Can Britain afford to abandon austerity? Maybe

Perhaps only Brexit is a more important political issue in Britain than austerity – the policy of restraint in public spending that is causing acute stress in parts of the public sector. It might surprising, therefore, that the quality of debate is so low as to be nonsensical. But then again, when things get important, truth is the first casualty. So let me attempt a dispassionate overview.

First let’s look at the case made by government supporters in favour of continued austerity. This runs at the level of household accounting. The government is outspending the revenue it collects. This means it is piling up debts which future generations must pay. How irresponsible! “There is no magic money tree,” says the Prime Minister, Theresa May. But one of the first things you learn in economics is that running a government budget is nothing like a household one. And the government does have a magic money tree – it’s called the Bank of England. It is perfectly safe for a government to create money to pay its own bills, in the right economic circumstances. Japan has being doing this for a couple of decades. Plus spending government money in the right way may generate the means to pay it back – through bringing spare capacity into the economy, or through investing in projects that generate a return. Or even both at the same time. The case made by government ministers is simply irrelevant. But that doesn’t make them wrong.

The case made by the left has more economic sophistication – and it is even nominally supported by authoritative economists like Joe Stiglitz, an American Nobel Laureate (who wrote a useful textbook on public economics). The main argument they make is often referred to as “Keynesianism” after the great Liberal economist Maynard Keynes, who offered it a the time of the Great Depression in the 1930s. Keynes pointed out that if there is spare capacity in the economy, such as during a recession, extra public spending will not displace other activity, and it will (or should) therefore cause the economy to grow, and pay for itself. But this argument is made by left-wingers regardless of the economic climate. Find me a trade unionist that has ever, ever said that because the economy is overheating, government spending restraint is required. It’s like finding a businessman who says, in any given economic conditions, that interest rates should go up. They are like barristers making a case, no matter how ridiculous. What should judge and jury think?

Two pieces of evidence may be offered in favour of Keynesian expansion now. First is that economic growth since the great financial crisis of 2007-2009 has been lacklustre, and behind many of Britain’s peer economies. Surely it needs a kick up the backside? Second is that inflation is low and looks stuck. Actually, inflation has been creeping up a bit, but that is due to the pound falling. Pay inflation – surely the critical point in this case – remains low. In classical economics high inflation is the surest sign of an overheating economy.

But two pieces of evidence can be offered against Keynesian expansion. First is that unemployment is at near record lows for recent times, and overall employment is very high (unlike in the USA, there don’t appear to be a lot of people who have dropped out of the labour market and so not treated as unemployed). Second is that Britain has a high current account deficit – at 3.1% of income it is one of the highest in the developed world, though it has been coming down since the pound fell. That means that Britain needs foreigners to pay it in its own currency, or Britons need to acquire foreign currency to finance foreign debts. This means that the country depends on “the kindness of strangers” as the Chairman of the Bank of England put it. Among other things that takes some of the magic out of the money tree owned by the Bank – and is a contrast with money-plucking Japan, which tends to run big surpluses. Money trees need net savings (or current account surpluses) to nurture them, or else their fruit turns bad, as many a horror story from South America will attest.

So there should be public debate around what these pieces of contradictory evidence mean. Unemployment is low, but the quality of many jobs is low – so would people work more productively under the right pressure? Britain has a trade deficit, but most debt (including government debt) is still denominated in Sterling, reducing risks substantially. There is much to explore, but few take the trouble. Easing austerity could simply raise growth; it could cause us to borrow in currencies that the Bank of England can’t print; it could cause inflation; it could simply stimulate more low paid immigration; or nothing much might happen at all.

The important message, though, is that it matters how any extra government money is spent. This rather goes against the flow of the usual macroeconomic debate, which likes to deal in quantities rather than qualities. But if you read carefully you will see that trained economists brought into oppose austerity policies are quite careful about the type of extra spending they advocate. They want more investment. If the government invests in things that generate financial returns by making the economy more efficient and productive, then the question of whether or not the economy is running at full capacity is side-stepped. The Labour manifesto at the general election offered this line of reasoning, and that is doubtless why the likes of Mr Stiglitz felt able to endorse it. Labour also wanted to put taxes up albeit mainly on the rich – which, nominally, at least, should reduce excess demand.

Unfortunately this can lead simply to politicians labelling all public expenditure as “investment” – a favorite trick of former Labour Prime Minister Tony Blair. We need to look at matters case by case. What if the government gave NHS employees a pay rise, which some say they are due after years of pay restraint? Some of the extra money would come straight back in taxes; some would be spent creating demand which might help local economies to grow. But some might be spent in businesses that will just put their prices up; some might simply be saved (which has no short-term economic impact) or spent on things like foreign holidays that just add to the current account deficit. Unless balanced at least some extent by tax rises the economic case for this looks unconvincing (where those tax rises should fall is not a simple question either…). But there are other benefits to increasing pay. Would it make it easier to recruit and retain top quality staff that would make the service more efficient? That mean the service could run on fewer temporary staff and make cost savings by heading off medical complications? Well that’s the key, and it depends on strong management. These benefits don’t just happen.

But what of devoting more money to public health? If done properly, this will head off demand for health services, and reduce the costs of poor health elsewhere in the economy. The case for funding this from borrowing is much easier to make. A similar case can be made for schools funding – though again this depends on good management (though personally I am more confident of that in schools than in hospitals, if only because the former are much simpler to run).

There is a lot of extremely interesting debate to be had around the economic implications of different sorts of public spending. Would forgiving student debt be a financial catastrophe? Or might it provide an economic boost in exactly the right places? We need some dispassionate analysis.

Instead we have a Conservative Party that will not engage in arguments of any economic sophistication, and is allowing some of its cost savings to do lasting damage to society. And though the Labour Party understands this, it seems uninterested in the discipline that will be needed to ensure that extra government spending and borrowing does not drag the economy down, rather than boost it. Each party is sponsored by advocacy groups who think that the overall outcome for the country is somebody else’s problem. Such is modern British politics.

Grenfell Tower shows the poor state of British democracy

I have made passing references to the Grenfell Tower disaster – the tower block fire in a social housing estate in London’s North Kensington district on the evening of 14 June, in which at least 80 people are thought to have been killed. It has been a highly significant event in British politics, but its implications are as yet unclear. To me it marks a failure of British democratic institutions. Alas it is in the nature of those institutions to divert attention to other issues raised by the episode, and a few that aren’t.

The tragedy got wall-to-wall coverage very quickly. It was conveniently located in central London, and it produced some spectacular television footage. BBC TV news set up their anchor with a smouldering building in the background. Although the published death toll in those early days was modest, the coverage was proportionate to the scale of the event. There is a curiously about this. Nobody in the mainstream media wanted to speculate on the number of deaths, but there was an unspoken understanding that it must be high. The estimate doing the rounds amongst those who knew a bit about the block was apparently in the region of 100. Those who felt that the authorities were trying to minimise the scale of the disaster apparently estimated the figure was 200 (the block housed over 300). But there are standard protocols about reporting casualties, so the BBC and others were probably being responsible in not reporting such estimates – though they would have helped public understanding if they had.

The main story in the days following the tragedy was the failure of the official response. There was a din of complaints from those close to the scene that was eagerly reported. I don’t know how justified these complaints were – and how much they were affected by the anger that such a disaster could be allowed to happen in 2017. But both local and national politicians showed a failure to grasp the political implications. Theresa May failed to talk to victims in her first visit, which nearly cost her job. It is easy to understand why she was advised not to – she was going to be on the receiving end of abuse, and there would have been public order issues that would have diverted resources from the relief effort. But savvy leaders understand that you have to allow people to vent when things go badly wrong. Other politicians, such as the opposition leader Jeremy Corbyn and the London Mayor Sadiq Khan, had a much easier job, but did it well enough. The media, meanwhile, seemed uninterested in deciphering the cacophony.

