Proportional Representation Must Come Now

Proportional Representation Must Come Now

Ian C. West, 9 Thenford Road, Middleton Cheney, Banbury, OX17 2NB. (Tel:07474 572588); cawstein@gmail.com 

Conclusion

   The flip-flop of UK's 2-party politics is ridiculous, and the unfairness of our First-past-the-Post (FPTP) electoral system is indefensible. Though Proportional Representation (PR) will frequently result in 'hung parliaments', we know it is not beyond the genius of the average European to negotiate workable and adequately stable coalitions. Indeed, by forcing our MPs to negotiate, instead of polarising the country into 2 camps, we might work our way towards compromises that gain the support of a sizeable majority of the whole country. Britain should now adopt a form of PR. PR by Weighted Voting offers a simple method that requires no changes to the voting procedure for electing MPs.

We are not Fairly Represented in Parliament.

    It will be well known to all who are the least bit interested in politics that the spread of opinion in the House of Commons does not reflect the spread of opinion in the country as a whole. Parliament does not represent us fairly.  Some people think this is a serious defect of our old fashioned 'first past the post' (FPTP) voting system. Others think the present voting system is good precisely because it favours large parties. Some others don’t think.

    One consequence of disproportionate representation in the House of Commons is that there can be a discrepancy between 'the will of the people' determined in a referendum, and the result of a vote on the same issue in Parliament. We saw that situation in the 3 years of political turmoil following the Brexit referendum of June 2016. Any discrepancy between parliament and country raises the question as to which to follow. However, it is by no means obvious that the popular vote should trump Parliament; many of the issues to be decided are extremely complex. What we can say is that, if parliament fairly represented opinion in the country, there would be little case for holding referendums. We could elect MPs and charge them with untangling the complex issues.

    Another consequence of the present disproportional system is that the moderate parties of the centre (e.g. the Liberals/LibDems) get squeezed out. Similarly, small dispersed parties like the Greens (a significant force in Germany) are very poorly represented in the House of Commons. Does this matter? We must have a serious look at the advantages and disadvantages of the present system before we seek to change it.

Advantages and disadvantages of 'First Past the Post' (FPTP)

    The FPTP voting system favours the existence of two large parties, and thus polarises the politics of the country. As each party exists primarily to gain power, they must aim to appeal to at least half the electorate. Each party must be distinct from the other, but not so extreme as to be unelectable. Each party, when in opposition, must appear to the electorate to be a potential ‘government in waiting’. This near equality suits the seating arrangements and the chummy atmosphere of the House of Commons, but leaves little role for smaller (cross-bench) parties. Most general elections happen to deliver an incisive majority for one or other of the major parties; enough to form a stable government able to drive through unpopular policies. But is this good or bad?

    Take, for example, Thatcher’s victory in 1979 (Table 1). The FPTP system gave Thatcher 359 seats, Labour 261 and Liberals 9. Thatcher’s government was unstopable, even if unpopular. Proportional Representation (5th column labelled '=Seats') would have produced a 'hung parliament', on issues where Liberals supported Labour. 

Table 1: Voting data General Election 1979 (Wikipedia).

Party	Seats	Votes	Votes/Seat	=Seats
Conservs.	339	13,697,923	40,407	279
Labour	269	11,532,218	42,871	235
Liberal	11	4,313,804	392,164	88
Other	16	1,677,417	104,839	34
Total	635	31,221,362		635
Turnout		76%

    Or take the recent extraordinary election of December 2019 (Table 2). The Conservatives won 365 seats and Lab+LibDem+SNP only 262 seats between them. The Tories won an incisive majority in Parliament, allowing them to enact any sort of Brexit they like. But, in the country, the Anti-Tory (Lab+LibDem+SNP) vote beat the Tory vote. 

Table 2: Voting December 2019 (The Guardian)

Party	Seats	Votes	Votes/Seat	=Seats
Conservs.	365	13,966,565	38,265	284
Labour	203	10,295,607	50,717	209
Scot Nat	48	1,242,372	25,883	25
LibDem	11	3,696,423	336,038	75
Other	23	2,800,943	121,780	57
Total	650	32,001,910		650
Turnout		67%

    This cosy (but unfair) arrangement can occasionally go badly wrong, for example if the big parties are rather even, or if there are too many smaller parties. In that case, our parliamentary traditions are poorly suited to forming coalitions, and we flounder. In February 1974, neither Labour nor Conservative party seemed to appeal to the country, and there was a surge in support for the Liberals. However, that only won them 14 of the 635 seats then in the House, instead of the 123 MPs that would have been their fair proportion (see Table 3: =Seats). Labour won fewer votes than the Tories, but more seats, and Harold Wilson formed a Labour government.

