11

TOWARDS A LIBERALFUTURE

22

Foreword

is the fruit of a collaboration betweenBernard Greaves, who has spent half a century developing Liberal andLiberal Democrat thinking and its application at community level andDavid Howarth, former MP for Cambridge and now one of the party’sleading academics and thinkers.

Their work is both deeply thoughtful and radical.  It starts from theproposition that the party has ‘lost its way’ producing an incoherentmixture of ‘local champions and national pragmatists’ (the latter,presumably including me, being the people who went into Coalition).

It seeks to revive the party’s long term vision and, in my view, does sobrilliantly.  There are no simple, pithy solutions but a broaderframework defining the kind of society we should be aiming for.  Itisn’t about ‘winning here’ but it provides a highly articulate account ofthe values which should underpin a winning strategy.

Leader of the Liberal DemocratsFebruary 2018

33

Introduction

The decision to write “Towards a Liberal Future” stemmed from aperception that the distinctive identity of the Liberal Democrats as theembodiment of the Liberal tradition of political thought and actionhas become lost not only in the minds of the public at large but to aconsiderable degree amongst members of the party.

We set out to do four things:

�� To examine briefly how that identity has been lost

�� Set out the fundamental values of Liberalism as committed toan open, tolerant, diverse and democratic society that enablesindividuals to develop their potential in the manner theychoose through their participation in the communities towhich they belong

�� Restate the core policy themes that lie at the heart of Liberal-ism: political and human rights, democracy throughout socie-ty, social and economic justice, environmental sustainability,internationalism and constitutional reform

�� Outline a strategy for change based upon a broad-based liber-al movement, reaching beyond the party, and acting bothwithin political structures at all levels, from the parishthrough to the EU and the UN, and outside them throughdirect campaigning for change within communities.

We present a long-term view of a Liberal future not a programme fora single government. We reiterate the identity of the LiberalDemocrats as a party of radical reform grounded since the days of

44

Lloyd George on the centre left of politics and rooted in the traditionof Liberal thought represented by John Stuart Mill, Lord Acton, LTHobhouse, Jo Grimond, Nancy Seear and Community Politics.

We are grateful to the support of The Joseph Rowntree Reform Trustin making this publication possible.

February 2018

55

Contents

SECTION 1…………………………………………………………….7WHAT HAS LED TO OUR CURRENT SITUATION

SECTION 2…………………………………………………………….11LIBERAL VALUES

SECTION 3…………………………………………………………….17PRIME POLICY THEMES

SECTION 4…………………………………………………………….81STRATEGY FOR CHANGE

66

77

SECTION 1

WHAT HAS LED TO OURCURRENT SITUATION

It would be easy to blame the current state of British Liberalism onthe Coalition of 2010-15. Certainly, many of the Liberal Democrats’short-term difficulties stem from that government’s unpopularpolicies, and more importantly, from the party’s decision early in thegovernment to submerge its separate identity to ‘show that coalitionworks’. But the problem goes much deeper and is more long term.

Jo Grimond’s achievement as leader of the Liberal Party was toresolve what British Liberalism was to mean for the late 20thcentury. The party rejected the corporatism then shared by bothLabour and Conservative Parties, but instead of turning to free marketfundamentalism, which was at one stage a live option, the LiberalParty developed a distinctive approach built around a programme ofradical democratisation: not only conventional constitutional reform(proportional representation, federalism and a democratic secondchamber) but also democratisation of the world of work throughindustrial democracy. That programme was the basis of the Liberalrevival Grimond inspired.

Community politics was intended to take this approach even further.The party would work both inside and outside existing institutions todemocratise them, to help people take and use power for liberalends. It was the practical expression of radical democracy.

88

But one can see the seeds of future problems even then. was prompted by the observation,

already clear in the late 1970s, that community politics was indanger of descending into an electoral tactic designed to win councilwards for Liberal candidates rather than to democratise institutions.Community politics largely descended into the exploitation of localgrievances and, worse still, into the promotion of ‘local campaigners’who would fix things residents rather than facilitating their effortsto solve problems together. One of the effects of grievance-basedcampaigning was that the party’s political themes and its nationalprogramme vanished. Concentrating on grievances, which varied fromplace to place, led to the accusation that the party said differentthings in different places. That accusation was often accurate.

Another source of incoherence was the alliance and then merger withthe SDP. One aspect of the problem was that the SDP containedsome who saw no problem with corporatism in the first place andothers who were eventually to conclude that the answer to it wasmarket fundamentalism. That meant that relations between policy-makers in the two parties often started from a position of mutualincomprehension. But much worse for the long-term coherence of themerged party’s programme was something that on the face of it wasa cause for hope, namely the prospect of electoral success on anational scale. Frequent bouts of optimism about breakthroughs andbreaking moulds encouraged short-term pragmatic thinking. Forexample, the principled case for federalism at all levels ofgovernment, from Europe to parishes, was abandoned out of a desireto make advances in the Euro-sceptical south-west and was replacedby populist promises of referendums. And when, as invariablyhappened, those hopes were dashed, the party hunkered down intothe tactic of promoting ‘local champions’, which even more obscuredthe party’s programme.

99

Even what some have seen as an ideological take-over of the party byso-called ‘Orange Bookers’ is part of the same process. The maincharacteristic of the pro-market views of those usually included inthat group was its conventionality. They were, in large part, merelyrepeating the conventional wisdom of the age. The corporatism of theother parties had been replaced by a new consensus around theinfallibility of market mechanisms and an obsession with outsourcing.The group around Nick Clegg, largely ignorant of the Liberal tradition,thought that they were attacking the corporatism of theirpredecessors. All they were really doing was burying even deeper theparty’s own distinctive anti-corporatist tradition.

The result was that when the party eventually took office, in 2010, ithad largely forgotten its own programme. It was a party made up oflocal champions and national pragmatists. The disappointments ofthe Coalition were the result, not the cause, of the party losing itsway.

What follows is an attempt to revive the party’s long-term vision. It isnot a list of policies that might be popular in the short term or whichmight bring the party publicity or votes. It is a sense of directiontowards the kind of society we should be aiming at.

1010

1111

SECTION 2

LIBERAL VALUES

Liberal values are universal. They are not relative or culturallyspecific. They are values to be aspired to, strived and campaignedfor, and where possible implemented in all societies, countries andcommunities.

That does not mean we think that Liberal values have nohistory. They have developed through time through the efforts ofindividual Liberals and Liberal political parties. They are stilldeveloping today.

Liberals uphold those values even in circumstances where we can dolittle or nothing to advance them.

In all societies, even under the most repressive regimes, someindividuals and groups speak out for freedom and campaign for basichuman rights. Liberals speak up for their rights and seek to protecttheir lives and wellbeing, even when it is politically inconvenient todo so.

The objective of Liberalism is to create a Liberal society.

The measure of the extent to which a society is Liberal is through theexperience of individuals. Collective experience, whether it be loyaltyto the nation and nationalism, or the solidarity of the working classes,or any other manifestation of group identity and loyalty, exists only so

1212

far as it is experienced by the individuals who comprise those groups.Liberalism values each individual equally. It aims to enable andencourage all individuals to fulfil their own potential in the way theychoose. People have an immense capacity for self-direction, self-cultivation, self-understanding and creativity. We are all different. Wehave different loyalties, different ideas of self, different abilities,different aims and objectives, and make different choices. Liberalismvalues and promotes the diversity individual freedom brings tosociety.

Individuals cannot survive on their own. We are all born into, live anddie within groups, many of which are stable enough to be calledcommunities. They are essential for our existence, our survival andour wellbeing.

We all belong to many communities. They vary in nature, size and intheir significance to individuals.

They include communities of residence, neighbourhood, geographicallocation, and nationality; of faith, religion or lack of it; of culture,language and history; of work, trade or profession; of friendship,recreation, intellectual pursuits, the arts or sport; of exclusion,oppression, discrimination, vulnerability or victimisation; and ofcampaigning, social activism or politics.

The most immediate community is the family, often the most stronglyfelt, the nature and quality of its structure and relationshipspowerfully influencing feelings of happiness, security, wellbeing andpersonal significance

Some communities are latent, emerging only as a result of threat,some are informal and unstructured, some have loose frameworks,

1313

some are highly organised, and some are constituted politicalauthorities with defined powers existing within a legal framework.

Communities bring great benefits to their members but also dangers.The benefits are not just emotional – a sense of support andcommunality – but also practical. Functioning communities can helptheir members in ways rarely captured by conventional economics –from shepherding natural resources to finding jobs and providingchildcare. But communities can also be oppressive and destructive ofindividuality. Indeed, the benefits and costs of communities might belinked. As Elinor Ostrom pointed out, one of the conditions forsuccessful community management of resources is maintaining clearboundaries of who is and who is not entitled to participate in enjoyingthose resources.

For that reason, Liberals do not see community as an unalloyed good.They accept the inevitability of living within communities and thebenefits of doing so, but they want to see Liberal communities.

Liberal communities can be characterised quite easily. To the extentthat they have internal organisation, that organisation is broadlydemocratic, recognises the equal standing of all individuals, upholdstheir individual rights, including respecting their privacy, safeguardsminorities and promotes diversity. Any collective decision-making isopen and transparent, information is shared and individuals are freeto say whatever they want in open debate, with dissent beingrespected.