The government’s overall response is damage limitation. Firstly that means a properly resourced relief effort – it took them longer than perhaps it should to wake up to the need for it, but they did get there. They also set up a public enquiry and commissioned safety tests on other blocks of flats. And they promptly moved the goal posts on the standards to which cladding, clearly a factor in the fire, should be tested – causing widespread (if not universal) failure of materials that had previously been considered safe. But there is something missing from all of this. It is being treated as a technical failure, to which technical solutions should be sought. There is no attempt at real dialogue with social housing tenants. The victims feel short-changed.

But one of the big issues arising from the disaster is that concerns over fire safety raised by residents were ignored. The management of the block was  delegated by the council to a Tenants’ Management Organisation (TMO). This is a classic piece of government decentralisation of a type that is characteristic of government in the last thirty years or so. Decision-making is pushed down to a body with technical powers but no  democratic mandate of it own, and no revenue-raising powers. The TMO had to negotiate its budget with the council, so the critical decisions ended up by being the council’s anyway. Governments claim that they are pushing decision-making closer to the users of services, but in practice this has very little meaning – the important powers are retained in the centre, and no meaningful consultation with users or local communities occurs.

The Labour opposition are picking up on this democratic deficit – or rather, they are trying to exploit it. Labour politicians have been trying to relay, and in some cases even stoke up, local anger. A lot of this is legitimate democratic politics. But it has been taken to absurd levels. A low point was reached last week when objections were raised by some victim groups to the judge appointed to head the enquiry. Now I have no idea whether this was a sensible appointment, but the objections raised initially by victims’ groups were hard to take seriously at face value. They wanted somebody who had experienced the deprivations of social housing and tower-block living, and who would share their anger. In other words they did not want an impartial inquiry, and the wider benefits that would flow from it. Two Labour spokespeople who were interviewed on the radio, including the newly-elected local MP, simply endorsed this view at face value. One, a front bench spokesperson (I forget who – alas that is rather the state of Labour’s front bench), then went on to deliver a tirade about private sector profiteering. Now of the many failings exposed by the disaster, profiteering is not among them. The failings mainly arose from public sector stinginess – the normal Labour bugbear of “austerity” would have been closer to the mark, though still not quite on point. This bespeaks politicians who are not really interested in the lessons arising from the crisis, but simply want to exploit it for short-term gain.

But surely there is a major political failure that neither the government nor the opposition want to do much about. The victims for now have their moment in the spotlight, and an unaccustomed moment of actual political power. But they know it is transitory. The failures of public administration that led to the tragedy grew out of the powerlessness of local communities, and of social housing tenants in particular. That is characteristic of the British way of politics. The local council, Kensington and Chelsea, is politically uncompetitive, with a large Conservative majority. Political power is concentrated in a clique of the ruling party. Most council wards, where councillors are elected, are safe for one party or another, so little dialogue takes place between the electors and their councillors. Any such dialogue arises from a sense of duty from councillors (who are only paid meagre allowances, except for the most senior), not political necessity. And councils themselves are highly constrained by central government in their powers – especially over funding, which has been severely cut since the financial crisis of 2009.

Politicians of all parties talk about more devolution of power from the centre, but mostly they don’t mean it. They want to devolve blame and not real power. That TMO is the model. So they will insist that the problems are down to inadequate rules, incompetence of some intermediate level of administration, or poor funding decisions at the centre, or some combination. Giving voice to the voiceless does not seem to be on the agenda.

Was Grenfell Tower Theresa May’s Black Tuesday?

Britain’s Conservatives are in an extraordinarily deep mess. Their catastrophic their election failure was followed quickly by the Grenfell Tower tragedy, which to many showed the bankruptcy of Tory policy. A union representative at recent meeting I attended confidently predicted that Labour would be in power in six months. That looks implausible, but the Tories could limp on like John Major’s government after Black Tuesday in 1992, before it went down to the Tories’ worst ever defeat in 1997.

It’s a bit shocking to think back to last April, when Theresa May called the election. It looked like a stroke of genius. Labour had some of their worst ever poll ratings and looked hollowed out after their internal struggles. But it wasn’t just that. It also looked clever to go to the electorate then, because the next few years were going to be rough going for the government. Brexit was looking very messy, and the short term economic outlook looked dire – especially if the government stuck to the fiscal conservatism that has been their hallmark. Now the party has lost its parliamentary majority, tarnished its brand, and rescued Labour from oblivion. And prospects for Brexit and the economy look just as difficult as before – worse.  I can only guess at the trauma Tory supporters must be feeling.

There has been some predictable lashing out. Tories cannot bear to give Labour’s leadership credit for anything, so they blame their own side for the calamity. Mrs May is regarded as a dire leader; the campaign is written off as the most dismal in history. And yet they won 43% of the vote, the highest since 1987, and their poll ratings were remarkably stable through the campaign. Still, many of the decisions taken by the Conservatives during the campaign look ill-advised in hindsight. A lot of the problem was that the calling of the election was so sudden. There was no time to put together the type of campaign infrastructure that was in place 2015. They lacked good quality campaign intelligence, and failed to see how the battleground was moving. The political environment, after Brexit and Corbyn, is radically different from that of 2015, and yet the Tory campaign theme – “strong and stable” versus “coalition of chaos” – was much the same. This points to a deeper weakness: the party lacks a strong army of volunteers to fight a ground campaign. So it badly needs the advantages that money and a long lead time can buy – and they need to identify the right constituencies and voters to target. It’s clear they were focusing their efforts on the wrong people time.

I have made a comparison before between Theresa May and John Major. Mr Major was a lacklustre leader, who experienced an initial honeymoon when he took over in 1990. He did not call a snap election, but pulled off a narrow but unexpected victory in 1992, after a dismal campaign. He had a bit of a second honeymoon, but it all came tumbling down on 16 September 1992, Black Tuesday, when Sterling was forced out of the European Exchange Rate Mechanism, shattering Mr Major’s economic strategy. It made no difference that he kept going for over 4 years more with a pretty decent economic record – he and his party’s credibility was shot, and the country was only waiting for somebody to put them out of their misery.

Does the Grenfell Tower fire provide a similar, seminal moment, to follow the failed election itself? There are clear signs of government failure, and Mrs May’s slow reaction showed a massive lack of political judgment by her and her advisers. The official neglect that led to a tragedy on this scale goes back much longer than when Conservative austerity started in 2010, but many of the things Conservatives have been saying about cutting public services and regulation resonate badly.

But, like John Major, I suspect the government will be quite successful at limping on. Only Labour currently wants another election, and they do not have enough parliamentary muscle to force one, nor sufficient political skill to engineer one. Also Mrs May herself looks quite secure for now; each of her potential replacements brings problems with them. Personally I think that the Chancellor Philip Hammond would do a much better job, but he would be distrusted as a more open Europhile. If there had been a strong field of potential leaders, Mrs May would not have walked into her job so easily. Just as nobody could replace Mr Major.

But the Conservatives are vulnerable. Brexit makes the short-term economic prospects look weak – undermining their reputation for economic competence. The lower pound is squeezing what people have to spend; business investment is blighted by uncertainty. A good moment for higher public investment in infrastructure and public services? But that would require the import of a lot of foreign skilled workers (and no doubt quite a few unskilled ones) just as Brexit makes life uncertain for the most readily available people. It may or may not be fair to put a faltering economy down to Brexit (it may have been coming anyway), but it is hard for the government to blame anything else, when the most plausible alternative is their own incompetence. And public services, such as education and health (to say nothing of social housing) are becoming stretched to the point of being politically toxic.