Table 3: The election of Feb 1974 (Wikipedia)

Party	Seats	Votes	Votes/Seat	=Seats
Conservs.	297	11,872,180	39,974	241
Labour	301	11,645,616	38,690	236
Liberal	14	6,059,519	432,823	123
Other	23	1,766,538	76,806	36
Total	635	31,343,853		635
Turnout		79%

As 23 seats went to 'other parties' (such as Scottish Nationalists, Ulster Unionists, etc.) even a Lib+Lab coalition could not command a majority, and there followed 8 months of parliamentary stalemate, until an October election gave Wilson an incisive majority in the House. 

    This concept of an incisive majority cuts both ways. Govenors like incisive majorities, for it allows them to formulate a programme and get it passed into law with the minimum of trouble. But are incisive majorities good for the country? Or popular with the governed? Opposition MPs are meant to scrutinise legislation, but there is little point if passage is a foregone conclusion. Attendance in the house often dwindles to a laughable extent. 

    Thus, one of the disadvantages of our present system is that the winning party in the House can represent a minority position of the electorate as a whole. We saw in the Thatcher victory in 1979 that a policy of deliberate unemployment and ‘anti-union’ legislation successfully defeated the Unions. But we do not know if that was the democratic choice of the country. And the Brexit election of December 2019, will doubtless "get Brexit done" even though the anti-Tory parties have more votes. 

    There is a degree of tyranny in the assumption that a simple majority can ignore all minorities. A flagrant example of this is the notion in the Brexit camp that the 2016 referendum gave them the mandate to "get Brexit done" in spite of the fact that 48.5% of the electorate voted to remain in the European Union. Yet it is worse than that. In most cases we are governed, not by a slim majority but by a minority. The present Conservative government respresents 43.6% of votes cast. But turnout was only 67%, so it could be argued that they have the explicit consent of only 29% of the electorate (Table 2). Tony Blair's landlside of 2001 gave him a majority of 167 seats, but the support of only 24.16% of the electorate; and in 2001 with the support of 21.57% of the electorate. The German constitution instructs that minorities shall be fairly represented in the Bundestag, so that they can at least be heard, even when they are over-ruled. Why not in the UK also?

    So, another disadvantage is the matter of ‘falling turnouts’. If your personal vote makes no difference, why bother to vote? Maybe you support Labour in a Tory constituency. Your vote is virtually thrown away, whether your candidate scored 10% or 90% of the Tory vote. Constituencies currently see all the votes of 2nd, 3rd, 4th, and 5th parties discarded; well over 50% of votes up and down the country are counting for nothing. So-called "safe seats" also discourage voting, both for the routinely unsuccessful candidates, and the 'un-needed' surplus votes of the successful candidates. 

Advantages of ‘Proportional Representation’ (PR)

     A truly proportional system meets all those objections to FPTP. (1) It meets the need for fairness. (2) No votes are disregarded. (3) Though the majority can still tyrannise the minority, minorities can at least be heard. (4) It might mitigate the ridiculous flip-flop nature of our politics, dominated by two main parties.

Some disadvantages of PR.

     PR has many opponents. 

    First, it is clear that PR will strengthen smaller parties and weaken the two ‘main’ parties; but is that good or bad? It is a disadvantage if you think that 2 parties offers enough choice; and this probably explains 80% of the opposition to PR. But the Green Party (e.g.) does have a valid position, not sufficiently represented by the 2 ‘main’ parties. 

    It has been argued that PR gives undue negotiating power to centre parties. Harold Wilson voiced this objection; he could see a Liberal/Labour coalition turning the next year into a Liberal/Conservative coalition with the Liberals continuously in government. The prominent Tory MP Andrea Leadsom objected similarly, writing to constituents in 2017:

 “Under PR, 10% of the votes are designed to produce 10% of the seats, but not necessarily 10% of the negotiating power in the House of Commons. Indeed, a party with 10% of the seats may be in a position to wield disproportionate negotiating power.” 