Liberals also tend towards formality especially in more powerfulcommunities – that the rules they follow and impose should beascertainable, open and contestable and that decision-makingprocedures should be fair and accessible.

1414

Liberalism is also a style of how different communities should relateto one another. Liberalism values diversity but upholds rights. Thebasic principle is the same as that which lies at the heart offederalism, that groups do not encroach on one another’s legitimatespheres of interest, but that they can take an interest in protectingfundamental rights across boundaries. But differences and conflictsbetween groups should be resolved as far as possible by discussion,persuasion, debate, negotiation, mediation and compromise, only bylitigation and legal enforcement in the last resort and never byarbitrary authoritarian imposition.

In the 1970s, the Liberal Party recognised a new imperative, toprevent environmental degradation threatening the very survival ofhumanity. All species, including humans, and natural systems areinterdependent, supporting one another in an ecological balance inwhich diversity promotes survival. Human consumption of naturalresources at unsustainable rates is putting that balance at risk.

Above all, climate change has the potential to destroy human life,either directly or indirectly through war and conflict. Even before thathappens, climate change poses another kind of threat, a threat to theliberty Liberals uphold, since, if we do nothing about it now, whenwe can act freely, a time will come when authoritarians will claimthat the only way to prevent further degradation is greatly to extendstate control over individual lives.

It follows that environmental considerations, and especially thoseabout climate change, put a hard constraint on everything else wedo. Economic growth, for example, is desirable only so long as it isenvironmentally sustainable. There might be times, if the rate oftechnical improvement, especially in carbon neutral energy

1515

production and energy efficiency, were to falter, when economicgrowth as conventionally measured cannot safely be achieved.

Liberalism is not concerned only with procedures and processes(although Liberals sometimes give that impression). It is concernedwith improving the quality of life of all individuals. Quality of life isthe product of the wealth we create, the nature of that wealth andhow it is distributed

But wealth is more than the accumulation of possessions. It includeseverything that benefits individuals, including social infrastructureand the quality of the physical environment. It is also, as JS Mill said,not limited to “things of which the utility … consist[s] in ministeringto inclinations” but also includes “things which are chiefly useful astending to raise the character of human beings.” That means aboveall knowledge, culture and the arts.

The first tenet of Liberal economics is that the central issue in politicsis to define our political, social, cultural and environmentalobjectives. Economic activity is the mechanism for achieving them,not an end in itself.

Indeed, Mill himself looked forward to a time “in which, while no oneis poor, no one desires to be richer, nor has any reason to fear beingthrust back by the efforts of others to push themselves forward.” Thatmight be a utopian hope, but one should not rule out the possibilitythat in the richest societies people are beginning to tire of the endlessand unsatisfying pursuit of possessions.

1616

1717

SECTION 3

Prime Policy Themes

In translating Liberal values into practice four prime interrelatedpolicy themes arise: democracy, which includes political rights, civilliberties and the rule of law; social and economic justice, whichincludes environmental sustainability; constitutional reform; andinternationalism. They are all essential elements of liberatingindividuals to release their potential in the way they choose, and toenjoy personal freedom, and working together in a coherent whole.

Democracy permeates the whole of a Liberal society. All communitiesand organisations should embrace democracy in some form, insmaller informal ones a direct voice, in larger formal onesrepresentative democracy.

There is more to democracy than the right to vote and majority rule.The key ingredient is discussion based on consideration of the factsand understanding the feelings of others. Opinions differ but it isimportant that decisions are well informed and not based onfalsehood or myth. That requires civilised debate in which differentviewpoints are presented and respectfully heard, enabling them to besubjected to analysis and scrutiny. It is out of that process thatdemocratic decisions are reached.

1818

We remain hopeful that participating in democratic decision-makingmakes people more respectful of others, more willing to work withthem and more responsible as citizens. Democracy can thuscontribute directly to the functioning of a Liberal society.

Those who think of democracy simply as a decision mechanism - asnothing more than majority rule - deny this. They say that peoplecannot be criticised for treating their right to vote as a personalpossession or as a weapon to be wielded purely in their self-interest.Democracy in this view is just as much an instrument of selfishnessas the market and is a threat to Liberalism, not its ally. This is notour view of democracy.

��

. Discussion makes us all vulnerable tohaving not just our ideas challenged but also our values andour desires. It is a collective process, not just adding up indi-vidual opinions.

�� , that is a proc-ess of some citizens acting on behalf of others and makingdecisions that affect not only themselves but many others.

The importance of discussion has long been recognised by Liberals.We want to reaffirm that. We also want to revive the importance ofrepresentation, an idea that goes back at least to J.S. Mill.

1919

The experience of being a democratic representative, of makingpublic decisions with real life consequences for one's fellow citizens,is profound and complex. Representatives are required to reconcilewhat they believe is the right thing to do with what the public says itwants. The experience changes people - it makes them confront theworld, the people in it and themselves as they really are.

Instead of discussion and wide experience of representation weincreasingly suffer from a spectator democracy, in which citizens hurlabuse from the side lines, neither engaging in discussion with peopleof values and interests different from their own nor having to confrontthe world as it really is.

The rise of incivility largely results from technological developments:social media systems that simultaneously make it easy to dish outabuse and, for commercial reasons, lock those sending the abuse intoecho chambers. The decline of realism results from deliberate publicpolicy: half a century of reducing the proportion of the population thatexperiences acting as a representative, especially relentless localgovernment amalgamation aimed at reducing the number ofcouncillors, and the centralisation of power into the hands first ofministers and now of 'mayors'. Other policies have contributed to thedecline of representation, including weakening trade unions andforcing the professionalisation of the voluntary sector through co-opting it to deliver public services, a development paralleled ineducation with the abolition of parent governors to accompany thetransfer of schools to national private sector chains.

2020

Freedom of speech should not be confined to elegant essays inliterary magazines. Freedom of speech includes expressing disgust.Admittedly, the increasing speed of modern communication has notbeen accompanied by any increase in human cognitive capacity.Many more opportunities now exist for instant unconsideredreactions. But that does not justify regulation. As Liberals, we lookinstead to education to limit the effects of the irrational elements inpublic discourse. Although one should resist the temptation toimagine that all social problems can be solved by already over-worked teachers, schools can inoculate young people against badarguments, cognitive biases and the dangers of jumping toconclusions.

. Thenumber of local councillors should increase, not decrease, and powerwithin authorities should be spread and not concentrated on singlepersons as if local government required monarchs to avoid falling intoanarchy.

Bureaucracyconcentrates power into narrow hierarchies. Extra layers and extranumbers of representatives disperse power, which Liberals, who havealways distrusted concentrations of power as a threat to freedom, seeas a good thing.

.We oppose excluding parents from running schools. Some schoolsmight be teachers' co-operatives, some run by local authorities andsome by NGOs, but all of them should include parent governors. Wesupport tenant co-operatives as a way of running social housing and

2121

tenant representation on boards of all other social housingorganisations.

Why, for example, should the non-executivedirectors of the Board of NHS England not be elected by the wholeadult population of England? Non-executive directors do not need tobe technical experts and the NHS would be in a far more powerfulposition in its relationship with ministers if its leadership benefittedfrom a direct electoral mandate.

Similarly, especially those, such as water, enjoying a natural

monopoly. Pension funds should be run by trustees the majority ofwhom are representatives of beneficiaries.

The principle of representation should also extend into highereducation so that the funding universities receive from government inthe form of tuition fees should be dispensed by a fund on which sitelected representatives of graduates.

Most people experience life primarily through work. If that experienceis authoritarian and undemocratic it will undermine their otherexperiences of democracy. That is why a country such as the USA, inwhich political representation is not in decline as it is in the UK,faces many of the same problems.

We know that representative democracy is not a panacea. Schools inwhich teachers and parents share views hostile to raising tostandards will not improve just by giving teachers and parents morepower. Individual rights to minimum standards need to exist and beenforced by powerful and independent inspectorates.

2222

Moreover, democratic organisations make mistakes. The organisationresponsible for managing Grenfell Tower is a tenant managementorganisation with extensive tenant representation on the board.Democracies can listen to the wrong advice or fail to ask for advice inthe first place.

Unlike dictatorships, however, democracies usually learn from theirmistakes.

Democracy is not cheap. As the saying goes, the problem withdemocracy is that it takes up too many evenings. We also recognisethat not everyone is inclined to take on the responsibility of being arepresentative and that the experience is not always positive (whichis why jury service is compulsory). It might even attract the wrongsort of person. But that is why the state should support representativeactivity, mandating paid time off, forbidding discrimination againstrepresentatives, and subsidising training.

Another problem with democracy is that those willing and able to actas representatives might not be evenly distributed, especiallygeographically – a problem many of us observed in trying toimplement the idea of community politics in local government. Someplaces simply did not generate many potential councillors. Thatproblem becomes less important if representation is a normal activityin many other spheres of life – at work, in education, in health and ineconomic activity. But generating enough people willing to becomerepresentatives is often difficult. It requires considerable investmentin community development.