But for the Conservatives to be beaten, it takes somebody to deliver the blow. In 1997 that was Tony Blair, who built up the most ruthlessly effective political machine Britain has ever seen. Labour are confident that the spirit of hope and optimism spelt out in their manifesto will convince enough extra voters to give them a try this time. They have plenty of enthusiastic young supporters to give them an army of foot soldiers. But they are very unlike Mr Blair’s Labour. Mr Blair moved Labour towards the Conservatives in policy terms, in a strategy that I have called “the same, only different”, and picked up many Tory voters. For Mr Corbyn’s  party, their motivation comes from a visceral hatred of the Conservatives and all they stand for. Their policy programme is full of contradictions, not least on Brexit, and would wilt under close scrutiny. This time they succeeded because nobody thought they could win. I can’t believe they will be able to deliver a knock-out blow. Challenges built on populist anger can gain momentum (look at Donald Trump and Brexit), but they provoke opposition, and it is very hard for them to get enough votes to secure more than a narrow victory in a parliamentary election. And the electoral system does not favour Labour either.

The alternative is that a new political force is able to grow and deliver the blow, as Emmanuel Macron has in France, drawing support from both right and left. The Liberal Democrats hope to be that force, but at best they can only be part of it. This new force needs defections from both the big parties, and some people new to politics too. And there needs to be a leader. Is there anybody of the right stature around to lead it?  Maybe somebody will emerge, as Tony Blair did. I can’t help thinking of David Miliband. Vince Cable, who looks likely to be the next Lib Dem leader, has a better chance than the current leader, Tim Farron, of drawing support across party lines.

But for that to happen, Labour will have to start falling apart. This is possible. The hard left looks is continuing its takeover of the party machinery. Mr Corbyn has made no gestures of reconciliation to his party’s centrists. But it will take more than driving out a few tainted centrists to break Labour’s momentum – something has to puncture the enthusiasm of Labour’s activist base, who now have a taste for successful campaigning. Perhaps only power will puncture Mr Corbyn’s bubble. Labour might be too weak to beat the Conservatives, even when they are vulnerable. But they may yet be too strong to allow anybody else to.

And that is the best hope for Conservatives. British politics is volatile. Their luck could yet turn.

 

The Conservatives and Labour are not finding life easy in the world of two-party politics

First, an apology. For the last two weeks I have been on holiday, and taking a break from blogging. So an incredible two weeks, featuring not just the election, but a terrorist attack in a place that I frequent, and the Grenfell Tower disaster, has passed without comment. Never mind the continued ascent of Emmanuel Macron in France and the scarcely believable goings on in America. I like my blog to be reflective rather than provide an instant reaction, but this has been taking it a bit far! I must start the catch-up by taking a first look at that British election.

The Conservative campaign was constructed, initially anyway, by their adviser Lynton Crosby, who achieved hero status after the unexpected success of his campaign in 2015. It was a plan based heavily on what has happened in previous elections, and, doubtless, informed about current voter feelings through focus groups and opinion polls. In the usual modern language, this was very “evidence-based”. People expected it to do very well based on two bits of received wisdom. First was that most people have already made up their minds at the start of a campaign, so the Tory lead of over 20% in the opinion polls would not change that much. Second was that perceptions of party leaders heavily influence election outcomes: and Theresa May showed an apparently unassailable leader over Jeremy Corbyn. What could possibly go wrong? It looked a perfectly sound decision to me.

Both of those bits of wisdom, for all the evidence backing them up, proved wrong. And so Mr Crosby’s reputation  has probably been trashed. The more reflective will point out that this is jumping to conclusions. The Tory campaign secured a huge Conservative vote – 42% on an increased turnout, a figure that barely moved as the campaign progressed. The problem was that they failed to contain Labour. And that was not all Mr Crosby’s fault.

How did Labour do so well? They increased their share of the vote by about 15% as the campaign progressed to reach an astonishing 40%. This increase seems to have had three sources, of roughly equal importance. First was from Lib Dem and Green voters, who took a strong dislike to the Conservative campaign, and saw voting Labour as the best way of stopping them. Second was Ukip voters; Ukip collapsed by about 11% since 2015. The early evidence, from local elections in May in particular, was that this was overwhelmingly in favour of the Tories. That may have been the case initially, but as the campaign progressed, Labour seems to have picked up a sizable chunk of that vote too (perhaps 5% of the 11% in the end). And the third factor was that Labour brought out a sizeable number of new, younger voters. All three of these factors was unexpected at the start of the campaign – not least by me.

Labour were rewarded for breaking with conventional wisdom, and putting together a genuinely innovative campaign. They were helped by two Tory miscalculations. One was at the heart of Mr Crosby’s strategy, which was to give Labour all the rope it needed to hang itself. They did not want to demean the Conservative brand, and Mrs May’s personal one, by tangling too closely with Labour. In particular they stood back from the leadership debates. They wanted to contrast the “strong and stable” government with the “coalition of chaos” opposing them. This seemed to be working when Labour Home Affairs lead, Diane Abbott, showed a complete lack of grip on her portfolio early in the campaign. But Labour were able to shake themselves free of that and move the campaign onto the issues they wanted to talk about – which was anything except Brexit.

The second miscalculation was the Conservative manifesto; this one cannot be put down to Mr Crosby, but to Mrs May herself, and her close cabal of advisers. They made the fatal mistake of believing their own propaganda, as published faithfully by supportive newspapers like the Daily Mail. The manifesto was a challenging one, designed to let Mrs May exploit her expected majority to maximum effect, to put her stamp permanently on British society. Notoriously this included rowing back on automatic increases to the state pension (the “triple lock”), including homes in the wealth assessments for personal care costs (referred to by opponents as “dementia tax”), and means-testing winter fuel payment to the elderly. There were minor concessions on schools funding, but there were a series of other ideas, hateful to liberals, such as the return of academic selection for state schools, and undoing advances in electoral reform (that one particularly annoyed me). And behind this was talking up the prospects of Brexit, with the bizarre slogan that “no deal would be better than a bad deal”. Remain voters are slowly coming round to Brexit, but rubbing their noses in the humiliation of it all is not sensible politics. I suspect that this manifesto was so tough because its authors felt that Tony Blair, the previous prime minister who was blessed with landslide victories, did not ask for enough, and that this hobbled his programme of public service reform. But the result was a small, but probably decisive, loss of support from older voters. This may have helped to push Ukip voters to Labour, for example; other potential Conservative voters may have stayed at home. And, of course, it helped rally opponents to back the one party that seemed capable of warding off the awful prospect of a big Conservative majority.

There is more I want to say about Labour’s successful campaign, which has really changed things. But for now I want to reflect on the remarkable return of two-party politics. In 2010 Labour and the Conservatives managed 65% of the vote between them; the share was similar in 2015, as though the Lib Dem vote collapsed, Ukip, SNP and the Greens rose. But this time the two big parties took over 82% between them. Many politicians from the main parties, and many others too in the media and in the establishment generally, have lamented the rise of third parties, complicating the choices presented to people. And yet Labour and the Conservatives are finding that it makes life no easier. In 2015 Labour’s big idea was to destroy the Lib Dems and win a majority with just 35% of the vote. But as they succeeded with the first part of this aim, other Lib Dem voters flocked to the Tories in horror. Something like that seems to have happened to Ukip voters this time. Pushing out the third parties just raises the bar to parliamentary success higher, making it yet harder to put together a winning coalition of voters.