    However, this is a relatively simple error. Suppose the House of Commons contained 300 Tories, 280 Labour, 40 SNP members. Suppose, on a Tory motion, SNP and Labour MPs vote against, and the motion is defeated. The power that defeated the motion does not reside in the SNP portion of the opposition, it resides in all 320 opposers. The motion is only defeated when there are more MPs against the motion than for; each MP counting for one vote. We cannot fault that.

     Andrea Leadsom seemed worried that centre parties in a proportional parliament have more power than extreme parties. But that also is a mistake. It is true that, by siding now with this main party and now with the other, LibDems might appear frequently to win.  But no one can seriously advocate disenfranchising the moderate middle merely to give the extremes a chance to govern. It is a lunatic suggestion. Yet that is exactly what FPTP does. The bell-shaped curve of the ‘Normal Distribution’ shows us that in most respects and on most issues the majority are in the middle. And on any rational system they will win; not individually of course, but collectively, by virtue of their number. 

    It could be argued that a fair system, giving equal weight to each elector, will so favour the majority that it will get stuck in the middle. It will not be possible to break the mould, exit the European Union, nationalise the railways, break the unions. That argument has some weight. But there are clear arguments against oscillating back and forth from left to right; out, then in, then out. (1) It is unsettling. (2) It wastes enormous resources of time, energy and money. We are surely the only country in Europe that nationalised its railways, denationalised them and then proposes to renationalises them again? The only country that eschewed the European Common market, then sought entry, then sought out again? (3) Our successive incisive governments are making of us a laughing stock.

It seem unlikely that we shall change our voting system soon.

     The LibDems in coalition (in 2010) forced a referendum on changing the voting system to an Alternative Vote procedure; not a truly proportional one but one thought to be a 'half-way-house' towards true PR. The idea of change was defeated, and it is unlikely that there will be a new opportunity to introduce changes in the foreseeable future. 

But we can have PR without changing our voting system.

     There are a number of different PR systems in operation in different countries, all of them more complex than our existing FPTP in Single-Member Constituencies. This simplicity is rightly seen, per se, as an advantage. So also the connection between the MP and a specific region; each voter can identify his Member of Parliament. This local connection is very nearly a complete anachronism, as it is now as easy, and clearly more productive, to contact an MP who shares your views, than a local MP who is hostile. 

    There is, however, a system that retains the simplicity and the local connection of the present system but renders a fully proportional representation in the House. It is tentatively called PR by Weighted Voting. 

    Look again at Table 2. It can be seen from the 4th column that each conservative member represents 38,265 votes; but each LibDem Member represents 336,038 votes; over 8 times as many. It is only necessary that, when the House of Commons divides for a vote, the party affiliations of the Members in each lobby are noted and multiplied by the appropriate numbers in the 4th column. 

    To apply this correction, we do not need an Act of Parliament. All we need is the published voting behavior of each MP, and the above table (officially verified). 

Advantages and Disadvantages of 'PR by Weighted Voting'

    (1) It is simple. (2) No modification of our familiar voting arrangements is necessary. (3) It retains the archaic geographical link between MPs and their constituents. (4) It is fully proportional; each vote in the country counts equally; none are thrown away. Middle parties and minority interest are fully represented.

    On the other hand, the power structure in Parliament will be dramatically changed. There will have to be coalitions. Parties will have to get used to doing deals, and learn a whole new etiquette (how to negotiate, when to stick with an agreement, when to break.) These are things that France, Germany, Holland, Scandinavia have been doing for decades.

    This whole argument depends on party loyalty. The 11 LibDem members in the House will not be compelled to vote on party lines, but they will be expected to do so, at least when ‘whipped’. This may seem somewhat vague, but the expectation that various members of a party will represent the policies of that party is inherent in most forms of PR, such as the 'second vote from party list' system in Germany. And indeed in our present parliament.

    This suggested scheme for proportional representation by weighted voting should be seriously considered, by politicians and academics.

Proportional Representation DIY

Proportional Representation DIY

We are not Fairly Represented in Parliament.

    Leavers and Remainers will both be glad of one thing — that Brexit is now settled, for a generation. But was leaving the right solution?

    It will be well known to all who are the least bit interested in politics that the distribution of opinions in the House of Commons does not reflect the numerical distribution of opinions in the country as a whole; our parliamentary representatives do not represent us fairly.  Some people think this is a serious defect of our old fashioned, 'first past the post', voting system. Others think the present system is a good one because it favours large parties. (This opinion is frequently held by members of large parties, so may simply be the result of self-interest, rather than deep analysis.) Others don’t think.