2323

The normalisation of representation also provides the basis of ouranswer to those who object that extending democracy means‘politicising’ society. Democratic politics, and participation in it, is agood thing. It is only because democracy is so rare that it isassociated with spin and inauthenticity. If our democratic revolutionis enacted, as many as 700,000 more people would be acting at anyone time as representatives. If we assume that they hold office for anaverage of five years, one could envisage a situation in which over acouple of decades three and half million people had experiencedacting as a representative. That is about 5% of the population, whichshould result in a situation in which a much larger number of peoplewould know someone personally who has acted as a representative.

But it will remain the case that most people will not themselvesexperience acting as a representative. The danger is that thetransformative effect of democracy will not reach them. They mightcontinue to treat democracy merely as a means of getting what theywant, as the market by other means. How do we guard against that?

Part of the problem is that of echo chambers. The process is largelythe result of algorithms used in social media. Online advertisingworks by sending people messages they might like based on theirprevious choices. They end up seeing only views they already agreewith. It should be possible to regulate such algorithms withoutdirectly regulating the content of what people see.

British Liberalism, through community politics, enlisted locality andproposed using the workplace to generate an inclusive sense of

2424

community. Two problems arose, however. First, once we movebeyond small groups, a sense of community becomes a function ofpeople’s imagination rather than of human contact or sympathy. Itbecomes easily manipulated. Secondly, especially in larger groups,one can too easily achieve a sense of community by exclusion and bycreating conflict.

Some forms of liberalism have reacted by retreating into undilutedindividualism. We, however, hold out for a more collective answer.

Some will object that we presuppose an unrealistically consensualview of politics. Politics is often antagonistic and interests clash. Butwe reject the view that politics is exclusively about defining enemiesand distinguishing them from friends.

. The currentsituation is dire. The exploitation of the parliamentary expenses crisisby the anarchic right and the triumph of anti-politics in the Brexitcampaign have to a very large extent discredited the very idea ofparliamentary democracy. Media talk of a monolithic 'will of thepeople' is merely a distillation of a more widespread view thatrepresentatives should act as no more than ciphers for the majorityview. The ideology of populism in its technical sense, that 'politicians'

2525

or 'the political class' are inevitably corrupt and that 'the people' arealways virtuous, has triumphed.

But populism in this sense is never satisfied. Anyone who takespower is immediately discredited by that mere fact. Coherent policybecomes impossible and chaos ensues, which someone claimingsimultaneously to be a 'strong leader' and the personification of the'people’ can exploit. Britain teeters on the edge of a disaster of thiskind – of Peronism or Putinism or, indeed, Chavezism: authoritarian,nationalistic and economically catastrophic.

Averting the fate of Argentina or Venezuela is a short-term politicalproblem to which we offer no short-term answer. In the long-term,however, the answer is rebuilding representative democracy.

In all erasand in all parts of the world regimes, many of them claiming to beenlightened or democratic, have sought to suppress dissent andnullify opposition. At its most extreme this involves the deployment ofmilitary force, tanks on the streets and indiscriminate bombing ofcivilians.

Around the world, the arrest, imprisonment and killing of oppositionpoliticians, journalists, artists and writers is still frequent. Wholepopulations are kept in ignorance of conditions in their own countriesand life in the outside world through rigid control of information,education, and ownership and censorship of the news media.Regimes create vast networks of secret police, informants andsurveillance technology to intrude into every aspect of people’s lives.

2626

The state exempts itself from the law and the law itself is replaced byunlimited arbitrary power. All these measures create a climate of fearand intimidation that is highly effective in keeping whole populationssubservient.

Nor is it just governments that seek to suppress opposition andsilence criticism. All kinds of organisations, private companies, publicservice providers, sports bodies and regrettably some charities, takedecisions in secret meetings, withhold information, sack or disciplinedissenting staff, and use confidentiality agreements to cover upmistakes. Moreover, people from a range of stigmatized groups canface violence, harassment, bullying and discrimination. Abusivecontrol and exploitation can occur in domestic relationships.

These are all manifestations of power being used to control,manipulate or exploit individuals who are vulnerable and incapable ofdefending themselves.

Justifications raised in defence of these actions, such as defendingthe state, protecting society, safeguarding the interests of thecompany, or upholding family values all invoke collectiveabstractions. None of those experience suffering pain or any otheremotion. It is individuals alone who experience feelings and perceivereality.

All individuals have the right to equal treatment before the law and tobe defended against from exploitation, coercion and mistreatment. Inany civilised society the protection of that right needs to be codifiedand written into law as the civil liberties of its citizens. Civil libertiesand the rule of law are an essential prerequisite for the involvementof all citizens in the processes of democracy.

The record of the UK in protecting civil liberties is rather lessimpressive than at first sight appears. Britain suffered for manydecades from a myth, drawn from Dicey, that the common law gave

2727

us more protection than any charter of rights. The truth was thatalthough the common law offered some protection against arbitrarydetention, it also included offences (criminal libel, blasphemy,sedition and conspiracy to corrupt public morals…) that posed gravethreats to basic freedoms. The common law also recognised no rightto privacy, and thus permitted police telephone tapping withoutjudicial authorisation.

The Human Rights Act has improved the situation, through the powerof the courts to interpret existing law to make it comply with thestandards set by the European Convention on Human Rights andthrough the power of the courts to declare legislation incompatiblewith the Act. So far, in all cases except on prisoner voting, Britishgovernments have accepted the view of the courts and havepromoted corrective legislation. That exception is, however,significant, since it concerns the most important right in ademocracy, the right to vote.

Other protection from the abuse of power has also come into Britishlaw from the EU, especially rights at work for LGBT+ people. Leavingthe EU means that the protection they offer will become vulnerable toabolition.

The tendency of all British governments has been to ignore civilliberties when it appears politically expedient to do so. For example,although the Coalition ended Labour’s identity card plan and rolledback detention without charge, it extended secret courts to judicialreview and tort actions against the government and reduced access tothe courts by cutting legal aid, reducing protection against costs andincreasing fees in the Employment Tribunal. Lack of funding for

2828

criminal legal aid lies at the heart of a series of miscarriages ofjustice.

The economy of the United Kingdom has often achieved levels ofeconomic growth that compare favourably to those of other developednations. Wealth is successfully created here. Yet we have a society inwhich large numbers of people seek to survive on inadequate statebenefits or low wages and characterized by substantial levels ofpersonal poverty. We also have a society in which public services arestarved of resources and in which investment in essentialinfrastructure is insufficient. And despite recent improvements, weare still producing 466 million tonnes of carbon dioxide equivalent ayear.

The wealth produced by the UK economy is not being used toaddress public and private poverty. It is being diverted elsewhere intothe hands of a tiny number of already wealthy individuals.

There are four main ways in which this is happening:

1. Wealth is being taken out of circulation so that it makes nocontribution to the welfare of anyone else, for example investment inland, which increases in value because it cannot expand to meetdemand. In addition, UK corporations have taken to holding vastsums in cash reserves because of low interest rates and economicuncertainty.

2. Wealth is being hidden outside the UK. Funds are deposited inoverseas tax havens with minimal levels of taxation or being declaredas profits in minimal tax regimes far from where they are generated.

2929

3. Similarly large national companies, particularly retail chains,centralise their profits, stripping money out of and weakening localeconomies.

4. Large sums are once again being mobilised for buying and sellingcompanies. This can be beneficial in leading to rationalisation,creating greater efficiency and saving failing companies. But it oftenleads to the concentration of ownership and wealth in fewer hands,to reduction in competition and to asset stripping. The merger ofCadbury with Schweppes and subsequent purchase by Kraft resultedin manufacture being moved abroad, products down-graded andprofits exported. Economies of scale can be illusory, beingoutweighed by the extra costs of managing large complexorganisations resulting from stifling entrepreneurial initiative andinnovation. Risk can be hidden in multi-layered structures such asthat of Carillion.

Important consequences stem from these factors, for example:

�� The substantial loss of taxation has a massive impact on gov-ernment finance. It goes a long way to explain the poverty ofpublic service provision. HM Customs and Revenue have esti-mated that the amount of tax evaded is about £30 billionannually. Other informed estimates put it at four times thatlevel. And that does not include even larger amounts of taxavoided legally through the diversion of funds into overseasaccounts.

�� Businesses have not been investing in development, moderni-sation and training, resulting in their not making full use ofadvanced technology, being reluctant to innovate, becomingreliant on undertrained and low-skilled labour rather thanautomation.

3030

�� The amounts of wealth tied up in land, including residences,adds enormously to problems of inequity between genera-tions.

�� Britain repeatedly experiences consumer booms based onunsustainable amounts of personal debt.

However, a much more important conclusion should be drawn.

Market economies certainly generate more economic growth thansocialist ones. It was the Marxist-inspired state-controlled economiesof the east that collapsed because of their internal contradictions, notthe capitalist economies of the west. One does not have to accept theviews of the New Right Chicago School espoused by Ronald Reaganand Margaret Thatcher to accept that. It was also accepted byAnthony Crosland and inherited in turn by Harold Wilson, DavidOwen, Tony Blair, and Gordon Brown. The only big differencebetween Crosland and Thatcher was how the proceeds of growthshould be distributed. The decline in public services, for example, islargely a result of decisions about distribution, not about the basicway the economy should work.

