Politics UK – thinking liberal

Will Boris Johnson survive?

I do not usually use this blog to indulge in short-term political speculation. I have access to no special inside sources – I simply make use of the information pumped out by sections of the mainstream media, being mainly the BBC and the Financial Times, supplemented by newsletters from The Guardian, The Times and the New Statesman. But I can’t resist it in the case of Boris Johnson’s future tenure as UK Prime Minister. There are some wider themes.

By last Friday Mr Johnson had hit a new low, as yet more revelations about parties in Downing Street emerged. Significantly these came through the Daily Telegraph, a paper that has been very supportive of Mr Johnson, with the angle that disrespect was being shown to the Queen, as these events occurred on the night before the funeral of the Duke of Edinburgh. Conservative MPs were reported to be going to their constituencies over the weekend to “take soundings”. This process is often referred to, but it don’t actually know what it means. Clearly comments coming through to MPs through email and social media are highly unrepresentative. But what can you do over a weekend? We are meant to conjure up pictures of MPs going out to high streets and knocking on doors to talk to ordinary voters. But if they do this, the coverage is likely to be small and equally unrepresentative. And it doesn’t sound the sort of thing Tory MPs do on cold days in January. Instead, presumably what happens is that the MPs have a chat to a few usual suspects: party officers and donors, in their Conservative Association – people that they need to keep onside in the shenanigans of local internal party politics. This morning a BBC correspondent was suggesting that the feedback was not as terrible as the emails last week. But it is hard to say how reliable this feedback is. Mr Johnson has not acted out of character after all, and he has a huge stock of capital to deplete.

Meanwhile Mr Johnson has been working on a recovery strategy. The first step is to buy time by asking people to wait for an investigation by civil servant Sue Gray to be completed. Then there has been spin that these are trivial events compared to the great affairs of state that Mr Johnson has supposedly got right, and that anyway he has made a fulsome apology. This apology was made last Wednesday before Prime Minister’s Questions in parliament. This in fact covered only one of the events, and hid behind the lame idea that he thought it was a “work event” that was within the rules at the time. Mr Johnson did look abject on that occasion, but few think that this had anything to do with being genuinely sorry. Alas this dissembling on the apology is typical of how politicians operate, and it is a foretaste of how Ms Gary’s report is going to be spun. It will be presented as answering a question that was actually outside its terms of reference – whether the events were illegal.

The next part of the strategy is to have a clear-out of the staff at 10 Downing Street, whose culture appears to be so out of tune with the public zeitgeist. This supports Mr Johnson’s narrative (to insiders) that he has been badly let down by his staff. This is well-trodden territory for incompetent leaders, and personnel changes almost never work.

But the most curious part of Mr Johnson’s survival initiative has been a series of policy ideas presented to Tory backbenchers as “red meat”. These include putting the Royal Navy in charge of stopping the flow of migrants in small boats coming across the Channel, and ending the BBC licence fee. These invite the question of why, if they are such good ideas, they hadn’t been progressed already. Worse, they look like an invitation to a political quagmire. In the case of migrants, it is hardly clear how this is actually going to solve the problem – instead it looks like more over-promising. Priti Patel, The Home Secretary, has already seen her reputation amongst Conservative activists nosedive for being unable to deliver on fierce rhetoric. And as for the BBC – this could very easily be presented as a vindictive attack an all its works, from Strictly Come Dancing to the Green Planet, from excessively doctrinaire Tories who resent the BBC’s political coverage. The public may have cooled a bit on the BBC, but it is still a much-loved institution amongst the middle of the road voters that the Conservatives need to hold onto.

So this strategy might be called an alligator strategy, after the famous James Bond scene where he escapes from a trap by using the backs of alligators as stepping stones to cross a pool. Tory MPs who are frightened of taking such a drastic step as unseating the PM must be given a possible path to safety. The point is to weather the crisis, not to create a winning strategy for the next two years. And since I think that these MPs are genuinely frightened of making awkward choices, and yearn for the feel-good days of Mr Johnson’s past, I think it could well work.

Which surely leaves Mr Johnson in a similar position to John Major in 1992, when his credibility collapsed with the ERM crisis. He limped on for over four years before succumbing to the worst electoral defeat in the party’s history. Mr Major is the exact opposite personality to Mr Johnson, but that will not stop them from suffering the same fate.

If Mr Johnson survives, it will be a vindication for the Labour leader Sir Keir Starmer, whose strategy has always been to differentiate himself from the Conservatives mainly on competence. After two years when this approach seemed to be taking Labour backwards, it is at last paying dividends. It is unlikely to work if Mr Johnson is replaced by Rishi Sunak, Liz Truss or, especially, Jeremy Hunt. But a wounded Mr Johnson is the perfect target.

Boris Johnson’s political achievements are astonishing. His fall will be as spectacular as his rise. My guess is that this will occur at the next General Election – but it could be much sooner if Conservative MPs have any sense.

The Tories must choose between lower taxes or the NHS

Discontent in the British Conservative party goes beyond frustration with the erratic leadership style of Boris Johnson, and his low poll ratings. Many feel that the government is failing to deliver on a distinctly Tory vision of how to run the country – one that is business-friendly with light regulation and low taxes. Shadow leadership contenders, the Chancellor Rishi Sunak, and Foreign Secretary Liz Truss are both trying to capitalise on this discontent. But there is no way out, which is why Mr Johnson may yet limp on until the next election.

