Tax and immigration will be the key issues between Labour and the Conservatives

Graphic: Statista.com

After Jeremy Corbyn, Boris Johnson and Liz Truss, and the post-2017 version of Theresa May, most Britons have been yearning for a time when their main party leaders were ordinary competent politicians. But now Sir Keir Starmer has taken over the Labour Party and Rishi Sunak the Tories, that day has come. Both men had less political experience than their leadership positions normally warrant, and accordingly had uncertain starts, but now both are now hitting their stride. It promises to be a fascinating, if unedifying, contest, at least for those who follow politics as a spectator sport without worrying too much for the consequences for the country.

Sir Keir matured first. Indeed earlier this year he decided that he had to hammer Mr Sunak’s apparent weakness as hard as he could. I was uncomfortable with this: it didn’t matter to Sir Keir whether the attacks were well grounded or not – he ruthlessly went for the man rather than the policy. It seems unpatriotic to keep undermining your country’s prime minister just for the hell of it. But that’s politics – Mr Sunak would not hesitate to do the same if the roles were reversed.

Mr Sunak has survived this, and it is Sir Kier who has lost momentum as a result. The turning point came with his renegotiation of the Northern Ireland Protocol that had been spoiling relations with the European Union. This was a thoroughly competent piece of statecraft that moved things along. Few doubted that this deal was the best that Britain could get – and opponents seemed to be the sort that did not really want resolution at all. Better still, Mr Sunak was successful in selling this to his own party. Only 22 MPs voted against it in parliament – with many formerly troublesome Eurosceptics lining up behind Mr Sunak. That both Mr Johnson and Ms Truss were amongst those 22 underlined just how little threat his predecessors now pose. The deal has not convinced the Democratic Unionist Party to rejoin the Stormont government – but most observers thought that nothing was going to pass that test that would not cause even bigger problems in the province. In UK terms the DUP is very isolated.

That’s a good start. Mr Sunak had earlier set out five priority areas for his administration: inflation, NHS waiting lists, growth, national debt and “small boats” – the influx of illegal migrants across the Channel. It was widely assumed that his specific pledges on these issues were designed to be easy to pass – but with the economy poised on an awkward knife-edge, this should not be assumed. He needs to do two things if he is to a reasonable chance of winning the next general election, widely assumed to be in the autumn of 2024. The first is to win back the Brexit-voting, conservative working class and lower middle class voters that flocked to the party in 2019 – many of these are telling pollsters that they will abstain or vote for a protest party such as Reform UK. To these he needs to show that he is true to the Brexit vision, and especially on immigration; these voters, who tend to be older and retired, may be not so sensitive to the economy, but they are sensitive to the NHS and crime. The second thing is to win back or win over Labour- and Liberal Democrats-inclined floating voters with a less conservative political outlook, who generally voted Remain, but who were put off by Labour under Mr Corbyn. For these voters a display of competence is critical.

Sir Keir Starmer starts ahead, with substantial poll leads, following the Johnson and Truss fiascos. He may also have had a stroke of luck in Scotland. Scottish seats used to be critical to Labour’s success, but the party was wiped out there by the SNP in 2015, and then they struggled against resurgent Conservatives. But now the SNP seems to be imploding after Nicola Sturgeon’s resignation as leader. To watchers from south of the border this episode has all the hallmarks of a bloodletting and collapse after a long period of imposed stability – all Britain’s main parties experience this from time to time. Things are always a bit different in Scotland. Pro-independence voters don’t have many convincing alternatives – Alba and the Greens each have issues of their own. But the case for independence will have taken a temporary knock, and Labour is prevailing over the Conservatives in the anti-independence camp, with a stronger appeal to independence-waverers. A resurgence by Labour there would be doubly good news for Sir Keir. It makes winning an overall majority in the UK much easier for him, and it reduces the risk of the SNP holding the balance of power in a hung parliament – which would be a nightmare outcome, and a prospect that might scare the voters too. But for all this lead, Sir Keir knows that a lot can go wrong, and that the electoral system is in many ways tilted against him.

A lot of how the battle will play out is obvious. Labour will attack the government for incompetence on just about any issue that comes up, regardless of how justified the complaint may be. The Conservatives try to divert the blame onto world events and cast doubts on Labour as being soft lefties. Most of this be just noise to voters and unlikely to change minds. Beyond this I think there are two issues where voters’ are more open, and which could cause a shift in balance between the parties: tax and immigration.

Tax-and-spend arguments are as close as we’ll get to a debate over economic strategy. We will not get any kind of sensible discussion of economics, of course – even though there is an interesting debate to be had between the parties. Labour’s approach tends to focus on macro-economic policy. The priorities for them are ensuring that aggregate demand is sufficient to ensure low unemployment and decent bargaining conditions for workers, and getting decent headline figures for investment. The Tories rather focus on microeconomics – the idea that prosperity must be based on the efficiency of businesses and public agencies and how hard we work – where the question of incentives and competition loom large. Instead of that, the Conservatives will accuse Labour of wanting to dramatically increase public spending, leading to higher taxes and a less productive economy. They remember fondly John Major’s success with the “Tax Bombshell” campaign in the last week or so of the 1992 general election, when fortunes suddenly turned in their favour. The problem for Labour is that almost all public services are crying out for more spending, and it is very hard not to criticise the government without suggesting a substantial increase. Which leads to the question how you pay for it. This question is dealt with as if a nation’s budget operated like a household one, which is far from how it actually works. But it is too hard to try to explain that extra public spending might simply lead to better use of the economy’s resources and higher wages, and not necessarily to higher taxes. This argument is in any case a lot shakier when inflation is taking hold, as it is now.

The obvious answer is for Labour to try and sell the idea of higher taxes in order to have more effective public services at a time when the ratio of working people is falling. The tax burden may be at a historical high as a proportion of national income, but it is still moderate by European standards. There is even polling evidence that this has majority support. But Labour still carry the scars from 1992 (and indeed 2019) when the Conservatives successfully scared many floating voters with the prospect of higher taxes. Instead they want to follow Tony Blair’s and Gordon Brown’s strategy of 1997 of promising to hold back taxes and spending – and then increase both after the second term, when people are more used to the idea of a Labour government. Meanwhile they will try to dream up a number of painless taxes on other people to pay for selected areas of higher spending – non-doms, oil companies and so on. Against this the Conservatives will try to promise that better public services can come without higher taxes; since many voters are under financial stress, they will not relish the prospect of higher taxs. The arguments of both parties are unconvincing, and it is hard to see which way the public mood will swing.

Neither party is convincing on immigration either. There is panic over the number of people trying to cross the Channel in small boats, and then claiming asylum. Actually this is a real enough problem: overall numbers may be modest by the standards of international refugee flows, but it is placing public resources under pressure, and and it is a bit of a slam-dunk for organised crime. Immigration is not a top issue for voters according to opinion polls in the way it has been in the past. But both parties know that with the chaotic situation in the Channel, it can be pushed up the agenda easily enough. Housing the refugees (and others) while their claims are processed is creating stresses right across the country. Mr Sunak knows that he needs to do two things. To motivate conservative working class voters (and a lot of conservative middle class ones come to that), he needs to promote a tough line that will be hard for Labour to follow. The second thing is that he needs to make a substantial dent in the numbers making the crossing – to demonstrate competence, and woo back more liberal floating voters, as well as convincing those conservative voter that he isn’t just grandstanding. The first of these things is going well enough. The Home Secretary makes a good hate figure for liberal types, who make all the noise that Mr Sunak needs to demonstrate his toughness. But few understand how he is going to achieve much in the way of actual results, though. The much vaunted scheme to deport migrants to Rwanda does not look remotely adequate to deal with the sort of flows that we are seeing, even after the government has bulldozed the legal objections.

The Tories can sense Labour weakness here. Sir Keir has one sensible idea – to make legal routes for refugees more accessible, and the processing quicker, and so reduce demand and the numbers having to be put up in temporary accommodation. This means increasing legal flows of refugees, which will annoy many – but it does tackle the disorderly aspect of the current situation, which is what is most dangerous. But it is a stretch to think that this will stop the flow of channel boats by itself. The incentives for people traffickers remain strong. The only thing that might work there is rapid return of the migrants to France or elsewhere in Europe. But why would the Europeans agree to that? Only a substantial change to legal routes for refugees might possibly unlock that. that would be too brave.

