General Anti-Tax Avoidance Principal offers a new judgement-based approach tax

Matthew Robertson 10.39am

"The hardest thing in the world to understand is the income tax." - Albert Einstein

The list is never-ending:

  • May 2012 - 2,000 senior public officials on more than £58,200 were found to be paid “off payroll”, which could minimise their tax bills, according to a leaked letter obtained by Exaro, the investigate website and the BBC’s Newsnight programme.
  • November 2012 - A tax avoidance scheme, marketed by Ernst & Young, that claimed to license newspaper mastheads to avoid tax, has been thrown out by a tax tribunal.
  • November 2012 - Amazon, Google and Starbucks accused of being “immoral”, “manipulative” and of “practising tax avoidance on an industrial scale”.

It is difficult to find someone who doesn’t have an opinion on tax,  a meritocratic society relies on the idea that everyone pays their fair share yet there must also be incentives for individuals and companies to create wealth.

This dilemma has troubled governments for as long as tax has existed and the above examples show that they are not always successful. The onslaught of globalisation and multinationals has further hampered the ability of national governments to tax efficiently as the question of residency becomes less clear.

The constant attempts to avoid tax by individuals and corporations has created a behemoth of tax legislation with some rules dating back centuries. In 2009, Lexis Nexis revealed that the UK’s tax code has more than doubled in size since 1997, going from 4,998 pages in 1997, to 11,520 in 2009, making UK tax code the longest in the world.

Many have called for HMRC to have more powers and better resources to tackle tax avoidance as government initiatives have failed to prevent both individuals and corporations from ‘bending’ the rules. The implementation of IR35 is a prime example of misplaced tax legislation. It took effect in April 2000 and was designed to eliminate the avoidance of PAYE and National Insurance contributions (NICs) by ‘contractors’ who for all intents and purposes are employees.

As the BBC example above illustrates, IR35 has not delivered on its promises and moreover, it has had a negative impact on some businesses as clients become reluctant to engage with some professionals for fear of them being liable for PAYE on their fees. Furthermore, in some instances the legislation is unfair on certain freelancers as employer NICs at 13.8 per cent need to be paid as well as employee NICs and income tax of up to 50 per cent. IR35 has been found out to be unworkable and there is no evidence that it raises any income for the Treasury.

The failure of IR35 is similar to why Albert Einstein could not understand income tax but could comprehend quantum physics. That is, applying a rules-based approach to tax is always likely to fail as rules are open to abuse by their very nature. Rules cannot be applied to individuals in the same way that the laws of physics can be applied to atoms. The wording of any rule can be interpreted to have been complied with or not and it is because of this that many have been able to work within the rules to minimise their tax liability.

The Institute of Chartered Accountants in England & Wales (ICAEW) realised this a while ago and adopt a principles based approach to ethics:

"The ICAEW pioneered the principles-based threats and safeguards approach to Codes of Ethics in the accountancy profession internationally. We believe that this approach is flexible but robust because it focuses on the spirit of the guidance and encourages responsibility and the exercise of professional judgement. The guidance can be applied to the infinite variations in circumstances that arise in practice and can be adapted to rapid changes of the modern business environment."

Professional judgement is the key; HMRC should be able to analyse the economic substance of transactions to determine whether the behaviour represents the true nature of the business or whether it is merely avoiding tax. It is encouraging to see the ‘General Anti-Tax Avoidance Principal’ Bill being debated in Parliament on Friday. Richard Murphy, one of the main contributors to the bill, makes a good case for how successful a rule such as this could be.

One of the main ways Starbucks was able to make a loss in the UK was to pay a 6 per cent royalty to another Starbucks company for the use of intellectual property attached to the brand.

Murphy argues: “The profit stays within the group, and it cannot be justified as commercial since no one would pay a royalty for thirteen out of fourteen years to make continuing losses.”

In other words, economic substance has nothing to do with actual trade and is merely being pursued to avoid tax. An anti-tax avoidance principle would allow HMRC to apply a greater degree of professional judgement instead of following set rules.

Furthermore, it would dampen the obsession of creating more and more rules to close ever more elaborate loopholes. There is nothing inherently wrong with individuals and businesses managing their affairs to minimise their tax liabilities; no one would argue that investing in an ISA is immoral tax avoidance.

