What is the point of the Labour Party?

People often ask what is the point of the British Liberal Democrats; the same question, for similar reasons, might be asked of the country’s Green Party. The raison d’être of Labour seems self-evident. But the party is failing and the question needs to be asked again.

A century ago Labour broke through the country’s two-party duopoly to replace the Liberal Party as one half of Britain’s two-party system. At that time the point of Labour was clear: it was to represent the interests of Britain’s working classes. The party’s founders argued that working people were ill served by the existing system, and that the Liberals in particular were letting their working class supporters down. Working people needed a more radical reworking of the political economy than the Liberals seemed capable of offering. It was an argument they won as the Liberals were riven by division and failed to offer a coherent raison d’être of their own. Labour then struggled to reconcile their radicalism with the practicalities of government, but eventually, in 1945, they succeeded with a radical programme of welfare reform, combined with relatively conservative economic management and foreign engagement. Ironically the two principal architects of this reconciliation were in fact Liberals: William Beveridge and Maynard Keynes. Such is politics.

Since then the function of the Labour party changed, as the nature of work in the British economy changed. The agricultural and industrial workforces were steadily replaced by bureaucrats and service industry workers. In the 1960s and 1970s trade unionism, which formed the backbone of the Labour movement, seemed out of touch with the times. They opposed more efficient industrial organisation and often entrenched conservative attitudes to race and sex. Labour struggled to adapt. It was riven by division when in government in 1964 to 1970, and failed to convincingly win power back in 1974, finally succumbing to a Conservative monopoly of power in 1979. When it retook power in 1997 it was as “New Labour” under Tony Blair. In its new form its job was simply to oppose the Conservatives by marshalling a coalition of working class and middle class voters. In this view the British political system had become a two-party institution like that in the USA. Political organisation outside the two main parties was pointless, each of the two had to be a broad coalition. The days when a political party could be based on narrow class interests were gone.

The British political establishment, from most politicians to journalists and civil servants largely accepts this idea of what the two main political parties are for. But it has a problem, evident in the USA as well as Britain, though it is resolving differently in each country. It is too tempting for an ideological clique to try and take over the machinery of one of the major parties in order to impose a programme on the country based on minority support. The ideologues may fail, but in doing so they leave the field to their opponents, and the system fails to become truly competitive. That is what has happened to Labour following its loss of power in 2010. Labour was still run by a relatively broad coalition, representing the interests of public service professionals and the “new” working class, dominated by ethnic minority workers in the big cities, but they dropped more conservative supporters.

The two-party system then fractured badly in 2015, when in Scotland as the SNP took almost all the seats. Since Labour had previously dominated there, it has ruined their chances of being truly competitive on the national stage – the party has little prospect of governing on its own, even if they deprive the Conservatives of a majority. An ideologically hollowed-out Labour Party has proved unable to challenge the SNP, and has even lost out to the Tories in Scotland. An ideologically-focused Labour Party has proved just as uncompetitive.

The Labour leadership since this disaster, Jeremy Corbyn followed by Sir Keir Starmer, has chosen to ignore it. Both clung to the possibility that the party can win enough seats in Westminster to govern on its own. Mr Corbyn sought to do this with ideological radicalism in the hope that this would motivate enough disillusioned and apathetic voters to overcome the legions of older, more conservative voters who turn out more reliably. This came closer to succeeding in 2017 than anybody expected, but led to disaster in 2019 – which of those elections was the outlier due to special circumstances remains hotly debated. Sir Keir is going back to the idea of an unideological party that can challenge the Conservatives on competence.

Sir Keir’s strategy seems to be navigating that awkward ground between success and failure. At this year’s conference he needed to show that he was in charge of its party. This he has largely done – the disunity and “chaos” described by some are in fact evidence of authority being asserted. But does Labour look like a competent government in waiting, as Mr Blair’s did before 1997? Not yet. Will it ever? Open to question. And if it can’t show evident competence, what else does it offer? Above all this looks like a strategy that depends on the Conservatives losing the election, rather than Labour winning it. For all the government’s incompetence, however, the current Tory leadership knows how to win elections by changing the subject. And remember Labour can’t just win – it has to win big.