Item One in this discontent is the government’s covid strategy. Many Tories feel that it is too heavy-handed and too beholden to cautious experts. Leave the public to make up its on mind on precautions and take the consequences, they suggest. Their thinking is plainly muddled, and out of touch with most voters, but at least as the virus morphs into something a bit less deadly, so policy can move on in their direction.

Item Two is Brexit. In Tory eyes this was meant to be a great liberation from bureaucracy, which would allow “buccaneering” British business to achieve its full potential. And yes, one prominent Tory did use that word, referring to licensed pirates on the high seas back in the 17th and 18th centuries, at whose modern equivalent the Russians’ advantage is surely unassailable. In fact businesses have been mired in even more form-filling, associated with imports and exports to the European Union, which surrounds the country, and is thus its readiest partner for both. Some remember that it was much simpler back in the 1960s before Britain entered the Common Market – failing to understand how the world has moved on. Meanwhile rolling back regulations has been happening at a snails’ pace, as the regulations were more than a bureaucratic whim, and aimed to achieve a public good – which has to be achieved in an alternative way. Downing Street has resorted to pointing to crowns printed on beer glasses and the changed colour of passports as among the main achievements of Brexit. And that is before the insoluble problem of Ireland is brought into the picture, ever capable of exploding with dire consequences. In fact most Brexit voters, including the former Labour-voting ones that Mr Johnson so successfully courted in the 2019 election, never much cared for deregulation as a reason for Brexit. They wanted to see more restrictive immigration policies – which the Tories have indeed delivered. But that has brought more bureaucracy, and snarl-ups due to labour shortages. Tory MPs’ business friends are not particularly happy, even as Tory voters are now a lot less worried about the issue.

And Item Three is taxes. They are going up, both corporate taxes and national insurance, levied on people in work and their employers. This is nominally to pay for grasping the nettle on the emerging social care crisis, but in fact the money will disappear into the National Health Service, which has been completely disrupted by the covid crisis, and now has massive backlogs for routine care. The Tory discontents say that above all they should be a party of lower taxes (especially on businesses and the rich, sotto voce) – and that this is a betrayal. Mr Sunak hints that if it was left to him, he would be cutting taxes soon. Most people outside the Conservative Party wonder if he can possibly be serious. With little room for manoeuvre on the budget deficit and national debt (and if you don’t think such things are relevant, high inflation suggests fiscal excess) the only way this vision can be delivered is by cutting government spending.

At the heart of this is rising spending on the NHS. Since the party regained power (in coalition) in 2010, the government has attempted to cap NHS spending so that it just about kept pace with inflation. But as the baby boomers age, and skew the ratio of older people, demand has been rising at a higher rate. The financial pressure has caused system resilience to be reduced, and this is one of the causes of the now alarming backlogs. Tory hopes that NHS costs are containable are based on two fallacies and a misconception. Fallacy One is that demand can be met through making the service more efficient. Any user of the service can point to inefficiencies in this massive, bureaucratic behemoth of an organisation. But that comes with the necessary scale and complexity of what the healthcare sector is trying to do – international comparisons show that Britain’s health services are amongst the world’s most efficient. But these same comparisons also show that in many areas Britain’s health services less effective. We are, to quote The Times columnist Matthew Parris, “getting a second-rate service for the cost of third-rate one.” This is not what the public wants, and further cost restraint is liable to mean the service becoming third-rate all round.

Fallacy Two is that faster economic growth can allow spending to keep up with demand. Alas the headwinds against growth in a modern, developed economy are many, and I have written about these many times. That demographic problem that is stoking up demand is not least among them. Besides there is plenty of evidence to suggest that the wealthier people become the more demand there is for health services. Which leads me to the misconception: which is that excess demand for the NHS arises because it is free. That suggests that there should be ways of persuading the public to make do. But the problem is that the effective NHS monopoly on health care limits supply. Other systems are much better at mobilising private money – and where they do, demand is higher, not lower. A large and growing healthcare sector is one of the features of any modern, developed economy, however it is financed. Resisting it will breed discontent.

That points to an answer. If Britain could move healthcare to a public insurance model, such as the Netherlands or Australia have, the public would both get a guarantee that their basic needs will be met, and the mobilisation of private money to pay for a world-class service. I have been to Australia quite a bit over the years – and one thing I hear very little of is discontent with its health system. And Aussies know how to be discontented. But such a shift, as surely almost all Tories know, is an impossibility. For all its faults, the public has become attached to the system. And trying to mix more private money into it would be seen as a betrayal of its ethos. Doing this as a open public policy is clearly suicidal. But doing so by stealth, by restraining the public service while allowing the private sector to grow, is problematic too – although exactly this has happened to dentistry and optometry already. If wealthier people are paying big taxes for a service they don’t use, it will create discontent, and reducing their taxes will starve the public service, making it even worse. Neglect of the NHS under the Conservative governments of 1979 to 1997 was one of the reasons that support for the party collapsed in the 1990s. And one of the reasons that Mr Johnson did so well in 2019 was by promising to invest a lot of public money in the NHS, amongst other public services.

But people can pay more tax. Taxation in Britain is not especially high by European standards. If the system is well-designed the harms can be limited. Tories will have to embrace this, unless they want to challenge the public shibboleth of the NHS. Instinctively many Conservative MPs understand this, and they may realise that Mr Johnson represents the best way of postponing this awkward choice, and they may well let him muddle on.