Not so long ago the idea of two-party politics looked fragile. Both the Conservatives and Labour looked about to fall apart. Those tensions will surely re-emerge. But right now it does not look as if either the Lib Dems will revive soon, nor that a new political force will arise, as it has in France. That will probably take a national disaster. But it is easy enough to predict what that national disaster might be: Brexit. But that’s another story.

Is Theresa May the new John Major?

Well if I was ever under the illusion that I had any special insights into Britain’s general election campaign, it is now banished. Last week I described the improvement in Labour’s poll ratings as a “dead cat bounce”. It is clearly much more than that. As the election goes into its last lap, it is going to be a lot more interesting.

So what happened? The truth is that we don’t quite know. After the pause caused by the Manchester outrage, we now have a series of new opinion polls, confirming an improvement in Labour’s position. It has advanced to an average of 35% according to Wikipedia, a remarkable achievement when you consider they started the campaign at 25%. Where has this come from? The Conservative poll share has eased by a couple of points to about 44%, but it is still better than where they started, before they mugged Ukip. The position of both the Lib Dems and the Greens has fallen back, as has the SNP in Scotland, though Ukip has struck bottom now. The headline figures are easy enough to see, but what really lies behind the shifts is much harder to say, as is their impact on individual races for seats.

But confidence in the Conservative campaign has been shaken, and Labour is being given more credit. It is particularly striking that Manchester has not helped Theresa May, as most campaigners from both sides thought it would. Indeed the Labour leader, Jeremy Corbyn, seized the initiative on Friday by pointing to the alleged failure of British foreign policy to make the world safer, and how police cuts have made things worse. Both points are spurious. Jihadi terrorism has struck Germany and Belgium, countries with a notably more pacific foreign policy than Britain’s. Britain’s interventions are an excuse for the terrorists, and not the real reason – which is hatred for the godless western way of life and a liberal attitude to women. And the security services have been lavished with funds – it is friendly neighbourhood policing that has been hammered – and the effect of that on terrorism is unclear. Never mind; Mr Corbyn delivered his speech in a measured, sober fashion (prime ministerial, I am tempted to say), and both arguments resonated with the public, who are not inclined to trust the political establishment. The Tory response was unmemorable.

This points to an important weakness in the Tory campaign. It is completely and utterly centred on the person of Mrs May, who they then proceed to shield from public interaction. While Mr Corbyn was delivering his speech, Mrs May was hobnobbing with world leaders at a couple of world summits. In itself this sort of distraction is considered to be a positive by campaigners, a chance to look like a world leader in power, but she had nobody of stature left on the home front. And the media were not inclined to give her party an easy ride.

That has to do with a second weakness. Mrs May is not a collegiate leader. Her pronouncements emerge from a small cabal of trusted advisers, without the ground being prepared amongst her colleagues and their media contacts. So it doesn’t take much for the grumbling to start, and this makes good copy. And the grumbling is in full flow. One columnist said that Mrs May had the charisma of an Indesit fridge-freezer. More than one has suggested that this is the most dismal Tory election campaign ever.

I wouldn’t say that. To me that record is held by John Major, both in 1992 (which won unexpectedly) and 1997 (the worst Tory defeat in history). The 1992 election is the better comparison to now. Mr Major was an uncharismatic sort, and he tried to make a virtue of it. He was never able to stamp his authority on his party. I remember thinking in the early stages of the 1992 campaign that the Tories did not look as if they even wanted to win. They were saved by events. The first was a triumphalist rally in Sheffield by the Labour leader Neil Kinnock, which was a disastrous misreading of the zeitgeist. And second was combative last minute switch in the Conservative campaign based on “Labour’s tax bombshell”, one of the most effective general election moves I can remember – which stops me rating the campaign as a whole the direst in Tory history (1997 takes that prize).

That gives two clues as to how the Conservatives can pull the campaign back to the massive landslide we expected at the start. First is the public not liking the prospect of Labour as a government rather than as a protest vote. Mr Kinnock was not considered Prime Ministerial. Second, is through a well-designed and aggressive drive by the Conservatives and their media allies against Labour weaknesses, perhaps on economics or perhaps on national security, in the remaining ten days.

We’ll see. Things could go well for Labour if we see a repeat of the anti-establishment mood evident in the Brexit referendum last year, or in Donald Trump’s victory in the US. “Strong and stable” could have been a campaign slogan for Hillary Clinton – but Mr Trump was able to project enough of an aura of competence to persuade enough people to give him a try – based on his supposed success as a businessman, and his success in getting to be the Republican nominee. Mr Corbyn is exceeding expectations in his campaigning skill, and he comes over as the more straightforward and honest politician compared to Mrs May. So you never know…

And what of my party, the Liberal Democrats? There is good an bad news. The good news is that knocking the shine off Mrs May helps in contests against the Conservatives. The bad news is that in the general polling the party has faded, and the gap between it and the Conservatives is as large as ever. The idea that the party is a more credible opposition than Labour has gained no traction. A good election for Jeremy Corbyn may be good for the Lib Dems strategically, but a failure to progress will pose some very challenging questions for the party.

Meanwhile I will be scouring the media for any evidence I can find as to how the election is developing. I have not got a clear picture yet. But if Theresa May fails to get a convincing majority, she will have nowhere to hide, and her authority would be damaged irreparably. And deservedly so.

What is the meaning of Theresa May’s wobble?

Featured on Liberal Democrat Voice

Last night 22 people were killed in Manchester Arena in a terrorist attack. The attack was on people attending a concert popular with young girls, and many children were victims. I am in shock , like most of my countrymen. As ever, we have few facts, but the news media must make these go a long way, as they endlessly recite the same reports, along with vacuous speculation, to the exclusion of all else. Nobody is thinking about the election. For anybody that wants a little relief from the awfulness of the news, and the emptiness of news coverage, I offer the following. I had mostly written this article on yesterday’s political events already, and so I decided to finish it and publish anyway. But I expect most readers will not be very interested, as we cannot stop thinking about those families caught up in last night’s horror.

At first I thought it was a sign of strength. The Conservative manifesto launched last week was everything Labour’s was not. It challenged the party’s supporters, and suggested that the Conservatives had the toughness to take on difficult decisions, where Labour were behaving like Father Christmas. It confronted some of the more difficult questions facing our society with something a bit more substantive than empty slogans and goodies all round. But then yesterday the Tory leader, Theresa May, backtracked. It was a very clear wobble. What are we to make of it?

The proximate cause of the wobble seemed to be a sharp narrowing of the gap between the two big parties in the opinion polls after the Conservative manifesto launch – Labour moved up into the low thirties while the Tories dipped from the upper-forties to the mid-forties. Labour (echoed by the Lib Dems) were trying to make hay from the Conservative manifesto. There were quite a few items they picked up on, including cuts to school lunches, and the softening of the policy on annual increases to the state pensions. But the main fury was devoted to the proposed policy on paying for social care.

The plan was to make people liable for the full cost of nursing care if, for example they suffered from dementia, down to the last £100,000 of personal wealth, and including the value of people’s homes – though the idea is that the home would not have to be sold before death. Two things upset people. The policy wonks in particular were alarmed at the lack of a cap to these costs after which the state would pay (the current policy has a cap set at £72,000). This meant that there was no attempt to spread the risk, which might allow an insurance market to be established. Relatives faced the prospect of massive inheritances disappearing in the event that their loved ones suffer a slow departure rather than sudden death. But the critics mainly focused on forcing people to sell their houses. Suddenly previously leftish politicians discovered the sacred right of people to pass their wealth on to their children. The Lib Dems’ Tim Farron has been spitting fury.

More reflective types, including me, thought that there was something in the government proposal. The money has to be found from somewhere, and assets at death look easily the best place. We might like the idea of spreading the risk (e.g. by increasing inheritance taxes on everybody), but there is little evidence that the public has the stomach for that. This proposal exposes rich people the most, and at least confronts the issue honestly. Never mind. Tories were branded as the nasty party, preying on people’s inheritances.

