Propped Up by the State

The huge explosion in the use of management consultants by the New Labour government — between 2005 and 2008 the NHS alone spent almost half a billion pounds on them — has been widely criticised. Much less widely known is that think-tanks close to New Labour, such as the Institute for Public Policy Research and Demos, have also become heavily reliant on funding from the taxpayer. The sums involved are much smaller but they are very significant for the organisations involved. A recent TaxPayers’ Alliance report has shown that in 2007-8, the IPPR, whose former staffers include Patricia Hewitt and David Miliband, received £350,330 in government funding for projects, the environmentalist New Economics Foundation £601,518 and the New Local Government Network £117,972. 

Demos is perhaps the best example of the taxpayer-funded think-tank, although to be fair, it is easier to see how reliant it is on state funding than several other organisations whose accounts are much less transparent about their funding. In Demos’s accounts, it divides its project income into “contracts” and “grant income”. In 2007, “contracts” income was £1,098,522. Of this, £741,195, or 67.5 per cent, came from national and local government bodies or taxpayer-funded bodies. These included the Improvement and Development Agency (£56,500), London Borough of Hackney (£12,000), the National College for School Leadership (£29,600), Nesta — the National Endowment for Science, Technology and the Arts (£51,250) — and Scottish Enterprise (£109,010).

Its “grant income” for 2007 was £386,536 with £260,498, or 67.4 per cent, coming from government or EU bodies. It received £85,000 from the Communities and Local Government Department, £14,066 from the Department of Trade and Industry and a further £58,200 from Nesta. 

Demos is not some kind of non-political font of technical expertise. It was founded in 1993 by Martin Jacques, from 1977 to 1991 the editor of the Communist Party monthly Marxism Today, and Geoff Mulgan, its first director. Demos’s mission was — after the abject failures of socialism borne out by the collapse of the Soviet Union — to help construct a new post-socialist Left. It played an instrumental part in the evolution of the New Labour project. Shortly after the 1997 election victory, it obtained its greatest public prominence with its call for Rebranding Britain — less warm beer, cricket on the village green and maiden aunts cycling to communion and more Manchester Sound, knowledge economy and Cool Britannia. Mulgan went on to serve under Tony Blair as director of the Prime Minister’s strategy unit and director of policy at 10 Downing Street.

This direct state funding of what are ideological think-tanks has no precedents in the UK. Those think-tanks which came to be seen as the intellectual powerhouses behind Thatcherism — the Institute of Economic Affairs, the Adam Smith Institute, the Centre for Policy Studies — received no public money. Indeed, those bodies have made a virtue of the fact that they are not reliant on state funding. The outgoing director of the IEA, John Blundell, has always been at pains to point out that this is a major difference between them and the universities — they are not reliant on the state for funding and thus are not constrained in their output by political or ideological fashions. 

The pro-market think-tanks have always been and remain reliant upon voluntary donations by companies, foundations and private individuals. This reliance on voluntary donations has been used as a basis for attacks upon them, with some on the Left arguing that they are merely mouthpieces for big business. In fact, direct corporate donations from publicly listed companies are a declining element of think-tank funding. In most cases, where such donations continue they are at a very modest level. Much more important today are donations from individuals, privately owned firms or foundations. This move away from support by publicly listed firms can also be seen in donations to the Conservative Party. It is difficult to find any donations from FTSE 100 companies to the party on the Electoral Commission’s register of donations.

A more solid basis for criticism of some pro-market think-tanks is that a few — not those already mentioned — have become too reliant on support from one or two large American companies. The best example of this is the largesse of US pharmaceutical giant Pfizer Inc, whose influence on some of those it supports can be seen in the endless stream of publications on the importance of intellectual property and the evils of generic medicines. But in general this type of criticism is overplayed. Environmental campaigns including Friends of the Earth (the recipients of £153,994 of taxpayers’ money in 2007-2008) have long demonised Exxon for allegedly funding “global warming denial”. The reality is that the main UK think-tank pushing a sceptical agenda on climate change, Julian Morris’s International Policy Network, has had to close down its global warming programme due to lack of funding.

It would also be wrong to argue that none of the market-oriented think-tanks have got into the game of trying to get the taxpayer to subsidise them. Policy Exchange has differentiated itself from the older right-wing think-tanks by announcing that it would be happy to accept government funding, although it does not appear to have had any success in this endeavour. 

The Adam Smith Institute itself has never received public money. Its founders, Madsen Pirie and Eamonn Butler, also set up and for many years co-owned Adam Smith International. This is a for-profit international consultancy advising foreign governments on privatisation and economic restructuring, or more specifically on how to communicate the message of economic restructuring. Adam Smith International’s dominant client under New Labour, along with the World Bank, has been Britain’s Department for International Development. 

Enthusiasts for DfID might have been rather less keen on its work if they had known that British aid money had been spent on the recording of The Privatisation Song, a pro-privatisation jingle played on Ugandan radio.

Will a future Conservative government continue such largesse to left-wing think-tanks? This must be a cause of concern for Demos and may help to explain why it recently launched a programme on progressive Conservatism, spearheaded at first by “Red Tory” Phillip Blond. It was launched with a speech by David Cameron and now includes as part of its team shadow cabinet member Greg Clark, former Tory spin-doctor and Times columnist Daniel Finkelstein and the environmentalist and Conservative candidate Zac Goldsmith. George Osborne and David Willetts have both joined Demos’s advisory board. So perhaps its funding is safe.

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