09 May 2006

How can Labour regain the voters trust?

In the north of England and in places like Lambeth, Labour actually managed a net gain of councillors in the recent elections. This shows how local issues and campaigning can make a huge difference. From Walsall to Wigan, Southampton to Wolverhampton, Birmingham to Preston, the Tories failed to gain any seats (even lost some). In Manchester, Newcastle and Liverpool, the Tories once again failed to win any seats. Hardly a revival for the Tories.

The Tories under Cameron only did 2% better than Howard did in terms of percentage of the vote in these elections. This is probably not enough for the Tories to win the next general election outright. Saying this, Labour has to win a lot of votes back if it is going to win the next general election itself. How do we go about doing this?

Getting rid of Blair will not be a miracle cure, in fact the evidence suggests that an early departure of Blair could actually make things worse for Labour. A lot of the voters we lost were middle class swing voters in the South East. The sort of 'middle England' voters that Blair not Brown appeals to most.

Saying that, the uncertainty and disunity in the party cannot be allowed to continue. We all know this old chestnut has been our biggest bugbear in the past and it was initially successfully banished by new Labour discipline.

No, what is really losing Labour votes is not Blair, it is disillusionment with policy. Some of this disillusionment is unfair, but some of it is perfectly reasonable. For instance;

People are happy there is huge extra investment in the NHS but confused as to why there are currently thousands of redundancies happening. PFI and internal competition doesn't seem to be very good value for money.

The bureaucratic incompetence at DEFRA and the Home Office are inexcusable, although this belief amongst some of the public that criminality and immigrants are linked is pure racism. Anyone who voted BNP should be ashamed of themselves, there is no excuse.

People don't see the need for more faith schools (or even any). Handing over control of our schools to evangelists and businessman that we later find out haven't even paid in full the miserly £2m that gives them this control.

Why promote super-casinos that no-one wants?

These are questions that need to be addressed if we are to win back votes.

Labour needs to combat better the lies of the press and explain to people how good the Labour record is. The vast improvement in healthcare, education, transport and other infrastructure. A third of children and most pensioners removed from poverty, free bus travel and tv licences, annual fuel payments, guaranteed weekly minimum for pensioners etc. The climate change levy, the minimum wage (£3.60 to £5.35 this October - increased above the rise in earnings).

The working tax credits. As much as I would criticise this bureaucratic and inefficient attempt at a citizen's income, it does at least provide something approaching a livable wage for the poorest workers even if it doesn't really address the financial disincentive to work of the benefits trap.

All these things would be taken away by a Tory government and winter crises in the NHS and poorly resourced state education would return as tax cuts for the rich would become priority. Much as the fraudulent Cameron and his chaffeur driven shoes tries to improve his image, there is little appetite for a return to the Thatcherism he promises.

Gordon Brown's aim of state education matching the per-capita spend of the private sector is a noble aim. It is the sort of eye catching popular policy that the Tories will never even attempt to match. This is how we will win back votes.

Blair is Labour's most successful leader and he deserves to be allowed to leave gracefully on November 27th 2008. This still allows 6/18 months to prepare for a 2009/10 election for whichever Labour leader follows him. Until that day, we need unity. Blair is a great leader, he must be allowed to leave when the political situation has improved and not forced out like Thatcher was.

34 comments:

  1. The Blue Foxxx10/5/06 10:00 am

    In today's Guardian:

    "The chancellor's intervention comes as the latest poll shows Tony Blair to be the most unpopular Labour prime minister in modern times. Only 26% of voters are satisfied with Mr Blair's performance - lower than Harold Wilson's 27% in May 1968 after the pound's devaluation."

    How could Blair's departure be a bad thing?

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  2. Bradfordlabourdude10/5/06 10:42 am

    What about the Economy Neil? Brown just got a thumbs up from the normally useless EU despite what George Osbore has been saying!
    By the way we got rid of a bunch of Tories up here in Bradford and now Labour are the largest party but the Lib Dems and Tories are about to team up for an all losers led council, Democracy my arse!

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  3. Blue Foxxx: Blair is an asset for the Labour party. Of course supporters of other parties want him to go, no more so than Cameron.

