6 intentionally controversial ideas for new Lib Dem policies

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I wasn’t at Lib Dem conference last week – Bournemouth is quite a way from Hanoi – so I had to settle for experiencing it vicariously. That’s a shame because it sounds it sounds like it was actually rather pleasant.

Writing in the Independent, Daisy Benson seems to suggest that it may actually have been too pleasant:

…looking at our agenda this week there is a retreat to old comfort zones. The issues we’re discussing are far too safe. Many of those, such as housing and the NHS, have been debated many times before. We are simply restating old policies.

Even in the discussion on the refugee crisis, an area where our new leader Tim Farron has led the public debate, as one new member reflected: “It was boring – everyone just agreed on everything.”

……

As controversial as the Orange Book was at the time, it stimulated debate and got members thinking critically about policy matters. We don’t need a new Orange Book, but what we do need is a set of thought-provoking ideas learned from the crucible of government, and from the public.

So in that spirit here are 6 policy ideas that meet the following criteria:

  1. a) In my opinion, they further Liberal Democrat aims, objectives and values;
  2. b) To my knowledge, they have not been Liberal Democrat policy before; and
  3. c) In my estimation, they will upset a fair number of Liberal Democrat members.

Three seem thoroughly sensible to me. I think a couple are probably right but I have misgivings about them. One is quite possibly mad. I’ll let you decide which are which.

1. Shred the planning system

The idea: Under the current structure, local councillors make convoluted plans and then sit on planning committees and make rather arbitrary decisions about whether or not applications comply with those plans. Instead, we ought to have a minimal set of transparent rules and give the role of deciding whether or not they have been complied with to an independent tribunal.         

Why it is desirable: If you constrain the supply of something, its price will rise. That will transfer wealth from those who want to buy that thing to those able to sell it. Unfortunately, in this context that means making the old and rich better off at the expense of the young and poor and thereby accomplishing the opposite of what anyone interested in equality should be aiming for.

Furthermore, while it’s true that decisions to build, alter or demolish a building will often generate externalities, the way the current system tries to manage them should unsettle liberals. For good reasons, we usually separate the role of legislator and judge. Yet in the planning system councillors perform both roles and as a result often wind up making what are effectively judicial decisions with electoral considerations in mind.

The result is a system wholly lacking a sense of proportionality: more tall buildings might be bad for the views of London but they’d be good for the people and businesses who would no longer be excluded from the city by high property prices. And that’s to say nothing of the ‘bland agricultural land conservation scheme’ AKA the Green Belt.

Why some Lib Dems wouldn’t like it:     There’s a long and ignoble tradition within the party of equating liberalism with localism and localism with maximising the power of local councillors, who not co-incidentally are a key part of our activist base. Many Lib Dems might also fear that they’d no longer be able to harness NIMBY sentiment as part of their local campaigning.

2. Determine school admissions by lottery

The idea: If a school is oversubscribed decide which children to admit at random rather than with catchment areas, admissions exams or by looking at the parent’s religion. 

Why it is desirable: It creates parity between middle and working class families. Buying a house in the catchment area, paying for Tabitha to be tutored for the 11+ and buttering up the local vicar are equally impotent to change the outcome of a lottery.

Why some Lib Dems wouldn’t like it: See the above point about a desire to maximise the influence of councillors. Plus there’s probably a reasonable correlation between being a Lib Dem voter and living in the catchment area of a good school. And to be fair, there are practical difficulties that would need to be worked through. It’s also rather counter-intuitive that the way to make school admissions fair is not to try and match the right student with the right school.

3. Stop exempting family firms from inheritance tax

The idea: Currently private firms – most of which are family run – can don’t count towards the value of an estate when determining the amount of inheritance tax due on it. We should start including them.

Why it is desirable: The UK has an unusually high percentage of family run businesses. It is also a productivity laggard. These two facts are not unrelated: the fact your Mum or Dad was a good manager does not mean you will be.

However, the exemption provides incentives for families to continue managing businesses themselves. Removing, it would encourage more family firms to become companies that separate management and ownership. That in turn allows them to bring in professional managers selected for their ability to do their job rather than their bloodline.

There’s also a good argument that both equality of opportunity and outcomes probably suffer when some people have multi-million pound businesses dropped in their lap’s tax free.

It would also raise around £250 million.

Why some Lib Dems wouldn’t like it: It’s politically risky. The losers will easily be able to spot they are losers and change their votes accordingly. By contrast, the benefits will be diffused across everyone in the country.

4. Abolish tax subsidies for corporate borrowing

What is the idea: If a company wishes to raise money from investors there are essentially two ways it can do it. Firstly, it can issue debt either by taking out loans or selling bonds. In this scenario, in return for their money, investors receive the right to be repaid a set amount of money in the future. Alternatively, it can sell part of itself by issuing shares. Here, the investors hope to eventually make back their money by taking a share of the company’s future profits. While they serve the same basic function, for tax purposes they are treated very differently. Companies can treat the interest payments on their debt as expenditure, which they can deduct from their profits and thereby reduce their corporation tax bill. But they can’t do that with dividend payments. This effectively creates a subsidy for corporate debt.

Why it is desirable: Removing this subsidy would encourage companies to borrow less and instead rely more on selling shares. This ought to make the economy more stable. The value of a company’s shares fall in tough times. By contrast, their debt repayments remains fixed. With the same liabilities but less opportunities to earn revenue to cover them, other things being equal, more debt will increase the risk of companies going under. In this way, tilting the balance from equity to debt is likely to increase the severity of a subsequent downturn. Untilting will therefore promote stability.

There would be other benefits too. Banks are the principal issuers of debt and therefore the primary beneficiaries of any subsidy on it. Abolishing that subsidy will reduce their role in the economy. It would shut down the wheeze Starbucks uses to go tax rate shopping.