It is hard to discern public attitudes to immigration post Brexit. There are two competing visions. The first is the Japanese one: that any immigration disturbs the cultural identity of the country and undermines social cohesion – as well as placing stress on housing and public services. So numbers of immigrants should be kept low, and definitely reduced. Or there is the Canadian/Australian vision, which accepts the desirability of substantial flows of immigrants, including refugees (at least in the case of the Canadians) – but wants the flow to be orderly – and abhors the idea of queue-jumping by unregulated arrivals. The small boats are abhorrent to both – but there any agreement ends. Both visions seem to have substantial support, and it is hard to see which way the zeitgeist will go. Labour seem to be more clearly pitching for the Australian/Canadian position, which is popular amongst the immigrant communities themselves – while the Conservatives are trying to play both visions at once. And as with tax, it is hard to see which side will end up on top.

There is a third issue which has the potential to sway voters: the environment. This covers not just the mission to reduce carbon emissions, but also threats to the countryside through habitat loss and pollution (and especially sewage overflows). The government is under attack for competence, as well as its heart not really being in it. But Mr Sunak has left it out of his five key targets – so presumably his party’s polling shows that this is not a critical issue. Labour are making a lot of the idea of green growth – but this may be more to motivate their core supporters than to win points over the opposition.

It will be an interesting contest. My guess is that sir Keir will prevail decisively. Whenever I try to write “Sunak” my computer changes it to “sunk”; I think he is, such is the low regard his party is held in by the voters..

Sir Keir Starmer: the tortoise of British politics

Picture: Randy Browning, US Fish & Wildlife Service

Uncharismatic politicians are gaining the ascendency. In America Joe Biden bumbles away in public and looks his age, and yet his record of achievement in difficult political conditions is remarkable. In Germany, Chancellor Olaf Sholz is hardly more impressive in public, and yet his awkward three-way coalition government looks solid and is managing stresses that could hardly have been imagined when it was formed. Meanwhile in France the charismatic Emmanuel Macron is not out, but he is down. In Britain the Leader of the Opposition, the dull Sir Keir Starmer, is looking getting stronger by the day.

Sir Keir has caused a lot of frustration among Labour supporters, along with anybody that wants to see the back of the Conservative government. He seems unable to spell out a compelling vision of what Labour stands for; as a speaker he is uninspiring. But Labour’s poll ratings are sky-high, and his own public approval ratings are higher than they have ever been. These ratings may not be decisively better than those for the prime minister, Rishi Sunak, (though one recent put them on that path) but the steady upward trend is what is remarkable. Usually politicians start by sparking high hopes, and then gradually disappointing. Sir Keir is achieving the opposite.

Partly this reflects the chaos stalking the Conservative party, to which Sir Keir’s colourless Labour party presents and appealing contrast. Boris Johnson had bags of charisma, but no grip. Liz Truss lacked charisma but did communicate a clear vision effectively – but people found it detached from reality, and she could not control her parliamentary party. Mr Sunak presents a favourable contrast to these two, but he struggles to reassure voters about the state of his party, and doubts grow.

But Sir Keir’s performance has been more assured of late too. He remains extremely cautious about putting clear policy proposals out into the public domain. Instead he and his team have put out two much vaguer themes in early 2023. These build on the theme developed in 2022 of placing a high priority on environmental sustainability, and the goal of “green growth”. The first of these was developed by Sir Keir himself: when he made an attempt to hijack the Brexit slogan of “Take Back Control” to promote the idea of greater devolution to the nations and regions of the UK. This is cheeky, not least because Britain has little tradition of devolved power, so the slogan is suggesting people take back what they never had in the first place. That is forgivable because the idea is the right one: decisions need to be taken closer to the people affected by them, and people need to have a greater sense of involvement in them. Whether Labour proposals will actually deliver much that is worthwhile is open to doubt. The party has a tradition of being highly centralised, and Sir Keir has batted away more radical ideas like electoral reform. It is hard to think that he will go down the road of a local income tax, for example. I’m unconvinced that anybody in the Westminster ecosystem really “gets” what would be involved in the sort of reform that would make more than a minor difference. Still, the verbiage is better than nothing. It is more worrying, if unsurprising, that Labour spokespeople have not tried developing the theme since Sir Keir flew the kite in the New Year.

The second idea to be developed this year comes from the party’s health spokesman, Wes Streeting. The NHS needs radical reform, he says, not “sticking plaster solutions”. Unlike the “take back control” idea, this one has been regularly repeated by Labour since. The idea seems to be that a reformed NHS can deliver better results without requiring an “open cheque book”, as sir Keir put it. At one level this looks like muddle and nonsense. Currently the NHS is suffering an emergency as it fails to cope with demand, following a decade of under-investment; this demands urgent solutions and not reforms that will take much longer to deliver benefits. The NHS badly needs sticking plaster right now, and lots of it. And radical reform has been tried before, and the results have almost always disappointed – most recently with the coalition government’s attempt in the early 2010s. To make a real difference, some kind of open chequebook will be needed, alongside sensible reforms – including to social care. Meanwhile Mr Streeting is vague about what reforms he has in mind – beyond tearing up the contract for general practitioners (GPs) – which came as a surprise to GPs. Still, politically these words make more sense. Labour does need say something about the NHS, and not just throwing money at it. Perhaps it is the inverse to 2010. Then the Conservatives promised that there would be no radical (“top-down”) reforms to the NHS, and then promptly broke their promise by embarking on a huge reform programme. Labour are probably promising radical reform but planning to deliver sticking plaster with spin.

Tactically this is all very shrewd. My feeling is that Labour will manage to consolidate their advantage over the Conservatives, which still has a certain fragility – polls show few people making a switch between the parties, and many more former Conservatives abstaining or supporting the Reform party of radical Brexiteers. It is the race of the tortoise and the hare. The hare lacks the attention span to win.

But there is a dark side to Sir Keir’s progress. In his campaign to party members to win the leadership, he promised to stay true to the party’s broad policy agenda, developed under his predecessor, Jeremy Corbyn. He has broken this promise. according to Stephen Bush, of the Financial Times and formerly of the New Statesman, this isn’t because he was deliberately misleading. He just didn’t understand the implications of his words, and found that when the time came he was unable to keep his promise. What he said was driven by the political exigencies of the time, without having been properly thought through. This is surely true of his emerging policy agenda now. Britain’s many problems can’t be fixed except with additional public spending, and this must be done when adverse demographics, among other things, mean that there will be little economic growth. Meanwhile Britain runs a substantial current account deficit. To my rather conventional mind, this means that there will have to be higher taxes, and the sort of taxes that will crimp domestic demand – income tax, VAT and National Insurance. Whether or not this is so in theory, Ms Truss has surely shown that it is true in practice – the government needs a degree of confidence from financial markets, which like to see a degree of prudence in public finance. Sir Keir will not say this, but once in power he will surely be faced with the need to raise taxes.

Two other areas worry people about Sir Keir’s caution. One is relations with the European Union. He avoids talking about Brexit, and has set his face against rejoining the Single Market or customs union. With the electorate slowly but surely coming to view Brexit was a serious mistake, surely he has the opportunity to be bolder, while forcing the Tories to defend a sticky wicket? Actually in this case I think Sir Keir’s judgement is sound. Re-integration with the EU brings with it awkward choices, surrendering sovereignty while acquiring little influence. Besides, the EU itself will be sceptical. And though the public may be regretting Brexit, they show little appetite to reopen the debate.

The second issue is electoral reform. Labour members support this, but Sir Keir is ducking and weaving, and is committing to nothing. This is disappointing because it is hard to see the British political system changing for the better without it. British politics has got itself stuck in an awkward groove, which in effect disenfranchises most voters, contributing to a huge sense of frustration. Of course countries with other electoral systems suffer problems too – but Britain’s are deep. Sir Keir’s caution is understandable though. I suspect many Tories think that Labour adopting electoral reform would be a gift to them. It gives them a chance to change the subject from their own record, and to awake the innate conservatism of the British electorate, with all sorts of lurid stories as to what the implications of reform are. Still, I don’t think it would work for them. Maybe Labour can promise electoral reform at a local level, as part of their “take back control” agenda. That would be a worthwhile step.

None of which takes away from Sir Keir Starmer’s relentless rise. It is a striking political achievement that deserves wider recognition.

The British Left needs to moderate its obsession with austerity

I’m not reviewing this book, but title reveal the left’s attitude to austerity

As a Liberal Democrat I’m often described as being on the political left. One word shows that this is far from true: “austerity”. To people on the left, especially in Britain, this word brings up a visceral reaction. To them austerity is the quintessence of evil: the crushing of all attempts to promote the public good, perpetrated by a brutal government out to protect the interests of the rich. But to me austerity is a government policy that is often necessary – and is part of a healthy tension that keeps the state efficient. Still, I always like to understand the arguments of people I disagree with, and when I saw a link on my New Statesman email to an article by William Davies entitled Fascism’s liberal admirers, I thought I’d take look. The sub-title was Austerity is a fiction designed to uphold capitalism – and it has a dark history. The pretext (I would not call the article a review) for the was a book by Clara Mattei called The Capital Order – How economists invented austerity and paved the way to Fascism. The subheadings demonstrate what I mean about the left’s attitude.

