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August 09, 2010

Coalition politics, graduate taxes and the Browne review

John Browne is due to deliver his recommendations on revising the system of undergraduate finance in October. But the starting point for any consideration of what is to come can not be the various policy options he is analysing. It has to be the question of what legislation can be pushed through the House of Commons.

Undergraduate finance is a highly charged topic. Any reform of this middle-class welfare is electorally potent and can be likened to driving a train freighted with political dynamite through hostile media territory. It would be a massive undertaking for any prime minister, whatever their majority. But for David Cameron, with the Lib Dems threatening to abstain, it’s specially explosive.

Government legislation on this is not guaranteed a majority and Cameron could end up a loser. The need to prevent that is why we all need to start thinking like a whip. Once you do, the current fog of confusion over things like the idea of a graduate tax dissolves.


The arithmetic

The arithmetic in the Commons is this:

Conservatives - 306 (after allowing for the Speaker)

Liberal Democrats - 57

Labour - 258

Others - 24 (excluding Sinn Fein absentees).

If the Lib Dems vote with the Conservatives, then their vote seems overwhelming - 363 vs 282, a majority of 81. Whatever the substance, whatever the rebellion, Cameron can’t fail to get a vote through if Clegg is leading his party past the Aye tellers.

However, the coalition agreement gives the Lib Dems the right to abstain in certain circumstances. The text of the agreement states: “If the response of the Government to Lord Browne’s report is one that Liberal Democrats cannot accept, then arrangements will be made to enable Liberal Democrat MPs to abstain in any vote.”

This seems a loosely-worded opt-out that Clegg can play at will, potentially covering several votes. If the Lib Dems opt out, then the arithmetic gets much tighter - the Conservative 306 vs a maximum of 282 others, a majority of 24. This means just 12 Conservative rebels could potentially defeat a vote in the Commons, provided all the opposition parties oppose it.

This brings us back to the factional dynamics within the Conservative party that bedevilled John Major. He had a dozen right-wing “bastards” who were prepared to do immense damage to the party as a whole in order to try and push the party rightwards. That right wing is still there in the Conservative party and is, by all accounts, spoiling for a fight. A vote on fees with Lib Dem abstentions is one of the few chances it is going to get to give Cameron a bloody nose.

If the Lib Dems abstain, then the potential to defeat Cameron will likely be too tempting for Labour to refuse, whatever the substance on offer. So passage of any vote in the Commons will depend primarily on how many “bastards” there are (currently a closely guarded secret as the Conservative right no longer makes the mistake of identifying itself via clubs); on how many Lib Dems are prepared to break the whip and vote against instead of abstaining (which Menzies Campbell has more than hinted at); and on the attitude of the minor parties. Bear in mind that, unlike Labour, the minor parties can be bought off. For example, the SNP would probably go for a deal that maximises the number of Scottish MPs when the number of constituencies is culled.

So trying to get reform through the Commons with a Lib Dem abstention is an uncertain route, fraught with danger for Cameron. But one point stands out. The first issue for Cameron is whether Clegg can be brought on board. If he can, then Cameron can be confident of getting through the Commons with a minimum of fuss. If he can’t, then things get much more difficult. Most MPs still have to decide where they stand, creating enormous uncertainty, but it’s certainly possible that Cameron could be defeated if he attempts to push through reforms without Clegg’s support. So Cameron’s position has to be one of wait-and-see until Clegg makes up his mind.


The shape of water

Today, Cameron clearly does have a wait-and-see approach. His point man, David Willetts, is saying wait and see to questions. And the formula that the coalition has agreed on for now - “looking at the feasibility of changing the system of financing student tuition so that the repayment mechanism is variable graduate contributions tied to earnings” - is a wait-and-see formula [more on this below].

Meanwhile, Clegg is getting on with the task of maturing the internal Lib Dem discussion to the point where he can decide whether he can back a reform plan. Most Lib Dem MPs (and a lot of Labour ones, too) have signed the NUS pledge, reading: “I pledge to vote against any increase in fees in the next parliament and to pressure the government to introduce a fairer alternative”.