Meanwhile there are those who think Labour should instead break the system that is now so loaded against it. This means changing the answer to the question of what Labour is for. It would cease to be one of the pillars of a two-party system, but an ideological vanguard fighting for the interests of its metropolitan voters in a multiparty system. To do this it has to work with other parties, including the SNP. Above all it needs to adopt electoral reform. That means adopting a system of proportional representation to the UK parliament – lesser reforms such as the Alternative Vote won’t do. This has two advantages. First it allows serious cooperation with the Lib Dems and the Greens, which should improve the party’s chances of winning, and of forming a successful government if it fails to win a majority. After the Lib Dem catastrophe following coalition with the Conservatives in 2015, the minor parties will seek a high price for their support and serious electoral reform must be part of it. Second, once implemented, it will pose big problems for the Conservatives, who will have much more trouble fighting off the populist right, as well as hanging onto liberal Remainers.

But this strategy brings its own problems. There is no upwelling for this sort of political reform amongst the public – support is broad but shallow. It would come under sustained attack by the Conservatives who would claim that it was throwing away the county’s cherished traditions and inviting weak governments. If they want to change the subject away from their competence to govern, this might present them with just that opportunity. This is why I was sceptical of such a strategy when I looked at Labour’s prospects last year. Back then, though, I thought that the Conservatives’ weak performance in government would make them vulnerable. I am much less confident of that now.

As it happens Labour’s conference rejected a motion in favour of electoral reform. It was backed by 80% of constituency members, but blocked by Britain’s ever-conservative unions, doubtless after nudging from the Labour leadership. There is no sign that the current leadership wants to go in that direction. Labour seems too weak to win, but strong enough to prevent any other parties than the Conservatives and the SNP from succeeding. So just what is the point?

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

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

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

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

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

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

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

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

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

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

Asking the wrong questions on the Plymouth shootings

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

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

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

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

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

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

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

The British government attempts a covid endgame

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

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

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

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

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

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

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

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

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

Should we be worrying about inflation?

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

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

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

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

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

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

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

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

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

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

Interesting times indeed.

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

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

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

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

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

Danny Finkelstein, The Times 22 June 2021

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

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

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

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

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

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

Matthew Parris, The Times 19 June 2021

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

It is time for Sadiq Khan to stand up for London

What is the point of Sadiq Khan, London’s Labour Mayor, recently reelected for a second term? He is a powerful symbol of inclusion – a Muslim bus-driver’s son making it to the city’s highest office. After that I struggle. He has acheived little in five years. But now he has an opportunity to make his mark.

Mr Khan’s problems aren’t entirely of his own making. Since his predecessor as mayor, Boris Johnson, took over as Prime Minister in 2019 the national government has been actively hostile. We then discover how little actual power London’s mayoralty has. The situation worsened when the pandemic came along, and Transport for London’s finances collapsed. This one of the few things the mayor is responsible for, but he had to go cap in hand to the government for a bailout. In doing so the government has gone out of its way to humiliate him. Mr Khan has looked like a powerless bleater from the sidelines. But this also reflects Mr Khan’s lack of political skill. He has shown little aptitude in mobilising broad political coalitions to get things done.

But now he has an opportunity: the Daniel Morgan report. This report into the Metropolitan Police was commissioned by Theresa May as Home Secretary in 2013. It looks at the Met’s repeated failings in the case of the murder of Daniel Morgan, a private investigator, in 1987. It was suspected that corrupt policemen were involved. The report is summarised here by the FT’s David Allen Green. It is shocking. It shows the Met as being keener to protect its reputation than to be held accountable. This culture is described as “institutional corruption”. And the report makes it plain that it stretches to the present day, with the inquiry being obstructed by senior police officers, who were as slow as they could be in producing evidence. What is even more significant is that the current Commissioner, Cressida Dick, is deeply implicated in this criticism. Ms Dick is every inch a Met insider, with her fingerprints on numerous police foulups. It is time for her to go and for an outsider to be brought in to replace her. The Met needs a change in management culture and she is n ot the person to do it.

Mr Johnson is not going to support this, and has expressed his confidence in Ms Dick. He is not in favour of public accountability, and likes senior public officials to be beholden to him. He is not directly responsible for appointing or dismissing the Commissioner, though. That is a matter of joint responsibility between the Home Secretary, currently Priti Patel, and the Mayor. Will Ms Patel stand up to her boss? She probably could if she wanted too, as she is one the politically stronger members of the government (whatever one thinks of her record). It is unlikely though. Which leaves Sadiq Khan as mayor.

I doubt that the Mayor has the legal power to sack the Commissioner by himself – but a public statement of loss of confidence would make her position untenable. That would allow him to show that he is standing up to the bullying from government and asserting his new mandate from London voters. There is a risk that Ms Dick could try toughing it out based on Ms Patel’s backing alone – that would be sadly characteristic of the current times. In which case the mayor would need to up the ante and start making the government, and the Force, pay a price. This is what politicians can do. Authority depends on much more than just legal powers.

