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Governing for the long-term: A Horizon Shift

Nick Clegg
Institute for Government

9th September 2010

Check Against Delivery

Successful governments require a number of ingredients: strong leadership, public support, dedicated ministers, and a good dose of luck, to name but a few. 

But above all they need a clear sense of purpose.

When governments lose sight of their overriding purpose for being in power, the glue that holds them together dissolves.
 
This is a mistake we will not repeat.  In my speech today and a second from the Prime Minister, at a date to be confirmed, we will set out the two animating purposes of this Coalition Government. The first is to bring about a radical redistribution of power – from central government to local communities and people. This power shift will be the subject of the PM’s address.
 
The other guiding purpose of the Coalition is to govern for the long term - to take the necessary steps now to ensure a fairer and more prosperous future. Our political culture - and in many ways our society more generally - has become too focused on immediate needs and demands, rather than considering our obligations to the future. We need to look towards a further horizon. It is this second guiding purpose – the horizon shift – that I will address today.
 
The challenge of acting over a longer time horizon is not simply one for this Government, or even just for politics. It is an issue for society as a whole. But it is vital that the Government leads by example. 
Today I will:

  1. illustrate the problem of short-termism in our culture generally
  2. argue for justice between generations and warn that we are in danger of failing the next generation
  3. describe ways of committing to the long term
  4. examine the causes and symptoms of political myopia; and
  5. outline how the Coalition Government is shifting towards a longer-term perspective


1) A culture of short-termism
 
Politicians are often accused of being obsessed with the short term. But it should be obvious that politics is not uniquely guilty here. In commercial and personal life, short-term temptations can trump longer-term benefits, too.
 
In firms and in the financial markets, the temptation to drive for short-term profits can sometimes undermine long-term prosperity.  The hunt for annual or quarterly economic returns gives vitality of markets – but taken to excess, the focus on immediate returns can also result in instability and, perversely, to lower returns over a longer time-frame. 
 
When remuneration packages are tied into the performance of shares over a very short time-span, the long-term result is often a weaker corporate sector. The best companies – the ones built to last – look well beyond quarter-on-quarter profits. In terms of bringing about the horizon shift we need, corporate myopia matters at least as much as political myopia.
 
And as individuals, most of us are acutely aware that short-term desires can trump our long-term interests. This is hardly a new problem. Temptation is part of the human condition. John Stuart Mill pointed out that ‘men very often reach for the nearer good, even though they know it to be less valuable’. In a slightly different vein, Oscar Wilde declared that the only way to be rid of temptation is to yield to it.
 
It is hard to know, historically, whether we are more myopic than our ancestors. But it is clear that the range of temptations is greater in a world of plenty – just think for a moment about the food and drink being offered for sale all around us, all of the time.
 
The range of entertainment available to us has widened beyond recognition – TV, computer games, cinema, social networking sites, music quickly downloaded onto our ipod. According to OFCOM, the average UK citizen now spends almost half their waking hours watching TV, or using mobiles and other communication devices. There is in fact so much available that we are consuming goods simultaneously. The typical citizen crams 8 hours and 48 minutes of media consumption into just over seven hours during the average day. We are no longer simply multi-tasking - we are multi-consuming too.
 
Don’t get me wrong: this is also good news. The choice and opportunities of modern life are very great blessings. I do not subscribe to the view that the expansion in our choices of entertainment, lifestyle and consumption is intrinsically corrosive. Choice is good.
 
But the question is whether our capacity to balance the immediate with the long-term is keeping pace with the expansion of choice. I think it was a Hollywood actress who said that nowadays, even instant gratification isn’t quick enough for some people.
 
And in many areas of life, the importance of investing in the long-term has certainly grown. Saving for our retirement rather than splurging today; controlling our intake of food and drink, and taking exercise in order to be healthy; taking time to be with our children and families, rather than being sucked into overwork or overconsumption.

In the pure, ideal universe of economic theory, each of us is supposed to be able to rationally calculate the utility value of any action both now and in the future. In real life, people eat donuts, decide not to go for a run, and put off making payments into their pension fund. The economists say this means we are engaged in an “irrational discounting of time”. The rest of us describe it as being human.
So, politicians certainly do not have a monopoly on myopia. The challenge of taking hard decisions in the short-term for the benefit of the long term is a more general one.
 
2) Generational failure
 
So far I’ve talked about short-termism in the context of business and personal life. But there is a generational question at stake here too. Many of the decisions we make today will affect the lives of our children, and our children’s children. Social justice is about the relations between classes, nations, races and genders – but it includes justice between the generations, too.
 
My colleague David Willetts reports in his book The Pinch that some north American Indian tribal councils judged the impact of their decisions over seven generations. The liberal philosopher John Rawls described how a socially just society was one taken by people unaware of what position they would occupy within it. But Rawls also insisted that the people behind his famous ‘veil of ignorance’ must consider the consequences of their actions over ‘at least two generations’.
 