To those like the Treasury and universities that want students to pay more, this pledge is supposed to read like a “No Pasaran” banner. Clegg’s task is to find a formula that allows Lib Dem MPs to vote with the Conservatives in the Commons while saying they have not broken their pledge. He can’t burn the banner or storm it; that would strengthen resistance. He has to seep around the banner, taking on - in the phrase used by the novellist Andrea Camilleri in describing the murky mafia-politics nexus in Italy - the “shape of water”, which is to say, no solid position at all.

So between now and winter, the central action I think is within the Lib Dems. As they face up to the realities of power and the detail of the fees debate, how will opinion develop there? Just as Cameron has alienated his right wing, Clegg has alienated his left. Where this cold-shouldered rump of the party end up - people like Charles Kennedy, Simon Hughes and Menzies Campbell - will be telling.


Parting of the ways

There will have to be ongoing discussions between Lib Dems and Conservatives aimed at reaching an agreed coalition position, but both sides can walk away without breaking faith or imperilling the coalition itself. That makes a deal far from certain. From Cameron’s point of view, he probably doesn’t need solid Lib Dem support. The key thing is to get support from Clegg. A Lib Dem rebellion, even a sizeable one of 10-20 MPs, probably won’t matter because the net inflow of Lib Dem votes will likely still be enough to stop the bastards defeating the government.

One upshot of this arithmetic is that the political environment for the development of policy in this area is highly, unusually, unstable. To get the support of his party, Clegg needs to be able to sell any reforms as “progressive”, ie left-wing. But if the Lib Dems drop out of the equation, then Cameron needs the support of at least some bastards in the Commons, and the more progressive the proposal is, the less they’ll like it.

Therefore, there is potentially a parting of the ways to come. There are two ways for Cameron to be confident of getting a revised system through the Commons. One is with the support of Nick Clegg, which will have to be progressive. The other is without Clegg’s support, in which case the safest route is anti-progressive with (probably unrelated) sweeteners for minor parties, even though this risks a Lib Dem backlash. (The more right-wing the proposal becomes, the more likely Lib Dem MPs are to break the whip and actively vote against the proposal.)

This is the reverse of coalition politics as usual, which consists of negotiating and narrowing differences. At the moment, Cameron can wait and see. But once Browne reports, pressure will start to mount for him to take a position. At this point he needs an answer from Clegg on whether he will lead the Lib Dems in support of reforms, and what the price for that is. If Cameron can’t get a clear answer to that question by the time Browne reports in the autumn, then he is in a real quandary. Several points follow.

First, this is another reason for a wait-and-see policy. Committing to either progressive or anti-progressive approaches would be to give a hostage to fortune.

Second, this of itself becomes a powerful argument for Clegg to win over wavering left-wing Lib Dems. Abstain and you gift victory to the bastards, your bitterest opponents.

Third, the same sort of argument can also be used (with more difficulty) by Cameron on the bastards. Hold out for anything too extreme and I’ll do a progressive deal with the Lib Dems.

Fourth, it explains precisely the positions taken currently by the coalition partners. Cameron is waiting for Clegg, and avoids taking a position in the meantime. Clegg is aiming to bring the party on board to support a vote in the commons, but can’t be sure of success. Hence he is floating progressive ideas without committing to any of them.


Clegg’s gambit

Last month Cable floated the prospect of the Lib Dems voting for reforms and the discussion within the party is now under way. Cable’s speech was widely reported as a call to replace the current fees system with a graduate tax. But here’s how I explained what’s going on in Research Fortnight:

 Take a look at what Cable actually said in his big speech on higher education: “I am interested in looking at the feasibility of changing the system of financing student tuition so that the repayment mechanism is variable graduate contributions tied to earnings”.

There is no mention of a graduate tax there. And, since the speech to vice-chancellors at South Bank University, officials at Cable’s Department of Business Innovation and Skills have been briefing universities about the exact meaning of the word “variable”.