    The media are always against Labour governments and every mistake this government has made has been amplified. Of course the debacle at the Home office is indefensible, but the facts are; the NHS is better, education is better, poverty is being reduced, and the economy continues to be strong (helped by immigration). These are fine achievements and we shouldn't forget them. Blair was given a mandate for a full term only last year, Brown should publicly back Blair until 2008 and stop this bickering that is damaging Labour. Brown will get his chance in 2008 and still have 6/18 months to prepare for an election IF he wins the leadership.

    bradfordlabourdude: The electoral system is unfair, check out the ERS site. Here are some facts;

    Wrong winners. In Kingston, the Liberal Democrats retained overall control of the Council despite coming second to the Conservatives in share of the vote;
    Electoral deserts. There are whole councils where a party wins many votes but not a single seat (eg Conservatives in Cambridge, Haringey and Manchester);
    Distorted results. Parties can hold all the seats in a ward even when they are far from having a majority of votes, for example in Hodge Hill in Birmingham where Labour now have all three seats with the support of only 34.5% of voters;
    Turbulent councils. The make-up of many councils can change fundamentally on just a small vote swing. In Richmond, a 5% swing from Conservative to Liberal Democrat changed a 2:1 Tory majority into a 2:1 Lib Dem majority.

    Change the electoral system by honouring the promise on a referendum, devolve power to local government and make party funding fairer and more transparent. Only Labour will realistically bring these measures about, and each one is a vote winner. It is also in the Left's long term interest. 60% of voters consistently vote for parties that advocate left of centre tax increasing policies, yet we are once again drifting towards giving absolute power to a Tory tax cutting party that might 'win' with just 30 something percent of the vote (less than 25% of the electorate). Not only that the Tories have promised to gerry mander the system in their favour by increasing boundary sizes. Let the Tories win and we might be out for another 18 years of hard right policies 60% vote against.

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  4. The Labour Party doesn't actually need to regain anyone's trust, it just needs people to keep on voting for it. The constituency of the Labour party is the people, poor or rich, who do well out of big government: welfare beneficiaries of various kinds, trades unionists, public sector employees (including all those doctors making 200K), and many parts of big business, and generally people who rely on the state for some or all of things like health, education and pensions. The constituency of the Conservative Party is those, rich or poor, who benefit from smaller government: poor people ineligible for much in the way of state welfare, not so well off private sector employees, small businessmen, some sectors of big business, and people who have private provision for some or all of health, education and pensions.

    This is the reason that spending more money on the NHS doesn't help the sick: too much of the money goes into the pockets of NHS staff instead, for a less than commensurate increase in healthcare outcomes. To the extent that this incentivises said staff to vote Labour (and I'd be surprised if the GPs who've just had a huge payrise can afford to vote against Labour), that party can regard the money as well spent.

    If we're going to redistribute wealth, why not do it openly, rather than ripping off the sick?

    Anyway, trust has little to do with it. People will vote, first and foremost, for their economic self-interest. The geographical distributional efficiency of the people with these different sorts of self-interest determines who wins the elections.

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  5. couldn't agree more. these are the issues I found came up on the doorstep. well, these and immigration, and I'm afraid that's a bit of a non-comprimise issue.

    it is precisely these 'centrist' reforms that people don't like. pragmatism is great, but the perception of these is that they just don't work!

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  6. with neil, that is...

    The blairite 'reforms' are damaging us and the public. blair should learn, not go.

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  7. Martin: "The constituency of the Labour party is the people, poor or rich, who do well out of big government...The constituency of the Conservative Party is those, rich or poor, who benefit from smaller government"

    There is some truth in what you say. What you forget to mention is that the number of poor people who benefit from big government is vast. The number of poor people who benefit from small government is virtually non-existent.

    In a perfect world we would have no bureaucratic waste, but there is more waste in a system that reduces the quality of life of those at the bottom, the waste of those denied real equality under the Tories.

    Under Labour, average NHS waiting times have fallen from 18 months to 9 weeks.

    The Tories tripled child poverty, Labour have reduced it by a third.

    The low waged now have a minimum wage and tax credits, better holidays, more job opportunities and less chance of being unemployed.

    Pensioners now have free bus travel, winter fuel payments and free tv licences and a guaranteed minimum income.

    Human rights of minorities are much better, more equal rights whatever your sexuality, ethnic minority or disability.