This has not been the ethos that has guided us in recent decades. The Prime Minister and I are from the same generation. And frankly, we know that both our generation - and the one before us - got it wrong. We have run up debts, despoiled the planet and allowed too many of our institutions to wither. For us, the longer-term view we are adopting in government will help to wipe the slate clean, and ensure that future generations can thrive, without being burdened with the dead weight of our debt, and our failings. 
We are absolutely determined that we will be able to look our children and grandchildren in the eye and say we did the best we could for them, even if this means taking some difficult, unpopular decisions today.
 
3) Commitment
I’ve talked so far about the tendency to short-termism that characterises too much of our society, and the particular failure of our generation to focus on the future.

But I do not want to sound too pessimistic. Thankfully, as a society we have also retained a wide array of institutions, habits and social norms to keep us focused on shared long-term interests. We are still capable of putting tomorrow ahead of today, using what one academic has called “commitment devices’’. When we sign up for a Christmas savings scheme, or join a running group, or a study class, or a dieting group, we are finding ways to make ourselves do the best for ourselves for the long-term. We know, like Ulysses, that we will be tempted by siren songs, and must sometimes tie ourselves to the mast.
 
Institutions like marriage and civil partnerships are profoundly important commitment devices: a way of pledging to work at a relationship through thick and thin, and make a life together. And on a wider scale, schemes of national insurance for unemployment, sickness and old age are effectively large-scale, collective commitment devices.
 
The challenge here is to find ways to encourage people to act in their own and in society’s long-term interest, while respecting individual freedom. There are various ways in which the state can support a shift from short-termism to long-termism. The plans outlined by the previous Government to automatically enrol people in workplace pensions are a good example. Individuals can still choose to opt out, of course. But by changing the ‘default’ setting to being in the scheme, millions more people are likely to save towards their old age. The Government’s new behavioural economics team, based in Downing Street, will be looking at ways in which, in a range of areas, the better choice can be made the easier choice.

4) Political myopia
 
I now want to turn to the specific issue of short-termism in politics and government.  I have already argued that myopia is not a problem restricted to SW1. But it is also clear that politics is often poisoned by short-termism. This is, after all, a profession in which a week is said to be a long time. Politicians stand accused of being incapable of thinking beyond the next election, the next parliamentary session, or even the next 24-hour news cycle. Sometimes the accusations ring true.
 
Again, these are not entirely new problems. The Conservative Prime Minister Benjamin Disraeli is reported to have said: ‘A politician thinks of the next election. A statesman thinks of the next generation.’ Now, I don’t think we should be under any illusions about the fact that Disraeli was as keen to be re-elected as any of his predecessors or successors! But his point nonetheless stands.
 
And I think there is some evidence that politics has become more afflicted with short-termism in the recent past. In part, this is because communication, both international and national, becomes faster by the year. The sheer scale and velocity of the news media has undoubtedly altered the way politics is conducted.
 
When you read, today, the diaries of Winston Churchill or William Gladstone, spending weeks travelling to conduct diplomatic missions, or on preparing a single speech to parliament, it is like entering a different world.
 
Nobody wants to turn back the clock, of course. But given the pressures of modern politics and government, we do need to work very much harder to keep our sights on the long-term consequences of our decisions.

This is especially true, given that many of the problems we face have a longer-term dimension: climate change, pensions and social care, and international economic development are just some of the more obvious examples. Our horizons have shortened as  the timescales of our problems have lengthened.

I think there are three principal symptoms of contemporary political myopia:

First – A tendency to confuse good headlines with successful reform. Professional, effective communications are of course a vital part of good government. But there is an ever-present danger of mistaking external perception for reality. Governments can easily fall prey to initiative-itis, announcing, almost daily, new policies or ideas to convey an impression of activity and progress.
 
 
The truth is that real reform – of public services, of our political system, of our economic system – takes many years of patient execution of a strategy. Much of this progress will go unreported. Successful reform is rarely a generator of daily headlines, and it is vital to understand that from the outset.
 
Second – the increase in the turnover of government ministers. Particularly among junior ministers, the level of churn has been so great in recent years that very often, by the time the minister has got close to understanding their subject, they are moved on.
 
Of course, it is dangerous just four months into government to raise the question of the rate of ministerial turnover. Just to be clear, I am not making any commitment today for a target average ministerial tenure. But I can say that this Government recognises that constant reshuffling of the ministerial deck – often to generate the headlines I mentioned a moment ago – is not conducive to good government, and that we will aspire to greater stability in the way ministers are allowed to govern.
 
The third - and most important - symptom of political short-termism is the failure to confront long-term problems requiring uncomfortable short-term solutions. Climate change; pensions; social care; social mobility; fiscal deficit; welfare reform – the list is long.
 
Let me stress again that I am not trying to score party political points here. The accusation of short-termism has to be levelled at the political class as a whole.

5) A Coalition Government horizon shift 
The proof, of course, will not be in what we say but in what we do. And in the four months since the Coalition Government was formed, I think we have begun to show that we are serious about a longer term approach to policy and politics. Let me take seven areas by way of illustration:
 
1) First, the public finances. We have set out a five-year plan to put the UK back in the black. The details of our spending plans will be published in October, and, as you can imagine, there is plenty of discussion going in Whitehall at the moment. But our starting point is simple: a thriving economy cannot be built in the long term on the shifting sands of debt. The Office for Budget Responsibility will issue independent assessments of the public finances: this is an institution specifically intended to improve long-term financial planning, and which will help not only this Government but future governments to remain on the fiscal straight and narrow.
 