What Conservatives should be doing is developing a new vision for the 21st Century that embraces higher taxes and a well-funded NHS at the heart of a flourishing health economy, based on world-leading health research and development. This is perfectly credible, unlike world leadership in buccaneering.

Boris Johnson’s Covid gamble

Understanding the latest wave of infections of Covid-19 in Britain is very hard. Data collection has been messed up by the holiday season, and anyway this wave, driven by the Omicron variant, is presenting in a different way to earlier ones, meaning the statistics don’t quite mean the same thing as before. Politically the most interesting thing, though, is the “don’t panic” attitude of the government’s policy in England, compared to what has been happening in Scotland and Wales. It is a gamble.

This gamblers based on a number of ideas. First is that the Omicron variant causes less serious harm than earlier ones, and that this is reinforced by more widespread vaccination, including third jabs, or “boosters”. The thought seems to be that scary infection rates won’t cause hospitals and other health services to be overwhelmed, and that the wave will burn out quickly and subside rapidly, reducing its impact on daily life. However this assessment seems to be as much driven by politics within the Conservative Party, as a sober assessment of what is known about the virus. For reasons that aren’t very clear to me, the Brexit awkward squad has decided that scepticism of the conventional, cautious approach to fighting the virus is the next Big Idea. Many business lobbies seem to have joined in, especially those in the hospitality and travel, after a frustrating two years, with recovery repeatedly postponed. The evidence and logic backing up these sceptics is weak at best – it is mainly a question of clutching at straws and finding out flaws in the logic of the advocates of caution. Funnily enough, though this scepticism is very prominent, even dominant, in the ruling party, it does not seem to be widely shared by the public, who usually find the government scientists more convincing. It is significant that the Scottish and Welsh governments (respectively led by the SNP and Labour) are taking a more cautious line.

So far it is very hard to tell who is right. Hospital admissions of people with Covid are going up, but not as fast as infections. Moreover it is not clear how many of these admissions are of people seriously ill with Covid, as opposed to being ill with something else, and also happening to be infected. A bigger source of stress seems to be staff being infected and having to stay away from work in isolation. Are things better in Scotland and Wales than in England? The statistics are very patchy; they do seem to be doing better, but that may be because Omicron hit them later (especially Wales). But if the government has got it wrong in England, it is too late to do anything about it. We could be in for two or three weeks of stories of overloaded hospitals and ambulances waiting outside unable to discharge their patients – and extra deaths, from Covid or not, as a result.

I find the sceptics generally unconvincing, and yet they aren’t wholly wrong. Stopping the virus is an impossibility – we have to have an end-game which involves us living with the virus, as we do with the common cold and flu. Vaccination is clearly part of that; other public health precautions may also have to become a permanent feature of life. We might need to adopt East Asian attitudes to the wearing of face masks. Ventilation standards need attention. Something else probably has a role too: waiting for the virus to evolve so that it comes less virulent, even as it becomes more infectious. Omicron seems to be a major step in that direction – which is why the government’s gamble may yet pay off.

And if it does, that will be a personal triumph for the Prime Minister, Boris Johnson, which will bolster his position within his party, if not the country at large. Another possibility is that things go badly, but turn out to be no better in Scotland and Wales, in spite of their extra precautions. That would prove the contention made by lobbyists that hospitality venues present minimal risk, and that restrictions are simply rounding up the usual suspects for appearances sake.

But most likely is that the evidence will be muddled, without proving either side right until many months later, when the debate has moved on. Such is life in the era of Covid. Happy New Year!

A vindication for Ed Davey and Keir Starmer

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

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

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

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

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

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

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

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

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

Tory MPs must ditch Boris Johnson

By common consent last week was terrible for the British Prime Minister, Boris Johnson. He failed to bluff his way through the story of a party a year ago in Downing Street, in apparent breach of covid regulations. More juicy details are leaked out whenever the story might be dying down. A video of a mock press conference held a few days after the party told us all we needed to know about this event: it happened; it was wrong; and they knew it. Meanwhile the Conservative Party was fined by the Electoral Commission or failing to disclose donations properly on the refurbishment of his flat – and it turns out that some of his statements on this affair have been less than complete. Then he has been forced to introduce “Plan B” of covid restrictions in the face of the Omicron variant – much to the consternation of many Tory MPs and lobbyists, who accuse him of doing this prematurely to divert attention from his other troubles. It says something about the trouble he is in that the birth this of his daughter failed to gain much attention at all.

It is possible to have some sympathy for Mr Johnson. The party in Downing Street was a long time ago, and doubtless many other similar events took place across the country, unpunished, even as many ordinary members of the public cancelled their plans, and were separated from their loved ones. I find the suggestion that the police should waste resources by investigating it a bit outrageous. There is clearly a malicious hand behind the way information is being leaked, and not least that video. The time for a fuss was a year ago; this is just political manoeuvres. Similarly on the flat, the bottom line is that the public were not asked to pay for it, and the fact that some external party donors might have been involved is, I’m afraid, just how many politicians run their lives. The Electoral Commission’s rules are often confusing, and they have the tendency of all regulators to pursue the minor infractions of the well-intentioned, rather than the serious stuff that is so much harder to pin down – a version of the proverb “Look after the pennies and the pounds will look after themselves”, ending up as “Penny wise, pound foolish”. And as for the new covid regulations, these look sensible and well-timed. As usual sceptics fail to understand the dynamics of exponential phenomena, as well as the reasons why it is important to keep the flow of cases to our hospitals manageable. Days make a difference; this was a welcome departure from reacting far too late, which has been the government’s usual habit. That is being too kind, of course: the first two stories illustrates mr Johnson’s fondness of flouting rules designed for everybody else; the third invites he question of by he did not act more promptly in previous critical moments in the never-ending covid drama.