So it is clear what Sadiq Khan should do. But I expect him to bottle it and serve out the rest of his term as another act of futlity and pointlessness.

How do we live with Covid-19?

As predicted “Freedon Day”, when covid restrictions were due to be lifted, has been postponed from 21 June. And as usual most of the sceptical comment seems to have missed the point. They are suggesting that the government will keep on postponing through dither and indecision. But in fact I thought the government was being quite clear, and there is good reason to think that they will stick with the new proposed date of 19 July, though doubtless some restrictions will be long-term. Meanwhile there is not nearly enough debate on what is an acceptable balance between risk and danger in future while the virus remains prevalent in the world at large – which may well be forever.

The government’s narrative is that the we are in a race between vaccination and the virus. This suggests that there is some kind of equilibrium to be found between the proportion of the population that is vaccinated and the infectivity of the virus, which might bring the reproduction rate to below one, depending on the level of restrictions in place. There is good reason to think that if 75% of the population is vaccinated, then the R rate will stay below one even with most restrictions lifted. The government’s calculation seems to have been that, with the previously dominant Alpha variant, R would be close enough to one on June 23, when 80% vaccination has been reached for one dose. But with infection rates increasing at an alarming rate, this is clearly not true. The now-dominant Delta variant seems to be to blame. They have now calcualted that 75% or more people need both vaccine doses for this equilibrium to be reached.

It isn’t as simple as that of course. There is plenty of evidence that vaccinated people who do become infected do not suffer severe disease, while the mainly younger people who are not vaccinated are less likely to suffer severely too. So we might be able to weather higher infection rates just like we already do for flu. Against this I think two arguments have been accepted. First is that there are still a lot of unknowns about the Delta variant, including whether the earlier assumptions about the vulnerability of younger age groups still hold. India seemed to be less vulnerable than us to covid, mainly it was thought because its population is younger: until it was hit by Delta. Second the NHS is distinctly fragile at the moment. Waiting lists are massive in many places; the Financial Times has reported that many staff are leaving, exhausted by the stress of the last 18 months, and without substantial improvements to pay and conditions on offer. While it is true that the NHS can cope with high levels of flu, that is because it is seasonal – and even then it can be touch and go. So it seems more sensible to wait. Most people agree.

But the most significant thing I picked up from the announcements was that ministers were saying that we must learn to live with the virus, rather than expect that it will be beaten. What does this mean? Hospitalisation rates need to be stable and reasonably low, and likewise deaths. Current levels are surely close enough to this – but the exponental growth of infections is a clear threat. But that comes with significant restrictions on public events, hospitality, social distancing and so on. The big question is whether we can relax all of these. What measures can be kept in place that would reduce risk of infection (and not just from covid), without annoying too many people? Better ventilation standards for public places is an obvious one. I suspect we need to adopt more Asian approaches to mask-wearing (though this is more a metter of social mores than regulation). Certain settings, hospitals and care homes perhaps, will doubtless need higher levels of infection control.

These are the questions we should be asking ourselves. We need to watch and learn from what is happening in the rest of the world. Alas instead we get the usual nonsense about whether lockdowns are evil in principle, or whether the government lost two weeks by not restricting travel from India earlier.

The information gap – the big issue of our age

I felt a brief pang of sympathy for former Prime Minister David Cameron last week, as he endured grandstanding “questions” from MPs over his lobbying on behalf of Greensill Capital. He probably really did think that what he was suggesting on that company’s behalf would be helpful to the government. But nobody cares about that; they just wanted the masochistic pleasure of giving him a beating. Such is politics. There is a deeper issue, though.

That issue is what I call the “information gap”. Governments do not have the information they need to use their resources efficiently on our behalf. We don’t get the right sort of help when we need it; lots of people get help they do not need. The government’s aid to businesses to help survive the covid lockdown was a case in point. Many needy businesses were unable to comply with the conditions and received no help. But many fraudulent companies were also set up to make claims, costing the state many millions, so it is thought. Greensill’s business was to lend money to businesses against outstanding invoices. Could this have helped close this information gap? Probably not, but it surely merited a closer look. It is not clear that the Treasury ever gave it that look. Mr Cameron does not seem to have been given any clear reason why they considered his suggestion unsuitable. There turned out to be good reasons to turn Greensill down, but Mr Cameron wasn’t wrong to put the question.