Which is why I was expecting a lot of nonsense – and by and large that is where the article ended up. But along the way it constructed a narrative that was fr from nonsense. The book is about the rise of Fascism, and how the pre-Fascist government in Italy in the 1920s was being pressured by Britain (as a creditor nation) to adopt austerity policies. The British ruling establishment had taken on the austerity narrative after the First World War, and was delighted when the Fascists in Italy followed through with these policies after they took power. Ms Mattei’s and Mr Davies’s point is that this narrative came about as a reaction to a socialist narrative that the success of war economies showed that there was an alternative to market capitalism, with economies led by, and substantially owned by, the state. Revolution was in the air. The capitalists needed to stamp this thinking out, and they aggressively promoted pro-market policies and a rolling back of state intervention. It was not a narrative based on economic necessity, but one developed to protect vested interests. It is but a short step for Mr Davies to suggest that this is what has been happening in the 21st century, following the financial crash of 2008, and now – with the fall of the Liz Truss government. That, historically, support for austerity led capitalists to embrace Fascism shows how they will turn on democracy to protect their interests, and economics is just camouflage. The fight against austerity is the fight to preserve democracy.

There’s something in this. Pretty much all economic policy, whether capitalist, socialist or anything else, is a conspiracy of vested interests: people try to persuade the public at large that their ideas are for the public good, using any argument that they think might gain traction, spurious or otherwise. That is how large, complex societies get anything done. Truth is incidental. And, though I’m not an expert, I think that the British ruling establishment over-reacted to the prospect of more socialist ways of working in the 1920s, and their arguments in support of the package of policies that Mr Davies calls “austerity” do not stand the test of time (though economies in the 1920s swiftly moved to growth after austerity – and it was not until the depression of the 1930s that the narrative seriously came to be questioned). After all they did something quite different after the next war, and capitalism (and wider society too) has never flourished more. It is a stretch to say that the same applies to 21st century episodes of austerity in Britain and the Eurozone, but there is a case to answer. Many of the justifications put up by the supporters of austerity policies were nonsense. So if you want to believe that austerity is always and everywhere economic nonsense promoted by self-interest, you will always find plenty of evidence. That is the insight I gained by the article. Evidence, but not proof.

The resources required to make an economy work are always limited. The bottom line is that economic policy will always be limited by resources, and that the more efficiently those resources are used, the more successful an economy will be. There are times when it pays a government to spend money to do things that are useless. Keynes wrote of getting people to dig holes and fill them in again; Hitler ramped up spending on armaments. That is when the economy is running slack and needs pump-priming. The people digging holes or making tanks spend their wages buying other things, creating a virtuous circle of job creation. Austerity is a bad idea at such times. But when the economy is running at close to capacity, or overheating (as is the case in most developed economies in 2022) then that logic disappears. If anybody, anywhere is employed doing things that don’t enhance society, it is means that the economy is running less efficiently than it should. If the government is running inefficiently, then austerity policies can be justified to cut waste, and move people from doing useless things in the public sector to being more useful in the private one. That is the basic intellectual case for austerity. And it is why governments of all economic stripes, capitalist and otherwise, will often carry out austerity policies. For example, Cuba’s socialist government after Soviet subsidies were withdrawn in the 1990s.

It goes deeper. All human organisations have a tendency to become complacent, and settle into inefficient ways of working to minimise internal conflict. In private enterprise this tendency is tempered by the need to compete, and by downturns in the business cycle. I well remember this from my work days. Things would seem to be going well, and then there would be a crisis. Savings had to be made, usually, eventually, entailing job losses. Workers were disappointed and often angry; but the overall effect of this stop-start was a more healthy, efficient and focused organisation. Some good things might be lost in the process, but that was outweighed by the reduction in waste and follies curtailed. The public sector is generally insulated from such commercial pressures, and so has an even greater tendency to become inefficient. Bouts of austerity act as a check on this, and force managers to focus on what needs to be done – though they won’t thank you for it.

But the timing is often difficult to decide. It is not always easy to tell if an economy is running slack or close to capacity. There is an argument to be had about that in Britain in the 2010s. But the real problems happen over resources transferred between countries. Economies are often sustained by using resources provided by other countries. But this creates international obligations – as well as the temptation to profligacy. If people in one country supply resources to people in another one, they do so because they expect to be repaid in some shape or form, usually profitably. If it turns out that poor economic management (or any other problem) puts the repayment in jeopardy, then the creditor countries will often insist on austerity. This is not always the right thing to do, but the basic premise that the debtor country is consuming more resources than it is producing, and needs to adjust to something more sustainable. This can be a capitalist conspiracy, but it doesn’t have to be. The politics around it get messy with truth, as usual, a casualty; creditors accuse debtors of profligacy – debtors accuse creditors of gratuitous cruelty. Some governments practice austerity simply to prevent getting into this sort of situation – the socialist president of Mexico, Andrés Manuel López Obrador, is an exemplar of this.

All this is common sense. Austerity – and this is best understood as cuts to government spending, rather than raising taxes – can simply be about the management of finite resources in a changeable environment, and doesn’t have to be ideological. So why do the British left react so violently to the idea? I’m not sure how deep the history goes. The New Labour of Tony Blair and Gordon Brown of the mid-1990s embraced austerity, but they were hardly of the left – but the left seemed happy enough to keep in tow. I think the issue originated from the coalition government of 2010. In the five or so years before this, the state payroll, direct and indirect, had expanded considerably. Many parts of the state had become very inefficient. At the time I could see this in both education (I was a school governor) and health (I was following health affairs closely, as I was looking for a job there). In both areas I could see over-complicated management structures and performance grids, and lightweight policies implemented to placate some lobbyist or other. Capital funding was tied to a bidding process that required the use of consultants on both sides. The bidding process was a matter of verbiage – the trick being to find the right trigger phrases. I read my borough’s bid for primary school expansion (which was successful), and it seemed to carefully saying nothing at all – but it was the work of many senior people, with external advice. In the NHS, funding was driven by something called “World Class Commissioning” – a vastly over-engineered superstructure designed to provide employment to consultants and middle managers. I could go on. The writing was already on the wall before Labour lost the election of 2010, as the crash put government finances under strain, but the government had been slow to apply austerity. Not so the incoming Conservative-Lib Dem coalition. They put in place a vicious programme of spending cuts. Suddenly a whole class of public sector employee found their livelihood at risk – and worse, political leaders were suggesting that their endeavours had all been a waste of time. That triggered an angry backlash. And just as the right tends to be controlled by the interests of capitalists, the left tends to be controlled by the interests of state employees.

By and large the angry people were university graduates trained to look for abstract principles to make sense of events. So instead of just protesting against the concrete adverse effects of particular cuts, they spied an abstract idea to focus their anger on: austerity. Austerity was evil; the cuts were not necessary but ideological. Many economists criticised the cuts as excessive, causing a needless recession and economic wasted resources – and this was seized on as evidence of the evils of austerity. As this line of thinking developed in the usual echo-chambers of social media and friendly journals, it morphed into the idea that austerity is always and everywhere evil. Mr Davies’s article shows how entrenched that thinking remains.

And that is a problem. The left seeks to achieve political power, and to do so democratically they must persuade people that they can be trusted. But most people’s attitude to austerity is pragmatic: sometimes it is required. Most people probably have their own hobby horse of perceived government waste that austerity could be used to sort out – though there will be no general agreement on what these actually are. A class of politicians that cannot let the idea that austerity can ever be justified pass their lips are going to find it very hard to win that trust. And yet it is more than easy to campaign convincingly against specific cuts – at a time when so many public services are wilting under pressure, and the public safety net is obviously inadequate in many places. The politically sensible thing to do is to allow for austerity in theory, but oppose it in the here and now: or to follow the example of Gordon Brown who advocated austerity in the mid 1990s, but once in power and having established public trust, launched the expansion of the British state.

The left are part of the Labour Party, but do not control it. The Labour leadership understand well enough the politics of all this. Polls show that they are maintaining credibility on economic management. The left’s obsession with austerity in the abstract undermines their political influence. Which means the advocacy of any good ideas they have is weakened. In a world when many long-held beliefs are being challenged, the left should challenge this shibboleth.