But there is a much deeper problem. We have been spun the story that Mr Johnson is a man of radical strategic vision, who does not get bogged down the detail – his supporters like to compare him to Winston Churchill in World War 2. But Mr Churchill had many years of experience in and around government by then, and knew the value of competent people. Mr Johnson has little governmental experience, and treats competent people as a threat. This week’s Economist bemoans the fact that all the radical promise of his takeover of government in 2019 has dissipated. But there is absolutely nothing surprising about any of this. It was always clear that Mr Johnson was a ducker and diver, with little of the grasp required of effective leaders. He was chosen by MPs and party members out of frustration with his predecessor, Theresa May, and then by the public, largely because his opponents lacked credibility. His majority is as much rejection of Corbynism as an endorsement of a new Conservative vision of levelling up, deregulation and the sweeping aside of complacent liberals.

As The Economist points out, Mr Johnson’s progress on the big issues is no better than his handling of the trivia. Covid has been a huge distraction, but the government gets stuck as soon as it hits anything difficult – such as liberalising planning policy, managing Brexit, investing in infrastructure, or many other things. The government’s handling of the pandemic is mixed at best. Mr Johnson often seems to be aiming for a middle way between lockdown advocates and sceptics that is the worst of both worlds. Ironically his recent handling of the Omicron variant has been very sound – it is an astute combination of short-term measures to buy time, and the promotion of a longer term solution through booster jabs; the public has clearly responded. And yet he cannot break free from the suggestion that he is using the issue to distract attention; the manner of his broadcast on Sunday night has few other convincing explanations.

The onus is now on Conservative MPs. They got themselves and us into this mess, and they need to get us out. Under Britain’s constitutional arrangements only they can remove the Prime Minister, outside an election, if he does not go of his own accord. They simply have submit no-confidence letters to the chairman of the 1922 Committee. And yet they seem reluctant. Some justify this on the grounds that he is an “election-winner”. But what is the use of somebody who wins elections but cannot govern? That is an unbelievably bleak view of the purpose of politics. Besides, the favourable circumstances of the last election will be hard to recreate. One problem is the lack of a challenger to wield the knife, as Margaret Thatcher did for Ted Heath in 1974 (as Matthew Parris points out). At least two cabinet ministers are on manoeuvres (Rishi Sunak and Liz Truss, excoriated by Mr Parris). Clearly of greater stature is Jeremy Hunt, who lost out to Mr Johnson in the last leadership election. Surely one of these can break cover?

Maybe they are waiting for Thursday’s by election in North Shropshire. But Britain needs somebody, somewhere to make a stand, and soon.

No easy answers to Britain’s migrant mess

A political crisis is playing out on the coast of England not far from my Sussex home. Almost daily, flimsy boats carrying migrants attempt to cross the Channel to reach the Kent and Sussex coast; they are often picked up by Border Force or RNLI boats. The numbers are growing rapidly, with not even the autumnal weather putting them off. And these crossings have turned to human tragedy, with 27 migrants dying off the French coast last week when their boat capsized.

The political crisis arises because Conservative Party supporters feel that this situation is intolerable; they had voted for Brexit to keep migrants out, but they seem to be flooding in, with the government apparently helpless. Many of these supporters would rather the travellers drown pour encourager les autres; Conservative politicians, realising that such views are unacceptable in the mainstream, instead rail against the people smugglers profiting from the traffic, and the allegedly unhelpful French. Left and liberal politicians meanwhile suggest that safer alternatives be provided for the migrants, but mainly enjoy the schadenfreude of pointing out that Brexit has made this particular problem harder to deal with. Workable solutions are not offered.

To a large extent the government’s problem is one of success. It has implemented harsh policies to keep out those migrants it deems to be undesirable, meaning most refugees and anybody who is not highly educated, preferably at a British university. They have taken full advantage of Brexit to do this, and the overall flow has been reduced substantially. The country takes in many fewer refugees than comparable other European countries. Earlier efforts to cooperate with the French, predating Brexit, have stemmed the flow of migrants smuggled on lorries. The refugees and their people-smuggling agents have few alternatives to the use of boats. Unfortunately the trade is so lucrative that it has expanded – and it has proved very hard to police. Unlike Poland and Belarus, Britain can’t simply put up a fence patrolled by soldiers to keep them out.

Why are they coming? After all they are passing through countries, not least France, that many Britons feel are desirable places to live. But like in Britain, these refugees, many of who are Muslim, evoke a lot of public hostility, so their governments aren’t exactly welcoming. Many of the migrants want to join family or former neighbours already settled in Britain. There is also a suggestion that Britain has a rather lax attitude to things like identity papers that makes it easier for illegal migrants to get on. Most of the migrants seem to be genuine refugees from the world’s growing number of troublespots – Afghanistan in particular. A suggestion by some that they are mostly “economic migrants” from countries that are simply poor no longer seems to be true, though I don’t entirely trust my sources on this. At the bottom of this, Britain is indeed a highly desirable place to live, and one where migrants with the sort of get up and go needed to make the hazardous journey can do well. Racism and Islamophobia are rife, but I don’t think they are worse than anywhere else in Europe – and indeed attitudes are probably more liberal than in most.