“Variable”, I am told, could mean that the amount paid by the graduate varies according to their income (as in a graduate tax). But it could also mean that it varies according to the university the student studied at (as in truly variable fees), or indeed the subject they studied (as in bye-bye government subsidy for humanities students).

Plus, of course, it can be argued that the existing fees regime is tied to earnings since you don’t have to repay anything until your salary reaches a set level.

Hence the meaning of the phrase “variable graduate contribution tied to earnings” as defined by Cable is so broad as to allow for any of the realistic options being considered by John Browne in his review of student fees, including the minimalist option of tweaking the fees regime without primary legislation.

Clearly Cable’s objective in spinning a “graduate tax” (while in fact sticking to an agreed coalition “graduate contribution” line) is to win Lib Dems over to the idea that the coalition’s proposals, when they emerge, are progressive and therefore acceptable. Equally clearly, it is no surprise when Willetts says he is only committed to a graduate contribution. This also is what Cable has actually said.

The reaction to Cable’s speech shows this gambit has had some success. The NUS greeted the speech with enthusiasm (even if this has dulled a bit as the reality has sunk in). On the other hand, the lecturers’ union has moved quickly to try and quash the idea that a graduate tax would be progressive, arguing that teachers and nurses would still pay more. This mixed reaction creates precisely the kind of confusion in the minds of voters and Lib Dems that Clegg needs. What does Cable mean by a graduate tax, and would it be progressive? The answer to these questions truly is as shapeless as water itself.


End game

An important subtlety in all this is that very little actually needs to go through Parliament. Nearly all the current financial regime can be revised without legislation. Only the cap on tuition fees needs a vote in the Commons, and that requires only a simple vote, not the lengthy legislative consideration that would allow opponents to build momentum. Which is not to say there won’t be some huge complicated bit of HE legislation as part of all this. Just that that may turn out to be a distraction from the main event.

I can see Cameron and Clegg playing right and left wings off against each other all the way up to the division bell in an attempt to navigate a middle way. As the detail of options emerges, as MPs properly grapple with the issues, as soundings are taken and the whips squeeze, as deals are lined up with minor parties and amidst a fog of brinksmanship and disinformation, Cameron may find he is be able to muddle through with a twin-track muddle.

But this would come at a price. It can only be done by failing to take a meaningful position on the substantive questions, which will be intellectually incoherent and - more’s the pity for Cameron as it’s one of his strongest cards - by abdicating leadership for as long as the twin-track approach persists.

This is why Cameron wants Clegg on side by the time Brown reports, and why Lib Dems have to be softened up now for the U-turn on fees.


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Excellent post, very well argued.

Thanks Anon. I should mention that in the two months since I wrote this, I've become aware that one possibility I discounted at the time as too extreme is actually an important part of the picture. This is the possibility that the Coalition could collapse over student fees, triggering a new General Election.
What happens if we go all the way to a vote, Clegg is unable to enforce the whip and enough Lib Dem MPs rebel to defeat the government? From the Conservative point of view, it's a breach of the Coalition Agreement. The Liberal Democrat Party has failed to abide by its part of the deal.
This then could provide grounds for the Conservatives to force a new election. Whether they would do that would in turn depend on the electoral outlook at that point. But certainly, glancing at the polls, it's a prospect that today Cameron can look on with interest - while Clegg has to view it with terror.
So, this puts additional pressure on Clegg to bow to Conservative demands. Maybe Cameron will try and force him to choose between repudiating his pledge to oppose rises in fees or face an early election.
Clegg has a card to play even here, not I think that it helps much in reality. The Coalition Agreement says that arrangements will be made to allow the Lib Dems to abstain. Clegg can always claim those arrangements were inadequate and try and shift the blame on to Cameron. But if Cameron believes he's got the chance of winning an outright majority with an early election, that won't stop him.
And a final PS - Lib Dem activists have made me aware that within the party Clegg and Cable are famed for opposing the party policy on fees.

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