The NHS makes Britain a high-tax nation. Tories need to get over it

The most significant political development here in Britain in the last week was the government’s announcement that it is going to raise National Insurance by 3% of income (1.5% each to be paid by employer and employee) to pay for additional short-term costs in the NHS and longer term costs of social care. Alongside it were announced a sketch for the future public funding of social care. This is a reversal for the Conservatives, who had promised not to raise rates of Income Tax, NI or VAT, which has caused consternation among many Tories. They see their dreams of Britain being a lower-tax country ebbing away.

With this new tax the proportion of national income taken as tax will be historically high – though I read differing stories of just how much. When I first started to work calculating PAYE and such in a small accountant’s office in 1976, the basic rate of income tax was 35%, and the top rate was 83%. On top of that “unearned income” was subject to a 15% surcharge, which could take the top rate up to 98%. Then there was National Insurance – admittedly at a much lower rate and capped so that it did not apply to higher levels of income. Corporation Tax was 52%. VAT was only 10% (or 8% on some goods I can’t quite remember), compared to 20% now – but I find it very hard to believe that the country is even close to raising as much tax relative to income as it was then. Maybe I’m missing something. It was a signal achievement of Margaret Thatcher’s government (1979 to 1990) that it cut these rates drastically without destroying the nation’s finances.

That achievement seems to have fostered an illusion amongst many Conservatives – that lower tax rates pay for themselves by creating economic growth – and the effect would be doubly beneficial if wasteful public spending could be cut too. They could point to successful countries with lower rates of tax: such as the USA and Japan – whereas many European countries were regarded as basket cases, suffering from excessive tax. Such people, often styled as “economic liberals”, dominated the Conservative/Lib Dem coalition of 2010 to 2015, and David Cameron’s majority Conservative government that briefly succeeded it. These governments drove forward a period of austerity, in which many areas of public spending were cut drastically, and spending on other areas, such as the NHS, failed to keep up with increased demand. Taxes did not fall so much, though. Personal tax allowances were raised – but tax collection was tightened up. This period should have awakened Tories to the fact that big tax cuts are off the political agenda in the UK. It required huge amounts of political capital just to stand still on the tax and spend equation.

At the heart of this reality is the National Health Service. Unlike most developed countries, the bulk of Britain’s health care is supplied for free through this nationalised utility. This must be funded by taxes (or if you are a follower of Modern Monetary Theory, taxes are required to ensure that the spending is not inflationary). Private health services exist alongside the NHS, but in most cases a wall is placed between the two. You cannot top up your NHS care with private money. Such are the egalitarian principles behind the NHS.

When the NHS was set up in 1949 it was widely thought that health services were like any other utility – such as the drains. Demand would be contained at a particular level when health needs were met – few people become intentionally ill after all. This has never happened. Health care has extended its reach as new conditions come within its scope, and new treatments become available.

All this is generally understood. But what economic liberals often fail to grasp is that if some perfect market mechanism could be found to supply medical services, backed by a perfect social insurance system, then the overall demand for medical care would be very high. In other words people would choose to spend on health services over and above other sorts of consumption. The consumer appeal of reducing pain and extending life has a strong competitive appeal. It is unknowable how much this hypothetical level of demand is – but to get some idea of how high it could be, look at the USA – where healthcare costs 18% of national income, notwithstanding high levels of unmet demand. In Britain the ratio is about 10%, with a lower income per head. So Britons get to spend 8% more of their income than Americans on other things. But other things they probably don’t want as much as better healthcare. They just have no good way of using their income to achieve this because of the way the NHS is structured, and because their political leaders have imposed such a draconian cap on costs. The NHS tops international league tables for value for money – but not for health outcomes. That is not the right way round. In one view the design of the NHS means that demand for health care is exaggerated, because it is free at the point of delivery. In practice the NHS acts as a constraint on demand, because it makes it hard for consumers to use their own money to get what they want.

Other health systems are better at drawing in private money to supplement taxpayer funding. This is done by not imposing a segregation between public and private systems – typically by using an insurance system underwritten by the state. Well-working examples include Australia and the Netherlands (America, on the other hand, is a horrible mess). Alas this not an option for the United Kingdom. The NHS and its egalitarian principles are a national religion that no politician dare touch. Since all health systems have serious drawbacks alongside their advantages, it surely makes sense to try and make the NHS system work better, rather than replace it with something new.

But making the NHS work properly means ramping up the level of funding so that it is closer to the level of “natural” demand, alongside taxes and fees that distribute costs fairly, reflecting that it is a form of insurance. To his credit Labour Prime Minister Tony Blair understood this when, in the early 2000s, he decided to just that, reversing many years of constrained spending. To balance this he and his Chancellor, Gordon Brown, raised National Insurance. At one level this makes sense. This tax is the closest we get to an insurance premium, paid while people are in work, and drawn down in retirement – alongside taxes on tobacco and alcohol, two big drivers of healthcare demand. However the Treasury hates the idea of hypothecated taxes, and there has been no attempt to fund the NHS actuarially. National Insurance is lost in general taxation. Alas Messrs Blair and Brown fatally misread the economy and cut income tax at the same time, all the way down to 20% for the basic rate. That was because of buoyant capital receipts from Britain’s booming capital markets. That income evaporated in the financial crisis of 2007 to 2009. Beyond a little tinkering with top rates, it has been considered toxic to raise income tax rates since Mr Blair promised not to do so before he was first elected in 1997. That is unfortunate because it is clear this tax that should be raised, rather than NI, as it would take money from better-off pensioners (people like me, in fact) who have not done so badly from the austerity years, but who can expect to be using NHS services more.

This problem will come back to haunt this government, or, more likely, its successor. The extra 3% on NI may be enough to keep the NHS going for now, but it surely cannot do the job on social care as well. The wider economy may give governments more time, through growth and with greater scope for budget deficits than the Treasury is assuming. In the long run though, the NHS means that the UK will be pushing its way up the league table of higher tax countries. Conservatives need to get used to that fact.

20 years after 9/11, the terrorists have failed

Pessimism is the prevailing wisdom of the times. So it is for most commentators looking back at the terrible events of 11 September 2001. In The Times Gerard Baker’s article is headed “Awful truth about 9/11: the terrorists won“, which the editor says “has the ring of truth”. The veteran BBC correspondent John Simpson has been saying much the same thing. This is what the public wants to hear: the glass must always be half empty. But the half full case needs to be made.

The muddle starts with what you think the terrorists were trying to achieve. Messrs Simpson and Baker assume that it was really rather limited: to promote their ideology, and to take America down a peg or two in its world standing. This framing perhaps comes from America’s “War on Terror”. I would accept that this was meant to stamp out jihadism and to maintain America’s world standing. And I have no difficulty in accepting that it has failed. Jihadism rumbles on; America’s standing has taken a knock in the last couple of decades. But wouldn’t his have happened without 9/11? America’s power, or rather its power relative to the rest of the world, has clearly diminished. This is mainly because of China’s rise. That is a product of successful policy in China itself, rather than anything America did or did not do. China’s resources are massive; the curious thing is why its global standing had been so low for so long. It is slowly moving towards its rightful place. Inasmuch as this has meant many millions being lifted out of poverty, that is something to celebrate.