    One consequence of the disproportionate representation in the House of Commons is that there can be a discrepancy between 'the will of the people' determined in a referendum, and the result of a vote on the same issue in Parliament. We saw that in the 3 years of political turmoil following the Brexit referendum of June 2016. (It is by no means obvious to me that the popular vote should trump Parliament; many of the issues to be decided are extremely complex.) But any discrepancy between parliament and country raises the question as to which to follow. If parliament were representative of the country as a whole, there would be little case for holding a referendum. We could elect MPs and charge them with untangling the complex issues.

    Another consequence of the present disproportional system is that the moderate parties of the centre (e.g. the Liberals/LibDems) get squeezed out. Similarly, small dispersed parties like the Greens (a significant force in Germany) are very poorly represented in the House of Commons. Does this matter? We must have a serious look at the advantages and disadvantages of the present system before we seek to change it. 

Some advantages and disadvantages of 'First Past the Post' (FPTP)

    The FPTP voting system favours two large parties, and thus polarises the politics of the country. As each party exists primarily to gain power, they must aim to appeal to about half the electorate. Each party must be distinct from the other, but not so extreme as to be unelectable. Each party, when in opposition, must appear to the electorate to be a potential ‘government in waiting’. This near equality suits the chummy atmosphere of the House of Commons, but leaves little role for smaller parties. Most general elections happen to deliver an incisive majority for one or other of the major parties; enough to form a stable government able to drive through unpopular policies. But is this good or bad?

    Take, for example, Thatcher’s victory in 1979. (Table 1) The FPTP system gave Thatcher 359 seats, Labour 261 and Liberals 9. Thatcher’s government was unassailable, even if unpopular. Proportional Representation (5th column labelled '=Seats') would have produced a hung parliament, on issues where Liberals supported Labour.

Table 1: Voting data General Election 1979 (Wikipedia)

Party	Seats	Votes	Votes/Seat	=Seats
Conservative	359	13,703,429	38,171	295
Labour	261	11,512,877	44,111	247
Liberal	9	4,324,936	480,548	93

    Or take the extraordinary election of December 2019 (Table 2). The conservatives won 365 seats and Lab+LibDem+SNP only 262 seats between them. An incisive majority for the Tories to enact any sort of Brexit they like. But without the  obvious support of the country. 

Table 2: Voting December 2019 (Wikipedia, corrected)

Party	Seats	Votes	Votes/Seat	=Seats
Conservative	365	13,961,086	38,250	309
Labour	203	10,292,632	50,653	230
Scottish Nats	48	1,242,380	25,883	28
Liberal Dem	11	3,675,342	334,122	82
DUP	8	244,127	30,516	5

    This cosy (but unfair) arrangement can occasionally go badly wrong if the big parties are rather even, or if there are too many smaller parties. In that case, our parliamentary traditions are poorly suited to forming coalitions, and we flounder. In February 1974, neither Labour nor Conservative party seemed to appeal to the country, and there was a surge in support for the Liberals. However, that only won them 14 of the 635 seats then in the House, instead of the 130 MPs that would have been their fair proportion (=Seats; see Table 3). Labour won fewer votes than the Tories, but more seats, and formed a gvernment.

Table 3: The election of Feb 1974 (Wikipedia)

Party	Seats	Votes	Votes/Seat	=Seats
Conservative	297	11,872,180	39,974	255
Labour	301	11,645,616	38,690	250
Liberal	14	6,059,519	432,823	130

As 23 seats went to 'other parties' (such as Scottish Nationalists, Ulster Unionists, etc.) even a Lib+Lab coalitions could not command a majority, and there followed 8 months of parliamentary stalemate, until an October election gave Wilson an incisive majority in the House. 

    This concept of an incisive majority is a dubious advantage. Govenors like incisive majorities; it allows them to formulate a programme and get it passed into law with the minimum of trouble. But are incisive majorities good for the country? Or popular with the governed? Opposition MPs are meant to scrutinise legislation, but there is little point if passage is a foregone conclusion. Attendance in the house often dwindles to a laughable extent. 

