Faulty reasoning signals

• Hasty Generalization - 33.7%
• Pessimism Bias - 6.5%
• Negativity Bias - 6.2%

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As Andy Burnham approaches his coronation as Labour leader and Britain’s prime minister, the think-tank of former PM Tony Blair has issued another warning . Over the weekend, the Tony Blair Institute for Global Change urged Burnham against ‘taxing our way to prosperity’.

This is a response to claims that Burnham could be set to raise capital-gains tax – a tax on the profit gained when selling an asset or investment. Guy Ward-Jackson , a senior analyst at Blair’s institute, said this would send the wrong signals to business.

Will Burnham listen? Don’t hold your breath. He is likely to continue the approach of the current chancellor Rachel Reeves and treat business as a cash cow that will keep on giving – until it does not.

This would be an error. It seems fairly clear that this tax-raising move would reduce the willingness of entrepreneurs to take risks with their capital and their future given the limited reward on offer. There needs to be a balance between risk and reward – incentives work. The historical evidence certainly suggests that such a measure will cause tax take to drop.

This is not the first criticism Blair’s think-tank has made of the Labour government recently. In an essay written by Blair himself, published at the end of May, he also raised questions about the government’s approach to education, technology and defence. Indeed, a Burnham government certainly needs to revive our defence capability after Labour and the Tories have allowed it to deteriorate. Whether Burnham will prioritise spending in this area is a moot point – but then all his policies are currently moot points.

Burnham should take a proper look at Blair’s essay. The real meat of the piece lies in its assertion that the government should govern from the centre – but that centre should be radical. Say what you like about Blair, he has always had that vision. The radical element was key to what he did in government – and where things went wrong.

Blair argues that the real challenge for government is improving ‘efficacy… the ability to get things done’. We agree. As it stands, neither Labour nor the Tories are capable of delivering the efficient, cost-effective services that people expect. Instead they continue to raise tax and increase borrowing to fund ever larger bureaucracies.

In our book, Left, Right, Wrong , we showed how service delivery could be improved by defining more clearly the outcomes wanted and then suitably incentivising actions to deliver those outcomes – just as we did successfully during our days in Newham council in the 2000s and 2010s. We showed then that theory could be put into practice.

There is currently no debate on how we can establish more productive and effective public services by looking at how they are delivered. All politicians instead vie to shovel more money into the gaping jaws of our state bureaucracies. While there might be some initial benefit, that is soon lost as bureaucracies expand and use the cash to feed themselves.

But Blair’s prescription of governing from the radical centre does come with problems. Historically the radical centre ground of politics for the better part of 80 years has been roughly social democratic. And it has delivered much of the improvement we have experienced in our lives.

But social systems are reflexive. They are affected by people which means the nature of those services can change over time, and sometimes very quickly. If you do not set up mechanisms to monitor the changes you have wrought and then take action the results can be catastrophic.

The best example of this is the benefits system. This was originally designed to help people get back on their feet in the event of being made unemployed or incurring an injury. It is now a mechanism that disincentivises people from working. This not only costs the state huge amounts of (borrowed) money – it also massively damages many of the recipients, condemning them to a life of state dependency.

Reeves did make an attempt to cap benefits spending last summer when she tried to get her welfare bill through parliament. But her Labour colleagues baulked at the plans and had the bill watered down. They clearly thought it was better to keep increasingly large numbers of people loyal and dependent on the state than to structure benefits to encourage independence and responsibility.

Or take another example, this time from Blair’s time – New Labour’s target, set in 1999, of having 50 per cent of young people attending university. This radically centrist drive to turn more and more people into degree holders created a monster.

Britain now runs an expensive, state-sponsored job-creation scheme for academics. We call this university education, but it is education subsidised by the taxpayer in the form of billions of pounds of unrepaid loans. We have unemployed graduates who are saddled with debt before they start work. The competition by universities for cash from students has driven down standards. And, since anybody who is somebody has to go to university it effectively devalues non-graduate employment.

For all Blair’s talk of the ‘radical centre’, however, today’s activists are more concerned about ideological purity, from gender ideology to racial identitarianism. That includes Labour MPs who tend to be more worried about the activists in their party than the people they represent. Unless they are in a seat threatened by Reform UK, at which point they suddenly discover the importance of listening to the electorate. Remove Reform and Labourites will go back to their activist base where they feel most comfortable.

Blair has called for a policy debate within the party. We are far from confident that will happen as Burnham prepares to wear the crown. Labour doesn’t seem to have the ability to reconstruct itself, and prefers to remain within its current welfarist comfort zone. That’s why we got out.

Sir Robin Wales served as mayor of Newham from 2002 to 2018.

Clive Furness is a former Newham councillor and executive member.

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