In addition to that it would raise colossal amounts of revenue.

Why some Lib Dems wouldn’t like it: It can be perceived as unfair to firms that are too small to issue shares and therefore have to rely on borrowing.

There’s a problem once again that the policy is counter-intuitive; because the value of shares fluctuate they look less stable than debt and encouraging more of them to be issued seems like it should make the economy less rather than more stable.

5. Commit to negotiating for free migration zones

What is the idea: In recent years with global trade talks stalled, countries have instead reduced trade barriers by striking smaller deals on a country to country or regional basis. I wonder if a similar approach might help make progress on immigration. If public opinion, is unwilling to countenance a general opening up to migrants, perhaps our government could negotiate the removal of immigration controls for citizens of certain countries on condition they do the same for British citizens. Free movement of people within the EU provides a precedent for this.

Why it is desirable: It may represent the path of least of resistance when it comes to liberalising immigration. Migrants from countries economically and culturally similar to the UK don’t generate the same kind of anxieties that immigration generally does. And the reciprocal element would provide an additional benefit to point to.

The obvious countries to make such agreements with would the US, Canada, Australia and New Zealand. While citizens of these countries have a relatively easy time getting into the UK – and British citizens have a relatively easy time getting into them – immigration controls are still a burden that could be done without. For starters, they involve a lot of bureaucracy. And they can generate strange incentives. Take for example, an Anglo-American couple I lived with for a while. In order to get permanent residence in the each other’s countries they postponed settling permanently in one country and instead moved across the Atlantic at regular intervals.

Why some Lib Dems wouldn’t like it: It would strike many as unfair to scrap barriers for rich Americans who generally don’t really need to emigrate to the UK rather than for poor Syrians or Ukrainians for whom that might be a life changing opportunity. In addition, some of the more ardent Europhiles within the party might object to anything that looks like a rival to the European single market.

6. A soft power push

The idea: ‘Soft power’ was a term coined by the American political scientist Joseph Nye. It essentially describes the power a country wields by being liked rather than feared. It represents the ability to persuade rather than pressure.

Why it is desirable: For the first time since the Cold War, there is a viable contender to liberal democracy as the organising principle for societies. Russia and China are devoting significant resources to their own soft power pushes. Confucius Institutes are proliferating and Russia Today – sorry RT – is hiring more journalists to produce Putinite propoganda. While these regimes may not be actively trying to export their system of government like the USSR did, liberals should still find their new ideological assertiveness alarming.

In particular, we ought to be concerned about their efforts to tilt international organisations away from a concern with the rights of individuals towards the rights of states. For example, Russia has been trying very hard to prevent the UN recognising LBTQ rights as human rights. To offset this there needs to be a countervailing soft power push from more liberal states.

Fortunately, this is a domain in which the UK excels. In fact, it may well have more soft power than any other country. We should aim to preserve and even accentuate this edge. We ought to being encouraging more foreign students to study at British universities, nurturing rather than constraining the BBC and pumping money into the British Council.

Why some Lib Dems wouldn’t like it: Soft power is still power and power plays are a zero-sum game. When Ukrainians decided they wanted their country  to be more like Europe and less like Russia that weakened Russia. Lib Dems are not instinctive Kissengerites and this way of looking at the world would make many in the party uncomfortable.

In addition, the idea of using British soft power to promote liberal values depends on the UK being protected by American hard power and America is an uncomfortable topic in the Lib Dems. The party was almost uniformly opposed to the Iraq War and to post 9/11 abuses like Guantanamo Bay and Rendition flights. But not everyone saw it the same way.

Some within the party recognised that it is hard for a global behemoth – especially a wounded one – to move without destructive missteps. Others saw the damage the US was doing as evidence of a moral equivalence between the it and its competitors and concluded that it was the real threat to international stability. Those in the later camp would not appreciate essentially acting as cheerleaders for America’s preferred international order.

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One thought on “6 intentionally controversial ideas for new Lib Dem policies

  1. A really good, thought-provoking selection, though I’m sorry to tell you that I agree with most of it.

    On school admissions (where I don’t necessarily agree) that would have the fascinating effect of making property wealth more equal at a stroke.

    Agreeing free migration zones is a really enticing idea both in itself, and as part of a long process of establishing long-term global goals re free movement; changing public opinion on that; and developing policy to tackle the novel, tricky problems of how tax and welfare systems can work across borders. It does raise some uncomfortable questions about which countries we prioritise, and is probably unhelpful in the EU referendum, though if the debate can shift to *which* countries we should have free movement with, or – better still – *when* should each country deal happen, rather than *whether* they’re a good idea, that would probably count as liberal progress. http://www.cfmo.org/ campaigns for free movement between UK, Canada, NZ and Australia.

    But I wanted to comment on the corporate borrowing idea. The reason I don’t like it is not one you’ve listed: it’s because it deters investment. The taxation of equity means that some investment does not go ahead. The same is not true of borrowing, but that doesn’t mean the answer is to make some debt-funded investment unprofitable too. This is really important. If in a world free of tax, a company would have been able to borrow/raise equity to buy new machinery, or someone invents a new service and would have been able to get it going, we don’t want a tax system that makes any of those decisions non-viable at the margin. Your change would mean less investment would go ahead.

    It may be that the benefits from greater stability outweigh the loss of investment/innovation. But I’d prefer other policies that achieve both. One is to introduce a symmetrical allowance for corporate equity. Another is to reduce corporation tax, as the Coalition and Osborne have. (And it would also help to cut/abolish stamp duty on shares, and reform dividend/CGT taxation.) Obviously those all have costs, but I think there are better ways to raise revenue than taxing marginal investment.

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