What is to be done? Shrugging and letting it carry on is unattractive. The country could probably absorb the arrivals easily enough, but the trade is lucrative and expanding. Many more will doubtless die – and also the continued acceptance of the migrants makes the state look ineffective. Most of the migrants seem to be scooped up by the authorities (unlike the lorry-smuggling trade) and then have to be processed, rather than simply disappear into their communities, placing a strain on the civic authorities. Pushing the boats back (as apparently the Greeks do to boats from Turkey) looks unworkable. The Channel is too broad and its waters too unsafe, especially in the craft that the migrants use. The traffickers have no incentive to give them more seaworthy boats. Beyond that the authorities’ main idea is to remove them from British shores as fast as they can. This, it is argued, will “break the business model” of the smugglers by reducing the chances of a successful journey. This could be to offshore processing centres – Australia has used such a policy with some success – and then back to their home countries. The legal obstacles to such a policy are in the process of being dismantled by new legislation. But where to process? It is not an attractive prospect for the host nation, and British dependencies are too small and too far away (the Falklands has been suggested). And how to send people back to a war zone?

Or the migrants could simply be sent back to France (or Belgium, also used by the smugglers). That requires their agreement, though, and they have no incentive to cooperate. After Brexit the country has many fewer pathways to achieving a solution along these lines. Some form of quid pro quo would be needed, and that would mean accepting a greater number of refugees one way or another. Meanwhile the idea of beefing up the border patrols on the continental side of the water and arresting the traffickers seems to have little chance of doing much to stop such a lucrative trade.

Another idea from conservative types is to make life harder for refugees and illegal immigrants in the UK. This was tried out a number of years ago with a policy called “hostile environment”. Alas such policies in the hands of bureaucrats and enforcement agencies usually end up by punishing the wrong people – those that came in long ago, when paperwork was laxer, and who are now fully integrated. Such people are easier to find. That was the “Windrush Scandal” that proved to be politically very damaging. Besides the idea of Brexit was to celebrate Britain’s tradition of freedom and lack of bureaucratic interference in daily life – and not t turn us just another Euro-state regulated by busybodies.

So what do liberals suggest? Increase the flow of refugees through safe, legal routes. The idea seems to be that doing so would reduce the incentive for migrants to take such a risky route and pay the smugglers. But, of course, it cannot reduce the overall flow of migrants. Indeed it would surely increase it – reducing the cost of migration would increase the flow. There would also be an incentive for other countries to send their awkward refugees on to the UK. Another liberal idea is to try and head of the trouble that is causing people to flee with more aid. But the failure of Western military interventions, and the concomitant rise of countries starting or provoking wars makes this a pretty hopeless task.

So what to do? There is no good answer, but the best way forward surely requires multiple approaches. It starts with more generous policies for accepting refugees through safe, legal routes. It is ridiculous that the country has not done more to accept more Afghans, for example, as there was clear political cover for this in response to Taliban victory. This would give Britain a stronger bargaining position when trying to hammer out solutions with our European neighbours to get tougher on the smugglers and reduce the number of successful crossings.

And that is probably as good as it gets. The people trade is like the one in illegal drugs – too hard to stop, but one that multiple channels can alleviate.

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

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

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

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

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

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

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

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

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

The curious case of Owen Paterson

Last week was acutely embarrassing for the British Conservative government, led by Boris Johnson. After an excoriating report by the Parliamentary Standards Commissioner, the House of Commons was due to censure former Tory cabinet minister Owen Paterson for repeated paid lobbying. Mr Paterson was popular on Conservative benches, and was vociferously maintaining his innocence – so Mr Johnson thought he’d help him out and rewrite the standards system, which he heartily despises, in one fell swoop. Thanks to a three-line whip, and the decisive voting support of a number of MPs who had fallen foul of the system, he narrowly won the vote last Wednesday. This caused such a stink that he promptly reversed course the following day, and now Mr Paterson has resigned as MP. All those Tory MPs who loyally voted for the wrecking motion endured the stink for nothing. I find the whole affair a bit puzzling.

The first curiosity was why Mr Patterson resisted the Standards Committee’s report so vociferously. At the start of the week the BBC interviewed him, and he vehemently maintained his innocence. He claimed that the whole standards process was unfair, saying that 17 witnesses that he had put forward were not heard, and that he had no way of making a proper defence, and not even a right of appeal. He even claimed that the way he was being persecuted over the two years of the investigation led to his wife’s tragic suicide. This was pretty strong stuff, though I had heard this kind of thing before from senior Tories. I will never forget Jonathan Aitken and his claim of “the sword of truth”, before being found guilty. His alternative course would have been contrition, admitting what he had done was wrong, and throwing himself on the mercy of his fellow MPs. Given his popularity, and his personal tragedy, this might well have worked – he could have got away with no suspension or a short one, that would not have had the possibility of triggering a by-election. He may well have believed what he was saying – but, as Matthew Syed points out in The Sunday Times, the human capacity for self-deception is massive, especially when it is in our interests. He would not have got himself in so deep if he had thought what he was doing was dodgy, but he does not appear to have been well-advised.