Jihadism also persists. But this is not as the international network whose aim is to bring down western civilisation – but more localised rebellions, building on the resentment of the left-behind against corrupt elites. This is on the rise in parts of Africa and the Middle East. It was present before 9/11, and did not need Al-Qaida to to push itself forward. and I don’t see its rise as a failure of Western policy – but the result of poor governance in many less well-off countries. It would surely have happened anyway.

But the aims of Osama bin-Laden, Al-Qaeda, and Islamic State who followed them, were and are much broader. They wanted to destroy the West by provoking a global clash of civilisations, in which force the oppressed Muslims to take sides, and would eventually bring down the decadent, materialist West, who lack of moral fibre would do for them in the end – and doubtless the decadent, materialist Russia and China too. At first things went well for them. America’s “War on Terror” played straight into their hands, especially when they decided to extend it to an attack on Iraq. This indeed provoked anger, and America and its allies found it hard to sustain their early victories. Meanwhile jihadism attracted a following among people in Western countries who felt powerless and marginalised. Their biggest success occurred more than a decade after 9/11, when the Syrian civil war created space for jihadists to become established. This was because the Syrian regime pushed anti-government forces into their arms, while the West stood back. But when they tried to exploit this space to fuel terrorism in Europe, this time by IS, the West acted and caused their collapse. But Western leaders had become cannier. Once IS has been destroyed they pulled back. They were happy to leave the jihadists to their fate in a messy but localised civil war, with Iran, Russia and the Gulf Arabs jockeying for advantage.

Meanwhile in Western countries jihadi terrorism has dropped off to a low level, with little serious organisation. It has clearly lost its cachet amongst the discontented. Security types worry that the Taliban victory in Afghanistan will change that; it’s their job to worry about that sort of thing. But jihadism does not look like a path to global victory, but an exercise in futility. Afghanistan is an exception. In North Africa, the Middle East (and not least in Palestine) and the rest of Asia Sunni Muslim militants look further than ever away from achieving their goals. And Afghanistan will doubtless start to look messy in its turn. For jihadism to maintain momentum they needed Western armies to go into Muslim countries and provoke retaliation. Now they are gone. It took time but Western leaders have finally understood what this war is all about and how to win it.

And that, rather paradoxically requires a dose of humility. It requires accepting that not everything that goes wrong in the world is a matter of policy failure in the West. Others have agency too. There can be no crusade (a word that means much the same as jihad) to promote Western values. If these values win out, it will be because of their inherent virtues, as the alternatives break down. And their the picture looks much more hopeful.

The developed world’s business model unravels. Is that a good thing?

Free trade and globalisation; just-in-time supply chains; the supply of cheap labour (such as lorry drivers or fruit pickers); each of these has been a critical aspect of economic development in the last twenty or more years in developed countries. And almost every day I read an article about each of these is unravelling. This feels like a profound reversal – but what will it mean?

I can’t help thinking back to my management training in the late 1990s. There was one segment called “The Power of One”. The idea was that if you improved each aspect of your business by a small amount (“one”, which could be 1%), the overall effect on profitability could be profound. Profit is the difference between two large numbers – so improving each of those numbers by a small proportion has a disproportionate effect. If your revenue is 100 units, and cost is 98, your profit is 2. If you increase revenue by one to 101, and cut costs by one, to 97, your profit is 4 – double. This was part of an era of tight micromanagement and of continuous, incremental improvement. Alongside this came a trend to break up business processes amongst specialists by outsourcing – and often this was to businesses based in places where labour was cheap. Or sometimes to agencies that could procure cheap labour, often by using immigrant labour. This gave managers more ways to exert the Power of One, often using the oldest management technique of all: bullying. The changes might be incremental each year, but over time the effect was profound. Complex supply chains and cheap labour became embedded in rich world economies. Some big businesses, such as supermarkets, became very powerful; others, such as farmers and haulage businesses were squeezed dry.

By and large economists applauded this process. Prominent liberal economist and Nobel laureate Paul Krugman once said “Productivity isn’t everything, but in the long run it is almost everything”. Human wellbeing is measured by the amount people consume (well it isn’t, economists admit – and then fail entirely to to act on this insight); in the long run to consume more per person people must produce more per person; that is the definition of improving productivity. Add to the mix gains from trade, a favourite concept of economists, and the gains made in the 1990s and 2000s through tighter management would be bound to lead to gains for everybody in the long run. Economists deal in aggregate numbers and sweeping generalities – their’s is not ask what is really happening beneath the numbers; that’s mere logistics that the little people like accountants are there to manage. But non-economists were not so sure that all was well. They pointed to a number of problems: inequality, exploitation, sustainability and resilience.

To many the rewards of all this productivity improvement were skewed. True, many things became cheaper and inflation was reduced to a small number – but the lives of many workers and small business owners were squeezed by the culture of continuous management bullying, and their livelihoods became less secure as work became here today and gone tomorrow. The big, powerful businesses controlling it all were not necessarily all that profitable, as they often competed intensely with each other, but they were controlled by small elites who were able to corner good incomes for themselves – a reward as they saw it, of making their business more efficient. And there was a strange shadow world of highly-paid professionals designing these complex systems and keeping them in being, in finance and consultancy.

But the inequality problem went deeper than that. Many of these techniques are about the use of cheaper labour (not all – just-in-time management is about inventories) , either by outsourcing to places where labour costs are low, or by importing workers from such countries. Economists are relaxed about this. Wages are low in less developed countries because productivity is low there. Trading with them helps the raise productivity and wages, so both sides gain. This is more of a stretch if the workers themselves are imported – but there is evidence of benefits to the exporting country in that case too. There are a couple of problems though. Labour standards are often lower and this is often exploitative and unethical. More fundamentally, it can only be a temporary fix. Living standards and wages rise in cheap labour countries (look at the succession of countries where this has happened – Japan, South Korea and now China) , and immigrant workers integrate into their new home.

There was also a hidden cost: to sustainability and resilience. Farmers were forced into methods that sucked the land dry (figuratively – depriving the soil of nutrients rather than water), and culled biodiversity. Few people want to be lorry drivers, and their average age is rising. And when there is disruption, such as an earthquake in Japan or a container ship grounding in the Suez Canal, chaos ensues right around the world. Never mind a global pandemic. Suddenly, the world is full of production and transport bottlenecks.

And so it has all started to unravel; the gains are being unpicked and reversed. The changes have been happening for a decade or more, but the first conspicuous reversal came with a political backlash that economists are prone to dismiss as “populism”. In 2016 Donald Trump railed against outsourcing, immigration and foreign trade deals. And in power he did his best to put the clock back, most successfully in trade. In the same year Brexit campaigners also exploited discomfort with free trade and immigration. The outcome has been a profound disruption to many businesses, as buying things from the European Union has become harder (and selling things there), while the pool of flexible European labour has diminished.

Brexit means that the shift has been particularly acute here in Britain – but Brexit has merely accelerated trends that can be seen right across the developed world, and which the Covid-19 pandemic has also accelerated. This has created a very challenging environment for many businesses, and it will surely mean that the prices of many goods will increase, and living standards, as measured by economists, will fall. But before we get too gloomy about this we need see it all in a broader perspective.