2)   Second, the environment. The Coalition Government is pushing hard to get the whole of the EU to sign up to tough targets for reducing carbon emissions – 30% below 1990 levels by 2020. We are under no illusions about how difficult these targets will be to meet. Our Green Deal, Green Investment Bank and our strategy for low-carbon energy production are the first steps in an ambitious programme to meet our pledge to be the greenest government ever.
 
2) Third, investing in future economic success. Despite our tough plans for cuts in public spending, we have stuck to the previous Government’s commitments on capital investment, apart from some small savings made in May. Our Regional Growth Fund will target resources on areas most in need of economic development. A renewed and reformed commitment to Higher and Further Education, and especially to world class research and science, are also essential to our long-term economic success – as Vince Cable argued in a speech earlier this week.
 
4)   Fourth, taking a long-term view of the UK’s role in the world. We are investing in our relationships with emerging economies in Asia and the Middle East, even as we play a fully committed role within the EU and maintain our traditional alliance with the United States. It was not an accident that the UK’s delegation to India in July 2010 was the largest ever. Both bilaterally and working through the EU, we want to put trade at the heart of our relations with emerging economies and our diplomacy more broadly. We are also strengthening our commitment to help the poorest countries participate fully in the global economy. Our commitment to ring-fence the budget of the Department for International Development, and meet the target of spending 0.7% of Gross National Income by 2013 on foreign aid, are founded on our conviction that the issues of development, security and trade are intertwined. Our commitment to a fairer and more prosperous world cannot be put on hold because of our own domestic financial pressures. 
 
5)   Fifth, acting now to put our political system on a sustainable footing. The Bill currently in parliament, equalising constituency sizes and paving the way for a referendum on the voting system, is part of a package of measures including reform of the House of Lords, cleaning up party funding and lobbying and allowing voters to recall MPs. In themselves, they will not provide an antidote to public despair about politics after the expenses scandals. But in the long-run, they will restore some faith in our political system and make politicians more accountable to the people.
 
6)   Sixth, our plans for a decentralisation of power. This is the power shift David Cameron will be speaking on. But it is a long-term measure too. It will take time to shift responsibility away from our over-centralised, bureaucratic state. We will need time, for example, to reform our excessively centralised tax system which stifles local autonomy and innovation. And we know that it will take even longer for people to realise that power is being wielded at a different level. Ministers standing at the despatch box will continue to be held responsible for local decisions over which they no longer have any control. This will feel uncomfortable, to say the least: responsibility without power, the curse of the decentralising minister. Fear of this scenario has been an obstacle to decentralisation in the past. But we know it is coming, and we are ready to stay the course.
7)  Seventh, this Coalition Government’s long-term commitment to fairness. The overriding priority for our social policy is improving social mobility. For too many people, the circumstances of their birth shape their chances throughout life. In recent decades, social mobility has flat-lined. We know that improving social mobility is by definition a long-term enterprise. Our pupil premium will be a downpayment on better future for the poorest children. Our support during the critical early years, especially for disadvantaged families through an improved Sure Start programme, is explicitly intended to have an impact on future fairness. There is no more potent investment in the future than investment in the early years. Similarly, in the emergency Budget we began the process of rebalancing the tax system to reward work and ensure fairness, by cutting income tax for the lowest-paid and increasing Capital Gains Tax.

Conclusion

I have today set out the defining purpose of what we call a horizon shift – a fundamental alteration in the timelines of our decision-making.
We know that decisions taken for the long-term are, in the short-run, difficult, painful or unpopular – or all three. The need to tackle our inheritance of debt is the most obvious case in point. I knew before the election how difficult it was going to be just to sort out the public finances. I remember being roundly criticised for spelling out the scale of the cuts which would be necessary to balance the budget. I am under no illusions about the significant political risks both parties in the Coalition are now taking by now facing up to these difficult decisions in government.

But I also think people will see, even through these tough times, that the Coalition Government is acting in the interests of a better future. I am encouraged that a panel of citizens convened in association with the Institute for Government called for two clear priorities to govern the spending review: encouraging people to take personal responsibility, and giving the country a long term future.

Denying the need to sort out the public finances would lead to bigger problems in the longer term, and would be a betrayal of the prospects and prosperity of future generations. We have had a budget for the future; our spending review is aimed squarely at the future too.
I did not come into politics to pore over the government’s budget figures like a beady-eyed accountant. But balancing the books is something we have to do today, so we can go on to do the things we want tomorrow: create a sustainable, balanced economy; provide the best life chances for all our children and young people; and build a society of growing opportunities and social mobility.

It falls to our political generation to take the necessary steps now for a better, fairer future. Reform and change today is necessary if we want mobility and prosperity tomorrow. That's the horizon shift we need. That’s what the Coalition Government is about.

[ends]