    One of the disadvantages of our present system is that the winning party in the House can represent a minority position of the electorate as a whole. We saw in the Thatcher victory in 1979 that a policy of deliberate unemployment and ‘anti-union’ legislation successfully defeated the Unions. But we do not know if that was the democratic choice of the country. And the Brexit election of December 2019, will doubtless "get Brexit done" even though the anti-Brexit parties have more votes. 

    Another disadvantage is the matter of ‘falling turnouts’. If your vote makes no difference, why bother to vote? Maybe you support Labour in a Tory constituency. Your vote is virtually thrown away, whether you candidate scored 10% or 90% of the Tory vote.  Constituencies currently see all the votes of 2nd, 3rd, 4th, and 5th parties discarded; well over 50% of votes up and down the country are counting for nothing. 

Advantages of ‘Proportional Representation’ (PR)

     (1) There is something universally appealing about fairness. (2) People should not feel that their votes are not going to affect the outcome. (3) The German constitution instructs that minorities shall be fairly represented in the Bundestag. (4) The flip-flop nature of our politics, dominated by two main parties is, on the face of it, ridiculous.

Some disadvantages of PR.

     There are a number of different schemes that have been devised in an attempt to meet the criticisms against the FPTP system. But here I shall consider the case against PR as a class, for it has many opponents. 

    First, it is clear that PR will weaken the two ‘main’ parties. But is that a good or a bad thing? It is a disadvantage if you think that 2 parties offers enough choice; and this probably explains 80% of the opposition to PR. But (e.g.) the Green Party does have a valid position, not sufficiently represented by the 2 ‘main’ parties. 

    It has been argued that PR gives undue negotiating power to centre parties. Harold Wilson voiced this objection; he could see a Liberal/Labour coalition turning the next year into a Liberal/Conservative coalition with the Liberals continuously in government. The prominent Tory MP Andrea Leadsom objected similarly, writing to constituents in 2017:

 “Under PR, 10% of the votes are designed to produce 10% of the seats, but not necessarily 10% of the negotiating power in the House of Commons. Indeed, a party with 10% of the seats may be in a position to wield disproportionate negotiating power.” 

    However, this is a relatively simple error. Suppose the House of Commons contained 300 Tories, 280 Labour, 40 SNP. Suppose, on a Tory motion, SNP and Labour MPs vote against, and the motion is defeated. But the power that defeated the motion does not reside in the SNP portion of the opposition, it resides in all 320 opposers. The motion is only defeated when there are more MPs against the motion than for; each MP counting for one vote. We cannot fault that.

     Andrea Leadsom seemed worried that centre parties in a proportional parliament have more power than extreme parties. But that also is a mistake. It is true that, by siding now with this main party and now with the other, LibDems might appear frequently to win.  But no one can seriously advocate disenfranchising the moderate middle merely to give the extremes a chance to govern. Yet that is exactly what FPTP does. It is a lunatic suggestion. The bell-shaped curve of the ‘Normal Distribution’ shows us that in most respects and on most issues the majority are in the middle. And on any rational system they will win; not individually of course, but collectively, by virtue of their number. 

    It could be argued that a fair system, giving equal weight to each elector, will so favour the majority that it will get stuck in the middle. It will not be possible to break the mould, exit the European Union, Nationalise the railways, break the Unions. That argument has some weight. But there are clear arguments against oscillating back and forth from left to right; out, then in, then out. (1) It is unsettling. (2) It wastes enormous resources of time, energy and money. Are we the only country in Europe that nationalised its railways, denationalised them and then renationalises them again? The only country that eschewed the European Common market, then sought entry, then sought out again? (3) Our successive incisive governments are making of us a laughing stock.

It seem unlikely that we shall change our voting system soon.

     The LibDems in coalition (in 2010) forced a referendum on changing the voting system to an Alternative Vote procedure; not a truly proportional one but one thought to be a 'half-way-house' towards true PR. The idea of change was defeated, and it is unlikely that there will be a new opportunity to introduce PR in the foreseeable future. 

But we can have PR without changing our voting system.

     There are a number of different PR systems in operation in different countries, all of them more complex than our existing FPTP in Single-Member Constituencies. This simplicity is rightly seen, per se, as an advantage. So also the connection between the MP and a specific region; each voter can identify his Member of Parliament. This local connection is very nearly a complete anachronism as it is now as easy, and clearly more productive, to contact an MP who shares your views, than a hostile MP who is local. 