Firstly, most of this is about “stuff”: things that need to be moved around by ship, train or lorry. Productivity levels for stuff are already very high, to the extent that it plays a much smaller role in the economy as a whole than it used to. Manufacturing and agriculture account for less than 20% of British national income, compared to over 70% for services. Furthermore there is a lot of over consumption. Most clothes that are bought are only worn rarely. Who really needs an SUV with a max speed over 100mph to do the weekly shopping? Vast amounts of refuse is generated. Consumption of yet more stuff is not going to be the route to improved wellbeing. We can adapt to consuming less across our society without an adverse impact – even recognising that a significant minority of people would benefit from an increase in consumption.

Secondly, it is good thing if many people in lower-paid jobs (which I will not call “low-skilled” as the Home Office does) have more bargaining power. We are long overdue for a reversal of the balance of power between workers and capital, which has tilted towards the latter from the 1980s. This is why incomes have been skewing towards the better off. Whether what we are witnessing is enough to be such a reversal is another matter – but it is surely a step in the right direction.

And thirdly there are other ways to improve productivity. Automation may destroy jobs, but, as economists don’t tire to point out, it leads to the creation of others. Good process management, another 1990s idea, but one that failed to catch on as much as it should, could improve many industries, especially in services such as health care. It failed to catch on because it involves delegating more power and responsibility to lower levels of the organisation – something that senior managers and regulators like are uncomfortable with. Many observers suggest that the shock of lockdowns has spurred innovation and productivity improvement.

So it may not be a bad thing that the world is changing, but all change is disruptive, and the main victims of disruption, in the short run, are usually the less well off. But in the short term most of will find it harder to get many of the things that we want. there will be more self-service. But it may a step towards making the world a better place.

Trying to get Afghanistan into perspective

What is it about Afghanistan that causes Western policymakers and commentators lose all sense of perspective? A striking example of this phenomenon is former British Prime Minister, Tony Blair, who has described President Biden’s policy as “imbecilic” in an outburst on his website – or at any rate that regime’s attempt to justify it.

This loss of perspective has been going on for more than 40 years. It all started at the end of 1978 when the Soviet Union established a puppet government there backed up by a military invasion – it made me chuckle that the year’s most significant event occurred after all the papers had published their reviews of the year. All hell broke loose in Western political circles. The US president, Jimmy Carter, was condemned for being soft, and failing to counter Soviet global encroachment. There were constant references to the Afghanistan’s supposed strategic importance. This was too much for me. I was a student at Cambridge at the time, and had been prompted to rethink my whole attitude to geopolitics by a course on the philosophy of international relations taught by Professor Harry Hinsley (hardly a radical leftie…). The games that the US and Soviet Union were playing by intervening in third-world countries were inversely proportional in intensity to strategic importance. The Soviet coup and invasion was undertaken exactly because the country was not strategically important, so there was no risk of an extreme counter-reaction, which could lead to a nuclear war. I even wrote a letter to The Economist, who were fuming away with everybody else, pointing this out. Alas the Great Game continued as leaders in America and Russia continued trash poor countries with little strategic importance while pretending that this was some life or death struggle of values. In the case of Afghanistan, Americans started to sponsor jihadist terrorists who were attacking Soviet troops – thereby helping to secure the foundations of the jihadist movement that would in turn attack the West. Events after the Iranian Revolution in 1979 should have been enough of a warning (and incidentally that country was strategically important, which is why the superpowers treated the crisis with kid gloves). That failure to grasp the bigger picture was all too typical.

At least this time we are hearing a lot less about the strategic importance of Afghanistan. Instead people are being exercised about the humiliation of the US-led coalition, and how this is upsetting our allies while heartening our adversaries. Mr Blair is saying, apparently, (confession: I have only skimmed his article and I am mainly relaying on secondhand reports) that the West needs to be “resolute” – and that the retreat in Afghanistan is a catastrophic and unnecessary defeat. This isn’t how the West won the Cold War, he suggests. In fact there were many defeats and humiliations for the West over the course of the Cold War. Vietnam (together with Cambodia and Loas) is the most obvious, but after that there were defeats in Angola Mozambique and Nicaragua. Military and intelligence types kept popping up to say that the West was losing, and needed to give them more money to buy their toys or play their deadly games. I was left feeling that these types weren’t all that impressed with Western values, and were more impressed with the higher priority that the Communists gave to their military and intelligence services. And then, practically without warning, it was all over.

How the West won the Cold War had little to do with military confrontation, or the winning or losing of third-world allies, notwithstanding US Republican attempts to suggest as much as they try to deify their hero, Ronald Reagan. It was the self-evident superiority of Western values that did it. This led to a much better standard of life for its citizens, which became clearly evident in Europe, with, for example, the contrasting fortunes of West and East Germany. The Communist Party governments simply lost the will to continue. Mikhail Gorbachev tried to address the system’s weaknesses, but instead simply precipitated their collapse.

Tony Blair has baggage, of course. He has staked a lot on his narrative of “no regrets” for the Afghan and Iraqi wars. This has long been built around cartoonish invocations of good guys and bad guys, in a war of values. But the bad guys are a disparate bunch. Alongside the jihadists who want to take the world back to Medieval values, and reject practically the entire Western materialist ethos, you have Russia and China, who are, if anything, even more materialist, and who also consider jihadism to be a threat. To find these powers cheering a jihadist victory shows just how over-extended the projection of power by the US and its allies had become. To many people, and not just ruling elites, the Western projection of power is not about the promotion of decent human values, but about the advance of the narrow interests of an elite that wishes them ill. In Afghanistan Western values became irreparably linked to civic corruption. Apparently the focus on fighting a war had much to do this; the military types in charge of the allied effort are get-things-done people; they used familiar channels of using people they saw as effective. Getting things done in a less developed society usually means abetting corruption, and so it appears to have been. The West thought that it should sort out security first, and then deal with nation-building. But they got it the wrong way round. The Taliban’s strongest selling point was that they were not corrupt, which most people seemed happy to believe. And with that they won the hearts and minds of people outside the educated urban elites, including, it seems, most of the Afghan security forces.

We should just let the paradox of that sink in. One of the best things about Western, liberal societies is that they are amongst the least corrupt. And yet Western interventions in less developed countries are closely associated with maintaining corrupt elites. We are trying to win the war of values by betraying them.

Ultimately the West will win the contest for the world’s hearts and minds through demonstrating that its values are better at bringing peace and wellbeing to their citizens. Russia is clearly in an economic cul-de-sac and its leaders will eventually be held to account. In China, this is much less clear – but power is being concentrated in a narrow elite which is intolerant of criticism. Perhaps more quickly than we image, they too will find themselves in a cul-de-sac.

But all is not well in the West either, due to the complacency of governing elites. The reverses in Syria, Iraq and now Afghanistan will not help the West’s standing and the advance of liberal values. We will need to respond robustly to threats to public order from jihadists, from Russia and from China. But we should not forget that our values will win through only by proving their worth. We were making too many compromises in Afghanistan, and ultimately that is what accounts for the humiliation. But as humans we should know that it is better to accept humiliation than indulge in an endless game of denial.

