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.
British public services are flagging – even without the wave of strikes provoked by the government’s attempt to force below-inflation payrises. Many are assailed by staff shortages – health services in particular. Backlogs mount in health, the courts and the processing of immigrants. The police seem to be dealing with a diminishing proportion of crimes. The government seems to have little idea how to address this.
What is the cause? There are three obvious ones. The first is the austerity policies in place since the great financial crash of 2008/09, ratcheted up by the coalition government of 2010-2015, and intensified by the Conservatives alone from 2015 to 2017. The second is more demand for services from an increasing population of elderly. On top of these came the disruption of the covid-19 pandemic, which caused many backlogs. These have all doubtless contributed, but the problems go deeper, and will require a new mindset to fix. Take the issue in hospitals of patients who cannot be released back into the community, causing a shortage of beds. This problem goes back a very long way. I remember people talking about “bed-blocking” thirty or more years ago. Or the bullying, racism and misogyny that are rife in the police and fire service, and doubtless elsewhere. Most of us thought that these problems were being stamped out after the 1960s – it is shocking to see that they are unchecked in this day and age. This bespeaks generations of weak management, fending off the modern world with defensive strategies, like extra bureaucracy, rather than true problem-solving. Every time that one or other service says that lessons will be learned after some failure (and it happens more than weekly), you can guarantee they mean that some extra rule has been layered onto the existing thicket of unmanageable procedures.
A lack of leadership, from senior politicians down, is clearly part of the problem – though more in some services than in others – in fact there are many pockets of excellence. But this problem results from institutions being trapped by a system that constrains initiative and crushes rather than rewards enterprise. This arises from how the work is organised – which leads to two related problems. First of all the system is heavily biased to fixing problems rather than preventing them. The best way of stopping health service backlogs is for people to be healthier, after all. Secondly almost all the difficult problems, and especially those that focus on prevention, require multiple agencies to cooperate without adequate structures to ensure that cooperation is effective. Somebody on the radio recently listed all the agencies that had to come together in a criminal trial (courts, police, prosecutors, defenders, the prison service, the probation service, and so on); it’s no wonder that they don’t work efficiently. No wonder, but also nobody’s responsibility.
Problems with public services are nothing new. People have been wrestling with it for as long as I can remember. The Thatcher government of 1979-1990 had the big idea of privatising large swathes of services, which then included many public utilities. In many cases this was very successful – in telecoms and energy, especially. But it soon became clear that there were limits. Privatising prisons, for example, may have solved some problems, but created many others. The next major push came from the Blair/Brown government that took power in 1997. They had two main ideas: establishing quasi-independent agencies in a sort quasi-market economy (academy schools and NHS Foundation Trusts, for example), an idea more closely associated with Tony Blair; and close performance management, with the use an array of performance targets, and managers being disciplined if they were not met, an approach more closely associated with Gordon Brown. For convenience I will call these the Blair and Brown approaches, though both men supported both approaches to some extent. We can learn much from what became of them.
The Blair approach had easily the best press – praised by many right-leaning think tanks and journals like The Economist. They were picked up, and in places turbo-charged, by the coalition government that followed Labour. They had one important success: university education in England. This was linked to a dramatic increase in student fees, linked to a student loan system that works like a graduate tax. This gave the universities a degree of operational independence. Problems continue, but Britain’s university system remains world-class; rationing of university places, as required by Scotland’s directly-funded system, has not been required, with the result that a higher proportion of the population can attend. Elsewhere the reforms are being quietly buried. Much success has been claimed for academy schools, and there have been success stories – but the main thing that can be said for them is that they have not made things much worse. They have been linked to the waste of public money, however, with senior management overpaying themselves. In the NHS the system is being quietly dropped, as it entails much bureaucracy, while doing little to address fundamental performance issues, like integration of care or patient safety. In both health and education, the services were linked to massively complicated and prescriptive funding models, which failed to work like commercial tariffs in the way the designers hoped. This is one way in which it differed from the university reform.
The Brown model, on the other hand, received a much worse press. People complained of complex targets, misaligned incentives, and macho sackings of senior managers – creating a climate of fear that undermined creative problem-solving. All of these criticisms were well-founded, but the system had some notable successes. The Labour government oversaw a dramatic improvement in the quality of teaching in schools, and especially in London. The new academies were part of this success, but local authority schools did just as well, if not better. As a primary school governor, and chair of governors, I saw this improvement happen at close quarters. There was some rather crude top-down management from the ministry, but the professionalism of school and local authority leaders by and large rose above this – and pushed through dramatic improvements. I have seen a quality of management that easily matches what happens in the private sector. Four things stand behind this success. Firstly, schools already had a huge amount management autonomy compared to other public agencies, as their services are relatively self-contained; second standards were enforced by an independent standards agency, Ofsted, which carried out regular inspections of schools and local authorities, and used well-designed metrics to act as benchmarks; third, local authorities proved effective intermediaries between central government and the schools; finally funding was increased, which gave managers more ability to achieve change. Interestingly the coalition government, while pushing the largely irrelevant academies initiative, picked up were Labour left off, by sharpening the focus on quality of teaching, and dramatically improving the funding system with the (Liberal Democrat) pupil premium system, and its attendant focus on disadvantaged pupils. Since the coalition, the focus has been somewhat lost, and funding squeezed; Ofsted went off the boil (doubtless thanks to funding cuts) by easing pressure on top-rated schools.
The Brown model was applied to the NHS too, and the quality of NHS services drastically improved over the Labour years. But this is mainly attributed to an equally dramatic increase in funding. The easiest thing to say about this is that the combination of extra funding and close scrutiny of results achieved much more than either of these would have alone. The Brown government, towards the end of the Labour period, did try to address some of the problems with the performance management system. I remember a new system called “team around a child” which aimed to bring multiple agencies together to address issues around individual cases. But it wasn’t clear whose job it was to knock heads together. Most of this was swept away when the Labour government ended.