Nevertheless, there is a difference between arranging your business in the most tax-efficient way and creating transactions that merely exist to avoid tax. The complexity of the tax system is emblematic of such efforts to create loopholes, it is time for a new approach, one that allows more judgement to be applied.

Finally, I gave him the first word, so I shall give him the last.

‘We can’t solve problems by using the same kind of thinking we used when we created them.’ – Albert Einstein.

Follow Matthew on Twitter @FlatFootTory

Press freedom, or press responsibility? It is time we checked the most powerful organisations in Britain

Giles Marshall 9.50am

Eight-six MPs and peers have signed a letter urging David Cameron not to accept any recommendation for statutory oversight of the press, should such be made by Lord Leveson in his much anticipated report.

In many ways it is encouraging that so many legislators, themselves often the target of press attacks, should be so concerned about what they have termed an issue of free speech. They are right in wanting to steer clear of political control of any media outlet. Yet the issue for the British press is no longer really one of free speech; it is one of responsibility.

The Leveson Inquiry’s exhaustive hearings unearthed example after example of astonishing abuse of press power. This wasn’t simply the willingness of some newspapers to use illegal methods to obtain information; it was also their relentless commitment to the harassment and persecution of those who they decided, often on a whim or on the barest of hard knowledge, to victimise.

Famous examples of non-celebrity figures include the McCanns and Chris Jefferies, but they were hardly the first. There have been many more low-profile examples. The stories of Juliet Shaw and an innocent deputy headmistress, both caught up in the Daily Mail’s tangled web of media ethics, serve as a reminder of just what happens when there isn’t a major inquiry into the conduct of the press.

The Sun managed to identify an innocent man as a paedophile and never produced an apology, so weak is the current system of press regulation. There are plentiful, regular examples of how an out of control press - particularly the tabloids - smear people’s reputations with no requirement to apologise or make restitution when they are proved - as they so often are - wrong. The intrusion of the press into private lives continues unabated. The best observation of press antics comes at the moment from heroic blogs such as Tabloid Watch and The Media Blog, which makes depressing reading.

The MPs who signed the letter today rightly consider that the ability of the press to investigate political and commercial interests without fear or favour should be unhindered. Agreed.

The problem is that it so often doesn’t. It isn’t MPs or political interests who require the defence of a proper system of regulatory control. It is the little people, the small people’s interests, who urgently require this support. The very people MPs should be representing and whose interests they should be considering. It is in some ways astonishing that the eighty-six signatories of today’s letter have been so willing to leap to the defence of powerful, vested media interests, but have remained mute when ordinary people have been victims of press abuse.

Then again, many politicians mix freely with owners, editors and reporters. Mr Cameron’s friendship with Rebekah Brooks; Michael Gove’s past employment with Rupert Murdoch’s Times; Boris Johnson’s present employment with the Barclay twins’ Daily Telegraph; Jeremy Hunt’s cringeworthy emails and texts to a senior aide of the Murdoch corporation - all these relationships betoken an unhealthy danse macabre that wholly fails to protect us from a rampaging, lazy, abusive press.

The Guardian has published a poll finding today suggesting that 79 per cent of the public want a powerful regulatory body to control the press. It would be difficult to find an issue on which there is such variance between our representatives and ourselves.

Preventing the press from publishing untrue statements that irreparably damage people’s lives is not the same - nowhere near - as political control and it is a pity that today’s letter’s signatories don’t realise this.

It was Stanley Baldwin many years ago - using a comparison possibly offered to him by his cousin Rudyard Kipling - who noted that the press “have great power without any responsibility. The prerogative of the harlot throughout the ages.”

Too much of the British media has failed to show even the slightest hint of willingness to regulate themselves. It is time they were subject to the same strictures as every other organisation in this country, for they wield the greatest power, and power should never be allowed to go unchecked.

Follow Giles on Twitter @gilesmarshall

House of Lords: the wrong reforms at the wrong time

Michael Burgess 10.27am

Rejoice! It has ultimately come to pass. Fret no longer, hard-working families of the United Kingdom; the House of Lords Reform Bill that you have so keenly anticipated is finally upon us.