    More chance of going to university.

    Labour have successfully managed the economy with record levels of continued growth. The Tories gave us the two deepest post-war recessions.

    More and better equiped hospitals and schools, more doctors, nurses, police and teachers. Is this bad?

    The Tories have never given a stuff about the environment which is why they oppose the climate change levy, congestion charging and better public transport.

    Even crime has fallen, probably because unemployment has fallen so much under Labour.

    You may prefer to return to the Tories and 'small government'. I don't and I think a majority would agree with me.

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  8. More chance of going to university.

    And, it should be noted, more chance of being in crippling debt at the end of it.

    Like many of Labour's reforms, this has been accomplished on the cheap (or via what we might politely call 'innovative' methods of funding). Just as many infrastructure projects have been funded through off-balance-sheet borrowing, in the form of PFI, so the basically meaningless expansion in HE provision has been funded by an off-balance-sheet tax on graduates, in the form of student loan repayments.

    Had the Tories seen the production of heavily-indebted media studies graduates as a vital national enterprise, they might well have enacted the same policies themselves.

    Labour have successfully managed the economy with record levels of continued growth. The Tories gave us the two deepest post-war recessions.

    It could also be said that the Tories got the economy into a state from which it was possible to have a meaningful recession (rather than just a slow slide into stagnation). It's quite a stretch to characterise the Callaghan-era United Kingdom as an economic powerhouse, subsequently brought low by Thatcher's malfeasance.

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  9. Neil, what's the significance of November 27th 2008 for Tony Blair's departure!?!

    Tony Blair used to be an asset for the Labout Party but is now totally discredited. Yes, Gordon Brown did make the Bank of England independent but his record is quite poor ever since. What are the long term benefits of his windfall taxes and private sector pension raids?

    Too many people feel over-taxed, yes, there may be record levels of investment in the NHS and education, but without deep and meaningful reforms how much of this money is needlessly wasted?

    Do you think social mobility is improving thanks to nine years of Labour Government? I would like to think it would be but fear it isn't!

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  10. bradfordlabourdude17/5/06 10:04 pm

    SNAFU
    "Gordon Browns record has been poor ever since"
    How do you figure that? He's overlooked the largest period of growth recorded! And don't try and credit that to the Tories, If we can't blame the Tories for current problems (Like crime) then the Tories sure as hell ain't taking credit for the good stuff that's happening now.

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  11. eben: So it was Callaghan to blame for the 1991 recession? Pull the other one.

    People hated the Tories for the mass unemployment and their destruction of public services but used to think that maybe they were better on the economy. After 1991, even that weak excuse to vote Tory disappeared and their vote collapsed. It still hasn't recovered despite the media love-in with that fraud Cameron (he wrote the 2005 Tory manifesto. Are we really expected to believe he has changed from that spiteful bile)? As for his environmental credentials, his chauffeur driven shoes says it all. He is a fraud and people are beginning to realise it.

    Labour's record by comparison is one of improvements in all areas, safe with the economy and vastly improving public services (though not as fast as we would like).

    You moan of high taxation, but we have some of the lowest taxes in Europe and we have historically low taxes as well.

    Britain can easily afford to have one of the best health services in the world (the Tory alternative is tax cuts for the rich - not very attractive to the vast majority of people. I'd rather have 10% of taxation wasted on employing management consultants than have it wasted on second homes and yachts for the rich).

    The facts are the NHS is very good but it could be much better. If we spent what the French and Germans do on health, (let alone the US, who spend twice as much as us per capita for a very poor level of healthcare for the majority of their people) then it could be the best.

    Yes the money could be spent better and millions (if not billions) has been spent on bureaucracy. But you have to put that in context. The NHS is still far more efficient than private healthcare, especially the system in the USA.

    More has to be spent on health promotion and there has to be more local control of expenditure.

    Snafu: I hate Thatcher so much that Blair being in control (he is still doing a good job) till Nov 27th 2008 and beconming the longest serving post-war PM would be great just to see the smile wiped off that witch's face.

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  12. eben: So it was Callaghan to blame for the 1991 recession? Pull the other one.