What does a high-wage economy actually mean?

Labour shortages mean that the pay of refuse workers is advancing

It turns out that the leaders of Britain’s Conservative and Labour parties agree on quite a lot. The latter, Sir Keir Starmer, gave a quite a weighty speech to the Confederation of British Industry this week – which did much to help his gravitas as prime-minister-in-waiting. What has drawn most attention is his opposition to excessive immigration (not clearly defined, of course) and commitment to making Britain a high-wage, high-productivity economy. This was one of the main planks of Tory policy in at least the last two general elections, and still is – in contrast to integration with the European Union’s labour and product markets. Many in the CBI want a more flexible approach to immigration (to say nothing of more integration with the EU) – but they weren’t getting it from either leader.

The politics are obvious. Immigration is a touchstone issue in Britain, as it is in much of the world. The public thinks that the ruling elite were too relaxed about immigration and this was one of the main factors behind the populist backlash of the last decade, and the Brexit referendum result in particular. Labour are less trusted by the public on the issue, and so need to show a visibly firm line, or they won’t win back the voters that have deserted them since their last election victory in 2005. And the idea that choking off cheap labour from abroad will raise living standards is superficially plausible. In fact it was one of the more plausible claims made by the supporters of Brexit. And having done Brexit, I can understand how mainstream politicians feel the need to try and make the idea work.

But how does political necessity fare against reality? Most people seem to have very little idea of how the high-wage economy is actually supposed to work. It’s a bit like the “Australian-style points system” to manage immigration, which most people think is a jolly good idea, without having much clue about what it actually is, and how it compares to alternatives. The main target audience for economic policy ideas seems to be property-owning retired folk in the English North and Midlands (and in the English South and Wales, to be fair), who have little direct stake in a modern, functioning economy – which is all somebody else’s problem. Meanwhile they insist that there is “no room” for more immigrants – and fear that it erodes English national culture. There is therefore no particular need to explain the actual impacts of policy.

The overall economic theory is clear. If we can raise economic productivity, there is more money per head to go round to support higher wages. By choking off the supply of cheap labour from abroad, employers will be forced to use the available resources, i.e. local workers, more productively. There are two basic problems with this line of argument. The first is that higher income per head on average does not guarantee higher income for everybody. An imbalance of power in the labour market leads to high pay for the powerful at the expense of the powerless. The hope is that cutting immigration strengthens the bargaining power of less powerful. Academics argue about whether it is true – but it is not hard to find anecdotal evidence of just this. A shortage of lorry drivers following Brexit has recently driven up their pay – and with it incomes workers in related fields, like refuse collection. Still, we shouldn’t forget, as Tories sometimes do, that better wages depend on the bargaining power of workers.The second problem is that productivity is only part of the equation – the proportion of working people, or working hours per head of the total population, is critical too. In fact in a modern developed economy it is probably more important – and it has been falling due to demographic pressures, the propensity of older workers to retire on their savings, and (perhaps) lack of access to health care for longer term and mental conditions. Immigration raises the ratio of working people in the short and medium term – which is why so many people think it is a good idea.

Still, let’s put these problems aside, and try to imagine what a high-wage society looks like. It is in fact not too hard to find such societies. They are usually located in spots in the developed world with a low population density. These are often tourist hotspots and it is mainly as a tourist that I have visited them: in Australia, New Zealand, Western Canada, Norway and Switzerland. The first thing you notice is that there aren’t many workers. If you are on safari in Africa, you will get a tour guide and driver as a minimum. In Canada and Australia the same individual does both roles. Go into a shop and there are few people to serve you. And there aren’t many shops. At hotels you carry your own bags. You get something of the Tesco automated checkout phenomenon. Self-service amounts to higher productivity for Tesco, but all they are doing is making you do more work for yourself. An experienced cashier is much quicker. In a high-wage economy you may find yourself eating at home instead of at restaurants – or inviting friends for drinks at home rather than trying to find a bar. The cost of services involving human contact is relatively higher.

So where are the workers? Not so many in the tourist spots, though there will be people delivering high-end products or services at quite a cost. They are mostly somewhere else, delivering highly productive goods or services. In Australia and Canada there is mining; in Norway there is oil; in Switzerland there is sophisticated manufacturing (chemicals and such) and banking. These are linked to exports, so that high-wage countries tend to be high-exporting ones, usually running trade surpluses.

Here’s the key. Some gains to wages for the less well off can be made by reducing profits and cutting top-level pay. But not enough and not sustainably. A large proportion of workers need to be employed in highly productive fields. If businesses simply raised prices to pay for higher wages, we end up where we started by putting so many things out of the reach of less well-off workers. But high productivity industries in the modern era are very productive indeed. They don’t employ many workers and usually need exports to to be sustainable.

And so we can start to see the characteristics of a high-wage economy. Workers must have strong market bargaining power, generally by being in short supply. There must be a strong, highly productive core to the economy, generating a substantial export trade (overall trade doesn’t need to be in surplus in theory – though in practice this often seems to be the case). And most people will have to put up with doing more things for themselves, as the price of services is high – and especially in rural areas. Taxes are also likely to be quite high to to support public services such as health and education – as a strong state underpinning of these, and an effective social safety net, is all part of the ethos – and supports the strong bargaining position of workers generally.

In Britain the problem is obvious. Labour shortages are improving the bargaining position of workers. We are moving towards a self-service economy as these labour shortages sweep through the hospitality industry amongst others. But what of the highly productive core? Here we are faced with a fleet of ships that have sailed. Fossil fuels are depleted and anyway a problem in the zero-carbon future. The country’s manufacturing has been hollowed out – the trade deficit is of very long standing. Financial services provided a lot of punch in the earlier years of the 21st century, but are going through rough patch in the 2020s. Brexit is widely blamed, but in truth the problems are wider. A lot of the strength of the mid-noughties turned out to be fictional – and it was very centred on London. The country needs to look to the future, and not try to recreate old glories. Here the parties do differ a bit. There doesn’t seem to be a coherent Conservative strategy at all. Their basic idea is to create fruitful conditions for investment and sit back and wait. Liz Truss, Mr Sunak’s predecessor, did lend some coherence to this approach. She wanted to create a low-tax, low-regulation haven for footloose international businesses. This idea quickly collapsed, leaving Mr Sunak plying platitudes about innovation. His government looks increasingly paralysed by internal divisions and unable to implement any decisive strategy.

Labour’s big idea is the green economy (something promoted by the Lib Dems and Greens too). This entails a massive investment programme designed to transform the country’s infrastructure as well as develop export industries. This is a good idea, but a lot of the work involved (home insulation for example) is not high-productivity. And there is intense competition for the rest – batteries and wind turbines for example. Still, it doesn’t do to underestimate British inventiveness, and public-private partnerships in this area surely provide part of the answer. Also renewable energy does offer high productivity, without the need for exports. There are other ideas. I have often talked about health care and related services, where Britain has a promising base – and where the NHS offers world-class data for developing new treatments – as the covid episode showed.

But there is a gorilla in the room that the politicians don’t want to talk about. This isn’t Brexit (though they don’t want to talk about that either). This has created problems for developing export industries – but other EU members are further down the path of developing exports and British industries struggled to compete with them in the single market. Britain’s trading problems got worse within the EU, after all, even if there were compensations. The gorilla is public sector pay – especially if we include the issue of social care. High wages mean high levels of pay in the public sector. Not all public sector jobs are badly paid, but the pressure of a tight labour market is putting public services sector under pressure. Staffing shortages are rife in many parts of it. Meanwhile part of the government’s anti-inflation strategy is to hold back public sector real pay levels – which is making matters worse. The answer is either to shrink the public sector or to raise taxes. Of course the politicians hope that an explosion of high-productivity private sector jobs (with associated tax revenue) will come to their rescue. But it won’t happen in time, if it ever does.

This is a tough place to be in, so it’s no surprise that our politicians are slow to confront the truth of it. I have to admit that it is forcing me to rethink some of my assumptions. But I do think that the vision of a high-wage economy is worth pursuing. The main alternative being offered by those interested in social equity is a universal basic income paid by the state. I am deeply uncomfortable with that idea for a number of reasons. Given that, here are two things to be thinking about.