The next puzzle is why the first initial media response to Mr Paterson’s claims were so muted. On the BBC there was only a formulaic rebuttal, saying that the standards process was independent; none of the specific issues that he raised was responded to; it wasn’t even very clear what he was being accused of; his interviewer certainly didn’t press him. It was not until the debate itself that it emerged just how flimsy Mr Paterson’s defence of was, both in his explanation of his behaviour, and his criticism of a parliamentary process that has been in place for decades. He behaviour was clearly and repeatedly in breach of standards; his 17 witnesses had submitted written statements; the process allowed Mr Paterson to make what amounted to an appeal; and so on. Given the Tory onslaught on the supposed bias of the BBC, I’m not surprised that they wouldn’t take it on, though it says much for the sad state of that institution. But nobody else did either, until that debate. My New Statesmen daily email wittered away about other things. There were no articles in my online Financial Times, nor in the email newsletters from The Times or the Guardian. Where they cowed by the threat of legal action until the parliamentary debate laid things bare? Did they not understand the importance of the story? Where they leaving a trap for the Conservatives to fall into? I’m too far away from the action to have much idea. Once the case against Mr Paterson was properly explained in the debate, though, the papers turned on him.

And then there is the puzzle of why Mr Johnson ordered a three-line whip on the rather bizarre wrecking motion, which basically suspended Mr Paterson’s case until the rules were rewritten by a committee with an inbuilt Conservative majority. This brought the whole thing back onto him and his government. Perhaps the initiailly muted press reaction lulled him into a false sense of security. But if sentiment in his party was strongly for Mr Paterson, and against the standards system, he surely did not need a three-line whip? And if it wasn’t, he was obviously taking a big risk. Mr Johnson certainly wants to dismantle the standards system, which he himself has run foul of, and which may well cause him trouble in future (the rather curious episode of the financing of the refurbishment of his flat is a case in point). Perhaps he was not aware of just how overwhelming the case against Mr Paterson was. It had ben a busy week and he has a distaste for detail. He also seems to have been badly advised by either or both of his Chief Whip and the Leader of the House.

It remains to be seen how much damage the affair will actually do. I suspect that the opposition’s aerated claims of corruption will not cut much ice in themselves, though attacks from fellow Conservatives, such as Sir John Major, might. It is still likely to be another dent in the government’s reputation, which will make support harder to rally in future. Perhaps more serious is that the prime minister will have lost credibility with his MPs; he will find them less willing to go into the lobbies to support any future dodgy business. There is no immediate threat to his leadership, though.

Still, this whole curious business shows that there is a level below which the government is not allowed to sink, much as it might want to. That is something.

New Labour was not about making hard choices

I have now finished watching Blair & Brown – the New Labour Revolution, a 5-part series from the BBC on the Labour government of 1997 to 2010. For politicos like me it was compulsive viewing, for all its flaws. Does it say anything to us about politics now?

One criticism of the series is that it was too long. Five episodes of one hour each is indeed a lot of time, but I was hooked, as were many of the reviewers. We learnt quite a few new things, and the tension between its two principal characters gives the subject a fascinating dynamic. In fact the main problem seemed to be on how much it left out. There was no coherent commentary from the left of the party, for example, and the causes of the Global Financial Crisis were not examined. This left two critical parts of the New Labour narrative (or myth in the word’s broader sense simplified story) unchallenged – that “Old Labour” was unelectable, and that the GFC was something that happened from out of the blue from the USA that the government neither contributed to, nor could do much about. Both warrant challenge, even if emotionally I am bought into the first of those myths, while strongly disagreeing with the second. But neither is a simple question to unpick, and the argument on the GFC is probably asking too much for most political journalists to be able to handle, alas. Instead they took a whole episode to dig into the Iraq War – an editorial decision that it is hard to gainsay. The first episode covered the period before they won power, and there was episode for each of the three terms – so there was a logical structure to the whole series. Quite a bit of time was spent on pregnant pauses within the interviews (which included both main protagonists amongst many other important figures), but the overall pace was not slow.

I am struck by how deeply flawed the partnership was. The two leaders worked as a team before the 1997 election, but after that Gordon Brown jealously guarded the Treasury as his fiefdom and kept Tony Blair at arms length. I have no doubt that it was Mr Brown who was primarily at fault here. One of the most remarkable moments came when it dawned on Mr Blair that the government had to dramatically raise its spending on the NHS, to bring it into line with the average of health spending in Europe. This was a brilliant insight (which I have explained recently on one of my blogs) that very few people in the governing elite seem to understand – instead seeing the NHS as a spending black hole that needs to be contained somehow. But the only way Mr Blair could persuade Mr Brown to follow this line was by announcing it in a television interview. Mr Brown could not see the wood for the trees. It turned out to be one of New Labour’s best, and most popular, policies.