    No, if you read my original post, you'll see that that wasn't what I was saying. The 1991 recession only looked bad against the backdrop of a decade of sustained high growth which hauled us out of our 'sick man of Europe' malaise and got us on our feet again.

    You bang on about the poor economic record of the Thatcher and Major governments, but ignore the fact that between 1979 and 1997 the country's absolute and relative economic position improved immeasurably. Omlettes, eggs, etc.

    I'd rather have 10% of taxation wasted on employing management consultants than have it wasted on second homes and yachts for the rich.

    I think that gets to the heart of the problem.

    You (and many members of the current government) see taxpayers' money as belonging to the government, and regard the need to let workers keep some of it to buy food, houses, yachts etc as a regrettable necessity. I (and many members of the Tory Party) see the money I earn as my own, and am only happy to relinquish some of it insofar as it benefits me*.

    Isn't it funny how political parties which support (or used to, thanks Tony) the idea that workers should benefit from the fruits of their labour prefer indirect methods (state ownership of industry, a large welfare state) to the simple expedient of not nicking the fruit in the first place?

    As for his environmental credentials, his chauffeur driven shoes says it all. He is a fraud and people are beginning to realise it.

    Oh come on, we both heard him speak the other day. If he didn't believe the stuff he was saying, he deserves next year's Oscar for Best Actor. You're right about one thing; Labour has to find someone smarter than Brown to succeed Blair. Can you imagine the TV debates?

    * Note that living in a country whose citizens are healthy, well fed, housed and educated benefits me. Google 'psychological egoism' for a good feeling.

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  13. BradfordLabourDude, Gordon Brown's economic miracle seems to be built upon ever increasing amounts of public and private sector debt. This 'miracle' will disappear as rapidly as a mirage when it starts being paid off!

    Anyone for PFI? Why does the NHS need to mortgage new properties over 30 years? Won't the UK need hospitals in 30 years!?! What was the benefit of selling off the Inland Revenue property estate? What happened to the claims of selling the family silver that were frequently hurled at the Tories as they privatised inefficient state monopolies?

    Neil, on what basis do you think the NHS is "far more efficient than private healthcare"? In terms of the delivery of results or value for money? I suspect it's far less efficient on both counts...

    I support tax cuts across the board, not just for the super rich! If they want to 'waste' their money on yachts and second homes, so be it. It's not for me to tell other people how they should spend their money as they see fit. That many of them are management consultants 'working' for the NHS or on ID cards is an irony you presumably overlook!

    Equally, should we stop poorer people from wasting their money travelling around the country following their favourite football team as their money could be better spent doing something else!?!

    Thanks for pointing out the significance of Nov. 28th 2008 by the way!

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  14. Bradfordlabourdude19/5/06 11:00 pm

    Snafu
    The economy grew 1.75% last year, It will grow 2.2% this year then 2.7% next year, No mirage there just cold hard numbers from the IMF and the EU com, I seem to remember the Tories saying the end was nigh when the economy grew at 1.7% in 2001 and Growth was over 3% by 2004! In case you did not notice inflation is on target despite the Tories saying it would 6% by now and interest rates are clued down, Those of us in the inner cities and out in the coalfields would have got on our hands and knees and thanked the maker for numbers like that in the Tory years (When young guys were topping themselves and tory ministers told us to become window cleaners) Face it The Tories have been hammered on the economy and unless there's an Alien invasion that will continue to be the case, I agree with you that PFI is a bomb waiting to go off but it's nothing compared to the huge public property blunders Tory councils (Like the one we just shifted up here in Bradford) get up to, You chew on that for a while smart guy and while your at it think about the North sea oil money Thatcher stole from Scotland and gave to rich southern snobs, I say let the bloody rich keep their money but don't give them anyone elses

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  15. eben: "The 1991 recession only looked bad against the backdrop of a decade of sustained high growth which hauled us out of our 'sick man of Europe' malaise"

    1991 was worse than anything that happened between 1974 and 1979 (you have to allow for advances in technology (mostly foreign driven) which is where the real growth has occured). Also Remember 1979 was the high water mark of equality in this country.

    Yes Thatcher sorted out some bad working practises dictated by the unions but it came at a extremely huge price. The Scandanavian/ German route of co-operation between workers and management would have been a better route. Maybe, arguably, that was impossible in Britain, as the two positions were too entrenched but we lost a third of our industrial base under Thatcher and society is still suffering from her legacy of cuts and victorian selfish immorality.