Over the last decade or so, the Conservatives have adapted rather than overturned the previous Labour government’s approach, with the important difference that they have squeezed funding relative to demand. They have revived and extended an older idea too: tendering and outsourcing to outside agencies, be they non-profit enterprises or commercial providers. This has been disastrous. The aim has been to save money, and this has meant redefining the services as a skeleton of what they should be to play a fully functional role. The outsourcers then duly cut the service back, by, for example, replacing skilled professionals with less skilled recruits following standard scripts, and who are unable to to make proactive interventions or prevent difficult cases becoming “frequent flyers”.
The problem is that none of the various things that governments have tried in the last forty years have addressed the fundamental organisational problem – which is that responsibility is divided among so many agencies, which in turn are managed at national level. The system is centred around specialist service provision, and not people. Crime, housing, mental health, physical health and family dysfunction are all closely linked together. We may find all these contributing in a particular serial offender, say, who causes multiple agencies to commit resources. But instead of the agencies coming together to find a solution, the system encourages them to continually pass the parcel.
So how to progress? Public services need to be more focused on their users, and services intermediated by professionals empowered to bring different elements of service together. This means more localised control of services, so that those intermediaries don’t have to escalate issues far up the chain of command in order to resolve blockages. It means a local political leadership able to focus on the needs of particular people, and accountable for the overall results in a particular locality. That, inter-alia, means substantial devolution of political power to regions and local authority areas. That is necessary but not sufficient. Scotland and Wales have just as disappointing record on public services as England, in spite of substantial devolution. We need more specific policy reform ideas.
Interestingly Labour’s recent proposals on constitutional reform (proposed by Mr Brown) show that there is a political consensus around further devolution. However the narrative is based more transport infrastructure and economic growth, rather than making public services more effective. I’m not sure if many politicians grasp what is needed to improve public services. Still, in the dying days of the coalition a deal was done make a more substantial devolution of public services to the Greater Manchester Mayor, including some NHS and social care services. As I recollect this was criticised by Labour at the time. According to this study, it has been a modest success, with a slight improvement to life expectancy.
Still the forces of conservatism are powerful. It is always tempting to try and make the current, departmentally bound and centralised system work, rather than undertaking risky reforms – especially ones designed to give credit to regional and local politicians. But politicians need to improve the effectiveness of public services urgently – and through the extra effectiveness reduce demand by solving problems. This needs a huge change in political culture, but once one area starts leading the way, that should generate momentum. With Scotland distracted by the debate on independence, the most promising place to start looks like Greater Manchester. we will probably have to wait for the next government, though.
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.
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.
Photo: USCapitol, Public domain, via Wikimedia Commons
The British political class is obsessed with US politics. The right wish to emulate US culture wars and attack “wokeism”. The left (rather more successfully) pick up on the Black Lives Matter movement, never mind our very different racial history. So perhaps it was inevitable that the BBC would cover the US mid-term elections so heavily. But in doing so they have posed deeper issues about the institution.
I try to resist the temptation to comment on other countries’ politics. I last commented directly on US politics in 2021, when I praised the progress being made by President Joe Biden. That quickly became a very unfashionable view, especially after the Afghanistan debacle. I still think he is underestimated – but then I thought that of Jimmy Carter when he was president – another deeply unfashionable view. But want I want to look at this time is not US politics itself, but how the BBC in particular covered it.
News coverage of the US midterm elections was extensive, and especially on the BBC – my leading source of daily news. A Danish general election came and went without comment – in a country with a close cultural affinity with England, if the not the rest of Britain – while reporting on the 10 O’clock TV News from America was almost daily.
The first striking thing abut this coverage was the BBC’s claim that these elections were hugely consequential, a view widely repeated in Britain. They explained how if the Democrats lost control over Congress, then the presidential agenda would be halted. And yet this usually happens in the US midterms, and life goes on. Mr Biden has fought hard to get as much of his legislative agenda as possible achieved before these elections; he always expected his party would lose them. BBC correspondents eventually seemed to realise that this argument wasn’t strong enough to support the trope that these were the most important midterms ever (how sick I get when this claim is made of elections, as it always is). So they said that democracy itself was at stake. The basis of this claim was the number of Republican supporters of Donald Trump, who claimed that the presidential election of 2020 was stolen by Mr Biden. And some of them sought to take control over state electoral processes, so that they could ensure the right outcome next time. This is indeed an interesting aspect of current US politics. But were the BBC following the Democrats’ line a bit too uncritically? I don’t mind their reporters repeatedly saying that Mr Trump’s claims are false – his supporters have been unable to produce evidence that can be tested in court – perjury is a serious matter, after all. But the endangerment of the electoral process in some states is only one issue that American voters have to weigh up.
But this marks a more general Democrat bias to the BBC coverage – a prejudice which, to be fair, is pretty prevalent in Britain. They are careful to present Republican views in their interviews with politicians and in vox pops. But we are left thinking that most Republican supporters are nutters – repeating those election fraud allegations, for example. If this were all there was to it, then it raises the question of why the Republicans are doing so well. Surely Americans aren’t all that stupid? There is clearly something else going on. And that something else seems to be the perceived extremism of many Democrats, which clearly annoys many Americans, and not just less-educated white ones. We will struggle to get any idea of what lies behind this fear from watching BBC coverage – or I suspect that of most other British news outlets. In the end the story of American conspiracy theorists, and the ramblings of Mr Trump, are the more entertaining story, and that dominates our coverage.
Funnily enough, after all the hype of the run-up, coverage of the election results has been very muted. They were almost exactly in line with the more considered predictions (published by The Economist, for example), but probably a bit worse for the Republicans in the House of Representatives. But they still won there – and there will be significant consequences arising from that. Mr Trump seems to have had a measurable negative impact on his party’s performance, but I haven’t seen that story through on the mainstream reporting. We’re now onto the World Cup and COP27. And there is quite a bit of domestic news to be digested too.