The central issue in politics is to define our political, social, culturaland environmental objectives. It is these that generate real wealth insociety. Economic growth is merely a possible mechanism forachieving them. Dissatisfaction goes deeper than decisions aboutdistributing the surplus. Increases in incomes have not necessarilymade people happier. Worse still, we seem to spend much time andeffort merely correcting what we got wrong in the first place. Thestandard measure of economic growth, increases in GDP or gross

3131

domestic product, does not measure annual improvement in wealthor well-being. It measures turnover, economic activity, whetherconstructive or destructive.

An extreme hypothetical example illustrates this. Imagine that theentire University of Cambridge were razed to the ground; all itsbuildings destroyed, all its books and records burnt, all its equipmentdestroyed. Imagine that the entire University, and all its faculties,lecture theatres, libraries and colleges were rehoused in newlyerected portakabins. Hundreds of jobs would be created, thousandsof people employed, millions of pounds earned in wages and profits,through demolition, destruction and manufacture. Much of thatmoney would boost spending power and consumption. The result: ahuge growth in GDP matched by a huge loss of real wealth

.

Technology and IT companies reinforce the pattern. Apple’sprofitability depends on the constant production and vigorousmarketing of new products, such as the I-Phone, which havedeliberately limited life. Apple’s products are useful and few woulddoubt the value of progress in advanced technology. But theeconomic model underlying their production is faulty. It uses up vastresources for marginal gains.

The picture improves a little if we look at services. Manufacturing,agriculture and construction now account for less than 20% of theUK economy. The service sector has grown from less than halfimmediately after the Second World War to now over 80%. Servicesare very diverse. For example, the largest export service industry inthe UK, surprising for many, is vehicle repair. By their nature somesuch activities promote environmental sustainability through the

3232

conservation of resources. Service industries such as accounting andthe law are an essential ingredient of a civilized society, creating theframework that enables trading and contracting, and they also haveminimal environmental impact. But other services, such asadvertising and marketing are far less benign in so far as theypromote the constant replacement of disposable goods.

Neither turnover nor profits are necessarily measures ofimprovements in real wealth. They are a measure of purchasingpower, but if what is purchased is continuously discarded andreplaced, a self-perpetuating cycle develops by which we purchasemerely to stand still. The primacy given to economic growth definedby the growth of turnover has created an economy that relentlesslyconsumes natural resources and generates increasing volumes ofwaste. None of this is a necessary precondition for creating andmaintaining a prosperous society.

The current world economic model, dependent on year on yeargrowth, produces interrelated patterns of accelerating growth inconsumption of resources, discarding of waste and growth inpopulation. This cannot be sustained. Unchecked it would strip theworld of natural resources and pollute the land, sea and air. Intensiveagriculture would degrade the quality of the soil, over-fishing andpolluted oceans destroy fish stocks, fresh water supplies becomeinadequate and the build-up of greenhouse gases lead to runawayglobal warming, until the planet would no longer support human life.

As far back as the 1970s people in the ecology movement, as it wasthen called, reacted by advocating a no growth economy. Many in thegreen movement still are today. Sustainability is an importantprinciple but that is not quite the right conclusion to draw.

For practical human purposes, energy drawn directly from the sunthrough photovoltaic conversion, wind or tidal power is so vast that itmay be regarded as infinite. So may information. Its limit is the entire

3333

universe. The only limit on their growth is our ability to access themwithout causing disastrous side-effects.

Growth is also possible if it is incremental, by building on what isalready there, safeguarding what has already been created, andadding to it gradually and progressively over time. There is no limit towealth thus created.

Many of the mostvaluable attributes of our current society are not easily quantifiable orgiven monetary value. Yet they require belief and motivation to investin the physical and intellectual resources required to produce them:

�� Knowledge, skills and expertise

�� Moral values, often incorporated into faith and religious tradi-tions

�� Political values such as democracy, free speech, justice andthe rule of law

�� Philosophical exploration

�� Scientific research

�� Culture and creativity

These things are not just valuable to an elite. True, advances inscience, philosophy and culture sometimes depend on remarkableindividuals – the likes of Einstein, Wittgenstein and Jane Austen – butthe benefits of those advances are available to all capable ofunderstanding them. Moreover, those advances were made possible,even in the cases of the most individualistic geniuses, by networks ofother individuals and communities.

3434

The objection to this approach from a classical liberal point of view(or a ‘neo-liberal’ point of view, although that is a bizarre way todescribe a view that pre-dates J.S. Mill and was rejected by him) isthat our view of real wealth violates the Liberal principle that no oneknows better than the individual what that individual wants and soamounts to a form of elitism or paternalism. Mill’s answer was thatsome kinds of pleasure were better than others. We would say thatsome pleasures lead to more happiness in the long term than others.We would also say that some pleasures are easier to justify to otherpeople than others.

Liberal economics is based on a series of straightforward preceptsthat stem directly from Liberal values.

3535

Also, for Liberals, democracy has an important economic role. In aLiberal society:

�� Local communities, through democratically elected local au-thorities, are entitled to decide how local services are run andto raise the funds required.

�� Employees are entitled to be involved in running the organisa-tions in which they work.

�� Service users are entitled to have a say in the running of theservices they use.

We believe that democratic reforms of this type yield distinctivebenefits:

3636

�� Services are more likely to be attuned to the needs of thosewho use them, become more flexible to changing circum-stances and more cost effective

�� Service users are likely to be more satisfied with the servicesthey receive and feel that their views have been listened toand taken into account

�� Employees are likely to feel that they are valued, their skillsand experience utilised, and that they find their work morerewarding.

The main themes of a Liberal economic policy would be equality,education, workplace democracy, improvement of the public services,local economic development, reform of taxation, investment andinternational co-operation. Environmental sustainability would runthrough all aspects of economic policy.

Inequality matters because of its effects on politics (e.g. wealth canequal power in a way that completely undermines democracy) andbecause of its effects on the quality of life of individuals (e.g.hierarchy can result in ill-health independently of the absolute incomeof those at the bottom of the heap).

The standard ways of reducing inequality – through tax and benefits –remain valid, at least if the right taxes are employed. The British taxsystem, if one takes direct and indirect taxes together, is not currentlyprogressive. The better off are taxed at a slightly higher rate thanthose on middle incomes, but those on low incomes are also morehighly taxed than the middle (because of the effects of indirecttaxation). Substantial redistribution in the British system comes fromthe spending side rather than from taxation and changes such as thebedroom tax and restrictions on disability benefits (both begun by

3737

Labour but completed by the Coalition) have weakened that effect.There is a strong case for wealth taxes to make the tax systemproperly progressive.

Taxation and spending policies, rather than supply side policies, arewhat make Nordic countries more equal than Britain, but we can alsodo better on the distribution of income before taxation and spending.That above all means devoting yet more resources to training andeducation at all levels. It also means strong equalities andantidiscrimination legislation.

But radical democratic reform will also have an effect and is adistinctive Liberal contribution to the debate. Workplace democracy,for example, should have a salutary effect. Pay differentials are muchlower in Germany, which has elected worker representatives onboards and powerful works councils, than in Britain, where corporategovernance in all sectors is one-sided, hierarchical and secretive.Similarly, the restoration of local democracy within a fully federalsystem should help overcome Britain’s serious regional disparities.

This is not the place for a detailed review of benefits policy, but wenote in passing that the whole system of state benefits is overdue forreform. Although assessment and entitlement to benefits should bethe same in every part of the country, perhaps its administrationshould be in the hands of democratically controlled local authorities,with service user involvement, able to respond flexibly, quickly andfairly to the real needs of individual claimants.

A necessity for a Liberal society is a population made up of educatedand informed individuals who can use their knowledge andjudgement to make decisions. Participation in democracy requires it.That underpins the commitment to free universal education. Lessacknowledged, particularly in the UK education system, is that

3838

people need to learn how to take part in democratic decision-making.Our education system does not do it.

Liberals have a commitment to a society in which all organisationsare democratic. Individuals need to learn how to participate indemocracy. Helping them to do so should be a prime objective ofeducation.

Education for democratic citizenship includes students understandinghow to distinguish between sound and unsound reasoning, how tospot misleading statistical claims and how to resist succumbing tocommon cognitive errors and rhetorical devices.

It also includes acquiring progressively more skill and responsibilityfor the democratic running of the institutions in which they study.Although education inevitably involves an element of those with moreknowledge guiding those with less, and thus an element of authority,there is no reason young people should not learn to make democraticdecisions about some aspects of their lives as students.

Schools as workplaces should also be more democratic. The cult ofthe heroic leader as head teacher went much too far, encouragingcoercive or exhausting styles of leadership that might have producedspectacular short-term gains but made schools worse in the longterm. Schools run as teacher co-operatives should be encouraged andsupported, as should other styles of co-operative school that bringtogether teachers, parents and local communities.

At the level of higher education, a further democratic deficit concernsgraduates. Universities used to give their graduates governancerights, which had the enormous advantage of giving universities aninterest in the long-term welfare of their graduates across their wholelives, not just in the immediate and possibly less than well-informedreactions of undergraduate students to their courses. Those rightshave withered, surviving only in the form of elections to a

3939

professorship of poetry here or a Chancellorship there. Universitygovernance structures vary – from Cambridge and Oxford’s highlydemocratic workers’ co-operative style to self-perpetuatinghierarchies, accountable to no-one. While it would be illiberal toundermine that diversity, self-perpetuating hierarchies need to bereformed, and some democratic voice for graduates should becreated.

