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31 August 2023

Ulez is a litmus test for interventionist government

From emissions to sugar, will Labour tax the public for their own good?

By David Gauke

On Tuesday (29 August), something rather unusual happened. A policy was implemented that made a non-trivial proportion of the population worse off. One might think that this is not a truly unusual occurrence, in that there is no shortage of examples of policies that have been pursued that have made people worse off but this is not another column about Brexit. No, this was unusual because the immediate and explicit consequence was to make some people worse off, as opposed to it being unintended.

The policy in question is the extension of the Ultra Low Emission Zone to cover outer London, which will cost many living there £12.50 a day to use their cars. It is a policy that meant that an unpopular Conservative government was able to retain a marginal parliamentary constituency in a by-election when much safer seats were being lost. And it is a policy that means that some are questioning whether the Labour Mayor of London could lose power in a Labour city, in what is likely to be a generally good year for Labour.

This is not a rant against the Ulez extension or Sadiq Khan, the Mayor. There is something admirable about Khan’s determination not to abandon the policy. But the row over Ulez does bring to the fore a potential vulnerability for Labour, in particular, but also more broadly the challenges of governing in the current economic environment.

Contrary to the widespread cynical view, most politicians go into politics because they want to change things for the better.  There are problems they want to solve and, in some cases, the solution requires the public to change their behaviour. This might involve reducing carbon emissions, eating and drinking more healthily, or reducing the use of vehicles that damage air quality (the ultimate objective of extending Ulez).

In some cases, behaviour change can be enforced by simple prohibitions or by mandating particular behaviours. But in other cases, the authorities merely seek to influence our behaviour by putting in place incentives. Good behaviour is rewarded, bad behaviour punished. Carrots and sticks.

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Carrots tend to be popular. But when the government lacks resources, they are not always affordable. Furthermore, people are loss averse, which means that they often more readily respond to sticks than carrots. If we want to discourage people behaving in a particular way, using the stick – making it more expensive to carry on as before – is more likely to be effective. But sticks, as opposed to carrots, are unpopular.

This is why there are plenty of Conservatives who think that the surprise result in the Uxbridge and South Ruislip by-election was not just the consequence of a local issue that has little application outside Greater London, but has wider significance.

Labour, the argument goes, is perceived as wanting to intervene more to protect the public from various environmental or health-related perils. That is often to Labour’s advantage – heart in the right place and all that – but at a time when the public is worried about the cost of living, an interventionist Labour government imposing higher costs could be a worrying prospect to many hard-pressed voters. For that reason, many voters may conclude that a Labour government would be an unaffordable luxury.

Plenty of Labour supporters might scoff at the injustice of a Conservative government benefiting from a weak economy.  But the Tories look set to give this argument their best shot and Keir Starmer appears nervous that there is a genuine vulnerability. He distanced himself from the Ulez expansion and let it be known that he understands the worries about the “implementation”. (When people complain about implementation, they usually mean that they would like more carrot and less stick.) On trying to make our food healthier, he has ruled out extending the sugar tax, at least for the moment. On climate change, he makes the argument for job creation in green industries but there is certainly no enthusiasm expressed for carbon taxes.

It is hard to argue against Starmer’s political judgement. As he has done on many other issues, he has sought to minimise the target for the Tories to aim at. The problem is that if politicians want to solve problems and the solution requires behavioural change from the public, how do you go about it when there is no money to spend and you are not prepared to risk unpopularity?

This is not just a Labour problem. Once it became clear that we faced intense cost-of-living pressures, the current government dropped a whole range of preventative measures on reducing obesity.

Maybe this was purely because the time was not right. Falling living standards drive politicians to narrow their horizons and focus on the immediate. But the depressing conclusion is that it is now very hard to pursue policies that impose immediate costs that bring about long-term benefits; that politicians have to choose between being cowardly and ineffective or risk losing office. Given that choice, the easy option is to leave problems unsolved.

The proponents of the Ulez expansion believe that opposition will diminish and the benefits for air quality will soon become apparent. But if they are wrong, it is a policy that might prove to be politically disastrous. Either way, the success or otherwise of the expansion will be influential on how we are governed on a much wider range of policies.

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