It seeks to establish a 450-strong, 80 per cent elected Upper House by 2025. The remaining 20 per cent is to be made up of appointees. Starting in 2015, the electorate will be able to vote for the first 120 new members using regional lists, a form of proportional representation (PR).

Disappointingly, this regional list system will give a lot more power to political -parties than the Single Transferrable Vote (STV) system that was proposed in the earlier Draft Bill.

Unsurprisingly, despite there being in principle some public support for a more democratic upper chamber,polls show that the general public don’t think this should be a priority at a time when we are still deep in the economic mire. A majority of those polled think that some type of reform is a good idea but that it should not be the main concern at this time. Perhaps more surprisingly, marginally more people think that the House of Lords should be left entirely as it is.

Only in Westminster is this a burning issue, with strong feelings on either side. The potential size of a Tory rebellion has prompted warnings that any PPS or Minister not voting with the Government will be sacked or ignored in a future reshuffle. Others on the Government’s backbenches have already expressed their willingness to fall on their sword.

Meanwhile, the Labour party is playing politics by claiming to support the Bill in principle while still seeking to make the Government suffer. Despite Labour’s dubious motives, we should welcome extra time for scrutiny of such large constitutional change.

There is also the issue of a referendum, or in the fact the absence of one. Ed Miliband has renewed his calls for one. He is not alone. Plenty of parliamentarians find it hard to see why a referendum was appropriate for the Alternative Vote but not for a major constitutional change such as this.

The main counter-argument is that since all three major parties included Lords reform in their 2010 manifestos, there is no requirement to ask the people.

However, now that the electorate are aware of the details of the Bill, there is a sound argument that they ought to be consulted before Parliament creates posts for another 360 elected politicians with constituencies five times the size of the average for a MP. Understandably, there is strong public support for a referendum.

Yet ‘more democracy’ alone is not enough; there has to be real accountability. The new senators will struggle to be truly representative and the 15-year terms weaken their accountability. Moreover, the future primacy of the House of Commons is a genuine concern, despite the continued presence of the Parliament Act.

Of course, proper reform of the House of Lords is something that is long overdue. But this could be achieved without time-consuming controversial legislation. By improving the appointments process, removing the remaining hereditary peers, reducing its size and reforming Prime Ministerial patronage, the Lords could be made a more efficient chamber and less of a political retirement home. A move towards an elected, truly representative second chamber could then be explored as a genuine alternative - with the option for a referendum - within the next Parliament.

Instead, we are left with a Bill that has been labeled a “Constitutional monstrosity”. David Cameron supposedly once said that Lords reform was a third term issue. It need not be thrown that far into the long grass, but it ought to be addressed at the right time and with the right reforms. Unfortunately, this Bill fits neither of these criteria.

Follow Michael on Twitter @SuperMacmillan

'Without the new, there would never be any old'

Craig Barrett 6.01am

Sitting watching the Queen’s Speech last week, I was reminded of how much better Britain does pomp and ceremony than other countries. European militia look faintly ridiculous in comparison.

And on 4th May, I felt hugely privileged to attend the Trial of the Pyx, a ceremony that goes back some nine hundred years. Every year, the Worshipful Company of Goldsmiths is responsible for assessing newly minted coins, to ensure they conform to required standards in terms of size and quality of metal. Present is an expert panel of assayers and the Queen’s Remembrancer (the senior Master of the Queen’s Bench), certifying above all that the Master of the Mint has not been shaving gold or silver from the nation’s coinage.

The Master of the Mint, George Osborne, was indeed there this year, so restoring a relationship broken between 1997 and 2010 by Gordon Brown and Alistair Darling. We are, of course, more than aware of Mr Brown’s attitude towards our nation’s gold reserves.

After assessing the coinage, the Verdict of the Pyx is delivered. Safe to say, it passed the test. We then repaired to luncheon to hear an address from the Chancellor of the Exchequer. Among non-disclosable political comments, Mr Osborne chose to highlight the fact that the Royal Mint provides currency to more than sixty countries around the world - a true export success to boot.