    The level of unemployment the Tories thought 'a price worth paying' was immoral and we will have generations of high crime estates to come as a result of Thatcher.

    "I (and many members of the Tory Party) see the money I earn as my own, and am only happy to relinquish some of it insofar as it benefits me*."

    Lets talk about whose money it really is. Just because someone is paid huge sums of money doesn't mean they earned it. The market is imperfect, nobody deserves the huge sums received at the top when the poorest are not paid a living wage for hard full time work that is of real value. Anybody who works full time deserves a living wage. Labour's working tax credits and the minimum wage encourage people to work by paying at a more acceptable level. The Tories don't care about this which is why they will freeze the minimum wage, scrap tax credits, cut benefit rates and force people to work at starvation rates.

    The majority of people want Governments to correct this injustice (hopefully elected democratically but in the US and UK under FPTP and a biased media we have the least democratic democracies which explains why we have such highly dysfunctional government). Markets need regulation to work better and taxation is the most efficient and fair way to provide some basic services and the UK is a low tax country. The Tories promise to cut services even more.

    "Oh come on, we both heard him speak the other day. If he didn't believe the stuff he was saying, he deserves next year's Oscar for Best Actor."

    What did Cameron actually promise to do that related to the Power report? Virtually nothing that's what. He categorically ruled out the most important recommendation - a fairer electoral system. He gave a weak and vague promise on local government that everybody in opposition promises and then always weazel out of when elected and he promised to remove the royal prerogative to go to war. Big Deal, these are nothing issues that sound grand but mean very little and Labour has promised to do the same anyway, so what is it worth? Cameron promised nothing that means anything. Somehow he managed to promise nothing and still get people like you to think he actually promised something significant.

    Snafu: "Neil, on what basis do you think the NHS is "far more efficient than private healthcare"?"

    I don't think it, I know it is more efficient. Private hospitals can't provide most procedures and operations at the cost that the NHS does.

    WHO agrees with me ranking the UK 18th in overall health provision compared to 37th for the US despite the fact they spend twice per capita what we do. The French are ranked 1st. If we spent what the French did we would be at the top.

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  16. WHO agrees with me, your argument is nonsensical!

    On the hand, you suggest that healthcare was as generously funded as the French do, overall healthcare provision would improve significantly. However, if we merely double per capita healthcare expenditure to US levels, UK healthcare provision would deteriorate significantly!

    Are you therefore suggesting that increases in state funding would improve or reduce healthcare provision in the UK? I suggest increased levels of funding without reform will achieve very little and could even make performance worse!

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  17. Neil - please define 'huge amounts of money'. You'll remember I work in academic publishing, and that Eben (my husband) is a university academic. A glance at the NUJ earnings tables and a quick scan of recent news articles about the current lecturers' salary argument will inform you that we're not members of the yacht owning classes, although I will admit that I am happy to spend more money on nice frocks than perhaps I ought.

    I believe in old-fashioned socialism; you couldn't possibly run the sort of British society they're planning on teaching in Citizenship classes without a proper welfare state and a good old-fashioned Utilitarian view of what your money's for. This doesn't mean, however, that I am happy for the tax money I merrily hand over every year to go towards funding doomed ID projects, grace and favour apartments for our Deputy Prime Minister to carry out abuses of power in, PFI City Academies and whatever Tony's latest legacy project happens to be. For me, the rot set in when they decided that the Millennium Commision and the Millenium Mandeldome were worth pouring money into when many schoolkids are still having to share the very inexpensive textbooks I edit. I've not voted Labour since.

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  18. Sorry; drunk. Spelling atrocious.

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  19. snafu: My point is that the private health system in the US is more inefficient than the NHS. Private provision is not always more efficient.

    The French spend less per capita than the US and we spend less than the French and half per capita what the US do. Despite this we still manage to have a reasonable system. There are arguments over how to achieve a better system, but it is clear that increasing the level of funding through higher taxation WILL improve services, though of course I agree that rigid PFI contracts and hiring more management consultants are detrimental to the level of this improvement.

    squeezeweazel: First just to say, apologies to you, martin and eben if I seemed a little out of it the other day at the conference. I had just got off an over-night train and had had no sleep. It took me a while to recognise who you all were.

