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Skills, pensions, and facing up to climate change: the real stakes in the electoral reform debate

Frederick Guy
12 September 2009

Electoral reform is back on the British political agenda, which is good. There are some important things that the British state simply cannot do properly under its present electoral system, and which it would stand a good chance of doing well under proportional representation.

The British state is very bad at providing for a workforce adequately skilled for the twenty-first century, establishing a pension system that doesn’t take your retirement funds for a flutter at the casino-on-Thames, or facing up to big environmental problems like climate change. You might be inclined to blame the current government for such problems, but you could equally well blame the previous one, or the one before that. If you look across the North Sea, you can find governments left and right - and, more to the point, coalition governments - in PR systems, that have done a much better job on such matters.

PR systems seldom produce one-party parliamentary majorities, and can look messy and unstable: governments ‘fall’, coalitions must be re-negotiated. The Westminster system, by contrast, almost always gives a single party a majority in parliament, and so produces governments which look strong and decisive. Yet Britain’s governments are incapable - constitutionally incapable - of making credible promises to future generations: anything today’s government does can be thrown out after the next election, on the whim of the leader who dominates a party that gets perhaps 40% of the popular vote. In those apparently messy, unstable PR systems on the Continent, policy reversals don’t come so easily: they require the consent of legislators representing a majority of the electorate; they can seldom be pushed through by a leader dominant within one party apparatus, because they must be negotiated between parties. For this reason PR governments can often make credible long-term commitments. The inability of UK governments to make such commitments takes a lot of policy options off the table.

Consider skills. The UK seems to be in a perpetual skills crisis. Employers’ representatives decry skill shortages; a large slice of the labour force is stuck in low-skill jobs with little prospect for advancement; pupils who know they are destined for that slice of the labour force have little motivation to learn in school, and this is a big factor in the country’s pervasive anxiety about the quality of schools.

We could blame the skill shortage on lack of training: the participation of young people in vocational education and training (VET) in the UK is very, very low, compared with any country in Continental Europe. This is not for want of government attention to the problem. The endless efforts to fix the UK’s VET system are wasted, for the simple reason that if you live in the UK a personal investment in specialized skills is a risky undertaking. Before you spend your time studying, or working at a low training wage, to learn the latest computer-assisted design technology, ask yourself, ‘If this skill becomes obsolete before I reach retirement, what support will I receive for retraining?’ If you live in the UK, the answer is ‘not much’. You would be better off studying something not tied to a particular technology or product, a subject such management or law. There is nothing wrong with general, transferable, skills, but a country needs some specialized skills as well.

Could a British government fix this problem either by providing direct state support for mid-career retraining, including income replacement while training is under way (as in, for instance, Denmark or the Netherlands); or by legislating job security, making it so costly for an employer to make you redundant that it would be worth their while to pay for retraining instead (as is the case in Germany and many other countries on the continent)? Yes, and no. Yes, a British government could easily put either of these changes in place: had Tony Blair snapped his fingers in 1997, it would have been done. But, no, it wouldn’t have solved the problem, because everybody would have known that the head of the next government could snap his or her fingers and the re-training programme or job security statute would disappear. If sixteen year olds don’t have any confidence that retraining would be provided for when they might actually need it - ten, twenty, thirty years down the road, when an unexpected change in technology or new foreign competition leaves them with obsolete skill sets, a mortgages to pay and families to support - they will likely stick with general skills.

Or consider pensions. Over the past several decades, our pensions have been moved into the stock market. This is a costly and unreliable system. It means pension funds managed by folk in the city whose services don’t come cheap; we pay those well-remunerated experts to play our nest eggs as best they can at the casino tables. We are all currently suffering the consequences.

Is there an alternative? Well, yes. The UK state pension is a ‘pay-as-you-go’ (PAYGO) system, in which people currently employed are taxed to pay current pensions. The UK state pension is not near enough to live on, however. In many countries with PR, substantial earnings-linked PAYGO pensions are the main retirement income.

Why have our pensions been taken to the casino? There are many villains we could point to, companies and individuals who profit from this system. But, at the end of the day, we have no choice: foolish as it is to trust the stock market and the city fund managers with our retirements, it would be more foolish to trust the British state. If you trace the history of Britain’s State Pension between the Second World War and 1986, and you will see the real value of both the basic pension and the earnings-related supplement yo-yo up and down as control of Parliament changed hands. By the time New Labour came to power in 1997, restoring the value of the State Pension was off agenda, and no wonder: a pension promise is worthless if another party, taking power in five, ten, or fifteen years’ time, can so easily discard it.

We can see similar problems in many areas where long term solutions - beyond the life of a parliament - are needed. Consider the task of creating a sustainable economy. The costs - changes in infrastructure, in business practices, in patterns of consumption and ways of living - are front-loaded; the benefits accrue to our great-grandchildren. No political system is really good at facing up to paying short term costs for long term gains, but some are worse than others. In the Westminster system, a party’s participation in government is all-or-nothing, and the big question - no, the only question - for many politicians is whether their own party will win the next election. (It doesn’t help that ‘green jobs’ require the sorts of skills Britain isn’t good at providing.)

The choice between PR and Westminster is a choice of the tools the British state has for solving problems. A government controlled by a single party with a strong majority can make people do a lot of things now: restructure the NHS, impose targets on the NHS and schools, and restructure again, and again; it was able to send armies to Iraq and Afghanistan in the face of overwhelming popular disapproval, something that most European governments, hamstrung by their need to achieve a broader consensus, could not bring themselves to do. Its promises for the future, however, are only as good as its fortunes in the next election, and that’s not good enough for meeting the big problems of the twenty-first century.

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