It would be tempting to characterise the partnership as Mr Blair being strong on vision, and Mr Brown being good on the detail. But Mr Blair was wrong about a lot of vision things too. He was wrong to push for joining the European currency (though at the time I was on Mr Blair’s side) – another disagreement resolved through the news media; he was wrong about joining the Americans in the Iraq war; he was wrong about trying to bring a private sector ethos into the public services, such as the NHS and schools. On all of these Mr Brown’s judgement seems to have been better, though he was and remains very unengaged on Iraq. But Mr Brown became complacent, especially with his hands-off approach to the financial sector. He put in place a tripartite system for managing national finance, between his Treasury, the Bank of England, and the Financial Services Authority (FSA). All well and good, but it was clearly his job to ensure that the system as a whole was working. He did not seem to grasp the seriousness of the situation until the collapse of Lehman in late 2008, by which time he was Prime Minister. His response then was magnificent – but more insight in 2007, when the risks were becoming obvious, would have helped. Instead he cut the rate of Income Tax, which left the country very vulnerable when the bubble burst. He was so blinkered by his success in “no more boom and bust” that he would not see the risks building up in the system.

Though it ended badly, New Labour has to be seen as a success overall, with three successive Labour general election victories, two of them landslides. Can it tell us anything about the future? The obvious parallel takes us back to Labour, which once again is back in the doldrums. The New Labour strategy was to win by courting the political middle ground and holding back on the party’s more left wing instincts; their most important insight was that the middle ground was a rather conservative place, and not the liberalism associated with centrist political parties, though it needed that too. The party needed a firm message on law and order, and a conservative stance on taxes and spending – as well as keeping union power at bay. This meant accepting that a lot of the legacy of Margaret Thatcher’s government had to stay. That itself was not enough, because John Major’s Conservatives were firmly anchored in that middle ground, and had used that strength to pull off a victory against the odds in 1992. Mr Blair and Mr Brown also had to exude confidence and competence. This was not too hard, as the Tories were beset by divisions, and their economic prestige suffered a fatal blow with the ERM fiasco in 1992, shortly after the election.

Can Labour follow the same strategy? Its leader, Sir Keir Starmer, clearly thought so after he took over in 2020, with the government floundering with its response to the covid-19 pandemic, and seemingly led by right-wing ideologues. Mr Starmer always appeared on television with the word “leadership” on his backdrop. But the Conservative leader, Boris Johnson, has a clear eye on that middle ground, which remains generally conservative. But he also understands that the middle ground has moved on – largely thanks to New Labour. Now it means a strong commitment to state-funded public services, such as the NHS. Unlike Mr Major (now Sir John), though, he has an iron grip on his party. He has recovered from his wobbles on the pandemic, and the public (or the floating voters anyway) appear to have forgiven him. Mr Johnson’s rhetoric on climate change and the environment also marks out his fight for the middle ground. He is not presenting anything like the target that Messrs Blair and Brown were able to destroy prior to 1997.

But the problem for Mr Johnson, and anybody hoping to win on the middle ground, is that it is a have-your-cake-and- eat-it sort of place. It wants well-funded public services but no more taxes; it wants action on climate change but no addition to heating or motoring costs, and so on. This is creating growing tensions within the Conservative Party. It does not create much of a direct opportunity for Labour – who are no more able to solve the contradictions of this middle ground than the Tories. But division amongst the Tories could allow Sir Keir to appear as a more competent alternative.

But a successful challenge is unlikely to look anything like New Labour. Perhaps Labour can try its own “cake” strategy by allying itself with the Lib Dems and the Greens, each of which can cement its appeal to different segments of the anti-Conservative market while leaving there contradictions unresolved. That alliance would need to be based on the promise of electoral reform. It would be a risky strategy, and it is too early to start playing the cards now. New Labour did create an informal alliance with the Lib Dems in the 1990s, as part of its strategy of leaving nothing to chance. But the Lib Dems are weaker now, while trust between the parties is low. Mr Blair was happy to hint at electoral reform then but in the end was “unpersuaded”. Something stronger would be needed now.

Britain, along with most of the rest of the world, is confronting some difficult choices. This is much more the case than in 1990s, when the opportunities for economic growth were much better. After an initial period of austerity, New Labour did not have to navigate such treacherous waters and was able to present voters with a “both/and” proposition. Alas hard choices do not make good politics – the revolution now would be to make taking those choices electorally appealing. The New Labour experience offers us no clue on how to pull off such a feat.

Now is the time for austerity

Contrary to some of the headlines, yesterday’s British Budget was an austerity budget. Its aim was to bring current spending and taxes into balance in three years, with a capital deficit restricted to 3% of GDP. With the current budget deficit at around 11% of GDP, that is a sharp contraction. The Institute of Fiscal Studies points out that most households will be worse off next year. The ratio of tax to GDP is widely projected to be the highest since the years of postwar austerity. Austerity is what current economic conditions demand. The main risk is that it will not be enough, and that it will precipitate a recession in the run up to the next general election.

That the Budget felt the opposite is down mainly to brazen but effective news management by the Chancellor of the Exchequer, Rishi Sunak, and also to a stroke of good fortune. The main bad news was the substantial rise in National Insurance, alongside the withdrawal of most of the emergency support for Covid, notably an uplift in Universal Credit and the furlough scheme. This news had been broken weeks ago, and presented as in the former case a bold stroke to deal with the growing crisis in social care, and in the latter as the coming to an end of the pandemic nightmare. The stroke of good luck was that the independent Office for Budget Responsibility that produces the economic forecasts on which the Budget is base offered a more optimistic picture of the years ahead than hitherto. It charted a rapid recovery from the pandemic with a reduced level of long-term damage. The country is indeed rapidly recovering from the shutdowns that disrupted the economy, making the furlough scheme in particular redundant, and this does improve the economic statistics – but beyond that this all chaff. The tax rises have little to do with the social care crisis; rising prices mean that the Universal Credit cut is causing hardship; economic forecasts have a paradoxically backward looking methodology which makes them very unreliable. Mr Sunak has navigated these treacherous waters cleverly, but what does this all mean in the cold light of day?

