Commentary: The economics of Lords reform

MARTIN HUTCHINSON, Business and Economics Editor

WASHINGTON, Nov. 14 (UPI) -- The British government last week published its recommendations on reform of the House of Lords. As expected, the White Paper recommended a second chamber that is partly elected, partly nominated. It got mixed reviews, most reviewers concentrating on the high proportion of "Tony's cronies" in the new House. Few however mourned the hereditary principle, indeed the poll conducted by the Internet pollsters didn't even allow for hereditary peers as an option.

This is a triumph for prejudice over economic literacy.


One understands the prejudice, of course. Britain became a full democracy in 1928, and received wisdom in both political parties (remember John Major) is that a "classless" Britain is a goal devoutly to be aimed for. The House of Lords quintessentially represents "class," it was also deemed by both political parties to be in need of "reform" as far back as 1911. One thus accepts -- reluctantly -- that the current central assumptions of British political life, by both parties, cry out for House of Lords "reform."

This can of course change. In 1970, the central assumptions of British political life called for a state owned telecoms industry, wage/price controls negotiated with Trades Union barons and massive bailouts of the catastrophically failing British automobile industry. However, such change generally takes a generation or so.


So, being politically unrealistic this side of 2025, what, in terms of maximizing British welfare, is the optimum form for a Second Chamber, if any?

Having a Second Chamber is clearly economically as well as politically beneficial because it reduces the risk of extremism. Democratic elections, being a "snapshot" of the people's mood at a particular moment, always run the risk of producing a highly eccentric outcome, that the electorate itself, if given time for reflection, would not have wanted, and that can prove extremely damaging to the economy. The risk is heightened in a "first past the post" system such as Britain's (in other respects advantageous) in which in extreme circumstances a party can be elected to more or less absolute power with less than 40 percent of the vote. Hitler, Germany 1933 is of course the classic example of this, but there are others in Allende, Chile, 1970, Peron, Argentina, 1945, Chavez, Venezuela, 1999 and to a limited extent Wilson, Britain, 1974.

A Second Chamber, either unelected or, like the U.S. Senate, elected on a cycle different from the first chamber's, provides a very valuable barrier against ill thought out legislation passed in a fit of popular frenzy. Of course, it's not infallible; think of the airline industry bailout passed by both houses of Congress within a week of Sept. 11. But it does help, and it's important -- it greatly reduces the risks to those doing business in the country concerned, whether of expropriation or just of suicidal economic management.


The need for a Second Chamber then rules out one which is simply a "poodle" of the first chamber, or of the current government. A House of Lords filled with "Tony's cronies" would suffer from two disadvantages. It would not provide adequate scrutiny to the legislation of a Blair government, thus failing to provide the backstop that is constitutionally needed. Even worse, come the (doubtless long distant) day when "Tony" is no longer prime minister, it would prove an immovable obstacle to his successor, perpetuating the policies fashionable in 2001 in what may be the very different circumstances of 2021.

A Second Chamber must thus have real power, ideally provided by a full veto on the actions of the first. The removal of the House of Lords veto in 1911, justified by demagogic ranting against the House of Lords as it then existed, was largely forced through owing to the then Liberal government's need to introduce Irish Home Rule, a policy which, however defensible in principle, was solidly opposed by a majority of the British electorate. The House of Lords reform which was then promised never materialized, and the Lords remained throughout the 20th century a body with only a limited raison d'etre, since it had so little power. To provide adequate safeguards against reckless legislation, therefore, a Second Chamber that is fully legitimate needs a full veto over legislation, just as in the United States legislation must be passed by both the House of Representatives and the Senate.


For a Second Chamber to be fully independent of the Executive, it must either be independently elected, on an electoral cycle different from the first Chamber, or it must consist of a body of delegates appointed by some independent means, with little or no input from the government of the day. It would, for example, be possible to have a Second Chamber consisting of the Law Lords (provided they were selected independently) the Bishops (selected by Convocation) the General Court of the Bank of England, the Board of the Institute of Directors, the Mayors of all top tier local authorities, the General Secretaries of the major trades unions and last year's winning Premier League football team. Such a body would be admirably representative of the population as a whole, it would also be wholly independent of any government.

It would, however, suffer from the same defect as the House of Commons, a tendency to pursue policies for short term gain. In the case of the Commons, policies are pursued for short term political gain; in the case of this Second Chamber, they would be pursued for short term gain of whichever interest group was dominant at a particular time.