I was accompanying the inimitable Catherine Bott, herself the guest of the Prime Warden of the Worshipful Company of Goldsmiths, Hector Miller. Unlike many Livery Companies, the majority of the Goldsmiths actually practise in their field, so we were in the presence of true craftsmen. At the new Goldsmiths Centre in Clerkenwell, you can see for yourself.

Funded partly by a bequest in 1514 when Agas Harding, a widow of a Goldsmith, left the Company a small amount of land in Holborn, the Company decided some years ago to put it to good use and create something to assist nascent craftsmen. Workshops are available at competitive rents, as well as extensive facilities for teaching. What impressed me most was that the focus is not simply on passing on techniques but also what we might call “life lessons”. There are classes on managing accounts and business planning - vital skills for the self-employed that might otherwise be overlooked.

The Goldsmiths have a long history of involvement in education. Goldsmiths College is the most obvious example, but the Company was also closely involved in the founding of Imperial College. This could be a kernel of the ‘big society’ - independent of the state, they have created a unique learning space for craftsmen and the public.

Catherine commented that she rather likes antique jewellery, to which I responded, “without the new, there would never be any old”.

What is marvellous about the new Goldsmiths Centre is the way in which the old has been able, hopefully, to continue to create the new. I urge you to pay it a visit.

Follow Craig on Twitter @mrsteeduk

European Parliament must find a bigger voice amidst the chaos

Nik Darlington 11.08am

The European Parliament is vast, its shiny superstructure reflecting the functional surroundings of Brussels back on itself. Yet when the citizens of Europe glance proverbially in its direction, it is not a reflection of themselves that they see - a reflection of their current plight - but a remote and faceless edifice.

However once inside, the Parliament shows itself for what it is. Or at least it offers a glimpse of what it could be.

Much happens here, but few follow it, fewer truly understand it, and even fewer, maybe, genuinely care about it. Whatever one’s views about the European Union, this is something to be regretted.

What we think of as the “European Union” is in fact a smorgasbord of not always complementary (nor complimentary) institutions.

Briefly, the Council consists of ministers passing laws, coordinating policies, and generally representing individual governments depending on the subject matter (e.g. agriculture or transport). Note that this is not the European Council we read of David Cameron attending with other heads of government. That irregular grouping sets the EU’s political direction and has no power to make laws.

The European Commission comprises nominees from individual member states who are assigned a portfolio (Lord Mandelson was a trade commissioner, for instance), and represent the interests of the EU as a whole.

Then there is the European Parliament, a body of more than 700 directly elected representatives from throughout the EU. Members (MEPs) serve Europe’s citizens in a similar way to how our MPs operate in Westminster - in essence holding the executive to account, scrutinising legislation, acting on behalf of constituents, and voting on new laws. MEPs typically stand for office as candidates of traditional political parties - e.g. the Conservatives, Labour, or France’s UMP - which subsequently coalesce with other European parties under like-minded umbrella labels.

As Europe lurches from one crisis to another, I believe it is the European Parliament that has to take the lead.

At a seminar for senior editors yesterday in Brussels, an Italian socialist MEP, Roberto Gualtieri, said: “Non è una problema economica, non è una problema tecnocratica, ma è una problema democratica”. Europe is on the brink because it is suffering a crisis of democracy, above all else. While Rome, Athens, or elsewhere burns, unaccountable placemen fiddle at the fringes. Or so the narrative goes.

The response of Europe’s leaders has been politically anaemic and economically heavy-handed. Throughout the continent in recent years, failed governments have been thrown out by voters. Largely in favour of rightist or centre-right alternatives, although the Left’s renewal is gaining traction. And while politicians have scarcely been so reviled, the political process has scarcely so mattered.

At the same time, euroscepticism has probably never been as strong. And not only in Britain. Why? Because at a time of public frustration, citizens are demanding a greater voice - maybe not their voice, necessarily, but a voice that represents their hopes and fears. The European Union, however, is seen to be inimical to that visceral democratic desire.

It needn’t be. A more self-confident and, crucially, better understood European Parliament can be that voice. Its members do, after all, have a democratic mandate. Of course, European elections in Britain typically attract few voters, but apathy is as much the fault of the electors as the elected.