Liberals have long had a commitment to democracy in the workplace.For many people it defines their view of themselves, their self-worthand their value to their families. It is where they spend most of theirwaking hours.

Work can be immensely rewarding, or monotonous drudgery, or asource of oppression and exploitation. The size of the impact it hason people’s lives matches only that of the family, in most cases farexceeding that of governmental structures.

Concrete proposals for employee participation in the running ofcompanies were first set out in 1928 in “Britain’s Industrial Future”(the Liberal Yellow Book). Those ideas were developed oversubsequent years. By 1962 the Liberal Party Industrial AffairsCommittee had produced a comprehensive set of proposals toincorporate employee democracy into company law, including:

�� Company supervisory boards, to oversee the work of boards ofdirectors, made up of equal numbers of members elected byboth shareholders and employees

4040

�� A requirement for employees to become shareholders and toshare profits

�� The creation of works councils made up of representatives ofmanagement and workers to agree conditions of employmentand pay

�� A co-ownership model under which employees and share-holders would have equal rights and status in the structure ofthe company

The intention of the proposals was to bring together the interests ofthe ‘sides of industry’ to prevent conflict and boost productivity. Theyenvisaged an enhanced role for trades unions in advising andsupporting workers carrying out their roles on works councils andexercising their rights as shareholders.

That basic framework remains valid today, but no substantial policydevelopment has taken place since. Further work is required in twoareas in particular:

�� The proposals applied to registered companies only. Thedemocratic involvement of employees in the public sectorrequires consideration, where democratic accountability toelected members of political bodies replaces the role of share-holders

�� The implications of labour mobility and the extensive use ofshort-term contracts need to be thought about (although ap-plicable models already exist at, for example, John Lewis).

There is also a limit to what legislation can achieve. Manyorganisations need a broader change in culture. Too oftenmanagement is over-centralised and over-directive. Otherorganisations have slimmed down management and decentralised

4141

decision-making to small front-line teams. Their day-to-dayexperience often enables them to resolve production and servicedelivery problems more effectively than remote managers. Theypromote initiative and release creativity that makes the experience ofwork more rewarding. It can be further enhanced by directly linking itto profit sharing. Government direction of management styles is not agreat idea but government support for management education andresearch is justified.

The regime of austerity imposed by central government stems fromthe failures of democracy and economic policy over many years.Since 2008 it has resulted in substantial real term cuts in revenueexpenditure and strict controls on capital expenditure in many centraldepartments, local government and policing. This has resulted inextensive cuts in staffing and in the scope and quality of services. Theconcerns of those managing services have been met with unrealisticdemands for annual efficiency savings. Pressures in one service haveknock on effects in others. Indeed, the police seem to have become akind of public service of last resort, picking up the pieces when otherservices cannot cope.

Public concern about failures in service provision has been growing.Nowhere is this more apparent than in relation to the NHS and socialcare. The increasing demands of an ageing population have beenpredictable for a long time. Expenditure on the NHS in England hasbarely grown in real terms since 2010 despite having to cope withthese demands. If one adds in expenditure on adult social care,which saw an 8% cut in real terms over the same period, the result iseven closer to standstill in the face of rising demands and costs.

The UK has ended up with fewer hospitals and doctors than manyother advanced countries. According to the NHS Confederation the

4242

UK had 2.8 physicians per 1,000 people in 2016, compared to 4.1in Germany (2015), 3.9 in Spain (2015), 3.8 in Italy (2015) and3.4 in France. The position is similar for hospital beds. This iscombined with inadequate levels and quality of care in people’shomes and support in the community.

Cuts in the number of training places means a serious shortage ofdoctors and nurses now exists. Britain has relied instead onrecruitment from abroad. The influx of trained medical professionalsfrom EU countries has reversed because of the Brexit referendum.There is no quick fix. Medical training takes years. Staff shortagesextend throughout the system, from GP practices through tohospitals. Assessment and treatment is delayed. Ambulances queueto unload their patients.

There are several reasons for this:

1. The NHS is underfunded. The NHS is more efficient than wastefuland ineffective systems such as that of the USA but the persistentfunding gap between it and equivalent European systems is havingserious effects. The UK spends just 9% of GDP (an inadequatemeasure but the best we have) on health, compared with 11% inFrance and Germany.

2. The English NHS is too large and is not democratic. The claimthat it is the third largest employer in the world, after the ChinesePeople’s Army and the Indian Railways, may be apocryphal.Nonetheless it is the largest unified healthcare system in the world,surely an anomaly for a modestly sized country like England. Its

4343

structure is enormously complex, a proliferation of trusts,commissioning groups, and specialist agencies, each with their ownboard and management team, very few of whom are elected byanyone. Managers accountable only to other managers take manydecisions around priorities and even treatment regimes. Numeroustargets and protocols exist to monitor and control them. Yet targetsare regularly missed, waiting times exceeded and budgets overspent.Scrutiny through local authority scrutiny committees andHealthwatch organisations is largely ineffective. This whole operationconsumes vast resources that could be put to better effect. The mosteffective health services, as in Denmark, are those that aredecentralised. The NHS requires a healthy dose of decentralisationand democracy.

3. The division between commissioning and service delivery makesno sense. The intention was to create competition between serviceproviders to promote efficiency and give patients choice. Competitionis meaningless when the NHS, particularly at a local level, is in effecta monopoly. The cost of pricing, recording, monitoring and invoicingevery treatment almost certainly exceeds any savings achievedthrough greater efficiency. Patients really want good local servicesproviding a full range of quality medical treatments. The competitionagenda has been driven by political dogma rather than reason.

4. The division between health and social care causes hugeproblems. To reduce costs a major initiative has been undertaken toreduce the time patients spend in hospital by moving them out at theearliest opportunity for treatment in their own homes or communityfacilities. Many of the costs have been transferred to local authorities.Their lack of capacity to put in place care packages and co-ordinatemoves has led to bed blocking in hospitals, anxiety for patients, theirfamilies and carers, and hospital readmission. The whole initiativehas proved costly and is failing.

4444

To improve its performance the NHS needs to address its structuralproblems. Only if it is free from the deadweight of its complex,inefficient and wasteful centralised national structure will it beequipped to address key priority healthcare issues such as:

�� Investment in GP services

�� An expansion of public health and health promotion

�� Investment in mental health services

�� Expanded training of doctors and nurses

There is no quick fix. No injection of funds, however large, canproduce immediate solutions to deep-seated problems.

The UK faces a worsening housing shortage. Homeless peoplesleeping on the streets are a visible manifestation of a failureshameful for an economically advanced country. Less visible is thelarge number of homeless people living in bed and breakfastaccommodation, nominally temporarily but often for long periods oftime. In addition, increasing numbers of young people, although nothomeless, are forced to live with their parents because they canafford neither to buy nor rent. Shelter estimated that by November2017 307,000 people were homeless, including those sleepingrough, in temporary bed and breakfast or in hostels, but excludingthe hidden homeless they describe as sofa surfing.

4545

Several interlinked problems exist: not enough houses, appreciablenumbers of unoccupied houses; unaffordable house prices and rents;and large geographical variations, with homes in acutely short supplyin London and the south east but elsewhere houses that cannot besold.

A substantial proportion of the value of a house is that of the land itoccupies. Land is a finite resource; it cannot expand to meet demand.Its value increases as demand increases. Vast sums accumulate inprivate and corporate hands from the resulting speculation. Yet itsvalue is created by its location, by the needs and vitality ofcommunities, rather than by the efforts of its owners. As capitalvalues increase so does demand, driving values even higher.

The impact on the housing market is immense. Property prices inLondon have become so high that only the globally wealthiest canafford them. Most people have been priced out and forced to move tothe suburbs, driving up demand and prices as they go. More peopleare travelling ever greater distances to reach work. The transportsystem is struggling to meet demand, blighting hundreds ofthousands of lives through the cost, time, misery and ill health ofdaily commuting.

Liberals have long advocated taxing land values. The land valuecreated by society through its communal activity should not besiphoned off into private and corporate hands. Land taxation featuredin Lloyd George’s 1909 “people’s budget” passed by the House ofCommons but defeated by the Conservative majority in the House ofLords. It would result in land values being determined by theproductive use to which land could be put. The value created bysociety through its location would return to the community intaxation. House builders would not be able to afford to hoard buildingland. Most ordinary householders would pay no more than they

4646

currently pay in council tax, but those holding very high value sites incentral London would pay considerably more.

Not all householders want to buy. Many people, even on averageincomes, cannot afford a mortgage. If they are unable to rely on thehelp of parents, they have no choice but to rent. Those on the lowestincomes suffer most. Private landlords tend to offer substandardproperties with inadequate levels of maintenance and repair. Theirtenants often end up sharing multiple occupied premises sufferingfrom disruption by fellow tenants and lack of privacy. Many wouldprefer to rent council or housing association accommodation. Butwaiting lists are so long that only those in highest need are likely tosucceed.