    There is, however, a system that retains the simplicity and the local connection of the present system but renders a fully proportional representation in the House. It is tentatively called PR by Weighted Voting in the House of Commons.

    Look again at Table 2. It can be seen from the 4th column that each conservative member represents 38,250 votes; but each LibDem Member represents 334,122 votes; nearly 9 times as many. It is only necessary that, when the House of Commons divides for a vote, the party affiliations of the Members in each lobby are noted and multiplied by the appropriate numbers in the 4th column. 

    I have called this Do-it-Yourself PR because we do not need an Act of Parliament to put it into practice. All we need is Hansard, and the above table (officially verified). 

Advantages and Disadvantages of PR by Weighted Voting

    (1) It is simple. (2) No modification of our familiar voting arrangements is necessary. (3) It retains the archaic geographical link between MPs and their constituents. (4) It is fully proportional; each vote in the country counts equally; none are thrown away. Middle parties and minority interest are fully represented.

    On the other hand, the power structure in Parliament will be dramatically changed. There will have to be coalitions. Parties will have to get used to doing deals, and learn a whole new etiquette (how to negotiate, when to stick with an agreement, when to break.) Something France, Germany, Holand, Scandinavia have been doing for decades.

    The whole argument depends on party loyalty. The 11 LibDem members in the House should not be compelled to vote on party lines, but they will be expected to do so, at least when ‘whipped’. This may seem somewhat vague, but the expectation that various members of a party will represent the policies of that party is inherent in most forms of PR, such as the 'second vote from party list' system in Germany. And indeed in our present parliament.

Conclusion

   The flip-flop of 2 party politics is ridiculous, and the unfairness of FPTP is indefensible. Though PR will result in 'hung parliaments' in nearly every election, it is not beyond the genius of the average European to negotiate workable and adequately stable coalitions. By forcing our MPs to negotiate, we might work our way towards a compromise that gains the support of a sizeable majority of the whole country. We should now adopt a form of Proportional Representation. PR by Weighted Voting offers a simple method. 

Liberal Democracy in Britain — now is the hour

     I spent my life assuming that the Liberal Party (becoming in time the LibDems) was my natural political home. But I was thinking of Gladstone, Asquith, and Lloyd George; thinking of a liberalism that extended the franchise, gave home rule to Ireland, massively taxed the landed magnates, introduced pensions and a heath service, and weakened the privileges of the House of Lords. I was taken with the idea that Liberals commanded the moral high-ground, unique in British politics and perhaps in world politics in that they fought not for their own pockets, but for other people's welfare, people less privileged than themselves. Liberalism was much more than laissez-faire free markets. 

     I trusted that Liberal policies would be well considered, and costed; by philosophers and economists. As I have grown older I have begun to doubt that superior moral and intellectual underpinning, and realise now that I have to do some radical thinking myself. I cannot rely on the Party line, but must shoulder my share of responsibility in forming the Party line. We must not let the LibDem label signify an empty reluctance to hold an opinion.

     I was brought up to the typically British notion that we have little or nothing to learn from other countries. It was a shock to find that, back in the seventies and early eighties, Germany and Scandinavia had already legislated for worker participation (Mitbestimmung, q.v.). More recently I came across the concept of Ordoliberalismus (q.v.), which emphasises the role of the state in actively ensuring that the free market produces results close to its theoretical potential. Germany evolved this vision back in the fifties; we seem not to have fully grasped it yet. 

     We have become mesmerized by the USA. There is the facile and lazy assumption that whatever works in the USA will work here, so we build shopping malls and BurgerKings, and watch Hollywood films, and abandon the adverb. But the USA has as maniacal a fear of socialism and trade unions as it has a love of firearms. Have we not yet grasped that we are different? We (I speak for myself and surely for many millions) are nearer to Europe than to the USA, geographically, climatically, emotionally, historically. 

     I think Capitalism is too rampant, in the UK. Are the current LibDems going to do anything about super-tax, wealth tax, off-shore accounts, money laundering, green energy, worker participation on boards of large and medium companies, curbing director salaries, reviewing student fees, and local government funding? If we stay in Europe have the LibDems got any policies to ameliorate real defects of the Europe project or to improve the way Europe is?
     In the history of the LibDem party this is a crucial 15 days. If we want to vote against the chaos of Brexit, we may have to vote with Labour in certain marginal constituencies. It would be an absurd vanity to expect a labour candidate to stand aside for a LibDem candidate if they are polling far more strongly. (In some few constituencies it should be the labour that steps aside.) 
     There will never be any future for the LibDems, and no proportional representation, till that is grasped. But absurd vanity seems to exist. Oh dear!