All of this is making me think harder about the role of the BBC in news. It remains a trusted brand, and we are lucky to have it in place of the more partisan free for all that dominates the US. But, as a public service organisation committed to balanced coverage, it faces tricky decisions. Not so long ago it got into trouble by “balancing” scientists warning us about carbon emissions with unqualified s**t-stirrers like Nigel Lawson. They have moved on from that, and it is good to see that they are not giving credibility to Mr Trump’s lies about the 2020 election in the name of balance. But, in general, the BBC feels it must follow the news agenda set by others, in which Britain’s diminishing print media have an outsize role. Since this media is dominated by organisations with a right-wing agenda, this causes much wailing and gnashing of teeth amongst people in the left. But there are bigger problems.
The first is the choice of which stories to cover, or not – what makes an important story in the news media is not necessarily all that important in the great scheme of things. We saw this in the coverage of the death of the Queen. This was a big news story, of course, but the BBC followed other media in excluding all other news reporting in the weeks after, until other media outlets started to let other stories in. The BBC wouldn’t devote so much as a minute to “other news” in extended news broadcasts, and instead went round in circles in with interviews with royal correspondents, there being little actual news to report. The BBC could and should have shown a bit of leadership here – five minutes of other news in a 60-minute programme was surely not have been too brave? The time given to US politics is another example, with European politics being neglected by comparison – in spite of the fact that the latter might have a more immediate impact on the country. That Danish general election was quite an interesting story. And then there is the bias towards covering elections before they happen, and neglecting the hard news of the actual results. Even The Economist does this, though. That is the difference between journalism and “the first draft of history”, I guess. Speculation is more fun than facts.
But what about the accusation of liberal bias that is so often levelled at the BBC – and which its coverage of the US election seems to illustrate? This is more complicated than it looks. Another example is racism and antisemitism. A few on the right might grumble about the apparently uncompromising stand that the BBC takes on these issues. But dig down a bit and you find problems. Racists and antisemites are portrayed as nutters that it is easy to dis-associate from. I have seen a couple of television dramas portraying far-right activism, along with its racist and antisemitic tropes. But these activists are cardboard cut-outs – poorly educated white people with a soft spot for Hitler and Naziism. There is much more to racism and antisemitism than this. Will there ever be a drama covering antisemitism in the far left? To say nothing of the muddle between antisemitism and criticism of Israel and Zionism? Of course not. It is too controversial. But this bias annoys both left and right. The right is annoyed by the persistent portrayal of racism as being confined tot he political right. The left complains that discussion of Israel is heavily constrained.
This is all rather depressing. There seem to be two types of news media: the partisan and the dumbed-down. The partisan media thrives on controversy and isn’t afraid to air conspiracy theories and nonsense tropes – and is consequently useless as a source of information. But the “balanced” media are too scared that controversy will damage their reputation for objectivity – and anyway tend to follow the pack in their coverage of stories. Perhaps there is an inevitability about this – but at least the BBC could try a bit harder to be more informative in its news coverage.
Conservative party members showed little self-awareness this summer. Under their party’s rules they had the final say on who was to be their party leader, and, as they never tired of telling us, the next prime minister. The rest of the country was appalled that such a small, self-selected body of people was playing such a pivotal role in the country’s constitution. The leadership candidates then vied for members’ support by offering ever more crackpot ideas to appeal to their prejudices. And when the winner, Liz Truss, took over as prime minister, she treated her promises made to this small body of people as more important than the manifesto on which her parliamentary majority was based in December 2019. But amid all this self-indulgence another British political party has been rowing hard in the opposite direction by trying to make itself more relevant to the public at large. It is time to talk of the Liberal Democrats.
This follows the party’s own moment of self-indulgence in 2019. It’s then newly selected leader, Jo Swinson, decided to make the party’s raison d’être to act as a rallying point for the overturning of the 2016 referendum on Brexit. This was very popular with party members, encouraging Jo to take ever more radical positions on the subject. The party’s poll ratings climbed; it outpolled the other established political parties in elections to the European Parliament (but not, significantly, Nigel Farage’s Brexit Party). It attracted defectors from both Conservative and Labour parties. At the 2019 election Jo delighted party members by suggesting that the party would win the election outright. But in the grim reality of a general election campaign, as voters confronted the awkward choices before them, this self-indulgence stuck in their throats. The party offered no reconciliation to the half of the country still determined to complete Brexit, and simply promised to keep stoking up a debate that was tearing the country apart. The party’s poll ratings sank, resources were deployed on an electoral strategy that was far too optimistic, and the end result was a dismal 11 MPs, a net loss of one on the poor 2017 result. Losses included Jo Swinson’s own seat in Scotland.
This disaster prompted much soul-searching. One of the party’s most successful politicians, Dorothy Thornhill (serially directly-elected mayor of Watford), was asked to head a review of the party. Disclosure: I am secretary of the party’s audit and scrutiny committee which sponsored this review, and which continues to monitor the party’s response to it – but the views expressed here are very much my personal ones. The review was unsparing int its criticism of many aspects of the party’s management. It’s leading recommendation was as follows:
Based on the lives of ordinary people in the country today, create an inspiring, over-arching and compelling vision which can guide the entire Liberal Democrats organisation for the duration of a parliament, ideally longer.
The party, under its new leader, Ed Davey, has taken this recommendation seriously, and especially that first phrase. Whether the party’s current vision is yet inspiring, over-arching and compelling is open to question. But that it is grounded on the lives of “ordinary” people is not in doubt. The policies that are promoted to the public reflect the concerns of general voters, and not those of activists: the energy crisis, the outflow of raw sewage in rivers and beaches, and many more specific, local concerns. To this Ed has now added the rising cost of mortgages, and the difficulty of seeing a doctor. It is, unfortunately, hard to meld such everyday concerns into something inspiring, over-arching and compelling, but the party is trying. This causes no little frustration to many of the party’s activists and members. They are dying to make a big fuss over the failures of Brexit, for example, and push radical proposals for political reform. But generally voters don’t want to reopen the wounds of Brexit, and have yet to translate their frustration with the political system into demands for reform. A further example of the party’s sensitivity to “ordinary” people was the cancellation of the party’s autumn conference, which had been scheduled for just before the Queen’s funeral. This infuriated many activists, who had booked hotel accommodation and were looking forward to the first in-person conference since covid-19. But it would not have been a good look to the public at large. The counter offered to this by some activists, that the public wouldn’t notice, was hardly an encouraging one.