Asking the wrong questions on the Plymouth shootings

On 12 August a gunman in a working class district of Plymouth killed five people: his mother and four others who were in the wrong place at the wrong time, before killing himself; two others are seriously injured. The community’s first thoughts, rightly, are for the victims and their loved ones. But questions must be asked about whether this episode could have been prevented. And here the early signs of the discussion are not encouraging. It is hard to see how Britain’s public services will get much better while politicians, senior managers and commentators all look at problems in the wrong way.

What is clear from the evidence that has emerged so far, however, is that this is indeed a failure of public service. The shooter used a licensed firearm; there was ample evidence that he was not a fit person to possess such a deadly weapon, and local people had expressed their concerns about his state of mind. The dots could easily have been joined and the weapon removed from his possession, as it had been temporarily previously. In fact the intervention could have been even simpler: by not returning the weapon to him a month or so ago.

And yet the senior politicians and public servants involved may be shocked at the loss of life, but they look unworried by accusations of failure. This is what the writer Douglas Adams called the SEP field in his Hitchhiker’s Guide to the Galaxy, which confers complete invisibility. SEP stands for Somebody Else’s Problem. In this case it stems from the way we assume that all organisations should be run, and especially public ones: through a system of written policies and procedures. Lawyers love this. To see if anybody is culpable if something goes wrong, all you have to do is check whether individuals followed the written procedures. Workers and managers like this for the same reason: follow the procedures and you should not be blamed if anything goes wrong. If something does go wrong even though everybody has followed procedures, then the call goes out to amend those procedures – and the public can be told that lessons have been learned. It is a wonderful system that rejects any notion of common sense and leadership, but it is no way to run an efficient and effective organisation. That depends on managers pulling together information from various sources and making decisions to further the interests of the society, or their employers. Procedures can help them to do this, but they can also get in the way, and they are often absent for the particular circumstances of the here and now. It is then that leadership kicks in – and the critical organisational thing here is whether managers have the scope to gather the information they need and the authority to act. This was clearly not the case for those overseeing public safety in Plymouth. But nobody is likely to be talking about it.

Commentary on this incident began badly. One of the main topics was whether the shooter should have been categorised as a terrorist. This matters so far as the various procedural routines that public servants follow, but is a red herring if you think that the main problem was a lack of local leadership. The conversation quickly moved on to the procedures for granting and renewing firearms licences, and the need to trawl social media postings. Absent from this discussion, as usual, is any question over resources and prioritisation. Apparently licences were being waved through because the police managers had decided that other areas were a priority. Police resources are stretched, so I would not like to second-guess that decision. Might the requirement to look at social media simply incur a whole lot of pointless trawling and arbitrary decisions about what is relevant? It would take a courageous public servant to suggest as much in the wake of this tragedy. Furthermore it still leaves those who were worried about the shooter’s state of mind with nobody to talk to.

There is in fact a clear organisational solution to the management of threats like this: neighbourhood policing. In London the police did try this a number of years ago, though only after prodding from politicians, and they quietly gutted it when political attention moved on. I had a little experience of it while helping one of our ward campaigns in the early 2000s. A team of half a dozen police officers and PCSOs were given responsibility for a local authority ward (about 15,000 residents in that case). They made it their business to meet regularly with local people, gathering information about their concerns and intelligence about who was doing what. They then took the initiative to try and head off threats to public order – organising youth activities, for example. In this case at least it would have given somebody the chance to put together the disparate pieces of information that pointed to a threat. The technique is popular in America, but it has failed to get much traction here. Police chiefs clearly think that it is an inefficient use of resources. They prefer to invest in specialist squads and things like heavily armed SWAT teams. Doubtless this follows modern management fashion, which emphasises focus and prioritisation. But a lot of the police’s job is risk management, which does not respond well to such thinking (“prioritising risk management” is an oxymoron: risk lurks in the areas you do not prioritise). But the problem isn’t just the police; it is the whole system of political management and public services. If there was more political accountability at ward level, the police would have to respond to it. Instead being a ward councillor is usually an undemanding first step for budding politicians, or a sinecure for status-seeking political activists. As with most of the country’s political representation, most contests are uncompetitive, with one party dominating. Councillors’ political careers depend more on managing their party connections rather than being accountable to the public.

Added to this is a persistent idea that an efficient organisation requires functional specialisation, which leads to what my management training referred to process fragmentation. Crafting a solution to a problem, such as somebody having mental health issues, often requires the involvement of several specialists, each of who can veto a solution. An official looking at a problem instead sees several problems, most of which are not his or her responsibility – the SEP field again. This can be compounded when people use data protection as an excuse not to share information. This is at the root of many public service failures – though not necessarily this one.

All this leads to a cycle of public service failure. Bad things happen; changes are made; things get no better because people ask the wrong questions. We content ourselves with the thought that things could be worse, and life goes on. We should demand better.

The tragedy in Afghanistan is the price of hubris 20 years ago

The collapse of the western-backed Afghan government in the last week has been breathtaking. My first thoughts go to the many thousands of Afghans who made use of its liberal freedoms, and who supported the western powers, but who now face a bleak future, and many who face no future at all. Some soul-searching is due for those of living comfortable lives in the west, whose governments have created this fiasco.

The proximate cause of the disaster is a lack of leadership within the Afghan government, contrasted with strong leadership from the Taliban. There seems to have been a will to resist the Taliban, but the elected leaders of the government, and their appointed officers, did little to mobilise it. Their authority and power depended on an implicit guarantee from the western powers, and America in particular. When first President Trump, and then Joe Biden withdrew that guarantee, the whole pack of cards came tumbling down. We may question the American tactics – they had reduced their governments’ commitment to the war to a historically low level, perhaps this was acceptable for the indefinite future. But any serious analysis of the situation leads to the observation that “I wouldn’t start from here.” Historical inevitability is a popular idea for people looking backwards, and is usually overdone. But it is hard to resist the idea that the American intervention in 2001 was doomed from the start. How did we get there?

As I was growing into political consciousness in the 1960s and 1970s the dominant world event was the war in Vietnam. America’s defeat was a massive loss of prestige. The country deployed uge firepower and yet was still defeated. In the last years, after America had already declared its retreat, morale among US servicemen, mostly conscripts, collapsed. This added to the idea that America did not have the stomach for war – it had “gone soft” through excessive economic development. It is an idea that persists to this day, in spite of manifest evidence to the contrary. America’s military regrouped after this catastrophe, though. And then came the collapse of the Soviet Union, who had suffered a similar loss of military prestige in Afghanistan. America had won the Cold War without its military fighting spirit being put to serious test. And then came Iraq’s invasion of Kuwait in 1990. Iraq’s leader, Saddam Hussein, was a strong exponent of the “America has gone soft” idea, with his own nation toughened up by a long war with Iran. But America, led by probably its ablest President in modern times, George Bush Senior, responded with force and diplomatic skill. An American-led coalition counterattacked and so completely outclassed the Iraqi opposition that the world was left aghast. American military prestige was restored at a stroke.