Austerity, by which I mean the squeezing of the government deficit by raising taxes or cutting spending or both together, has a bad name at the moment. In this country it is attached to the policies of the Conservative/Liberal Democrat coalition of 2010 to 2015, after the Great Financial Crisis (GFC), and to the following Conservative-only government. The crisis had shredded government finances, but its aftermath left economic demand weak. Economists pointed out that in these circumstances it was usually wise to loosen government finances, not tighten them. Years of hardship and lacklustre growth bore this analysis out. The defenders of austerity stuck to economically illiterate but intuitively appealing arguments, making an analogy with prudent household budgeting and the idea of protecting future generations from debt. There was a literate defence of government policy to be made, at least up to 2015, but practically nobody made it – I was a lonely voice (Lib Dem Business Secretary Vince Cable also made a valiant attempt). This put the blame on the unbalanced nature of the economy before the crisis and the need to restructure it. But even I (and surely Vince) thought the austerity was overdone, especially with regard to public investment. Meanwhile the literate economic critique gave the left their opening to demonise “Austerity” as vicious crime against humanity. Loose fiscal policy and economic growth came to be seen as two sides of the same coin.

Given that experience, it was natural to respond very differently to the next economic crisis, brought on by Covid-19. Government coffers were immediately opened up with a number of very generous schemes to support individuals and businesses. These were successful in alleviating a lot of hardship – though economists making comparisons between different countries have struggled to draw a connection between fiscal generosity and the scale of economic damage. Britain’s government was one of the most generous, but many others suffered less economic damage. That, though, is more a reflection of poor management of public health than the economic policies. Also Britain was coping with a further disruption: dropping out of the European Single Market and customs union, and the implementation of tighter immigration controls – which collectively I will call “Brexit”. All the same it points towards a greater truth: this crisis is very different from the previous one, and that affects the economic response.

In retrospect the remarkable thing about the GFC is that it affected the demand side of the economy more than supply. Important though it may be to the functioning of the economy, the financial sector at the centre of the crisis did not have such a big impact on the “real” economy – relatively few jobs were directly impacted, and a lot of those were saved by narrow but generous government intervention. What it did was to increase the level of net saving by making it harder for people to borrow, while at the same time the shock stopped businesses from investing. Increased saving paired with reduced investment is the very definition of a Keynesian recession, to which the public policy response should be to loosen fiscal policy.

But the problem this time is very different. Demand is alive and well; the impact of the crisis on jobs has been muted, while the lockdowns have allowed many people to accumulate savings that are now available to spend. Supply, however, and especially in Brexit Britain, has been hit hard. This is particularly evident in trade and logistics, and also in energy. The problems are global, but Brexit has added an extra dimension in Britain, especially as many foreign workers went home as the lockdowns took effect. This was what the economy demanded at the time, but these workers are reluctant to come back, partly, but not only, because of immigration controls. In the last two decades Britain has relied on two safety valves to regulate its economy: imports and immigration. Mismatches in supply and demand have been met through both – and in particular the fact that the supply side of the British economy is relatively weak. Now neither is working properly – or rather they are only working in one direction – to accommodate reduced demand, as in the early stages of the pandemic, but not its increase. The result is visible: inflation.

Government politicians and economic forecasters shrug the problem off. The problems are temporary, they insist. Once more ships are back plying the seas and containers located in the right places, and businesses have adapted to the changed environment, then it will be business as usual. But this is complacent, and especially so in Britain. It reminds me of the early stages of the GFC (and has resonances with what I read of the oil shocks of the early 1970s); the crisis was evident by mid 2007 when the uncertainties arising from complex derivatives linked to the US housing market caused international interbank markets to freeze up. At the time (alas before I had started blogging) this was scary enough for me to sell all shares in my pension plan and invest in index-linked gilts. But most people were in denial, supported by the usual backward-looking economic data, which showed th problems to be limited. The metaphor I used at the time was of a ship holed beneath the waterline desperately sailing for safety. That metaphor works less well this time, but the problems with supply look deeper than most people are allowing. And in Britain the changes following from Brexit are long-term. The Prime Minister, Boris Johnson, cheerfully talks about the economy responding to the difficulties by restructuring to become a high-skill high-wage one; he is even encouraging people to push for wage rises. But such changes take time and investment – and meanwhile all putting wages up does is encourage a wage-price spiral. We have thrown away the stabilisers on our bicycle without having learnt to ride it unaided. These are exactly the conditions where governments should reduce overall demand by applying austerity.

What happens if the austerity is not enough? This was the topic of my last post. Inflation gets stuck at a high level; interest rates go up; hardship spreads across Middle England (and Scotland and Wales) and property prices dive; the costs of government spending go up. Recession follows. Most Government supporters seem to be in denial. The smarter ones (and I suspect that Mr Sunak is among them) hope that with clever footwork they can time the next election in a sweet spot while people are feeling good from inflationary payrises before the devastation strikes, perhaps supported by a (reckless) tax cut. But at least there is some appreciation that austerity needs to be the direction of travel. Alas the left have not caught up with this fact, ever unwilling to acknowledge that economic policy depends on context.