The European Parliament also has, in the experienced German politician Martin Schulz, a president (akin to the Speaker of the House of Commons but with more political power) with strong opinions about the current crisis, and opinions that diverge from the inflexibly austere forces that have led the EU’s response to date. Brussels sources point out that President Schulz’s strong opinions are not weakly held, not shall they be meekly guarded.

In Britain, the public seems to prize that certain sort of parliamentarian who stands tall, is independent and speaks out “for the people”. Europe’s problems are indeed largely economic, but the solutions must be political. And those solutions must be seen to be legitimate in the eyes of Europeans.

There is only one European institution that can achieve this, and therein lies the European Parliament’s unenviable, but also unmissable, opportunity. And, some might add, its duty.

Follow Nik on Twitter @NikDarlington

Lords reform: time for a fresh approach to an old problem

Craig Prescott 10.17am

Some people think a referendum is necessary, others don’t. Both sides are correct but they miss the fundamental issue.

Nick Clegg has argued that reform should not be dependent on a referendum because all three main parties support reform, and further, they committed themselves to reform at the last general election.

David Cameron, while still open to the idea of a referendum, also believes there are many arguments against holding one.

Both positions are untenable as far as the draft Bill is concerned, or the recommendations proposed by the majority of the Joint Committee for the Bill.

As all three main parties were in favour if reform at the last election, voters were presented with Hobson’s choice and couldn’t express their views either way on the issue. Furthermore, the Labour party included a commitment to a referendum in their 2010 manifesto.

Significant constitutional change should be as inclusive as possible, whereby the agenda is not wholly dominated by a section of the political class. This is why in many written constitutions around the world you would not now be reading this article, as it would be legally required for such proposals to go before an electorate in a referendum (the Australian Constitution is such an example).

Furthermore, it would be odd if a referendum was required to change the method of composition for the Lower House (the AV referendum) but not for a more radical alteration of the Upper House.

On a more principled level, it seems strange to attempt to introduce democracy to the House of Lords in an undemocratic way by refusing to hold a referendum. In this respect, the view of a majority of the Joint Draft Bill Committee in strongly suggesting a referendum is to be commended.

However, those who argue against a referendum are also correct. It all depends on what one means by ‘reform’. At the risk of criticising the Bill committee in the way you might criticise a lemon for not being an orange, they have not considered other proposals for reforming the House of Lords.

Incremental reform, for instance, would not require a referendum. This is the line taken in the Alternative Report, published independently by a minority of the membership of the Bill committee. This report proposes to harness the momentum for reform to propose legislation that could readily be included in the forthcoming Queen’s Speech. It should remove the remaining hereditary peers, permit peers to take permanent leaves of absence, introduce a minimal attendance requirement, and allow for the retirement of peers. Such legislation would be more politically acceptable to all members of all parties. It contains nothing controversial and could be a basis for more long-term reform.

Which according to the Alternative Report should be the responsibility of a Constitutional Convention. This is a common process elsewhere in the world, such as in Australia and certain federal states in the USA. The convention would consider the issue fully and in a broader manner than the current Bill committee has been able to do. Its membership would comprise constitutional experts, current Westminster politicians and representatives of devolved assemblies, local government, businesses and faith groups. It must operate apart from the political cycle. Ultimately, the convention’s proposals would be put to the electorate in a referendum, for the reasons offered above.

The fundamental issue missed by participants in the present debate about a referendum is that it is no longer sufficient for the ordinary political process to dominate the debate. It has dominated for a century, over two Royal Commissions, innumerable policy papers, inconclusive parliamentary debates and votes and, today, a draft Bill with a split committee and two diverging reports.

It is time for a fresh approach to an old problem.

Craig Prescott teaches Constitutional & Administrative Law at the University of Manchester.

Follow Craig on Twitter @craigprescott

Who governs the school governors?

Neil Carmichael MP 11.32am

Applications for free schools and academy status have become a daily part of the coalition era. Widening choice, removing stifling bureaucracy and creating new opportunities for our children are fundamental Conservative principles and are at the heart of the Education Act.

Yet one area that is even more fundamental in the new landscape than before is the growing importance of school governors. That is the issue I addressed in my report with Edward Wild, Who Governs the Governors?: School Governance in the Twenty First Century.

The report assesses the opportunities created by our education reforms and asks some fundamental questions about how the quality of boards can be enhanced and their appeal widened.