Bush was conscious that even this awesome military power had its limits, but he was defeated by Bill Clinton in 1992. Meanwhile many Americans became hubristic; this awesome military power was for the using. They saw it as a means of either crusading to make the world a better place, or of bending the world to America’s advantage. To his credit, Mr Clinton was clearly sceptical about this. But into the picture came a politician from outside the US: Britain’s Tony Blair, who came to power in 1997. He developed the idea of “liberal interventionism” – the idea that western powers should intervene militarily to prevent humanitarian catastrophe, and, later, to stop villains. He persuaded Mr Clinton to use US power to intervene in Kosovo, which was perceived as a success – especially compared to the West’s earlier timidity in the Yugoslav wars. Then, in 2000, Bush’s son, George Bush Junior, won the US presidency.

Mr Bush was not as strong and experienced as his father. And amongst his key supporters, including his Vice President Dick Cheney, were a group of politicians known as the “NeoCons”. The NeoCons believed strongly in the muscular use of US military power to secure advantage. They also believed that sympathetic regimes could be put in established across the world based on liberal democratic values. Their particular project was the takeover of Iraq, still ruled by Saddam, in which they planned to make pots of money for their cronies, while bestowing on that country a superior political system. Then came the terrorist atrocities of 11 September 2001.

Most Americans wanted to respond to this tragedy with the use of military might, notwithstanding that it was unclear how this could be done effectively against so nebulous a foe. The was the NeoCon’s moment, and Mr Blair was happy to lend his support. But it was too much of a stretch to blame 9/11 on Saddam, even for the American right. But there did seem to be a link between the terrorists and Afghanistan, and there was a military opportunity. Taliban rule was starting to crumble, especially in the north of the country. The Americans could capitalise on this to gain a quick victory. This they duly did. But what next? It was easy to knock over the existing government, but there was little with which to build a replacement from the country’s disparate tribes. But this is exactly what America and its allies tried to do. Was failure inevitable? Perhaps not, but America lacked the political leadership with which to accomplish such a task. The NeoCons soon became bored and moved on to Iraq, where they managed to manufacture an excuse to go to war, backed by Mr Blair again. That was a colossal distraction, which has not ended very well.

But even if disaster in Afghanistan could have been averted, it would have involved a colossal effort for an unclear political gain, disproportionate to the aim of dismantling some terrorist bases. The country’s other area of significance, as a hub of the global heroin trade, has been beyond central government control. Afghanistan is often described as “strategic”, but this is very questionable. It borders many countries, but it comprises harsh terrain which has proved impossible for outside powers to control. Wise leaders leave it alone.

What strikes me is the hubristic nature of both Mr Bush and Mr Blair’s understanding over how military power should be used. The idea that America and its allies can act as a global policemen whose reach goes everywhere, apart from China, Russia and some of their satellites, has probably always been nonsense. It has led to countless thousands placing hopes on western intervention, which either fails (as in Iraq, Afghanistan or Libya) or never happens (as in Syria). We should be developing an alternative idea that the policeman’s role should mainly be down to to the lesser powers in the neighbourhood. Instead these powers define themselves in opposition to America’s power (or sometimes in support), and defer to its leadership or actively try to undermine it. Rarely do they offer leadership of their own.

Afghanistan is a good example of this. The powers in the neighbourhood are Pakistan, Iran, China, Russia and India (I’m not counting the neighbouring former Soviet republics as substantive powers, perhaps unfairly). None of them want Afghanistan to be a hotbed of Sunni extremism, but none, other than India, were prepared to make America’s situation any easier. The current mess is for them to sort out, and always should have been. This is clearly Mr Biden’s view, and probably Mr Trump’s, and they are right strategically, whatever the tactical errors.

But there is no sign of any of these local powers stepping up to the plate. That deepens the tragedy. Meanwhile the best that America, Britain and the other allies can do is accept as many Afghan refugees as they can in order to palliate the guilt somewhat. But their grumpy electorates are unlikely to reward such courage. The picture is bleak indeed.

The British government attempts a covid endgame

In England 19 July is “Freedom Day” when most covid-related legal restrictions will be lifted in England. This was first trailed a couple of weeks ago, when the government billed it as a major step forward in the battle against he virus, and delighted lockdown sceptics, which include a substantial number of Conservative MPs. Alas it looks like heavy going for the government.

Freedom Day was originally billed for 21 June, but the government lost its nerve. At the time I defended this postponement, based on the government’s narrative that we were experiencing a race between the virus and the vaccine, and that the extra four weeks will allow the ever increasing number of vaccinations to slow the progress of the virus. Alas for my understanding of epidemiology. There is no sign that the level of vaccinations is having much impact on the spread of the new Delta variant, which is following a similar exponential path to the Alpha variant in the Spring. There is no sign of the vaunted herd immunity, so beloved of lockdown sceptics. Delta may be just too contagious.

Instead the government’s strategy, as originally explained by the new Health Secretary Sajid Javed, is to let the disease rip, and rely on the vaccine to keep people out of hospital, and so limit the stress on the health system. Mr Javid made no attempt to deny that infections would continue their exponential path, up to 100,000 a day and beyond. Reckless as this sounds, this is perfectly logical, and even shows a degree of leadership in the face legions of people urging caution of some sort or another. There has to be an endgame, and ours is based on a high level of vaccination, using the more effective vaccines, such as Pfizer, Astra Zeneca and Moderna. We only have to look at Australian, where Delta is breaking out into a population with a low vaccination rate. Australia had managed the disease by keeping people out, but failed to focus on the endgame, and messed up its acquisition and roll out of vaccines as a result.

But the government’s strategy had clearly not been thought through. This was evident from one of the goverment’s core arguments: “If not now, when?”, whose logic I find unfathomable. They seem to be hoping that the disease will burn itself out before the busy winter season, but it looks just as likely to make things worse. Two big problems have emerged. The first is the use of face masks. Some people can’t be vaccinated; others will derive less protection than the norm; many more (I have to include myself) are far from sanguine about catching the virus, even though double vaccinated. Even most vaccine sceptics have understood that some efforts need to made to protect the vulnerable – they just don’t want the tail to wag the dog, as they see it. Where this has come to a head is on mask-wearing. As we have better understood the virus, our appreciation of the effectiveness of masks in stopping the spread has grown. It seems sensible to most people to continue to require people to wear them in those public spaces which vulnerable people will find it hard to avoid. This does not include pubs and night clubs – but surely does include public transport and most shops. And the government yet wants to drop all legal requirement to wear a mask, and at first suggested that such matters could be left entirely to personal discretion. One Tory MP (admittedly not a minister) suggested that freedom from mask wearing was essential to getting people using public transport again – his argument seemly was that if we ignored the disease our worries would cease. Slowly but surely the government is being forced into retreat on this; by this morning they were suggesting that operators should use their powers to enforce mask -wearing on public transport. But the messaging has been fatally mixed.