I think Mrs May night have weathered this storm except that she had not developed the policy in consultation with her own side. The manifesto was imposed on the party by a tiny band of trusted confidantes – Mrs May does not do open consultation. Conservative ranks were visible fraying. So the wobble. Mrs May said that the proposals would be put out to consultation, and that there would be a cap after all. And that means significant costs being picked up by the state, to be paid for in some unspecified way.

What are the implications of this? The central theme of the Conservative campaign has been competence. This has been damaged a bit, but not in a way that enhances the standing of the opposition parties. These are still intent on hoovering up a protest vote, rather than setting out a credible programme for government.

As a Lib Dem I know what this means. My party has made the harvesting protest votes a core skill; the trouble was that support evaporated as soon as people thought they might take a share in power. And it was even worse when the party actually did so in 2010 as it could not meet so many conflcting expectations. Labour might have been testing the same self-destructive dynamic if their attacks on the Tory manifesto had gained traction.

There are, in fact, much more worrying aspects to Conservative policy. First is the drive to reduce immigration. The weapon of choice is to add to the burden of red tape on businesses. Those business people who supported Brexit so that it would reduce bureaucracy are going to get a rude awakening. Second is a refocusing of funding for early years education and support. The neediest families will suffer the most from changes to schools and local authority funding. The longer term consequences of this are likely to be dreadful. Britain’s lower crime rates are in large measure due to a reduction in rates of youth crime. This is surely related to increased levels of early years intervention put in place by the Labour government before 2010, and now being dismantled at an accelerating pace. And then there is a move to increase the number of secondary schools selecting children on an academic basis. When the main challenge to the system is to raise the educational attainment of the less academic, this looks like a costly distraction.

But however harmful these policies look, together with an alarming vagueness from Mrs May on the biggest job her government faces, negotiating exit from the European Union, would we trust a Labour-led government? Though the party has adopted the Blairite slogan “for the many, not the few” their policies nevertheless add up to a massive concentration of power to an elite in central government, whose competence is open to question. It looks distinctly Venezuelan.

But the Manchester attack puts all this on hold. Campaigning will be suspended, perhaps until the weekend, as we all take in the shock of what has just occurred. This will act as a bit of a reset button. When politics resumes, it will not be in the same place as before. But speculation on its impact at the moment serves no useful purpose.

The real questions behind the politics of tax and spend

Warning: this is a longer read for those interested in achieving a deeper understanding of political choices, especially here in Britain. I write it to release some my internal tensions after a tough few weeks helping to organise my party’s general election campaign, while tackling questions posed by tightening school budgets.

The politics of tax and spend is close to the heart of Britain’s general election campaign. And yet the quality of economic commentary is very shallow. Here is my attempt at something deeper.

Running government finances is not like running a household budget. The primary constraint on a household budget is money, which can be treated as a fixed resource, and can be stored for use at a future date (so long as inflation is not a major factor). But looking at an economy as a whole, money is just an economic tool, a means to an end. Hoarding it is pointless. Money is tactics, not strategy.

So to look at matters strategically we need to take money out of the picture, and ask what it is that we are trying to achieve. A higher level of public services? More private consumption? More investment for the future? All of these things are constrained by real resources. By which we mainly mean people. If we want to increase the level of consumption or investment, more people need to be put to work, or the same number of people need to work harder or more productively. The latter may also be a function of capital assets, but capital assets are created by people working in earlier periods and forgoing consumption.

So, if you want to expand public services, the question arises as to where the extra resources are to come from. If you are hiring 10,000 extra policemen, those individuals may be doing nothing now, in which case the economy as whole expands costlessly. Or they may be doing important jobs elsewhere, in which case the recruitment will potentially reduce the production levels of their previous employers. And what if you simply raise the level of pay for the same work? Or increase the level of a cash benefit. That is a way of raising the levels of consumption for those targeted individuals. Who is to produce those extra things they are to consume?

And so we come to a central question of fact, which is discussed surprising little. The left claim that there is plenty of spare capacity in the economy, so if we expand the consumption of the disadvantaged, or the reach of public services, the economy as a whole will respond by utilising those spare resources, and nobody is disadvantaged. This idea goes by the term “Keynesianism”. It is more likely to be true in a recession than at the height of a boom. The right thinks that spare capacity is not so easily manipulated, and such expansion will usually come at the cost of private consumption, whether that is intended or not. And in Britain, when employment is at record levels, and we are still net importers of goods, this is not so easily dismissed. Some on the left counter with the hope that any reduced consumption will be by the rich, of luxury goods.

But many more thoughtful observers think that there is still spare capacity in the economy. They point to low levels of pay and productivity in many places. If there was more pressure from the demand side of the economy, then private sector produces might sharpen up and become more productive. And if the extra public resources were directed well, into investment, then that will help expand future capacity too. The likelihood of these outcomes depends a lot on the tactics.

But before considering the tactics – the details of taxation and monetary policy – we need to reflect that modern, developed economies are quite open. We can import resources from abroad. And we can import workers. For certain advantaged economies, like the USA, a high level of net imports is completely sustainable. And there are economies out there (Germany, for example) that are happy to be net exporters, for their own tactical reasons. But for others a prolonged period of net imports, especially if not used to create productive assets, can lead to a financial crisis and the seizing up of the economy. Where the UK stands between these two poles really is unclear; the country has been a net importer for most of recent history, and financially stable for most of that period too. But there will be a level of net imports that is unsustainable; and a financial crisis can take many years to build, as we found in 2008.

It is worth touching on the issue of immigration. What if the extra workers needed for expanded public services could themselves be imported, either directly or to substitute for home recruits?  These workers will create demands of their own, but it is one way of squaring the circle. Indeed in the mid noughties, when the Labour government undertook a significant expansion of the public sector, this was one of the ways they were able to sustain it, using workers from the new entrants to the EU from central and eastern Europe. That Labour leaders are now saying that this influx was a serious mistake is a piece of hypocrisy; they love to take credit for the expansion of public resources at the same time.

It is worth trying to establish these basic rules on strategy – but it is not hard to see the strategy that public leaders converge on, from left and right. It is to expand public services and benefits (such as pensions and hardship relief) while taking up slack in the country’s productive capacity, or expanding that capacity through higher productivity.  And so we turn to the tactics. If the tactics of expanding the public sector go wrong, there is a more or less disorderly reduction in the levels of consumption by the general public in order to make room.

We need to understand what we mean by this. In the conventional view of economists this about one thing above all: inflation. Most economists like the idea of a little bit of inflation (I don’t agree, but because I think inflation erodes trust in public institutions rather than its effect on short-term incentives, the obsession of most economists). But inflation can quickly become unhealthy, so that an increasing amount of effort is placed in managing money rather than valuable production, and it clogs the process of exchange, which is the foundation of a healthy economy. Inflation occurs when demand outstrips supply. Its effect in this context is either to undermine the attempt to expand the public sector, by eroding real wages or the real value of the benefits, or by reducing public consumption as real incomes are reduced. The so-called neo-Keynesian consensus of the 1990s and early 2000s built an entire edifice on this idea – using a targeted rate of inflation as the primary way of determining whether an economy was in balance. The idea still stalks the conventional wisdom.