Economically, this points to a further requirement for a Second Chamber; it should pursue policies that are in the long term interests of the country, even though those policies may be painful in the short run. An obvious example of this is the environment, where a Second Chamber will give due weight to the likely extent of global warming in 2100, a date which for the Commons is 19 elections away and thus of no conceivable interest. On the opposite political side, a Second Chamber that was worth its salt would have seen the dangers of unrestricted Commonwealth immigration in the 1950s, and thus would have moved to restrict it a decade before restrictions were finally put in place, in 1962 -- the outrage of legitimate British subjects volunteering to fight for Third World terrorists against Britain would thus have been avoided. In foreign policy, a good Second Chamber would have objected to the deception involved in the Suez fiasco, because of the long-term damage to Britain's reputation that it brought, though it would have wanted to retain the considerable strategic asset of the Suez Canal itself.


A Second Chamber will also work to ensure that the social security system is adequately funded, though the penalties of not funding it are a generation, or five elections away, still well beyond the normal time horizon. It will pursue long term infrastructure policies, not allowing central London traffic to slow to a complete halt through failure to provide any reasonable road access system. It will act to preserve Britain's heritage, not wasting billions of dollars on a temporary Millennium Dome full of meretricious exhibits. Et cetera, et cetera, the list could be considerably prolonged.

There is no way currently that an elected or appointed Second Chamber will have a sufficiently long-term focus; human life is simply too short. Unless they are professional politicians, in which case they will simply duplicate the Commons, it will be impossible for Second Chamber members to have achieved sufficient life experience and wisdom to be useful until at least their mid-40s, by which time they will have only 25-30 years of active life ahead of them before senility sets in. Genetic engineering techniques may in time solve this problem, but we are still a long way technologically from that solution.

The real solution, of course, is a Second Chamber that is hereditary. A hereditary Second Chamber will automatically take the long view, because its members will expect that their descendants will still be sitting in it, available to take society's blame, a hundred years hence. Families like the Cecils, which produced senior ministers in the second, third, fourth, fifth, sixth and future seventh marquesses, inevitably take a longer view of British needs than the average politician. This is not because of their wealth, which was never extreme and these days is only moderate, it is because they have known, until the present Lord Cranborne, due to become the last of his line once the Blair reforms go through, that each generation would sit in the House of Lords, and would, if the family's record was honorable and the individual capable, play a significant role in the nation's government. It is a very powerful incentive to long term thinking.


Of course, there is no reason whatever in these egalitarian days why National Union of Mineworkers members, selected by lot, could not form the corpus of a hereditary Second Chamber. It would probably take the miners a generation or two to acquire the appropriate long-term approach, since at least for the first few decades they would think it likely that their elevation was temporary. But appoint the miners now, and by 2070 or so their grandchildren, still by all means hewing coal daily when the Second Chamber was not in session, would form as effective a Second Chamber as any number of Salisburys.

However, Britain has a hereditary peerage, established for 800 years, and it might as well use it. It cannot be objected these days that the peerage represents only the rich, since many who have inherited their titles are now middle class at most in their lifestyles. However, to reduce still further the bias towards wealth, we should allow peerages to be inherited through the female line, thus further separating the wealth from the title. Still better, we should backdate this provision to 1837, when good birth registration began -- changing it only proactively would be grossly unfair -- allowing inheritance through any female legitimately born after that date. This would bring into the Lords several hundred additional people, currently middle or working class and brought up with no expectation of being otherwise, who by the lottery of descent were able to inherit a previously extinct peerage.


The "half life" of a hereditary peerage, once it is properly established (in other words, has passed through at least one generation) can be calculated at about 200 years, possibly somewhat more as it is to be hoped that further World War I-type decimations don't occur. With about 750 hereditary peers currently, it can be expected that about 1/3 percent of them, two or three, will disappear each year. However, with female inheritance the equation is changed; with the rate of extinction declining, but the number of peers increasing to perhaps 1,000-1,200. Either way, even if there were no further creations, the peerage can be expected to last until at least 4,000 AD.

New creations should be permitted, but be strictly capped, at a maximum of say six in any calendar year, with an exception allowing replacements only in a year of plague or war in which perhaps 5 percent of existing peerages had become extinct. Life peers already created would be allowed to continue sitting until they died, but no further life peer creation would be permitted -- a life peer, by definition, does not offer the benefit of a long term time horizon, and indeed, if superannuated, may have an exceptionally short one. Thus the "Tony's cronies" element in the House of Lords would gradually die out, and the House would become truly independent. Sitting peers should be paid for attendance, in order to assure adequate middle class subsistence, which provision would itself ensure the regular attendance of the more indigent among them. Of course, the Second Chamber so created should have a full right of veto over legislation.


Such a Second Chamber represents an ideal, but it is not an unattainable one. On the contrary, it is the system that Britain had between 1688 and 1911, with one exception: there was no constitutional provision against mass creation of peers. That defect was responsible for ministerial blackmail at the time of the 1712 Treaty of Utrecht negotiation, the 1832 Reform Act and the 1911 Parliament Act. It needs to be remedied for the reformed Second Chamber.

What a good thing that, in 2025 when the current central assumptions of British political life have changed, such an ideal model for a Second Chamber will be readily available!

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