After the First World War and through to the 1950s local authoritieshad large council house building programmes. By building newhouses to high standards they were able to clear slums, relieveovercrowding and provide many of their poorest residents healthierand more comfortable homes at modest rents. In recent yearscontrols imposed by central government have led to a sharp declinein council housing. The percentage of people living in councilaccommodation has dropped to under 8% compared to 42% in1979.

Local councils should be set free from central government control indeciding their housing policies and in setting their capital andrevenue housing budgets. They should be able, for example, to:

4747

�� Keep all the proceeds of “right to buy” sales to reinvest inlocal housing

�� Borrow money to build houses against the security of theirrents and capital assets

�� Set council house rents at the level that they decide

�� Grant mortgages to individuals for house purchases

Housing associations, charitable bodies, often meeting particularspecialist needs and free to operate across local authority boundariesshould enjoy similar financial freedoms.

For many people their home, like the workplace, defines their view ofthemselves. People who own their own homes possess a degree offreedom denied to those who rent. For that reason, Liberals viewdemocratic participation of tenants as of the same fundamentalimportance as democratic participation at work.

Much of the current housing stock contributes substantially to CO2emissions because it is low in energy efficiency. Installing insulationin older properties is an important goal. However, new houses arestill being built to insufficient energy standards. House buildingremains a largely preindustrial craft industry involving the slow layingof bricks and mortar and tiled roofs by hand in the open air. As farback as the 1940s the emergency prefab building programmedemonstrated the potential for assembling factory-built componentson site to produce serviceable homes quickly at a reduced cost.Modern technology now enables the factory-based manufacture ofhouses to the highest standards of comfort but emitting little or nocarbon. That technology is not being applied. It should be. Localauthorities should be able to take a lead.

4848

Small and medium sized enterprises are one of the prime drivers ofeconomic growth. They tend to bring economic benefits to thecommunities in which they are located. This is particularly importantin promoting economic activity in poor communities.

A role exists for public authorities to promote the growth of localenterprises through their purchasing and procurement policies. Thedangers of granting large contracts to vast multinational companies isclearly demonstrated not only by the collapse of Carillion but also bythe poor record of delivery by companies such as G4S and Interserve.Lowest price does not necessarily mean best value. Important factorsinclude the quality of service and local economic benefits

In-work training is also important, particularly in areas of highunemployment and low educational attainment. In addition to formalapprenticeships, work placements, secondments, and mentoring areall desirable. For those thinking of setting up their own businesses,advice about employment practice, accounting, tax and othertechnical fields is crucial.

The development of locally based SMEs is greatly helped by locallending. The large banks are risk averse, with decisions oftengenerated by algorithms rather than people. Britain has many fewerlocal banks than other advanced economies such as Germany, Spainand Italy

Micro loans systems work indeveloping countries. They can work here too.

4949

The demutualisation of building societies was itself a blow to localeconomies, replacing local institutions with national ones. We shouldbe looking for ways to make easy the creation of new mutuals and,where possible, remutualisation.

Itwould make investment in areas of low land values much moreattractive. To be effective it needs to be a national tax set at auniform rate across the country. As it would replace current taxes onproperty, council tax and business rates, a new means of raisingrevenue for democratically elected local authorities would berequired.

That would require an effective and independentmechanism, free from manipulation for political ends by centralgovernment, to redistribute the resources it yields equitably betweenrich and poorer areas.

Secondly, there needs to be a shift of emphasis from the taxation ofpersonal income and corporate profits onto taxation of accumulatedwealth. Very high rates of income and corporation tax arecounterproductive. They encourage evasion and avoidance anddiscourage enterprise.

.

Thirdly, taxes on profits need to be levied where those profits aregenerated rather than diverted abroad to jurisdictions with lowerrates. It is clearly a nonsense that Amazon in 2016 paid just £15.8million in tax on European revenues of £19.5 billion throughregistering its business in Luxembourg and Google £42.5 million onrevenues of £20.1 billion, about 20% of which is estimated to have

5050

come from sales in the UK, by registering the business in Dublin.Tackling this problem is difficult, as George Osborne’s unsuccessfulattempts demonstrate.

Using the tax system to unlock accumulated wealth for investment isthe key to redressing the imbalances in the UK economy andmaintaining strong growth. There are four priority areas for publicsector investment in infrastructure and human capital:

�� Environmentally sustainable energy – especially in infrastruc-ture for electric vehicles and electricity transmission

�� Research and development – especially in energy technologyand health

�� Areas of poor economic performance – with an emphasis oneducation and training and public transport

�� Areas of exceptionally good economic performance – with anemphasis on public transport and housing

Many important economic and financial issues require internationalco-operation. Tax havens are a case in point. They are as much, ifnot more, to do with secrecy and concealment as with tax avoidance.They are used to conceal the ownership of companies and themovement of funds. It is reasonable to suspect that they are used formoney laundering, financing criminal activity, avoiding sanctions andfinancing repressive regimes. Without transparency other issuescannot be addressed. Solutions depend on international agreement

5151

that is difficult to secure. Britain lies at the heart of the problembecause of the activities of its overseas territories. But Britain actingalone might do no more than transfer the problems to other taxhavens over which it has no influence.

A Liberal economy depends on diversity, choice and competition.This is in the interests of its consumers. At their best largemultinational companies, such as Google, Microsoft and Amazon,offer an unparalleled range and quality of service to their customers.At worst they can ride roughshod over their interests, ruthlesslysuppress competition and the ability of national governments toregulate or control their activities or tax their profits. They canundermine national economies and harm national interests.

.

We need, however, to be on our guard against economic nationalism.The excellence of British automotive design was jeopardised byunder-investment in production and poor management. The injectionof foreign ownership and capital has resulted in a thriving British carindustry.

Economic nationalism also harms the environment. The delicatelybalanced and interconnected ecosystems that support life on theplanet are not contained by national borders. A modest rise in globaltemperature creates drought in one part of the world and floods inanother. Rising sea levels threaten to displace whole populations aslarge areas, such as much of Bangladesh, become uninhabitable. Airpolluted in one country puts at risk the health of residents of another.

Threats such as these will have a profound impact on the lives ofeveryone in Britain, but Britain alone cannot eliminate or even reducethem. The Paris Agreement may limit, but certainly not halt, globalwarming. Further international agreements, some global and some

5252

regional, to protect the natural environment are necessary.

The relationship between political reform and political and socialchange is not straightforward. Liberals are sometimes accused ofbeing over-optimistic about the effects of constitutional reform onpolitics and social behaviour. The formal rules that create andregulate institutions do not necessarily determine how people act inreal life. For example, in the 1980s we were optimistic that bringing

5353

in a UK Bill of Rights would cause cultural change. We hoped itwould bring about a 'culture of rights', undermining the idea thatgovernment could treat the interests of citizens as an inconvenienceand underpinning a new respect for the rights of others. After theHuman Rights Act came in a change of attitude did occur inside thestate, but in the population at large no 'culture of rights' developed. Avirulent anti-human rights campaign in the media has left us in asituation in which, as a YouGov survey in 2014 found, a quarter ofthe electorate think that there is no such thing as ‘human rights’ andonly a third think it never justified to violate human rights. Thechange in the conduct of state officials is worth having, but it wasover-optimistic to think that reforming the law would automaticallyreform wider attitudes.

even if we cannot predict precisely how. Electoral reform,that old Liberal favourite, is an example. Switching from 'first-past-the-post' (better called 'single member plurality', since there is no'post') to the single transferable vote, as we have long advocated forUK parliamentary elections, has, for example, transformed localpolitics in Scotland. Not a single council in Scotland remains underone party control. Conservative councillors serve on Glasgow CityCouncil. Almost every conceivable form of coalition exists, including aLabour-Conservative coalition in Aberdeen formed in defiance of thetribalism of Labour's Scottish Executive. Possibilities and minds areslowly opening. No one would claim that STV, even in combinationwith the proportional Additional Member System used to elect theScottish Parliament, has turned Scottish politics into a haven ofcivility, co-operation and compromise, but the institutional facts arehaving an effect. It is less tribal than it used to be.

5454

We remain hopeful about the capacity of institutional reform to bringabout wider change, even if we now realise that it does not alwayswork, at least by itself.

Liberals have long favoured formalising and codifying the UK'sconstitution – what is normally, if inaccurately, known as a 'written'constitution (inaccurate because it is already written down in variousplaces – statutes, cases, parliamentary reports, official codes ofpractice and manuals – the problem is that it is not systematicallyedited into a single document). We have also called for manychanges to the system and for a stronger role for judges. But thesethree issues are different.

Editing the rules of the constitution into a single document, as in theNew Zealand Constitution Act, has many advantages. The finalproduct should be more easily understood and more easily reformedin a coherent way than is possible with collection of documentsdrafted in different centuries in vastly different styles. The rulesthemselves would need to be expressed clearly and reformers wouldhave to propose specific changes to specific words in the document.

Codification is not a simple process. It always reveals inconsistenciesand ambiguities, which in turn means that the codifiers have differentoptions for how to resolve them (including leaving ambiguities inplace). Those choices would have to be made democratically. On theother hand, it is very largely a technical process and not a particularlygood opportunity for wide participation.