And them came a problem with the NHS covid app, which pings people who have come into near contact (within 2 metres for 15 minutes) with somebody who has tested positive and tells them to self-isolate for 10 days. The government said that it was going to leave this in place until mid-August, when double-vaccinated people would asked to do a test instead. They weren’t very clear on why this delay was being instituted – I suspect it simply takes that long to change the app and test it. But the consequences look worrying if infections are likely to reach 50,000 a day next week, and 100,000 a day not so long after that. The opening up was supposed to help the economy to get moving again, but the projected volume of people being told to self-isolate will hit it right back down again, remembering that these self-isolation requests will tend to cluster in particular workplaces, the disease being what it is. The government’s response has been to suggest that it would de-sensitise the app, so that fewer people would be pinged – within one metre for 30 minutes, say. As a response to the virus becoming more contagious this is nonsense – it leads to the question of what they are hoping to achieve by keeping the app in being. And it points to an easy answer to the government’s “If not now?” question. Then again, if the government wants to let the disease rip and peak before the winter comes, won’t the app just slow things down? Unlike mask-wearing it looks an inefficient way of trying to protect the vulnerable.

The government have clearly thought a bit harder about ta third issue – the effect increased infections will have on the NHS. The link between infections and hospitalisations – and that to ICU usage and deaths – has been weakened but not broken. Hospitalisations for covid now seem to be doubling every month, and we can expect that to increase after the loosening up. The levels are nothing like those experienced in previous peaks, but the NHS is fragile. Backlogs are massive; there are press reports of staff leaving, exhausted after the pressure placed on them over the last 18 months. Given the quality of the government’s ability to think things through elsewhere, there must be a degree of scepticism that they have got their calculations right.

I am more sympathetic with the government on another widespread criticism: that loosening up increases the chances of a new and deadlier variant turning up. With the virus rampant in the rest of the world, where vaccination is woefully slow in many places, what happens in Britain will make little difference. Besides, scientists are reporting that new variations are repeating. The possibilities of new variants for a simple thing like a virus must be limited, so maybe the chances of a significantly more dangerous new variant are not as high as some people are making out. That’s a bit speculative, of course.

So the government is facing a sticky few months, when it will continue to be on the defensive. Other issues loom. The government plans to withdraw the fiscal support it is giving to the covid-stricken economy. This is bound to lead to hardship and criticism; it is also likely that the economy will start to slow as well.

A government that was well-led and with a core of first-rate ministers would command a lot more confidence. But this government cannot seem to think anything through properly and lurches from one crisis to the next. It will be determined not to reimpose lockdown. Twice before it has thought it could wether the storm without reversing course, only to U-turn in the end. What odds would anyone offer that this does not happen again?

Should we be worrying about inflation?

Now is a very interesting time to be a macro-economist. The shock arising from the covid-19 pandemic is unprecedented in its extent (barring world wars, maybe) and its economic effects. Government responses, with very loose monetary policy combined with generous fiscal measures, is similarly unprecedented. The latter is remarkable in that its generosity is far greater than that shown by governments following the Great Financial Crisis that started in 2007. Economic conservatives have been routed and are grasping for evidence that their once confident assertions about the public debt and deficits have a basis in fact. These generally turn on the question of inflation.

Inflation plays a critical role in macro-economics. In theory it is what happens when supply fails to meet demand across an economy. There a number of reasons that this can happen but the most important, to macroeconomic commentators, is when a when aggregate demand is boosted by a government spending too much or taxing too little. Or, putting the same idea in a slightly different way, when too much money is being put into circulation by government policy. It is one of the points of agreement between orthodox conservatives, whose narrative is that bad things happen when governments intervene, and advocates on the left for Modern Monetary Theory (MMT), whose narrative is that governments can and should spend freely so long as inflation is kept at bay. Things get more complicated when you try to apply the theory to an open economy – one that trades substantially with others – that issues its own currency, but this is usually glossed over.

The theory of inflation had to be redeveloped after the 1970s, when inflation (excess demand) and high unemployment (inadequate demand) co-existed in so-called stagflation. The new theory, working its way through such ideas as monetarism, a craze of the 1980s, to the Neo-Keynesian consensus of the 1990s, built on the idea of inflation expectations. This suggested that inflation could happen simply as a function of the zeitgeist. The standard theory was that therefore it was essential that inflation expectations were “anchored”, and that it was the central bank’s job to do this. This theory has become so embedded that organs such as The Economist, who should know better, report it as fact.

In the first two decades of the 21st Century inflation in the developed world has been stable and quite low (around 2% per annum and often less). This has been hailed as a great success for central banks, who have firmly anchored those expectations. It has also been taken up by MMT enthusiasts as evidence that reticence over government spending and national debt, and especially the demon “austerity”, is vastly overdone.

And so here we are now. Many developed world governments, led by the United States, have thrown caution to the wind in response to the pandemic. This appears to have been remarkably successful in in that the economic impact of the calamity has been relatively limited. But now inflation seems to be breaking out everywhere. Optimists say that this is just the result of temporary supply bottlenecks, pessimists say that over generous economic policies are coming home to roost. Commentators pore over the available data and argue like mad.

If you find all this rather perplexing, you should. Macro-economists inevitably deal in simplified models that represent the actual world but imperfectly. The statistics they deal with, such as income and, indeed, inflation, are similarly imperfect representations of a complex reality. They all know this, but instead of taking on an air of humility, they find it easier to gloss over the difficulties and wallow in the vicarious power of dealing in the fate of millions. In the process most of them have become completely detached from reality.

Inflation is a case in point. What most economists seem to mean by the term is a devaluation of money: the price of everything going up without anything deeper going on. One of the 1980s economists suggested that “Inflation is everywhere and always a monetary phenomenon,” because it couldn’t happen in that favourite fiction of conservative economists, a barter economy. But a general rise in consumer prices may simply be part of a widespread balancing out of things across different markets. In the 19th Century, according to statisticians who estimate these things, there were many surges in prices, but compensated by falls at other times, so that there was no overall rise over the long term. Not coincidentally, money was closely linked to gold at the time, though that is incomplete as an explanation. A more recent example is the inflation that accompanied the economic boom in Ireland after it joined the Euro. This rise in prices was the only way an open economy could respond to a surge in productivity without a now-impossible currency revaluation. That didn’t stop the European Central Bank ticking the Irish government off. Another example came during the austerity years of the British Coalition government after 2010. There was persistent (though not especially high) consumer price inflation. But this wasn’t matched by wages, and it was simply the economy reflecting the reality of lower living standards. I remember one commentator suggesting that the inflation would make debt easier to pay off; nonsense because you pay debts out of income. Inflation then was not reflecting a devaluation of currency.

So what is happening now? Prices rises genuinely seem to reflect shortages in supply relative to demand, both in goods markets and labour markets. These may well reflect temporary bottlenecks. We can expect this to go on for some time as the pandemic has had far-reaching impacts on many supply chains and labour markets. Yesterday our local picture framer was complaining on behalf of his glass supplier that the cost of hiring a container from China had risen from £500 to £8,000 (or something like that), because all the containers are in the wrong places, not to mention the disruption to the Suez Canal. In Britain we have the added complication of Brexit disrupting both goods and labour markets; in that case when the dust settles most people are bound to end up a bit poorer. But the pessimists have a point too. The entrenched inflation of the 1970s started with similar temporary shocks, to the oil market in particular. If it really is all about expectations, this is how it starts. But there is so much noise in the statistics that it is really very hard to see what is going on.