--

Ian West, 9 Thenford road, Middleton Cheney, Banbury, 

Why not a Second Referendum?

I suggest something like the following, bearing in mind:

[a]. The question is “What is the best for the country?”,  not “What do I want?”. There is only one “best for the country”.

[b]. This whole exercise needs more spirit of compromise. Think before you cast your vote “What if one option is clearly unpopular? Then why vote for it?"

*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&*&

We suggest the following as a way forward that might appeal to a majority of MPs and be ‘fair’. Voters are to be encouraged to a spirit of compromise, and to reflect on what is best for the country and fellow citizens rather than the outcome that suits them personally.

[1]   It is widely understood and accepted that Westminster Parliament is sovereign in the United Kingdom, as established in 1649. The Queen and her ministers play an executive role that must ultimately be reversible by Parliament. Parliamentary (i.e. representative) democracy must trump plebiscites or referendums. Referendums are useful as ‘straw-polls to test the weather'.

[2]   It has been argued that the 2016 referendum did not specify sufficiently the terms of exit that would emerge if the country sought to leave the EU. Further, it was not made sufficiently clear to the public that the 2016 referendum was advisory not definitive. Further, there were electoral rules broken. There can be delay and expense but no affront to democracy in asking for another referendum. (The Swiss have frequent advisory referendums; 3 were held in the first 5 months of 2019.) 

[3]   We therefore suggest asking the EU for a 6 month extension (or an indefinite revoking of Article 50), in order to run the following referendum:

[a] UK voters to vote for one only of the following three options:

[i]  Remain in the EU with full existing rights, exemptions, rebates and duties. 

[ii] Leave the EU on Theresa May terms (*One-off divorce bill of 39B£, respect EU-citizen rights reciprocally, transition period, UK leaves Single Market, and Customs Union, and EU institutions, but Northern Ireland stays in the Customs Union if Britain diverges.)

[iii] Great Britain leaves the EU without a deal in place, without a transition period, but presumably with the ability to make deals in the future without prejudice. A hard border is created in Ireland with immediate effect. 

[b] In the event that no single one of the three options exceeds any other by at least 1% of the votes cast the default position is that we retain our present EU membership with full existing rights, exemptions, rebates and duties, as there being insufficient justification for massive upheaval.

. 

[4]   Parliament will be expected, but is not bound, to endorse and enact the result of this referendum.

(*I have not found it easy to find a clear statement of Theresa May’s deal. Something like this would need to be on the ballot-paper)

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Ian West
9 Thenford Road, Middleton Cheney,
BANBURY, OX17 2NB,

Bank Capitalization

“If the banks relinquish risk to the state, they must also relinquish interest in the same proportion.” [1]

Following the banking crisis of 2007 – 9 I read avidly into the question of Debt, Credit and Money Supply. I am particularly indebted to Tony Weekes & Sue Holden [2], Michael Rowbotham [3], and Richard Werner [4] for their clear expositions of the manner in which a very large fraction of our ‘money’ is generated as credit, and its corresponding debt. Their clarity triggered a train of thought in which I re-designed the whole banking system on a more logical and less pernicious basis. Let me explain.

When the owner of a business accumulates more capital than he can usefully employ, he is willing to lend it to friends to enable them to build or acquire plant and the means of producing goods and wealth. The borrower is willing to offer, and (depending on his religion) the lender is willing to accept, a small and regular fee proportional to the outstanding value of the loan, i.e. 'interest'. In a free market where there are numerous independent lenders and borrowers, the level of interest should indicate the real value of the loaned capital. Banks arise as clearing houses to link depositors and borrowers.