But that was dealing with yesterday’s problem. Neo-Keynesianism was built in response to the 1970s phenomenon of stagflation, when the old-fashioned “Keynesian” model broke down (quotation marks because though Maynard Keynes’s fingerprints are on this old conventional wisdom, such a flexible mind would surely have moved on as the facts changed). But what emerged in the 1980s and 1990s was different. It was changed by two things – a shift in the balance of power in the political economy towards employers, and away from employees and unions; and the process of globalisation. Globalisation, we must understand, is a combination of more advanced production and communication technologies, and the opening up of new Asian economies into the global trading system, starting with Japan and moving by way of South Korea and Taiwan to the giants of India and China. This has broken down the previous relationships between demand, supply and price.

First, it has broken the link between prices and pay. It used to be easy to identify a single rate of inflation that, give or take, would apply to both prices and wages. At first this seemed to work in workers’ favour. Cheap imports from Asia held price inflation in check, but workers’ pay kept ahead. But since the crash in 2008 this has flipped. Rises in prices (often from those same Asian imports) are not reflected in pay levels. It makes no sense to talk of a single level of inflation, and to use consumer price inflation as a lone yardstick of economic health. And the second change is that other ways that excess demand can be satisfied have been made easier. It is easier to import goods and services either directly, by buying from foreign firms, or indirectly by domestic firms outsourcing production. We are still trying to understand what the impacts of these changes are. But excess demand is likely to lead to two things: fat profits by businesses as they are able to increase their prices while holding wages down, and an increasing trade deficit. It is also means that the risks of excessive inflation are much lower, as it quickly feeds into lower real incomes and dampening demand.

At this point we need to think about money. This, too, has changed dramatically, as technology has moved us away from physical currency to a much more flexible system of paying for things. The idea of “money supply” as being a physical thing that needs managing as such is increasingly old-hat – another nail in the coffin of neo-Keynesianism. Instead, policymakers need to think about interest rates, exchange rates and controls of the physical transfer of capital (in this case money balances not required for consumption) within economies (banking controls) and between them (exchange controls). If this goes wrong, people lose confidence in the means of exchange, and the economy rapidly melts down – as we can see happening now in Venezuela. This is what spooked so many governments in 2008 and 2009 when they launched into a series of panicky bail-outs of banks.

And so in this brief overview (that is already much longer than my usual posts) we at last come to where most of the political conversation starts: taxation and public debt. Looked at through the eyes of an economist (money is not a thing in itself, remember) the main purpose of tax is the regulate demand so that we have an orderly economy. Not enough tax, and the financial system becomes unstable, with or without inflation. Too much tax and it is a self-inflicted wound – living standards are lower than they need to be. Tax has other important functions too, of course. It is a means of wealth redistribution (and too skewed a distribution of wealth leads to a poorly functioning economy), and managing incentives. Whether an economy needs more or less tax at any given point depends on a wide variety of factors, of which the size of public spending is only one. This has led to a lot of tension between economists and politicians, especially in the austerity years from 2010. Politicians insist on talking as if public accounts were like household accounts; economists (or many of them) say this is self-harm. Actually a lot of the  argument is at cross purposes. What the politicians do, and what they said were different things. Oddly enough, I suspect that politicians were in fact thinking long term, and trying to rebalance the economy, while economists were obsessing about the moment – a reversal of the usual characterisation.

And what of public debt? This again is not all it seems. Many governments, including the US, the UK and most spectacularly, Japan, have asked their central banks to quietly buy up government debt. This acts to in effect cancel it. The world has not ended, as some conservative commentators have suggested it would. What is going on? The central bankers are reacting to an unbalanced financial system. For one reason or another there is too much hoarding of money, by business organisations and rich individuals. This hoarding is sucking demand out of the economy. And it is also creating excess demand for short-term financial instruments. Governments are taking advantage of this by satisfying this excess demand by buying back longer term debt. They hope that in the process they will restore some of the lost demand by encouraging more genuine capital investment, as opposed to a continuing financial merry-go-round. There is little evidence for this working, though.

This makes it an extremely easy time for governments to finance budget deficits and investment – at least tactically. And that is why calls for more public investment at a time of high national debt only outrages conservative politicians and their allies. But the strategic question remains. As real resources are mobilised towards these ends, what will the impact be? There may indeed be spare capacity to be utilised, but that actually be what happens?

To me the key point to arise from this is that managing public finances is a matter of competence and discipline. The left may well be right that in the short term that we can expand the public sector with few real risks, even without raising taxes by much. But that could turn bad very quickly. Do they have the competence to appreciate when that moment arrives, and the discipline to act?

This is where the Labour government of the mid-noughties fell down. They expanded the public sector, while holding, or even cutting, taxes on mainstream income and consumption (as opposed to capital transactions). They secured growth with low inflation (those cheap Asian imports helped a lot), but not based on genuine productivity (supposed advances in productivity were in sectors such as finance where it turned out to be chimerical). Rapid immigration helped sustain this, but it created tensions, especially in working class communities. And they failed to grasp that the extent of the financial boom, which generated a lot of short-term tax revenue, was creating systemic risk. As a result the financial crisis was a rout for the UK, unlike the relative calm of better-managed economies such as Canada or even France.

And yet there is no sign that either wing of the Labour Party has learnt from this. They want to stoke up demand but have no understanding of when enough will be enough. The Conservatives have many faults (and their idea of eliminating the budget deficit is plain nutty), but to my mind they show a greater grasp of the strategic risks, and the need for discipline and competence (as do my own Liberal Democrats, come to that – indeed Vince Cable showed more awareness of the dangers in the mid-noughties than any other leading politician).

But quite apart from party differences, I feel that there is a deeper need to reform the process of governance so that these risks are managed more securely. There is a slo a need to reform the workings of the economy so that extra demand for goods and services does not simply end up in fat profits and foreign jobs. Alas there is little talk from any of the parties of how this is to be done.

A progressive alliance would help the Tories not hurt them

Last week, I was still in shock from Theresa May’s announcement of a British General Election three years early on 8 June, and I predicted that the Conservatives would end up much where they had started. A few other Lib Dems were coming to similar conclusions (see this from Richard Morris)  But I closed with the thought that I might have underestimated Theresa May. A week later I think I did.

The campaign is taking shape. The Conservatives are dusting down their campaign from 2015 – portraying themselves up a stable government against a “coalition of chaos”. This message is being repeated relentlessly with discipline. Mrs May looks good at discipline. While the principal opposition party is Labour, this line of attack must surely resonate with the public. No government led by Labour in its current state can be anything other than chaotic. And all the other parties (bar the now irrelevant Ukip) have ruled out working with the Conservatives.

The Tories are making headway on three fronts. Firstly they have won back their direct defections to Ukip. Douglas Carswell, the Tory MP who defected to Ukip, has given up the ghost. Mrs May’s support for Brexit and turn against social and economic liberalism has satisfied them. This victory may look good in the polls but matters least where the Tories need it most: in the marginal seats. They had done a good job of squeezing Ukip there in 2015.

The second area of Tory success is picking up votes from Labour, even from Labour’s low point in 2015. A lot of these seem to be coming via Ukip. After former Labour voters rejected the party to support Ukip, they are ready to switch to the Conservatives this time – especially under Mrs May. And it isn’t hard for the BBC to find people in their vox pops who have defected directly from Labour ro the Tories. She has accomplished a significant detoxification of the Tory brand for older, working class voters at least. This will help the party make headway against Labour in England, and Wales (where local polls show the Tories with an unprecedented 10% lead over Labour). All this gives the Tories a high poll share in the mid 40s in the country as a whole, and the prospect of winning many seats from Labour.

The third area of Tory success is that the party is gaining ground in Scotland. It is now firmly established as the second party after the SNP, whose poll share is coming off the boil from its high point in 2015. It could be that the SNP’s policy of advocating for a second referendum on independence will push unionists in the direction of the Tories, allowing them to pick up many more seats than I thought (perhaps as many as 10). After the cataclysm of the 2015 election, who can say that there will not be some very sharp movements in some seats?