    "A glance at the NUJ earnings tables and a quick scan of recent news articles about the current lecturers' salary argument will inform you that we're not members of the yacht owning classes"

    I know that compared to doctors pay, lecturers pay has fallen behind in recent years (but who apart from dentists and directors hasn't fallen behind doctors pay?).

    Correct me if I'm wrong, but I remember reading that the average lecturer is on around 34k a year, a lot get more than this. HALF of earners in this country have to survive on LESS THAN 21k a year, so lecturers are not poorly paid. In fact 34k is in the top 10% of earners in this country (top 1% of earners worldwide). So I would argue that some senior lecturers ARE members of the 'yacht owning classes', certainly the sort of people who can afford to buy a second home in devon and cornwall (where some towns have 50% second homes damaging the local economy and community). It seems nearly everybody who is wealthy underestimates how wealthy they really are.

    There are plenty of policies where I disagree with this government, but if the only realistic opposition is worse then I still have to vote Labour, it is detrimental not to.

    Everybody should vote Labour and join the Labour party and campaign for change from within. If enough people did this, the Labour party could be improved. It is not voting Labour and allowing a Tory government that will mean real harm to this country yet again.

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  20. Neil -> Correct me if I'm wrong, but I remember reading that the average lecturer is on around 34k a year ... So I would argue that some senior lecturers ARE members of the 'yacht owning classes', certainly the sort of people who can afford to buy a second home in devon and cornwall.


    Ignoring the vast student debt incurred by completing a degree, masters, PhD and the lower paid years as a junior lecturer, reader etc, debt which the average lower paid worker will not have incurred.

    The average price for a flat in Brighton is £168k, or about five times the income - considerably more than a bank is likely to lend. How do you suggest our 'wealthy' lecturer, purchases a flat, yacht and a second home in Devon?


    You may also wish to bear in mind that University lecturers typically do a large amount of unpaid overtime, and there is no option to employ someone else to share the job because it's just not possible to locate an equally bright person and given them the requisite ten years study, and few years of experience in the field overnight.


    From my university experience, the most talented tutor I had by far, got fed up of extremely long hours and poor pay in the middle of my first year, and went off to work for a bank netting himself only a 500% payrise in his first year.

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  21. Neil -> In fact 34k is in the top 10% of earners in this country (top 1% of earners worldwide).


    Just for comparison, someone on £5.25 / hour, 37.5 hours a week earns, £10237.50 / year and is in the top 11% worldwide.


    The median world income is £485, which surely gives a compelling argument that the minimum wage should be reduced to 25p / hour since otherwise we're paying people above average.

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  22. Senior lecturers can earn in excess of 60k, more than enough to buy yachts and second homes, especially if you got on the housing ladder 10 years ago and have seen your house equity double.

    You are right to say that even someone on the minimum wage is a high earner compared to third world workers (although it is not as simple as this, climate and cost of living need to be taken into account).

    People who moan about 34k earnings like lecturers do, should remember that most people who live in their same town have to survive on LESS THAN 21k. 34k puts you in the top 10% of earners in this country. I have no problem with lecturers going to work in banks for more money. Most lecturers don't do this, because they know they will have to work a lot harder in a job that is not as enjoyable. There is no shortage of qualified people waiting to take lecturers jobs. That tells you all you need to know.

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  23. Senior lecturers can earn in excess of 60k, more than enough to buy yachts

    Care to back that up with figures? Do you even know what the term 'senior lecturer' means? From context (and weary past experience) I'm guessing not.

    Most lecturers don't do this, because they know they will have to work a lot harder in a job that is not as enjoyable.

    Hang on. When they do go and work very hard at a bank, you're going to tax them at some staggering rate, on the basis that somehow they've not 'earned' it. Sounds fishy to me.

    There is no shortage of qualified people waiting to take lecturers jobs. That tells you all you need to know.

    If the criterion is that they look smart from where you're standing, I suppose that's true. Note that you also think that the government could conjure a couple of Oxbridge-class universities out of thin air if the need arose. I think that tells us all we need to know about your competence in matters academic.