The information gap is nothing new. It arises whenever a large, centrally-managed organisation has to interact with the world beyond the direct experience of the core group of 100 or so people that run it. We might call it “Empire Syndrome”. The classic way to deal with it is for the elite to create an arbitrary set of rules for outlying officials to follow, and simply to shrug when this leads to bad outcomes – call this the “Imperial Method”. Conscientious officials try to optimise these rules to minimise bad outcomes and get some sort of positive return. Other officials don’t care – they just derive pleasure from the exercise of arbitrary authority and the status that this confers. The alternative solution is to allow local officials broad discretion to exercise their judgement based on the achievement of broad objectives. This brings problems of its own. Discretion is a opportunity for corruption; also it allows power centres to build up and undermine the authority of the central elite.

The imperial method is deeply ingrained into our psyche. Most people assume this is the way things should be done. You can see this from how annoyed people are getting with the government’s regulations on foreign travel. Nobody is asking whether it is wrong to expect anybody to offer advice that is going to be applicable in all circumstances. As a school governor there was an expectation that you would create files of detailed policies approve them, even to run a primary school of 200 pupils. When Chair of Governors I learned not to spend too much time on these, although developing a policy can be a good way of thinking through problems in advance. As an operations manager for a department of over 100 people I remember being advised by a lawyer that management-by-policy was what you had to do: you create rules and people follow them, and that way you could manage risks of legal liability. I tried to do this but soon gave up. The rules never could keep up with the world as you encountered it, and they soon became so complicated that nobody could master them, especially if you kept updating them. In the face of the real world you had to be more flexible – discretion and honest two-way communication between the levels of management were the key.

Interestingly, one part of our state services complex has actually thought about this problem and developed a solution: the military. The Prussian army and then Germans were the pioneers in the 19th Century. They developed a system of discretion and honest communication to govern their operations. In many ways this operated against their authoritarian culture, but the system improved over time. By the time of the Second World War it had developed into a highly effective system which meant that man for man the German Army was most effective in the world, alas for humanity, until Hitler undermined it toward the end. It has been widely copied since, notably by the British and US armed forces. Which is one of the reasons why these institutions are now held in such high regard by the public. But the system requires immense discipline and a very strong culture of working towards common objectives.

Back in the 1990s it became fashionable for large businesses to develop analogous systems to run their businesses. This included reducing the number of layers of management and empowering junior and middle managers. It never caught on in the public sector, and by the 2000s central authority and management pyramids became the norm again everywhere. I’m not quite sure why this was, but I suspect that senior officials feared that they would be blamed for bad decisions made in junior ranks, as the public and politicians are only too happy to do.

New technology may also have played a role. Developers of information systems offered their own automated way of closing the information gap, by baking the rules into control systems. This started with workflow technology, which can be used to empower workers by making more information available to them, but instead became used for tying them down, including the measurement of toilet breaks. The process of “de-skilling” began. This had a dire effect on the public sector, as de-skilling became the basis of many an outsourcing contract, causing catastrophic loss of effectiveness. But this was but the start of a journey; the technologists started to talk about the Holy Grail – the use of Artificial Intelligence to intermediate between organisations and the public, so that you wouldn’t need people at all. AI is powerful technology, with many important uses, but it cannot possibly as effective as a skilled professional in helping people solve complex personal problems. Many, if not most, AI applications are pre-destined to fail.

Unfortunately too many people believe that technology can solve the information gap by itself. The Chinese Communist Party seems to have embarked on this road. Providing the data that the state needs to make its systems work means a steady erosion of privacy; ensuring its consistency means standardisation; maintaining confidence in the system means the suppression of honest communications. And so on. Ultimately the Imperial Method means that people have to conform to the needs of the state, rather than the other way around. This is truly the road to serfdom.

But the answers are not too difficult to find. Free markets will find appropriate solutions for most of our needs if we are alert to excessive market power by large businesses. State services need to be mediated by empowered professionals held accountable by people who understand the challenges they face. Countries like Britain, with a strong public service culture, can do this. There are examples of excellent public service – the two primary schools where I had the privilege to be governor are undoubtedly among them. Technology can empower other than enslave.

Too few people appreciate this in government, or amongst those holding them to account. But as public service systems fail, perhaps understanding will grow. There is now a growing consensus that the Test and Trace system for coronavirus was approached in completely the wrong way, and should have been localised from the start. If more aid to businesses had been intermediated at local level then perhaps more businesses could have survived and more frauds stopped.

Organisations like Greensill were never going to be the answer. But the more important question is whether the Treasury ever really cared about the problem.