Banks are keen to lend at interest, for that is the way they make much of their profit. It soon became clear to banks that (in times of peace and stability) they could lend more money than they strictly owned, for the chance of all the depositors demanding repayment simultaneously was very small. As long as their borrowers eventually paid back all the borrowed money (or forfeited equivalent collateral) they could lend out their capital 5 times over, or 10 or 100 times. Lord Turner suggests [5] that banks should be allowed to lend 5 times as much money as they own, the Swiss bankers suggest 14 times; the risk-takers of Wall Street and the City of London may have dared to go to 30 times, but that seems to have been too far. (I am talking of ratios of capital to total lending of 20%, 7% and 3.3% respectively.) It does seem crazy that there is as yet no agreed ratio of total bank assets to capital held, and no mechanism of insisting that it is adhered to. The old mechanism was to let the over-extended banks fail, and then lock up the board of directors for debt [6]. That worked well enough to inculcate a generation or two of prudent bankers; but it created hardship for thousands of innocent depositors, and governments now-a-days step in and supply the missing money, with the consequence that bankers have become progressively less prudent.

It could be argued that the money that banks lend over and above their own capital, the debt-based money (or credit-based money), is not in any sense the banks’ money, and the interest on it should therefore not be their interest. I am going to argue that it could instead be regarded as a state asset. This is especially reasonable when it is ultimately the state that underwrites the bad debts. Under the present system it can be argued that when a bank makes a loan it takes a risk, and that risk gives it a right to the profit which is the interest; the bigger the risk the higher the interest. But it is the state that ultimately takes the risk. If the banks relinquish the risk to the state, they must also relinquish the interest. On this principle, banks would only keep the interest they earn on the capital they hold; interest they earn on their lending of debt-money must be handed to the treasury. On this basis there would be much less incentive for the banks to over-extend. They would still earn fees on the contracts they draw up; their income would consist of fee income plus interest on their lent capital, but it would not include interest on money they do not own –– which is the current anomalous position.

This rationalization effectively takes from banks the power of generating money and passes it to the government. The banks would be the brokers by which the treasurer generates debt. Fee income suffices for doctors and lawyers, so why not bankers?

Pursuing the argument further we can consider bad debts of two types: [a] when the debt is totally written off, and [b] when there is collateral. For clarity let us suppose that the bank that issued the loan is operating a ratio of capital to total assets of 10%. In case [a] the bank would lose its 10% portion of the loan, while the state loses its 90% portion. The bank would also lose its brokerage fee, as a punitive incentive towards prudent lending. In the case where there is collateral (type [b]), the collateral would revert to bank and government in the ratio 10:90; but the bank would again lose their brokerage fee as a punishment for arranging a ‘bad’ debt. (Or the collateral could revert wholly to the government with the bank being paid its lost capital minus its forfeited brokerage fee).

Note that a ‘bad’ debt with collateral is hardly a bad debt, for the lending bank can end with a more valuable real asset than the virtual debt they created in the first place. They lend money of which they own as little as 10% or even 3%, in exchange for the title-deeds of a real property worth 100%; so of course they are perfectly content to foreclose! This situation can lead to what is called ‘predatory lending’ whereby banks deliberately lend to someone who cannot easily pay back the loan, and where the object is to acquire the collateral; for example, the selling of ‘sub-prime mortgages’. This destructive practice is possible under the present laissez faire system; and indeed it is encouraged by the system, in so far as banks are encouraged to make profit. The cynical onlooker can shrug and say “We cannot stop stupid people signing stupid contacts”. But it is repugnant to the average citizen to see clever people taking money off simpler people in this way; or in any other of the manifold ways currently permitted, practiced, and encouraged by our corrosive financial system. The argument developed above would largely eliminate the problem of predatory lending.

How might this reform of the financial sector be implemented? It would be as simple as the Inland Revenue taxing all lending institution on their interest-income at a rate of not 20% nor 40% nor 50% but in proportion to their capitalization ratio; so at 97% if they are capitalized at 3%, and at 99% if they operate at 1% capitalization. This might seem a very high tax rate, but as argued above, the portion of the interest that I propose to tax in no way belongs to the banks, and letting them keep it seems even more anomalous than claiming it for the Inland Revenue.

References:
[1]  This idea stems from my post of 2011/11/ Debt-and-banks; it was also deployed (2014/8/12) on my IanWest2 blog: "Debt-Money, and the Banking system".
[2]  The Friend, 27 May & 3 June, 2011.
[3] http://www.freewebs.com/whosemoney/gripofdeathchapter1.htm.
[4] http://www.youtube.com/watch?v=wDHSUgA29L
[5]  https://www.theguardian.com/business/blog/2011/oct/12/financial-policy-committee-bankofenglandgovernor
[6]  Overend, Gurney and Co. crashed in 1866, City of Glasgow in 1878.