This was the only party conference to be lost to the Queen’s death. Other parties, large and small, benefited from the traditional extra publicity that arises from such events (though in the case of the Conservatives “benefit” is a stretch). Last weekend the party attempted to make up for this with a set-piece leaders’ speech from Ed – which was dutifully covered by the BBC and the more respectable newspapers. The coverage mainly focused on his proposal of a fund to assist stretched families to manage higher mortgage costs. I didn’t find the speech especially uplifting, but that may be because I am on old cynic, and I was watching it on a Monday morning. But it was coherent and competent. Ed clearly focused the party’s political strategy on winning parliamentary seats from the Conservatives, implicitly part of a coalition to end their time in power. Ed only mentioned other political parties in the context of local elections – where he made an attack on the SNP, but he resisted the temptation to attack Labour. He did make time to advocate proportional representation, but that was the only political reform that got a look in. It did not beat raw sewage in its prominence. Since the Labour leadership isn’t even going that far with political reform, we’ll have to accept that.
Is the party’s new approach working? Membership has plummeted since the heady days of 2019 and the party’s prominence in the Brexit debate. Reduced means stretches the party’s infrastructure, both paid staff and volunteers. But the party is winning elections again, including three spectacular gains in parliamentary elections. It is slowly rebuilding a local government base – but it is very patchy. The party consistently polls around the 10% mark – better than it has been, but short of the party’s heyday in the years 1997 to 2010. This too was a time when local electoral pragmatism trumped ideological vision – only for the party to collapse once it tried to use its electoral mandate by joining a coalition government.
Political vision is a tricky thing, especially in a political system such as Britain’s. Too much and the electoral coalitions needed for success fragment; too little and the party loses its way at the grassroots, which is central to party’s electoral successes. Under Ed Davy the Liberal Democrats are attempting a balancing act. The party is basing its campaigns mainly on issues that resonate with voters, especially those in Conservative-held areas; at the same time it is trying to manage expectations about what it might do after the election (i.e. potentially support a Labour-led government). Meanwhile the party still holds to its core beliefs, on openness, on the environment, and on the need for political reform. This is a balancing act traditionally managed best by the Conservatives – until now.
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 Comet airliner was world-beating British design before a crash in the 1950s allowed US aircraft designs to dominate the market. The British aviation industry never recovered.
Our new prime minister, Rishi Sunak, says that Britain faces a profound economic crisis. I don’t disagree – few will. Neither do I disagree with his statement that hard choices lie ahead. I almost certainly will disagree with him what the right choices are. We are entering a period when politics matters. But we need to understand more about the mess and how we might progress.
Liz Truss, Mr Sunak’s predecessor, presented a clear narrative to explain the country’s economic ills. A timidity in the British ruling elite, abetted by the “abacus economics” of the Treasury, has stifled private enterprise, leading to a bloated public sector accompanied by low economic growth. She saw that a combination of lower taxes and deregulation could correct this, deliver economic growth, and that, thanks to the wealth thus generated, the country would be able to afford an acceptable level of public services and welfare safety net, together with improved state pensions. She thought that she could kick start the process with tax cuts. The overarching narrative may or may not have substance, but the timing was all wrong. The result was the shortest prime ministerial stint in British history.
Ms Truss was rare in offering us a clear narrative. Mr Sunak will not make that mistake. Clarity divides, getting in the way of the coalition building that successful politics demands. But a clear narrative helps the rest of us decide which policies to support. I will attempt one of my own.
My story starts in the middle of the last century. Britain was an industrial powerhouse, with a strong belief in free trade, though this regularly caused political controversy. Before the Second World War, though, this was marred by widespread poverty; the country had not found a good way of spreading economic (or any other) wellbeing across the whole of society. And then came the war. The necessities of the war ushered in a period of massive state intervention that followed a lot of the principles of socialism. Food was rationed, but people were amazed that levels of nutrition improved, as the diets of the poorest in society improved. Meanwhile the British war economy produced wonders of production and ingenuity, combining state direction with private initiative. People saw that a new way was possible, and this was brilliantly articulated by the Labour leader Clement Attlee, who reassured the middle classes with a particularly British slant on socialism, and Labour won an overwhelming parliamentary majority in 1945. He ushered in a period of profound welfare reform and the nationalisation of key industries. Labour lost power in 1951, but the landscape was so profoundly changed that most of the reforms were supported by a political consensus.
There followed two decades of what many regard in hindsight as a golden age. Economic growth was rapid, living standards advanced, poverty reduced and life expectancy dramatically extended. Many transitioned from working class to middle class. An expanding working population and an industrial revolution in the development of consumer products were the drivers. But all was not well. Other countries were doing better. Britain was steadily losing its place among the front rank of industrial powers, to America, to Germany, and even to Japan. Each of these countries turned into export powerhouses, while Britain, relatively, declined. What was happening? Poor management and a relative lack of investment were to blame, along with some bad luck (the crash of the Comet airliner in the 1950s dealt a body blow a world-leading aviation industry). A lot of this had to do with the fact that large parts of the industrial heritage was now under public ownership, and this increased as industries, notably the motor industry, started to fail and led to a clamour for government intervention. The government either starved nationalised industries of investment (the water industry for example), or squandered unbelievable sums on ill-conceived investment programmes (notably nuclear power). There were exceptions to this general mis-management, of course, such as the switch from coal gas to natural gas for domestic use. But by and large decisive management was replaced by consensus-building and political grandstanding, and the constraints of government financial management. By the 1970s nationalised industries were a by-word for bad management. Meanwhile the private sector was weighed down by high marginal rates of income tax (top rate 83%, or 98% for investment income by the mid-1970s) and corporation tax (52%).