There are more than half a million school governors in the UK across primary, secondary, state and independent schools. I regard them as being a core part of the community whose work is often overlooked or taken for granted. With the role of the local authorities diminishing, the role of governors will change.

I welcome the move from representative boards to skills and experiences based boards and believe lessons can be learned from other public sector and non-profit organisations in terms of how to improve the overall standard and quality of their work.

Some of the key conclusions of the report are as follows:

  • Key Skills: Boards will often evolve without full consideration of the breadth of skills and experience needed, which leads to the over-representation of certain professions or sectors. Key areas to be covered by all boards should include experience of eduction, finance, HR, property and communications.
  • Diversity: Ensuring a breadth of backgrounds and experience is important for boards to thrive. The time commitment is likely to increase as the role of LEAs is reduced. In common with housing providers and NHS boards, individual schools may wish to consider remuneration for chairs to widen the range of candidates attracted to serve.
  • National Advertising Campaign and Database: The role of school governors offers an opportunity to serve the community and to be part of the country’s education system. Never before have so many people wanted to join boards and develop their non-executive experience. We see schools as being a great opportunity to meet that need. Empowering schools and federations to find new governors and candidates through a database will accelerate the process of filling vacancies and, at the same time, enable candidates to update their own profile.
  • Composition: In common with federations and key academy providers, we concluded that smaller, skills based boards of around twelve members were ideal to ensure effective governance.
  • The role of the Chair: Strong and effective chairs who bring experience from other sectors and boards are ideal. Succession planning should be considered more both for future Chairs and new governors.
  • Fixed terms: Refreshing boards while ensuring continuity is vital. We recommend three year fixed terms with the possibility of a maximum term of nine years.
  • Accountability: In the event a governing body fails to deliver its obligations to the staff and pupils, then mechanisms should be in place to give the majority of parents the opportunity to vote to force a resignation of the Chair or - in extreme cases - full boards.

Finally, the formation of the All-Party Parliamentary Group on Education Governance and Leadership, which I chair, is helping to follow through with these proposals and to develop new ideas.

This article originally appeared in the Autumn edition of Reformer, the TRG’s journal.

How to thaw the frosty relationship between the political class and the public

Iain Martin 11.07am

Like all other political anoraks, I spent my Easter Monday gluttonously indulging in chocolate and BBC Parliament’s re-run of the 1992 general election night.
As someone whose political memory began in 1997, it shocked me both how much and how little has changed in politics.
Recession, the break-up of the union, rising home repossessions and rising levels of unemployment are once again the key issues of the day. The challenges we face are not new challenges but challenges we have faced at many points in our history and the solutions we as a ‘politcial class’ propose are rather uninspiringly similar to those used in the past.
As a party which is so dominated by historians, it is hardly surprising that the best solutions we have are nods to the past, such as deregulation, the right to buy your council house and enterprise zones (which Nik covered last August); nor should this be taken as a bad thing.
It is a good thing that the polarised debates of the past around socialism and capitalism are no longer. Yes, we still have the political cycle and the natural oscillation between the ‘left’ and the ’right’ - change is fundamental and forever will be. It is both heartening and shameful that our politics has converged to a point where the cliff-edge for families to receive child benefit is one of the main talking points.
While avoiding the needless and misinformed romanticising of 1950s Britain as a close-knit society, intrinsically egalitarian and altruistic, it is striking how more than ever what matters most to people is the ability to consume, to have some luxuries, to afford a second holiday.
As a society we recognise the challenges we face, we all have friends, acquaintances or family members who have suffered from the recession; we can see how young people are struggling to find work, we want the government to act. This Government has acted by raising the personal tax allowance, by lowering corporation tax, through welfare reform.
The Government must do more to protect the most vulnerable and get the lowest paid back into work, yet it knows to go too much further would mean greater restraints on spending or increasing the burden on higher earners.
Society has been well briefed by politicians of all sides on the need for ‘austerity’, yet when austerity bites society is, in some quarters, rejecting it. This hypocrisy is regrettable, though understandable given the political climate we are living in.
Arguably the biggest challenge facing this Government is the disconnection between the people who run the country and the people who live in it. It is by no means a problem caused by this Government but one which it much address if it is to achieve its goals.
 
