Speech to Launch 2015 Prosperity Index

On Monday night, I gave a short speech marking the launch of the 2015 global Prosperity Index. In truth I was merely the warm-up act for Iain Duncan Smith. The video is below and I’ve provided a transcript of my remarks underneath.

The video starts with Sian Hansen, the Legatum Institute’s Executive Director. I’m at 1min50. Ian Duncan Smith begins at 8min15.

My remarks:

Welcome to the Legatum Institute’s Winter Reception, to mark the launch of the 2015 Global Prosperity Index.

We’re delighted that your all here. Chances are, if you a reasonably familiar with the Legatum Institute then you may well know of our Prosperity Index. For the benefit of those who are new – and as a refresher for those who are not – I’m going to spend a few minutes explaining what this thing is, and why it’s important. And then I’ll hand over to Iain Duncan Smith who will say a few words.

What is the Prosperity Index?

One way of looking at the Prosperity Index is that it is a data-rich, complex, and comprehensive way of ranking the nations of the world.

I could tell you that it includes 142 countries, covering 99% of global GDP and 97% of the world’s population.

I could tell you that for each of those 142 countries, the Index includes 89 individual indicators spread across 8 categories.

(The maths geniuses among us may have worked out that this adds up to more than 12,000 datapoints in any given year).

I could tell you that we use a combination of objective data and subjective data in order to capture a comprehensive measure of global prosperity.

I could tell you that this year Norway comes top; the UK 15th; and the U.S. 11th.

And all of that is true. But it’s not the whole story. In fact it’s not even the main story.

Because the Prosperity Index – fundamentally – is about people. It’s about how individuals in these countries experience their lives. It tells a human story. The charts and the graphs that point upwards tell us that, overall, conditions for people in those countries are improving.

And so yes, the Prosperity Index does tell us something about the world as a whole, but it’s about the individuals in those countries.

Why Produce a Prosperity Index?

Put simply, the Prosperity Index is an answer to a problem. The problem is this: the way we have traditionally measured the ‘success’ of nations is too narrow. Traditionally we use measures national wealth to determine success. Of course wealth is important but it’s not the whole picture. GDP is an incomplete measure of societal progress.

But don’t just take my word for it…

Simon Kuznets – the economist who created GDP…

The welfare of a nation can scarcely be inferred from a measurement of national income.

Nicholas Sarkozy, former French President…

It is time for our statistics system to put more emphasis on measuring the well-being of the population than on economic production.

Robert F Kennedy – speaking in 1968 – bemoaned the use of economic measures to assess national progress.

…the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials.

Kennedy concluded by saying,

it measures everything in short, except that which makes life worthwhile.

And of course the American Founding Fathers included the “pursuit of happiness” as one of the fundamental tenets of the Declaration of Independence.

A little closer to home…

David Cameron…

I do think it’s high time we admitted that, taken on its own, GDP is an incomplete way of measuring a country’s progress.

And the list of quotes like this goes on and on.

To summarise: GDP can only tell us so much. It can tell us the average wealth of a country but it can’t tell us how that wealth was created.

It can’t tell us whether the citizens of that country are free.

It can’t tell us whether the government of that country is corrupt.

It can’t tell us whether children in that country have to walk 10 miles to go to school, or whether the education they receive when they get there is any good.

And it can’t tell us anything about the strength of social capital in that country.

Guess what folks? The Prosperity Index can!

The Prosperity Index gives us a broad perspective of our progress. And that’s important because the information we have affects the decisions we make. If we want governments – or indeed anyone – to make the right decisions (decisions that increase prosperity), they need to have the right data.

As the economist Joeseph Stiglitz put it (far more eloquently than me): what you measure affects what you do. If you have the wrong metrics, you strive for the wrong things.

We believe the Prosperity Index provides the right metrics in order that we might strive for the right things.

And that, in a nutshell, is what the Prosperity Index is – and why we do it. It is the definitive measure of global progress.