The 1970s were a time of profound economic crisis, with many parallels to now. Energy costs rocketed with two Middle East crises following the Arab-Israeli war of 1973 and the Iranian revolution of 1979. Inflation took off, and policymakers struggled to respond, as this came alongside rising unemployment (which we don’t have now, or not yet). In 1972 the Conservative government of Ted Heath tried to break the deadlock with tax cuts and more public spending (I can still remember the party political broadcast promoting this – I was 14), in a move reminiscent of Ms Truss’s failed budget. This quickly collapsed into disaster, and the government was locked into a confrontation with the miners’ union, amongst others. Harold Wilson’s Labour government of 1974 did not make things much better. Unions were able to block any serious economic reform.
In 1979 came the election of Margaret Thatcher and the Conservatives. Mrs Thatcher brought with her a new economic philosophy of reducing the role of the state. She started to reform the nationalised industries preparatory to privatisation. She cut marginal rates of income tax (though putting VAT up to maintain the overall tax take). At first things seemed to be going very badly. Inflation persisted, unemployment climbed, and nationalised industries played havoc with government finances. But by 1982 things were getting better. She received a political boost from the Falklands war, while Labour seemed to be imploding. A new party, the SDP (which I joined and have never left), offered a diversion, but failed to break Britain’s electoral system, even in alliance with the Liberals. Mrs Thatcher won a landslide majority in 1983, and quickly became politically more secure. Inflation was tamed and economic growth returned. This period remains a matter of bitter controversy. Many say that her success was based on the exploitation of North Sea oil. This was clearly a factor but her economic reforms, especially the privatisations of the energy, telecoms, steel and motor industries, clearly helped. Another factor that proved of benefit, though perhaps more so later, was the development of the European Single Market, of which Mrs Thatcher was one of the architects. Prior to this European product and labour markets had been badly fragmented. The European Economic Community had tackled tariff barriers, but non-tariff barriers remained high. These were progressively dismantled, so that Europe could follow America in the benefits of a large domestic market for many goods – and labour. Britain became a favoured European base for American and other countries. But while this progress was happening a lot of industries, notably the coal industry, collapsed under foreign competition and changing production technology. This has coloured Mrs Thatcher’s memory ever since – as she saw no reason to soften the blow as swathes of the country went into industrial decline.
One of the driving forces of change was globalisation. Increasingly the Far East became a source of cheap industrial imports. This started with Japan, and then moved on to South Korea and Taiwan, amongst others. Falling import prices became one of the chief sources of improving living standards, but it hastened the decline of former industrial heartlands. By the 1990s we see taking shape some of the main outlines of the current British economy. The country became a major net importer of manufactured goods, only partially offset by a booming service industry. At this point the books were being balanced by net oil exports. But some areas of the country were doing much better than others.
Labour under Tony Blair took over in 1997. Mr Blair sought to maintain much of the Thatcher legacy, but with an important difference. After 2001 in particular he expanded the public sector, through expanding public services such as health and education in particular. In these years a powerful myth took over the British political class. You could solve the conundrum of getting Scandinavian-level public services and welfare with American tax levels though allowing economic growth to expand level of tax receipts. But the politicians failed to understand the source of Britain’s growth in the early 2000s. This was largely driven by three factors. The first was an acceleration of globalisation, enabled by internet technologies and driven by China. I remember looking at the components of Britain’s consumer price inflation, which was about 2% per annum. The prices of manufactured goods were falling; this allowed 4% inflation in many services to be balanced out. And pay tended to follow the services figure, staying consistently ahead of overall inflation, and so leading to improved living standards. The second factor was a dramatic increase in European immigration. By the early 2000s many parts of the country were experiencing labour shortages. The baby boom was over, and the process of bringing women into the workforce largely complete; pension schemes were only slowly catching up with increased life expectancy and the proportion of retired people was growing. But the European Union at this point admitted Eastern European countries with a workforce that wanted to improve its living standards by working abroad. Poles and others flooded in and the demographic crisis was averted. Inflation was kept at bay, the second major component of growth. The third factor was the rapid expansion of financial services, and especially the banking industry. Many banks made big profits, giving the City of London the air of a boom town, inflating the property market, and generating significant capital taxes. Pretty much all the increase in recorded productivity in the early 2000s came from the banking industry, alongside “business services” (management consultants, lawyers, accountants and others feeding off the banking boom, as well as juicy public sector contracts), and the now-declining oil industry.
None of this was sustainable, and the moment of truth arrived in 2007, when the world banking crisis developed. Those big banking profits, and the productivity gains that came with them, were exposed as fiction, and the industry experienced massive write-offs. Meanwhile the globalisation boom peaked, as China sought to improve its own living standards rather than those of westerners. The public increasingly turned against European immigration. And the decline of North Sea oil continued apace.
So in this account the slow growth that followed the crash arose not from a failure of government policy (be it austerity in the left’s account; or excessive tax and regulation in the right’s), but from the exposure of demographic forces that were always present, and the passing of globalisation into a new phase that was not producing gains in living standards. And two further things were added after 2015: the decline of North Sea oil turned precipitate, and Brexit, after the referendum in 2016. Brexit has raised the cost of imports (especially if you attribute the depreciation of the pound that coincided with it, though I’m inclined to believe that much of this was in the pipeline anyway), made exporting harder, reduced the attractiveness of inward investment, and caused many immigrants to go home and made immigration harder. On that last point it is worth observing that the country has made up the shortfall in European immigrants with people from other countries, and in any case the European labour market is becoming tighter. But the labour market for immigrants became much less responsive to short-term demands. All round Brexit has added to the friction of running a business, rather than causing an immediate catastrophe.
To these troubles we must now add two more. Firstly the gas and oil price spike, exacerbated by the war in Ukraine, and secondly the rise in world interest rates. The energy price rise is a double whammy. It is helping to stoke up inflation, which causes economic damage in its own right, but also causes nominal interest rates to rise, which disrupts the economy in further ways; and the public expects the government to shield at least some of us, or even all of us, from the effects, causing a massive outlay in government spending. Rising interest rates make mortgages more expensive, which causes further hardship, and also disrupts a finance sector that has grown complacent on low interest rates.