What to make of Labour? Their leader, Jeremy Corbyn, looks to be in good form – confidently pitching to bands of his supporters as he did in the Labour leadership election. Even in 2017 a hard left campaign can develop momentum, as has just been shown in France by Jean-Luc Mélenchon, somebody whose political attitudes look quite close to Mr Corbyn’s. Still, he only achieved 20%, and the other left-wing candidate, Benoît Hamon, the official Socialist, failed to reach 7%. Mr Hamon was also a left-winger, and put forward a radical policy agenda, but was regarded as an irrelevance by the public. That looks closer to Mr Corbyn. Perhaps Mr Corbyn will attract a sympathy vote; perhaps local MPs can rely on a personal vote. But all this reminds me of the clutching at straws indulged in by Liberal Democrats before their disaster of 2015. The party is disorganised and disunited; Mr Corbyn’s spokespeople are very much a B team, if that. The Tories are content to let Labour make all the running in the media they want to  because, they are making the case to vote Tory better than the Tories themselves.The party is out of fashion and demoralised.  A rout looks a distinct possibility.

And the Lib Dems? They are in good heart. New members continue to flow in (my local party has grown by over 20% in a week).  They are getting plenty of media coverage after a period of being ignored. And they are well led. This week’s Economist said no less than three times in three separate articles that the party is suffering from weak leadership under Tim Farron, while otherwise being quite encouraging for the party. They offered no evidence for this assertion: so what can they mean? Tim is not highly regarded at Westminster; he has not made much impact on the public – his approval rating is negative. But as a party member I have seen somebody who understands campaigning much better than his predecessor, and has pushed through some very well-judged changes. First was preparing the party for a snap election last summer, by ensuring that all constituencies had selected candidates. Second was forcing through changes to selection procedures to ensure that more women and ethnic minority candidates would be selected in target seats. This will be critical to any rebranding of the party. He did take a little longer than he should have done to rule out a coalition with the Conservatives, after ruling out one with Labour – but he got there quickly enough. And now he is talking up the idea of the party being a the real opposition – so as to undermine efforts by the Tories to talk of a “coalition of chaos” – and move it on to not offering the Tories a blank cheque.

So the Lib Dems have momentum. And yet they have a mountain to climb. Taking back the seats that they lost last time to Labour and the Conservatives will be hard work. The new MPs are well entrenched – and the sheer scale of the Conservative popularity under Mrs May makes it an uphill battle. At every general election since 1997 the Lib Dems have failed to live up to my hopes and expectations. I am trying to keep them under control this time.

Furthermore some Lib Dems are being distracted by notions of an anti-Tory “progressive” alliance, by doing deals with Greens and Labour, up to the point of even withdrawing candidates. The Greens in particular are talking up the idea. While there may be virtue in some local arrangements (covering Brighton and Lewes perhaps?), and especially local non-aggression pacts, this looks like a very bad idea.

The main electoral task for the Lib Dems is to detach some of the 30% or so of Conservative voters (15% of the electorate) who think Brexit is a mistake. Being part of an alliance, especially with Labour, will make this task much harder and indeed plays right into the hands of the Conservatives’ “coalition of chaos” mantra.  Labour and the Greens are making no serious attempt to challenge for these voters – and yet any anti-Tory coalition is doomed without them. The first problem for the progressive alliance is that the Tories are too damn popular. The second problem is that any alliance is not credible as anything more than a temporary electoral arrangement.

Unlike some Lib Dems, I am not against electoral alliances in principle – indeed it may be the only way to beat the current electoral system. But any such alliance needs to have clear, agreed objectives, and momentum. Labour are so far away from agreeing to such an alliance (to many of them, Labour IS the progressive alliance) that there is hardly any point in talking about it. Labour still dreams of recreating on the left what Mrs May has achieved on the right.

Until and unless Labour sorts it self out, rids itself of the hard left, and starts to embrace the compromises required to win back voters from the Tories, the best hope for progressives is that the Lib Dems surpass Labour and can build an electoral alliance from a position of strength.

 

Don’t underestimate Theresa May – but the Lib Dems will play a critical role in this election

Today Theresa May announced her intention to hold a General Election in Britain on 8 June. She is certain to get her way, notwithstanding the Fixed Term Parliament Act. Personally I’m not happy – this is an unwelcome distraction from other things I need to do – and my post on mental health has been swamped. Unable to concentrate on much else, I’m going to post again.

The first thing that strikes me is that British politics is littered with people that have underestimated our Prime Minister. This election was an almost total surprise. Rumours had circulated earlier in the year of a a General Election, but faded when it was clear it would not be on the first Thursday in May, which has now become the traditional date for elections in Britain. (A practice established by John Major in 1992, and only broken in 2001 because of an outbreak of foot and mouth disease. But before that Margaret Thatcher preferred June elections, a parallel that will no doubt please Mrs May). This surprise shows how tight a ship she runs compared to her ill-fated Labour predecessor Gordon Brown, whose career had otherwise had some striking parallels. Mr Brown’s reputation was destroyed because he let speculation about an early election get out of hand, and then lost his nerve.

The second striking thing is how unusual it is for us to have a snap election in the UK. Until now Prime Ministers have waited until the fourth or fifth year of parliament’s term. The date has been widely known well in advance (though in the case of the four year terms favoured by Tony Blair and Mrs Thatcher, not for certain), allowing for a lot of pre planning. We have to go back to 1974 for one like this one, unless you count 1979, when the Callaghan government was brought down by a vote of no confidence less than six months before its term had run. And even the 1974 parallels aren’t that strong. This is uncharted territory. The parties will be fighting with much less pre-planning. The campaign could be much more chaotic than the carefully choreographed ones we have been used to.

Politically the election is dominated by the weakness of the Labour Party. Already demolished by the SNP in Scotland, it shows no signs of recovery there, and looks very vulnerable everywhere else. Its opinion poll ratings are very low – about half the Conservative vote. I have not seen any analysis of what this means in terms of the party’s vulnerability in particular seats. It has a large number of very safe seats, so it might well hang on in lots of places, while doing catastrophically in Middle England.  The party has two huge problems. The first is that the political agenda is clearly on Brexit, where its message is weak – it will not be rewarded for reflecting the confusion that much of the voting public has on the topic. Much as it would like to move the debate on to austerity, where cuts are now looking quite alarming in places, this looks like a doomed enterprise. And that is because of their second major problem: a spectacularly inept leader in Jeremy Corbyn. By itself this ineptitude is not fatal – after all he has done well in Labour’s internal elections – but the public don’t see him as a prime minister in waiting. Time an again that has proved a fatal handicap at election time. Without that credibility Labour can’t change the agenda.

So the Conservatives are looking confident. It seems that their key electoral message is that Britain needs a strong government right now, regardless off what that government actually plans to do. But the messaging will not have been exhaustively tested, so we don’t know how this will actually play. It seems clear that they will be able to beat off any threat from Ukip, but they may find it harder to manage the Lib Dems.

The Lib Dems are in a very interesting position. Most people considered them wiped out after the last general election in 2015, when they were punished for having been in coalition with the Conservatives. But the Brexit referendum result has energised the party. It has now reliably retrieved third place in the opinion polls (though still only half of even Labour’s disastrous score), and its membership is booming. It has a clear position on Brexit. The Tory strategy in 2015 was mainly to destroy their coalition allies – on the principle that you should always go for the weakest opponent first. That meant they won many more seats from them than they did from Labour. But holding those seats could be tricky, since the messages that worked so well in 2015, which relied on a strong Labour threat, lack punch now -and the Tories are unlikely to have the same organisational strength, since this is a snap election.