5555

The British constitution is full of illiberal andundemocratic elements we want to change. But piecemeal reform, aswe have seen over the past 20 years, tends, for the sake of gettinganything through at all, to leave the worst elements alone. For moreradical reform, we need to consider the entire system. For example,House of Lords reform has foundered because it is too easy to blockchanges that proceed from an unclear view of what a secondchamber is for. Not being clear about what the second chamber is forin turn results from not being clear about what the first chamber isfor. The two Houses need to be reformed together.

. Indeed, the oneargument against holding a constitutional convention that gives uspause for thought is that a constitution made now, during anauthoritarian ascendancy, might not be a Liberal one. But Liberalsshould be prepared to argue for a liberal constitution and to take therisk that others might not agree.

5656

The order of purposes is important. The conventional order, assumedby most participants in UK politics, is precisely the opposite: effectivegovernment comes first, democratic law-making comes second andindividual rights come third. A more traditional position reverses thesecond and third elements, putting individual rights in front ofdemocracy but keeping effective government in front of both.

Populism, or illiberal democracy, when in opposition puts democracyfirst and both individual rights and effective government nowhere, butwhen in power puts effective government first with individual rightsand democracy nowhere.

Indeed, it is increasingly underpressure both from its traditional opponents, whose views areultimately governed not by a defunct economist, as Keynes noted ofhis own anti-theoretical opponents, but by the dead philosopherThomas Hobbes, and from populists and other kinds of illiberaldemocrats.

The case against Liberal democracy from the Hobbesian perspectiveis that Liberal democrats underestimate the dangers of domesticdisorder. To put individual rights above effective government, in theHobbesian view, is foolish and dangerous, since only an effectivegovernment can create the conditions in which any individual rightscan exist.

The populist case against Liberal democracy, in contrast, is thatnothing should stand in the way of the will of the people, asexpressed in referendums or by leaders who incarnate the will of thepeople, and so individual rights are undemocratic.

5757

The Liberal democrat answer to the Hobbesian position is that thepurpose of effective government is to protect the rights of citizens,starting with their political rights. If government fails in that task it isnot worth having. We are entitled to know from a state that purportslegitimately to coerce us what reasons it can point to that justifiesthat coercion. If its answer makes no reference to our political rightsto take part in deciding what kinds of coercion it can carry out, itsanswer is not good enough.

Of course, Liberals might now be a minority and people (at leastthese days and around here) might be so scared of, for example,terrorism that they would accept an answer that said 'this state islegitimate solely because it keeps you relatively safe from violence'.We do not think most people think that, but even if they did, wewould seek to persuade them to change their minds. Such a state isliterally a police state. The dangers it creates are worse than thedangers it prevents.

The populist critique makes no sense (not that populism issusceptible to rational argument) because at its simplest democracymeans voting and the answer to the question 'who should be entitledto vote' cannot itself be answered by a majority vote. A majority voteof whom? The question can only be answered as a matter ofprinciple. Political rights must be prior to democracy.

A darker version of populism uses nationality or ethnicity as its pre-democratic criterion for deciding who is entitled to vote. Its version ofthe state's answer to the question of legitimacy is 'because we areyour kind and because we defend the interests of your kind'. Liberaldemocrats find that answer repulsive, not because we cannotunderstand affection for places and cultures, but because we refuseto accept that any connection exists between such affection and thejustification of coercion by the state. Justification through ethnicity or

5858

nationality is inherently aggressive to other countries and inherentlyoppressive at home.

Theirextension to other fields arises from the difficulty of defining the outeredge of politics. Since politics can turn its attention to any topic,freedom of speech and association also apply to any topic.

Liberals do not, however, believe that fundamental pre-democratic political rights include extensive economic and socialentitlements. Rights of that kind are post-democratic, which is to saythat their existence and extent should depend on the decisions ofdemocratically elected legislatures and should not be protected fromdemocratic politics by being constitutionalised.

The second goal of a Liberal democratic constitution is to establish ademocratic law-making process. Since, for Liberal democrats,democracy is more important than effective government, we give ahigher priority to creating a politically representative parliament thanto generating stable administrations. That is why we supportproportional representation. New laws should have majority supportand the nearest approximation to that in a representative democracyis to ensure that representatives reflect political opinion in thelegislature.

5959

But although majority consent is an essential element of a democraticlaw-making process, it is not the only one. Another is discussion.That means not only debate but well-informed and well-structureddebate, which includes opportunities to propose amendments andcompromises. Simple up-or-down votes are rarely democratic sincethey restrict discussion by cutting off other options.

The need for discussion and for being open to new ideas and thecorrection of errors also point towards dividing law-making betweenat least two Houses. If majority rule without debate were sufficient fordemocracy, a second chamber would be a puzzling institution, sinceit would make no sense to do the same thing twice, risking a differentanswer second time around. But

.

In theory any second chamber on which the first chamber hasconferred the relevant functions might do. A chamber consistingentirely of experts appointed by competitive examination, in the styleof the French Conseil d'Etat, is one possibility. A chamber consistingentirely of citizens chosen at random is another. The problem withboth these proposals is that the members of the second chambercould speak only for themselves. They are not representatives ofanyone else. That means they lack something the first chamberalways has, namely a sense of accountability and responsibility andthus, ultimately, credibility.

An unaccountable House easily belittled by the elected Housedescribes the current House of Lords, which is an unstable mixture ofexperts (or rather former experts), randomly selected hereditary peers,political donors and party placemen. It has little effect on thestandard of discussion in the Commons.

6060

Admittedly, anti-political populists would say that election wouldconfirm the status of members of the second chamber as despised'politicians', but for members of the House of Commons (and forLiberals) election confers dignity and credibility, not the status ofpariah.

Two more substantial objections to electing the second chamberstand out. One claims that election would exclude from the Lords allthe experts and random enthusiasts whose presence improvespolitical debate. The other argues that electing the Lords and givingthem more credibility would lead to extended conflict and deadlock inlaw making.

In one sense these objections contradict each other, since the firstposits that an elected Lords would be too weak whereas the secondassumes it would be too strong. But critics claim that the twoobjections are complementary – that election would reduce thequality but increase the quantity of disagreements between the twoHouses.

On the first objection, we would counter that elected representatives,especially if their status were lifted from its current catastrophicallylow level, are perfectly capable of absorbing expert advice. Indeed,debates in the Commons when taken as a whole, and ignoring thetheatrics of PMQs, are often just as informed and comprehensive asthose in the Lords.

. That is why the House of Lords even now retains its

6161

veto over bills that extend the life of parliament, in effect delayingelections and denying the right to vote.

But for other, less fundamental issues, it is often more important thatthe system makes some decision, whatever it is, than a perfectdecision. For those issues deadlock is not desirable. Defining whichissues are which is the task Lords reformers have shied away from,but urgently need to engage in. A veto over legislation that threatenshuman rights of any kind, not just political rights, looks justifiable,especially if the courts continue to be confined to declarations ofincompatibility on such issues. Blocking offending legislation as partof the political process protects the courts from having to intervene inpolitically fraught issues.

The second chamber might also have a power, independent of thegovernment, to propose legislation responding to declarations ofincompatibility by the courts. Veto power over legislation that reducesor undermines the powers of the Scottish Parliament and the Welshand Northern Irish Assemblies also looks justifiable on the samegrounds.

.

The British system has long taken literally Gladstone’s declarationthat the role of the Commons is not to govern the country but to holdto account those that do. Gladstone was right to think thatgovernment by an assembly of more than 600 people is impractical,and the dangers of the US system, with its wasteful log-rolling andpork-barrelling, should not be underestimated. But the weakness ofthe Commons, even during a minority government, over government

6262

future expenditure plans and even over its own agenda contributes tothe sense that British national politics consists largely of cheap talk.

The main role of the Commons is to sustain, or to refuse to sustaingovernments. We think it should keep that role. We do not believe inmoving to a directly elected executive branch, as in the USA. Suchsystems centralise power and exclude diverse voices fromgovernment. Either they risk dictatorship or, to reduce that risk,surround the executive with checks and balances so extensive thateffective government becomes close to impossible, as in the USA.Parliamentary representative democracy offers a better balancebetween democracy and effectiveness.

Consequently, we deprecate the tendency to call for a generalelection whenever a change in Prime Minister takes place. We wantrepresentative democracy to work, and that means givingrepresentatives real responsibilities, among which is the choice ofprime minister. But we would formalise the situation by making theappointment of the prime minister depend on a vote of the House ofCommons, and not, as now, on a royal appointment subject only tothe possibility of losing the House’s confidence at some future point.

The UK, and England in particular, is the most centralised largedemocracy in the world. No parliament, however reformed, or cabinetor civil service could cope competently with the volume of detailed

6363

business passing through the UK system, much of it concerning localservices about which they are singularly ill-informed.

Currently, Westminster’s legislative supremacy makes the devolutionsettlement to Scotland, Wales and Northern Ireland legally insecure.Westminster could repeal the whole system at any time, including thestatutory guarantees that it will not do so. Within England, the adhoc devolution of economic development to undemocraticpartnerships and combined authorities is even less secure and notparticularly effective.

Scotland, Wales and Northern Ireland illustrate an important pointabout federalism. Neat and tidy uniform structures do not work.Different characteristics inevitably lead to different structures andpowers.