The first doesn’t involve any great rethinking on my part, but remains politically toxic. We need higher taxes. This is not just on various soft-spots and loop-holes in the wealthier parts of the economy – schemes that are predestined to disappoint. Higher taxes need to affect most people. This is because public spending will have to rise to accommodate higher public sector pay – and we need to manage down the level of demand in the rest of the economy to help stabilise it, to say nothing of limiting the need to borrow money on world markets. Of course public sector productivity can be improved (though I prefer the word “effectiveness” to “productivity” – as a lot of the solution is lowering demand by forestalling problems), reducing the need for spending. But our political class, our civil servants, and the commentators and think tankers that critique them, have almost no idea how to achieve this. They are stuck in an over-centralised, departmental mindset. What is needed is locally led, locally accountable, cross-functional, and client-centred services – an idea that is so alien to British political culture that most people can’t even imagine it. So we can’t count on that idea and must settle for replacing the dysfunctional with the merely mediocre, with no cost-saving.

The second idea is even more contentious, and I haven’t properly thought it through yet. It is that inflation is an essential part of the process of readjustment, and we have to tolerate it to a degree – provided that the source of that inflation is a rise in pay for the less well-off. As somebody who grew up in the 1970s, I hate inflation. I think it undermines trust between the state and the governed. I have never subscribed to the view of liberal economists that it can be a tool of economic management. But there have to be exceptions. One example was Ireland in the 2000s, as that country worked through its economic transformation as it integrated with the EU economy, which did involve a spurt in productivity. Wages rocketed, driving inflation up. Ireland was in the Euro, so there was no ability for the currency to appreciate to ameliorate the effect. This was the only way for the country to reach the sunlit uplands – which didn’t stop the European Central Bank from criticising it – something my economics lecturer at UCL said was absurd.

Britain’s position is different from Ireland’s. We haven’t had that productivity spurt. There is nothing to drive an appreciation of the currency. But we want wages amongst the less well-off to rise. Price rises are part of the adjustment – with inflation acting as a tax on the wealthy, as part of a redistribution process. Meanwhile we need to drive capital investment – most renewable energy is very capital intensive, for example – as are most of the ideas for developing higher productivity. That means keeping interest rates low. Which won’t happen if interest rates are jacked up to combat inflation. And, as suggested already, to the extent that inflation needs to be managed, higher taxes are a better way to do it.

This is quite a progression in my personal thinking (and thank you to regular commenter Peter Martin for helping me along the way – though doubtless we still disagree). But trying to get to the fairer, more sustainable society we seek is going to require many of us to change our thinking – and put up with some things we don’t like.

There may be a path back for the Tories, but it’s a long shot

Photo: Chris McAndrew, CC BY 3.0 https://creativecommons.org/licenses/by/3.0, via Wikimedia Commons

When Theresa May went to the country in the general election of 2017, she promoted herself under the slogan of “strong and stable”. Polls showed the Conservatives heading for a massive landslide. Polling day came a few weeks later, and the party lost its majority. British politics has not settled down since. The “strong and stable” label for the Tories has never looked less appropriate, though that won’t stop the party from trying to use a version of it again. Reliable predictions are impossible, but it’s still worth trying to get some idea about how things could develop from here.

When Boris Johnson won his landslide for the Conservatives in December 2019, it was commonplace to suggest that it would be impossible for Labour to come back to winning a majority in one go. I always thought that was nonsense – an example of the human cognitive bias towards the status quo. It was suggested that a turnaround on such a scale would be unprecedented. So what? Less than three years later under Liz Truss, Conservative polling plumbed to such depths as to suggest not only a Labour majority, but a landslide. Now she’s gone, and the dust has far from settled.

Slowly the poll ratings are coming back to the Tories, but the Labour lead remains massive. The new Conservative leader, Rishi Sunak, is regarded much more favourably than his predecessor by the public, especially on the critical area of economic competence. It is possible to sketch out a scenario whereby he manages to claw his party back to winning a majority at the next election. Economic competence is at the centre of such a scenario.

Now it is important to understand how the public perceives economic competence. It has little to do with actual competence. The critical signs for the public are keeping a tight reign on public spending, and also for the economy not to be subject to dramatic adverse changes. Economic growth does not count for as much as many people seem to think. The bedrock of Tory support is retired. They have paid off their mortgages, have substantial value in their houses, and receive reasonably secure pension income, some of it from the state. They don’t like higher taxes because their income is relatively fixed. But unemployment, higher interest rates, and so on hurt them little. They shrugged at warnings that Brexit would damage the economy, and still do, even as many of the warnings are being realised. They are for economic growth in theory, but against just about any policy that will bring it about. There aren’t enough such people to produce a winning majority, but without them, or a substantial majority of them, the Tories cannot win. Labour under Tony Blair wooed enough of them over to put the Conservatives out of power for more than a decade.

On top of this bedrock the Tories need to win over another swathe of voters with conservative instincts. These are more aspirational; they have jobs (usually in the private sector) and own their homes, or feel that home ownership is within reach. This group is going to be put under pressure by higher interest rates. Mr Sunak may escape blame for the current rise in rates, justifiably or not, thanks to the political ineptitude of his predecessor. But it’s important that the rates don’t keep going up. That means running a conservative fiscal policy. Both he, and his Chancellor of the Exchequer, Jeremy Hunt, seem to understand this. If inflation turns a corner, thanks to easing world conditions for energy and food, the pressure on interest rates will ease and it will look as if the government has managed a crisis well. The Tories would be in a position to raise doubts about Labour or a “coalition of chaos”, and, combined with the redrawing of parliamentary boundaries, there lies a narrow path back.

The threat to Labour of such a scenario is real enough. The public retains a serious bias against the party on economic management. This was made worse during Jeremy Corbyn’s tenure as leader. This wasn’t so much from what he and the party actually said – his shadow chancellor, John McDonnell, proved to be an able communicator – than from a general attitude by the party that used the word “austerity” as a term of abuse. The party made no attempt to pick fights with interest groups on the grounds that “we can’t afford that”. Things are much better under Sir Keir Starmer, though he has not picked able communicators as shadow chancellors – the best that can be said of the current incumbent, Rachel Reeves, is that she is more effective than her predecessor, Anneliese Dodds. Their strategy seems to be, as it was under Mr Blair and Gordon Brown, “the same, only different”: trying to pick only carefully chosen and relatively minor differences, like windfall taxes, but copying Tory policy otherwise. When Tory policy goes crazy, as it did under Ms Truss, this leaves them looking muddled. They were much happier under Boris Johnson, who tried to dodge hard choices altogether, meaning theatre was less pressure on Labour to confront choices it would rather not. Labour will face an awkward strategic challenge under the Sunak-Hunt regime. The “same, only different” strategy is still viable, but it will pose some awkward choices on its attitudes to public spending.

Mr Sunak is left with two major headaches, though. The first is on public services. The government will be forced to constrain resources in order to manage the budget deficit. The timing is awful. Services across the board – health, education, the police, courts, to name only the most obvious – are all under stress, and they are about to be put under further pressure by workers demanding that pay keeps pace with inflation. The job market remains quite tight, so retaining staff is going to be hard. And these public services, mostly, matter to people. The obvious cuts have already been made, and saving money through more competent management is something this government seems to be unable to pull off – years of incompetent leadership are a large part of how they got into this mess. Politicians have lived too long on the notion that message and narrative matter more than operational effectiveness. The government could face constant distraction from one public service crisis to the next, giving the overall impression that they have been in power too long and their time is up. They won’t be able to rely on trying to divert the focus to Labour.

The second problem for Mr Sunak is related: his party lacks competence and discipline. Crisis in public services could be compounded by parliamentary rebellions and questions over his leadership. His need to maintain a broad church of views within the cabinet does not help. Trouble with the Home Secretary, Suella Braverman, illustrates this. She goes down a storm with party activists, and helps keep the culture wars burning – but tub-thumping will help little in trying to run a complex and important brief, which has already suffered from years of poor leadership. She had already been sacked by Ms Truss for what amounted to gross disloyalty (thinly disguised as breach of ministerial procedure). She is more a politician than an administrator. But on the backbenches she could be a thorn in her leader’s side.

To people like me, it is hard not to think that these are symptoms of a political system that may have worked once, but which has long since ceased to do so. Politicians achieve high office by playing the gallery to a small coterie of deranged activists and donors, and where administrative competence and negotiating skills count for little. So it is disappointing that Labour are offering no serious political reform. Activists support the introduction of proportional representation, but Sir Kir has no intention of letting that get into his manifesto. He is worried that marginal conservative voters will react against it. That may be a sound judgement. Perhaps if a coalition is forced on him by the Liberal Democrats, he will entertain some degree of reform. There may be something in Tony Blair’s strategy of being cautious before winning power for the first time, and more radical on the next occasion. But for now it is hard to know whether the Labour party is on the right strategic course, and has enough competent people at the top. To me it looks vulnerable.

