Why do the wealthy and well-connected tend to win so many political battles? Because they are wheels

The squeaky wheel gets the grease and losers cry louder than winners sing. British politics certainly bears out the truth of those old observations.

Just two months ago we witnessed a backlash against Philip Hammond’s hike in national insurance for the self-employed, which was designed to bring the levy closer into line with the tax paid by employees. This resulted in a spectacular and humiliating U-turn for the Chancellor within days.

That fiasco came hot on the heels of a noisy revolt against business rates reevaluations and a partial retreat in the Budget (a retreat which is set to cost taxpayers £435m). That affair was also a reminder that, for a quarter of a century, cowardly governments (of all stripes) have dodged a revaluation of council tax bands in England out of fear of an eruption of opposition from the Home Counties.

Then, just last week, there was a coordinated push back from Tory MPs against a new funding formula unveiled by the Government last year for the distribution of central funding for local schools. One does not have to be Mystic Meg to foresee where this one ends.

All the reforms above have two things in common. First, they would make for a more equitable raising and distribution of resources. Second, they would create more winners than losers around the country. But the losers shout louder than the winners. And the losers, in the main, are satisfied: the squeaky wheel is lubricated.

In all cases, ministerial foolishness or cowardice made reform harder. Severe cuts to real terms per pupil school funding over the coming years accentuates the pain of the transition to the new formula for individual schools. The business rates revaluation was delayed for nakedly political reasons, making the eventual re-rating more painful (for a minority of firms) when it eventually came. The same applies, albeit on a grander scale, in the council tax saga. Hammond’s national insurance reform probably ought to have been done in tandem with a wider set of reforms to address the conditions of self-employed workers.

Yet there’s a larger dysfunction here. Even without those ministerial missteps there would have been significant, possibly insurmountable, opposition. Why? Why do reforms that would benefit more people than the numbers who lose out get shot down, watered down or never even attempted? 

Media framing is a major part of the problem. Newspapers run lobbying campaigns championing those who stand to lose out from a particular reform. They never run campaigns on behalf of those who stand to benefit. The broadcasters tend to take their lead from the press. And the resulting media cacophony persuades ministers to retreat.

Yet the media is not the only factor. Lazy MPs must be culpable too. In all these cases – school funding, self-employment tax, business rates, council tax – parliamentarians ought to be defending or pushing for reforms that would benefit the vast majority of the own constituents.

Where are the MPs from all those areas that will benefit speaking out on behalf of the more equitable school funding formula? Where are the political representatives from less well-off regions pushing for the original business rates revaluation? Where are the MPs, with their tens of thousands of conventionally employed constituents, defending the national insurance equalisation with the self-employed? Why are parliamentarians not lobbying for council tax revaluations, given the fact that, arithmetically, most of their constituents would benefit? 

Economics is often unhelpfully and inaccurately framed as a zero sum game, where one person’s gain is another person’s loss. Think of how Donald Trump talks about trade, or the way Ukip and now the Conservatives talk about immigration. But when it comes to reforming an unequal tax or spending system the zero sum logic actually holds. And the person who gains tends not to be the poor but the wealthier, the more powerful and the better connected.

The pessimistic view is that because potential winners are usually dispersed and disorganised, and because people generally bank gains without gratitude, the incentives of politicians will always be to listen to the angry and organised losers. Perhaps that’s true. But it would be nice to put it to the test rather more often.

The first step is for the silent wheels to start squeaking too.

#counciltax #businessrates #zerosumgame #newspapers #nationalinsurance

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