These powers should be enhanced. Scotland, Wales and NorthernIreland should take control of all their internal affairs, includingpowers to raise taxes to pay for all their expenditure.

An English parliament, in contrast, would merely reinforce over-centralisation. England needs a legally stable structure of directlyelected regional assemblies. Their size and structure need to relate toreality, reflecting differences in geography and local loyalties. Theuniform imposition of the enormous standard regions previouslyenvisaged is not appropriate. A region stretching from Cornwall to

6464

Bristol makes no sense. Solutions for conurbations need to bedifferent from those for rural areas.

English regions should have responsibility for economic development,regional transport and combining health and social care, butimportant services such as housing, street cleaning and open spacesbenefit from local control. Local government structures in Englandappropriate to local circumstances could become a responsibility ofregions, but within a legal obligation to set up democratic localgovernment.

How one achieves legal enforceability is a longstanding puzzle. Itwould require judges and politicians, and perhaps a chunk of theelectorate, to accept that a discontinuity had occurred in Britishconstitutional history. A constitutional convention and a referendummight achieve it in practice if not in theory.

The function of the debate in a referendum is only to decidewhich option to vote for rather than creatively to generate newoptions. The quality of information available to most voters is usuallypoor and voters have little time, or inclination, to absorb theinformation they do receive. The question to ask about referendums iswhether laws are illegitimate if passed only by representative bodiesand not by referendums. We think the answer to that question is no.

6565

but it would be wise to restrict referendums toamendments that have already passed through parliament and whoselegal effect is clear.

The current confusion about referendums is another reason to codifythe constitution. At present it is far from clear what counts as aconstitutional amendment, since no authoritative list of constitutionalprovisions exists. One can make a plausible case in the absence ofsuch a text that entering or leaving the EU is a constitutional matter,which it would be in many other European states, but the dissentingjudges in the Supreme Court in thought differently. Scottishindependence, founding a new state, is almost certainly aconstitutional matter. But in many countries changing the electoralsystem for parliamentary elections would be a matter for parliament,not a plebiscite.

The necessity for a judicial process of some kind (not necessarily theordinary courts) to resolve conflicts between different levels oflegislature in a federal system takes us to the third issue, which iswhether constitutional reform should include increasing the power ofjudges.

The problem of different levels of law-making has already resulted ina judicial power to strike down (or 'disapply') UK statutes, not in thedevolution arena, in which only the statutes of the devolvedparliaments are vulnerable, but rather under EU law. Section 2(4) ofthe European Communities Act 1972 required British judges to givepriority to EU law over subsequent UK statutes, a mandate theycarried out in the famous case. No equivalent arisesunder the Human Rights Act, which gives judges a power to declarea statute incompatible with human rights, but the statute continuesin force unless the government and parliament decide to dosomething about the situation.

6666

British judges, however, arelargely hostile to the idea, fearing that they will be drawn into partypolitics, an apprehension no doubt increased by the 'enemies of thepeople' antics of the Daily Mail during the case. The judges’stance is reinforced by the fact that, contrary to the impression givenby the UK media's obsession with the USA, judicial review oflegislation is not a universal rule in countries with formal, codifiedconstitutions. Respectable liberal democracies, such as theNetherlands, do perfectly well without it. Moreover, review oflegislation where it exists is frequently, again contrary to the USmodel, in the hands not of the ordinary courts but of a specialistinstitution, such as the German Constitutional Court.

We would not at this point propose extending the power to strikedown legislation to the ordinary courts in all human rights cases. Thejudges are right to fear being drawn into party politics were they tohave such a power and the current incompatibility system seems towork except for the right to vote, a core political right we wouldprotect through the Constitutional Court.

International co-operation is the key to safeguarding national security,promoting human rights and democracy, protecting the environmentand improving living conditions around the world.

6767

The nature of the threats facing the free world has significantlychanged over recent years. Russia no longer has the capacity toundertake and sustain a large-scale head-on military conflict. Insteadthe threat lies in its mounting more operations on the Ukrainianmodel, covertly deploying special forces to promote and supportrisings by ethnic Russian groups immediately outside its borders andactively intervening in areas of instability such as the Middle East.Also, Russia is not alone in developing and deploying cyber andinformational capability to destabilise and undermine westerndemocracies.

Britain alone can do little to counter these threats. Britain is no longera major world power. Its weakened armed forces might struggle nowto mount an operation to defend the Falklands. Its diplomaticinfluence, already much less than the nostalgic and imperialist Britishmedia like to think, suffered a very severe blow at the Brexitreferendum. It is difficult to see what significant impact Britain canhave on its own in addressing major international problems. ButBritain can play a constructive role in effective co-ordinatedinternational responses.

It will require sustained diplomatic effort to reintegrate Russia intoco-operative partnership with other states. But we also need to beprepared for an immediate and decisive response in, for example, theBaltic States, and we need enhanced intelligence and cybercapability. NATO and the EU are key partners. The vast wealthdeposited in Britain, particularly London, by the Russian elite, givesBritain an important role, both representing a vulnerability and anincentive for peaceful co-operation.

6868

A radical review of the future role of Britain’s armed forces is longoverdue. Despite having the seventh largest defence budget in theworld, Britain’s forces are ill-equipped and much reduced innumbers. Chronic procurement failures have played a part. But thepurpose for which we need two large aircraft carriers and anenhanced submarine nuclear capacity needs to be questioned.

But those international and supranational bodies themselves need tochange and to democratise. The EU has always been moredemocratic than its critics claimed, but integration has not beenaccompanied by sufficient democracy. One way forward is to makethe Commission fully responsible to the Parliament as a governmentwould be. A more distinctive European way forward would be for theCommission President to be directly elected but also for individualcommissioners to be directly elected from member states (orcombinations of member states).

6969

SECTION 4

Strategy for Change

To summarise: the aim of Liberalism is to create a Liberal society.People have an immense capacity for self-direction, self-cultivation,self-understanding and creativity that can be released only throughinteraction with others in the communities to which they belong.Liberals seek to uphold Liberal values in all communities. Liberalsuphold or advocate for political and human rights, especially the rightto democratic participation, and strive for social and economic justicefor all.

For Liberals politics is not just about Westminster, important thoughthat is, but about active participation in all levels of government fromparish councils to the European Union and the United Nations.Participation in all of them is complementary in advancing thecreation of a Liberal society; the denial of Liberal values in any ofthem directly affects the well-being of individuals.

Many bodies – the House of Lords, quangos or hospital boards, forexample – currently lack democratic legitimacy. But if they aretaking or influencing decisions, Liberal voices should be heard withinthem to advocate Liberal values.

Reform frequently requires more than action within the structures ofgovernment. They have an inbuilt inertia highly resistant to change.Advocacy within the institutions of government combined with

7070

effective campaigning outside them is often crucial in deliveringreform. But on their own neither is sufficient. The green movementand the campaigns for the rights of women and LGBT peopleillustrate this

Movements for change cross party boundaries and go beyond them.Liberals are prepared to co-operate with those involved in suchcampaigns in so far as they advance Liberal values. Progress towardsa Liberal society will occur when there is a broad movement acrosssociety for Liberal values.

. Whenin the 1970s the Liberal Party began campaigning for what was thentermed gay rights, some within the party were opposed. They tookthe view that it was such an unpopular cause it would inflict seriouselectoral damage on the party. That never happened. Instead theLiberal Party’s initiative triggered a broad change in social attitudesthat was gradually embraced by the Labour and Conservative parties.It led to legislation enshrining in law near equality for LGB&T peopleculminating in Liberal Democrat MP Lynne Featherstone securing theintroduction of same-sex marriage. Had the Liberal Party and theLiberal Democrats not led the fight for LGBT equality and had theirgrowth in electoral support not yielded them a place in governmentthat might not have happened.

Through effective campaigning inside and outside state structuresLiberals have achieved significant change. By campaigning for Liberalvalues the Liberal Democrats can generate a broad movement forchange that can become a core vote made up of people committed tothose values.

7171

The present electoral weakness of the party stems from the fact thatmuch of its support has been negative, voting tactically against otherparties for different reasons in different places rather than votingpositively out of a belief in what the party stands for

That core vote will be built by campaigning at local level to establisha firm base in local government. But the world has moved on andlocal government is not the only relevant sphere. Campaigning,especially for democratic reform, should happen beyond localgovernment in all communities. And that also means becoming farmore sophisticated about online campaigning.

Much of the party’s growth in parliamentary seats has in the pastbeen built on its strength in local government. Its fragility has beenthat in too many places that success has not been rooted in Liberalvalues but on populist campaigning on local issues

7272

About the authors:

has been influencing Liberal Party and LiberalDemocrat policy for half a century. His works include the celebratedpamphlet (withGordon Lishman) (1980) and

(with David Boyle) (2008). He has chaired a NHSPrimary Care Trust and served as an independent member of theLeicestershire Police Authority.

served as a Cambridge City Councillor for 17 years,three as Leader of the Council, before winning the Cambridgeparliamentary seat in 2005. He retired from the Commons in 2010and returned to academic life. He is currently Professor of Law andPublic Policy at the University of Cambridge and a Fellow of ClareCollege.