Please do take a copy away with you. The results this year are genuinely fascinating, often counter-intuitive, and of nothing else the report itself is laced with beautiful info graphics!

Before I introduce Iain, I’d like to make a special mention to the team here at Legatum who are responsible for the Index. Each one has worked heroically in recent months to produce the Index and once I’ve mentioned them all, perhaps you would all join me in thanking them in the traditional way. They are: Stephen, Harriet, Alexandra, Augustine, Fei, and Abi.

Iain Duncan Smith is the Secretary of State for Work and Pensions. As well as founding the Centre for Social Justice, he has been the leader of the Conservative Party and the Member of Parliament for Chingford & Woodford Green since 1992.

One of the governments big success stories of the past 5 years is the way it has turned around the British economy and in particular seen so many people get back into work. Much of the credit for that lays with Iain, and in particular the vision and leadership he has brought to the DWP. Although I’m sure he’ll be the first to admit there is still much work to be done, the story so far is quite extraordinary.

Secretary of State, it’s great to have you with us. The results of this year’s Prosperity Index validate many of the policies you and your department have been pursuing over the past 6 years. We’re delighted to have you here to help us launch it tonight. Ladies and Gentlemen, Iain Duncan Smith.

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Five Things Cameron Should Include in His Conference Speech

Britain's Prime Minister David Cameron delivers his keynote speech at the Conservative Party conference in BirminghamA few thoughts on what I think David Cameron should include in his speech to the Conservative Party Conference this week…

1)      Staying the course on deficit reduction

One of David Cameron’s strategic successes in the lead up to the last election was to secure a mandate for austerity. He stood before the country and said that times were going to be hard, that we had a huge debt, and that the economy was not growing. And he explained that the only sensible response when facing huge debt is to reduce spending, which means everyone has to tighten their belts. With reduced spending, economic growth would return and prosperity would increase. Of course the return to growth has been slower than predicted. But the economy is now growing and unemployment is going down (it’s lower now than when Mr Cameron took office in May 2010). Now is not the time to go wobbly on the economic plan and risk the progress that has been made.

2)      Defend the 45p income tax rate

Labour loves to denounce the government’s “tax cut for millionaires”. But the evidence suggests that the 45p tax rate for the highest earners has actually brought in more revenue than the 50p rate. That’s more money to spend on those who need it most. More money for childcare, hospitals, infrastructure, etc. By opposing this policy, Labour is saying that they would rather punish the rich than help the poor. Mr Cameron needs to challenge Labour on their narrative about the “tax cut for millionaires” and explain why the 45p rate makes good economic sense. Right now Labour are winning the argument because they are shouting the loudest.

3)      Announce that marriage will be recognised in the tax system

It’s high time Cameron made good on his longstanding promise to recognise marriage in the tax system. This was a Conservative manifesto commitment, it was in the Coalition Agreement, and Cameron has said on numerous occasions he still intends to do it. Next week he should announce exactly when and how he’ll introduce it. To his credit, Cameron has always been an advocate for strong marriage and strong families. Over the last few years, however, all the political discussion around marriage has focussed on gay marriage (much to the despair of many conservatives). Earlier this year I asked Treasury Minister Greg Clark about this issue and he assured me that it is still in the government’s plans during this parliament. But time is fast running out.

4)      Recognise that Miliband has the right diagnosis but the wrong prescription

The “cost of living crisis” that Ed Miliband described is a powerful message. It will play very well on the doorsteps and during the campaign. Mr Cameron must acknowledge this problem but set out a different solution. Many people are experiencing a cost of living crisis. Part of the solution is to ask people to keep tightening their belts as the economic recovery continues. Another part of the solution is to set out clearer policies for helping those on low incomes (like taking more low earners out of the income tax). Another part of the solution is to encourage greater competition between energy providers so that bills don’t rise sharply. But Mr Cameron should be very clear that you certainly can’t solve the problem by legislating to prevent energy firms from raising their prices (the unintended consequences of which have been discussed in detail). 

5)      Be Positive.