The problem is this. Britain has a deep structural deficit in the trade of manufactured goods. We are heavily dependent on imports for our standard of living, and exports are nowhere near enough to cover this. We now have a substantial trade deficit on energy too, made worse by the Ukraine crisis. We still have a trade surplus on services, but nowhere near enough to cover the gap. Inward investment is sluggish, and anyway broader troubles in the world economy limit the possibilities. This means that the country as a whole has to borrow heavily from abroad – whether this is to fund the national debt or the private sector. Rising interest rates makes that more expensive. Crashing the pound would help exporters, maybe, and inward investment, almost certainly – and since nearly all the debt is denominated in sterling. would not make those debts any harder to maintain. But that would feed through to consumer prices, and destroy the economic strategy of the last few decades of consuming cheap imports.
There is a striking comparison to be made between Britain and Japan. Both are island nations with challenging demographics. Both have an uneasy relationship with their continental neighbours, on whom there is a degree of economic dependence. Japan has long set its face against immigration, an attitude that is prevailing Britain too. Japan has also been suffering economic stagnation, but it is not so obvious that the people living there mind, as economic wellbeing is spread widely. Something like Japan is what many of Britain’s Brexit supporters aspire to. But there is a crucial difference. Japan remains an industrial powerhouse, and produces a substantial trading surplus. They do not depend on inflows from abroad to keep the show on the road. That means the government has a huge amount of flexibility in borrowing money to meet its needs. Abacus economics is dead. It is living proof of the Modern Monetary Theory (MMT) idea that the debate on government deficits and national debt is beside the point. Japan is in the position that Liz Truss seemed to think Britain was in when she promoted her tax-cutting and free-spending budget. But even under MMT consumption cannot outlast production forever, and inflation is admitted as a constraint. That is where Britain now is, and the government has little choice but to bring its budget position under control. The pressure is not extreme, as it has been for countries like Argentina or, in a rather different context, Greece in 2010 – but the trajectory needs to be clear or otherwise market interest rates will rise further than they otherwise would, with difficult repercussions.
That’s for now. But what should the country’s longer term strategy be? Ms Truss, and indeed Mr Sunak, subscribe to vision of what might be called a “buccaneer” strategy. They present a picture of the country being a haven for freewheeling businesses, attracted by low taxes and able to out-manoeuvre over-regulated competitors in Europe and elsewhere. But buccaneering has its dark side – the original buccaneers were licensed pirates, legal in their home domain and criminals elsewhere, after all. Britain would need to develop its already burgeoning function as a haven for grey and even darker money, from kleptocrats and criminals across the globe. The trick to this, as we have learned, is not so much lax laws on such things money laundering, but weak enforcement. Most Brexit supporters would likely connive at such a strategy, if not openly support it – on one condition: that public services are made more effective, and the state pension is improved – they are probably less fussed abut other aspects of welfare spending. This is where the main political battles are going to come in the next few years – as it is far from clear that such things can be maintained without increasing taxes.
Liberals recoil from such a strategy, but they will agree in principle to another strategic objective – that of energy security, and reducing the dependence on fossil fuel imports. There is a disagreement, of course, on whether that means developing the remaining domestic fossil-fuel opportunities. But, in principle at least, most can agree on the development of renewable energy, with the storage and grid upgrades that will be needed alongside it. One thing that helps is that this can largely be financed by foreign borrowing and equity investment – as the linkage of investment to financial returns is easy to make.
If liberals can agree on the need to turbo-charge the development of renewable energy, what alternative can they present to the buccaneer strategy? We can’t go back to being an industrial powerhouse with a strong export industry. That ship has sailed. We can make modest gains, but we can’t reverse more than half a century of decline.
I can’t see a single big idea, but a number of smaller ones might add up to a strategy. The drive for renewables should be tied to a more general mission to decarbonise the economy. This should drive a whole series of investments and reforms that will help renew life generally. The country should aim to ease trade with the European Union, which will mean accepting EU regulation in lots of areas. But we should be wary of relaxing immigration rules. The public seems to be happy with immigration by and large, if it is closely regulated. That means bureaucracy and friction, but in a democracy we have to work within the constraints of public consent. The government should also help develop industries where the country looks internationally competitive. Healthcare is the most promising area – I think the idea of cooperation between the NHS and private entrepreneurs to develop new treatments has much potential. The relatively unified state of health records is an opportunity, though bringing challenges with it. Also public services need to become more effective. That means shifting towards solving problems rather than simply repairing the damage after the event. This in turn means a stronger emphasis on prevention, and getting the various different services working together more closely. It is hard to see how this can work without more localised leadership and accountability – serious decentralisation and devolution. A further idea is political reform – through electoral reform, and reforming the House of Lords. This is as yet a bit of a long shot. For all public discontent about the state of politics, I see little groundswell for changing the system , as the was case in New Zealand in 1993, for example.
But we are going to have to get used to two two things alongside all of this. Taxes will need to rise, and economic growth will continue to be sluggish. This is the opposite to what Ms Truss was trying to achieve. That is not the end of the world. We can still achieve an improved quality of life and an environmentally sustainable way of being. That is a simple consequence of where the country stands as demographic forces assert themselves, and after the country’s mishandling of its industrial legacy over the generations.
Boris Johnson promised us that we could have our cake and eat it. So we ate the cake. When his successor, Liz Truss, went to the cupboard to look for it, she found that it was all gone. The transition from the bounty of tax cuts and energy subsidies promised by Ms Truss when she took charge to the austerity being promised just a few weeks later is one the most dramatic policy reversals I have ever seen in Britain.