Personally I am less concerned about inflation that many. I think the 1970s-style inflation was mainly a product of unionised labour markets and less flexible supply chains, which gave labour much more power. This certainly had a good side in ensuring a fairer distribution of wealth, but it prevented adjustment to economic realities. In today’s much more open world economy there are other ways than inflation for unsustainable excess demand to play out, in the most developed economies anyway. In the 1990s it may have been right to talk about inflation expectations being anchored by the central bank, but the world has moved a long way since then. Inflation is held in check by the forces of global trade. The stress is taken in the financial system through higher levels of debt and international capital flows. This is likely to end in financial busts rather than 1970s stagflation.

So if there’s trouble ahead we are looking in the wrong place. Is there trouble? Financial asset markets certainly look as if they are in a bubble, but the banking system looks a lot healthier than it was in 2007, when the last great financial crisis started to gather momentum. In Britain I think things are going to get much bumpier as the government tries to bring its budget deficit (currently an eye-watering 11.5% of GDP, though less than America’s 13.9%) back to a new normal. But there are so many uncertainties as to what a sustainable new normal will look like, that this very hard to predict. This is going to dominate politics from 2022 on as there is no coherence to the government’s message on this.

Interesting times indeed.

The Lib Dems after Chesham & Amersham: time to move to the centre

The Times operates a pay wall for its online content. I have been paying £10 a month to access it. So it was a bit upsetting when my email provider decided their newsletters were junk (while being happy with The Guardian and Financial Times). It was rather more upsetting that it took me over a month to notice. Still, I missed regular articles from some of my favourite columnists, especially Matthew Parris. I also regularly read Danny Finkelstein and David Aaronovitch. I sometimes read Melanie Phillips, who, rather alarmingly, I seem to be agreeing with more and more. You may note a distinctly conservative taste for somebody who tends to the left – but I have always believed that you should expose yourself to challenging views. In any case all three of these are liberals in the traditional sense, although that is a bit of a stretch for Ms Phillips.

I have been catching up, with especial interest on the response to the Lib Dems’ astonishing victory in the Chesham & Amersham by-election. Those from Mr Parris and Lord Finkelstein were especially striking. Both acknowledge that the result must give the Conservative leadership pause for thought, but suggest that the deeper questions posed by the result are for the Lib Dems. Lord Finkelstein’s view is made clear in the article’s title: There is no Point to the Liberal Democrats. Some context is helpful here. Like me, Lord Finkelstein’s first political commitment was to join the Social Democratic Party (SDP) when it was formed in 1981. Doubtless also like me he had been inclined to be Conservative beforehand, but he was a bit younger (born in 1962 to my 1958). Unlike me, he opposed the SDP’s merger with the Liberal Party in 1987 to form what eventually would be known as the Liberal Democrats. He limped on with the “continuing SDP” with former SDP leader David Owen until he joined the Conservatives in 1990, who made him a peer in 2013. This suggests that like Lord Owen, he has always had a loathing for the Liberals and its successor party, as the little people in British politics, though he hides it a bit better. (Lord Owen always finds some clever reason to oppose anything the Lib Dems support, most notably in the 2011 referendum on electoral reform). Still Lord Finkelstein’s arguments bear hearing out, however painful they are to read for somebody that has given so many years of their life to the party.

The essence of Lord Finkelstein’s argument is as follows:

Here are the problems of the Liberal Democrats. They don’t stand for anything, they don’t stand for anybody, they can’t win and even if they could it would be utterly pointless.

Danny Finkelstein, The Times 22 June 2021

He goes on to say that they are worse than pointless, as they are getting in the way of establishing a coherent opposition to the Conservative Party. Lib Dems like me may protest the party does stand for a clear set of liberal, internationalist and environmentalist values, and that this has become more coherent since the loose coalition assembled by former leaders Paddy Ashdown and Charles Kennedy has fallen apart. He would counter that those same views are also held by many members of the Labour Party, and even the Conservatives, and are not distinctive. More seriously it is clear that local government does not exist in Lord Finkelstein’s world – which is revealing. But the Lib Dems aspire to being more than being a party of local councillors. He is onto something when he points out that the party collapsed when it went into coalition with the Conservatives in 2010, its only exercise of real power. This makes it understandable that the party rules out coalition with the Conservatives. But that kills the party’s leverage, and poses the question of why members shouldn’t just join the Labour Party.

Ouch! There are many moments when I have wondered whether my support for the Lib Dems has been futile. I have made a lot of friends (and the party is how I met my wife) – and it has been one of the best ways to meet like-minded people. But I don’t join it as a social club. Sometimes I am simply left with the impact the party has had on other parties by competing with them. It is true that the spectacular by-election victories the party has scored from Orpington in the year of Lord Finkelstein’s birth to this one have led nowhere in the following general elections. But they have often had a big political impact, usually on the Conservatives. Other parties were simply in no position to deliver these shocks. The complacency of Conservatives prior to the latest Chesham & Amersham was quite astonishing, to read some of the things that their supporters had been writing beforehand.

And are we really in the way of forming a coherent opposition to the Tories? And should we really join Labour? I might ask why, if Lord Finkelstein thinks that the Conservatives so badly need such an opposition, and that if joining Labour is the only way to achieve it, why hasn’t he? I joined the SDP as soon as I realised that I wanted it to succeed. My reasons for not wanting to join Labour are probably pretty similar to his; my blood runs cold at the thought of it. I do not want to be a foot soldier in something distinctly ugly (and I would say the same for joining the Conservatives). The alternative for me to being part of the Lib Dems is leaving politics altogether. The reason that Labour can’t form an electorally convincing alternative to the Conservatives (coherence is easier…) lies mainly within that party, and not because it is missing a few more liberal members and activists. Sometimes competition works better than collaboration, even in politics. Would Tony Blair’s New Labour have happened without the SDP split?

Mr Parris’s article Tories need to start caring about the blue wall is ultimately more compelling, though almost as searing in its opinion of the Lib Dems. The article’s main focus is on the Conservatives, and how the current leadership is taking for granted a whole stratum of liberal conservative voters, of which he is one, and which is prominent in Chesham & Amersham. These are repelled by Boris Johnson’s party, and are ripe for the taking. Can the Lib Dems do this outside a fevered by election? Mr Parris is sceptical:

Liberal Democracy has a wonky wheel that, time and again when hard choices loom, wobbles them off the highway and into the ditch of localism, neighbourhood grumbles, government intervention and “whatever’s your gripe is ours too”

Beyond its orange bird, Lib-Demmery has a big yellow streak. Nick Clegg, Danny Alexander and David Laws took the leap into real politics in coalition. But their party seems to have disowned that brave compromise. Are they ready for adult politics again? If they can learn to show steel, to say no to someone, something, anything, then Sarah Green, the new MP for Chesham & Amersham, may approach the next election with a fighting chance. If not, this will be one more by-election we shout about, then forget.