But there are good odds on Sir Keir being the next prime minister – and that looks justified.

The next election is Starmer’s to lose

Chris McAndrew, CC BY 3.0 https://creativecommons.org/licenses/by/3.0, via Wikimedia Commons

It looks certain that Liz Truss will become British prime minister this week, and British politics will take a dramatic turn. It is surely an act of political suicide by her Conservative Party.

We are, of course, urged not to underestimate Ms Truss – as so many of us have in the past. And yet, Matthew Parris in The Times tells us that this is a mistaken sentiment – just as it was for Boris Johnson and for Donald Trump – also politicians who won the top job against huge scepticism of their fitness for the job. She really is as shallow and dangerous as she looks.

I agree. During her bid to persuade first Tory MPs and then ordinary Tory members to vote her into the job, she has backed herself into a difficult corner. Her fiscal policies are inflationary; her economic ideas delusional, and she has shown little aptitude for the negotiation and compromise that are essential to any successful political leadership. She is also a stiff and awkward communicator. She enters the job in the middle of an economic crisis – it is hard to see that she has much chance of a honeymoon period longer than a month.

It gets worse for the Conservatives. They have built their political appeal on the basis of being a safe pair of hands with the economy. Whether this claim has been justified is another matter: while the austerity policies with which the party was associated from 2010 until 2019 struck most voters as being careful and sensible, most economists regarded them as being inappropriate at best. Now that reputation for economic competence is under water. Recent polling shows a Labour lead on handling of the economy, as its does in overall voting intentions. This is very dangerous territory for the Conservatives – and Ms Truss is going to do nothing to improve it. The sort of tax-cutting fantasies that are popular on the American right do not play so well with floating voters here. And it is hard to see that inflation is going to improve much under her stewardship – not without a recession, which she is claiming that she can avoid.

Still, many observers think the Conservatives can pull things back. Ms Truss will hit the ground running, as she has had plenty of time to prepare. A new cabinet will be put in place quickly – and the current government lethargy will be replaced by energy and optimistic talk. There is bound to be a honeymoon bounce. Ms Truss might even go straight into a new general election. This would be perfectly justifiable, to give her a fresh mandate, rather than the flawed manifesto of 2019. The Conservatives have been planning for this possibility for some time, as new, and more advantageous constituency boundaries come into effect. They will likely be better prepared than they opponents. But the polling looks dire – and she and all her hangers-on will be dismayed at the idea of throwing away their coup so soon. Opposition is a dismal place to be for those used to government. Still there is a certain recklessness about Ms Truss, and I wouldn’t rule it out.

The main reason that people seem to think that the Conservatives might win the next election is a lack of belief in Sir Keir Starmer, the Labour leader. He is uncharismatic and cautious. It is hard to say what he stands for, and his polling is weak. But is this a Westminster bubble thing? Activists on the left like their leaders to be charismatic and radical – and so do the journalists and others who follow them. It is easy to see their disappointment. But FT columnist Janan Ganesh warns that this bias against the uncharismatic, also applicable to US President Joe Biden, leads us to underestimate them. Floating voters like their leaders to be reassuring and middle of the road – and, I would add, especially if those leaders are from the left. Radicalism is not a positive attribute. The Conservatives are walking into a trap.

The main equation for Labour is whether they will win the next election by themselves, or alongside the Liberal Democrats. The Lib Dem leader, Sir Ed Davey, is no more charismatic than Sir Keir, though he is more experienced. He has made a lot of the political running in the last few weeks on the energy crisis – a subject he knows well as a former Energy Secretary. Like Sir Keir, he is relentlessly un-ideoligical. He is not trying to move the debate to the areas that his activists want to talk about – such as Brexit – but focuses on the areas that are close to floating voters top concerns. The other issue that the Lib Dems have been able to run with is the water companies’ disposal of raw sewage into rivers and the seaside. The Lib Dems are doing well in many Tory heartland seats where Labour is weak. The public ground is being subtly prepared for a coalition – or cooperation at least – between the two parties – in a way that it wasn’t before the Lib Dem coalition with the Conservatives in 2010, which saw Lib Dem support collapse.

It is reported that the Conservatives are preparing a campaign based on defeating the “Coalition of Chaos”, compared with strong and stable one-party government. This follows the successful deployment of this line of attack in 2015, which nearly wiped out the Lib Dems – though it failed in 2017, to the extent that the Tories are likely to avoid the slogan “Strong and Stable”, the basis of the 2017 flop. This line might gain traction if it looks as if a Labour-Lib Dem alliance will not gain enough seats to prevent the Scottish Nationalist Party from holding the balance of power. The SNP will not want to let in a Conservative government, but they will demand another referendum on independence. Labour and the Lib Dems are going to need to think through their strategy on that front with care, and not just hope that the issue won’t come up. But will the prospect of another Scottish referendum scare English floating voters? Probably not enough.

Sir Keir’s strategy was a risky one. He has done nothing to motivate his own activists – and gone out his way to insult the socialist left, the source of Labour’s most energetic supporters. He is unable to project the flair of Tony Blair, who previously made a floating-voter strategy work for Labour. But the Conservatives are playing into his hands.

I am going to be offline for two or three weeks.

Targeting help to the neediest depends on knowing who they are

This week’s Bagehot column in The Economist suggests that Labour’s policy of freezing energy prices is bad policy (actually “silly”) but good politics. It says that Labour has been too tied to “wonkery” – the design of policies that are clever enough to solve problems without the need to confront awkward choices. Their new policy is a welcome break form the current Labour leader, Sir Keir Starmer. But I don’t think the policy is quite so silly – even if Labour’s suggestions about how the costs will be managed mainly are.

The challenge is huge. British energy prices, especially for gas, have shot up this year. But that is just a foretaste. Further steep rises are in the pipeline: the graphic above, showing annualised costs, culled from the New Statesman (featuring widely quoted projections from Cornwall Insight – who seem to be the only people making them) shows the problem. The median annual household income is estimated to be £31,400 after tax – so costs are rising from 4% to maybe nearly 14% of income for the median household, and it could be double this for the bottom quartile. Other costs are rising too, and, for most people, pay is not keeping up (many senior executives and our local refuse collectors excluded). The media has little difficulty in finding cases of extreme hardship – of people choosing between energy and food for example – and, apparently, not even being able to heat that food up. In one case publicised by BBC News, somebody was selling their furniture to pay their bills. And that is before the forecast price rises have gone through, and before winter brings in the need for heating. Overwhelmingly the public feel that the government should step in to relieve hardship – although how many Conservative Party members share this feeling, while they choose their next leader, is not clear. So far, so clear.

This is where The Economist‘s wonkery comes in. The view amongst Britain’s policy wonks is that help needs to be concentrated on those that need it most. Trying to cap the price for everybody, a policy widely favoured in other European countries, is regarded as a bad idea. For two reasons: first it wastes public funds on people that don’t need it, and second it blunts the market signal that people should reduce energy consumption, and so ease the imbalance between supply and demand that is causing the problem in the first place. This thinking has guided government policy to date. British energy prices have been allowed to shoot ahead of those in the rest of Europe – while the government is trying to target the bulk of its help to the neediest. But this bumps into a major problem. How can the government tell who to help, and who can get along without it? They have two main ways of trying to do this. The first is to help those already entitled to other help, such as Universal Credit – and the second is to ask people to apply for help, and then to assess whether they actually need it.

Both solutions are badly flawed. A problem on this scale is going to hit many people not entitled to benefits, which have become notably stingier over time. I have seen this problem in a different context: the supply of free school meals to struggling families. Many families need the help but are just above the threshold for entitlement. The problem with asking people to come forward is that many will refuse to as a matter of pride, while others who don’t need the help will try their luck, and need to be weeded out in some way, or else the system will subject to allegations of widespread abuse. This last has been the case with help for businesses in the pandemic. This problem is what I have called the Information Gap. The state does not know enough about individuals or businesses to tailor its policies to specific need. It either creates universal entitlements, helping those who are not in need, or resorts to a number of very blunt instruments, which often create political backwash.