During her selection campaign for the leadership of the Conservative Party, Ms Truss railed against “Treasury orthodoxy”. This, she said, was responsible for the country’s strangled growth since the financial crash of 2007-09. She knew what she was talking about since she had served as Chief Secretary at the Treasury for a stint in 2017-19. This was a widespread complaint. I heard it made by Lib Dems during the coalition years, especially as many ideas for long-term investment were shut down. The complaint was much more virulent from Labour supporters, for whom “Austerity” was the root of all evil. It is interesting to see these usual suspects being joined by the libertarian right, who have elevated high tax levels to the same heights of evil that the left has for austerity.
It is important to distinguish Treasury orthodoxy from economic orthodoxy – though most people seem to do just this. Treasury types are steeped in economic orthodoxy: you won’t get away with the “lump of labour fallacy” (the idea immigrants, for example, take away people’s jobs) if you talk to one of them. But it is tempered by an older belief, dating back to Gladstone and beyond, in “sound money”. They do not like to see high levels of government borrowing, leading to creditors being able to dictate policy. The divergence between Treasury and economic orthodoxy was especially evident in the coalition government of 2010-15. Many orthodox economists argued that austerity policies were at best overdone, or at worst completely wrong-headed. They suggested that there was significant slack in the economy, and that policies that reduced demand were a self-inflicted wound (whether there was as much slack in the economy as they thought, and whether the austerity policies were as destructive, are questions for economic historians). They produced as evidence more generous US policies at the time, leading to less economic hardship. The Treasury thought otherwise. In 2010 coalition ministers were scared witless by warnings of dire consequences in financial markets if austerity programmes weren’t followed. Both Tory and Lib Dem ministers accepted this basic premise, while quibbling with the details. The previous Labour government under Gordon Brown and Alistair Darling had as well. Almost all serious economic commentators now suggest that this was a serious mistake – and that the market position was not nearly as precarious as suggested.
Doubtless this is what gave Ms Truss the courage to take on the Treasury, though her central idea that tax cuts can be paid for through the growth they stimulate, especially when unemployment is at a record low and inflation on the rise, was a challenge to economic orthodoxy as well. She noted the substantial “headroom” in forecasts by the Office for Budget Responsibility (OBR) earlier in the year – doubtless brought about by stealth tax rises through holding tax thresholds down. She also noted that government debt levels were not as high as other some other big developed economies. So she appointed her close ally Kwasi Kwateng as Chancellor of the Exchequer, and his first act was to sack the leading Treasury civil servant, with talk of replacing him with an outsider.
It fell apart with startling speed. In the popular telling the “Markets” struck back, causing mortgage rates to shoot up. This has wiped out any feelgood factor brought about by tax cuts and energy interventions amongst a key constituency of Conservative voters. The talk about the power of Markets is a convenient shorthand, but oversimplifies things a lot. Media coverage as been very muddled. At first a lot of attention was focused on the pound – which at one point nearly sank to parity with the US dollar. But it was the gilt (government debt) markets that caused the mortgage rate problems. I think this took a lot of people by surprise, including, perhaps, our political leaders. In the common understanding interest rates are determined by the Bank of England, which was not due to meet until early November – so people probably expected any crisis on the mortgage front to approach slowly. In fact Bank of England decisions are only one factor amongst many – and mortgage providers need to look forwards at potential future rises. Then a crisis blew up with the liability matching policies in certain pension funds. I have read two tellings of this crisis. In one the pension funds had been indulging in reckless speculation camouflaged as prudent management of future cash flows; in the other prudent management was caught short by a temporary liquidity crisis dictated by the way certain financial markets are structured. The Bank of England rode to the rescue, but a temporary tiding over of a technical crisis was presented by many as something much broader. The Bank’s attempts to communicate what it was doing and why didn’t really help. Neither did Mr Kwateng’s attempts to shrug the whole thing off.
The muddle made things worse. The pound recovered, but gilt markets have not made life for mortgage providers any easier. But what has now been revealed to the world is what the point of Treasury orthodoxy is. Financial markets are complicated things, and they can affect the public in a number of ways. As with any market, they are the meeting place of people with many different agendas. If mismatches occur they can be destabilised quite easily. The Treasury tries to manage things by making orderly, predictable demands, and not pushing its luck. It builds up a reservoir of confidence which means that it can respond to emergencies. The timing of Ms Truss’s attempted coup could hardly have been worse. Rising inflation, low unemployment (showing limited capacity to expand the economy) and the energy crisis, coming after the trauma of the pandemic and alongside the destabilising effects of the Ukraine war, all pointed to this being a particularly delicate moment. Ms Truss’s attempt to blame the demise of her strategy on the markets is a bit like the Captain of the Titanic blaming the iceberg for the loss of his ship. Except that this was no stray iceberg, the government was steaming full-steam ahead the middle of a known iceberg belt.
Now the government, having destabilised things, is having to work very hard to restore order. Treasury orthodoxy reigns triumphant. The new chief civil servant is an experienced insider; an experienced senior politician has replaced Mr Kwateng as Chancellor; most of the tax cuts have been withdrawn; public spending cuts are back on the agenda; the energy price intervention has been scaled back. There was even talk of not raising the level of the state pension in line with inflation – the Treasury has long hated the so-called “triple lock” on pensions.
The dust hasn’t settled, but the effect of this change is chilling. It isn’t just tax cuts that have been put on ice – but hopes by politicians on the left of raising spending on public services and benefits now look much harder to fulfil. Suddenly Britain looks like a lonely nation living beyond its means in a hostile world. Hard choices lie ahead.
The new Conservative leader and British prime minister, Liz Truss, has endured a spectacular collapse in public approval after only a month in office. Her party’s poll ratings have collapsed, and there is an expectation – unthinkable not long ago – that Labour will win by landslide at the next general election. A lot of people have drawn a parallel with a similar collapse under previous Tory prime minister John Major in 1992, after the pound fell out of the European Exchange Rate Mechanism, shredding his government’s reputation for economic competence. Ms Truss’s misfortune followed her government’s first budget, which rocked financial markets, causing a temporary breakdown, followed by much higher mortgage rates. Mr Major lost to a massive landslide in the subsequent general election, put off for as long as he could, in 1997. Ms Truss has only two years to go.