Matthew Parris, The Times 19 June 2021

I often disagree with Matthew Parris, but I think he has it this time. The party has changed since the days of anything-goes in the 2000s. But has it changed enough? How should the party present itself to the electorate, and how can it show that it is interested in adult politics again?

In my previous article I suggested that the by-election showed what the point of the Liberal Democrats was. It was to appeal to Conservative voters whom Labour and the Greens cannot reach, while holding to its liberal values. That means it must champion the centre ground of politics. Lib Dem activists bristle when it is suggested that theirs is a party of the centre, as it implies the party is rootless and defined by the ground that parties of left and right happen to inhabit. But while the core values of the party are not defined by the political centre, core values do not win elections – you have to broaden your appeal. Taking the centre is how the party must do this, and that is how they pulled off this coup. If they are to turn this one-off event into something more substantial, then the party has to stick to this line.

What does that mean, in practice? It means going back to the traditional values of public service that Mr Johnson’s followers (and many in the Labour Party) dismiss as elitist: fair play and tolerance; truth rather than grandstanding; saying sorry every so often. It also means being clear that international cooperation has a big role to play in solving many of the country’s problems – from trade to taxing companies to global security – in contrast to the Tory preference for tub-thumping and “buccaneering”. That’s the easy bit. The party needs to stand up for effective public service, without getting hung up on public ownership, but combining this with a degree of fiscal prudence. This means two things which will be hard. First is not to suggest that spending more public money is the solution to every problem: which means challenging Labour every so often when they do just that. And it means admitting that an ageing population and stronger public services mean higher taxes on everybody, and not just some soft underbelly of rich people and taxes. All these positions may be open to respectable challenge, but this is the approach that will earn credibility amongst centre-ground voters. Sir Keir Starmer’s Labour Party may adopt similar positions in the end, but the Lib Dems can do so with more credibility amongst Conservative voters.

And the party needs to be honest about where they want all this to go. That is taking part in a coalition government, if the coalition as a whole follows largely centrist principles. The party can rule out a coalition with the Conservatives under Boris Johnson, but not necessarily under another leader. But the most likely option is government with a Labour Party that has taken some steps towards a centrist programme itself.

Will the Lib Dems be able to pull this off, and win 30 to 40 seats at the next election? I understand the scepticism of people like Matthew Parris. But I am hoping he is wrong.

What is the meaning of the Chesham and Amersham by election?

What is the point of the Liberal Democrats? This question has been asked often since the party bet big on reversing the Brexit referendum result and lost. Languishing in single digit poll ratings, with only a handful of MPs, a weak brand and a leader who looks like just another white male middle-aged politician, the question was asked rhetorically. It was obvious that the answer was that there wasn’t any. The party would be replaced by some combination of a newly-moderate Labour Party and the Greens. On the eve of the by-election in the safe Conservative seat of Chesham and Amersham bookmakers were still offering odds of only 13-1 that the Lib Dems would win.

But the result showed a different answer to that question. It wasn’t even close. The Conservative vote crashed by 20%; Labour’s by 10% (they only had 11%); the Lib Dems ended up with a big majority. This shows that only the Lib Dems amongst “progressive” parties have a chance of challenging the Tories in their heartlands. Labour is still paying the price for its flirtation with radicalism under Jeremy Corbyn; the Greens do not have the strength and depth of ground organisation, and many Conservative voters find their brand offputting. It is now clear that if the Conservatives’ grip on the Westminster parliament is to be broken, the Lib Dems will have to play their part.

Why did the Conservatives do so badly, when nationally their stock is still riding high? The obvious answer is that the party is focusing on consolidating its hold on its newly won voters in northern England, the Midlands and Wales – the old “red wall”; this leaves the party’s traditional heartlands feeling neglected. By itslef this explanation doesn’t work. Under Boris Johnson’s leadership the party has a sunny “Have your cake and eat it” stance: doing well by the new voters is not meant to be at the expense of the old. After all that is what “levelling up”, the stated aim of their policy, is meant to mean. Something else is annoying the heartlands.

The first, I think, is resentment about Brexit. To old Remain supporters, many of whom were in this consituency, this is not going well, and the arguments made about the damage it would do, dismissed by Brexit supporters like Mr Johnson as “Project Fear”, are turning into facts. Combine this with the many missteps of the government’s response to covid, and there is little love and trust in the government.

There were to more specific issues that the Lib Dems hammered on, once they found they were resonnating. The first was the government’s new planning law proposals, designed to make it easier to build on greenbelt land. Suburban voters such as those in this constituency have a fear of development spoiling their green and pleasant environment. The Lib Dems also want more houses to be built, but suggest that the government’s plans will be a developers’ charter to build poor quality housing (in terms of environmental standards at least) where it is not needed, instead of “community-led” initiatives to build more good-quality affordable and social housing. The second issue was the new HS2 railway from London to Birmingham, which is being built through the area. The Lib Dems support HS2, so once again some political finesse was required. The candidate promised to uphold constituents’ interests in opposing what is seen as a brutal juggernaut not listening to local concerns.

Doubtless Tories will feel that this is more chicanery from the Lib Dems – but it is not as if their party does not delight in chicanery itself. If the roles were reversed they would have had no hesitation in doing the same. That is politics; there are no prizes for holding the high ground. For the Lib Dems a weak brand has its disadvantages: it doesn’t rile floating voters so much and gives more room for manoeuvre. Still the party is only a threat to the Conservatives if it has a local foothold, and that is only patchy. Besides its appeal is now largely restricted to better-educated voters, and the result does not provide evidence of a broadening of their appeal. But where the party already has a foothold, it will be re-energised. The party should also get more attention in the media for a while – after the embarassment of most outlets failing to spot what was happening here, in spite of ample evidence, while giving extensive coverage to the Batley and Spen by election, due on 1 July. The party now needs to make good use of this brief window of opportunity.

For the Conservatives it is a clear sign of danger, though their politcal position remains formidable. Success in British politcs depends to some extent on taking core support for granted while reaching out to more marginal voters. But this is a dangerous exercise, as Mr Johnson’s predecessor, Theresa May, found in the 2017 election, when she tried to do just that far too blatently. The main point of worry for the government must be those planning reforms. They are going to need far more political skill on housing than they have shown hithertoo if they are to avoid further damage.

Labour’s predicament deserves a post of its own, but for them there is good and bad news. The collapse of their vote shows that their brand is now very weak – after a period when they had often done relatively well in Lib Dem strongholds. The Greens got more than twice as many votes. But there is no evidence that resurgent Lib Dems will undermine them in critical battleground seats, and it also shows that the Conservatives can be put on the defensive. An optimist might suggest that a weakening of the brand is a necessary precursor to de-toxification. The party still needs to be able to fire up its supporters, of course. Talk of a “progressive alliance” of non-Tory parties is premature, however. But Labour strategists will need to let the Lib Dems undermine the Conservative vote somehow.

For now though the Lib Dems can bask in the glory a bit. Their new MP, Sarah Green, is a strong addition to their parliamentary ranks. Remarkably, 8 of the party’s 12 MPs are now female. Quite a reversal from a party that used to be much derided for its failure to get female MPs elected.