So the Lib Dems could make a big comeback. Big enough to stop the Conservatives from getting a majority? Almost nobody would suggest that. The closer the party gets to achieving that aim, the more powerful the Conservative message about strong government will become. But after the last year we have started to expect the unexpected. The Tories will make little headway in Scotland (even though they now outpoll Labour there). They may find that taking many seats from Labour means going deep into their strongholds. Their high poll rating could simply mean piling up votes in seats they have already won.

So, much as I find this election personally unwelcome, it will be an interesting one to watch. My hunch is that the Conservatives will end the election in much the same place that they started it – but with fewer Labour seats and more Lib Dem ones on the opposition benches. But am I making the fatal sin of underestimating Theresa May?

What is the meaning of Richmond Park?

My (many) Liberal Democrat friends are ecstatic. The party has just won the parliamentary by-election in Richmond Park, overturning a massive majority from the sitting MP,  Zac Goldsmith. As the dust slowly settles, what is there to learn about the state of British politics?

Richmond Park is quite close to where I live. I have been visiting it since the 1980s, helping out the local Liberals and then Liberal Democrats, including a few visits this time. It consists of the suburb of Richmond, together with a slice of Kingston, near Richmond Park, nearly up to Kingston town centre, and including the local hospital. The seat, and its predecessors, has been the scene of epic battles between Conservatives and Liberal Democrats. After a series of close results, the Lib Dems won it in the Tory collapse of 1997, with the rather eccentric Jenny Tonge as their MP (she kept testing the boundaries of what respectable politicians it could say about the Israel-Palestine conflict, transgressing on occasion – she has now left the party). She held the seat in 2001, but then stepped down. In the high water mark election of 2005 for the Lib Dems, which gave the party the illusion that seats that could be readily handed on from one candidate to another, the Lib Dems held the seat with Susan Kramer.

But in 2010 Zac Goldsmith, a local boy and inheritor of a substantial fortune, took the seat back for the Conservatives. He held it with a crushing majority (with 58% of the vote) in the Lib Dem meltdown of 2015, though the Lib Dem candidate, Robin Meltzer, managed to hang on to second place with 18% – a feat that could by no means be taken for granted. Many Lib Dem activists sighed and suggested that the influx of rich voters meant that the seat was gone for good.

But Mr Goldsmith was an independent minded MP, who had campaigned hard against the expansion of nearby Heathrow airport – which blights an area that otherwise offers sites of outstanding beauty. This is necessary for anybody that aspires to be an MP there. When the Conservative government under the new prime minister, Theresa May, finally opted to expand the airport, Mr Goldsmith fulfilled a campaign promise by resigning and standing as an independent. But the Conservatives did not put up a candidate against him, undermining his claim of independence.

Notwithstanding the mountain that the Lib Dems had to climb, expectations on the party were high. They had surged in the Witney by election, and a similar surge might take the seat for them. The Lib Dems had been doing well in local by elections (as well as Witney) over the summer, though their national poll rating remained dismal. To prove that that this improved electoral performance had substance, many commentators suggested that it was an election they had to win. All Liberal and Liberal Democrat revivals since 1945 had been led by spectacular parliamentary by election wins. If not here, where was that boost going to come from?

But Mr Goldsmith had clout on the issue that triggered the election: Heathrow. The Lib Dems had campaigned just as hard on the issue, and the government’s decision had proved the party’s contention that the best way to prevent the government from pressing ahead was for a strong Lib Dem party in coalition. Five years of coalition had held off the considerable political pressure for expansion. (Though Lib Dems might want to ask themselves why the party showed backbone on Heathrow, but not student fees). Barely a year of even a small Conservative majority and the resistance to expansion folded. But that’s a subtle argument, and the Lib Dems needed something bigger to shift enough votes their way. And so they campaigned on Brexit. Mr Goldsmith is a prominent supporter of hard Brexit, while the constituency voted 69% to remain in the EU. That did the trick.

What does this mean? Let’s start with the red herrings. First it says nothing about the state of play in Britain’s battle over Brexit. One of the strongest Remain  constituencies voted for an anti Brexit MP. That does not change the calculations for a large majority of MPs, whose constituents voted to leave. What would change the nature of the debate is a large number of Brexit voters changing their mind. With 45% of the electorate still voting for Mr Goldsmith, there was no sign of that.

A second red herring is that the collapse of the Labour vote (they lost their deposit, polling less than their party’s membership in the constituency). This is what happens in this sort of by election, and says nothing about the party’s chances in a future general election. A resurgent Lib Dem party could be a worry, but Labour still holds the aces, and this should not be a problem for a half-way competent leadership. Indeed if the Lib Dems draw off Remain voters from the Tories, it could help Labour. That Labour voters can be persuaded to vote Lib Dem tactically does not hurt Labour at all. The reversal of this trend in 2015 was a disaster for Labour.

The first lesson I would draw is that the Lib Dems have nailed their colours to the pro-EU mast. That seems to cover about a quarter of the electorate, a big enough pool for the party to fish in in its current state. It answers the question “what is the point of the Lib Dems?”, as the Tories adopt Brexit as their own, and Labour collapse into muddle. Those Lib Dems, like me, who are inching towards some form of reconciliation will have to bite their tongues. We need to understand that this is the best way of that the party can demonstrate its open, liberal values and present itself as a bastion against the rise of nativism and intolerance. It does not quite answer the question of whether the party is going for a core vote strategy, though. If the party gets the by election bug they will be tempted to water the message down in pro Brexit constituencies.

The next lesson is that organisation matters in British politics, and that the Lib Dems still have it. It was possible to feel sorry for the Zac supporters, overwhelmed by a blitz of Lib Dem literature and canvassing, while not having adequate data themselves. Many of them felt shell-shocked, and the graceless Mr Goldsmith whinged about being crushed by a machine. This delighted Lib Dem activists. Having been written off in 2015, after being crushed by a ruthless Tory machine, to be accused of being a ruthless machine themselves is a compliment indeed. The party pulled together, mobilising old members and new, in an optimistic, cheerful campaign, led by their candidate, Sarah Olney, who only joined the party in 2015. Both Labour and the Conservatives, with their bigger and better party machines, will take note, and will not be too upset. Breakaway parties, such as some Labour members were contemplating earlier in the year, look as hopeless an enterprise as ever. Lesser parties, including the Greens and Ukip, are presented with a big challenge.

A further point of interest comes from the fact that Ukip and the Greens did not put up candidates, and instead deferred to Mr Goldsmith and the Lib Dems respectively. The former reflects Ukip’s current  turmoil, and the party is weak locally – it has created no debt on the Conservatives. The Greens’ move is more significant. They too were in a weak position, and faced being crushed by the Lib Dem juggernaut, as Labour were.  By pulling out they made a virtue out of this weakness and will have softened the attitude of Lib Dems to do electoral deals with party in future, as part of a “progressive alliance”. Under Britain’s first past the post electoral system this kind of dealing is a logical response that may well take hold. Labour came under quite a bit of pressure from many of its members to do the same. There was never much chance of this from the still very tribal Labour party with its weak leadership – and Lib Dems will be relieved. They do not want to be under any kind of obligation to Labour under its current leadership.

What we don’t yet know about this election is whether it will boost the Lib Dems national standing amongst the public. The media is starting to take the party more seriously, but it will be some time before we have enough polling evidence to tell. What is clear is that the party is in fighting form, and has a much greater political weight. That is good news for supporters of liberal values, for which it is the clearest upholder on the British political scene. If Labour and the Conservatives can take their reluctant liberal supporters less for granted as they face the challenge of the populists, it will make all those efforts by the party’s volunteers worthwhile.