Finally, the tone of Mr Cameron’s speech is very important. To those on the left, Ed Miliband’s speech was spot on in both content and tone. Where necessary Mr Cameron should rebut Labour proposals. But overall he should set out a positive, clear message outlining his vision for Britain. And he should highlight the government’s successes. There is much to be proud of: lifting more than 2 million low earners out of tax altogether; reforming the welfare system to make work pay more than benefits; bringing rigour back into the education system; opening 93 new free schools at the start of this new school year alone; a benefits cap to ensure that claimants won’t receive more than the average family earns; vaccinating, educating, and feeding millions of the world’s poorest people by sticking to the overseas aid commitment; and the list goes on.

These five are just a few that came to mind and are in no particular order of importance. I hope that at least some of them feature in Mr Cameron’s speech on Wednesday. 

UPDATE 28 Sept: The PM is obviously an avid reader of my blog. Just minutes after I posted he announced plans to give married couples a tax break. One down, four to go…

Europe

CamEUBy the time most Londoners were arriving at their desks last Wednesday morning, David Cameron was already delivering his long awaited speech on Europe, in which he outlined his plan to hold a referendum on UK membership of the EU (should the Conservative party win a majority at the next election). Both Wednesday’s and Thursday’s front pages made for very good reading for the Prime Minister.

The responses from commentators and parliamentarians has also been very positive. Toby Young, writing in his Telegraph blog, said that this was the best outcome eurosceptics like him could have hoped for and it provides eurosceptics with “a good reason to vote Conservative at the next election.”

Over at ConservativeHome Tim Montgomerie outlined four reasons why the In/Out pledge could be good news for conservatives. One: it demonstrates David Cameron’s leadership qualities. Two: it should win support from Britain’s centre right newspapers. Three: it diminishes the threat from UKIP (the party most likely to steal conservative votes at the next election). Four: it allows the Conservative Party to move on from Europe and talk about other issues.

Even Labour supporters, who may not agree with the policy, agreed that the PM played his hand very well. The referendum pledge leaves Labour between a rock and a hard place said George Eaton over at the New Statesman: “If Ed Miliband matches Cameron’s referendum offer, he will look weak. If he doesn’t, he will look undemocratic.”

The always brilliant Dan Hodges asks some serious questions of both Ed Miliband and his party and laments the absence of any serious Labour policy on, well, anything really. On Europe the damage “has already been done”, he concludes.

Today’s Sun provides an insight into why the Labour Party has not joined the Conservative position to support an In/Out referendum. It reports that Ed Miliband has taken the advice of his brother, David, who views a referendum as “too populist”.

International reaction to Cameron’s speech has been mixed. Almost immediately, French Foreign Minister Laurent Fabius described Britain’s position as “dangerous” and likened it to someone joining a football team and then wanting to play rugby. He went on to say that Britain was pushing for “Europe à la carte.” But the response from Angela Merkel was slightly more favourable, stating that she is “prepared to talk” and wishes to “find a compromise” with Mr Cameron.

While there was no immediate reaction from Washington, the Obama administration has previously questioned David Cameron over his position on Europe. See, for example, the comments made by Philip Gordon, US assistant secretary for European affairs, during a visit to London earlier this month.

Obviously, Cameron’s announcement is a welcome one for those who believe that the British people deserve a say on the UK’s future relationship with the EU. But for the foreseeable future it remains just an announcement, a statement of intent. It may have shifted the debate but it has not changed the game. The biggest obstacle to seeing it realised is still firmly in place: a Conservative majority at the 2015 General Election. And following last night’s vote on the Boundary Review, this is looking increasingly unlikely.

Elected Lords Proposal to be Abandoned?

This morning the Telegraph has reported that the Coalition’s plans for an elected House of Lords may be abandoned. Tim Montgomerie has suggested that the Coalition might instead support David Steel’s bill, which was approved by the Lords last session but ran out of time in the Commons.