But the episode also puts me in mind of a similar political collapse, suffered by the Liberal Democrats when they entered a coalition with the Conservatives in 2010, led by Nick Clegg. Their polling support shrank to a fraction, and the party was nearly wiped out in the subsequent general election in 2015, and has only partially recovered since. I was a loyal party member at the time – and I still am. The current machinations by senior and not-so-senior Tories is very familiar. Exhortations that the party could turn things around, that it is all unfair, and other variations on denial – together with searing criticism from others, and a steady membership exodus, followed by the disappearance of most of the party’s council base (this last has yet to happen to the Tories, but it surely will). The public turned hostile; it became part of every current affairs comedian’s contract with the BBC that they should heap derision on the party and its leader. I also remember the personal opprobrium heaped on Nick – who evoked a loathing among many members of the public that he never overcame. He fled to America to make his subsequent career. Ms Truss is suffering the same treatment.
Does Ms Truss deserve this? I hate to see politics descending into such personal abuse. And in some ways she is a refreshing change from Boris Johnson, her predecessor. She is clear and focused. This is a little bit of truth that a lot of the misfortune to mortgage rates would have happened anyway. It is a mark of courage to do unpopular things for the longer-term good. Still, she has no electoral mandate to take the government in the direction she has – and she seemingly fails to understand this. And the precarious nature of financial markets was well known before the budget – which makes its content all the more reckless. Her approach to appointing cabinet ministers – reading loyalty ahead of competence – betrayed a complete lack of political skill.
There are lots of contrasts between Nick Clegg and Ms Truss. Nick was a much abler and more rounded leader. He subsequently took up a senior role with one of the world’s most important companies, Facebook (now Meta), and has held down the role successfully, securing a promotion. Few British politicians from any party have been able to pull off such a feat (the only one I can think of is Labour politician David Miliband, now head of International Rescue; he’s perhaps one of the best prime ministers we never had). It is hard to see Ms Truss being offered a senior management role in anything other than a political think tank. Her clarity and focus would equip her well for a number of middle-management roles, but an absence of market or customer awareness, and a blind spot on risk management, would disqualify her from most serious roles. For all his abilities, Nick could not shake off his collapse in popularity – though his high point, during the 2010 election, was much higher than Ms Truss ever achieved. If he couldn’t turn his fortunes around, what chance has Ms Truss?
There was also a striking contrast in what brought about their undoing. In Nick’s case it was because he broke a firm pledge: to abolish student tuition fees. Ms Truss’s problem was sticking to a very foolish pledge – to deliver tax cuts as soon as she took office, regardless of the cost of government intervention on energy prices. Of course the pledge was made to party members – the public had no say in her elevation. The public sees Ms Truss as ideological and incompetent; they saw Nick as sacrificing his political principles for the status of ministerial office – after he’d promised to be different.
Still, there is something the two have in common: a lack of connection with the public at large. Neither had much in the way of a serious contested public elections on their rise to power. They didn’t have careers as councillors; they achieved their ambitions through appealing to party members instead. Nick first became a member of the European Parliament by getting to the top of the list for a list-based proportional election system; he then got elected to the national parliament by getting selected in a safe Lib Dem seat at the only election, in 2005, when such a thing existed. Ms Truss did have a run at being a councillor (in the London Borough of Greenwich), standing twice before being elected in 2006, and standing down in 2010, when she stood for parliament in far away Norfolk. These council elections were all in different wards – there was no sense of building a serious council career. She was just doing her bit while searching for a safe parliamentary seat. I don’t think either she nor Nick expected that the public would react as deeply as they did to their first steps in power. So far as Nick was concerned, going into a coalition is what politicians in minor parties should do, as happens so often in other countries; the reversal on tuition fees was just one of the compromises you have to make to achieve other objectives. Ms Truss seems to think there would be widespread public support for her vision, where it not for all those silly lobbyists and talking heads. And that you implement policies by declaring your objectives loudly and railroading them through with loyal but inexperienced subordinates, regardless of practical difficulties. In both cases they caused a profound breach of trust, both with specific promises – but more generally with what they had claimed to stand for when originally elected. Such breaches of trust are impossible to come back from.
Apart from the fact that Ms Truss achieved the top job in British politics and Nick didn’t, things look bleaker for Ms Truss. Many ambitious Lib Dems MPs in 2010 suspected that they would only get one shot in government in their careers, but accepted that it would be worth it – though I don’t know whether these included Nick. The Lib Dem parliamentary party remained disciplined, the government lasted a full term of five years, and the party had a pretty decent record of achievements within it. Looking back, the most important of these was turning the corner on the promotion of renewable energy. The Lib Dem pupil premium policy also made a profound difference in education. There were other, negative achievements – vetoing or softening Conservative policies. I am, though, probably alone in thinking that the overall balance on austerity policies was right (as implemented rather than as planned), or at least justified based on what was known at the time – apart from excessive restraint on capital spending, which the party argued against. Against this admittedly modest record, Ms Truss stands to achieve very little of her agenda. Her party is divided; the government’s financial position is weak; she doesn’t have enough time.
One thing I think we can learn from the experiences of Liz Truss and Nick Clegg is that it is dangerous to be led by politicians whose careers are built purely on appealing to party members – and not on direct voter appeal – or even a record of achievement in the world outside politics. What to do? Electoral reform could make things worse if the wrong system were adopted. It is one reason that I favour the single transferable vote system – which avoids this pitfall better than any other. But Britain’s politicos don’t want to change the system that has been the basis of their careers. If there is change – which remains unlikely – it is likely to be for a system that includes a role for party lists, which are just as bad as safe seats in the current system. Still a proportional system would do something to constrain the power of those that reached the top – by forcing compromises between parties. A Truss moment would be nearly impossible, and a Clegg moment probably less shocking.
Meanwhile, political parties should reflect on whether it is wise to let their memberships choose their leaders – which they all do – and especially if they are leading the government at the time. Surely this is best left to MPs?