In 1992, Britain opted for John Major - a leader who they trusted, who understood them, who was a safe pair of hands at a time when Britain required someone to drag this country out of a recession.
Britain rejected the triumphalist, flashy, arrogant pseudo-socialist Neil Kinnock in favour of a firm hand on the tiller. The highest turnout ever seen in a general election demonstrated the nation’s trust in a man who represented Britain’s psyche at that time better than any of the alternatives.
We, as a party, won votes in all parts of the country and astonishingly acheived a better swing in Scotland than anywhere else in the country. The ‘one-nation’ tradition was preserved.
Eighteen years later we have a deeply divided nation with life expectancy, average earnings and unemployment so wildly heterogenous across our nation. This, sadly, is reflected in the political geography which now exists and the obvious north/south divide which has emerged in recent years. Much of this must be attributed to the cynical, unsustainable, politically motivated, short-sighted policies of the previous Labour government who ‘solved’ unemployment through public sector job creation in the north.
Political disengagement is often measured by the strength of the ‘other’ parties and in a recent poll UKIP acheived 11 per cent support, enough to put anyone off their dinner.
It would be easy to dismiss UKIP as a temporary sponge for the disaffected (and Prof Tim Bale did so persuasively for the Spectator yesterday).
But to dismiss UKIP entirely would be a grave folly. Since 1992, we have lived through internal bickering on matters European, cash for questions, cash for honors, cash for access, an expenses scandal, broken promises and unpopular ’liberal’ interventionism. Westminster has shrunk into a self-absorbed, self-obsessed and at times self-loathing bubble fuelled by the tribal and vindictive media. It is no surprise that the public as a whole are more sceptical of politicians than ever.
 
In the cities and towns of Britain there are millions whose lives are barely touched by the actions of politicians. They ask themselves: ultimately who can make a difference to my local area, to my local schools and communities? They just want clean, safe streets and opportunities for their children.
The Government’s solution to this is truly exciting. The Localism Act, wholesale reform to the schools system and, most notably, directly elected mayors in our towns and cities.
We now have an irreversible cult of celebrity which pervades urban Britain. Many friends in my hometown of Whitley Bay idolise the likes of Alan Shearer and Cheryl Cole but could not name their MP (Labour’s deputy chief whip Alan Campbell, for what it’s worth) or their local councillors.
Directly elected mayors are a way of bridging the gap between Westminster and the public. Naturally, Whitehall is disinclined to cede power. But this could be a genuinely transformative move towards a more one-nation form of government.
 
It must be allied to lasting political reform. The Government must seriously look at reform of the trade union movement and funding of political parties, of course, and it will no doubt do this.
What it must not ignore, however, is the selection and subsequent election of MPs. The death of political party membership can be taken as a surefire sign of dissatisfaction and disengagement with the political system. To dismiss the decline in party membership as an irrelevance would be to miss one of the fundamental problems in modern British politics: the lack of charisma, the lack of inspiration, the lack of energy from our political elite.
Time after time, we see our politicians on the television in suits looking as though they are funeral-bound, morosely defending or attacking the government of the day’s position like puppets.
Where are the characters? Those who can motivate through speech and action the voters to engage in debate? They have disapperared in part due to the media’s obsession with gaffes, thus influencing leaders into promoting bland but safe candidates, but in part due to the decline in local political activism and membership.
The typical local party selection meeting is attended by a very small number of members who rarely represent the demographic of their constituencies. It is staggering that in many cases someone who might represent 70,000 constituents can be selected by less than a hundred local party members. Or in the Labour party’s case, a den of union fixers.
Each party has a responsibility to broaden their outreach. The open primaries which were trialled by the Conservative party at the last election were an excellent start. They encouraged people as Dr Sarah Wollaston, who had not even considered a role in politics, to stand for election.
To introduce open primaries across the country would require both financial investment (opening the possibility of state funding) and political investment, it would certainly be a radical reform requiring an immense amount of political will. It is decisions like this that can define governments as genuinely radical, that can be quietly transformational. To simply trust that the ‘lost generation’ will naturally return to the fold would be to ignore a fundamental problem and to miss a rare opportunity to make a lasting difference.