In fact, the Government has already agreed to let the Bill pass through the Commons early in the new session of Parliament, as Lord Steel revealed to the House of Lords on 30th April. Lord Steel said that it has been agreed that his Bill will be “put through the House by expedited procedure”. And so if today’s Telegraph article is correct, it looks like we will see David Steel’s Bill on the statute books very soon.

I’ve written about the merits of the Steel Bill (as it is known), which I think is an excellent little Bill that would do a lot to improve the Lords. The crucial thing about this Bill is that it would make these improvements without making the fundamental constitutional changes that many people fear would undermine the current relationship between the Lords and the Commons.

Below I have pasted the article I wrote on this subject for ConservativeHome in May. This provides a little more detail about the Steel Bill and why, I think, the government would do well to support it. The original article on ConHome can be found here.

The Steel Bill is an opportunity for Cameron to support Lords reform without upsetting the constitutional apple cart

Conservatives have an opportunity to support reform without upsetting the constitutional apple cart.

Last Friday, the House of Lords (Amendments) Bill received its second reading in the House of Commons having passed through the Lords with universal support. However, the bill was not moved for debate and there is no indication when the Bill will progress further.

This was perhaps predictable judging by the timing of the debate (Friday afternoon graveyard slot), as well as the complete lack of coverage it received. It is now safe to assume that this short Bill has been thrown into the long grass.

This is unfortunate because the bill (known as the Steel Bill, after it’s author Lord Steel of Aikwood) could be just what the Conservatives are looking for.

Lords reform has always been a constitutional headache for the government but over the last fortnight it has developed into a full-blown migraine. This Bill could be the much-needed paracetamol the Prime Minister is searching for.

The Steel Bill provides cover for Conservatives who want to uphold their commitment to reform the Lords but who also fear a backbench rebellion over more far-reaching proposals. By supporting the Bill, Conservatives can place themselves on the side of reform without completely upsetting the constitutional applecart. A win-win scenario.

The Bill is short, simple, and, specific.  It should be viewed as the first step on the road to reform. In contrast to other proposals, it doesn’t attempt to bundle together every facet of Lords reform into a single package. Rather it would enact several important but relatively uncontroversial reforms that seek to improve the House of Lords.

As Lord Steel has explained, the current version of his Bill does only three things:

  • It paves the way for a Peers retirement scheme (which would reduce numbers and cost);
  • It allows for the removal of Lords who don’t attend;
  • It allows for the removal of Lords who are convicted of a serious criminal offence.

The question at this point is not should the Lords be reformed but how best to do it. The recent (and much discussed) fiery meeting of the 1922 Committeedemonstrates the uneasiness that is felt among Conservative MPs about the current reform plans – particularly with the commitment to forge ahead with an 80% elected House of Lords.  This Bill could be the answer the government needs, for now at least.

The bigger issues of reform won’t go away, nor should they. Both the Conservative Manifesto and the Coalition Agreement make reference to an elected House of Lords (although it is worth noting that neither document promises to bring forward legislation; the Coalition Agreement simply commits to establish a committee). Further, this issue has generated so much attention and debate both in Westminster and beyond that we have gone past the point of no return – action is needed.

By supporting the Steel Bill and placing it on the statute books, the government would buy itself time to properly consider the more controversial areas of reform while at the same time implementing proposals that get to the heart of the anomalies that exist in the upper house. What is more, these are the anomalies that tend to generate the most unfavourable headlines for the House of Lords.

The Steel Bill has a lot going for it: it was universally supported in the Lords; it would reduce the running cost of the Lords; it would reduce the number of Lords without sacrificing expertise; it does not require huge constitutional change.

Lord Steel has described how he has tried in vain to persuade senior Lib Dem colleagues about the merits of his Bill. He concludes that Nick Clegg has his heart set on “Big Bang” reform rather than smaller, incremental changes that would deliver genuine improvements to the upper house.

I suggest that Conservatives who support reform but fear what is currently proposed, should listen carefully to what the noble Lord, Lord Steel, has to say.