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  24. eben: you are right, it seems senior lecturers can only earn around 38k. Other university academic staff can earn over 60k though (and that is what I had mis-read).

    The point about lecturers leaving to do other jobs was raised by pete stevens. I pointed out that very few actually do this, and that there are no problems recruiting qualified replacements.

    I think generally the tax rates of high earners can be increased to around 50%. I question whether anybody truly 'earns' 100s or 1000s of times the hourly rate of someone else. There is something quite clearly wrong in the market mechanism when this happens.

    As for Oxbridge, it is over-rated.

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  25. I question whether anybody truly 'earns' 100s or 1000s of times the hourly rate of someone else. There is something quite clearly wrong in the market mechanism when this happens.

    Okay, I'll walk you through it.

    Imagine for a second that I am a very clever guy, and that I have spent many years acquiring both education and experience. I can use these skills (inate and learned) to give you some good advice, perhaps about the outcome of a football match, or about a product which you can buy cheaply and sell for a profit on eBay. As a result, you make 1000 pounds.

    You are probably grateful for my good advice, or at any rate want to encourage me to keep advising you, so you take 20 pounds and buy me dinner.

    You might say that I have 'earned' my dinner, but really that's beside the point; all that's happened is that I have applied my skills on your behalf and you, whether through gratitude or self-interest, have cut me in on the proceeds. You certainly wouldn't expect to see an editorial in next day's paper decrying me as some sort of fat cat for having accepted your gratuity.

    Now imagine that I have given some advice simultaneously to a million people, causing them each to make 1000 pounds. This is exactly the situation of a chief executive who has, by application of his manifold skills, increased the value of his company by a billion pounds. People who can do this are in short supply, so it seems fair (and above all wise) for his shareholders to give him a 2% tip (20 million pounds) to ensure that he stays around.

    But what of the assembly line worker in the executive's factory? He has few unique skills, and if he leaves he can be replaced from the labour pool. As a result the shareholders will choose to pay him the minimum required to keep the factory just about full. If the labour market is slack enough, this might not even be enough money to live on. Thank God for the minimum wage, eh?

    Companies do not pay their employees according to some idea of fairness; they pay them according to the value that they add to the company and, critically, the value that they would subtract if they leave. The situation in which chief executives earn orders of magnitude more than their employees is evidence that the market is working, not that it is broken.

    As for Oxbridge, it is over-rated.

    Have you been here? It's entirely possible that you're correct, but I think you're arguing from some weird Maoist ideological starting point (which is funny, because I had you pegged as a Stalinist up to this point).

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  26. Neil,

    Imagine for a moment that I am very clever. Imagine that I've discovered a chemical additive that I could add to petrol that would increase fuel efficiency by 5%. I decide to sell this for £2 per bottle. Then every car own in the UK buys some, netting me a return of £50 million.

    Am I immoral for having done so, because I've now earned £50 million, even though I've saved car drivers many hundreds of millions in petrol costs?

    You may also wish to bear in mind that all the oil companies will now have to start sacking people because the amount of oil that needs to be produced has dropped.

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  27. Pete and eben: Leaving aside corruption and monopolistic control of the market by those at the top, do you see nothing wrong in a market mechanism that pays a few people millions while others starve?

    Do technological advances depend on people being paid millions? I would argue that people would still manage, invent and innovate just as well on far less excessive remuneration. In fact a more equitable distribution of wealth might increase the number of innovators and inventors. Money is not the only factor that motivates people, in a lot of cases money played no part.

    Government is needed to tax, regulate and correct the injustice of the market.

    To ensure governments look after as many people as possible we need as democratic a process as possible. We need a better electoral system and we need to reduce media bias. This media helps persuade people like you that the current economic system is fair and just. It is not.

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  28. Neil,

    " Do technological advances depend on people being paid millions? "

    I work for a startup. I prototype products and services for people to use. The company has released about eight products to date and has a roadmap for more. My offices are surrounded by the offices of other startup technology companies, drug discovery companies, biochemical tool companies, software companies, mobile phone companies etc. I think I am definitely in a position to comment.

    Without exception, each company exists because the founders bet their money and time on it, in the hope they could become rich through the company being successful. I, through my stock options also hope to become rich through it. So do many of the other early stage employees.