The Information Gap is not just some technical problem that can be left to policy wonks to solve. It is one of the central problems of the modern state, and everybody in politics, wonk or not, should be aware of it. There are three general philosophical approaches to dealing with the Gap. One is to use the best efforts of the state to gather information and close the gap, compelling disclosure as required. This is the approach we associate with the Chinese Communist Party; it is highly paternalistic, and seamlessly moves into the state intruding into our private lives in unexpected ways. And the state never gets enough information to solve the problem properly. Its opposite is the libertarian approach. This suggests that the state should not involve itself in helping individuals at all. It should establish a system of security and property rights, and not much else. This thinking is popular n the political right, though not amongst populists. The third approach is solve the problem through a combination of universal entitlements and high taxes. This has recently been popularised through the advocacy of Universal Basic Income. Of course nobody, or almost nobody, advocates taking any of these three approaches to the extreme. Practical statecraft involves balancing all three approaches. Politically, though, we need to develop a sense of in which direction is the site needs to tilt at the current time.

Alas politicians rarely succeed by being honest about the difficult choices involved. Tory leadership contender Rishi Sunak seems to be suggesting that we take the more paternalist approach – but without being clear as to how the information gap is to be closed. His past behaviour in the pandemic suggests that we will accept a high degree of failure and try to shrug it off. His rival, Liz Truss, is suggesting a more libertarian approach – but without being honest about the widespread hardship and business failure that is likely to result. And now Labour is suggesting the use of universal entitlements – but without being honest that this will lead to higher taxes. All three are displaying a dependence on magical thinking. Labour’s “costing” of its new policy is laughable – but the economic illiteracy it is showing is the rule amongst serious politicians, not an aberration.

Personally I think Britain needs to move further along the universal entitlements and high tax route – an approach derided by Ms Truss, but one which the better-run European states favour. That does lead to further problems. Public services will require more discipline to improve their effectiveness, which I believe will have to come alongside decentralisation – with political accountability moving in parallel. That will require deep reforms that people may support in theory, but will resist in practice. Without reform, services will simply gobble up resources without becoming more effective. A further problem, shown in other European countries, is that tensions over immigration have to be managed. If entitlements are high, the public resents people it sees as freeloaders – and there is political mileage in stoking up that resentment, whether fair or not.

So that’s two cheers for Labour – and indeed the Lib Dems whose policies Labour seem to be copying. Alas I don’t see any sign that either party is going to be honest about taxes. But the public, surely, will start to see the need for hard choices. The careers of the two British politicians most egregious in suggesting that no hard choices are required – Boris Johnson and Jeremy Corbyn – have both ended ignominiously.

Boris Johnson survives another disaster

Image Petr Kratochvil, CC0, via Wikimedia Commons

Boris Johnson, Britain’s Prime Minister, was nicknamed “the greased piglet” by his predecessor and Oxford contemporary David Cameron, for his ability to get out of tight situations. He has demonstrated those skills yet again after last week’s very poor local election results for the Conservatives. Instead the pressure is on his Labour counterpart, Sir Keir Starmer.

The Conservatives lost about 500 council seats across Britain, against the low base of when these seats were last fought in 2018, in the midst of the floundering of his predecessor, Theresa May. Many Tory MPs had supposedly been waiting for these results to decide whether they would ask for a vote of confidence. And yet Mr Johnson looks confident and there is little talk of unseating him. Those Tory MPs will put off their decision until the next event, such as the publication of Sue Gray’s report into lockdown shenanigans. But if these MPs were going to do the dirty, they would have done it long ago. There will always be a reason why today is not the day, and mr Johnson’s supporters are adept at providing them.

Mr Johnson’s confidence is not faked. The party’s disasters in London and Scotland were “priced in” in the popular expression. Not too many Tory MPs seats are at stake in these areas. Meanwhile in the “Red Wall” of former Labour seats taken by the Conservatives they fared better; there is no sign of an impending Tory collapse. The Conservatives also lost a lot of seats in their rural heartlands across southern England. But mostly they lost these to the Liberal Democrats, with some to the Greens, as well as a few to Labour. Mr Johnson seems a lot less worried about these than about the Red Wall. A general election is very different to these local elections, and mostly the parliamentary seats are held with very comfortable majorities. The party knows how to sow doubt into voters’ minds, enough to limit any Lib Dem rise to a small number of seats. Meanwhile his line of attack on Labour, as having been taken over by an evil alliance of out-of-touch metropolitan middle classes and urban lefties, remains intact. There is work to do, but the next election looks quite winnable for Mr Johnson, albeit with a reduced majority. All he has to do is communicate this to his wavering backbench MPS. They seem ready to be convinced.

Which is one reason why the pressure is on Sir Keir. His supporters claim that the results show Labour has turned the corner in the Red Wall. But pulling back a bit from the low point in 2019 is not good enough for Labour. The results show that these seats are still in play – and pose the question of what would happen to Labour in a full strength general election campaign. Sir Keir has devoted all his energy to slaying the ghost of his predecessor, Jeremy Corbyn. This seems to be largely successful: Tory taunts that Labour is in the grip of extremists looks off the mark. That was a huge negative for the party in 2019, when many voters were put off by Mr Corbyn’s leadership. But Mr Corbyn’s leadership came with positives too – he was able to invoke enthusiasm amongst his supporters, and he managed to reach parts of the electorate that others did not. This was most evident in 2017 but was surely still there in 2019. But Sir Keir has lost this, and he isn’t able to rustle up much enthusiasm amongst people in the political centre either – in the way that Tony Blair and Gordon Brown were able to. The local elections have done nothing to allay those doubts.

The second reason Sir Keir is under pressure is a police investigation into an alleged breach of lockdown rules in 2021 while campaigning in a by election. This follows a persistent campaign by a tabloid newspaper, in an attempt to deflect pressure from the Prime Minister’s apparent serial breaches in Downing Street. Because Sir Keir has pursued Mr Johnson so aggressively on this issue, he is accused of hypocrisy, in the time-honoured manner of British politics. The truth is that the lockdown rules were unclear, especially with regard to work meetings, and many people pushed the boundaries without being challenged. The police have also levied fines when they shouldn’t. Sir Keir’s lapse, if that is what it was, does not compare to the goings on in Downing Street under Mr Johnson’s supervision. But in order to keep the pressure up on Mr Johnson, Sir Keir has now said that he will resign if he is fined. Which puts the local police in a very difficult situation. It also puts Sir Keir’s leadership in limbo.

What of the Lib Dems? They had an excellent set of elections, and, alongside the two spectacular by election victories last year, they have fought their way back into political relevance. They only did well where they had local strength, and even then, struggled against Labour in places like London. But they have now built a platform from which they can substantially build on their parliamentary representation – provided the voters are not scared that they might let in a Labour government, as they were in 2019. Lib Dems were quite happy with Labour being led by Sir Keir, as he is unlikely to scare off their floating voters. All this is a vindication of the leadership of Sir Ed Davey, and especially his decision, criticised within the party, of not mentioning Brexit. The party has shown an ability to come back in Brexit-supporting parts of the country, such as Somerset. But will they be able to do enough to stop the Conservatives from gaining a majority?

Mr Johnson’s strengths in political survival and campaigning are not matched by skills in government. His avowed radicalism has dissipated into gesture politics. Meanwhile an economic storm is gathering pace. This would be a tricky challenge for any government, let alone the current hapless one. Can the greased piglet survive that too?

A vindication for Ed Davey and Keir Starmer

The Liberal Democrat victory in North Shropshire is astonishing. It is the second stunning victory for the party in a year – Chesham & Amersham could be explained away by it being a Remainer seat and affected by NIMBY issues on house building and railways. No such excuses are on offer here, and the swing was even larger. In fact the last time there was such a large by-election swing between the parties (Christchurch in 1993) it was a prelude to the Tory meltdown in 1997. The Lib Dems have reestablished themselves as the protest party of choice in the Tory heartlands.

The first thing to say about this is that it is a vindication of the leadership of Sir Ed Davey. He has come in for much criticism, from inside and outside the party, since being elected last year. He wasn’t being radical enough, it was said, and in particular he should have spent more energy banging on about the failure of Brexit to deliver its promises. But that would have limited the party’s appeal to a rather well-off and well-educated elite, and probably failed even there with the party lacking wider credibility. He has been proved correct that the public mainly wants to move on. Instead he has revived the party’s focus on local issues, used to highlight the message that Westminster is out of touch. Importantly they were able to convince many Labour voters (the party was a comfortable second in 2019) that they had a better chance of winning in this seat – but the victory was founded mainly on scooping up doubting Conservative voters, and persuading others to stay at home..

Labour failed to do quite so well in the by-election two weeks previously in Bexley, in the London suburbs, in spite of the Lib Dems keeping their heads down there. We can’t read too much into the contrast, since evidently what proved fatal for the Conservatives in Shropshire were their evasions over Christmas parties in December 2020 in Downing Street and elsewhere – and that blew up largely after Bexley.

