issue benefits should be simple and targeted.

The politics of the case are what Yes Minister used to call “courageous”. The median age of those who vote is over 50. To persuade grandad not to borrow money from his grandchildren, is not an easy platform on which to win an election. 

The last comprehensive review then deliberately protected benefits and services for the elderly (NHS, linking state pensions to wages) whilst reducing them for the  young (tuition fees, child benefit,  national insurance). Most youthful protests against that were based around wanting to get on the derailed gravy train rather than sharing the load of carrying the current passengers or asking them to walk.  

It’s not obvious then what trigger events or political incentives are going to change to encourage politicians to take intergenerational justice seriously. Even the Liberal Democrats, who do relatively poorly amongst the elderly are wedded to the stitch-up.

Meanwhile the rather modest reforms suggested by the IEA have provoked a stream of abuse including a death threat. Underestimate the grey terror that shuffles amongst us at your peril…

“There is no blue without yellow and without orange”

By Leslie Clark
February 23rd, 2011 at 1:13 pm | 15 Comments | Posted in coalition, Liberal Democrats, Liberal Philosophy

Or so said Vincent Van Gogh.

Since its publication in 2004, and especially since the formulation of the Liberal-Conservative Coalition, there has been an astonishing  amount of guff written about The Orange Book. Barely a day goes by without someone decrying the influence of those supposedly unsavoury rightist ‘Orange Bookers’. However, Edward Stourton’s recent Analysis programme on Radio 4 was an intelligent and more measured approach to assessing its political impact. In short, it questioned whether yellow + blue = orange.

Personally, I’ve discovered that those most vehemently against The Orange Book are those most likely never to have read it. One of those interviewed in the Analysis programme was the historian and now Labour MP Tristram Hunt (post-Naughtie/Marr, I must ensure that I spell his last name correctly). His recent piece in The Guardian is a fine example of the hyperbole that surrounds it:

For these neoLiberal Democrats of the Orange Book school remain determined to junk social liberalism for economic liberalism. Their guiding light is the Gladstonian ideal of a low-tax, laissez-faire, “night-watchman state””.  And yes, he did say night-watchman state…

It is because of this that for the first and possibly last time on a Liberal Vision post, I’d like to propose to ban something – the unnecessary and overuse of the term ‘Orange Booker’ in political discourse.

For me at least, The Orange Book was just a coherent set of essays that looked to all strands of liberal history when devising future party policy; it was about looking at liberalism in its entirety – economic and social liberalism. It had nothing to do with Tory entryism in the same way that the authors of Reinventing the State weren’t closet Labour supporters. It certainly wasn’t an updated version of Nozick’s Anarchy, State and Utopia.

Just look at those who penned chapters for The Orange Book: Steve Webb could hardly be described as a man of the right and both Chris Huhne and Vince Cable were ex-SDP and Labour members. Charles Kennedy wrote the foreword (one presumes he actually read the contents of the book prior to publication?).

Edward Stourton was correct in saying that the book may have had a profound effect on British politics. Many of its authors now sit round the Cabinet table. However, the formation of the Liberal-Tory Coalition in 2010 was as much to do with The Orange Book as with the modernisation strategy pursued by David Cameron to bring the Conservatives back into the centre ground of British politics.

(P.S Please include any ridiculous examples of the term ‘Orange Booker’ in the comments).