    If you taxed all that wealth away, the companies wouldn't exist - they'd be no point betting the money and time on becoming rich if the government taxes all the riches away. The jobs created by the companies wouldn't exist either. The exports the companies create wouldn't exist. The very large monthly tax & national insurance bill wouldn't get paid. Instead the founders would just be working regular jobs at the companies they had before they quit to form a startup.

    The companies exists, because a small number of people spotted an opportunity to make themselves very rich, and decided to bet on it.

    The creation of jobs, new technology and paying a large tax revenue to the government are side effects of the founders becoming rich.

    The government has a special 10% CGT rate to encourage people to do this. It's spotted that the way to obtain wealth in the country, is to persuade small groups of smart people to work very hard and create a large amount of wealth and take 10%, rather than taking 40% of a much smaller amount of wealth.

    (Just incase you didn't get it, many technological advances come from startup companies, they are commercialised and turned into products because the founders wish to become millionaires. The way to make technological breakthroughs is not to pay scientists and engineers millions, it's to make it so that if they discover something really commercially valuable they can make millions by selling it, otherwise they may as well not bother).

    Question : Do you think Google would exist if the founders had 99.9% of their wealth taxed away (bearing in mind they'd still have a few million left) ?


    I guess my summary would be, given the choice between a mechanism that means everyone gets one potato, and a mechanism that means some people get 100 potatos but everyone else gets two, I'd take the second even if it increases inequality.

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  29. I believe a country somewhere to the east of the UK tried the one-metaphorical-potato scheme. My recollection is that many people ended up without any potatoes, metaphorical or otherwise.

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  30. Peter Clay24/5/06 4:02 pm

    I absolutely agree with Pete. I've worked at three different companies which could be called "startups", and quite a lot of people I know are in similar situations.

    For the founders, it's:
    - signifigant amounts of work. Forget work-life balance. I don't think it's possible to get a company off the ground with less than 50 hours work a week.
    - complex to negotiate the paperwork requirements (contributing to the long hours)
    - requires a breadth of skills (personal and technical)
    - requires a signifigant investment of personal money, and income forgone
    - the odds are against you; I believe the official figure is over 75% of businesses started fail in the first couple of years.

    Starting a business is placing a bet of most of your own savings plus several years of your life, in the face of poor odds. The government does not cover that downside risk. So it should not seek to take away the upside. Instead it should recognise that starting businesses creates jobs and increases tax revenue and the size of the economy, and offer incentives to people to start businesses.

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  31. "do you see nothing wrong in a market mechanism that pays a few people millions while others starve?"

    Is there anything you're unwilling to sacrifice in the pursuit of equality?

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  32. Pete, Squeezeweazel, Peter, Martin: I asked if you saw ANYTHING wrong in a system that pays millions to a few while a huge number starve?

    Like you, I am in favour of the market system. But I believe the market operates best when it is properly regulated.

    'Laissez Faire' didn't create the Japanese, German or even British and US economic miracles. It was regulation and even strategic protectionism in the early stages.

    Tim Berners Lee was not motivated by money. In fact a lot of the best innovations, inventions, management etc. depend more on enthusiasm for the business, product etc than on pure greed. Money is just one motive, an important one I will give you. Taking away the most excessive wealth at the top (and re-investing it) will not change the incentives at the bottom. Is it really money that drives Branson, Murdoch and Gates?

    The Soviet Union had a lot of things wrong with it's system other than it's 'superficial' drive for equality. It's lack of democracy was it's biggest problem. I believe that the more democratic a system is, the more equality you will automatically get.

    Unfortunately the US and the UK are the most undemocratic 'democracies'. The countries that are more democratic have more equality, e.g Scandanavia, Germany etc.

    Martin: "Is there anything you're unwilling to sacrifice in the pursuit of equality?"

    I believe it is you that is making the sacrifices. I just want a more democratic system, the equality will take care of itself after that. We need to reduce media bias and change the electoral system as the most important steps.

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  33. So what you're saying is not that you're not prepared to sacrifice anything, but that no such sacrifices will be necessary?

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  34. Yes. I don't think having a more democratic system would be a sacrifice. I think it is a sacrifice to think that the market doesn't need regulation or that democracy holds business back. This regulation needs to be guided by the democratic process. The more democratic the better.

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