In fact the Labour leader, Sir Keir Starmer, should feel vindicated too. He too has avoided stoking up told-you-so on Brexit; he has also avoided saying anything radical at all, notwithstanding his promises to Labour members before they selected him. Instead he has chosen to major on competence and “leadership”. In his early months he always stood in front of a backdrop with the word “leadership” in it. This was a failure at first. Criticism of Boris Johnson, the Prime Minister, seemed to be a Westminster village thing that didn’t “cut through” to the general public, in the village’s terminology. Not long ago I was urging Sir Keir to be be more radical by advocating reform of the House of Lords and the electoral system, allying himself with the Lib Dems and Greens, and capitalising on disillusion with the political system. That has proved unnecessary – it would always have been a risky strategy, but playing it safe can be paradoxically risky too in politics. But now the government’s credibility is shot in the nation at large, and voters are not as frightened of him as they were of his predecessor. That Lib Dem by-election victory in 1993 (in fact there were two that year, like this) heralded a Labour victory after all. Labour is now leading in the national opinion polls.

For the Conservatives this defeat points to two big problems. The first is Mr Johnson’s leadership, the subject of my previous blog. As I said then, I get very tired of the suggestion that Tories tolerate the incompetence because he is an election-winner. What on earth is the point of winning then? The public can and did suspend its judgement on Mr Johnson, but that happy period seems to be over. Many Tories hope that with a stronger team of advisers, his record can be turned around. Mr Johnson is certainly resilient. But is he able to manage his advisers? Personally I doubt it. The party would be better off changing leaders, and fast.

The second problem for the Conservatives is their discipline over covid policy. Covid policy scepticism is rife on the backbenches, and it shows. The most visible sign was the lack of mask-wearing in parliament, before the Omicron crisis put the wind up them. But there has been constant carping, leading both to a big backbench rebellion on the “Plan B” measures this week, and to confused messages from government ministers. Should or shouldn’t people reduce social contact in the run up to Christmas? Many on the right have disappeared down the rabbit-hole of extreme scepticism – stoked up in their social media bubbles, and egged on by increasingly vocal owners of hospitality and other affected businesses. This occasionally breaks the surface – such as with the complaint that the NHS has become the “National Covid Service” by excessively prioritising the disease, and as a result it is neglecting other conditions. I guess they want the covid patients to be left in the car park. While the sceptics make some pertinent criticism of policy – such as how we prioritise saving life over quality of life – their overall position descends quickly into incoherence. More to the point politically, it is an extreme position and incompatible with winning middle-ground voters. Covid is a deadly disease, if not for most people, then a significant minority, often including people we know. People are worried about it, and want to take precautions, and want to know that the NHS will be there for them if they or their loved ones fall seriously ill. They can’t see how that happens if they follow the wishes of the sceptics. As the FT’s Robert Shrimsley points out, Tory sceptics aren’t interested in learning to live with the virus, they just want things to go back to the way they were.

Now I am sure that most Conservative MPs are quite sensible on covid policy, but their sceptical colleagues are making the whole party look like nutters, and are clearly having an effect on government policy. They need to be stamped out just as the rump of Remainers were when Mr Johnson first took the leadership in 2019. But first that means Mr Johnson has to articulate a clear strategy for dealing with covid that takes on some of the points sceptics make – on finding a way to live with the virus, and on quality of life. Which brings this second problem back to the first.

For as long as the Conservatives fail to deal with their leadership and discipline issues, the strategies of Ed Davey and Keir Starmer look to be sound. Moreover their apparent pact to stay out of each other’s way in Tory seats, but not try any formal arrangement, also seems to be vindicated – and is another echo of that 1997 landslide. That still leaves two questions for them, and especially the Labour leader. What happens if the Conservatives change leader? And what do they do if they actually win power at the next election?

Eschewing radicalism will help persuade soft Tory voters to vote Labour or Lib Dem – but there must be a point to it all.

If Labour want to capitalise on Tory sleaze they need a political alliance

As many Conservatives feared, the government’s fiasco over the Owen Paterson affair is giving traction to accusations of “Tory sleaze”. You can argue whether Mr Paterson’s conduct actually merits this description, but a fair appreciation of the facts matters little in this kind of rough and tumble – a rough and tumble that Conservatives are only too happy to indulge in when it is to their advantage. And in any case there have been other examples of dubious behaviour. The Conservative opinion poll lead is evaporating. This must give Labour some badly needed hope. But capitalising on this issue will be tricky.

Labour does come at this with some advantages. They are much less sleazy than the Conservatives, having been out of national power for eleven years. Their MPs tend not to have well-paid consultancies. The government won’t let them award peerages to donors, removing the temptation to do so, and so on. Better still, their leader, Sir Keir Starmer, looks the model of personal integrity, even if he is a bit pompous with it. But for all that, Labour has been slow to see much poll benefit. The Conservative poll share is falling, but Labour’s does not seem to be rising, or not by much. The most conspicuous beneficiary in the most recent poll are the Greens. The Greens have very little prospect under the current electoral system, so in any general election their vote will get squeezed away. A lot of that squeeze is likely to go back to the Conservatives, such is the fear so many people have of voting Labour.

What is the problem? The party’s reputation can be tainted by two lines of attack. The first is that they will be no better in if they win power – “they’re all the same” – capitalising on the public’s general cynicism over politicians. Labour’s record when it was last in power wasn’t particularly clean by British standards. They needed big money donors, some of whom ended up with peerages, or, apparently, other favours; many of their MPs indulged in dubious expense claims. Former leader Tony Blair seemed a bit too relaxed about such things – though his successor Gordon Brown had a stronger reputation. The other line of attack is that the party is being taken over by the far left; their politicians are not beholden to big money, but they might have a tendency to think that the ends justify the means, and play fast and loose with the rules in other ways. And, of course, hard left parties are open to other lines of attack that might drive under decided voters away.

Labour has another problem. They are not articulating clear policies that would make British politics cleaner, beyond vague promises of tightening up the existing regime. They have suggested that MPs should not be allowed to take on paid consultancies. But they won’t suggest that second jobs will not be allowed – as at least one of their number is an emergency doctor, and they like to make the claims to sainthood that such a role allows – and doubtless there are other examples of “real world” jobs that enhance an MP’s job. Besides, all this is just tweaking at the edges, and would hardly make it harder for powerful business interests to get undue influence.

What is needed is something much more eye-catching. An obvious policy is the abolition of the House of Lords, perhaps with its replacement by an elected second chamber. The Lords are already over-large and over-used for patronage; the government is in the process of making things much worse by creating even more peers, of which large party donors will undoubtedly feature heavily; that could give the idea public traction. A second idea is to reform the electoral system for the House of Commons. Nothing is more annoying than Conservative claims that it is up to constituents to judge the behaviour of their MPs, when most voters quite rationally think that party label is more important – and most MPs hold safe seats anyway. Behaviour has to be pretty extreme for an MP to lose his seat, and usually the opposition has to be pretty canny too. Actually electoral reform would not necessarily deliver a better system; proportional systems can produce their own safe seats (though not the Single Transferable Vote, which requires multiple-member constituencies). But it’s a real change that would make established politicians uncomfortable – and it can prove a focus for a public wish to make a real change to politics. The is exactly what happened in New Zealand in 1993.

But Labour has a credibility problem when proposing such policies, which go to the root of why people distrust it. When the party has had the opportunity, they have done little to progress either Lords reform or electoral reform. The New Labour government from 1997 to 2010 made some important reforms to both, but none that changed the system radically, to tackle patronage appointments or safe seats, for example. When the Conservative-Liberal Democrat coalition of 2010 to 2015 proposed much more significant reforms (in some cases not far from Labour’s 2010 manifesto), Labour undermined them because they did not want the governing parties (and especially the Lib Dems) to get any of the kudos; party advantage came first. Besides, the Leninists on the party’s left probably quite like the opportunities conferred by the current system to create an elective dictatorship. Big constitutional changes are tricky to push through, so the public would be right to question Labour’s determination to make changes when things got a bit rough.

What would give Labour a much better chance of showing that it really wants to change things is to form a cross-party alliance. This would need to include the Liberal Democrats, who have their own credibility issues after the coalition, but who are locally strong in places, and the Greens, who have the momentum. Bringing Scottish and Welsh nationalists into the picture would add even more credibility, but would be much harder. This would have the added benefit of making things easier after the election if neither the Conservatives nor Labour won a majority – which looks more probable than Labour winning a majority on its own.

Alas Sir Keir shows no sign at all that he has either the courage or the imagination to take such a path. The result of that is that the business of British politics will carry on much as normal for many years to come.